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annual report
AVENIRA LIMITED AND CONTROLLED ENTITIES
AVENIRA LIMITED AND CONTROLLED ENTITIES
THE VISION
Avenira Limited has a long-term vision to develop a portfolio of agricultural minerals and production assets that will
build long term shareholder value by supplying the agricultural nutrients needed to help address a fundamental
issue of global food security.
CORPORATE STRATEGY
To become a major contributor to the world nutrient market through the development of a carefully selected
portfolio of valuable phosphate and other nutrient projects.
BAOBAB, SENEGAL (80% OWNED)
WONARAH, AUSTRALIA (100% OWNED)
•
•
•
•
Senegal is stable and mining friendly
Phosphate is a vital commodity
Sedimentary rock phosphate mineralisation
Simple open pit mining, unconsolidated sand
• Wet screening plant commissioned August 2016
•
•
Production commenced August 2016
First shipment expected second half 2016
• Good proximity to existing markets
•
Progress to full Mining Concession underway
• One of Australia’s largest known JORC and
NI 43-101 compliant phosphate resources
•
Validation of IHP technology is required to
liberate value in Wonarah
JDCPHOSPHATE, USA (APPROX. 8% HOLDING)
•
•
JDCP owns a proprietary phosphate technology,
Improved Hard Process (IHP)
Validation of IHP delayed due to now resolved
technical issues and ongoing funding activities
• Avenira is currently the only licensee for IHP with
exclusive rights for Australia and Senegal
ARABLE DECLINE
PER CAPITA
INCREASED
PER CAPITA
CONSUMPTION
DEMAND ON
FARMERS
SOURCE OF
FUTURE SUPPLY
AVENIRA LIMITED AND CONTROLLED ENTITIES
02 Corporate Information
03 Chairman and Managing Director’s Review
04 Directors’ Report
19 Corporate Governance Statement
29 Auditor’s Independence Letter
31 Consolidated Statement of Comprehensive Income
32 Consolidated Statement of Financial Position
33 Consolidated Statement of Changes in Equity
34 Consolidated Statement of Cash Flows
35 Notes to the Consolidated Financial Statements
77 Directors’ Declaration
78
Independent Auditor’s Report
80 ASX Additional Information
1
SOLICITORS
Richard O’Shannassy & Co Pty Ltd
Level 3, 46 Ord Street
West Perth, WA 6005
DLA Pipes Australia
Level 31, Central Park
152-158 St Georges Terrace
Perth, WA 6000
BANKERS
National Australia Bank Limited
1232 Hay Street
West Perth, WA 6005
SHARE REGISTER
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth, WA 6000
Telephone: 1300 787 272
AUDITORS
Ernst & Young
11 Mounts Bay Road
Perth, WA 6000
INTERNET ADDRESS
www.avenira.com
EMAIL ADDRESS
frontdesk@avenira.com
STOCK EXCHANGE LISTING
Avenira Limited shares are listed on the:
Australian Securities Exchange (Code: AEV)
ABN 48 116 296 541
DIRECTORS
Richard H (Dick) Block
(Independent Non-executive Chairman)
Cliff Lawrenson
(Managing Director and CEO)
Ian McCubbing
(Independent Non-executive Director)
Timothy Cotton
(Non-executive Director)
Farouk Chaouni
(Non-executive Director)
David Mimran
(Non-executive Director)
Christopher Pointon
(Independent Non-executive Director)
COMPANY SECRETARY
John Ribbons
Rodney Wheatley
REGISTERED OFFICE
Ground Floor, 20 Kings Park Road
West Perth, WA 6005
PRINCIPAL PLACE OF BUSINESS
Ground Floor, 20 Kings Park Road
West Perth, WA 6005
2
AVENIRA LIMITED AND CONTROLLED ENTITIES CHAIRMAN AND MANAGING DIRECTOR’S REVIEW
Dear Fellow Shareholders
It is a great pleasure to present a review of what has been a transformational year for Avenira Limited.
Over the past 12 months, Avenira has made substantial progress in developing the Baobab Phosphate Project in
Senegal culminating in the achievement of first production in August 2016. Delivery of this significant milestone strongly
aligns with the Company’s strategy to create shareholder value through the development of resource projects with a
specific focus on the macro-nutrients sector.
Significantly, having secured the Baobab Phosphate Project in September 2015, Avenira has moved quickly and
diligently, on time and on budget, through all the required development steps to successfully achieve first production.
These development steps have included geological work, feasibility studies, permitting, raising of finance, design
and installation of mine plant, infrastructure arrangements, product offtake, mining and production of final product.
The Baobab Phosphate Project is set to become the cornerstone asset for Avenira, producing a quality product while
providing substantial upside through production and resource expansion.
The Board and management of Avenira continue to strongly believe in the long term fundamentals of the macro-
nutrient sector, given the growing food requirements of an expanding world population. Efficiency of food production
is becoming increasingly important and phosphate is a key input and integral part of this process.
Avenira continues to maintain its investment in JDCPhosphate’s Improved Hard Process technology and the long-term
potential to commercialise the Wonarah Phosphate Project in Australia.
BAOBAB PHOSPHATE PROJECT
As at 30 June 2016, Avenira had progressed the Baobab Phosphate Project to the point of advanced mining activities,
with the processing plant and supporting site infrastructure nearing completion. Subsequently, the processing plant
was commissioned and first product was produced, marking a significant milestone in the Company’s history. Stage
1 of the Baobab Phosphate Project is designed to produce 500,000 tonnes per annum of phosphate product, with
a Stage 2 expansion planned following the achievement of steady-state production. The mining process is low cost
and uncomplicated and the processing plant is similarly cost effective, employing a simple wet-screening process to
beneficiate to final product.
Offtake contracts were executed with Polyserve Import Export and Trade, Getax Agrifert DMCC and Actatrade SA in July
and August 2016. The combined offtake agreements account for between 360,000 and 480,000 tonnes per annum of
production for the first three years, representing almost all of the expected annual production.
The excellent initial demand for the Baobab phosphate product vindicates the decision to employ a staged approach
to project development. An increase in production is planned in 2017, once a full mining concession is secured.
WONARAH PHOSPHATE PROJECT AND JDCPHOSPHATE
The Board continues to believe in the long term merits of Avenira’s investment in JDCPhosphate and the Improved Hard
Process technology, as well as the Wonarah Phosphate Project in the Northern Territory.
Improved Hard Process technology is a potentially disruptive technology in the phosphate industry and consequently Avenira
will maintain its investment and licenses to both the Australian and Senegalese markets. While development of the technology
remains the priority of JDCPhosphate, Avenira expects that this may take further time and investment to validate on a
commercial scale.
The Wonarah Phosphate Project continues to be included as part of Avenira’s longer term strategy, however it will require an
enabling technology, such as Improved Hard Process technology, to become commercially feasible at current phosphate prices.
CONCLUSION
Given the outstanding progress made over the past year we would like to thank, in particular, our on-site staff in Senegal for
efficiently and professionally bringing the Baobab Phosphate Project to production. More broadly, we thank our fellow Board
members and our small team of corporate staff for their enthusiasm and effort throughout the year.
To our shareholders, thank you for supporting the Company during this transformational period. The acquisition and
subsequent development of the Baobab Phosphate Project has already delivered strong returns to shareholders and we
expect this to continue as we progressively deliver our strategy.
Dick Block
Chairman
Cliff Lawrenson
Managing Director and CEO
3
AVENIRA LIMITED AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
Your directors submit their report on the consolidated entity (referred to hereafter as the Group) consisting of Avenira
Limited (Company) and the entities it controlled at the end of, or during, the year ended 30 June 2016.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are as
follows. Where applicable, all current and former directorships held in listed public companies over the last three years have
been detailed below. Directors were in office for this entire period unless otherwise stated.
NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
Richard H (Dick) Block, B.Sc (Chemical Engineering), (Non-executive Chairman)
Experience & Expertise
Dick Block is a US based mining and processing industry executive with 4 decades’ experience in the fertiliser and base
and precious metals businesses. The majority of his career was with the Freeport-McMoRan group of companies, where
he rose to Executive Vice President and Chief Operating Officer of Freeport-McMoRan Inc. and senior vice president
of Freeport-McMoRan Copper & Gold Inc. In addition, he was President of two of the world’s largest phosphate mining
and fertiliser producing firms, Agrico Chemical Company and IMC-Agrico Company. Further, he was deeply involved in
Queensland Nickel JV in Australia in the 1980s.
Mr Block has been a senior executive or member of the board of directors of six NYSE and TSE listed firms, including
Amax Gold Inc. and Kinross Gold Corporation. Also, he has been a member of the board of a number of trade, non-
profit and charitable organisations, including the International Fertiliser Industry Association, the Fertiliser Institute, the
Phosphate Chemicals Export Association (Phos Chem), the Sulphur Institute, United Way of the North Shore and Illinois
Public High School District 115.
Other Current Listed Company Directorships
None
Former Listed Company Directorships in the last 3 years
None
Special Responsibilities
None
Cliff Lawrenson, B.Com. (Hons), (Managing Director and CEO)
Experience & Expertise
Cliff Lawrenson joined Avenira after holding the position of Chief Executive Officer of FerrAus Limited which he led
to a recommended takeover by Atlas Iron Limited in December 2011. Mr Lawrenson held the position of group Chief
Executive Officer of GRD Limited from 2006 which incorporated GRD Minproc Limited, OceanaGold Limited and
Global Renewables. Prior to joining GRD Limited, Mr Lawrenson was a senior executive and Vice President of CMS
Energy Corporation in the United States of America and Singapore.
He has worked extensively in investment banking around the world and holds postgraduate qualifications in Finance
and Strategy.
Mr Lawrenson has served on several boards in international locations where he led the development and financing of
numerous major infrastructure projects. He is also Non-executive Chairman of Pacific Energy Limited.
Other Current Listed Company Directorships
Non-executive Chairman of Pacific Energy Limited from August 2010
Former Listed Company Directorships in the last 3 years
None
Special Responsibilities
None
Richard O’Shannassy, B.Juris., LL.B. (Hons), (Non-executive Director – Resigned 14 March 2016)
Experience & Expertise
Richard O’Shannassy is a commercial lawyer with over 30 years’ experience in the mining and energy sectors. He has
experienced private legal practice, including conducting his own practice in Perth for nearly 20 years, as well as in-house
roles. He has served upon mining industry committees over a number of years and is a member of Australian Mining and
Petroleum Law Association Inc.
Other Current Listed Company Directorships
Non-executive Director of Brierty Ltd from September 2011
4
AVENIRA LIMITED AND CONTROLLED ENTITIES Former Listed Company Directorships in the last 3 years
None
Special Responsibilities until resignation
Member of the Audit Committee
Chairman of the Remuneration and Nomination Committee
Ian McCubbing, B.Comm (Hons), MBA(Ex), CA, GAICD (Non-executive Director)
Experience & Expertise
Ian McCubbing is a Chartered Accountant with more than 25 years corporate experience, principally in the areas of
accounting, corporate finance and mergers and acquisitions. He has spent more than 15 years working with ASX-200
and other listed companies in senior finance roles including positions as finance director and Chief Financial Officer in
mining and industrial companies.
Other Current Listed Company Directorships
Non-executive Director of Swick Mining Services Limited from August 2010
Non-executive Director of Kasbah Resources from March 2011
Non-executive Chairman of Rimfire Pacific Mining NL from July 2016
Former Listed Company Directorships in the last 3 years
Non-executive Director of Mirabela Nickel Limited from January 2011 to April 2014
Special Responsibilities
Chairman of the Audit Committee
Member of the Remuneration and Nomination Committee
Timothy Cotton, B.Comm (Hons), (Non-executive Director – appointed 23 September 2015)
Experience & Expertise
Timothy Cotton has over two decades of experience in the phosphate mining and fertilizer sector, with a strong focus on
business and project development, strategic transactions, M&A and finance. Mr. Cotton is Vice Chairman and a principal
in the Agrifos Group of companies, which include Agrifos Partners LLC, Baobab Partners LLC and Vulcan Phosphates LLC.
The Agrifos Group is a significant shareholder in Avenira and in JDCPhosphate, Inc. Mr. Cotton began his career in the
merchant banking department of Kidder, Peabody & Co., later becoming a Vice President at Lepercq, de Neuflize & Co.,
a New York-based investment bank. Mr. Cotton formed the Agrifos Group with his partner, Mr. Farouk Chaouni, in 1993. In
addition to his role in the Agrifos Group, Mr. Cotton is a Director of Zalagh Holding S.A., an integrated poultry company,
and MedInstill LLC, a medical device company.
Other Current Listed Company Directorships
None
Former Listed Company Directorships in the last 3 years
None
Special Responsibilities
Member of the Audit Committee
Member of the Remuneration and Nomination Committee
Farouk Chaouni, MBA, (Non-executive Director – appointed 19 November 2015)
Experience & Expertise
Farouk Chaouni was involved in numerous transactions in the U.S. phosphate fertilizer industry including acquisition of the
fertilizer assets of W.R. Grace (Seminole Fertilizer), the acquisition of the Wingate Creek Mine, and the re-commissioning of
Mississippi Chemical Pascagoula phosphate fertilizer plant. Mr. Chaouni served as the Chairman of Seminole Fertilizer until
its sale to Tosco in 1989. In 1998, Mr. Chaouni was instrumental in Agrifos’s acquisition of ExxonMobil’s Pasadena phosphate
fertilizer plant, which was converted to an ammonium sulphate plant in 2011 and sold to Rentech Nitrogen Partners in 2012.
Prior to launching his entrepreneurial activities in the U.S., Mr. Chaouni was the commercial Director of Office Chérifien des
Phosphates (OCP) the large Moroccan phosphate company, where he was responsible for worldwide phosphate rock and
fertilizer sales and raw material purchases.
Other Current Listed Company Directorships
None
Former Listed Company Directorships in the last 3 years
None
Special Responsibilities
None
5
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) David Mimran (Non-executive Director – appointed 2 March 2016)
Experience & Expertise
David Mimran has tremendous knowledge and experience in operation within West Africa. Mr. Mimran is head of Tablo
Corporation, Miminvest SA, and Mimran Natural Resources, all established as investment vehicles into West Africa’s natural
resource sector by Mr. Mimran and the Mimran Group, a family conglomerate with a history of successful business operations
in Africa and Europe. Mr. Mimran’s previous roles included Vice Chairman and founding partner of Breeden Partners, L.P.
from 2006 to 2012, an actively managed investment fund focused on value generation in U.S. public companies, and Vice
Chairman of Milestone Merchant Partners, a Washington-based investment bank from 2003 to 2005. Prior to 2003, Mr.
Mimran served as the President of several food processing, grain and shipping companies across Europe and West Africa.
He has served as a director and principal to the Bank of West Africa (CBAO), one of the largest banking groups in the region,
as well as Archer Daniels Midland Company.
Other Current Listed Company Directorships
Non-executive Director of Taranga Gold Corporation from October 2015.
Former Listed Company Directorships in the last 3 years
None
Special Responsibilities
None
Dr. Christopher Pointon, BSc (Hons), PhD (Geology), (Non-executive Director – appointed 30 June 2016)
Experience & Expertise
Dr. Christopher Pointon who is based in the United Kingdom, is a respected mining executive with deep public company
board and operational management experience. Dr. Pointon trained as a geologist and has over 35 years experience in
the resources business, initially with Rio Tinto and subsequently with Royal Dutch/Shell, Gencor, Billiton and BHP Billiton
where he was a member of the Executive Committee from 2001 to 2006. He has since served on the boards of a number
of public and private companies. His experience includes exploration, operations management, mergers, acquisitions,
post-transaction integration and change management. He has led acquisition and aggressive growth initiatives as well as
major turn-arounds and divestments and he has operated in Australia, Africa, Asia, South America and Europe.
Other Current Listed Company Directorships
None
Former Listed Company Directorships in the last 3 years
African Eagle Resources plc
Special Responsibilities
Member of the Audit Committee
Chairman of the Remuneration and Nomination Committee
COMPANY SECRETARY
John Ribbons, B.Bus., CPA, ACIS
Mr John Ribbons is an accountant who has worked within the resources industry for over 20 years in the capacity of
company accountant, Group Financial Controller, Chief Financial Officer or Company Secretary.
Mr John Ribbons has extensive knowledge and experience with ASX listed production and exploration companies.
He has considerable site based experience with operating mines and has also been involved with the listing of several
exploration companies on the ASX. Mr Ribbons has experience in capital raising, ASX and TSX compliance and
regulatory requirements. Currently, Mr Ribbons is a director of Montezuma Mining Company Limited. Mr Ribbons has
not held any Former Listed Company Directorships in the last 3 years.
Rod Wheatley, B.Bus., CPA
Rod Wheatley is a senior accountant who has worked within the oil and gas, and resource industry for in excess of
13 years in the capacity of company accountant, Group Financial Controller and Chief Financial Officer.
Mr Wheatley joined Avenira in 2009 as group financial controller. He was appointed chief financial officer in 2011 and
Joint Company Secretary in July 2013. Prior to joining Avenira, Mr Wheatley held senior accounting positions in a
number of ASX and AIM listed production and exploration companies. He has extensive experience in management
and project accounting, financial reporting at national and international levels and mergers and acquisitions.
6
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) 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 in the shares rights and options of Avenira Limited were:
Dick Block
Cliff Lawrenson
Ian McCubbing
Timothy Cotton*
Farouk Chaouni*
David Mimran
Christopher Pointon
ORDINARY SHARES
OPTIONS OVER
ORDINARY SHARES
RIGHTS OVER
ORDINARY SHARES
500,000
2,351,868
400,000
154,000,000
154,000,000
104,750,000
-
2,500,000
15,000,000
1,500,000
94,000,000
94,000,000
-
-
-
3,750,000
-
40,000,000
40,000,000
-
-
*Mr Timothy Cotton and Mr Farouk Chaouni collectively hold shares, options and share rights through their related parties,
Baobab Partners LLC and Vulcan Phosphates LLC.
PRINCIPAL ACTIVITIES
The principal activity of the Company during the course of the financial year was the acquisition and development of
the Baobab Phosphate Project in the Republic of Senegal (“Baobab Phosphate Project”). The Group’s operations are
discussed in the Review of Operations section of this report.
The activities of the Group changed significantly during the year. The Group:
• Acquired 100% of the Baobab Phosphate Project. Details of the acquisition are contained in Note 36 of the financial
statements.
•
•
Sold 20% of the Baobab Phosphate Project. Details of the sale are contained in Note 30 of the financial statements.
Transitioned from the mining exploration stage to the mining development stage with the decision to commence
mining at the Baobab Phosphate Project.
CONSOLIDATED RESULTS
Consolidated (loss) before income tax expense
Income tax expense
(LOSS) FOR THE YEAR
YEAR ENDED
30 JUN 2016
YEAR ENDED
30 JUNE 2015
$
$
(9,464,695)
(43,018,117)
-
-
(9,464,695)
(43,018,117)
DIVIDENDS
No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made.
REVIEW OF OPERATIONS
A review of the operations of the Group during the financial year and likely developments and expected results is
included in the Operating and Financial Review set out below.
BAOBAB PHOSPHATE PROJECT (80% OWNED)
In September 2015 the Company acquired 100% of the Baobab Phosphate Project a potential near-term production
rock phosphate project in the Republic of Senegal from Baobab Partners LLC, an affiliate of Agrifos Partners LLC
(“Agrifos”). Agrifos is an affiliate of Vulcan Phosphates LLC (“Vulcan”), which is a co-investor with Avenira Limited
(“Avenira) in JDCPhosphate Inc. (JDCP) and a major Avenira shareholder.
In November 2015 the Company took the decision to commence mining of the Baobab Phosphate Project located
within the Gadde Bissik Small Mine Permit (“SMP”) license area.
7
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) THE REPUBLIC OF SENEGAL
OVERVIEW
• One of Africa’s most stable and successful democracies (IMF 2010) with a stable and investor friendly social and
political environment
Population of circa 14.6 million (2014 estimate)
Substantial progress in combatting poverty, improving social
infrastructure and advancing its economic emergence (IMF)
•
•
•
• GDP of USD15.5 billion (World Bank 2014)
MINING FRIENDLY LOCATION
•
Established mining industry with
phosphates as primary exports
• Mining code implemented in 2003,
administered by Ministry of Mines
•
State involvement constructive and
transparent
• Good connected infrastructure and
qualified workforce
•
Several ASX or TSX companies are in
successful development and operations in Senegal
•
Effective Senegalese Chamber of Mines
GEOLOGY AND EXPLORATION
Phosphate mineralisation in the greater Gadde Bissik prospect region, within the Baobab tenement, was initially identified
from material recovered from water wells excavated during the 1950s. The easternmost of the wells lie just within the
Gadde Bissik East resource area. A review of historic reports, conducted in 2012 by the commercial arm of the French
Geological Survey (BRGM) for Agrifos West Africa, identified a broad area at Gadde Bissik of 4 x 8 kilometres as a high
priority target for phosphate exploration along with several other prospects across the broader Baobab tenement.
Drilling within the broader Gadde Bissik area commenced in May 2014. The initial phase consisted of broad-spaced
drilling on a predominantly 2000 x 2000 metre grid with infill drilling to 1000 x 1000 metres and 500 x 500 metres in what
is now the Gadde Bissik West resource area. Two holes drilled on the easternmost line of the 2000 x 2000 metre grid
in June 2014 had significant high grade mineralisation and warranted an extension of the exploration grid to the east.
