Australian Strategic Materials Ltd
ABN 90 168 368 401
Annual Report ‐ 30 June 2019
Australian Strategic Materials Ltd
Directors' report
30 June 2019
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the
'consolidated entity') consisting of Australian Strategic Materials Ltd (referred to hereafter as the 'company' or 'parent entity') and the
entities it controlled at the end of, or during, the year ended 30 June 2019. Australian Strategic Materials Ltd changes its name from
Australian Zirconia Holdings Pty Ltd on 25 March 2020.
Directors
The following persons were directors of Australian Strategic Materials Ltd during the whole of the financial year and up to the date of
this report, unless otherwise stated:
I J Gandel
N Earner
D I Chalmers
A D Lethlean
G Smith was appointed director from 29 November 2017
Principal activities
The principal activities of the Consolidated Entity during the course of the period was mineral evaluation activities for the Dubbo Project
a large in‐ground resource of zirconium, hafnium, niobium, vttrium and rare earth elements. The Consolidated Entity's subsidiaries,
Australian Strategic Materials (Holdings) Limited (ASM) continues to focus on mineral evaluation activities for the Dubbo Project and
Toongi Pastoral Company Pty Ltd (TPC) continues to focus on managing the farm activities (breeding and grazing of sheep and cattle)
and biodiversity offsets as part of the Dubbo Project activities.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $3,247,582 (30 June 2018: $2,956,014).
The Dubbo Project remains ready for construction, subject to financing, with the mineral deposit and surrounding land wholly owned,
all major State and Federal approvals in place, an established flowsheet and a solid business case. Efforts during the period focussed
on product development and marketing with potential customers with a focus on establishing offtake contracts.
The continued focus on product development has led to the execution of a binding agreement with Ziron Tech (a South Korean
company) to fund the final stage of research and feasibility into a clean process for converting metal oxide, including Dubbo Project
metals, to metals of a highly marketable purity. Several conditions precedent that remained outstanding at 30 June 2019 have now
been satisfied, and an investment of US$1.2m has been made for the final stage of research which will include construction of a
commercial scale equipment unit for testing. The new technology should allow the company to bypass traditional supply chains and
sell products direct to the consumer. The commercial scale pilot plant being constructed is due to be commissioned in the second
quarter of 2020.
Chinese authorities continue their war on pollution, with smaller operations being forced to upgrade facilities or close down. This
extends to the rare earths industry in China, which has been consolidated in recent years, and to ionic clay mining and processing in
southern provinces which has been largely eliminated. On top of this is the chronic shortage of water in northern China, affecting both
rare earths and zirconium production. Risks for supply disruption of rare earths and zirconium products continue to grow, with few
alternatives outside China at this time.
Market prices for zirconium and rare earths remained flat or slightly lower at time of finalising the accounts, with some small companies
reducing prices to reduce stocks. Zircon prices remained weak on the back of slow demand in China, while niobium and hafnium prices
remained stable.
1
Australian Strategic Materials Ltd
Directors' report
30 June 2019
Significant changes in the state of affairs
In June 2019 Australian Strategic Materials (Holdings) Ltd executed of a binding agreement with Ziron Tech (a South Korean company)
to fund the final stage of research and feasibility into a clean process for converting metal oxide, including Dubbo Project metals, to
metals of a highly marketable purity. Several conditions precedent that remained outstanding at 30 June 2019 were satisfied in July
2019, and an investment of US$1.2m has been made for the final stage of research which will include construction of a commercial
scale equipment unit for testing. This was reflected through an investment in a new company called RMR Tech Corp, incorporated in
Korea.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
In early 2020 with the outbreak of Coronavirus Disease 2019 (“COVID‐19” or “the coronavirus”) unprecedented measures put in place
by the Australian Government, as well as governments across the globe, to contain the coronavirus have had a significant impact on
the economy. Management continues to consider the potential implications of coronavirus, which may include delaying he construction
and commissioning of the pilot modification plant, and other optimisation work in progress focused on further improving the project
economics. As at the date these financial statements were authorised, Management was not aware of any material adverse effects on
the financial statements as a result of the coronavirus.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
Likely developments and expected results of operations
The Consolidated Entity intends to continue evaluation activities in relation to the Dubbo Project in line with details provided in the
Review of Operations.
Environmental regulation
The Consolidated Entity is subject to significant environmental regulation in respect of its exploration and evaluation activities.
The Consolidated Entity aspires to the highest standards of environmental management and insists its entire staff and contractors
maintain that standard. A significant environmental incident is considered to be one that causes a major impact or impacts to land
biodiversity, ecosystem services, water resources or air, with effects lasting greater than one year. There were no significant
environmental incidents reported at any of the Consolidated Entity’s operations.
Indemnity and insurance of officers
Alkane Resources Ltd (the Ultimate Parent Entity) has entered into deeds of indemnity, access and insurance with each of the
Directors. These deeds remain in effect as at the date of this report. Under the Deeds, the Ultimate Parent Entity indemnifies each
Director to the maximum extent permitted by law against legal proceedings or claims made against or incurred by the Directors in
connection with being a Director of the Consolidated Entity, or breach by the Consolidated Entity of its obligations under the Deed.
