AVZ Minerals Limited
ABN 81 125 176 703
Annual Report 2017
AVZ Minerals Limited |
Contents
Corporate Directory
Review of Operations
Directors’ Report
Corporate Governance Statement
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Schedule of Mineral Tenements
1
2
11
21
22
23
24
25
26
27
47
48
52
55
AVZ Minerals Limited |
Corporate Directory
Directors
Klaus Eckhof (Executive Chairman)
Nigel Ferguson (Executive Director)
Patrick Flint (Non-Executive Director)
Hongliang Chen (Non-Executive Director)
Guy Loando (Executive Director)
Company Secretary
Mathew O’Hara
Principal Place of Business
& Registered Office
Level 2, Suite 9
389 Oxford Street
Mt Hawthorn WA 6016
Telephone: +61 8 9380 6789
Facsimile: +61 8 9380 6761
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
APPLECROSS WA 6153
Telephone: 1300 922 916
Facsimile: (08) 9315 2233
Email: registrar@securitytransfer.com.au
Auditors
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
Telephone: (08) 6382 4600
Securities Exchange Listing
Australian Securities Exchange
(Home branch: Perth, Western Australia)
ASX Code: AVZ, AVZO
Frankfurt Stock Exchange
FSE Code: AOMXC7
Website Address
www.avzminerals.com.au
AVZ Minerals Limited | 1
Review of Operations
Overview
The 2017 financial year has seen AVZ and its shareholders rewarded for supporting the Board’s strategy of
focusing on securing large scale mineral projects. AVZ reviewed many project opportunities during 2015 and
2016, but it was not until early in the current financial year that projects were identified that met the Board’s
investment criteria.
In September 2016 AVZ entered into an agreement to acquire a 100% interest in the Manono Extension
Project, which was considered prospective for lithium, tin and tantalum. This was followed in November 2016
by the acquisition of a 60% interest in the Tanganyika Regional Project, which comprised seven licences
prospective for lithium, rare earths and base metals. In January 2017 AVZ secured a 60% interest in the
Manono Project, the site of the historic Manono tin mine and also prospective for lithium and tantalum.
AVZ immediately commenced field work on these projects, comprising site visits, geological mapping, surface
sampling and trenching. The completion of an initial 7-hole drill program demonstrated the immense size of
the Manono Project.
The Board completed a number of capital raisings during the year and in August 2017 announced a $13 million
investment by the Huayou Cobalt Group, China’s largest cobalt chemicals producer.
The Board considers that the Manono Project is a world class asset. Outstanding drill results have been
received and with funding secured for an extensive diamond and RC drill program focused on resource
definition drilling, the upcoming year will be very busy and exciting for AVZ.
Manono Project, DRC (AVZ 60%)
In February 2017, AVZ announced it had agreed to acquire an interest in the historic Manono Mine and
surrounding area in the south of the Democratic Republic of Congo (DRC) in central Africa (Figure 1). The
Manono Project comprises licence PR13359, covering approximately 188km2. The licence was granted on
28th December 2016 for a period of five years and may be renewed in accordance with the Mining Code.
AVZ Minerals Limited | 2
Review of Operations
Figure 1: Location of the Manono Project in the Democratic Republic of Congo
Historical Activities
The pegmatites located within the Manono Project extend for a strike length of at least 13km, however only
a limited portion was tested by historical mining and exploration activities. According to publicly available
records, the Manono pegmatites were mined for their tin content between 1919 and 1980, during which time
approximately 185,000 tonnes of cassiterite concentrate was produced, at an average of 1,850gm of cassiterite
concentrate per cubic metre (g/m3) or approximately 1,330g/m3 tin. The ore was sourced mainly from eluvial
and weathered pegmatite, and the pits were completed to a depth of between 25 and 45 meters.
Between 1948 and 1949 a study of the hard-rock pegmatite was initiated. Forty-two holes, totaling 2,202m
were completed in the far western part of the known pegmatites centered around the Roche Dure pit. Based
on these results a hard-rock open pit that operated from 1951 to 1956 was established. With the exception
of some exploration work carried out on the old mine dumps, aimed at determining cassiterite and
spodumene grades, it appears very little prospection took place at Manono after 1960.
Beneficiation test work carried out by Belgium government demonstrated that a 6.82% lithium concentrate
was produced using a combination of heavy media separation, tables and spirals. These are considered to be
promising results for basic heavy liquid testing. It is anticipated that further grind size optimisation and
potentially a flotation stage would see further improvement.
Mapping and Trenching
Detailed deposit scale geological mapping was commenced by AVZ in March 2017. This work confirmed that
the Manono Project contains two large areas of pegmatite, with the northeast area referred to as the Manono
AVZ Minerals Limited | 3
Review of Operations
Sector and the southwest area referred to as the Kitotolo Sector. Mapping within the two sectors established
that there are many pegmatites, representing separate intrusions. AVZ has named the six largest pegmatites
(with lengths from 400m to greater than 5kms) using the names of the historical open-cut mines (shallow but
extensive pits) within the area (Figure 4).
Observations of outcrops indicate that the main Li mineral in the large pegmatites is spodumene. In addition,
outcrops and exposures in pits suggest that the two largest pegmatites are the Carriere de L’est Pegmatite
and the Roche Dure Pegmatite, and that each of these alone is evidently as large or larger than the famous
Greenbushes Pegmatite in Western Australia.
The geological mapping was used in initial geological interpretations and was followed by systematic trenching
programs designed to test mapped surface spodumene mineralisation.
A total of 37 reconnaissance trenches have been excavated to date for a total length of 2,797m (Figures 2 and
3). From these trenches 1,205 composite rock-chip samples were collected, mostly from 2m intervals.
Figure 2: Trenches in the Kitotolo Sector
AVZ Minerals Limited | 4
Review of Operations
Figure 3: Trenches in the Manono Sector
The high Li2O concentrations reported correspond to samples collected from trench intervals cut into relatively
fresh, less leached pegmatite. Conversely, the samples collected from outcrops of highly weathered pegmatite contain
much lower concentrations of lithium but are still indicative of a well mineralised system. This near-surface
weathering-induced lithium depletion is typical of weathered pegmatites.