Drilling was able to define an area of higher grade and thicker mineralisation at the Gadde Bissik East prospect which
has subsequently been substantially drilled out at either 250 x 250 metres and 125 x 125 metres spacing to define a
Mineral Resource.
A maiden Indicated Resource estimate was completed by MPR Geological Consultants and released to the market
on 7 December 2015. The total Indicated Resource estimate stands at 12.6 Mt at 21.0% P2O5 all contained within the
SMP. The SMP also contains an Inferred Resource of 16Mt at 20% P2O5. A further Inferred Resource of 64Mt at 19%
P2O5 was estimated for Gadde Bissik East outside the SMP and a small Inferred Resource of 7Mt at P2O5 was estimated
for Gadde Bissik West. A technical report prepared by MPR Geological Consultants is available to be viewed on the
company web-site. The resource estimate is summarised in the Annual Mineral Resource Statement following and a
plan showing the resource areas is included as Figure 2. Areas drilled out to 500 x 500 metre grid spacing are included
in the Inferred Resource estimate. The resource estimate is based on 339 aircore holes and 139 diamond cored holes
for a total of 17,906 metres of drilling.
8
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
Diamond drilling recommenced in April 2016 aimed predominantly at increasing the 125 x 125 metre grid coverage
within and adjacent to the SMP to provide data to support an increase in the Indicated Resource estimate. This program
is still ongoing both within and adjacent to the SMP and should be completed in the final quarter of 2016. Following
completion of this drilling it is anticipated that an update to the current JORC resource will be undertaken.
During the reporting period to the end of June 2016, 130 diamond cored holes were drilled for 5,516 metres. The
majority of holes were drilled within the SMP.
Beyond the SMP and near environs, a scout aircore drilling program was undertaken to the east of the SMP in December
2015 and January 2016.The program was on predominantly 4000 x 4000 metre and 2000 x 2000 metres grid spacing. A
total of 26 holes for 1015 metres was completed. The drilling intersected phosphate mineralisation up to 8 metres thick
and a follow up program has been schedule for the second half of 2016.
Figure 1: Tenement and Gadde Bissik prospect location
location
Figure 2: Resource outline and drill status plan – Gadde Bissik
9
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
PROJECT DEVELOPMENT
The work program for development of the Gadde Bissik Project commenced in mid-2015, prior to the decision to mine
in November 2015. This early work allowed confirmation of the long lead tasks within the development schedule and
subsequent optimisation of the development timing.
SMALL MINE PERMIT (SMP)
A SMP for the Baobab Phosphate Project was granted in May 2015. The Environmental Impact Statement was approved at
the end of October 2015 together with the associated Community Relocation and Compensation Plan.
MINING
A mining contract was signed with a Senegalese contractor, Agromines SUARL in December 2015. The contract was
structured to allow continuation of mining after the Stage 1 open pit, allowing operations to be continuous once
pre-stripping commenced.
Mobilisation of the mining fleet was undertaken through January 2016 and February 2016, with pre-stripping
commencing for the Stage 1 open pit in March 2016.
From March to May 2016 mining efficiencies and operating methods were continuously improved in line with the
mining schedule developed with the assistance of Australian Mining Consultants (“AMC”).
The first phosphate horizon was uncovered in the third week of July 2016.
The first phosphate was mined at the end of August 2016.
Mining of the phosphate mineralisation demonstrated that efficient grade control can be achieved visually during
daylight hours, with the mining geology team trained to supervise phosphate mining.
Pre-stripping of Stage 2 open pit commenced in late June 2016 ensuring continuity of phosphate mineralisation
after completion of Stage 1.
AMC continues to assist with on-going mine design and scheduling within the SMP as development progresses.
INFRASTRUCTURE/LOGISTICS
Discussions with the Port of Dakar for the provision of port storage areas and for longer term export capacity resulted in
a contract for port services signed with TVS Necotrans, the port services provider, at the end of November 2015.
A tender process for road transport of product took place through January 2016 and February 2016 with a contract
signed with Sogotrans, a Senegalese transport company with phosphate rock transport experience, in June 2016.
WATER SUPPLY
The water drilling for the Baobab Phosphate Project was undertaken by Bauer Resources Senegal.
The scope provided for the drilling and equipping of two process water bores drilled to a depth of 500m and three bores
for local community use.
Drilling commenced for the two process water bores in late February 2016, with both bores successfully completed and
equipped in August 2016, yielding sustainable water flows greater than planned. Final surface piping for these bores was
completed at the end of August 2016.
The community bores have been drilled and tested with two of the three providing suitable water flows. It is planned to
equip these bores with solar pumping systems.
PROCESSING
Design and engineering for the processing facility was developed with Consulmet (Pty) Limited, a South African based
engineering and construction company, experienced in modular designed process facilities for remote locations
throughout Africa.
This initial plant comprises a contract screening and crushing plant and an “ultrafine” wet screening plant. Future
modular processes for owner crushing and magnetic separation can be readily added to the existing plant design.
Following the execution of the Consulmet contract in January 2016, fabrication of the equipment was undertaken in
Johannesburg from January to May 2016 and then pre-erected to ensure minimal delays upon site installation.
All plant equipment was transported through the Port of Dakar with very efficient co-ordination of logistics and
regulatory system processes.
10
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) Consulmet construction teams mobilised to site in May 2016 and completed construction during July 2016 with wet
commissioning completed at the end of July 2016.
First phosphate product was stockpiled at the end of August 2016.
MARKETING
Initial discussions took place with potential offtake partners focused on both Single Super Phosphate producers and
Phosphoric Acid producers. Samples were produced from drilling and these were used in offtake discussions prior to bulk
sampling material being available.
The Baobab Phosphate Project possesses significant potential commercial advantages due to its location with export
of product from the Port of Dakar providing competitive access to markets in North and South American and Europe.
Offtake contracts were executed with Polyserve Import Export and Trade, Getax Agrifert DMCC and Actatrade SA in
July and August 2016. The combined offtake agreements account for between 360,000 and 480,000 tonnes per annum
of production for the first three years, representing almost all of the expected annual production.
Service agreements have been signed with Bureau Veritas and SGS for the supervision of loading operations, sampling
and lab testing for the delivered product. A service agreement has been signed with Sahel Sipping agency to provide
a bespoke service for maritime matters related to our exports.
GOSSAS PHOSPHATE PROJECT
Groupe Mimran agreed to transfer their 2016Km2 Gossas exploration tenement to Baobab Mining and Chemicals
Corporation (“BMCC”) as part of its investment in Avenira and BMCC. Exploration on the tenement will be undertaken
by the BMCC team. The tenement lies to the south-east of Baobab (Figure 3) and the eastern part of the tenement
covers an area of high prospectivity for phosphate with numerous historical records of phosphate occurrences, mainly
in water wells. Initial exploration of the tenement has comprised a comprehensive study by the BRGM of all the relevant
documentation held by them in France and the production of a prospectivity plan of the tenement. A scout air core
drilling program is planned for the latter part of 2016.
Figure 3: Gossas Project location
11
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
WONARAH PHOSPHATE PROJECT, NORTHERN TERRITORY (100% OWNED)
SUMMARY
The Wonarah Phosphate Project (“Wonarah”) hosts one of the largest contained P2O5 resources of any known phosphate
deposit in Australia. Current resource estimates are unchanged from last year and are presented in the annual mineral
resource statement at Table 1.
Avenira commenced a Feasibility Study in 2012 for the development of Wonarah using JDCP patented Improved Hard
Process (IHP) technology. The Company believes Wonarah has compelling features apart from its size and grade that
will support a major phosphate development at the site. These include:
•
Situated in a stable political jurisdiction
• Northern Territory Government support and designation as a Major Project
• A life of mine Mining Agreement in place with Traditional Owners which covers mining, processing and fertiliser
production
•
Proximity to a regional population centre at Tennant Creek
• Access to an established bulk commodity port at Darwin
• Bitumen highway access
•
•
•
•
Proximity to a standard gauge railway with spare freight capacity
Proximity to a natural gas supply, the pipeline for which closely follows the railway line
Proximity to ample groundwater
Silica available on site and petroleum coke readily available regionally
• Growing importance of technical grade phosphoric acid and fluid fertilisers both globally and locally
Figure 4: Wonarah Project Locality Map
12
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
Whilst Wonarah is located approximately 1,300km from the port of Darwin, under an IHP development scenario, the
financial impact of this distance is mitigated by the production of a more concentrated and higher value product. The
existence of suitable and immediately accessible road and rail infrastructure relieves the Company of a potentially
heavy capital burden on the project.
Pending successful commercial validation of the IHP technology by JDCP, Avenira intends to use the IHP method of
producing superphosphoric acid at Wonarah using beneficiated rock mined at Wonarah. Beneficiation test work on
a composite sample of diamond core, representing potential run-of mine material, has resulted in the elaboration
of a treatment regime to optimise P2O5 recovery and minimise clay content to produce a suitable feed for an IHP
plant. Variability testing across a range of ore profiles indicated that the treatment regime remained successful. The
efficacy of superphosphoric acid production by the IHP method is currently subject to validation testing by JDCP at a
demonstration plant in Florida, USA.
IMPROVED HARD PROCESS DESCRIPTION
Low-grade phosphate rock, petroleum coke and silica sand are fed at accurately controlled flows to a dryer to remove
moisture. The solids leaving the dryer are screened to remove large lumps and the material passing through the screen
is finely ground in a ball mill.
The ground material is formed into balls in a balling drum. Fines and oversize are returned to the balling drum and
product sized balls are fed to the ported kiln.
IHP PROCESS FLOW
Pet Coke
Silica and Clay
Phosphate
Rock Mining
Beneficiated
Phos Rock
Feedstock
Balls
Kiln
P4O10 Gas
J•Rox
Phosphoric
Acid
Fertilizers
Animal Feed
Industrial &
Consumer
Source: JDCPhosphate, Inc.
Air is heated by burning natural gas and blown counter-currently to the flow of material in the kiln. The P4O10 gas is
liberated and passes to the hydrator where it is absorbed in water to form a concentrated phosphoric acid. Gases
leaving the hydrator are further scrubbed in a venturi scrubber, cyclone/scrubber and mist eliminator to recover product
not absorbed in the hydrator. Vent gases are then scrubbed with lime slurry and then pass to a flue gas desulphurisation
unit for final cleaning.
The phosphoric acid is cooled, filtered to remove any suspended solids and stored ready for shipping.
13
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
EXPLORATION
No new exploration work was undertaken during the reporting period.
In March, three of the Wonarah exploration tenements (EL29840, EL29841 and EL29849) were reduced in area by
approximately 40%. The areas relinquished were rated as having lower prospectivity for economic phosphate
mineralisation than the retained areas. Two exploration tenements, EL24607 and EL23767, were relinquished. These
tenements were considered to be peripheral to the main phosphate mineralisation at Wonarah.
ANNUAL MINERAL RESOURCE STATEMENT AS AT 30/06/16
2016 ANNUAL MINERAL RESOURCE STATEMENT
WONARAH PROJECT, NORTHERN TERRITORY, AUSTRALIA
TiO2
%
0.21
0.22
0.22
0.2
0.19
0.22
0.21
0.2
SiO2
%
41.3
42
43
43
40
41.3
43
Cut off
P2O5 %
Resource
Category
Mt
Tonnes
P2O5
Al2O3
CaO
Fe2O3
10
Measured
78.3
Indicated
M+I
Inferred
222
300
542
15
Measured
64.9
Indicated
M+I
Inferred
133
198
352
%
20.8
17.5
18.3
18
22.4
21.1
21.5
21
%
4.85
4.75
4.77
4.8
4.47
4.77
4.67
4.6
%
28
23.2
24.4
24
30
28
28.7
28
%
1.11
1.49
1.4
2.1
1.1
1.53
1.39
2.1
K2O
%
0.43
0.47
0.46
0.5
0.37
0.47
0.44
0.5
MgO
MnO
Na2O
%
0.25
0.2
0.21
0.2
0.19
0.21
0.2
0.2
%
0.04
0.04
0.04
0.08
0.04
0.04
0.04
0.1
%
0.1
0.09
0.09
0.05
0.09
0.09
0.09
0.06
SiO2
%
39.7
48.3
46.1
46
37
39.7
38.8
39
BAOBAB PROJECT, REPUBLIC OF SENEGAL
CUT-OFF GRADE 15% P2O5
Area
Resource
Category
Mt
Within SMP
Indicated
12.6
Gadde Bissik East
Within SMP
Inferred
Outside SMP
Inferred
Combined
Inferred
Gadde Bissik West
Inferred
16
64
80
7
Total
Indicated
12.6
Inferred
87
P2O5
%
21.0
20
19
19
18
21.0
19
CaO
MgO
Al2O3
Fe2O3
%
28.8
28
26
26
24
28.8
26
%
0.08
0.13
0.12
0.12
0.17
0.08
0.13
%
2.05
2.2
2.8
2.7
4.8
2.05
2.9
%
3.30
3.9
4.0
4.0
6.3
3.30
4.2
ANNUAL CHANGE IN RESOURCE CATEGORY - BAOBAB PROJECT
Category
Indicated
Inferred
2015
2016
Change
Tonnes (M)
% P2O5
Tonnes (M)
% P2O5
0
12.6
+12.6
na
21.0
na
68
87
+19
22
19
-3
Table 1: Annual Mineral Resource Statement
14
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
The resource estimates for the Wonarah Project remained unchanged from 2015. Changes to the resource estimates
for the Baobab Phosphate Project are summarised above and reflect the addition of a maiden Indicated Resource and
the use of a lower cut-off grade than 2015. The lower cut-off grade is supported by additional beneficiation test work.
The mineral resource statement is based on, and fairly represents, information and supporting documentation prepared
by a Competent Person.
The mineral resources statement as a whole is approved by Russell Fulton, who is the Geological Manager of the
Company and a Member of the Australian Institute of Geoscientists. Mr Fulton has sufficient experience deemed
relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking
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 Fulton consents to the inclusion in the report of the matters based
on his information in the form and context in which it appears.
JDCPHOSPHATE, INC., FLORIDA (APPROX. 8% EQUITY)
Avenira owns approximately 8.0% of JDCP and has an exclusive licence to utilise the IHP technology in Australia and
Senegal for an extended period of time.
Over the last 12 months, JDCP has continued to conduct extensive laboratory scale testing to quantify the positive effect
of its proprietary methods for optimising operations in the reduction kiln on acid quality. It operated the demonstration
plant to evaluate operating materials and techniques to produce hard, dust free feed agglomerates.
In July 2016 Avenira executed two agreements with JDCP that provide for:
• Updated and strengthened Avenira’s exclusive IHP license agreements in Australia and Senegal for a prepayment
of certain licensing fees.
•
Secured convertible loan funding to JDCP to allow further time for JDCP to achieve its strategic objectives. The
convertible loan is interest bearing and has rights to convert into additional JDCP equity in certain circumstances.
Avenira has an associated right to a seat on JDCP’s board.
•
The total funding is limited to USD2m and will be drawn down progressively.
Shareholders are encouraged to view the JDCP website http://jdcphosphate.com/
INVESTMENTS AND CORPORATE INFORMATION
In July 2015 Avenira completed the sale of all its remaining legacy assets in Republic of South Africa to Spearhead Capital
Limited and received sale proceeds totalling ZAR10,862,874 ($1,170,965). Under the sale agreement, ZAR1,852,406 ($200,000)
is to be held in escrow by the Group until the fulfilment of two post-completion conditions. At the reporting date one
condition is yet to be satisfied and the amount of ZAR 1 million ($96,389) remains in escrow in Avenira’s trust account.
In September 2015 the Company received approval, via receipt of an Amalgamation Certificate from the Registrar
of Companies in Mauritius (“Registrar”), for the Reverse Triangular Merger involving the amalgamation of Baobab
Fertilizer Africa, a wholly owned subsidiary of Baobab Partners and the parent company of BMCC, and Minemakers
Baobab Mauritius, a wholly owned subsidiary of Avenira.
Following the amalgamation, Baobab Fertilizer Africa is the sole surviving company, with Avenira as its sole shareholder.
In accordance with the terms of the Merger Implementation Agreement (“MIA”), Mr Timothy Cotton was appointed as
a Non-executive Director of Avenira.
In consideration for the acquisition and in accordance with the terms of the MIA, Avenira issued to Baobab Partners:
•
•
•
•
100 million ordinary Avenira shares.
80 million Avenira unlisted options with an exercise price of AUD0.25 and a term of 4 years.
40 million contingent share rights satisfied by the issue of Avenira shares upon the earlier of:
(i) achievement of a board approved preliminary feasibility study; or
(ii) the decision to proceed with the construction of a phosphate rock mine; or
(iii) first commercial production of phosphate rock.
40 million contingent share rights satisfied by the issue of Avenira shares upon first commercial production of
phosphate rock.
In November 2015 the Board of Avenira made the decision to commence construction of a phosphate rock mine
resulting in 40 million share rights being converted into 40 million shares in Avenira.
15
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) In November 2015 the Group raised additional funds via the issue of 28,151,676 shares at $0.11 per share to global
institutional investor JP Morgan Asset Management UK Limited to raise $3.1 million, before costs. The funds raised
were utilised for the Baobab Phosphate Project and for working capital purposes.
Following shareholder and ASIC approval in November 2015, Minemakers Limited changed its name to Avenira
Limited. As a result of the name change, Avenira was assigned the new ASX and TSX code “AEV”.
In January 2016 the Company executed an agreement with Mimran Natural Resources (“MNR”) and Tablo Corporation
(affiliate of Groupe Mimran) for:
•
•
The issue of 20% of the capital in BMCC to MNR for consideration of USD$11.25 million (AUD16m) and the
transfer of a the Gossas phosphate exploration permit in the Republic of Senegal to BMCC.
The issue of 104,750,000 fully paid ordinary Avenira shares (19.9% of Avenira Limited) to Tablo Corporation at a
issue price $0.117 per share, raising AUD12.3m.
In March 2016 the joint venture and placement transactions with Groupe Mimran companies achieve financial close.
Avenira received approximately AUD28 million in proceeds which ensures funding for:
• Development of the Baobab Phosphate Project small mine to production.
•
•
Exploration and project development towards a full mine permit.
Flexibility for Avenira to consider new investment opportunities.
In March 2016 the Company voluntarily delisted from the Toronto Stock Exchange. Subsequent to delisting, the
Company applied to the Ontario Securities Commission for a decision that the Company no longer is a reporting issuer
in the province of Ontario. A decision is currently pending.
FINANCIAL REVIEW
FINANCIAL INFORMATION
At 30 June 2016 the total closing cash balance was $24,473,574 (2015: $15,388,406). The Group has recorded an
operating loss after income tax for the year ended 30 June 2016 of $ 9,464,695 (2015: $43,018,117).
OPERATING RESULTS FOR THE YEAR
Summarised operating results are as follows
Consolidated entity activities before income tax expense
Shareholder Returns
Basic profit/(loss) per share (cents)
2016
2015
REVENUE
$
RESULTS
$
680,401
(9,464,695)
2016
2015
(2.31)
(17.5)
IMPAIRMENT – WONARAH PHOSPHATE PROJECT
The updated valuation review conducted by Optiro in June 2016 revealed that the fair market value of the Wonarah
project remains unchanged from the valuation prepared at June 2015. Optiro’s valuation lies within a range $15.9m
and $32.1m, with a preferred value of $24.0m. As a result, during the reporting period the exploration and evaluation
expenditure totalling $861,574 incurred at Wonarah less the R&D tax refund of $286,612 totalling $574,962 was impaired
and recognised in the statement of profit or loss.
In addition, following the surrender of exploration licences EL24607 and EL23767 the capitalised exploration and
evaluation expenditure of $635,125 relating to the two licences has been written off to the statement of profit or loss.
Please refer to Note 14 for further details.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than detailed in the Review of Operations above there were no significant changes in the state of affairs
of the Group.
16
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) SIGNIFICANT EVENTS AFTER THE BALANCE DATE
The following events occurred subsequent to the end of the year:
• On 7 July 2016 Avenira and JDCP, Inc. signed an amended licence agreement for a prepayment amount of
USD350,000 that update and strengthen Avenira’s exclusive IHP licence rights in Australia and Senegal.
• On 15 July 2016 Avenira Holdings LLC, a wholly owned subsidiary of Avenira Limited, and JDCP executed a
convertible secured promissory note purchase and exchange agreement. The principal amount of the JDCP
promissory note (Note) is USD1,650,000 with a maturity date of 15 July 2017 and an applicable interest rate of 12%
per annum. As at the date of this report USD1,250,000 has been advanced to JDCP in accordance with terms and
condition of the promissory note.
• On 22 July 2016 and 16 August 2016 the Company announced that it has signed three export rock phosphate
supply agreements with established international fertiliser producers. The agreements are for three years and for
between 360,000 and 480,000 tonnes per annum.
Other than as disclosed above, no event has occurred since 30 June 2016 that would materially affect the operations of
the Group, the results of the Group or the state of affairs of the Group.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
It is expected the Group will complete the commissioning phase and first product shipment will take place in the 2016
December quarter. The Group will continue to focus on ramping up the project production target to 500,000 tonnes
per annum. The Group will continue to advance its application process for a mining concession to pursue its strategy
of multiple stages of expansion across the Baobab Phosphate Project.
RISK MANAGEMENT
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities
are aligned with the risks and opportunities identified by the Board.
The Company believes that it is crucial for all Board members to be a part of this process, and as such the Board has
not established a separate risk management committee.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with
the risks identified by the Board. These include the following:
•
Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholders’ needs
and manage business risk.
•
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets.