The liability insured is the indemnification of the Consolidated Entity against any legal liability to third parties arising out of any Directors
or officers duties in their capacity as a Director or Officer other than indemnification not permitted by law.
No liability has arisen under this indemnity as at the date of this report.
The Ultimate Parent Entity has not otherwise, during or since the financial year, indemnified or agreed to indemnify an Officer of the
Consolidated Entity or of any related body corporate, against a liability incurred as such by an Officer.
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Australian Strategic Materials Ltd
Directors' report
30 June 2019
Indemnity and insurance of officers (continued)
During the year the Company has paid premiums in respect of Directors’ and Executive Officers’ Insurance. The contracts contain
prohibitions on disclosure of the amount of the premiums and the nature of the liabilities under the policies.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or
any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any
related entity.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
N Earner
Director
21 April 2020
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Australian Strategic Materials Ltd
Contents
30 June 2019
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Australian Strategic Materials Ltd
General information
5
6
8
9
30
31
The financial statements cover Australian Strategic Materials Ltd as a consolidated entity consisting of Australian Strategic Materials
Ltd and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Australian Strategic Materials Ltd's functional and presentation currency.
Australian Strategic Materials Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business are:
Registered office
Principal place of business
Australian Strategic Materials Ltd
89 Burswood Road, Burswood, Western Australia
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which
is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 21 April 2020. The directors have
the power to amend and reissue the financial statements.
4
Australian Strategic Materials Ltd
Consolidated statement of comprehensive income
For the year ended 30 June 2019
Revenue
Other income
Expenses from continuing operations
Professional fees and consulting services
Dubbo consumables expenses
Audit fees
General and administration expenses
Pastoral company expenses
Finance charges
Exploration provided for or written off
Loss before income tax (expense)/benefit
Consolidated
Note
2019
$
2018
$
3
1,763,484
2,026,475
224,481
(162,356)
(11,003)
57,137
(1,184,711)
(3,417,610)
(444,135)
(358,436)
(252,531)
(12,541)
(241,327)
(894,449)
(3,291,158)
(6,878)
(3,174,713)
(3,030,845)
Income tax (expense)/benefit
4
(72,869)
74,831
Loss after income tax (expense)/benefit for the year attributable to the owners of
Australian Strategic Materials Ltd
14
(3,247,582)
(2,956,014)
Other comprehensive income for the year, net of tax
‐
‐
Total comprehensive income for the year attributable to the owners of Australian
Strategic Materials Ltd
(3,247,582)
(2,956,014)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
5
Australian Strategic Materials Ltd
Consolidated balance sheet
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Receivables
Consumables
Biological assets
Total current assets
Non‐current assets
Property, plant and equipment
Exploration and evaluation
Biological assets
Other financial assets
Total non‐current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans from related party
Provisions
Total current liabilities
Non‐current liabilities
Loans from related party
Deferred tax
Provisions
Total non‐current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2019
$
2018
$
5
6
7
8
9
7
10
11
12
11
4
12
26,968,287
296,896
56,490
81,127
27,402,800
26,317,347
68,046
6,407
11,565
26,403,365
26,958,677
88,783,436
401,928
20,000
116,164,041
26,947,323
83,387,571
526,159
20,000
110,881,053
143,566,841
137,284,418
296,801
11,640,878
10,860
11,948,539
1,292,457
5,876,237
7,188
7,175,882
77,681,310
25,874,708
6,660
103,562,678
74,263,700
24,539,106
2,524
98,805,330
115,511,217
105,981,212
28,055,624
31,303,206
13
14
15
1
39,873,309
(11,817,686)
1
39,873,309
(8,570,104)
28,055,624
31,303,206
The above consolidated balance sheet should be read in conjunction with the accompanying notes
6
Australian Strategic Materials Ltd
Consolidated statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Contributed
equity
$
1
‐
‐
‐
Capital
Contribution
$
39,873,309
Accumulated
losses
$
(5,614,090)
Total equity
$
34,259,220
‐
‐
‐
(2,956,014)
‐
(2,956,014)
‐
(2,956,014)
(2,956,014)
Balance at 30 June 2018
1
39,873,309
(8,570,104)
31,303,206
Consolidated
Balance at 1 July 2018
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Contributed
equity
$
1
‐
‐
‐
Capital
Contribution
$
39,873,309
Accumulated
losses
$
(8,570,104)
Total equity
$
31,303,206
‐
‐
‐
(3,247,582)
‐
(3,247,582)
‐
(3,247,582)
(3,247,582)
Balance at 30 June 2019
1
39,873,309
(11,817,686)
28,055,624
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
7
Australian Strategic Materials Ltd
Consolidated statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Rent received (inclusive of goods and services tax)
Payments to suppliers (inclusive of goods and services)
Interest received
Other income
Finance costs paid
Consolidated
Note
2019
$
2018
$
96,091
(1,192,255)
135,621
(1,074,550)
(1,096,164)
643,573
307,452
(20,141)
(938,929)
653,116
1,246,623
(42,475)
Net cash from/(used in) operating activities
23
(165,280)
918,335
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation
Payments for biological assets
Proceeds from sale of biological assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings from related party
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
8
9
(67,381)
(6,387,480)
(195,043)
438,750
(807,492)
(8,752,108)
‐
‐
(6,211,154)
(9,559,600)
7,027,374
1,285,269
7,027,374
1,285,269
650,940
26,317,347
(7,355,996)
33,673,343
Cash and cash equivalents at the end of the financial year
5
26,968,287
26,317,347
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
8
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or
position of the consolidated entity.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
AASB 9 Financial Instruments addresses the classification, measurement and de‐recognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and new impairment model for financial assets. The standard applies from 1 July 2018.