The trenching results demonstrate a well mineralised system across a significant strike length. It is likely that high-
grade lithium mineralisation will be intersected when each of the pegmatites that have been sampled to date, are
subjected to a drilling campaign.
Drilling
AVZ completed an initial phase of drilling in July 2017, comprising seven diamond drill holes for a total of 1,739m
and testing four of the large pegmatites. In all cases, thick intervals of pegmatite were intersected and spodumene
was present within all the pegmatites. Drill-holes MO17DD001 – MO17DD006 were completed in the Kitotolo
Sector, and MO17DD007 completed in the Manono Sector. Samples were forwarded to ALS Global’s laboratory in
Lubumbashi for preparation work, with assay determinations being completed at ALS Global’s laboratory in Perth,
WA.
AVZ Minerals Limited | 5
Review of Operations
Figure 4: Location of drill-holes completed to date.
Table 1: Summary drill results
Drill-hole ID
Pegmatite
Main Pegmatite Intersection 2
Profile
MO17DD001 Roche Dure
235.0m @ 1.66% Li2O, 1001ppm Sn Unweathered
MO17DD002 Roche Dure
202.8m @ 1.57% Li2O, 1078ppm Sn Unweathered
MO17DD003 Roche Dure
18.3m @ 0.15% Li2O, 500ppm Sn
Very weathered 1
MO17DD004 Roche Dure
43.1m @ 0.07% Li2O
Very weathered 1
MO17DD005 Mpete
45.7m @ 1.59% Li2O, 1230ppm Sn Unweathered
MO17DD006 Tempete
65.9m @ 1.51% Li2O
Unweathered
MO17DD007 Carriere De L’Est 250.9m @ 1.48% Li2O, 913ppm Sn Unweathered
Notes
1 – intersections entirely within the weathered zone and lithium mineralization leached out.
2 - Down-hole length. Additional drilling is required to confirm the true-thickness of the pegmatites.
AVZ Minerals Limited | 6
Review of Operations
Based on the work completed to date the Roche Dure Pegmatite has a proven length of at least 2,100m. Drill-holes
MO17DD001 and MO17DD002 are centrally located within an 800m long interval in which the Roche Dure
Pegmatite’s average true thickness is interpreted to be 200m and drilling has proven the pegmatite extends down-
dip more than 250m and remains open.
Secondary mineralisation in the form of tin and tantalum should not be discounted either. The exact nature of the
Sn and Ta mineralisation will develop with further drilling, but early indications are that these could provide a
significant economic benefit to the project.
Drill-holes MO17DD004 (some 1.5kms north east of MO17DD001) and MO17DD003 (some 2.1kms north east of
MO17DD001) passed through the Roche Dure Pegmatite entirely within the weathered zone above fresh rock and
did not return significant assays for lithium. However, drill-hole MO17DD004 established that the Roche-Dure
Pegmatite is likely to have a true thickness of about 78m at its location. MO17DD003 confirmed the pegmatite has
reduced dimensions near its north-eastern termination, with a thickness of about 18m at this location. In addition,
it is likely that the unweathered down-dip continuation of the Roche Dure Pegmatite in the vicinity of these drill
holes is also well mineralized.
The Mpete Pegmatite is the main pegmatite mined from the Mpete open pit. Based on outcrop mapping and drill-
hole MO17DD005 the Mpete Pegmatite is estimated to have a strike length of 1km and is potentially a large source
of lithium mineralisation within the Kitotolo sector.
The Tempete Pegmatite is the main pegmatite mined from the Tempete open pit and like the Mpete and Roche Dure
Pegmatites, is a potentially large source of lithium mineralisation within the Kitotolo sector. AVZ’s mapping suggests
that the Tempete Pegmatite has a strike length of 1.5kms.
The Carriere de L’Est Pegmatite, with a length of about 5,500m, is the largest pegmatite in the Manono Project.
Assay results from drill-hole MO17DD007 confirmed the mineralisation distribution and tenor evident from the
spodumene present in the drill-core. Sampling commenced at 1.9m from which depth the pegmatite is unweathered.
The thickness of intersected pegmatite and the geometric relationship between the location of the drill hole and
mapped pegmatite boundaries suggests the thickness of the pegmatite may be 280m.
To AVZ’s knowledge, the drill intercept of 250.93m @ 1.48% Li2O and 913ppm Sn is the longest pegmatite intercept
ever reported. The Carriere de L’Est Pegmatite has the potential to be the largest lithium-rich pegmatite in the
world, with the Roche Dure Pegmatite coming in a close second.
These are outstanding results for the initial drill program. The drilling results demonstrate that four of the largest
pegmatites at Manono contain a large proportion of spodumene and that in the unweathered, unaltered pegmatite
the lithium mineralisation seems to have a typical grade of about 1.5% Li2O. Significant tin mineralisation is also
present.
The depth of weathering varies significantly across the project area, with Top of Fresh Rock (TOFR) ranging from a
few meters below surface down to about 70m below surface. In many cases, historical mining has stripped much of
the weathered material, reducing the amount of low-grade mineralised pegmatites. The program has confirmed the
immense size and potential of the Manono Lithium project.
AVZ is currently planning an extensive diamond and RC drill program scheduled to commence in Q4 2017. This
program will focus on resource definition, extension drilling and initial mineralogical test-work.
AVZ Minerals Limited | 7
Review of Operations
Figure 5: Stacked cross sections showing MO17DD001 (width estimated at 230m), MO17DD002 (width estimated at 190m) and MO17DD004 (width estimated at 78m)
intersecting the Roche Dure Pegmatite over approximately 1.2km strike length
AVZ Minerals Limited | 8
Review of Operations
Exploration Target
Based on detailed prospect scale mapping, trenching and drill results and given the size and mineralised nature of the
pegmatites at Manono, the Company generated an exploration target of between 1Bt to 1.2Bt of 1.25% to 1.5% Li 2O
for the entire Manono Project, including between 300 and 400Mt of 1.25% to 1.5% Li2O for the Roche Dure Pegmatite
alone.
The potential quantity and grade of the exploration target as stated, is conceptual in nature as there has been insufficient
exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a
Mineral Resource.