ON-MARKET SHARE BUY-BACK
The buy-back program that commenced on 6 November 2014 lapsed on 2 November 2015. A total of 1,300,000 shares
were bought back at a cost of $97,167. The cost was presented in the 2015 financial statements.
SAFETY AND HEALTH
Avenira aspires to a goal of causing zero harm to people. In this regard the Company is committed to undertake our
activities so as to protect the safety and health of employees, contractors, visitors and the communities in which we
operate.
There were no lost time or medically treated injuries during the year.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation with respect to its exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, as far as it is
aware is in compliance with all environmental legislation. The directors of the Group are not aware of any breach of
environmental legislation for the year under review.
17
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) DIRECTOR’S MEETING
During the year the Company held 15 meetings of directors. The attendance of directors at meetings of the Board were:
DIRECTORS MEETINGS
AUDIT COMMITTEE MEETINGS
REMUNERATION AND NOMINATION
COMMITTEE MEETINGS
Dick Block
Cliff Lawrenson
Richard O’Shannassy
Ian McCubbing
Timothy Cotton
Farouk Chaouni
David Mimran
A
15
15
10
15
10
4
6
B
15
15
10
15
12
8
6
A
1
*
1
1
*
*
*
B
1
*
1
1
*
*
*
A
1
*
1
1
*
*
*
B
1
*
1
1
*
*
*
Notes
A – Number of meetings attended.
B – Number of meetings held during the time the director held office or was a member of the Committee during the year.
* – Not a member of the Committee.
SHARES UNDER OPTION
At the date of this report there are 122,575,000 unissued ordinary shares in respect of which options are outstanding.
Balance at the beginning of the year
Movements of share options during the year
Expired on 3 January 2016 ($0.47)
Expired on 15 June 2016 ($0.22)
Issued, vesting at $0.12, exercisable at $0.10, on or before 30 June 2018
Issued, vesting at $0.18, exercisable at $0.15, on or before 30 June 2018
Issued, vesting at $0.25, exercisable at $0.25, on or before 30 June 2018
Issued, vesting at $0.25, exercisable at $0.25, on or before 24 September 2019
Total number of options outstanding as at 30 June 2016
Movements subsequent to year end:
Expired on 29 July 2016 ($0.18)
Exercised on 29 July 2016 ($0.18)
Exercised on 13 September 2016 ($0.10)
Total number of options outstanding as at the date of this report
The balance is comprised of the following:
NUMBER OF OPTIONS
40,050,000
(500,000)
(1,500,000)
3,000,000
3,000,000
3,000,000
80,000,000
127,050,000
(1,550,000)
(2,000,000)
(925,000)
122,575,000
EXPIRY DATE
18 June 2017
18 June 2017
18 June 2017
8 April 2017
20 Nov 2016
30 June 2018
30 June 2018
30 June 2018
GRANT DATE
21 June 2012
21 June 2012
21 June 2012
8 April 2013
20 Nov 2013
28 July 2015
28 July 2015
28 July 2015
24 September 2019
24 September 2015
EXERCISE PRICE (CENTS)
NUMBER OF OPTIONS
23
27
31
30
22.5
10
15
25
25
5,000,000
5,000,000
5,000,000
14,000,000
5,500,000
2,075,000
3,000,000
3,000,000
80,000,000
Total number of options outstanding at the date of this report
122,575,000
18
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in
any share issue of any other body corporate.
INSURANCE OF DIRECTORS AND OFFICERS
During or since the financial year, the Company has paid premiums insuring all the directors of Avenira Limited against
costs incurred in defending proceedings for conduct involving:
a. wilful breach of duty; or
b. a contravention of sections 182 or 183 of the Corporations Act 2001,
as permitted by section 199B of the Corporations Act 2001.
The total amount of insurance contract premiums paid is $49,271 (2015: $28,574).
NON AUDIT SERVICES AND INDEMNIFICATION OF AUDITORS
Details of amounts paid or payable to the auditor for audit and non-audit services provided during the period, and an
assessment by the Board of whether non-audit service provided during the period are compatible with general standards
of independence for auditors imposed by the Corporations Act 2001 are set out in Note 25 - Remuneration of Auditors,
to the Consolidated Financial Statements on page 68.
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young during or since the financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or any part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section
237 of the Corporations Act 2001.
CORPORATE GOVERNANCE
In recognising the need for the highest standard of corporate behaviour and accountability, the Directors of Avenira Limited
support and adhered to the principles of sound corporate governance. The Board recognises the recommendations of
the Australia Securities Exchange Corporate Governance Council, and considers that Avenira Limited is in compliance,
to the extent with those guidelines, which are of importance to the commercial operation of a junior listed resources
company. During the financial year, shareholders continued to receive the benefit of an efficient and cost-effective corporate
governance policy for the Company.
The Company has established a set of corporate governance policies and procedures and these can be found within the
Company’s Corporate Governance section on the Company’s website: http://www.avenira.com/about-us/governance
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 29.
REMUNERATION REPORT - AUDITED
The remuneration report is set out under the following main headings:
A.
Introduction
B. Remuneration governance
C. Overview of executive remuneration
D. Details of remuneration of Key Management Personnel
E. Executive KMP employment agreements
F. Overview of Non-executive Director remuneration
G. Shared-based compensation
H. Equity Holding
19
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) A. INTRODUCTION
The remuneration report for the year ended 30 June 2016 outlines the director and executive remuneration arrangements
of the Company and Group.
The information in this remuneration report has been provided in accordance with section 300A of the Corporations Act
2001. The information has been audited as required by section 308(3C) of the Corporations Act 2001.
For the purpose of this report, Key Management Personnel (“KMP”) of the Group are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Company and Group,
directly or indirectly, including any Director (whether executive or otherwise) of the Company.
The table below outlines the KMP of the Group during the financial year ended 30 June 2016. Unless otherwise
indicated, the individuals were KMP for the entire financial year.
NAME
POSITION
i) Non-executive Directors
Dick Block
Richard O’Shannassy
Ian McCubbing
Timothy Cotton
Farouk Chaouni
David Mimran
Christopher Pointon
ii) Executive Directors
Cliff Lawrenson
Independent Non-executive Chairman
Independent Non-executive Director (Resigned 14 March 2016)
Independent Non-executive Director
Non-executive Director (Appointed 23 September 2015)
Non-executive Director (Appointed 19 November 2015)
Non-executive Director (Appointed 2 March 2016)
Independent Non-executive Director (Appointed 30 June 2016)
Managing Director
iii) Other executive key management personnel
Rod Wheatley
Chief Financial Officer and Company Secretary
B. REMUNERATION GOVERNANCE
Remuneration and Nomination Committee
The Board retains overall responsibility for remuneration policies and practices within the Group.
The Board has established a Remuneration and Nomination Committee (“RNC”) which operates in accordance with
its charter as approved by the Board. A copy of the charter is available under the corporate governance section of the
Group’s website.
For the year ended 30 June 2016 the RNC comprises Non-executive Directors with a majority being independent directors.
The RNC is primarily responsible for making recommendations to the Board on remuneration arrangements for
Executive Directors, Non-executive Directors and other senior executives. The Corporate Governance Statement
provides further information on the role of this committee.
The RNC meets as required throughout the year. Refer to page 18 for the number of Committee meetings held during
the year. The Managing Director attends certain RNC meetings by invitation, where management input is required. The
Managing Director is not present during any discussions relating to his own remuneration arrangements.
Use of remuneration consultants
The RNC seeks external remuneration advice where necessary to ensure it is fully informed when making remuneration
decisions. Remuneration advisors are engaged by, and report directly to, the RNC.
No remuneration consultants were engaged during the financial year ended 30 June 2016. Subsequently, an independent
remuneration consultant, Gerard Daniels, was appointed in August 2016 to undertake an independent review of remuneration
for the 2017 financial year.
Voting and comments – 2015 Annual General Meeting (AGM)
The Company received 90% “Yes” votes cast on its Remuneration Report for the 2015 financial year. The Company did
not receive any specific feedback at the AGM regarding its remuneration practices.
20
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) C. OVERVIEW OF EXECUTIVE REMUNERATION
The remuneration policy of Avenira Limited has been designed to align executives’ objectives with shareholders and
business objectives. The Board of Avenira believes the policy to be appropriate and effective in its ability to:
•
•
attract and retain high quality directors and executives to run and manage the Company.
create goal congruence between directors, executives and shareholders.
The executive KMP receive an appropriate level and mix of remuneration consisting of fixed remuneration and variable
remuneration in the form of incentive opportunities.
The RNC reviews executive KMP packages annually by reference to the Group’s performance, executive performance
and comparable information from industry sectors and other listed companies in similar industries.
Elements of Executive Remuneration
The executive remuneration framework comprises of:
1. Fixed Remuneration - Base Salary, including superannuation
2. Variable Remuneration - Incentives
1. FIXED REMUNERATION - BASE SALARY, INCLUDING SUPERANNUATION
All executive KMPs receive a base cash salary (which is based on factors such as scope of the role, skills, experience
and length of service) and superannuation contributions. The executive KMPs receive a superannuation guarantee
contribution required by the government, which is currently 9.50%, and do not receive any other retirement benefits.
2. VARIABLE REMUNERATION - INCENTIVES
Incentives in the form of equities are provided to certain executive KMP at the Board’s discretion. The policy is
designed to provide a variable “at risk” component within the executive KMP’s total remuneration packages to
attract, retain and motivate the highest calibre of executive KMP and reward them for performance that results in
long term growth in shareholder wealth through achievement of the Company’s financial and strategic objectives.
Receipt of variable remuneration in any form is not guaranteed under any executive KMP’s employment contract.
2.1. PERFORMANCE RIGHTS
The Company has adopted an incentive plan comprising the “’Avenira Performance Rights Plan” (the Plan) to
reward executive KMP and key employees and consultants (“Participants”) for long term performance. Shareholders
approved the Plan at the Annual General Meeting (“AGM”) in November 2015. The Plan replaces the Company’s
Employee Share Option Plan.
The objective of the Plan is to:
•
•
•
•
enable the Company to recruit, incentivise and retain talented people needed to achieve the Company’s
business objectives.
link the reward of Participants with the achievements of strategic goals and the long term performance of
the Company.
align the financial interest of Participants with those of shareholders.
provide incentives to Participants to focus on superior performance that creates shareholder value.
The Plan provides for the issuance of performance rights (“Performance Rights”) which, upon satisfaction of the
relevant performance conditions attached to the Performance Rights, will result in the issue of a fully paid ordinary
share in the Company for each Performance Right. Performance Rights are issued for nil consideration and no
amount is payable upon conversion thereof.
Performance Rights granted under the Plan to eligible Participants will be linked to the achievement by the Company
of certain performance conditions as determined by the Board from time to time. These performance conditions must
be satisfied in order for the Performance Rights to vest. The Performance Rights also vest where there is a change
of control of the Company. Upon vesting of the Performance Rights, ordinary shares are automatically issued for no
consideration. If a performance condition of a Performance Right is not achieved by the earlier of, the milestone
date (if applicable) or expiry date, then the Performance Right will lapse. The Performance Rights will also lapse if the
Participant ceases employment with the Group. Executive Directors who are not eligible under the Plan were issued
Performance Rights outside of the Plan on the same terms and conditions as those that are eligible.
21
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) Given the strategic goals of the Company and the fact the Company is not currently cash generating the Board does
not provide short term incentive rewards in the form of cash bonuses. Instead, the Board adopted the Plan which
combines elements of a traditional short term incentive reward together with a long term incentive reward. This was
considered a cost effective and efficient reward to appropriately incentivise continued performance.
During the last quarter of 2015, Performance Rights were granted to certain KMP and other participants. The
Performance Rights expire two years after grant date and will vest over the two-year period on the achievement of the
following performance conditions in relation to the Baobab Phosphate Project:
1. 50% on commencement of commercial production being the date the first truck of sold or contracted product
departs the Baobab Phosphate Project site, provided that at that date the actual capital expenditure for the
Baobab Phosphate Project is within the capital expenditure budget for the Baobab Phosphate Project as
approved by the Board from time to time.(1)
2. 25% on the Baobab Phosphate Project achieving steady state commercial production which will occur when
over two consecutive months 75% of the annual production rate approved by the Board from time to time
is sold or contracted production, provided that the cost of production and product specification for the two
months’ period is within the range approved by the Board from time to time.(1)
3. 25% on accumulation of 100Mt of Inferred Resource of P2O5 at 20% or greater, capable of being converted
into saleable product.(1)
(1)
b.
In order for a Performance Right to vest following the satisfaction of the performance condition applying to that Performance Right,
the Board must, acting in good faith and in its sole discretion determine that:
a.
the Company has implemented a procedure to ensure compliance with the occupational health and safety policies and guidelines
as approved by the Board from time to time for the Company and its associated bodies corporate; and
in circumstances where the Satisfaction VWAP is lower than the Benchmark VWAP as at the date which is the last trading day
for the purposes of calculating the Satisfaction VWAP, the decrease is not a consequence of the manner in which the executive
management have performed their duties (i.e. if a minimum 20% increase in Share price has not been achieved over the 2 year’s life of
the Performance Rights, or a pro rata increase over a period less than 2 years, the Board must consider if this is due to the executive
management’s performance).
In paragraph (b) above:
Satisfaction VWAP means the VWAP of Shares for the 10 trading days immediately after the day the Company announces the
satisfaction of the applicable performance condition; and
Benchmark VWAP means 11 cents multiplied by a factor of 1.2, for the period ending on the expiry date of the Performance Rights or pro rata
for any part thereof.
If the Board makes a determination that the Company has not implemented health and safety procedures or, if applicable, that the
Share price not increasing by the target amount is related to the executive management performance of their duties, then it has
the discretion to determine what percentage (if any) of the Performance Rights linked to the performance condition which has been
satisfied will vest.
Each performance condition has a milestone date that the performance condition is required to be achieved by
otherwise the Performance Right will lapse. This date can be extended at the discretion of the Board.
The Board has determined the milestones dates as follows:
•
•
•
Tranche 1: 30 September 2016
Tranche 2: 31 May 2017
Tranche 3: 18 November 2017 (Executive Directors) and 3 December 2017 (other participants).
Details of Performance Rights issued during the year can be found on page 26 under the Details of Remuneration
heading with the Remuneration Report.
As at 30 June 2016 no Performance Rights had vested, therefore, no shares were issued for the financial year.
2.2. EMPLOYEE SHARE OPTION PLAN (ESOP)
No options were issued to KMP during the 2016 financial year as the ESOP was replaced by the Plan at the
Company’s 2015 AGM. As a result, there was no cost effect to the Company in 2016 financial year for the options
issued in prior periods.
Relationship between remuneration policy and company performance
The remuneration policy has been tailored to increase the direct goal congruence between shareholders, directors and
executives. Currently, this is facilitated through the issue of Performance Rights to executive KMP and options to the
directors to encourage the alignment of personal and shareholder interest. The Company believes this policy will be
effective in increasing shareholder wealth. For details of directors’ and executives’ interests in performance rights and
options at year end, refer to pages 26 and 27 of the remuneration report.
22
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) The table below shows the performance of the Company over the last 5 years:
EPS (cents)
Share price
2016
(2.31)
$0.19
2015
(17.5)
$0.071
2014
(1.4)
2013
6.2
2012
(1.3)
$0.081
$0.120
$0.145
As the Company is in the evaluation and development phase the performance of the Company is not related to the
profit or earnings of the Company.
D. DETAILS OF REMUNERATION OF KEY MANAGEMENT PERSONNEL (KMP)
The table below shows details of each component of total remuneration for KMP.
SHORT-
TERM
POST
EMPLOYMENT
OTHER
LONG-TERM
SALARY &
FEES
SUPER-
ANNUATION
LONG
SERVICE
LEAVE
SHARE-BASED PAYMENTS
TOTAL CASH
RELATED
OPTIONS(1)
PERFORMANCE
RIGHTS(2)
TOTAL
PERFORMANCE
RELATED
$
$
$
$
$
$
$
%
Directors
Cliff Lawrenson
2016
2015
550,000
550,000
52,250
52,250
24,978
14,171
627,228
616,421
-
-
124,202
-
751,430
616,421
Richard O’Shannassy(3)
2016
2015
Dick Block(4)
2016
2015
Ian McCubbing
2016
2015
Timothy Cotton(5)
2016
Farouk Chaouni(6)
2016
David Mimran(7)
2016
Christopher Pointon(8)
2016
Subtotal Directors
42,258
60,000
191,047
245,159
60,000
60,000
38,596
30,811
-
-
-
-
-
-
5,700
5,700
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,258
60,000
191,047
245,159
65,700
65,700
38,596
30,811
-
-
-
15,390
-
25,650
-
15,390
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,258
75,390
191,047
270,809
65,700
81,090
38,596
30,811
-
-
17%
-
-
20%
-
9%
-
19%
-
-
-
-
2016
2015
912,712
915,159
57,950
57,950
24,978
14,171
995,640
987,280
-
56,430
124,202 1,119,842
1,043,710
-
Other executive KPM
Rod Wheatley
2016
2015
242,000
242,000
22,990
22,990
19,712
11,779
284,702
276,769
-
716
38,638
-
323,340
277,485
12%
0%
Total KMP compensation
2016
2015
1,154,712
1,157,159
80,940
80,940
44,690
25,950
1,280,342
1,264,049
-
57,146
162,840 1,443,182
1,321,195
-
1. No options were issued to KMP during the 2016 financial year. The value of the share options in 2015 financial year represent the options granted
during 2013 as approved at the general meeting of shareholders held on 20 November 2013. These options were valued using a Black-Scholes option
pricing model for options and a market price for ordinary shares. The exercise prices of the options at the date of this report and at the date of issue
are at a price in excess of current market value. Refer to Note 23 for details.
2. Share based payments in 2016 financial year represent performance rights granted to executive KMPs in accordance with the Company’s
Performance Rights Plan and approval at the Annual General Meeting held on 18 November 2015. The fair value of the performance rights
was estimated at the grant date taking into the account both market and non-market based vesting conditions. The Monto-Carlo simulation
methodology was used to calculate the fair value of each performance right. Refer to Note 34 for further details.
3. The amount represents the total remuneration paid to Mr Richard O’Shannassy up to his resignation on 14 March 2016.
4. The amount represents the total remuneration paid to Mr Dick Block and includes $81,593 (2015: $145,577) of consulting services fee paid to Mr
Block for strategic advisory services provided during the year. Please refer to Other Transactions and Balances with KMPs and Their Related Parties
on page 6 for further details.
5. Mr Cotton was appointed 23 September 2015.
6. Mr Chaouni was appointed on 19 November 2015.
7. Mr Mimran was appointed on 2 March 2016. No remuneration was paid to Mr Mimran up to 30 June 2016.
8. Mr Pointon was appointed on 30 June 2016. No remuneration was paid to Mr Pointon up to 30 June 2016.
23
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...)
E. EXECUTIVE KMP EMPLOYMENT AGREEMENTS
The Group has entered into formal employment contracts with Executive KMP. The employment contracts for executive
KMP have no fixed term and do not prescribe how remuneration levels are to be modified from year to year. A summary
of the main provisions of these contracts for the year ended 30 June 2016 are set out below:
NAME
TERMS
Cliff Lawrenson
(Managing Director)
Base salary exclusive of superannuation of $550,000 reviewed annually on 31 December
(or such other time as agreed).
3 months’ notice by Mr Lawrenson. 12 months by Company and upon change of control.
Termination payments to reflect appropriate notice, except in cases of termination for cause.
Rod Wheatley
(Chief Financial
Officer and
Company Secretary)
Base salary exclusive of superannuation of $242,000 reviewed annually on 31 December
(or such other time as agreed).
1 month notice by Mr Wheatley, 1 month notice by Company and 6 months’ notice on
change of control.
Termination payments to reflect appropriate notice, except in cases of termination for cause.
There was no increase in executive KMP base salary for the year end 30 June 2016.
F. OVERVIEW OF NON-EXECUTIVE DIRECTOR REMUNERATION
The Board policy is designed to attract and retain high calibre directors and to remunerate Non-executive Directors at
market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to
the Non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability.
The Chairman’s fee will be determined independently to the fees of the Non-executive Directors based on comparative
roles in the external market. External advice from independent remuneration consultants is sought when required.
The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by
shareholders at the Annual General Meeting. The most recent determination was at the November 2012 Annual
General Meeting, where shareholders approved the maximum aggregate amount of fees that can be paid to Non-
executive Directors be $350,000.
The Company makes superannuation contributions on behalf of the Non-executive Directors in accordance with
its Australian statutory superannuation obligations, and each director may sacrifice part of their fee for further
superannuation contribution by the Company.
Fees for Non-executive Directors are not linked to the performance of the Group. However, to align directors’ interests
with shareholder interests, the directors are encouraged to hold shares in the Company. Any equity components
of Non-executive Directors’ remuneration, including the issue of options or performance rights, are required to be
approved by shareholders prior to award.
During the 2014 financial year, in accordance with the resolution passed at the November 2013 Annual General Meeting,
the Chairman and Non-executive Directors at that time were issued options in the Company. For further information on
these options refer to page 27 of the remuneration report.
The table below summaries the Non-executive fees for the 2016 financial year:
Board
Chair
Non-executive Directors
Committee
Audit Chair
Remuneration and Nomination Chair
FEES
US$80,000
A$50,000
A$10,000
A$10,000
24
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) Termination payments
The Board must approval all termination payments provided to all employees at the level of director, executive or
senior management to ensure such payments reflect the Company’s remuneration policy and are in accordance with
the Corporations Act 2001.