From 1 July 2018, the group classifies its financial assets in the following measurement categories:
●
●
those to be measured subsequently at fair value (either through comprehensive income, or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the group’s business model for managing financial assets and the contractual terms of the cash flows. For
investments in equity instruments that are not held for trading, the group has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through other comprehensive income.
The group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost
and fair value through other comprehensive income (FVOCI). The impairment methodology applied depends on whether there has
been a significant increase in credit risk. For trade receivables, the group applies the simplified approach permitted by AASB 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables.
Trade receivables
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables. Other current receivables and prepayments were previously presented together with trade receivables but
are now presented as other financial assets at amortised cost (receivables) and other current assets (prepayments) in the balance sheet,
to reflect their different nature.
The group completed a detailed assessment of its financial assets as at 30 June 2019. Most of the requirements in AASB 139 for
classification and measurement of the group’s financial assets were carried forward in AASB 9. Hence, the group’s accounting policy for
financial assets did not change except for the application of new impairment rules.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the group performs a risk analysis
considering the type and age of the outstanding receivables, the creditworthiness of the counterparty, contract provisions, letter of
credit and timing of payment.
The group has applied the new rules from 1 July 2018.
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Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and
services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised
when control of a good or service transfers to a customer – so a notion of control replaces the existing notion of risks and rewards. The
standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional
adjustments in retained earnings on the date of application (eg 1 July 2018) ie without restating the comparative period. They will only
need to apply the new rules to contracts that are not completed as of the date of initial application.
Adoption of the new standard has had neither an impact on the timing of recognition, nor on the measurement of revenue in respect
of the sale of goods.
Revenue from the sale of goods is recognised when the group satisfies its performance obligations under its contract with the customer,
by transferring such goods to the customer’s control. Control is generally determined to be when the customer has the ability to direct
the use of and obtain substantially all of the remaining benefits from that good.
The group does not expect to have any contracts where the period between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. Accordingly, the group does not adjust transaction prices for the time value
of money.
New standards and interpretations not yet adopted
AASB 16 Leases
The group will adopt AASB 16 Leases from 1 July 2019. The standard replaces AASB 117 Leases and for lessees eliminates the
classifications of operating leases and finance leases. Except for short‐term leases and leases of low‐value assets, right‐of‐use assets
and corresponding lease liabilities are recognised in the statement of financial position. The right‐of‐use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight‐line basis, while the lease liability is reduced by an allocation of each
lease payment. In the earlier periods of the lease, the expense associated with the lease under AASB 16 will be higher when compared
to lease expenses under AASB 117. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
The group has elected to use the simplified transition approach as allowed under AASB 16 as well as apply the following practical
expedients permitted by the standard:
●
●
●
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term less than 12 months as at 1 July 2019 as short‐term leases;
the use of hindsight in determining the lease term where the contract contains options to extend or terminate lease.
The group has reviewed its contracts that were in place at 1 July 2019 and determined that there are no long term operating leases. As
a result, no impact on the current or prior financial period is expected upon adoption of AASB 16.
Mandatory for financial years commencing on or after 1 January 2019. The Consolidated Entity adopted the standard on its effective
date. The Consolidated Entity applied the simplified transition approach and will not restate comparative amounts for the year prior to
first adoption.
There are no other standards that are yet effective and that would be expected to have a material impact on the entity in its current or
future reporting periods and on foreseeable future transactions.
Going concern
The consolidated entity had net assets of $28,055,624 as at 30 June 2019 (2018: $31,303,206), and a working capital surplus of
$15,454,261 as at 30 June 2019 (2018: $19,227,483). The net assets includes the balance of loans owing to Alkane Resources Ltd (“the
ultimate parent entity”) of $89,322640,878 (2018: $115,876,237). The loans are AUD denominated and $89,322,188 (2018:
$80,139,937) is payable on demand with the undiscounted balance of $110,000,000 payable on 22 March 2027. Notwithstanding, the
directors consider that the going concern basis of accounting is appropriate as the Ultimate Parent Entity has given an undertaking not
to call the loans unless the consolidated entity can pay down the debt without interfering with normal business operations. The
undertaking has been provided for a minimum of twelve months from the date of signing this financial report.