It is noted that outlying occurrences of pegmatite are also recorded about 5km north of Manono and also to the south,
offering further potential.
Other Projects
During the year, AVZ acquired:
•
•
a 100% interest in the Manono Extension Lithium, Tin and Tantalum Project (Manono Extension Project), and
a 60% interest in seven additional exploration licences known as the Tanganyika Regional Project.
The Manono Extension Project comprises two granted exploration permits (PRs 4029 and 4030) covering 242.25km2
and contiguous to and totally surrounding the Manono Project (PR13359). Preliminary work has confirmed the potential
for lithium-bearing pegmatites within the project area as extensions to the main Manono Pegmatite. AVZ has mapped a
coarse grained granitic body of approximately 800m strike length and 200m width. This body straddles the western
licence boundary, with approximately 600m of strike contained within PR4030.
The Tanganyika Regional Project is also located in the south of the DRC. The project covers approximately 1,172km2
within the prospective mid-Proterozoic Kibaran Belt and preliminary work identified anomalous mineralisation on two
of the permits, with results indicative of pegmatite intrusives with an REE signature.
AVZ also held interests in a number of exploration licence applications prospective for base metals in Namibia. AVZ
has now withdrawn those applications and wound up its activities in Namibia.
Corporate
Capital Raising
During the year AVZ completed the following capital raisings:
•
•
•
the issue of 90,000,000 shares at an issue price of 0.9 cents per share to raise $810,000 in September 2016.
the issue of 44,583,333 shares at an issue price of 1.2 cents per share to raise $535,000 in December 2016.
the issue of 250 million shares at 2c per share (together with up to 250 million attaching options exercisable
at 3c and expiring 15 April 2019) to raise $5 million to fund due diligence, acquisition costs and planned work
programs in respect of the Manono Project. The first tranche of the placement for $2.5 million was completed
in February 2017, and the second tranche of the placement was completed in May 2017.
Post year-end, in August, AVZ announced a $15 million placement that included a $13.02 million investment by Huayou
International Mining (HONGKONG) Limited (Huayou) to acquire an 11% interest in AVZ. Huayou is a wholly-owned
subsidiary of Zhejiang Huayou Cobalt Co., Ltd. (Huayou Cobalt). Huayou Cobalt is the largest cobalt chemicals producer
at present in China and is listed on the Shanghai Stock Exchange. Huayou Cobalt also owns and operates a number of
copper and cobalt mines in the south of the DRC, exporting concentrates back to its processing and refining facilities
in China. The funds will primarily be used for the planned drilling and initial mineralogical testwork programs at the
Manono Project, as well as ongoing corporate and administration costs.
Board & Management changes
In conjunction with the acquisition of the interest in the Manono Project, in February 2017 Mr. Klaus Eckhof transitioned
from the role of Managing Director to Executive Chairman.
At the same time, Nigel Ferguson was appointed Technical Director. Mr. Ferguson, a geologist with 30 years of
experience, is responsible for managing AVZ’s exploration activities at Manono. He has been active in the DRC since
2004 in gold and base metals exploration and resource development.
AVZ Minerals Limited | 9
Review of Operations
Subsequent to year end, Mr. Hongliang Chen (a nominee of Huayou Cobalt) and Mr. Guy Loando were appointed as
Directors and Mr. Mathew O’Hara was appointed as Company Secretary. Mr. Gary Steinepreis resigned as Director
and Company Secretary.
Legal
In March 2017 AVZ was served with a writ of summons filed in the Supreme Court of Western Australia by MMCS
Strategic 1 (MMCS) seeking certain declarations regarding the granting and ownership of the Manono licence (MMCS
Claim). MMCS is a shareholder of Manono Minerals S.A.R.L. (Manomin), which previously held an exploitation licence
over the Manono Project. In July 2017 MMCS abandoned the MMCS Claim, and filed an amended claim (Amended
Claim) seeking an order pursuant to the ASIC Act and the Corporations Act requiring AVZ to make announcements
to the market to correct what MMCS claims were misleading or deceptive announcements (or announcements which
were likely to mislead or deceive) made by AVZ concerning the Manono licence.
AVZ firmly denies that any of its past announcements concerning the Manono licence were misleading or deceptive or
likely to mislead or deceive, and AVZ will strenuously defend the claims made by MMCS under the Amended Claim.
Competent Persons Statement
The information in this report that relates to Exploration Results and Exploration Targets is based on information
compiled by Mr. Peter Spitalny, a Competent Person whom is a Member of the Australasian Institute of Mining and
Metallurgy. Mr. Spitalny is a full-time employee of Hanree Holdings Pty Ltd. Mr Spitalny has sufficient experience that is
relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to
qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves’. Mr Spitalny consents to the inclusion in the report of the matters based
on his information in the form and context in which it appears.
AVZ Minerals Limited | 10
Directors’ Report
Your directors submit their report on the consolidated entity consisting of AVZ Minerals Limited (AVZ) and the
entities it controlled (the Group) for the financial year ended 30 June 2017. In order to comply with the
provisions of the Corporations Act 2001, the directors report as follows:
Directors
1.
The names of directors who held office during or since the end of the year and until the date of this report are
as follows. Directors were in office for the entire period unless otherwise stated.
Klaus Eckhof
Nigel Ferguson
Patrick Flint
Hongliang Chen
Guy Loando
Gary Steinepreis
Charles Thomas
Executive Chairman
Executive Director (appointed 2 February 2017)
Non-Executive Director
Non-Executive Director (appointed 21 August 2017)
Executive Director (appointed 21 August 2017)
Non-Executive Director (resigned 21 August 2017)
Non-Executive Director (retired 24 November 2016)
Company Secretary
2.
Mathew O’Hara was appointed Company Secretary on 21 August 2017 at which date Gary Steinepreis resigned.
Principal Activities
3.
The principal activity of the consolidated entity during the financial year was mineral exploration. There were no
significant changes in the nature of the consolidated entity’s principal activities during the financial year.
4. Operating Results
The loss of the consolidated entity after income tax amounted to $1,683,329 (2016: $479,734 loss).
Dividends Paid or Recommended
5.
The directors do not recommend the payment of a dividend and no amount has been paid or declared by way
of a dividend to the date of this report.