Loans to key management personnel
In 2016 and 2015 there were no loans to KMP.
Other transactions and balances with KMPs and their related parties
Mr Dick Block
In addition to the Non-executive Chairman fee disclosed in section D, Mr Block was engaged to provide strategic
advisory services on a consulting basis. Total consultancy fees of $81,593 (2015: $145,577) were charged by Mr Block
during the year. These services, in particular, related to issues pertaining to the company’s position as a shareholder
and licensee of JDCP. Mr Block acted as the Company’s primary contact person on all JDCP matters including assisting
with the evolution of the growing business relationship plus providing support to JDCP with strategic input. Fees were
charged at a fixed retainer of US$10,000 per month. At 30 June 2016 advisory fees paid to Mr Block impacted the
statement of profit and loss and other comprehensive income with $20,398 recognised in Administrative and Other
Expenses. Further $61,195 initially impacted the statement of financial position and was recognised in the capitalised
exploration and evaluation expenditure before subsequently being impaired. The agreement had no fixed term,
however required one month notification of termination. The agreement was terminated on 30 June 2016. As at 30
June 2016 US$40,000 was outstanding, which was paid in July 2016.
Mr Richard O’Shannassy
In addition to the Non-executive Director fees disclosed in section D, Mr O’Shannassy was engaged to provide
legal services. The total payments made to Mr O’Shannassy was $36,000 (2015: $48,000) for legal consultancy fees
paid to Richard O’Shannassy & Co Pty Ltd, the firm through which Mr O’Shannassy provides legal services to the
Group. Fees were charged on a monthly retainer of $4,000. As at 30 June 2016 legal fees paid to Mr O’Shannassy’s
company impacted the statement of profit and loss and other comprehensive income with $36,000 recognised in
Administrative and Other Expenses. There was no impact on the statement of financial position. The agreement has
no fixed term and requires one month notification of termination.
G. SHARE-BASED COMPENSATION
Share based compensation – Performance Rights
Performance rights affecting remuneration in the current or a future reporting period are as follows:
Key terms of performance rights held by KMP
GRANT
DATE
NUMBER
GRANTED
VESTING
DATE
EXPIRY DATE
FAIR VALUE
AT GRANT
DATE, $
EXERCISE
PRICE, $
NUMBER
VESTED
VESTED
%
30 June 2016
Directors
18-Nov-15
1,875,000
30-Sep-16
18-Nov-17
Cliff Lawrenson
18-Nov-15
937,500
31-May-17
18-Nov-17
18-Nov-15
937,500
18-Nov-17
18-Nov-17
Other Executive KMP
03-Dec-15
825,000
30-Sep-16
03-Dec-17
Rod Wheatley
03-Dec-15
412,500
31-May-17
03-Dec-17
03-Dec-15
412,500
03-Dec-17
03-Dec-17
$0.092
$0.092
$0.092
$0.067
$0.067
$0.067
nil
nil
nil
nil
nil
nil
-
-
-
-
-
-
-
-
-
-
-
-
Performance rights granted carry no dividend or voting rights. When exercisable, performance rights are convertible
into one ordinary share per right. Further information is set out in Note 34 of the financial statements.
25
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) Value of performance rights held by KMP
FAIR VALUE OF PR
GRANTED DURING
THE YEAR, $(1)
VALUE OF PR VESTED
DURING THE YEAR, $
VALUE OF PR
LAPSED DURING
THE YEAR, $
VALUE OF PR
INCLUDED IN
REMUNERATION
REPORT FOR THE
YEAR, $(2)
REMUNERATION
CONSISTING
OF PR FOR THE
YEAR, %
30 June 2016
Directors
Cliff Lawrenson
Other Executive KMP
Rod Wheatley
345,000
110,550
-
-
-
-
124,202
38,638
17%
12%
1. The total fair value of performance rights granted is estimated based on the number of rights issues multiplied by the fair value of a right at the grant
date. Fair value at a grant date is determined using the Monto-Carlo Simulation pricing methodology. Please refer to Note 34 for further details.
2. The assessed total fair value of performance rights granted is allocated equally over the period from grant date to vesting date, being the relevant
performance milestone and is factored by the probability of achievement of vesting performance conditions. As at 30 June 2016 the Board considered
the percentage likelihood of achieving the performance milestones as 1st Milestone – 75%, 2nd Milestone – 50%, 3rd Milestone – 60% The above
amounts are recognised as an expense in the statement of profit and loss for the period ended 30 June 2016. Please refer to Note 34 for further details
H. EQUITY HOLDINGS
The number of performance rights and contingent share rights in the Company held during the financial year by each
director of Avenira Limited and other KMP of the Group, including their personally related parties, are set out below:
BALANCE
AT START
OF THE
YEAR
GRANTED AS
COMPENSATION
OTHER
CHANGES
VESTED
LAPSED
BALANCE AT
END OF THE
YEAR
VESTED AND
EXERCISABLE
UNVESTED
2016
Directors
Cliff Lawrenson
Timothy Cotton(1)
Farouk Chaouni(1)
Richard O’Shannassy
Ian McCubbing
Dick Block
David Mimran
Christopher Pointon
Other Executive KMP
Rod Wheatley
-
-
-
-
-
-
-
-
-
3,750,000
-
-
-
-
-
-
-
-
-
1,650,000
80,000,000 (40,000,000)
80,000,000
(40,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,750,000
40,000,000
40,000,000
-
-
-
-
-
1,650,000
-
-
-
-
-
-
-
-
-
3,750,000
40,000,000
40,000,00
-
-
-
-
-
1,650,000
1. Mr Timothy Cotton and Mr Farouk Chaouni collectively received 80,000,000 contingent share rights through their related party, Baobab Partners LLC,
on the day of acquisition of Baobab Mining & Chemical Corporation SA by the Company on 24 September 2015. 40,000,000 of these share rights
vested on 11 November 2015. Please refer to Note 36 (Business Combination) for further details.
26
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) Option Holdings
The number of options over ordinary shares in the Company held during the financial year by each director of Avenira
Limited and other KMP of the Group, including their personally related parties, are set out below:
BALANCE
AT START
OF THE
YEAR
GRANTED AS
COMPENSATION
OTHER
CHANGES
EXERCISED
EXPIRED
BALANCE
AT END
OF THE
YEAR
VESTED AND
EXERCISABLE
UNVESTED
2016
Directors
Cliff Lawrenson
15,000,000
Richard O’Shannassy(1)
1,500,000
Ian McCubbing
Dick Block
1,500,000
4,000,000
Timothy Cotton(2)
14,000,000
Farouk Chaouni(2)
14,000,000
David Mimran
Christopher Pointon
-
-
Other Executive KMP
Rod Wheatley
500,000
-
-
-
-
-
(1,500,000)
-
-
- 80,000,000
- 80,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 15,000,000
15,000,000
-
-
-
-
1,500,000
1,500,000
(1,500,000) (3)
2,500,000
2,500,000
- 94,000,000
94,000,000
- 94,000,000
94,000,000
-
-
-
-
-
-
-
500,000
500,000
-
-
-
-
-
-
-
-
-
1. Mr Richard O’Shannassy resigned as a director on 14 March 2016 and is not considered a KMP from that date.
2. Mr Timothy Cotton and Mr Farouk Chaouni collectively held 14,000,000 options prior to their commencement as directors of the Group and
collectively received 80,000,000 options through their related party, Baobab Partners LLC, on the day of acquisition of Baobab Mining & Chemical
Corporation SA by the Company on 24 September 2015. Please refer to Note 36 (Business Combination) for further details.
3. Options were granted in June 2012.
All vested options were exercisable at the end of the year.
Shareholdings
The number of shares in the Company held during the financial year by each director of Avenira Limited and other
KMP of the Group, including their personally related parties, are set out below.
BALANCE AT START
OF THE YEAR
RECEIVED DURING THE
YEAR ON EXERCISE
OF OPTIONS/ RIGHTS
CONVERTED
OTHER CHANGES
DURING THE YEAR(1)
BALANCE AT END OF
THE YEAR
2016
Directors
Cliff Lawrenson
Richard O’Shannassy(2)
Ian McCubbing
Dick Block
Timothy Cotton(3)
Farouk Chaouni(3)
David Mimran(4)
Christopher Pointon
Other Executive KMP
Rod Wheatley
1,901,868
1,147,652
200,000
500,000
14,000,000
14,000,000
-
-
-
-
-
-
-
40,000,000
40,000,000
-
-
-
450,000
(1,147,652)
200,000
-
100,000,000
100,000,000
104,750,000
-
-
2,351,868
-
400,000
500,000
154,000,000
154,000,000
104,750,000
-
-
1. All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and conditions
no more favourable than those the Group would have adopted if dealing at arm’s length.
2. Mr Richard O’Shannassy resigned as a director on 14 March 2016 and is not considered a KMP from that date.
3. Mr Timothy Cotton and Mr Farouk Chaouni collectively held 14,000,000 shares prior to their commencement as directors of the Group and collectively
received through their related party, Baobab Partners LLC 140,000,000 shares as part of acquisition of Baobab Mining & Chemical Corporation SA by the
Company. Please refer to Note 36 (Business Combination) for further details
4. Mr Mimran acquired and holds shares through his related party, Tablo Corporation, which is an affiliate of the Mimran Group. The shares were issued
as part of the investment transaction where Mimran Group acquired 20% interest in Baobab Miming and Chemicals Corporation SA, the Company’s
subsidiary in Senegal. Please refer to Note 23 for further details.
27
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) No ordinary shares in the Company were provided as a result of the exercise of remuneration options or conversion of
performance rights to directors of Avenira Limited or other KMP of the Group for the current year.
None of the shares above are held nominally by the directors or any of the KMP.
There were no other transactions and balances with KMP and their related parties other than as disclosed.
End of Remuneration Report
Signed in accordance with a resolution of the directors.
CLIFF LAWRENSON
Managing Director
Perth, 30 September 2016
28
AVENIRA LIMITED AND CONTROLLED ENTITIESDIRECTORS’ REPORT (cont...) AUDITOR’S INDEPENDENCE LETTER
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of Avenira Limited
As lead auditor for the audit of Avenira Limited for the year ended 30 June 2016, I declare to the best of
my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Avenira Limited and the entities it controlled during the financial period.
Ernst & Young
Gavin Buckingham
Partner
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
29
GB:EH:AVENIRA:020
AVENIRA LIMITED AND CONTROLLED ENTITIES
QUALIFYING STATEMENTS
STATEMENT OF GOVERNANCE ARRANGEMENTS AND INTERNAL CONTROLS
Governance of Avenira Limited’s mineral resources estimation process is a key responsibility of the Executive
Management of the Company.
The Geological Manager of the Company oversees technical reviews of the estimates and the evaluation
process is augmented by utilising Avenira’s in-house knowledge in operational and project management,
ore processing and commercial/financial areas.
The Geological Manager is responsible for managing all Avenira’s drilling programs, including resource definition drilling.
The estimation of resources is done by an independent contractor, MPR Geological Consultants Pty Ltd.
The Company has adopted quality assurance and quality control protocols based on current and best practice in regard
to all field aspects including drill hole surveying, drill sample collection, sample preparation, sample security, provision
of duplicates, blanks and matrix-matched certified reference materials. All geochemical data generated by laboratory
analysis is examined and analysed by the Geological Manager before accession to the Company database.
Data is subject to additional vetting by the independent contractor who carries out the resource estimates. Resource
estimates are based on well-founded, industry-accepted assumptions and compliance with standards set out in the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
Mineral resource estimates are subject to peer review by the independent contractor and a final review by Avenira’s
Executive Management before market release.
Avenira Limited reports its mineral resources and ore reserves on an annual basis, in accordance with the Australian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC code) 2012 Edition.
COMPLIANCE STATEMENT
Information in this report relating to Exploration Results or estimates of Mineral Resources or Ore Reserves has been
extracted from the reports listed below. The reports are available to be viewed on the company website at: www.avenira.com
BAOBAB PHOSPHATE PROJECT:
27 April 2015:
Minemakers to acquire a potential near-term production rock phosphate project in the Republic of Senegal
11 May 2015:
Minemakers delivers maiden Inferred Resource for Baobab Rock Phosphate Project in Republic of Senegal
22 September 2015: Baobab Phosphate Project update
7 December 2015: Maiden Indicated Mineral Resource at Baobab Phosphate Project
7 January 2016:
Technical Report Mineral Resource Estimation for the Gadde Bissik Phosphate Deposit, Republic of Senegal
WONARAH PROJECT:
15 March 2013:
Technical Report Mineral Resource Estimation for the Wonarah Phosphate Project, Northern Territory, Australia
30 April 2014:
Quarterly activities report
The company confirms that it is not aware of any new information or data that materially affects the information included in the
original market announcements and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and
technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially
changed. The company confirms that the form and context in which the Competent Person’s findings are presented have not been
materially modified from the original market announcement.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
All statements, trend analysis and other information contained in this document relative to markets for Avenira’s trends in
resources, recoveries, production and anticipated expense levels, as well as other statements about anticipated future events
or results constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use
of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect” and “intend” and statements that an event
or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. Forward-looking
statements are subject to business and economic risks and uncertainties and other factors that could cause actual results of
operations to differ materially from those contained in the forward-looking statements. Forward-looking statements are based
on estimates and opinions of management at the date the statements are made. Avenira does not undertake any obligation
to update forward-looking statements even if circumstances or management’s estimates or opinions should change. Investors
should not place undue reliance on forward-looking statements.
30
AVENIRA LIMITED AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2016
Continuing Operations
REVENUE
Other income
EXPENDITURE
Depreciation and amortisation expense
Salaries and employee benefits expense
Exploration expenditure
Impairment of exploration and evaluation expenditure
Write off of exploration and evaluation expenditure
Impairment losses on available-for-sale financial assets
Impairment losses on derivative financial instruments
Net loss on disposal of subsidiary
Doubtful debts
Share based payment expense
Net foreign currency loss
Administrative and other expenses
LOSS BEFORE INCOME TAX
INCOME TAX BENEFIT/(EXPENSE)
CONSOLIDATED
NOTES
2016
$
2015
$
4
5
14
14
6
34
6
7
680,401
108
(120,490)
(1,607,741)
(643,900)
(574,962)
(635,125)
-
-
(1,354,707)
(93,588)
(489,742)
(192,683)
(4,432,266)
(9,464,695)
-
713,937
90,732
(85,484)
(1,779,380)
(1,780,615)
(34,432,307)
-
(1,463,005)
(635,481)
-
(727,762)
(61,833)
(3,846)
(2,853,073)
(43,018,117)
-
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS
(9,464,695)
(43,018,117)
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to Profit or Loss
Exchange differences on translation of foreign operations
Reclassification of foreign operations on disposal
Exchange differences arising during the year
Available-for-Sale-Financial assets
Net fair value loss on available-for-sale financial assets
Impairment of available for-sale financial assets reclassified to profit and loss for the year
Other comprehensive income for the year, net of tax
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
Loss for the year is attributable to:
Owners of Avenira Limited
Non-controlling interest
Total comprehensive loss for the year is attributable to:
Owners of Avenira Limited
Non-controlling interest
LOSS PER SHARE
From continuing operations
Basic loss per share (cents)
Diluted loss per share (cents)
2,420,842
(1,369,418)
1,051,424
-
-
-
1,051,424
(8,413,271)
(9,324,324)
(140,371)
(9,464,695)
(7,957,769)
(455,502)
(8,413,271)
-
17,618
17,618
(1,338,049)
1,463,005
124,956
142,574
(42,875,543)
(42,990,545)
(27,572)
(43,018,117)
(42,847,971)
(27,572)
(42,875,543)
24(b)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the Notes to the
Consolidated Financial Statements
31
33
33
(2.31)
(2.31)
(17.5)
(17.5)
AVENIRA LIMITED AND CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Assets held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Available-for-sale financial assets
Plant and equipment
Capitalised exploration and evaluation expenditure
Capitalised mine development expenditure
Intangible assets
Goodwill
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Liabilities directly associated with the assets held for sale
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Provisions
Deferred tax liabilities
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Reserves directly associated with the assets held for sale
Accumulated losses
Capital and reserves attributable to members of Avenira
Limited
Non-controlling interest
TOTAL EQUITY
CONSOLIDATED
NOTES
2016
$
2015
$
8
9
18
10
11
13
14
15
16
17
19
20
18
21
22
23
24(a)
24(a)
24(b)
30
24,473,574
1,657,986
26,131,560
-
26,131,560
1,491,217
15,629
800,789
15,418,499
35,526,331
192,619
4,746,961
58,192,045
84,323,605
3,154,788
181,814
3,336,602
-
3,336,602
4,018,459
4,746,961
8,765,420
12,102,022
72,221,583
15,388,406
317,731
15,706,137
287,863
15,994,000
1,481,600
15,629
32,471
16,000,000
-
202,095
-
17,731,795
33,725,795
1,886,729
127,128
2,013,857
647,128
2,660,985
1,333,139
-
1,333,139
3,994,124
29,731,671
119,817,389
26,036,371
-
(81,189,960)
89,901,304
13,857,599
(2,042,989)
(71,865,636)
64,663,800
29,850,278
7,557,783
72,221,583
(118,607)
29,731,671
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the
Consolidated Financial Statements.
32
AVENIRA LIMITED AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2016
CONSOLIDATED
NOTES
ISSUED
CAPITAL
RESERVES
ACCUMULATED
LOSSES
TOTAL
NON-
CONTROLLING
INTEREST
TOTAL
ATTRIBUTABLE TO OWNERS OF AVENIRA LIMITED
BALANCE AT 30 JUNE 2014
Loss for the year
Other comprehensive
income for the year
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR
TRANSACTIONS WITH
OWNERS IN THEIR
CAPACITY AS OWNERS
Shares issued during the year
Share buy back
Employee share options
De-recognition of non-
controlling interest relating
to subsidiary deregistered
$
$
$
$
$
$
89,927,470
11,610,203
(28,875,091)
72,662,582
(148,357)
72,514,225
-
-
-
-
(42,990,545)
(42,990,545)
(27,572)
(43,018,117)
142,574
-
142,574
-
142,574
142,574
(42,990,545)
(42,847,971)
(27,572)
(42,875,543)
71,000
(97,166)
-
-
-
-
61,833
-
-
-
-
-
71,000
(97,166)
61,833
-
-
-
71,000
(97,166)
61,833
-
57,322
57,322
BALANCE AT 30 JUNE 2015
89,901,304
11,814,610
(71,865,636)
29,850,278
(118,607)
29,731,671
Loss for the year
Other comprehensive
income for the year
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR
TRANSACTIONS WITH
OWNERS IN THEIR
CAPACITY AS OWNERS
Shares issued during the year
Share issue transaction costs
Share based payments
34
Share based payments on
acquisition of subsidiary
De-recognition of non-
controlling interest
Non-controlling interest
Sale of 20% interest in
BMCC to Mimran
30
-
-
-
-
(9,324,324)
(9,324,324)
(140,371)
(9,464,695)
1,366,555
-
1,366,555
(315,131)
1,051,424
1,366,555
(9,324,324)
(7,957,769)
(455,502)
(8,413,271)
30,070,918
(154,833)
-
-
-
-
-
-
-
489,742
4,900,000
-
-
7,465,464
-
-
-
-
-
-
-
30,070,918
(154,833)
489,742
4,900,000
-
-
-
-
30,070,918
(154,833)
489,742
4,900,000
-
-
118,607
118,607
8,013,285
8,013,285
7,465,464
-
7,465,464
BALANCE AT 30 JUNE 2016
119,817,389
26,036,371
(81,189,960) 64,663,800
7,557,783 72,221,583
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the
Consolidated Financial Statements.
33
AVENIRA LIMITED AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 JUNE 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Payments for exploration expenditure
Receipts for other income
Interest received
CONSOLIDATED
NOTES
2016
$
2015
$
(6,918,066)
(643,900)
100,781
384,349
(3,701,786)
(1,780,615)
7,240
737,879
NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES
32
(7,076,836)
(4,737,282)
CASH FLOWS FROM INVESTING ACTIVITIES
Research and development tax receipt
Expenditure on mining interests
Payments for mine development
Payments for plant and equipment
Proceeds on sale of plant and equipment
Payments for security deposits
Refund of security deposits
Proceeds on sale of subsidiary
Cash balance from subsidiary acquired
Proceeds from disposal of interest in subsidiary
Cash outflow relating to assets held for sale
Loans to other entities
286,612
(2,582,464)
(12,694,681)
(222,758)
908
(103,013)
94,500
1,170,965
117,255
15,478,749
213,728
(1,196,279)
-
-
18,319
(215,000)
55,000
-
-
-
-
-
(3,065)
(718,100)
18
NET CASH INFLOW/ (OUTFLOW) FROM INVESTING ACTIVITIES
1,546,073
(1,845,397)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Transaction costs on issue of shares
Payment for share buyback
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF
THE FINANCIAL YEAR
15,373,376
(154,833)
-
15,218,543
9,687,780
15,388,406
(602,612)
-
-
(97,167)
(97,167)
(6,679,846)
22,075,533
(7,281)
8
24,473,574
15,388,406
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated
Financial Statements.
34
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of Avenira Limited and its subsidiaries (the “Company” or the “Group). The
financial statements are presented in the Australian currency. Avenira Limited is a for profit company limited by shares,
domiciled and incorporated in Australia. The Company’s principal place of business is Ground Floor, 20 Kings Park
Road, West Perth WA 6005. The financial statements were authorised for issue by the directors on 30 September 2016.