10
Type text here
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Basis of preparation
This financial report has been prepared because the Group is preparing for an initial public offering ("IPO") on the Australian Securities
Exchange ("ASX"). The report is required for the purpose of including the financial performance for the period to 30 June 2019 and
financial position as at 30 June 2019 in the public prospectus that will be lodged with the ASX prior to the IPO.
While this annual report for the year ended 30 June 2019 is a non‐statutory report, it is a General Purpose Financial Report and has
been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards
Board ('AASB') and the Corporations Act 2001, as appropriate for for‐profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of
financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income,
investment properties, biological assets, certain classes of property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note
2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 20.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Australian Strategic Materials Ltd
('company' or 'parent entity') as at 30 June 2019 and the results of all subsidiaries for the year then ended. Australian Strategic Materials
Ltd and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the
consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control
is transferred to the consolidated entity. They are de‐consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without
the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book
value of the share of the non‐controlling interest acquired is recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non‐
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
11
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the
contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into
account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand‐alone selling price of each distinct good or service to be delivered; and recognises revenue
when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services
promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and
refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using
either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining
principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund
liability.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
Other income
Other income is recognised when it is received or when the right to receive payment is established.
Current and non‐current classification
Assets and liabilities are presented in the balance sheet based on current and non‐current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months
after the reporting period. All other assets are classified as non‐current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional
right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non‐
current.
Deferred tax assets and liabilities are always classified as non‐current.
Impairment of non‐financial assets
At each balance sheet date, the Consolidated Entity reviews the carrying amounts of its non‐current assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable
amount of an individual asset, the Consolidated Entity estimates the recoverable amount of the cash‐generating unit (CGU) to which
the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU
is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses the carrying amount of the asset or CGU is increased to the revised estimate of its
recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised
for the asset or cash generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
12
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
The recoverable amount of a CGU is the higher of its fair value less costs to dispose (FVLCTD) and its value‐in‐use (VIU). FVLCTD is the
best estimate of the amount obtainable from the sale of a CGU in an arm’s length transaction between knowledgeable willing parties,
less the costs of disposal. This estimate is determined on the basis of available market information taking into account specific
circumstances.
VIU is the present value of the future cash flows expected to be derived from the assets or group of assets (CGUs). Cash flow projections
are based on economic and regulatory assumptions and forecast trading conditions prepared by management.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the tax authority is included in other receivables or other payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not
been early adopted by the consolidated entity for the annual reporting period ended 30 June 2019. The consolidated entity has not yet
assessed the impact of these new or amended Accounting Standards and Interpretations.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year are discussed below.
Impairment of capitalised exploration and evaluation expenditure
Exploration and evaluation costs have been capitalised on the basis that the consolidated entity will commence commercial production
in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are
applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating
overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered
either through successful development or sale of the relevant mining interest. Factors that could impact the future commercial
production at the mine include the level of reserves and resources, future technology changes, which could impact the cost of mining,
future legal changes and changes in commodity prices.
Where economic recoverable reserves for an area of interest have been identified, and a decision to develop has occurred, capitalised
expenditure is classified as mine development.
To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which the
determination is made.
13
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Impairment of non‐financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non‐financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or
value‐in‐use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of
business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit
issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these matters is different
from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such
determination is made.
Alkane Resources Ltd, the ultimate parent entity, and its wholly‐owned Australian controlled entities have implemented the tax
consolidation legislation.
The ultimate parent , Alkane Resources Ltd, and the controlled entities in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand‐alone
taxpayer in its own right.
In addition to its own current and deferred tax amounts, the ultimate parent entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly‐owned entities fully compensate Alkane Resources
Ltd for any current tax payable assumed and are compensated by Alkane Resources Ltd for any current tax receivable and deferred tax
assets relating to unused tax losses or unused tax credits that are transferred to Alkane Resources Ltd under the tax consolidation
legislation. The funding amounts are determined by reference to the amounts recognised in the wholly‐owned entities’ financial
statements.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Biological assets
Biological assets are measured at fair value less cost to sell. Costs to sell include the incremental selling costs but excludes finance costs
and income taxes.
Livestock classified as current assets if they are to be sold within one year.
Changes in fair value of livestock are recognised in the statement of profit or loss.
Farming costs such as feeding, labour costs, pasture maintenance, veterinary services and sheering are expensed as incurred. The cost
of purchase of the livestock plus transportation are capitalised as part of biological assets.