Review of Operations
6.
Refer pages 2 – 10 for a detailed review of the Company’s operations during the year.
The Company’s financial position, financial performance and use of funds information for the financial year is
provided in the financial statements that follow this Directors’ Report.
As an exploration entity, the Company has no operating revenue or earnings and consequently the Company’s
performance cannot be gauged by reference to those measures. Instead, the Directors’ consider the Company’s
performance based on the success of exploration activity, acquisition of additional prospective mineral interests
and, in general, the value added to the Company’s mineral portfolio during the course of the financial year.
Whilst performance can be gauged by reference to market capitalisation, that measure is also subject to
numerous external factors. These external factors can be specific to the Company, generic to the mining
industry and generic to the stock market as a whole and the Board and management would only be able to
control a small number of these factors.
The Company’s business strategy for the financial year ahead and, in the foreseeable future, is to continue
exploration activity on the Company’s existing mineral projects, including an extensive diamond and RC drill
program focussed on resource definition drilling at the Manono Project.
Due to the inherent risky nature of the Company’s activities, the Directors are unable to comment on the
likely results or success of this strategy. The Company’s activities are also subject to numerous risks, mostly
outside the Board’s and management’s control. These risks can be specific to the Company, generic to the
mining industry and generic to the stock market as a whole. The key risks, expressed in summary form, affecting
the Company and its future performance include but are not limited to:
•
•
•
•
•
•
geological and technical risk posed to exploration and commercial exploitation success;
security of tenure including licence renewal (no assurance can be given that the licence renewals and
licence applications that have been submitted will be successful), and inability to obtain regulatory or
landowner consents;
change in commodity prices and market conditions;
environmental and occupational health and safety risks;
government policy changes;
retention of key staff; and
AVZ Minerals Limited | 11
Directors’ Report
•
capital requirement and lack of future funding.
This is not an exhaustive list of risks faced by the Company or an investment in it. There are other risks generic
to the stock market and the world economy as whole and other risks generic to the mining industry, all of
which can impact on the Company.
Significant Changes in the State of Affairs
7.
There have been significant changes in the state of affairs of the group to the date of this report and these are
referred to in the Review of Operations.
Events Occurring after the Reporting Date
8.
On 10 August 2017, the Company reached an agreement with Huayou International Mining (Hong Kong) Limited
(Huayou) for Huayou to invest $13.02 million and acquire an 11% interest in AVZ (Capital Raising)
The placement to Huayou comprised 186 million shares at an issue price of 7 cents per share, together with 186 million
attaching options exercisable at 10 cents and expiring 15 April 2019 to raise $13,020,000. Huayou also exercised the
right to appoint Hongliang Chen to the AVZ Board.
AVZ issued 186 million shares and 86 million attaching unlisted options to Huayou under its existing placement capacity.
The remaining 100 million attaching options will be issued to Huayou subject to shareholder approval on 12 October
2017.
In addition, AVZ also proposes to raise, subject to shareholder approval on 12 October 2017, up to a further $1.98
million from institutional and sophisticated investors by the issue of up to 28,285,714 shares at an issue price of 7 cents
per share, together with up to 28,285,714 attaching unlisted options exercisable at 10 cents and expiring 15 April 2019.
The shareholder meeting is also seeking approval to the issue of 5,000,000 employee performance rights and 6,000,000
ordinary shares in consideration for an introduction fee in connection with the Capital Raising.
Between 1 July 2017 and the date of this report, the Company issued a total of 54,415,438 ordinary shares following
the exercise of listed options. The Company also issued 7,500,000 ordinary shares following the conversion of
performance rights.
Other than the above, there has been no matter or circumstance that has arisen that has significantly affected, or may
significantly affect:
•
•
•
the group’s operations in future financial years, or
the results of those operations in future financial years, or
the group’s state of affairs in future financial years.
Likely Developments and Expected Results of Operations
9.
The group will continue its mineral exploration activity at and around its principal exploration projects, being
the Manono Project and the Manono Extension Project.
10. Environmental Regulation
The group is aware of its environmental obligations with regards to its exploration activities and ensures that
it complies with all regulations when carrying out any exploration work.
11.
this report)
Information on Directors and Company Secretary (including Director’s interests at the date of
Klaus Eckhof
Qualifications
Experience
Executive Chairman
Dip. Geol. TU, AusIMM
Mr Eckhof is a geologist with more than 20 years of experience identifying, exploring
and developing mineral deposits around the world. Mr Eckhof worked for Mount Edon
Gold Mines Ltd as Business Development Manager before it was acquired by Canadian
mining company Teck. In 1994, Mr Eckhof founded Spinifex Gold Ltd and Lafayette
Mining Ltd, both of which successfully delineated gold and base metal deposits. In late
2003, Mr Eckhof founded Moto Goldmines which acquired the Moto Gold Project in
the Democratic Republic of the Congo. There, Mr Eckhof and his team delineated
more than 20 million ounces of gold and delivered a feasibility study within four years
from the commencement of exploration. Moto Goldmines was subsequently acquired
by Randgold Resources who poured first gold in September 2013.
Interest in Securities
Fully Paid Ordinary Shares
63,000,000
Directorships in last 3 years
Amani Gold Ltd (since 6 February 2012)
Okapi Resources Ltd (since 29 May 2017)
AVZ Minerals Limited | 12
Directors’ Report
Patrick Flint
Qualifications
Experience
Former Directorships in the Last Three Years:
Carnavale Resources Ltd (1 January 2008 to 20 July 2015)
Panex Resources Inc. (30 May 2006 to 24 July 2014)
Non-Executive Director
B.Com, CA, MAICD
Mr Flint has been involved in the resources sector as a director or company secretary
of ASX and Toronto Stock Exchange listed companies with mineral projects in
Australia, Africa and Asia for the last 20 years. He is a Chartered Accountant and has
significant experience with project acquisitions, joint venture negotiations and
management, fund raisings and corporate matters.