The directors have the power to amend and reissue the financial statements.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Compliance with IFRS
The consolidated financial statements of the Avenira Limited Group comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared on an accrual 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.
Going concern
The Group’s cashflow forecast for the period ending 30 September 2017 reflects that the Group has sufficient working
capital to enable it to continue as a going concern.
The Group is however in the process of ramping up the Baobab Phosphate Project in Senegal, and accordingly certain
assumptions included in the Group’s cashflow forecast relating specifically to the production and sale of phosphate
product have not yet been achieved. Should these assumptions either not be achieved or not achieved within the
timeframes expected the Group may be required to raise additional working capital in the form of debt or equity. The
Directors are satisfied that additional working capital can be secured if it is required.
In the event that the Group is unable to raise additional working capital, if required, there is a significant uncertainty as
to whether the Group will be able to meet its debts as and when they fall due and thus continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of the recorded
asset amounts, nor to the amounts or classification of liabilities that might be necessary should the Group not be able
to continue as a going concern.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Avenira Limited
(“Company” or “Parent Entity”) as at 30 June 2016 and the results of all subsidiaries for the year then ended. Avenira
Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls
an entity when the Group 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. They are de-consolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer Note 1(h)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, statement of changes in equity and statement of financial position respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company.
35
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
(ii) Joint Arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the
contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.
JOINT OPERATIONS
The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share
of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial
statements under the appropriate headings.
JOINT VENTURES
Interest in joint ventures are accounted for using the equity method, after initially being recognised at cost in the
consolidated statement of financial position.
(iii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the financial
statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in
associates includes goodwill (net of any accumulated impairment loss), is identified on acquisition.
(iv) Equity Method
The Group’s share of the investee post-acquisition profits or losses is recognised in the statement of comprehensive
income, and its share of acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment. Dividends receivable from associates and joint
ventures are recognised in the parent entity’s profit or loss, whilst in the consolidated financial statements they reduce
the carrying amount of the investment.
When the Group’s share of losses in an equity accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent
of the Group’s interest in other entities. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where
necessary to ensure consistency with the policies adopted by the Group.
(v) Changes in ownership interests
The Group treats transactions with non-controlling interests in subsidiaries that do not result in a loss of control as transactions
with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts
of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between
the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in retained
earnings within equity attributable to owners of Avenira Limited.
When the Group ceases to have control of a subsidiary, any retained interest in the entity is remeasured to its fair value
with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the
purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset.
In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted
for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a subsidiary is reduced but joint control or significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income are re-classified to profit or
loss where appropriate.
(c) 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 full Board of Directors.
36
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Avenira Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the net investment in a foreign operation.
Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or
loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through
profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-
monetary financial assets such as equities classified as available-for-sale financial assets are included in the fair value
reserve in equity.
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date
of that statement of financial position;
•
Income and expenses for each statement of comprehensive income are translated at average exchange rates
(unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
• All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are
repaid, a proportionate share of such exchange differences is reclassified to profit or loss, as part of the gain or loss on
sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entities and translated at the closing rate.
(e) Revenue recognition
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets.
Sales revenue is recognised and measured at the fair value of consideration received or receivable when the significant
risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably.
Service revenue is recognised by reference to the stage of completion. Stage of completion is measured by reference to
labour hours incurred to date as a percentage of total estimated labour hours for each contract. When the contract outcome
cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.
(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on
the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period in the countries where the Company’s subsidiaries and associated entities operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
37
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting
date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(g) Leases
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases (Note 27). Payments made under operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations. The consideration transferred
for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting
from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition
date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at
fair value or on the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the
fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value
of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the
difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being
the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
(i) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units). Non-financial assets other than goodwill that have been impaired are reviewed for possible reversal
of the impairment at each reporting date.
38
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
(j) Cash and cash equivalents
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in
value, and bank overdrafts.
(k) Trade and other receivables
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less an allowance for impairment. An estimate for doubtful debts is made when there is objective
evidence of impairment. Bad debts are written off as incurred.
(l) Investments and other financial assets
CLASSIFICATION
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends
on the purpose for which the investments were acquired. Management determines the classification of its investments
at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in
this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for
trading unless they are designated as hedges. Assets in this category are classified as current assets.
(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. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables in the statement of financial position.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to
sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and
reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those
with maturities less than 12 months from the reporting date, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the reporting date. Investments are designated
available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to
hold them for the medium to long term.
RECOGNITION AND DERECOGNITION
Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets
not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially
recognised at fair value and transaction costs are expensed to the statement of comprehensive income. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity
are included in the statement of comprehensive income as gains and losses from investment securities.
39
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
SUBSEQUENT MEASUREMENT
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains
or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in
the statement of comprehensive income within other income or other expenses in the period in which they arise. Gains or losses
arising from changes in the fair value of the available-for-sale financial assets are recognised in other comprehensive income.
Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income
as part of revenue from continuing operations when the Group’s right to receive payments is established.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed
between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount
of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other
changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities
classified as available-for-sale are recognised in equity.
Details on how the fair value of financial investments is determined are disclosed in Note 2.
IMPAIRMENT
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial
assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the
fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is
removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the
statement of comprehensive income on equity instruments classified as available-for-sale are not reversed through the
statement of comprehensive income.
If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost, the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding
future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective
interest rate. The loss is recognised in the statement of comprehensive income.
(m) Plant and equipment
All plant and equipment is stated at historical cost less depreciation and impairment. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to the statement of comprehensive income during the
reporting period in which they are incurred.
Depreciation of plant and equipment is calculated using the reducing balance method or straight line method,
depending on a type of an asset, and it allocates their cost or re-valued amounts, net of their residual values, over their
estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter
lease term. The rates vary between 10% and 40% per annum.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
the statement of comprehensive income. When re-valued assets are sold, it is Group policy to transfer the amounts
included in other reserves in respect of those assets to retained earnings.
(n) Exploration and evaluation costs
Exploration and evaluation costs for each area of interest in the early stages of project life are expensed as they are
incurred up until pre-feasibility.
40
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
Exploration and evaluation costs for each area of interest that has progressed to pre-feasibility are accumulated and
carried forward where right of tenure of the area of interest is current and they are expected to be recouped through
sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities
in the area of interest have not at the end of the reporting period reached a stage that permits reasonable assessment
of the existence of economically recoverable reserves, and activates and significant operations in, or in relation to, the
area of interest are continuing.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect
to that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end
of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.
(o) Mine development
Once technical feasibility and commercial viability of extraction of mineral resources in a particular area of interest become
demonstrable, the exploration and evaluation assets attributable to that area of interest are reclassified as mine development.
Mine development represents the direct and indirect costs incurred in preparing mines for production and includes
plant and equipment under construction, stripping and waste removal costs incurred before production commences.
These costs are capitalised to the extent that they are expected to be recouped through the successful exploitation
of the related mining leases. Once production commences, these costs are transferred to Mine Properties or Plant
and Equipment, as relevant, and will be amortised using the units of production method based on the estimated
economically recoverable reserves to which they relate or are written off if the mine property is abandoned.
PRE-STRIP COSTS
In open pit mining operations, it is necessary to remove overburden and waste materials to access the ore. This process
is referred to as stripping and the Group capitalises stripping costs incurred during the development of a mine (or pit)
as part of the investment in constructing the mine (pre-strip). These costs are subsequently amortised over the life of a
mine (or pit) on a unit of production basis.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year
which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(q) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The Group does not expect its long service leave benefits to be settled wholly within 12 months of each reporting date.
The Group recognises a liability for long service leave measured as the present value of expected future payments to
be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wages and salary levels, experience of employee departures, and periods of
service. Expected future payments are discounted using market yields at the reporting date on high quality corporate
bonds with terms to maturity and currencies that match, as closely as possible the estimated future cash outflows.
(iii) Share-based payments
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’)
refer to Note 34. The cost of these equity-settled transactions with employees is measured by reference to the fair value
at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option
pricing model and Monte Carlo methodology as appropriate.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (‘vesting date’).
41
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
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 number of options or performance rights that, in the
opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information
at balance date. 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.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon
a market condition.
Where 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.
(r) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition
of a business are not included in the cost of the acquisition as part of the purchase consideration.
(s) Provision for rehabilitation and restoration
The Group records the present value of the estimated cost of legal and constructive obligations to restore operating
locations in the period in which the obligation arises. The nature of restoration activities includes the dismantling
and removing of structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and
restoration, reclamation and revegetation of affected areas.
Typically, the obligation arises when the asset is installed or the ground/environment is disturbed at the production
location. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of
the related mining asset. Over time, the liability is increased for the change in the present value based on a discount
rate appropriate to the market assessments and the risks inherent in the liability. Additional disturbances or changes
in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability
when incurred. The unwinding of the effect of discounting the provision is recorded as a finance cost in the statement
of comprehensive income. The capitalised carrying amount is depreciated over the useful life of the related asset.
Costs incurred that relate to an existing condition caused by past operations, and do not have future economic benefit,
are expensed as incurred.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any costs
of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(u) Intangible assets
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives.
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that
are acquired separately are carried at cost less accumulated impairment losses.
42
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
(v) Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending
on the requirements of the applicable Accounting Standard.
Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e.
unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine
fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.
To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the
market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the
most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises
the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account
transaction costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset
in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment
arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial
instruments, by reference to observable market information where such instruments are held as assets. Where this
information is not available, other valuation techniques are adopted and, where significant, are detailed in the
respective note to the financial statements.
VALUATION TECHNIQUES
In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation
techniques to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in
the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant
data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques
selected by the Group are consistent with one or more of the following valuation approaches:
Market approach: valuation techniques that use prices and other relevant information generated by market transactions
for identical or similar assets or liabilities.
Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single
discounted present value.
Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or
liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques
that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market
data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would
generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available
and therefore are developed using the best information available about such assumptions are considered unobservable.
FAIR VALUE HIERARCHY
AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair
value measurements into one of three possible levels based on the lowest level that an input that is significant to the
measurement can be categorised into as follows:
Level 1
Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date.
Level 2
Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly.
43
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
Level 3
Measurements based on unobservable inputs for the asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one or more
valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.
If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or
more significant inputs are not based on observable market data, the asset or liability is included in Level 3.
The Group would change the categorisation within the fair value hierarchy only in the following circumstances:
i.
ii.
If a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or
If significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa.
When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e.
transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred.
(w) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(x) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant
relates to an asset it is recognised in the statement of financial position against the asset, and subsequently recognised
as income in equal amounts over the expected useful life of the related asset.
(y) Comparative figures
When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation
for the current financial year.
When the Group applies an accounting policy retrospectively, makes a retrospective restatement or reclassifies items
in its financial statements, a statement of financial position as at the beginning of the earliest comparative period will
be disclosed.
No reclassification of the presentation of financial information has occurred during the year and as such, the
comparability of years has been sustained.
(z) New accounting standards for application in future periods
New and revised AASB’s affecting amounts reported and/or disclosures in the financial statements
The Group has adopted all new and amended Australian Accounting Standards and Interpretations effective from 1
July 2015 including:
• AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality.
• AASB 2013-9 (part C) Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments.
The adoption of these new and amended standards and interpretations did not result in any significant changes to the
Group’s accounting policies.
The Group has not elected to early adopt any other new or amended standards or interpretations that are issued but
not yet effective.
New, revised or amended Accounting Standards and Interpretations issued but not yet effective
Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not
been adopted by the Group for the annual reporting period ended 30 June 2016 are outlined in the table below. The
potential effect of these Standards is yet to be fully determined.
44
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
TITLE
SUMMARY
AASB 9 Financial
Instruments
AASB 2014-3
Amendments
to Australian
Accounting
Standards –
Accounting for
Acquisitions of
Interest in Joint
Operations
AASB 2014-4
Clarification on
acceptable methods
of depreciation
and amortisation
(amendments to
AASB 116 and
AAB 138)
A finalised version of AASB 9 which
contains accounting requirements
for financial instruments, replacing
AASB 139 Financial Instruments:
Recognition and Measurement. The
standard contains requirements
in the areas of classification and
measurement, impairment, hedge
accounting and derecognition.
This standard sets out guidance on
the accounting for acquisition of
interests in joint operations in which
the activity constitutes business.
This standard clarifies that a
depreciation method that is based
on revenue that is generated by
an activity that includes the use
of an asset is not appropriate for
property, plant and equipment.
AASB 15 Revenue
from Contracts with
Customers
AASB 15 provides a single, principles
based five-step model to be applied
to all contracts with customers.
Guidance is provided on topics
such as the point in which revenue is
recognised, accounting for variable
consideration, costs of fulfilling and
obtaining a contract and various
related matters. New disclosures
about revenue are also introduced.
This standard provides clarification
amendments to AASB 5, AASB 7,
AASB 119 and AASB 134.
AASB 2015-1 Annual
Improvements to
IFRSs 2012-2014
Cycle
APPLICATION
DATE OF
STANDARD
EXPECTED
APPLICATION
DATE FOR
GROUP
1 Jan 2018
1 Jul 2018
1 Jan 2016
1 Jul 2016
1 Jan 2016
1 Jul 2016
1 Jan 2018
1 Jul 2018
1 Jan 2016
1 Jul 2016
IMPACT ON GROUP FINANCIAL
REPORT
Gains or losses on an
investment in equity
instruments will be
recognised in profit or loss,
or in other comprehensive
income if the Group makes
such election on a case by
case basis.
When acquiring an
interest in a joint
operation in which the
activity constitutes a
business, the Group will
be required to apply all of
the principles on business
combination accounting
and disclose information
required by AASB 3.
The adoption of AASB
2014-4 is not expected
to significantly affect the
Group’s depreciation
method in respect of
property, plant and
equipment.
Given the Group’s
activities proceeded to
the mine development
phase and production
is anticipated in second
half of 2016, the Group’s
revenue recognition
policy will be reviewed to
ensure compliance with
AASB 15 upon adoption.
The adoption of AASB
2015-1 is not expected
to significantly impact
disclosures in the Group’s
financial statement or the
application of discount
rates when determining
long term employee
benefit obligations.
AASB 2015-2
Amendments to
AASB 101
This standard makes amendments
to AASB 101 to further encourage
companies to apply professional
judgement in determining what
information to disclose in the
financial statements.
The adoption of AASB
2015-2 is not expect to
significantly impact the
information of financial
disclosure in the Group’s
financial statements.
1 Jan 2016
1 Jul 2016
45
AVENIRA LIMITED AND CONTROLLED ENTITIES AASB 2014-10
Amendments
to Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor or its
Associate or Joint
Venture.
2016-2 Amendments
to AASB 107
AASB 16
Leases
IFRS 2
(Amendments)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
TITLE
SUMMARY
This standard addresses an
inconsistency between the
requirements in AASB 10 and
AASB 128 in dealing with the sale
or contribution of assets between
an investor and its associate or
joint venture.
APPLICATION
DATE OF
STANDARD
EXPECTED
APPLICATION
DATE FOR
GROUP
1 Jan 2018
1 Jul 2018
IMPACT ON GROUP FINANCIAL
REPORT
A full gain or loss to be
recognised when such
transaction involves a
business and partial gain
or loss to be recognised
when such transaction
involves assets that do not
constitute a business.
This standard requires entities
preparing financial statements with
Tier 1 reporting requirements to
provide disclosures that enable users
of financial statements to evaluate
changes in liabilities from financing
activities, arising from both cash
flows and non-cash charges.
This standard will require to
recognise assets and liabilities for
all leases with a term of more than
12 months, unless the underlying
asset is of low value.
The amendments clarify how to
account for certain types of share-
based payment transactions and
require to account for effects of
vesting and non-vesting conditions
and modifications to the terms and
conditions of share-based payments.
The adoption of AASB
2016-2 is not expected to
significantly impact the
information of financial
disclosure in the Group’s
financial statements.
The adoption of AASB
16 is not expected to
significantly impact the
information of financial
disclosure in the Group’s
financial statements.
The adoption of these
amendments is not
expected to significantly
affect the Group’s
accounting for share-
based payments.
1 Jan 2017
1 Jul 2017
1 Jan 2019
1 Jul 2019
1 Jan 2018
1 Jul 2018
(aa) Critical accounting judgements, estimates and assumptions
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are:
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 by an internal valuation using a Black-
Scholes option pricing model and Monte Carlo simulation method for performance rights, using the assumptions
detailed in Note 34.
Exploration and evaluation expenditure
The application of the accounting policy in Note 1(n) requires management to make certain estimates and assumptions
as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves will be
found. Any such estimates and assumptions may change as new information becomes available, which may require
adjustments to the carrying value of assets.
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead
to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. The
valuation review conducted by Optiro in June 2016 revealed that the fair market value of the Wonarah project remains
unchanged from the valuation prepared in June 2015. As a result, during the reporting period the evaluation and
exploration expenditure totalling $574,962 was impaired and recognised in the statement of profit or loss. In addition,
46
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
1. SUMMARY OR SIGNIFICANT ACCOUNTING POLICIES (cont...)
following the surrender of exploration licences EL24607 and EL23767 the capitalised exploration and evaluation
expenditure of $635,125 relating to the two licences has been written off to the statement of profit or loss. There have
been not indicators for impairment of the Baobab Phosphate Project.
Rehabilitation and restoration provision
The Group assesses its mine rehabilitation provision half yearly in accordance with the accounting policy Note 1(s).
Significant judgment is required in determining the provision for mine rehabilitation as there are many transactions and
other factors that will affect the ultimate liability payable to rehabilitate the mine sites. Factors that will affect this liability
include future disturbances caused by further development, changes in technology, changes in regulations, price
increases and changes in discount rates. When these factors change or become known in the future, such differences
will impact the mine rehabilitation provision in the period in which they change or become known. As at 30 June 2016
rehabilitation obligation has a carrying value of $1,289,500 for the Wonarah Phosphate Project and $2,676,481 for the
Baobab Phosphate Project.
Valuation of financial instruments
As described in note 2, the Group uses valuation techniques that include inputs that are not based on observable
market data to estimate the fair value of certain types of financial instruments. Note 2 provides detailed information
about the key assumptions used in the determination of the fair value of financial instruments, as well as the detailed
sensitivity analysis for these assumptions.
The directors believe that the chosen valuation techniques and assumptions used are appropriate in determining the
fair value of financial instruments.
The Group assesses at each reporting date whether there is objective evidence that an investment or a group of
investments is impaired. In the case of equity investments classified as available-for-sale and derivative financial instruments,
objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. The
determination of what is “significant” or “prolonged” requires judgement. “Significant” is evaluated against the original
cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. The
Board exercises judgement in the process of applying the Group’s accounting policy on impairment at each reporting
period. In this regard a 20% decline in the fair value of the investment from its original cost represents a significant decline
in value. When an Available-for-sale investment carried at fair value is impaired, the cumulative fair value loss recognised
in other comprehensive income (Available-For-Sale Financial Asset reserve) is reclassified to profit and loss for the period.
When a derivative financial instrument carried at fair value is impaired the fair value loss is recognised in the profit and loss
statement for the period. Refer to Notes 11 and 12 for further details relating to impairment.
In relation to the judgement required regarding the Group’s promissory note receivable refer to Note 2(b).
Goodwill
The Group assesses at each reporting date whether goodwill is impaired. This requires an estimation of the recoverable
amount using a value in use discounted cash flow methodology, to which the goodwill is allocated. Please refer to Note
17 for further details.
2. FINANCIAL RISK MANAGEMENT
FINANCIAL RISK MANAGEMENT POLICIES
The financial risks that arise during the normal course of Avenira operations comprise market risk, credit risk and
liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the Group.
Risk management is carried out by the full Board of Directors as the Group believes that it is crucial for all Board members to
be involved in this process. The Managing Director, with the assistance of senior management as required, has responsibility
for identifying, assessing, treating and monitoring risks and reporting to the Board on risk management.
These disclosures are not, nor are they intended to be an exhaustive list of risks which the Group is exposed to.
47
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
Financial instruments
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Other non-current receivables
Available-for-sale financial assets
- Listed investments
- Unlisted investments
Derivative financial instruments
Financial liabilities
Trade and other payables
(a) Market risk
2016
$
2015
$
24,473,574
1,657,986
1,491,217
15,629
-
-
15,388,406
317,731
1,481,600
15,629
-
-
27,638,406
17,203,366
3,154,788
1,886,729
Market risk arises from Avenira’s exposure to interest bearing financial assets and foreign currency financial instruments.
It is a risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in foreign
exchange rates (currency risk), interest rates (interest rate risk) and share prices (price risk).
(i) Foreign exchange risk
The functional currency of the Group is Australian dollars, however the Group and the parent entity operate internationally
and are exposed to various currencies, primarily with respect to Central African Franc (XOF). The Group is exposed
to foreign exchange risk arising from fluctuations of the Australian dollar against US dollar, Euro at parent level and
fluctuations of the Australian dollar against South African Rand and Central African Franc at subsidiary level.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in
a currency that is not the entity’s functional currency and net investments in foreign operations. The exposure to risks is
measured using sensitivity analysis and cash flow forecasting.
The Group has not formalised a foreign currency risk management policy however, it monitors its foreign currency expenditure
in light of exchange rate movements. The Group does not have any further material foreign currency dealings other than the
noted currencies.