14
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 3. Other income
Interest income
Pastoral company income
Lease income
Sundry income
Other income
Consolidated
2019
$
2018
$
643,573
697,153
105,393
317,365
653,116
611,611
124,704
637,044
1,763,484
2,026,475
Revenue from the sale of goods is recognised when the group satisfies its performance obligations under its contract with the customer,
by transferring such goods to the customer’s control. Control is generally determined to be when the customer has the ability to direct
the use of and obtain substantially all of the remaining benefits from that good.
Interest income from financial assets at fair value through profit or loss is included in the net fair value gains/(losses) on these assets
Interest income on financial assets at amortised cost and financial assets at fair value through other comprehensive income calculated
using the effective interest method is recognised in profit or loss as part of other income.
Note 4. Income tax
Income tax expense/(benefit)
Current tax
Deferred tax ‐ origination and reversal of temporary differences
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Increase in deferred tax liabilities
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Loss before income tax (expense)/benefit
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non‐deductible expenses
R&D tax incentive
Income tax expense/(benefit)
Consolidated
2019
$
2018
$
(1,262,733)
1,335,602
(2,550,173)
2,475,342
72,869
(74,831)
1,335,602
2,475,342
(3,174,713)
(3,030,845)
(952,414)
(909,254)
1,025,283
‐
980,200
(145,777)
72,869
(74,831)
15
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 4. Income tax (continued)
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Accruals and provisions
Borrowing costs
Previously expensed blackhole costs
Property, plant and equipment
Offset against deferred tax liabilities
Deferred tax asset
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Prepayments
Exploration
Set‐off of deferred tax asset
Deferred tax liability
Movements:
Opening balance
Charged to profit or loss
Closing balance
Consolidated
2019
$
2018
$
7,417
‐
33,276
1,814
(42,507)
8,293
1,428
56,802
1,973
(68,496)
‐
‐
Consolidated
2019
$
2018
$
2,602
25,914,613
(42,507)
‐
24,607,602
(68,496)
25,874,708
24,539,106
24,539,106
1,335,602
22,063,764
2,475,342
25,874,708
24,539,106
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax
rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of
the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
●
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.
16
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 4. Income tax (continued)
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount
to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future
taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current
tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same
taxable entity or different taxable entities which intend to settle simultaneously.
The Consolidated Entity and its ultimate Parent Entity, Alkane Resources Ltd have implemented the tax consolidation legislation. The
head entity, Alkane Resources Ltd, and the controlled entities in the tax consolidated group, account for their own current and deferred
tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand‐alone taxpayer
in its own right. Current tax liabilities (or assets) and deferred tax assets arising from unused tax losses and unused tax credits are
derecognised in the Consolidated Entity’s accounts and instead recognised in the head entity’s accounts. Assets or liabilities arising
under the funding agreement with the Ultimate Parent Entity are recognised as amounts receivable or payable to that entity.
Note 5. Cash and cash equivalents
Current assets
Cash at bank
Consolidated
2019
$
2018
$
26,968,287
26,317,347
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short‐term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Note 6. Receivables
Current assets
Other receivables
Prepayments
GST receivables
Consolidated
2019
$
2018
$
288,223
8,673
‐
10,677
6,381
50,988
296,896
68,046
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method,
less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
17
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 6. Receivables (continued)
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by
reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that
the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in
payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the
impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. Cash flows relating to short‐term receivables are not discounted if the effect of
discounting is immaterial.
Note 7. Biological assets
Current assets
Biological assets
Non‐current assets
Biological assets
Consolidated
2019
$
2018
$
81,127
11,565
401,928
526,159
483,055
537,724
Biological assets comprise sheep and cattle owned by subsidiary Toongi Pastoral Company Pty Ltd as part of farming operations on the
surrounding land to the Dubbo Project mining lease.
Note 8. Property, plant and equipment
Non‐current assets
Land and buildings ‐ at cost
Less: Accumulated depreciation
Plant and equipment ‐ at cost
Less: Accumulated depreciation
Capital Work in Progress
Consolidated
2019
$
2018
$
26,456,134
(7,739)
26,448,395
26,155,481
(403)
26,155,078
527,943
(137,224)
390,719
261,082
(72,341)
188,741
119,563
603,504
26,958,677
26,947,323
18
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 8. Property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Additions
Transfers in/(out)
Depreciation expense
Balance at 30 June 2018
Additions
Transfers in/(out)
Depreciation expense
Balance at 30 June 2019
Land &
Buildings
$
Plant &
Equipment
$
Work in
Progress
$
26,133,286
‐
22,195
(403)
26,155,078
‐
300,653
(7,336)
210,269
‐
18,442
(39,970)
188,741
‐
266,860
(64,882)
46,054
598,087
(40,637)
‐
603,504
83,572
(567,513)
‐
Total
$
26,389,609
598,087
‐
(40,373)
26,947,323
83,572
‐
(72,218)
26,448,395
390,719
119,563
26,958,677
All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment charges. Historical cost
includes:
●
●
expenditure that is directly attributable to the acquisition of items;
the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is located
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 Consolidated Entity 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 profit or loss during the reporting period in which they are incurred. Land is not depreciated.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An assets
carrying value amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of
comprehensive income.