Interest in Securities
Fully Paid Ordinary Shares
16,000,000
Directorships in last 3 years
Former Directorships in the Last Three Years:
Nemex Resources Ltd (8 September 2010 to 16 December 2015)
Explaurum Limited (27 November 2013 to 2015 to 23 October 2015)
Mount Magnet South NL (15 April 2011 to 22 December 2014)
Nigel Ferguson
Qualifications
Experience
Executive Director (appointed 2 February 2017)
BSc (University of Tasmania), F AusIMM, MAIG
Mr Ferguson is a geologist with 30 years of experience having worked in senior
management positions for the past 18 years in a variety of locations. He has experience
in the exploration and definition of precious and base metal mineral resources
throughout the world, including DRC, Zambia, Tanzania, Saudi Arabia, South East Asia
and Central America. He has been active in the DRC since 2004 in gold and base
metals exploration and resource development.
Interest in Securities
Fully Paid Ordinary Shares
Performance Rights
16,083,333
20,000,000
Directorships in last 3 years
Okapi Resources Ltd (since 29 May 2017)
Hongliang Chen
Non-Executive Director (appointed 21 August 2017)
Experience
Mr Chen is a nominee of the Huayou Cobalt Group. Mr Chen joined the Huayou
Cobalt Group in May 2002 and is currently a director and the president of the
parent company, Shanghai stock exchange listed Zhejiang Huayou Cobalt Co Ltd. Mr
Chen previously worked in management positions at the Agricultural Bank of China,
Tongxiang Branch Investment Corporation Tongxiang Securities Department and
Shenyin Wanguo Securities Co Ltd.
Interest in Securities
Fully Paid Ordinary Shares
Nil
Directorships in last 3 years
Zhejiang Huayou Cobalt Co Ltd (listed on the Shanghai Stock Exchange)
Guy Loando
Executive Director (appointed 21 August 2017)
Experience
Mr Loando is a qualified lawyer based in Kinshasa in the Democratic Republic of
Congo (DRC). He has significant experience with corporate and legal matters in the
DRC, and has recently been involved in executive management roles in the resource
sector. Mr Loando is a nominee of AVZ’s largest shareholder, Dathomir Resources
Sarl.
Interest in Securities
Fully Paid Ordinary Shares
40,000,000
Directorships in last 3 years
Nil
AVZ Minerals Limited | 13
Directors’ Report
Mathew O’Hara
Qualification
Company Secretary (appointed 21 August 2017)
B.Com, CA
Experience
Mr O’Hara is a Chartered Accountant and holds a Bachelor of Commerce Degree
from the University of Western Australia
directors
Former
Company Secretary:
and
Charles Thomas
Qualifications
Non-Executive Director (retired 24 November 2016)
B.Com
Experience
Mr Thomas holds a Bachelor of Commerce from UWA majoring in Corporate
Finance.
Gary Steinepreis
Qualifications
Non-Executive Director / Company Secretary (resigned 21 August 2017)
B.Com, CA
Experience
Mr Steinepreis is a Chartered Accountant and holds a Bachelor of Commerce Degree
from the University of Western Australia.
Audited Remuneration Report
12.
This report details the nature and amount of remuneration for all key management personnel of AVZ Minerals
Limited and its subsidiaries. The information provided in this remuneration report has been audited as required
by section 308(C) of the Corporations Act 2001. For the purposes of this report, key management personnel of
the Group are defined as those persons having authority and responsibility for planning, directing and controlling
the major activities of the Company and the Group, directly or indirectly, including any Director (whether
executive or otherwise) of the Group.
The individuals included in this report are:
Klaus Eckhof
Patrick Flint
Nigel Ferguson
Gary Steinepreis
Charles Thomas
Executive Chairman
Non-Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
Appointment date:
12 May 2014
12 May 2014
2 February 2017
Resigned 21 August 2017
Retired 24 November 2016
Klaus Eckhof was non-executive director from 1 April 2016 to 31 August 2016 and was re-appointed Managing
Director effective from 1 September 2016 and Executive Chairman on 2 February 2017. Charles Thomas retired
on 24 November 2016 and Gary Steinepreis resigned from the Board on 21 August 2017.
Remuneration Policy
(a)
The remuneration policy of AVZ Minerals Limited has been designed to align director objectives with shareholder
and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line
with market rates. By providing components of remuneration that are indirectly linked to share price
appreciation (in the form of options and/or performance rights), executive, business and shareholder objectives
are aligned. The board of AVZ Minerals Limited believes the remuneration policy to be appropriate and effective
in its ability to attract and retain the best directors to run and manage the company, as well as create goal
congruence between directors and shareholders. The board’s policy for determining the nature and amount of
remuneration for board members is as follows:
(i) Executive Directors & Other Key Management Personnel
The remuneration policy and the relevant terms and conditions has been developed by the full Board of
Directors as the company does not have a Remuneration Committee due to the size of the Company and
the Board. In determining competitive remuneration rates, the Board reviews local and international
trends among comparative companies and industry generally. It examines terms and conditions for
employee incentive schemes, benefit plans and share plans. Reviews are performed to confirm that
executive remuneration is in line with market practice and is reasonable in the context of Australian
executive reward practices.
AVZ Minerals Limited | 14
Directors’ Report
The Company is an exploration entity, and therefore speculative in terms of performance. Consistent
with attracting and retaining talented executives, directors and senior executives are paid market rates
associated with individuals in similar positions, within the same industry.
Mr Eckhof was re-appointed Managing Director effective from 1 September 2016 and executive chairman
on 2 February 2017. Mr Eckhof receives an annual remuneration package of $180,000 through a consulting
letter agreement. The arrangement is able to be terminated by either party on a month’s notice. Mr
Ferguson provides management services via Ridgeback Holdings Pty Ltd as trustee for the Ferguson Family
Trust (Ridgeback) and receives a monthly fee of $16,150 (plus GST). The agreement has a 6-month
termination period unless there is a breach or unremedied continued neglect of the terms of the
agreement by Ridgeback in which there is a one-month termination period. There are no other service
or consulting agreements in place with key management personnel. At this stage due to the size of the
Company, no remuneration consultants have been used. The Board’s remuneration policies are outlined
below:
Fixed Remuneration
All executives receive a base cash salary which is based on factors such as length of service and experience
as well as other fringe benefits. If entitled, all executives also receive a superannuation guarantee
contribution required by the government, which is currently 9.50% and do not receive any other
retirement benefits.