The Group’s exposure to foreign currency risk at the reporting date, expressed in Australian Dollars, was as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
XOF
AUD
ZAR
AUD
USD
AUD
EUR
AUD
7,123,999
1,400,138
8,524,137
3,830,752
3,830,752
169,883
90,967
260,850
-
-
570,989
-
570,989
7,728
7,728
90,406
-
90,406
-
-
The following conversion rates were used at the end of the financial year:
ZAR/AUD: 10.993
XOF/AUD: 438.69
USD/AUD: 0.7441
EUR/AUD: 0.6701
(2015: 9.387)
(2015: 453.63)
(2015: 0.7655)
48
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
Sensitivity analysis – change in foreign currency rates
The following table demonstrates the estimated sensitivity to a 10% increase/decrease in the ZAR/AUD, XOF/AUD, USD/
AUD and EUR/AUD exchange rates, with all variables held consistent, on a post-tax profit or loss and equity. These sensitivities
should not be used to forecast the future effect of movement in the Australian dollar exchange rate on future cash flows.
Impact on post tax profits
XOF/AUD +10%
XOF/AUD -10%
USD/AUD +10%
USD/AUD -10%
ZAR/AUD +10%
ZAR/AUD -10%
EUR/AUD +10%
EUR/AUD -10%
Impact on equity
XOF/AUD +10%
XOF/AUD -10%
USD/AUD +10%
USD/AUD -10%
ZAR/AUD +10%
ZAR/AUD -10%
EUR/AUD +10%
EUR/AUD -10%
2016
$
2015
$
(426,671)
521,487
(51,206)
62,585
(23,714)
28,983
(8,219)
10,045
(426,671)
521,487
(51,206)
62,585
(23,714)
28,983
(8,219)
10,045
(6,620)
8,091
-
-
(8,015)
9,796
-
-
(6,620)
8,091
-
-
(8,015)
9,796
-
-
A hypothetical change of 10% in exchange rates were used to calculate the Group’s sensitivity to foreign exchange rate
movements as this is management’s estimate of possible rate movements over the coming year taking into account
currency market conditions and past volatility (30 June 2015: 10%).
(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. As at and during the year ended 30 June 2016, the Group had interest-bearing assets, being cash and
cash equivalents. As such the Group’s income and operating cash flows are somewhat exposed to movements in market
interest rates.
The Group’s policy is to monitor the interest rate yield curve out to six months to ensure a balance is maintained between
the liquidity of cash assets and the interest rate return. At 30 June 2016 the entire balance of cash and cash equivalents for
the Group of $24,473,574 (2015: $15,388,406) is subject to interest rate risk. The proportional mix of floating interest rates
and fixed rates, to a maximum of six months, fluctuate during the year depending on current working capital requirements.
49
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
Sensitivity analysis – change in interest rates
Based on the financial assets held at reporting date, with all other variables assumed to be held constant, the table
below sets out the notional effect on consolidated profit or loss after tax for the year and on equity at reporting date
under varying hypothetical changes in prevailing interest rates:
2016
Impact on post tax profits
Hypothetical 80 basis points increase in interest
Hypothetical 80 basis points decrease in interest
Impact on equity
Hypothetical 80 basis points increase in interest
Hypothetical 80 basis points decrease in interest
2016
$
2015
$
130,852
(130,852)
130,852
(130,852)
153,792
(153,792)
153,792
(153,792)
The hypothetical movement in basis points for the interest rate sensitivity analysis is based on the currently observed
market environment (30 June 2015: 0.80%).
The weighted average interest rate received on cash and cash equivalents of the Group is 2.51% (2015: 3.58%).
(iii) Price risk
The Group’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about
future values of the investment securities.
At 30 June 2016 the exposure to unlisted equity securities at fair value is nil (2015: $nil). Refer to Note 11 for further
details of impairment recognised in respect of unlisted available-for-sale financial assets.
At 30 June 2016, the exposure to listed equity securities at fair value was $15,629 (2015: $15,629). A decrease of 40%
on the market price could have an impact of approximately $6,000 (2015: $6,000) on the income or equity attributable
to the Group, depending on whether the decline is significant or prolonged. An increase of 40% in the value of the
listed security would only impact equity, but would not have an effect on profit or loss.
(b) Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of
contract obligations that could lead to a financial loss to the Group. Credit risk arises from cash and cash equivalents
and deposits with financial institutions, derivative financial instruments, trade receivables and security deposits
receivable.
Credit risk related to balances with banks and other financial institutions is managed by investing surplus funds in
financial institutions that maintain a high credit rating.
The maximum exposure to credit risk at the reporting date is the carrying amount of the assets as summarised below,
none of which are impaired or past due.
Financial assets
Cash and cash equivalents
Trade and other receivables
Other non-current receivables
Derivative financial instruments
2016
$
2015
$
24,473,574
1,657,986
1,491,217
-
27,622,777
15,388,406
317,731
1,481,600
-
17,187,737
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external
credit ratings (if available) or to historical information about counterparty default rates.
50
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
Cash at bank and short-term bank deposits
Held with Australian banks and financial institutions
AA- rated
A rated
Held with South African banks and financial institutions
BBB rated
Held with Mauritius banks and financial institutions
BBB rated
Held with Senegalese banks and financial institutions
BBB rated
Total
Trade and other receivables
Held with Australian banks and financial institutions
AA- rated
Counterparties with external credit ratings
Counterparties without external credit ratings(1)
Group 1
Group 2
Group 3
Total
Other non-current receivables
Held with Australian banks and financial institutions
AA- rated
A rated
Counterparties with external credit ratings
Counterparties without external credit ratings
Group 1
Group 2
Group 3
Total
Derivative financial instruments(2)
Counterparties with external credit ratings
Counterparties without external credit ratings(1)
Group 1
Group 2
Group 3
Total
2016
$
2015
$
17,098,854
-
-
15,388,406
169,883
68,897
7,135,940
24,473,574
60,000
-
1,449,706
148,280
-
1,657,986
1,481,600
-
-
9,617
-
-
-
-
-
15,388,406
-
-
-
317,731
-
317,731
-
1,481,600
-
-
-
-
1,491,217
1,481,600
-
-
-
-
-
-
-
-
-
-
1. Group 1 – new Advances from suppliers (less than 6 months)
Group 2 – existing Advances from suppliers (more than 6 months) with no defaults in the past
Group 3 – existing Advances from suppliers (more than 6 months) with some defaults in the past. All defaults were fully recovered.
2. Derivative financial instruments were impaired to nil during the last financial year. Refer to Note 12 for further details of impairment recognised in
respect of derivative financial instruments.
51
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
IMPAIRED CURRENT RECEIVABLES
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. The
other receivables are assessed to determine whether there is objective evidence that an impairment has been incurred
but not yet identified. For these receivables the estimated impairment losses are recognised in a separate provision
for impairment.
The Group considers that there is evidence of impairment if any of the following indicators are present:
•
•
Significant financial difficulties of the debtor.
Probability that the debtor will enter bankruptcy or financial reorganisation.
• Default or delinquency in payments (more than 30 days overdue).
Receivables for which an impairment provision was recognised are written off against the provision when there is no
expectation of recovering additional cash.
Impairment losses are recognised in profit or loss within other expenses. Subsequent recoveries of amounts previously
written off are credited against other expenses. Refer Note 1(l) for information about how impairment losses are
calculated.
At 30 June 2015 the Company considered the carrying value of the JDCP promissory note receivable as impaired due
to the financial situation of JDCP. JDCP are currently attempting to raise additional funds and until funds have been
raised the Company believes the recoverability of the full amount of the promissory amount, due to mature on 15 July
2017, is unlikely. Therefore, the Company has recognised the full carrying amount including the interest accrued on
promissory notes as a provision for impairment rather than writing off the amount because it is yet unknown whether
the amount will be uncollectable.
Movements in the provision for impairment of current receivables that are assessed for impairment collectively are as follows:
Opening balance
Provision for impairment recognised during the year
Closing balance
2016
$
2015
$
727,762
88,045
815,807
-
727,762
727,762
During the year, the following gains / (losses) were recognised in profit or loss in relation to impaired receivables:
Impairment losses
Movement in provision for impairment
(c) Liquidity risk
2016
$
2015
$
(88,045)
(727,762)
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient
cash and marketable securities are available to meet the current and future commitments of the Group. Due to the
nature of the Group’s activities, being mineral exploration and development, the Group does not have ready access to
credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitors the
state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating
appropriate capital raisings as required.
The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial
position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date.
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with
agreed repayment periods.
52
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
LESS THAN
1 MONTH
1 – 3 MONTHS
3 MONTHS –
1 YEAR
1 – 5 YEARS
5+ YEARS
TOTAL
$
$
$
$
$
$
Contractual maturities of
financial liabilities
2016
Non-interest bearing
2015
Non-interest bearing
(d) Net fair value
1,072,832
2,081,956
1,072,832
2,081,956
1,886,729
1,886,729
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,154,788
3,154,788
1,886,729
1,886,729
Fair value estimation
The fair value of financial assets and financial liabilities held by the Group must be estimated for recognition and
measurement or for disclosure purposes. All financial assets and financial liabilities of the Group at the balance date
are recorded at amounts approximating their fair value.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date.
The quoted market price used for financial assets held by the Group is the current bid price (as disclosed in Note 2(a)
(iii)).
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair
values due to their short-term nature.
The totals for each category of financial instruments, other than those with carrying amounts which are reasonable
approximations of fair value, are set out below:
Financial assets
Available-for-sale financial assets
Derivative financial instruments
Total financial assets
CARRYING AMOUNT
FAIR VALUE
2016
$
2015
$
2016
$
2015
$
15,629
-
15,629
15,629
-
15,629
15,629
-
15,629
15,629
-
15,629
Financial instruments measured at fair value
The financial instruments recognised at fair value in the statement of financial position have been analysed and classified
using a fair value hierarchy reflecting the significance of the inputs used in the making the measurements. The fair value
hierarchy consists of the following levels:
•
•
quoted prices in active markets for identical assets or liabilities (Level 1).
inputs other than quoted process included within Level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices) (Level 2).
•
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
53
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
LEVEL 1
LEVEL 2
LEVEL 3
$
$
$
TOTAL
$
2016
Financial assets
Available-for-sale financial assets
- Listed investments
- Unlisted investments
Derivative financial instruments
- Warrants
- Conversion rights on promissory note
2015
Financial assets
Available-for-sale financial assets
- Listed investments
- Unlisted investments
Derivative financial instruments
- Warrants
- Conversion rights on promissory note
15,629
-
-
-
15,629
15,629
-
-
-
15,629
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,629
-
-
-
15,629
15,629
-
-
-
15,629
The fair value of the financial assets not quoted in an active market has been determined with reference to the
amount at which the instrument could be exchanged in a current active market between willing parties, other than
in a forced or liquidation sale. The following methods were used to estimate the fair value:
•
The Group holds an unlisted investment in JDCP. The fair value of this investments has been estimated based
on the net asset value of JDCP as at 30 June 2016. At each reporting date the Group considers whether net
asset value is representative of fair value. Where observable market transactions indicate that the net asset value
exceeds fair value, an adjustment to the fair value is made. At 30 June 2016 the fair value of the Group’s investment
in JDCP was assessed as nil. Refer to Note 11 for further details of impairment recognised in respect of unlisted
available-for-sale financial assets.
• Derivative financial instruments are measured under level 3 disclosure requirements. The Group acquired unlisted
warrants in JDCP during 2014. The warrants have an exercise price of USD0.01 and expire on 17 February 2024.
Accordingly, the fair value of warrants is considered to equate to the fair value of the underlying ordinary shares.
The fair value of the underlying ordinary shares at 30 June 2016 was considered to be nil. Refer to Note 12 for
further details of impairment recognised in respect of unlisted warrants.
• On 2 February 2015, the Group (the “holder”) entered into convertible secured promissory notes (“series B
conversion stock”) with JDCP, (the “recipient”). The notes accrue interest at 8% per annum, payable on maturity,
and mature on 30 June 2017. If prior to maturity date a qualified financing event occurs, defined as completion
of a capital raising by JDCP for no less than USD10,000,000, then the principal amount, and all accrued interest,
will convert automatically into shares in JDCP. The number of shares to be received upon such conversion shall be
calculated by dividing (i) the principal amount plus accrued interest by (ii) 90% of the lowest price per share paid
by the purchaser of qualified financing event shares, rounded down to the nearest whole share. The fair value of
the conversion right attached to the JDCP promissory notes at 30 June 2016 was considered to be nil based on a
probability weighted option pricing model. Refer to Note 9 for further details of impairment recognised in respect
of promissory notes.
54
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
Reconciliation of Level 3 fair value measurements of financial assets
Opening Balance
Purchases
Total gains / (losses) in other
comprehensive income
Total gains / (losses) recognised in the
profit or loss
Impairment
Closing net carrying amount
AVAILABLE FOR SALE UNLISTED
INVESTMENTS
UNLISTED WARRANTS AT FAIR VALUE
THROUGH PROFIT OR LOSS
30 JUNE 2016
30 JUNE 2015
30 JUNE 2016
30 JUNE 2015
$
-
-
-
-
-
-
$
1,291,200
$
-
-
-
(1,291,200)
-
-
-
-
-
-
-
$
544,749
-
-
90,732
(635,481)
-
(e) Capital risk management
For the purposes of the Group’s capital management, capital includes issued capital and all other equity reserves
attributable to the equity holders of the parent, which at 30 June 2016 was $64,663,800 (30 June 2015: $29,850,278). The
primary objective of the Group’s capital management is to maximise the shareholder value.
At 30 June 2016 the Group does not hold any external debt funding (30 June 2015: Nil) and is not subject to any
externally imposed covenants in respect of capital management.
3. SEGMENT INFORMATION
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Board of Directors that
are used to make strategic decisions.
The Board considers the business from both functional and geographic perspectives and has identified that there are
two reportable segments being:
•
•
exploration and development of the Wonarah Phosphate Project in the Northern Territory (Wonarah) located in
Australia, and
exploration and development of the Baobab Phosphate Project in the Republic of Senegal (Baobab) located
in Africa, a new operating segment identified in the current reporting period, hence there is no comparative
information relating to this segment in the financial report.
55
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
2. FINANCIAL RISK MANAGEMENT (cont...)
(b) Segment information provided to the Board
The following table presents revenue and profit for the Group’s operating segments for the reporting period.
2016
Revenue
Interest revenue
Other revenue
Other income
Total segment revenue
Total revenue as per statement of
comprehensive income
Impairment of non-current assets
Write off of non-current assets
Net loss on disposal of subsidiary
Depreciation and amortisation
Segment net loss
Total net loss as per statement
comprehensive income
Segment assets
Capitalised exploration and evaluation
expenditure
Capitalised mine development expenditure
Other assets at balance date
Total Segment Assets
Segment liabilities
Deferred tax liability
Other liabilities at balance date
Total Segment Liabilities
4. REVENUE
From continuing operations
Revenue
Provision of services
Other revenue
Interest from financial institutions
Interest other(i)
Other sundry revenue
WONARAH
(AUSTRALIA)
BAOBAB
(SENEGAL)
UNALLOCATED
– OTHER
SEGMENTS
TOTAL
CONSOLIDATED
$
$
$
$
44,599
-
-
44,599
21,116
238,166
-
259,282
376,520
-
108
376,628
574,962
635,125
-
4,339
-
-
-
82,963
-
-
1,354,707
33,188
442,235
238,166
108
680,509
680,509
574,962
635,125
1,354,707
120,490
(1,203,131)
(855,850)
(7,405,714)
(9,464,695)
(9,464,695)
15,364,874
53,625
-
15,418,499
-
1,580,104
16,944,978
35,526,331
9,351,727
44,931,683
-
22,446,944
22,446,944
35,526,331
33,378,775
84,323,605
-
1,293,836
1,293,836
4,746,961
3,846,765
8,593,726
-
2,214,460
2,214,460
4,746,961
7,355,061
12,102,022
2016
$
2015
$
14,154
410,937
31,298
224,012
680,401
1,000
689,634
23,303
-
713,937
i. On 2 February 2015, the Group (the “holder”) entered into convertible secured promissory notes with JDCP, (the “recipient”). The notes accrue
interest at 8% per annum compounding monthly, payable on maturity, and mature on 30 June 2017.
56
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
5. OTHER INCOME
Net gain on financial assets at fair value through profit or loss
Net gain on disposal of property, plant and equipment
6. EXPENSES
Loss before income tax includes the following specific expenses
Defined contribution superannuation expense
Minimum lease payments relating to operating leases
Net loss on disposal of property, plant and equipment
Net loss on disposal of subsidiary
Foreign exchange losses(net)
7. INCOME TAX
(a) Income tax expense/(benefit)
Current tax
Deferred tax
-
108
108
2016
$
2016
$
135,997
137,058
9,148
1,354,707
192,683
90,732
-
90,732
2015
$
2015
$
166,391
199,496
18,612
-
3,846
2016
$
2015
$
-
-
-
-
-
-
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
(9,464,695)
(43,018,117)
Prima facie tax benefit at the Australian tax rate of 30% (2015: 30%)
(2,839,408)
(12,905,435)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Share based payments
Other
Loss on sale of subsidiary
Movements in unrecognised temporary differences
Tax effect of current year tax losses for which no deferred tax asset has
been recognised
39,060
(381,170)
406,412
(66,819)
18,550
867,523
-
9,857,797
2,841,925
2,161,565
Income tax expense/(benefit)
Attributable to:
Continuing operations
Discontinuing operations
(c) Tax affect relating to each component of other comprehensive income
Available-for-sale financial assets
-
-
-
-
-
-
-
-
-
-
-
-
57
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
7. INCOME TAX (cont...)
(d) Deferred tax assets
Capital raising costs
Rehabilitation provision
Other provisions and accruals
Available-for-sale financial assets
Unrealised foreign exchange losses
Tax losses in Australia
Deferred tax assets not recognised
Offset against deferred tax liabilities
Net deferred tax assets
(e) Deferred tax liabilities
2016
$
2015
$
118,478
1,055,970
77,788
882,763
-
29,141,139
31,276,138
(25,932,939)
5,343,199
(5,343,199)
-
184,167
455,993
211,161
9,369
1,154
26,703,027
27,564,871
(22,747,129)
4,817,742
(4,817,742)
-
Capitalised exploration and evaluation costs and development costs
(10,025,543)
(4,800,000)
Unrealised foreign exchange gain
Other accruals
Offset against deferred tax assets
Net deferred tax liabilities
DEFERRED TAX
(53,634)
(10,983)
(10,090,160)
5,343,199
(4,746,961)
-
(17,742)
(4,817,742)
4,817,742
-
Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been
brought to account at 30 June 2016 because the directors do not believe it is appropriate to regard realisation of the
deferred tax assets as probable at this point in time. These benefits will only be obtained if:
i.
The Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from
the deductions for the loss and exploration expenditure to be realised;
ii. The Company continues to comply with conditions for deductibility imposed by law; and
iii. No changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the loss
and exploration expenditure.
TAX CONSOLIDATION
Avenira Limited and its 100% owned Australian resident subsidiaries are part of a tax consolidated group. As a
consequence, all members of the tax consolidated group are taxed as a single entity. Avenira Limited is the head entity
of the tax consolidated group. Members of the tax consolidated group have entered into a tax sharing agreement that
provides for the allocation of income tax liabilities between the entities should the head entity default on its payment
obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis
that the possibility of default is remote.
8. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
2016
$
7,916,851
16,556,723
Cash and cash equivalents as shown in the statement of financial position
and the statement of cash flows
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
24,473,574
2015
$
888,406
14,500,000
15,388,406
Short term deposits are made for varying periods of between one day and three months depending on the immediate
cash requirements of the Group, and earn interest at the respective short term deposit rates. Refer to Note 2 (a) (ii) for
additional details on the impact of interest rates on cash and cash equivalents for the period.
58
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
8. CURRENT ASSETS – CASH AND CASH EQUIVALENTS (cont...)
9. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Convertible promissory notes(i)
Provision for impairment(ii)
Trade and other receivables(iii)
Government taxes receivable
Prepayments(iv)
Sundry receivables
Security deposits
2016
$
2015
$
815,807
(815,807)
57,731
404,425
1,022,760
21,903
151,167
1,657,986
727,762
(727,762)
2,471
71,254
-
83,806
160,200
317,731
i.
In February 2015, the Group (the “holder”) entered into a convertible secured promissory notes with JDCP, (the “recipient”). The notes accrue interest at 8%
per annum compounded monthly, payable on maturity, and mature on 30 June 2017.
ii. Refer Note 2 (b) for further details on impairment.
iii. Trade and other receivables are generally due for settlement within 30 days and therefore classified as current.
iv. Prepayments comprise advances prepaid to contractors engaged to perform exploration and development activities at the Baobab Phosphate Project
in Senegal.
The carrying amounts disclosed above represent their fair value.
10. NON CURRENT ASSETS – OTHER RECEIVABLES
Security deposits
Sundry receivable
2016
$
1,487,767
3,450
1,491,217
2015
$
1,481,600
-
1,481,600
11. NON CURRENT ASSETS – AVAILABLE-FOR-SALE-FINANCIAL ASSETS
Available-for-sale financial assets include the following classes of financial assets:
Listed investments, at fair value - Australian listed equity securities(i)
Unlisted investments at fair value- international equity securities(ii)
2016
$
2015
$
15,629
-
15,629
15,629
-
15,629
i. These equity securities represent 15,619,524 ordinary fully paid shares of Niuminco Group Limited valued at 0.10 cent per share.
ii. At 30 June 2015 the Group assessed whether any objective evidence existed indicating that its available-for-sale investments in JDCP was impaired. The
financial situation of JDCP and the protracted capital raising activities at the time were considered sufficient evidence that the investment was impaired.