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight‐line basis to write off the net cost of each item of property, plant and equipment (excluding
land) over their expected useful lives as follows:
Buildings
Leasehold improvements
Plant and equipment
40 years
3‐10 years
3‐7 years
19
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 9. Exploration and evaluation
Opening balance
Expenditure capitalised during the year
Amounts provided for or written off
Closing balance
Consolidated
2019
$
2018
$
83,387,571
5,840,000
(444,135)
75,183,367
8,211,082
(6,878)
88,783,436
83,387,571
Exploration and evaluation costs are carried forward on an area of interest basis. Costs are recognised and carried forward where rights
to tenure of the area of interest are current and either:
●
●
the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable resources, and active and significant exploration and evaluation activities in,
or in relation to, the area of interest continuing.
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial
viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of
impairment testing, exploration and evaluation assets are allocated to cash‐generating units to which the exploration activity relates.
The cash generating unit is not larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable,
exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine
properties under development. No amortisation is charged during the exploration and evaluation phase.
Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial
exploitation, or alternatively, sale of the respective areas of interest.
Costs carried forward in respect of an area of interest that is abandoned are written off in the period in which the decision to abandon
is made.
There may exist, on the Consolidated Entity’s exploration properties, areas subject to claim under native title or containing sacred sites
or sites of significance to Aboriginal people. As a result, exploration properties or areas within tenements may be subject to exploration
or mining restrictions.
Note 10. Trade and other payables
Current liabilities
Trade and other payables
Consolidated
2019
$
2018
$
296,801
1,292,457
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and
which are unpaid. Due to their short‐term nature they are measured at amortised cost and are not discounted. The amounts are
unsecured and are usually paid within 30 days of recognition.
20
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 11. Loans from related party
Current liabilities
Loans from related party
Non‐current liabilities
Loans from related party
Consolidated
2019
$
2018
$
11,640,878
5,876,237
77,681,310
74,263,700
89,322,188
80,139,937
The loans are AUD denominated and the current liability is repayable to the Ultimate Parent Entity on demand and the non‐current
liability component repayable by 22 March 2027. The loan facility attracts no interest. The total non current liability loan repayable is
$110,000,000, the above value represents the discounted values of the loan as at balance date.
Note 12. Provisions
Current liabilities
Employee benefits
Non‐current liabilities
Employee benefits
Consolidated
2019
$
2018
$
10,860
7,188
6,660
17,520
2,524
9,712
Other long‐term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at
the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using
the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the reporting date on national government
bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Note 13. Issued capital
30 June 2019
Shares
Consolidated
30 June 2018 30 June 2019
Shares
$
30 June 2018
$
Ordinary shares ‐ fully paid
5
5
1
1
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the
number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a
limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have
one vote.
21
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 14. Reserves
Capital contribution
Consolidated
2019
$
2018
$
39,873,309
39,873,309
This reserve is used to recognise the discounted value of a related party loan from the Ultimate Parent Entity, Alkane Resources Ltd in
accordance with AASB 9. This loan agreement was executed on 22 March 2017 for a term of ten years with no interest payable.
Note 15. Accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax (expense)/benefit for the year
Accumulated losses at the end of the financial year
Note 16. Fair value measurement
Consolidated
2019
$
2018
$
(8,570,104)
(3,247,582)
(5,614,090)
(2,956,014)
(11,817,686)
(8,570,104)
Accounting policy for fair value measurement
When an asset or liability, financial or non‐financial, is measured at fair value for recognition or disclosure purposes, the fair value is
based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act
in their economic best interests. For non‐financial assets, the fair value measurement is based on its highest and best use. Valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Note 17. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the
company:
Audit services ‐ PricewaterhouseCoopers
Audit of the financial statements
Other services ‐ PricewaterhouseCoopers
Other advisory services
22
Consolidated
2019
$
2018
$
11,003
12,541
‐
189,300
11,003
201,841
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 18. Contingent liabilities
An additional contingent liability of $1,710,000 (US$1.2m contingency converted at 30 June 2019 spot rate of 0.7015) existed at balance
date relating to an agreement with South Korean company Ziron Technology to fund final stage research and feasibility relating to a
clean metal process for the conversion of metal oxide to metals of high marketable purity. Several conditions precedent were
outstanding at balance date and not fully under the company’s control, resulting in a possible future obligation. Subsequent to 30 June
2019 these conditions were satisfied and the payment has been made.
The Consolidated Entity has contingent liabilities estimated at up to $3,670,000 for the potential acquisition of parcels of land surrounding the
Dubbo Project (2018: $3,670,000). The landholders have the right to require the consolidated entity to acquire their property when the
development consent conditions for the Dubbo Project have been met.
Note 19. Commitments
Mineral tenement leases
In order to maintain current rights of tenure to exploration and mining tenements, the Consolidated Entity will be required to outlay
amounts of approximately $207,741 within the next twelve months (2018: $211,425). These costs are discretionary, however if the
expenditure commitments are not met then the associated exploration and mining leases may be relinquished.