Short-term Incentives (STI)
Under the group’s current remuneration policy, executives can from time to time receive short-term
incentives in the form of cash bonuses. No short term incentives were paid in the current financial year.
The Board is currently determining the criteria of eligibility for short-term incentives and will set key
performance indicators to appropriately align shareholder wealth and executive remuneration.
Long-term Incentives (LTI)
Executives are encouraged by the Board to hold shares in the company and it is therefore the Group’s
objective to provide incentives for participants to partake in the future growth of the group and, upon
becoming shareholders in the Company, to participate in the group’s profits and dividends that may be
realised in future years. During the financial year the Company issued a total of 40 million Performance
Rights to directors of the Company. Refer Note 21(b) of the financial statements for full terms of the
Performance Rights issued. The Board considers that this equity performance linked remuneration
structure is effective in aligning the long-term interests of group executives and shareholders as there
exists a direct correlation between shareholder wealth and executive remuneration.
(ii) Non-Executive Directors
The board policy is to remunerate non-executive directors at market rates for comparable companies for
time, commitment and responsibilities. In determining competitive remuneration rates, the Board review
local and international trends among comparative companies and the industry generally. Typically, the
Company will compare non-executive remuneration to companies with similar market capitalisations in
the exploration and resource development business group.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which will be
periodically recommended for approval by shareholders. The maximum currently stands at $250,000 per
annum as per the Group’s constitution and may be varied by ordinary resolution of the shareholders in
general meeting. Fees for non-executive directors are not linked to the performance of the Company.
However, to align directors’ interests with shareholder interests, the directors are encouraged to hold
shares in the company and from time to time, non-executive’s may receive options or performance rights
subject to shareholder approval, to further align directors’ interests with shareholders.
(b)
Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration
Performance rights issued during the years are detailed in Note 21 (b) of the financial statements.
Voting and comments made at the Company’s 2016 Annual General Meeting
At the 2016 Annual General Meeting the Company remuneration report was passed by the requisite majority of
shareholders (100% by a show of hands).
AVZ Minerals Limited | 15
Directors’ Report
(c) Details of Key Management Personnel Remuneration
2017
Name
Short term employee
benefits
Salary
Consulting
fees
Post
employ-
ment
Share
Based
Payments
Total
Executive Director:
Klaus Eckhof (1)
Nigel Ferguson (2)
Non-Executive
Directors:
Klaus Eckhof (1)
Gary Steinepreis
Patrick Flint
Charles Thomas (3)
TOTAL
$
-
-
-
-
78,622
-
78,622
$
150,000
100,761
4,000
64,000
-
4,000
322,761
$
-
-
$
$
2,320,000
382,959
2,470,000
483,720
-
-
7,378
-
7,378
-
-
290,000
-
2,992,959
4,000
64,000
376,000
4,000
3,401,720
Remuner-
ation
consisting
of share
based
payments
%
94
79
0
0
77
0
Fixed
remun-
eration
%
100
100
100
100
100
100
1: Klaus Eckhof ceased being a Non-Executive Director on 3 October 2016 and commenced the role of Managing Director on 3 October 2016. He
was subsequently appointed as Executive Chairman on 2 February 2017.
2: Nigel Ferguson was appointed on 2 February 2017.
3: Charles Thomas retired on 24 November 2016.
2016
Name
Short term employee
benefits
Salary
Consulting
fees
Post
employment
Executive Director:
Klaus Eckhof
Non-Executive
Directors:
Klaus Eckhof
Gary Steinepreis
Patrick Flint
Charles Thomas (1)
TOTAL
$
-
$
135,000
-
-
32,877
-
32,877
6,000
24,000
-
6,000
171,000
1: Charles Thomas was appointed on 15 April 2016.
$
-
-
-
3,123
-
3,123
Total
Fixed
Remuneration
Share
Based
Payment
$
$
-
135,000
6,000
-
24,000
-
36,000
-
-
6,000
- 207,000
%
100
100
100
100
100
Share-based compensation
Issue of shares
Details of shares issued to directors as part of compensation during the year ended 30 June 2017 are set out below.
These shares were granted to Klaus Eckhof in consideration for facilitating the acquisition of the Manono project during
the year:
Name
Klaus Eckhof
Date
No of
shares
Issue price
$
6 April 2017
80,000,000
$0.029
2,320,000
AVZ Minerals Limited | 16
Directors’ Report
Performance rights
The terms and conditions of each grant of performance rights affecting remuneration of directors in this financial year
or future reporting years are as follows:
Grant date
Vesting date and
exercisable date Expiry date
Exercise price
Fair value
per right
at grant date
23 May 2017
(i)
22 May 2020
nil
$0.029
(i) The vesting conditions of the unlisted Performance Rights are as follows:
(i)
On 23 May 2017, 30,000,000 Performance Rights were issued to Mr Nigel Ferguson, with the vesting terms as below:
Tranche 1 – 10,000,000 Performance Rights shall vest if the 10-day volume weighted average share price
(VWAP) for the Shares on the ASX is $0.03 or higher from the date of issue;
Tranche 2 – 10,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.05 or higher during the period commencing 12 months from the date of issue; and
Tranche 3 – 10,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.075 or higher during the period commencing 12 months from the date of issue
(iii)
(ii)
Mr Patrick Flint was issued 10,000,000 Performance Rights on 23 May 2017, convertible to ordinary shares if the 10-
day VWAP for the Shares on the ASX is $0.03 or higher from the date of issue.
The number of performance rights granted to and vested by directors as part of compensation during the year ended
30 June 2017 are set out below:
Name
Nigel Ferguson
Patrick Flint
Number of Number of
rights
granted
rights
vested
during the during the
year
2017
year
2017
30,000,000
10,000,000
10,000,000
10,000,000
Values of rights over ordinary shares granted, exercised and lapsed for directors as part of compensation during the
year ended 30 June 2017 are set out below:
Name
Nigel Ferguson
Patrick Flint
Value of
rights
granted
during the
year
$
Value of
rights
vested
during the
year
$
Value of
rights
lapsed
during the
year
$
870,000
290,000
290,000
290,000
-
-
(d) Key Management Personnel Compensation – other transactions
(i)
No options were provided as remuneration during the year.