Accordingly, the fair value of the Group’s investment in unlisted equity securities at 30 June 2015 was assessed as nil. The impairment expense of $1,291,200
was recognised in the statement of comprehensive income for the year ended 30 June 2015. At 30 June 2016 there has been no change to the financial
situation at JDCP, therefore the carrying value as at 30 June 2016 is assessed as nil. to Refer to Note 2(d) for further details.
12. NON CURRENT ASSETS – DERIVATIVE FINANCIAL INSTRUMENTS
Unlisted warrants at fair value through profit or loss(i)
2016
$
2015
$
-
-
-
-
i. The Group holds unlisted warrants in JDCP. The warrants have an exercise prices of US$0.01 and expire on 17 February 2024. The fair value of the warrants
is considered to equate to the fair value of the underlying ordinary shares. Accordingly, unlisted warrants were fully impaired to nil as at 30 June 2015. As at
30 June 2016 the fair value of the underlying shares was zero, therefore, the carrying amount remains zero.
These derivative financial instruments are classified as level 3 hierarchy. Refer to Note 2 (d) for further details.
59
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
13. NON CURRENT ASSETS – PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Net carrying amount
Movements in carrying amounts
Opening net carrying amount
Additions
Additions through business combination
Disposals
Depreciation charge
Foreign currency exchange differences
Transfer to assets held for sale
Closing net carrying amount
2016
$
1,079,408
(278,619)
800,789
2015
$
1,902,669
(1,870,198)
32,471
32,471
721,919
227,617
(9,548)
(91,699)
(79,971)
-
800,789
379,533
-
-
(36,929)
(59,870)
16,327
(266,590)
32,471
14. NON CURRENT ASSETS – CAPITALISED EXPLORATION AND EVALUATION
EXPENDITURE
Reconciliation of movements of exploration and evaluation costs in
respect of mining areas of interest
Opening net carrying amount
Capitalised exploration and evaluation costs(i)
Impairment of exploration and evaluation expenditure(ii)
Write off of exploration and evaluation expenditure(ii)
Research and development tax refund(iii)
Capitalised exploration and evaluation costs on acquisition(iv)
Reclassification of capitalised mine development(v)
Closing net carrying amount(vi)
2016
$
2015
$
16,000,000
1,657,576
(574,962)
(635,125)
(286,612)
19,908,486
(20,650,864)
15,418,499
48,664,776
1,981,258
(34,432,307)
-
(213,727)
-
-
16,000,000
The ultimate recoupment of costs carried forward for exploration and evaluation is dependent on the successful
development and commercial exploitation or sale of the respective mining areas. Amortisation of the costs carried
forward for the development phase is not being charged pending the commencement of production.
i. Capitalised exploration and evaluation expenditure includes costs incurred in relation to both Wonarah and Baobab Phosphate Projects.
ii. Following the Group’s assessment of the carrying value of exploration and evaluation expenditure capitalised in respect of the Wonarah project for
impairment at 30 June 2015, the project was written down to $16m being the low end of the independent expert’s valuation prepared by Optiro Pty Ltd.
At 30 June 2016 Optiro Pty Ltd was engaged to conduct a review of the Wonarah project’s valuation to determine the recoverable amount of the project. The
expert’s estimated recoverable amount of the project had not materially changed from 30 June 2015 with its lowest level of valuation of the fair market value
being $15.9m. Considering no exploration expenditure, other than rental and incidental land costs, has been budgeted for the financial year ending 30 June
2016 and a delay with commercialisation of IHP technology, Avenira’s management have taken a conservative view that the fair value less costs of disposal
of the Wonarah project at 30 June 2016 is at the low end of the independent expert’s valuation. As a result, during the reporting period the evaluation and
exploration expenditure totalling $574,962 was impaired and recognised in the statement of profit or loss. In addition, following the surrender of exploration
licences EL24607 and EL23767 the capitalised exploration and evaluation expenditure of $635,125 relating to the two licences has been written off to the
statement of profit or loss.
iii. The research and development (R&D) tax incentive provides a tax offset in the form of a refund, calculated with reference to expenditure on eligible R&D activities.
iv. Refer to Note 36 (Business combination) for further details.
v. On 11 November 2015 the capitalised exploration and evaluation expenditure in relation to the Baobab Phosphate Project was reclassified to capitalised
mine development following the decision of Avenira’s Board of Directors to commence mining activities at the Baobab Phosphate Project. The exploration
and evaluation expenditure attributable to this area of interest was first tested for impairment and then reclassified to capitalised mine development
expenditure.
vi. The closing balance comprises the net carrying amount of exploration and evaluation expenditure attributable to both the Wonarah and Baobab Phosphate
Projects being $15,364,875 and $53,625 respectively.
60
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
15. NON CURRENT ASSETS – CAPITALISED MINE DEVELOPMENT EXPENDITURE
Reconciliation of movements during the year
Opening net carrying amount
Reclassification from exploration and evaluation expenditure
Capitalised mine development
Capitalised provision for rehabilitation
Foreign currency translation movement
Closing net carrying amount
2016
$
2015
$
-
20,650,864
13,119,591
2,676,481
(920,605)
35,526,331
-
-
-
-
-
-
The capitalised mine development represents the costs incurred in preparing the mine for production and includes
plant and equipment under construction, stripping and waste removal costs incurred before the production commences
at the Baobab Phosphate Project. These costs are capitalised to the extent that they are expected to be recouped
through the successful exploitation of the related mining leases. Please refer to Note 1 (o) for the Group’s accounting
policy on “Capitalised Mine Development Expenditure”.
Development expenditure assets are assessed for impairment if an impairment trigger is identified. For the purposes
of impairment testing capitalised mine development assets are allocated to cash generating unit to which the
development activity relates.
16. NON CURRENT ASSETS – INTANGIBLES
Intangibles
Licence rights at cost
Accumulated amortisation and impairment losses
Net carrying amount
Movements in carrying amounts
Opening net carrying amount(i)
Additions
Additions through business combination
Amortisation
Closing net carrying amount at year end
2016
$
2015
$
275,463
(82,844)
192,619
202,095
9,025
10,290
(28,791)
192,619
256,148
(54,053)
202,095
227,709
-
-
(25,614)
202,095
i. The licence rights include US$250,000 paid by the Company to JDCP, to extend and improve the terms of Avenira’s exclusive Australian licence to
construct a commercial scale IHP facility at Wonarah for a period up to 10 years after the commercial validation of the IHP technology. The licence is
amortised over the deemed useful life of 10 years.
61
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
17. NON CURRENT ASSETS – GOODWILL
Goodwill
Goodwill acquired in business combination
Net carrying amount
Movements in carrying amounts
Opening net carrying amount
Goodwill acquired in business combination at cost(i)
Provision for impairment(ii)
Foreign currency translation movement
Closing net carrying amount at year end
2016
$
2015
$
4,746,961
4,746,961
-
4,977,122
-
(230,161)
4,746,961
-
-
-
-
-
-
-
i.
ii.
The goodwill arose on acquisition of Baobab Mining and Chemicals Corporation SA (BMCC) on 23 September 2015. Please refer to Note 36 for
further details.
The Group has performed an annual impairment assessment of goodwill at 30 June 2016. The recoverable amount was determined by using the fair
value less costs of disposal method calculated having regard to the Group’s recent divestment of a 20% equity interest in BMCC to a non-related
market participant. For further details regarding the divestment please refer to Note 36. As the divestment did not involve a quoted market price,
the transaction is considered to be Level 2 in the fair value hierarchy.
As the recoverable amount calculated was higher than the total carrying value of the Baobab project assets and the goodwill, there was no
requirement to impair goodwill at 30 June 2016.
18. ASSETS HELD FOR SALE
On 16 July 2015 Avenira completed the sale of all its remaining legacy assets in South Africa to Spearhead Capital
Limited and received sale proceeds totalling ZAR10,862,874 ($1,170,965). Under the sale agreement, ZAR1,852,406
($200,000) is to be held in escrow by the Group until the fulfilment of two post-completion conditions. At the
reporting date one condition is yet to be satisfied and the amount of ZAR 1 million ($96,389) remains in escrow in
Avenira’s trust account.
The assets held by Avenira in South Africa through its original takeover of Bonaparte Diamond Mine NL were
classified as held for sale at 30 June 2015 as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Assets held for sale
Liabilities
Trade and other payables
Provisions
Liabilities held for sale
Net liabilities held for sale
2016
$
2015
$
-
-
-
-
-
-
-
-
3,065
18,208
266,590
287,863
(416,653)
(230,475)
(647,128)
(359,265)
62
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
19. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables(i)
Other payables and accruals
i. Trade creditors are non-interest bearing and generally on 30 day terms.
The carrying amounts disclosed above represent their fair value.
20. CURRENT LIABILITIES – PROVISIONS
Employment benefits
21. NON-CURRENT LIABILITIES – PROVISIONS
Mine rehabilitation and restoration (i)
Employment benefits
Movements in mine rehabilitation and restoration provision
Opening net carrying amount
Increase in provision
Transfer to liabilities directly associated with the assets held for sale
Closing net carrying amount
2016
$
959,388
2,195,400
3,154,788
2015
$
1,353,624
533,105
1,886,729
2016
$
181,814
181,814
2016
$
3,965,981
52,478
4,018,459
1,289,500
2,676,481
-
3,965,981
127,128
127,128
2015
$
2015
$
1,289,500
43,639
1,333,139
1,482,419
37,556
(230,475)
1,289,500
Movements in employee benefits provision
Opening net carrying amount
Increase in provision
Closing net carrying amount
i. Provision for future removal and restoration costs are recognised where there is a present obligation as a result of exploration, development,
production, transportation or storage activities having been undertaken, and it is probable that an outflow of economic benefits will be required
to settle the obligation. The provision includes the restoration costs based on the latest estimated future costs as assessed independently by the
Northern Territory Government Department of Regional Development, Primary Industry, Fisheries and Resources and is determined on a discounted
basis. The estimated future obligations include the costs of removing plant, abandoning mine site and restoring the affected areas. The rehabilitation
provision also includes costs of the future rehabilitation works relating to the Baobab Phosphate Project in Senegal and is measured on a discounted
basis. The costs have been preapproved by the Ministry of Environment and Substantial Development of Senegal as part of the progressive
rehabilitation plan and include the costs of backfilling, levelling the ground and creating a macroclimate.
43,639
8,839
52,478
-
43,639
43,639
22. NON-CURRENT LIABILITES – DEFERRED TAX LIABILITIES
Deferred tax liability
Deferred tax liability on acquisition
Net carrying amount
Movements in carrying amounts
Opening net carrying amount
Deferred tax liability on acquisition (i)
Foreign currency translation movement
Closing net carrying amount
2016
$
2015
$
4,746,961
4,746,961
-
4,977,122
(230,161)
4,746,961
-
-
-
-
-
-
i. The deferred tax liability arose on acquisition of Baobab Mining and Chemicals Corporation on 23 September 2015. Please refer to Note 36 for
further details.
63
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
23. ISSUED CAPITAL
(a) Share capital
Ordinary shares fully paid
(b) Movements in ordinary share capital
Beginning of the financial year
Transactions during the year:
- Share buy-back for cash(i)
- Issue of shares(ii)
- Issue of shares(iii)
- Issue of shares(iv)
- Issue of shares(v)
- Issue of shares(vi)
Less: transaction costs
End of the financial year
2016
2015
NOTES
NUMBER OF
SHARES
$
NUMBER OF
SHARES
$
23(b), 23(e) 523,901,468 119,817,389
247,204,006
89,901,304
247,204,006
89,901,304
247,504,006 89,927,470
-
-
-
-
(1,300,000)
(97,166)
1,000,000
71,000
28,151,676
3,096,682
3,795,786
417,536
140,000,000
14,280,000
104,750,000
12,276,700
-
(154,833)
-
-
-
-
-
-
-
-
-
-
523,901,468 119,817,389
247,204,006 89,901,304
i. From 6 November 2014 to 19 November 2014 1,300,000 shares were bought back on market at an average price of 7.47 cents.
ii.
Issued at 7.1 cents per share in consideration for corporate advisory services provided.
iii. Issued at 11 cents per share to JP Morgan Asset Management. Share issue costs of $154,834 were incurred.
iv. Issued at 11 cents per share under the Stock Option Repurchase Agreement with Baobab Mining and Chemicals Corporation SA.
v.
Issued to Baobab Partners LLC in consideration for acquisition of Baobab Fertilizer Africa, the parent company of Baobab Mining and Chemicals
Corporation SA: 100 million shares were issued on 24 September 2015 at 10.5 cents and 40 million shares were issued on 11 November 2015 at
9.5 cents.
vi. Issued for cash at 11.72 cents per share to Tablo Corporation.
(c) Movements in unlisted options on issue
Beginning of the financial year
Issued during the year:
- exercisable at 10 cents on or before 30 June 2018(i)
- exercisable at 15 cents on or before 30 June 2018(i)
- exercisable at 25 cents on or before 30 June 2018(i)
- exercisable at 25 cents on or before 24 September 2019(ii)
Expired/cancelled during the year
- 47 cents, 1 July 2014
- 32 cents, 16 October 2014
- 71 cents, 25 March 2015
- 47 cents, 3 January 2016
- 22 cents, 15 June 2016
End of the financial year
NUMBER OF OPTIONS
2016
2015
40,050,000
53,350,000
3,000,000
3,000,000
3,000,000
80,000,000
-
-
-
(500,000)
(1,500,000)
127,050,000
-
-
-
-
(500,000)
(300,000)
(12,500,000)
-
-
40,050,000
i. On 28 July 2015 the total of 9 million unlisted options were issued to third parties as an incentive remuneration for services.
ii. On 24 September 2015 80 million unlisted options were issued to Baobab Partners LLP in accordance with the terms and conditions of the Merger
Implementation Agreement in consideration for the acquisition by the Group of Baobab Fertilzer Africa, the parent company of Baobab Mining and
Chemicals Corporation SA, a company which owns the Baobab Phosphate Project in the Republic of Senegal.
64
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
23. ISSUED CAPITAL (cont...)
(d) Movements in share rights
Beginning of the financial year
Issued during the year:
NUMBER OF SHARE RIGHTS
2016
2015
- Issued contingent share rights, expiring on 20 September 2020(i)
- Issued for performance rights, expiring on 10 December 2017(ii)
- Issued for performance rights, expiring on 10 December 2017(iii)
Exercised during the year:
- Contingent share rights exercised on 11 November 2015(iv)
End of the financial year
80,000,000
10,050,000
3,750,000
(40,000,000)
53,800,000
-
-
-
-
-
i. On 24 September 2015 80 million contingent share rights were issued to Baobab Partners LLP in accordance with the terms and conditions of the
Merger Implementation Agreement in consideration for the acquisition of Baobab Fertilzer Africa, the parent company of Baobab Mining and
Chemicals Corporation SA, a company which owns the Baobab Phosphate Project in the Republic of Senegal. These share rights will convert to
ordinary shares upon the first commercial production of the phosphate rock at the Baobab Phosphate Project.
ii. Subsequent to the approval of the Performance Rights Plan (Plan) at the Annual General Meeting held on 18 November 2015 performance share
rights were issued during the period to senior management personnel of the Group. The share rights were issued in three tranches in accordance
with the terms and conditions of the Plan. Each tranche is subject to vesting performance conditions, a vesting milestone date and has an expiry date
2 years from the date of issue.
iii. Subsequent to the approval at the Annual General Meeting held on 18 November 2015 Director performance share rights were issued to Mr.
Lawrenson. The share rights were issued in three tranches in accordance with the terms and conditions approved at the Annual General Meeting.
Each tranche is subject to vesting performance conditions, a vesting milestone date and has an expiry date 2 years from the date of issue. Refer to
Note 34 for further details.
iv. 40 million contingent share rights issued to Baobab Partners LLP (as per note (i)) were exercised and converted to 40 million ordinary shares.
(e) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(f) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that
they may continue to provide returns for shareholders and benefits for other stakeholders. There has been no change
in the strategy adopted by management to control the capital of the Group since the prior year.
Due to the nature of the Group’s activities, being mineral exploration and development, the Group does not have
ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the
Group’s capital risk management is the current working capital position against the requirements of the Group to
support exploration programmes, development and production start-up phases of the Baobab Phosphate Project
and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated
operating requirements, with a view to initiating appropriate funding as required.
The working capital position of the Group at the end of the year is as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Current provisions
Working capital position
65
2016
$
24,473,574
1,657,986
(3,154,788)
(181,814)
22,794,958
2015
$
15,388,406
317,731
(1,886,729)
(127,128)
13,692,280
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
24. RESERVES AND ACCUMULATED LOSSES
2016
$
2015
$
(a) Reserves
Foreign currency translation
Share-based payments
Reserves
Reserves of assets held for sale (refer to Note 18)
Consolidation reserve
Total reserves
Movements:
Available-for-sale financial assets reserve
Balance at beginning of year
Revaluation
Cumulative loss reclassified to profit or loss on impairment of
available-for-sale financial assets
Balance at end of year
Foreign currency translation reserve
Balance at beginning of year
Currency translation differences arising during the year
Reserves of assets held for sale (Refer to Note 18 – Assets held for sale)
Balance at end of year
Share-based payments reserve
Balance at beginning of year
Employee and third party share options
Performance rights and share rights
Balance at end of year
Non-controlling interest reserve
Balance at beginning of year
Parent equity adjustment for NCI consideration
Balance at end of year
(b) Accumulated losses
Balance at beginning of year
Net loss for the year
Balance at end of year
(c) Nature and purpose of reserves
(676,313)
19,247,220
18,570,907
-
7,465,464
26,036,371
-
-
-
-
121
1,366,555
(2,042,989)
(676,313)
13,857,478
2,762,200
2,627,542
19,247,220
-
7,465,464
7,465,464
121
13,857,478
13,857,599
(2,042,989)
-
11,814,610
(124,956)
(1,338,049)
1,463,005
-
(2,060,486)
17,618
2,042,989
121
13,795,645
61,833
-
13,857,478
-
-
-
2016
$
2015
$
(71,865,636)
(9,324,324)
(81,189,960)
(28,875,091)
(42,990,545)
(71,865,636)
(i) Available-for-sale financial assets reserve
Changes in the fair value of investments, such as equities classified as available-for-sale financial assets, are recognised
in other comprehensive income and accumulated in a separate reserve within equity. Amounts are reclassified to profit
or loss when the associated assets are sold or impaired.
66
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
24. RESERVES AND ACCUMULATED LOSSES (cont...)
(ii) Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
foreign operations where their functional currency is different to the presentation currency of the reporting entity. The
reserve is recognised in profit and loss when the net assets of foreign controlled entities are disposed of.
(iii) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options, contingent share rights and
performance rights granted.
(iv) Consolidation reserve
The non-controlling interest’s reserve records the difference between the fair value of the amount by which the non-
controlling interest was adjusted to record their initial relative interest and the consideration paid.
25. REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
The auditor of Avenira Limited is Ernst & Young Australia.
Auditor remuneration:
Ernst & Young Australia – audit and review of financial reports
W.K.H Landgrebe – statutory audit of foreign subsidiary
Other non-audit remuneration:
Ernst & Young
Tax compliance services
International tax consulting and advice on mergers and acquisitions
Other tax advisory services
Bentleys - other advisory services
W.K.H Landgrebe – tax compliance (South Africa)
Remuneration of related practices of Ernst & Young
Foreign subsidiary audits (Senegal and Mauritius)
Tax compliance services
2016
$
2015
$
66,950
29,976
96,926
29,931
21,430
24,365
-
2,286
78,012
24,286
-
24,286
40,930
-
40,930
32,000
139,140
18,620
1,000
-
231,690
18,318
23,594
41,912
From time to time the Group may decide to employ the external auditor on assignments additional to their statutory audit
duties where the auditor’s expertise and experience with the Group is important.
The Board has considered the position and is satisfied that the provision of non-audit services is compatible with the
general standard of independence imposed by the Corporates Act 2001.The nature of services provided to the Group
during the period by Ernst & Young and other practices do not compromise the general principles relating to auditor
independence because they relate to tax advice in relation to domestic and international compliance issues, and due
diligence services which involved the provision of assurances arising from their engagement.
26. CONTINGENCIES
In relation to tenement acquisition agreements entered into by the Group, the following additional cash may be
received dependent on future events:
TNT Mines Royalty Deed
The parent entity will receive a royalty on a quarterly basis on all product sold, removed or otherwise disposed from
all tenements held by TNT Mines. The royalty is calculated at 1.5% of the net smelter return and the total amount
receivable is capped at $5,000,000.
The Directors are of the opinion that it is not practicable to estimate the financial effect at the date of this report.
67
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
27. COMMITMENTS
The Group has certain commitments to meet minimum expenditure requirements on the mineral exploration assets for
the Wonarah project areas that it has an interest in. Outstanding exploration commitments are as follows:
(a) Exploration commitments
The Group has certain commitments to meet minimum expenditure
requirements on the mineral exploration assets for the Wonarah project
areas that it has an interest in.
within one year
later than one year but not later than five years
later than five years
(b) Non-cancellable operating lease
Minimum lease payments:
within one year
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but
not recognised as liabilities
2016
$
2015
$
3,069,682
2,905,365
7,707,000
13,682,047
104,400
8,700
113,100
1,201,785
3,674,688
8,095,500
12,971,973
76,316
-
76,316
The Group has a non-cancellable office lease, expiring within one year. The lease has varying terms, escalation
clauses and renewal rights.