Capital commitments
The Consolidated Entity has capital commitments estimated at $2,980,000 for the potential acquisition of parcels of land surrounding
the Dubbo Project (2018: $2,980,000). The amount to be paid is based upon a multiple of market values and is subject to movement.
The landholders have the right to require Australian Strategic Materials (Holdings) Limited to acquire their property as provided for
under the agreement with Australian Strategic Materials (Holdings) Limited as development consent conditions have been met for the
Dubbo Project.
Note 20. Related party transactions
Parent entity
Australian Strategic Materials Ltd is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 21.
Transactions with related parties
The following transactions occurred with related parties:
Payment for goods and services:
Purchase of goods from other related party
Consolidated
2019
$
2018
$
‐
420
Nuclear IT, a director related entity, provides information technology consulting services to the Group which includes the coordination
of the purchase of information technology hardware and software. These terms are documented in a service level agreement and
represent normal commercial terms.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
Refer note 11 for details.
23
Australian Zirconia Holdings Pty Ltd
Notes to the consolidated financial statements
30 June 2019
Note 19. Related party transactions (continued)
Terms and conditions
With the exception of the related part loans, all other transactions were made on normal commercial terms and conditions and at
market rates.
Note 21. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Profit after income tax
Total comprehensive income
Balance sheet
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Capital contribution
Accumulated losses
Total equity
Parent
2019
$
2018
$
174,651
176,366
174,651
176,366
Parent
2019
$
2018
$
‐
562,626
115,483,633
115,759,970
2,007,641
5,876,237
79,688,981
80,139,937
1
39,873,309
(4,078,628)
1
39,873,309
(4,253,277)
35,794,682
35,620,033
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except
Alkane Resources Ltd and its wholly‐owned Australian controlled entities have implemented the tax
Ultimate
consolidation legislation. Refer to note 1 for further detail.
Parent
Entity,
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments ‐ Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
24
Australian Zirconia Holdings Pty Ltd
Notes to the consolidated financial statements
30 June 2019
Note 20. Parent entity information (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the
following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of
an impairment of the investment.
Note 22. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1:
Name
Principal place of business /
Country of incorporation
Ownership interest
2018
2019
%
%
Australian Strategic Materials (Holdings) Ltd
(name changed from Australian Strategic Materials Ltd on
14 February 2020)
Toongi Pastoral Company Pty Ltd
Australia
Australia
Note 23. Events after the reporting period
100.00%
100.00%
100.00%
100.00%
In early 2020 with the outbreak of Coronavirus Disease 2019 (“COVID‐19” or “the coronavirus”) unprecedented measures put in place
by the Australian Government, as well as governments across the globe, to contain the coronavirus have had a significant impact on
the economy. Management continues to consider the potential implications of coronavirus, which may include delaying he construction
and commissioning of the pilot modification plant, and other optimisation work in progress focused on further improving the project
economics. As at the date these financial statements were authorised, Management was not aware of any material adverse effects on
the financial statements as a result of the coronavirus.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
25
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 24. Reconciliation of loss after income tax to net cash from/(used in) operating activities
Loss after income tax (expense)/benefit for the year
(3,247,582)
(2,956,014)
Consolidated
2019
$
2018
$
Adjustments for:
Depreciation and amortisation
Exploration provided for or written off
Increase in employee benefits
Non deductible finance charges
Change in operating assets and liabilities:
(Increase)/decrease in receivables
Decrease in consumables
(Decrease)/increase in trade and other payables
Increase/(decrease) in deferred tax liabilities
(Decrease)/increase in biological assets
Net cash (used)/from operating activities
Non‐cash investing and financing activities
72,219
444,135
7,808
3,417,610
40,373
6,878
1,251
3,627,236
(262,711)
4,587
(430,508)
72,869
(243,707)
61,510
195,178
173,454
(74,831)
203,300
(165,280)
918,335
There were no non‐cash investing and financing activities during the current period.
Note 24. Reconciliation of loss after income tax to net cash from/(used in) operating activities (continued)
Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Related party borrowings ‐ repayable within one year *
Related party borrowings ‐ repayable after one year**
Net debt
Consolidated
2019
$
2018
$
26,968,287
(11,640,878)
(77,681,310)
26,317,347
(5,876,237)
(74,263,700)
(62,353,901)
(53,822,590)
26
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Related party
borrowings
repayable
within one year
*
Related party
borrowings
repayable after
one year **
Cash
Total
Opening net debt
Cash flows
Other non‐cash movements
Closing net debt
26,317,348
650,941
‐
(5,876,238)
(7,098,280)
1,333,640
(74,263,700)
‐
(3,417,610)
(53,822,590)
(6,447,341)
(2,083,970)
26,968,289
(11,640,878)
(77,681,310)
(62,353,901)
*
**
The related party loan is current and repayable upon demand from the ultimate parent entity, Alkane Resources Ltd. Refer Note
11.