Options provided as remuneration and shares issued on exercise of such options.
Loans to key management personnel
(ii)
No loans were made to any director or other key management personnel of the group, including related parties
during the financial year.
AVZ Minerals Limited | 17
Directors’ Report
(iii) Other transactions with key management personnel
Transactions with Director Related Parties
The following transactions occurred with related parties:
Consolidated
2017
$
2016
$
Payment to GTT Ventures - Advisory
Options issued to GTT Ventures – Advisory
Outstanding balances arising from recharges/purchases with Director Related Parties
Current payables (purchases)
19,838
-
35,937
136,500
-
3,300
GTT Ventures provided advisory services to the Group on normal commercial terms. Charles Thomas is a
director of GTT Ventures.
Guy Loando was appointed to the Board on 21 August 2017. Mr Loando ia a nominee of AVZ’s largest
shareholder, Dathomir Resources Sarl and received 40,000,000 shares (refer Note 21(c)) as part of the
transaction to acquire the 60% interest in the Manono Lithium, Tin and Tantalum Project.
Terms and conditions of related party transactions
Transactions between related parties are on commercial terms and conditions, no more favourable than those
available to other parties unless otherwise stated.
Ordinary shareholdings
(v)
The number of shares in the company held during the financial year by each director of AVZ Minerals
Limited and other key management personnel of the group, including related parties, are set out below.
There were no shares granted during the year as remuneration, apart from those issued as a result of
performance rights vesting.
Balance at the
start of the year
Received as
remuneration
Other Changes Balance at the end
of the year
2017
Directors of AVZ Minerals Limited
Patrick Flint (1)
Klaus Eckhof (2)
Gary Steinepreis
Charles Thomas
Nigel Ferguson (3)
4,000,000
8,000,000
20,495,533
3,500,000
-
-
-
-
-
-
14,000,000
80,000,000
-
(3,500,000)
16,083,333
18,000,000
88,000,000
20,495,533
-
16,083,333
1: Patrick Flint was issued a total of 14,000,000 shares as a result of the vesting of performance rights during the year.
2: Klaus Eckhof was issued 80,000,000 shares in as a facilitation fee for the acquisition of the Manono Project during the year (refer Note 21(c)).
3: Nigel Ferguson held 6,083,333 shares prior to becoming a director of the Company and was issued 10,000,000 shares as a result of the vesting
of performance rights during the year.
(vi)
Peformance Rights
Performance rights
Balance at the
start of the
year
Granted
During the
year
2017
Directors of AVZ Minerals Limited
Performance Rights
vested
Balance at the
end of the year
% Vested
Patrick Flint
Klaus Eckhof
Gary Steinepreis
Charles Thomas
Nigel Ferguson
4,000,000
-
-
-
-
10,000,000
-
-
-
30,000,000
(14,000,000)
-
-
-
(10,000,000)
-
-
-
-
20,000,000
100
-
-
-
33
AVZ Minerals Limited | 18
Directors’ Report
There have been no options issued to current directors and executives as part of their remuneration in the current
period.
This is the end of the audited remuneration report.
13. Meetings of Directors
The number of directors' meetings held during the financial year and the number of meetings attended by each
director is:
Director
P Flint
K Eckhof
N Ferguson
G Steinepreis
C Thomas
Directors Meetings
Number Eligible to Attend
6
6
1
6
2
Meetings Attended
6
6
1
6
2
Insurance of Officers
14.
During the financial year, AVZ Minerals Limited paid a premium of $7,377 (2016: $7,215) to insure the directors
and secretary of the company and its controlled entities.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be
brought against the officers in their capacity as officers of entities in the Group, and any other payments arising
from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities
that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of
their position or of information to gain advantage for themselves or someone else or to cause detriment to the
company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
15.
Unissued ordinary shares of AVZ Minerals Limited under option as at the date of this report are as follows:
Shares under Option
Expiry
date
Exercise
price
Balance at
start of year
Issued during
the period
Exercised
during the
period
Balance at
end of the
period
15 April 19
24 May 20
30 Sep 17
10.0 cents
3.0 cents
1.2 cents
-
-
35,000,000
86,000,000
300,001,000
-
-
(54,415,438)
(35,000,000)
86,000,000
245,585,562
-
No option holder has any right under the options to participate in any other share issue of the company or any
other entity.
16. Proceedings on behalf of the Company
In March 2017 AVZ was served with a writ of summons filed in the Supreme Court of Western Australia by MMCS
Strategic 1 (MMCS) seeking certain declarations regarding the granting and ownership of the Manono licence (MMCS
Claim). MMCS is a shareholder of Manono Minerals S.A.R.L. (Manomin), which previously held an exploitation licence
over the Manono Project. In July 2017 MMCS abandoned the MMCS Claim, and filed an amended claim (Amended
Claim) seeking an order pursuant to the ASIC Act and the Corporations Act requiring AVZ to make announcements
to the market to correct what MMCS claims were misleading or deceptive announcements (or announcements which
were likely to mislead or deceive) made by AVZ concerning the Manono licence. AVZ firmly denies that any of its past
announcements concerning the Manono licence were misleading or deceptive or likely to mislead or deceive, and AVZ
will strenuously defend the claims made by MMCS under the Amended Claim.
Auditor’s Independence Declaration
17.
Section 307c of the Corporations Act 2001 requires our auditors, BDO Audit (WA) Pty Ltd, to provide the
directors of the Company with an Independence Declaration in relation to the audit of the annual report. This
Independence Declaration is set out on page 22 and forms part of this directors’ report for the year ended 30
June 2017.
AVZ Minerals Limited | 19
Directors’ Report
18. Non-Audit Services
Details of the non-audit services provided by the Company’s external auditor BDO Audit (WA) Pty Ltd during the
year ended 30 June 2017 are outlined in the following table. The Directors are satisfied that the provision of non-
audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The nature and the scope of each type of non-audit service provided means that auditor independence
was not compromised.
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:
Taxation services
Total remuneration for other services
Signed in accordance with a resolution of the Board of Directors.