(c) Mine development commitments
within one year
Development expenditure contracted for at reporting date but not
recognised as liabilities
481,509
481,509
-
-
The mine development commitments relate to completion works of the wet screening plant and water boreholes at
the Baobab Phosphate Project.
28. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
29. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Avenira Limited. The consolidated entity has a related party
relationship with its subsidiaries (see Note 30) and with its key management personnel.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 30.
(c) Compensation of Key Management Personnel
Short-term benefits
Long-term benefits
Post-employment benefits
Share-based payments
68
2016
$
2015
$
1,154,712
44,690
80,940
162,840
1,443,182
1,157,159
25,950
80,940
57,146
1,321,195
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
29. RELATED PARTY TRANSACTIONS (cont...)
Other transactions and balances with the key management personnel
Mr Richard O’Shannassy was engaged during the financial year to provide legal services. In addition to the Non-executive
Director fees the total amount of $36,000 was paid to Richard O’Shannassy & Pty Co Ltd, the firm through which the legal
consultancy services were provided to the Group.
30. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in Note 1(b) (i):
SUBSIDIARIES
COUNTRY OF
INCORPORATION
CLASS OF SHARES
2016
2015
EQUITY HOLDING(i)
Minemakers Australia Pty Ltd
Minemakers (Iron) Pty Ltd
Minemakers (Nickel) Pty Ltd
Minemakers (Salt) Pty Ltd
Minemakers (Gold) Pty Ltd
Bonaparte Diamond Mines Pty Ltd
Samber Trading No 115 (Pty) Ltd(ii)
Matayo Trading 7 (Pty) Ltd(ii)
Baobab Fertilizer Africa(iii) (vii)
Baobab Mining and Chemicals Corporation SA(iii) (iv) (vii)
Gadde Bissik Phosphate Operations Suarl(iii) (vii)
Avenira Holdings LLC(v) (vi) (vii)
Australia
Australia
Australia
Australia
Australia
Australia
South Africa
South Africa
Mauritius
Senegal
Senegal
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
%
100
100
100
100
100
100
-
-
100
80
80
100
%
100
100
100
100
100
100
100
74
-
-
-
-
i. The proportion of ownership interest is equal to the proportion of voting power held.
ii. On 16 July 2015 Avenira completed the sale of Samber Trading No 115 (Pty) Ltd and Matayo Trading 7 (Pty) Ltd to Spearhead Capital Limited.
iii. On 23 September 2015 Avenira acquired Baobab Fertilizer Africa through the amalgamation. Baobab Fertilizer Africa (“BFA”) is the parent company
of Baobab Mining and Chemicals Corporation SA (“BMCC”) and its wholly subsidiary, Gadde Bissik Phosphate Operations Suarl.
iv. On 29 February 2016, as a result of the additional share issue by BMCC to Mimran Group and BFA, BFA’s ownership’s percentage in BMCC decreased
from 100% to 80%. Mimran Group also holds 19.9% direct interest in Avenira Limited.
v. The entity was incorporated on 8 June 2016.
vi. The company’s equity represented by an initial capital contribution by Avenira as the sole member.
vii. The financial year end date is 31 December.
On 29 February 2016 the Group disposed of 20% of the ownership interest of BMCC. Following the disposal, the Group
still controls BMCC and retains 80% of the ownership interest. The transaction has been accounted for as an equity
transaction with non-controlling interest (NCI), resulting in the following:
Proceeds from sale of 20% ownership interest
Net assets attributable to NCI
Increase in equity attributable to parent
Represented by increase by:
Increase in consolidation reserve
$
15,478,749
(8,013,285)
7,465,464
7,465,464
69
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
30. SUBSIDIARIES (cont...)
Portion of equity interest held by non-controlling interests
Baobab Mining and Chemicals Corporation SA
COUNTRY OF
INCORPORATION
Senegal
Accumulated balance of material non-controlling interest
Baobab Mining and Chemicals Corporation SA
Loss allocated to material non-controlling interest
Baobab Mining and Chemicals Corporation SA
2016
2015
20%
2016
$
(7,557,783)
2016
$
140,371
2015
$
2015
$
The summarised financial information of the subsidiary is provided below. This information is based on amounts
before inter-company elimination.
Summarised profit or loss for Baobab Mining and Chemicals Corporation SA
Other Income
Depreciation expense
Salaries and employee benefit expenses
Exploration expenditure
Administrative and other expenses
Loss for the period from continuing operations
Income tax benefit/ (expense)
Loss for the period from continuing operations
Total comprehensive loss
Attributable to non-controlling interest
Foreign currency loss on translation of foreign operations attributable to
non-controlling interest
2015
$
2016
$
259,282
(82,963)
(129,588)
(1,507)
(901,074)
(855,850)
-
(855,850)
(855,850)
(140,371)
(315,131)
Summarised statement of financial position for Baobab Mining and Chemicals Corporation SA
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total Equity
Attributable to:
Equity holders of parent
Non-controlling interest
2016
$
2015
$
8,552,091
41,126,553
(3,846,765)
(8,042,965)
37,788,914
30,231,131
7,557,783
Summarised statement of cash flow for Baobab Mining and Chemicals Corporation SA
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Net increase/(decrease) in cash and cash equivalents
2016
$
2015
$
(1,948,351)
(10,018,732)
14,986,072
3,018,989
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
AVENIRA LIMITED AND CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
31. EVENTS OCCURRING AFTER THE BALANCE DATE
The following events occurred subsequent to the end of year:
a. On 7 July 2016 Avenira Ltd and JDCPhosphate (JDCP), Inc. signed an amended licence agreement for a
prepayment amount of USD 350,000 that update and strengthen Avenira’s exclusive IHP licence rights in
Australia and Senegal.
b. On 15 July 2016 Avenira Holdings LLC, a wholly owned subsidiary of Avenira Limited, and JDCP executed a
convertible secured promissory note purchase and exchange agreement. The principal amount of the JDCP
promissory note is USD 1,650,000 with a maturity date of 15 July 2017 and an applicable interest rate of 12%
per annum. As at the date of this report USD 1,250,000 has been advanced to JDCP in accordance with terms
and condition of the promissory note.
c. On 22 July 2016 and 16 August 2016 the Company announced that it has signed three export rock phosphate
supply agreements with established international fertiliser producers. The agreements are for three years and
for between 360,000 and 480,000 tonnes per annum.
Other than as disclosed above, no event has occurred since 30 June 2016 that would materially affect the operations of the
Group, the results of the Group or the state of affairs of the Group not otherwise disclosed in the Group’s financial statements.
32. STATEMENT OF CASH FLOWS
Reconciliation of net loss after income tax to net cash outflow
from operating activities
Net loss from continuing operations
Adjustment for non-cash items
Depreciation of plant and equipment
Net loss/(gain) on disposal of plant and equipment
Net loss/(gain) on disposal of subsidiary
Impairment on available-for-sale financial assets
Impairment on financial assets held through profit or loss
Fair value gain on revaluation of financial assets at fair value through
profit & loss
Option expense
Expense in respect of shares issued in consideration for services rendered
Net foreign currency loss
Amortisation of intangibles
Impairment of exploration and evaluation expenditure
Write off of exploration and evaluation expenditure
Impairment provision recognised on current receivables
Items classified as investment / financing activities:
Interest income
Other income
Reversal of NCI from pre-acquisition of Bonaparte Dimond Mines
Change in operating assets and liabilities, net of effects from
purchase of controlled entities
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in provisions
Net cash outflow from operating activities
71
2016
$
2015
$
(9,464,695)
(43,018,117)
94,875
(108)
1,354,707
-
-
-
130,200
359,542
192,683
25,615
574,962
635,125
93,588
(31,298)
(114,867)
(325,107)
112,937
(778,520)
63,525
(7,076,836)
59,869
18,612
-
1,463,005
635,481
(90,732)
61,833
71,001
3,846
25,615
34,432,307
-
727,763
-
-
-
53,372
749,273
69,590
(4,737,282)
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
33. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating loss per share
Loss attributable to the owners of the Company used in calculating basic
and diluted loss per share
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic loss per share
Weighted average number of ordinary shares used in calculation
of diluted loss per share
(c) Effects of anti-dilution from
Unlisted options
Share rights
2016
$
2015
$
(9,324,324)
(42,990,545)
2016
NUMBER OF SHARES
2015
NUMBER OF SHARES
404,401,121
246,143,129
404,401,121
246,143,129
127,050,000
53,800,000
40,050,000
-
Between the reporting date and the date of authorisation of these financial statements no additional securities were
issued that could potentially dilute basic loss per share in the future.
34. SHARE BASED PAYMENTS
(a) Employees and Contractors Option Incentive Plan
The Group provided benefits to employees (including directors) and contractors of the Group in the form of share
based payment transactions, whereby employees and contractors render services in exchange for options to acquire
ordinary shares. The exercise price of the options granted range from 18 cents to 47 cents per an option. All Avenira
Limited options granted have vested and have expiry dates ranging from 29 July 2016 to 18 June 2017.
The Employee and Contractors Option Incentive Plan was replaced by the Performance Rights Plan which was approved
at the Company’s 2015 AGM.
There were no options granted to employees during the year ended 30 June 2016.
(b) Other option-based payments
The Group provided unlisted options to third parties as incentive remuneration for provision of services. Options were
issued in three equal tranches with a different exercise price for each tranche, being 10 cents, 15 cents and 25 cents,
and all have an expiry date of 30 June 2018. 66.6% of the granted options vested during the financial year and the rest
of the options will vest once the Company’s share price reaches 25 cents.
All options granted by the Company carry no dividend or voting rights. When exercisable, each option is convertible
into one ordinary share of the Company with full dividend and voting rights.
The below table summarises the number and movement in options granted and their weighted average prices:
AVENIRA LIMITED
2016
NUMBER OF
OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
CENTS
2015
WEIGHTED AVERAGE
EXERCISE PRICE
CENTS
40
-
-
-
69
25
NUMBER OF
OPTIONS
39,350,000
-
-
-
25
17
-
-
28 (13,300,000)
26,050,000
22
26,050,000
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at year end
Exercisable at year end
26,050,000
9,000,000
-
-
(2,000,000)
33,050,000
33,050,000
72
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
34. SHARE BASED PAYMENTS (cont...)
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 1.06
years (2015: 1.64 years), and the exercise prices range from 10 cents to 31 cents.
All options issued during the period were valued using the Black-Scholes European Option Pricing model. The fair
value of options granted during the year was estimated on the date of grant using the following input:
Weighted average exercise price (cents)
Weighted average life of the option (years)
Weighted average underlying share price (cents)
Expected share price volatility
Weighted average risk free interest rate
Weighted average fair value per option granted (cents)
2016
2015
24.16
3.89
10.1
68.20%
1.93%
3.1
-
-
-
-
-
-
Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is
indicative of future trends, which may not eventuate.
(c) Performance Rights Plan
Performance rights were issued to the executive KMP, key employees and consultants of the Group under the terms
and conditions of the Avenira Performance Rights Plan which was approved at the AGM in November 2015. These
performance rights were issued for nil consideration and each performance right will convert to a fully paid ordinary share
upon satisfaction of the relevant performance conditions.
The performance rights expire two years after the grant date and will vest over the two-year period on the achievement
of the following performance conditions in relation to the Baobab Phosphate Project:
•
•
•
Tranche 1 - 50% on commencement of commercial production
Tranche 2 - 25% on achievement of steady state commercial production
Tranche 3 - 25% on accumulation of 100Mt of inferred resource of P2O5 at 20% or greater, capable of being
converted into saleable product.
The below table summarises the details of the performance rights granted during the financial year.
NUMBER OF
RIGHTS ISSUED
FAIR VALUE AT
GRANT DATE, $
EXERCISE
PRICE, $
VESTING
DATE
EXPIRY
DATE
PROBABILITY
MILESTONE
ACHIEVEMENT(1)
AVENIRA LIMITED
Balance at 1 July 2015
Grant Date: 18 November 2015
Tranche 1
Tranche 2
Tranche 3
Grant Date: 3 December 2015
Tranche 1
Tranche 2
Tranche 3
1,875,000
937,500
937,500
5,025,000
2,512,500
2,512,500
Total balance at 30 June 2016
13,800,000
0.092
0.092
0.092
0.067
0.067
0.067
nil
nil
nil
nil
nil
nil
30 Sep 16 18 Nov 17
31 May 17 18 Nov 17
18 Nov 17 18 Nov 17
30 Sep 16
3 Dec 17
31 May 17
3 Dec 17
3 Dec 17
3 Dec 17
75%
50%
60%
75%
50%
60%
1. Each performance condition has a milestone date that the performance condition is required to be achieved by otherwise the performance right will
lapse. As at 30 June 2016 the Board considered the percentage of likelihood of achieving the performance milestones as indicated in the table and
it is based on the progress of operations at the Baobab Phosphate Project.
For further information on the performance conditions please refer to the page 22 of the Remuneration Report.
Due to the fact the performance rights have a market-based condition the appropriate methodology, Monto-Carlo
simulation method, was used for the valuation of the performance rights.
73
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
34. SHARE BASED PAYMENTS (cont...)
The below table lists the inputs used for determination of the fair value of the performance rights granted during the
financial year:
18 NOVEMBER 2015
3 DECEMBER 2015
GRANT DATE
Underlying security spot price, $(1)
Exercise price
Dividend rate(2)
Stock volatility(3)
Risk free rate(4)
Valuation date(5)
TRANCHE 1
0.140
nil
nil
70%
2.04%
18 Nov 15
TRANCHE 2
0.140
nil
nil
70%
2.04%
18 Nov 15
TRANCHE 3
0.140
nil
nil
70%
2.04%
18 Nov 15
TRANCHE 1
0.115
nil
nil
70%
2.04%
3 Dec 15
TRANCHE 2
0.115
nil
nil
70%
2.04%
3 Dec 15
TRANCHE 3
0.115
nil
nil
70%
2.04%
3 Dec 15
1. The underlying security spot price used for the purposes of this valuation is the closing price on the date of grant.
2. For the purposes of this valuation it is assumed that the company’s share price is “ex-dividend”.
3. The AEV stock volatility is based on historical data.
4. The risk free rate is the implied zero coupon yield on Australian Government Bonds of maturity equivalent to the expected life of the performance rights.
5. The valuation date is the date of grant of the performance rights.
As at 30 June 2016 no performance rights vested, therefore, no rights were converted to shares for the financial year
Fair value of share based payments that were granted or vested to directors, employees, contractors and other parties
are recognised in the profit or loss for the period:
Employee benefit expense - options
Other share based payment
Employee benefit expense – performance rights
Total for the year
2016
$
2015
$
-
130,200
359,542
489,742
61,833
-
-
61,833
35. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Avenira Limited, at 30 June 2016. The information presented here
has been prepared using accounting policies consistent with those presented in Note 1.
(a) Financial position
Assets
Current assets
Non-current assets
Total liabilities
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Asset Position
Equity
Contributed equity
Reserves:
- Share Based payment reserve
- Performance Rights
Accumulated losses
Total equity
(b) Financial Performance
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
74
2016
$
2015
$
18,563,005
42,081,409
60,644,414
620,198
52,478
672,676
59,971,738
15,597,137
15,473,510
31,070,647
1,385,431
43,639
1,429,070
29,641,577
119,817,389
89,901,303
16,619,677
2,627,542
(79,092,870)
59,971,738
(4,975,667)
-
(4,975,667)
13,857,477
-
(74,117,203)
29,641,577
(44,533,226)
213,291
(44,319,935)
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
35. PARENT ENTITY INFORMATION (cont...)
(c) Details of any contingent liabilities of the parent entity
The parent entity does not have any contingent liabilities at 30 June 2016.
(d) Details of any commitments by the parent entity for the acquisition of property, plant and equipment
There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment
as at reporting date.
36. BUSINESS COMBINATION
On 23 September 2015 Avenira acquired 100% of the issued shares in Baobab Fertilizer Africa (BFA). BFA is the 100%
shareholder of Baobab Mining and Chemicals Corporation SA (BMCC), a company which owns the Baobab Phosphate
Project in the Republic of Senegal.
The acquisition advances the Group’s focus on the nutrient and fertiliser sector and nearer-term strategic objective of
early cash flow with minimal capital expenditure and no technology risk.
The acquisition of BFA has been accounted for using the acquisition method. The financial statements include the
results of BFA from the date of acquisition.
PURCHASE CONSIDERATION
The equity instruments were issued as a consideration in a business combination and measured at their fair value on
the acquisition date as follows:
Purchase consideration
100,000,000 fully paid ordinary shares(i) (v)
80,000,000 unlisted options(ii) (v)
40,000,000 Class “A” contingent share rights(iii) (vi)
40,000,000 Class “B” contingent share rights(iv) (vi)
$
10,500,000
2,632,000
3,780,000
2,268,000
19,180,000
i. Fair value is the share price on acquisition date, being $0.105.
ii. Fair value price of $0.033 was calculated using Black-Scholes European Option Pricing Model at acquisition date.
iii. Each Class “A” Contingent Share Right will convert to one ordinary share upon the earlier of achievement of (i) a board-approved preliminary feasibility study;
(ii) the decision by the Board to proceed with the construction of a phosphate rock mine; or (iii) first commercial production of phosphate rock. Fair value is the
share price on acquisition date, being $0.105. Maximum amount of contingent consideration is $4,200,000.
iv. Each Class “B” Contingent Share Right will convert to one ordinary share upon the first commercial production of the phosphate rock. Fair value is the share
price on acquisition date, being $0.105. Maximum amount of contingent consideration is $4,200,000.
v. The consideration paid is calculated by multiplying the number of securities issued by the fair value of each security.
vi. The consideration paid is calculated by multiplying the number of securities issued by the fair value of each security multiplied by the probability of each
milestone being achieved.
75
AVENIRA LIMITED AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont...)
YEAR ENDED 30 JUNE 2016
36. BUSINESS COMBINATION (cont...)
Fair value of identifiable net assets and liabilities
The fair values of the identifiable assets and liabilities of BFA as at the date of acquisition were:
Assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets
Capitalised exploration and evaluation expenditure recognised on acquisition
Total assets
Trade and other payables
Deferred tax liability recognised on acquisition
Total liabilities
Total net assets acquired on acquisition
Goodwill arising on acquisition
Total purchase consideration
Analysis of cash flows on acquisition
Cash consideration paid to acquire subsidiary
Cash balance acquired
Net cash inflow on acquisition
FAIR VALUE ON ACQUISITION
$
117,255
82,753
227,617
10,290
19,908,486
20,346,401
(1,166,401)
(4,977,122)
(6,143,523)
14,202,878
4,977,122
19,180,000
-
117,255
117,255
The fair value of trade and other receivables represents their recoverable amounts.
The goodwill on the transaction has principally arisen as a result of the requirement to recognise the deferred income
tax liabilities representing the tax effect of the difference between the fair value and the tax base of assets acquired.
Other Considerations
Management are not aware of the existence of any other assets and liabilities that should be considered in the assessment
of the fair value of assets and liabilities of the acquiree except for the recognition of deferred tax liabilities.
Revenue and loss of acquiree since the date of acquisition to 30 June 2016
The acquired business contributed revenue of $259,672 and a net loss of $855,850 to the Group for the period from
23 September 2015 to 30 June 2016. If the acquisition had taken place at the beginning of the year, revenue and loss
for the period would have been $790,430 and $1,283,891 respectively.
Transaction costs
Transaction costs of $1,189,532 have been expensed and are included in administrative and other expenses in the profit or loss.
76
AVENIRA LIMITED AND CONTROLLED ENTITIES DIRECTOR’S DECLARATION
The Directors’ declare that:
a.
the financial statements and notes set out on pages 31 to 76 are in accordance with the Corporations
Act 2001, including:
i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of their
performance for the financial year ended on that date;
b.
in their opinion, subject to achieving the matters set out in Note 1(a) of the financial report, there are
reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable; and
c. a statement that the attached financial statements are in compliance with International Financial
Reporting Standards has been included in the notes to the financial statements.
The directors have been given the declarations by the chief executive officer and chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
CLIFF LAWRENSON
Managing Director
Perth, 30 September 2016
77
AVENIRA LIMITED AND CONTROLLED ENTITIES
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
INDEPENDENT AUDITOR’S REPORT
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of Avenira Limited
Report on the financial report
We have audited the accompanying financial report of Avenira Limited, which comprises the consolidated
statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
78
GB:EH:AVENIRA:019
AVENIRA LIMITED AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT (cont...)
Opinion
In our opinion:
a.
the financial report of Avenira Limited is in accordance with the Corporations Act 2001, including:
i.
giving a true and fair view of the consolidated entity's financial position as at 30 June 2016
and of its performance for the year ended on that date; and
ii.
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1(a).
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1(a) in the financial report which describes the
principal conditions that raise doubt about the consolidated entity’s ability to continue as a going concern.
These conditions indicate the existence of material uncertainty that may cast significant doubt about the
consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be
unable to realise its assets and discharge its liabilities in the normal course of business.
Report on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2016. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Avenira Limited for the year ended 30 June 2016 complies
with section 300A of the Corporations Act 2001.
Ernst & Young
Gavin Buckingham
Partner
Perth
30 September 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
79
GB:EH:AVENIRA:019
AVENIRA LIMITED AND CONTROLLED ENTITIES ASX ADDITIONAL INFORMATION
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 22 September 2016.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
ORDINARY SHARES
NUMBER OF HOLDERS
NUMBER OF SHARES
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
The number of equity security holders holding less than
a marketable parcel of securities are:
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
1
2*
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Baobab Partners LLC
HSBC Custody Nominees
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