Represents the discounted value of related party loan balance of $110,000,000 repayable 22 March 2027.
Note 25. Key management personnel disclosures
Directors
The following persons were directors of Australian Strategic Materials Ltd during the financial year:
I Gandel
N Earner
D I Chalmers
A D Lethlean
G Smith
Compensation
Compensation for the directors are paid for by the Ultimate Parent Company, Alkane Resources Ltd.
Note 26. Financial risk management
Financial risk management objectives
The group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate
risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The group uses
derivative financial instruments including gold forward and gold put option contracts to mitigate certain risk exposures.
This note presents information about the group's exposure to each of the above risks, their objectives, policies and processes for
measuring and managing risk, and the management of capital.
The Board of Directors' has overall responsibility for the establishment and oversight of the risk management framework. Management
monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks and mitigating
strategies.
(a) Market risk
(i) Foreign currency risk
The majority of the group's expenditure are in Australian dollars as such the risk is not significant and is not currently required to be
managed through the use of derivatives.
27
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
Note 25. Financial risk management (continued)
(ii) Commodity price risk
The group's is currently not in production and has minimal income so there is no current requirement to mitigate commodity risk
through the use of derivatives.
(iii) Interest rate risk
The group's main interest rate risk arises through its cash and cash equivalents and other financial assets held within financial
institutions. The group minimises this risk by utilising fixed rate instruments where appropriate.
Summarised market risk sensitivity analysis:
Interest rate risk
Impact on profit/(loss) after tax
30 June 2019
30 June 2018
Carrying
amount
$
+100BP
$
‐100BP
$
Carrying
amount
$
+100BP
$
‐100BP
$
Financial assets
Cash and cash equivalents
Receivables
Other financial assets
Financial liabilities
Trade and other payables
Total increase/(decrease)
26,968,287
296,896
20,000
188,778
‐
140
(188,778)
‐
(140)
26,317,347
68,046
20,000
184,221
‐
140
(184,221)
‐
(140)
(296,801)
‐
188,918
‐
(188,918)
(1,292,457)
‐
184,361
‐
(184,361)
There is no exposure to foreign exchange risk or commodity price risk for the above financial assets and liabilities.
Note 26. Financial risk management (continued)
(b) Credit risk
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through
the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all
customers of the consolidated entity based on recent sales experience, historical collection rates and forward‐looking information that
is available.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the group performs a risk analysis
considering the type and age of the outstanding receivables, the creditworthiness of the counterparty, contract provisions, letter of
credit and timing of payment.
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposure to customers,
including outstanding receivables and committed transactions.
(i) Risk management
The group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only utilising banks and
financial institutions with acceptable credit ratings.
(ii) Credit quality
Tax receivables and prepayments do not meet the definition of financial assets. The group assesses the credit quality of the customer,
taking into account its financial position, past experience and other factors.
28
Australian Strategic Materials Ltd
Notes to the consolidated financial statements
30 June 2019
(c) Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial liabilities as they fall due. The group's approach to managing
liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation. The Board of Directors'
monitors liquidity levels on an ongoing basis.
The group's financial liabilities generally mature within 3 months, therefore the carrying amount equals the cash flow required to settle
the liability.
Note 27. Capital risk management
The group's objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the group may return capital to shareholders, pay dividends to shareholders,
issue new shares or sell assets.
29
Australian Strategic Materials Ltd
Directors' declaration
30 June 2019
In the directors' opinion:
●
the financial statements and notes set out on pages 5 to 28 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance
for the financial year ended on that date
●
the financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in note 1 to the financial statements;
●
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
N Earner
Director
21 April 2020
30
Independent auditor’s report
To the members of Australian Strategic Materials Ltd
Our opinion
In our opinion the accompanying financial report presents fairly, in all material respects, the financial
position of Australian Strategic Materials Ltd (the Company) and its controlled entities (together the
Group) as at 30 June 2019 and its financial performance and its cash flows for the year then ended in
accordance with Australian Accounting Standards.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Emphasis of matter - basis of accounting and restriction on use
We draw attention to Note 1 in the financial report, which describes the basis of accounting. The
financial report has been prepared for the purpose of meeting the requirement of Australian Strategic
Materials Ltd and its members. As a result, the financial report may not be suitable for another
purpose. Our report is intended solely for Australian Strategic Materials Ltd and its members and
should not be used by parties other than Australian Strategic Materials Ltd and its members. Our
opinion is not modified in respect of this matter.
PricewaterhouseCoopers Securities Ltd, ACN 003 311 617, ABN 54 003 311 617, Holder of
Australian Financial Services Licence No 244572
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and the directors for the financial report
Management is responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards, and for such internal control as Management
determine is necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, Management is responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless Management either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf. This description forms part of our
auditor's report.
Helen Bathurst
Authorised Representative
PricewaterhouseCoopers Securities Ltd
Perth
21 April 2020