Consolidated
2016
$
2017
$
-
-
-
-
Klaus Eckhof
Executive Chairman
Mount Hawthorn, Western Australia
29 September 2017
AVZ Minerals Limited | 20
Corporate Governance Statement
AVZ Minerals Ltd, its wholly owned subsidiaries (the Group) and the Board are committed to achieving and
demonstrating the highest standards of corporate governance. The Board continues to review the framework and
practices to ensure they meet the interests of shareholders.
The directors are responsible to the shareholders for the performance of the Group in both the short and the longer
term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is
to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.
ASX Listing Rule 4.10.3 requires listed companies to disclose the extent to which they have complied with the ASX
Best Practice Recommendations of the ASX Corporate Governance Council in the reporting period. The Company has
disclosed this information on its website at https://avzminerals.com.au/corporate-governance/. The Corporate
Governance Statement is current as at 30 June 2017, and has been approved by the Board of Directors.
The Company’s website at www.avz minerals.com.au contains a corporate governance section that includes copies of
the Company’s corporate governance policies.
AVZ Minerals Limited | 21
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF AVZ MINERALS LIMITED
As lead auditor of AVZ Minerals Limited for the year ended 30 June 2017, I declare that, to the best of
my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of AVZ Minerals Limited and the entities it controlled during the period.
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 29 September 2017
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
AVZ Minerals Limited | 22
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 30 June 2017
Revenue from continuing operations
3
20,432
37,919
Consolidated
Note
2017
$
2016
$
Administrative costs
Consultancy expenses
Share-based payment expense
Employee benefits expense
Occupancy expenses
Compliance and regulatory expenses
Insurance expenses
Depreciation expense
Exploration impaired
Loss before income tax
Income tax expense
(387,892)
(296,133)
(706,863)
-
(25,600)
(258,106)
(8,876)
-
(20,291)
(43,293)
(207,000)
(136,500)
(6,610)
(24,000)
(59,349)
(8,805)
(3,977)
(28,118)
(1,683,329)
(479,734)
5
-
-
Loss after income tax for the year
(1,683,329)
(479,734)
Other comprehensive income:
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations
Other comprehensive income
(778,843)
(778,843)
(7,077)
(7,077)
Total comprehensive loss for the year
(2,462,172)
(486,811)
Loss for the year is attributable to:
Owners of AVZ Minerals Limited
Non-controlling interests
Total comprehensive loss for the year attributable to:
Owners of AVZ Minerals Limited
Non-controlling interests
(1,682,272)
(1,057)
(1,683,329)
(477,537)
(2,197)
(479,734)
(2,196,042)
(266,130)
(2,462,172)
(484,260)
(2,551)
(486,811)
Basic and diluted loss per share attributable to owners of AVZ
Minerals Limited (cents per share)
15
(0.21)
(0.09)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
AVZ Minerals Limited | 23
Consolidated Statement of Financial Position
As at 30 June 2017
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Mineral exploration and evaluation
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liabilities
Total Current Liabilities
Non-Current Liabilities
Financial liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Consolidated
Note
2017
$
2016
$
6
1,189,086
82,179
2,048,089
27,695
1,271,265
2,075,784
7
34,515,613
-
34,515,613
35,786,878
-
2,075,784
10
8
172,601
2,000,000
2,172,601
34,991
-
34,991
8
2,543,428
-
2,543,428
4,716,029
31,070,849
34,991
2,040,793
33,656,076
1,282,448
(14,638,812)
20,299,712
10,771,137
14,404,348
790,855
(12,956,540)
2,238,663
(197,870)
31,070,849
2,040,793
Equity
Share capital
Reserves
Accumulated losses
Capital and reserves attributable to owners of AVZ Minerals Ltd
Non-controlling interests
11
13
19
Total Equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 24
Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2017
Consolidated
Share Capital
Accumulated
Losses
Other
Reserves
$
$
$
Foreign
Currency
Translation
Reserve
$
Total
Non-
controlling
Interests
Total
Equity
$
$
$
Balance at 1 July 2016
Total comprehensive loss
for the year:
Loss for the year
Exchange differences on
translation of foreign operations
Transactions with owners in
their capacity as owners:
Contributions of equity
(net of transaction costs)
Issue of shares as consideration
for asset acquisition
Share based payments
Conversion of Performance
Rights
Exercise of Options
Non-controlling interests on
acquisition of subsidiary
14,404,348
(12,956,540) 1,464,148
(673,293) 2,238,663
(197,870) 2,040,793
-
-
-
(1,682,272)
-
(1,682,272)
5,385,228
13,150,000
-
580,000
136,500
-
19,251,728
-
-
-
-
-
-
-
-
-
-
-
-
1,721,863
(580,000)
(136,500)
-
1,005,363
- (1,682,272)
(1,057)
(1,683,329)
(513,770)
(513,770)
(513,770) (2,196,042)
(265,073)
(266,130)
(778,843)
(2,462,172)
-
5,385,228
-
5,385,228
- 13,150,000
1,721,863
-
-
-
- 13,150,000
1,721,863
-
-
-
-
-
-
- 20,257,091
11,235,137 11,235,137
11,235,137 31,492,228
Balance at 30 June 2017
33,656,076
(14,638,812) 2,469,511 (1,187,063) 20,299,712 10,771,137 31,070,849
Balance at 1 July 2015
Total comprehensive loss
for the year:
Loss for the year
Exchange differences on
translation of foreign operations
Transactions with owners in
their capacity as owners:
Contributions of equity
(net of transaction costs)
Share based payment
13,996,848
(12,479,003) 1,327,648
(666,570) 2,178,923
(195,319) 1,983,604
-
-
-
(477,537)
-
(477,537)
-
-
-
-
(477,537)
(2,197)
(479,734)
(6,723)
(6,723)
(6,723)
(484,260)
(354)
(2,551)
(7,077)
(486,811)
407,500
-
407,500
-
-
-
-
136,500
136,500
-
-
-
407,500
136,500
544,000
-
-
-
407,500
136,500
544,000
Balance at 30 June 2016
14,404,348
(12,956,540) 1,464,148
(673,293) 2,238,663
(197,870) 2,040,793
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
AVZ Minerals Limited | 25
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2017
Consolidated
Note
2017
$
2016
$
Cash Flows from Operating Activities
Payments to suppliers and employees (inclusive of GST)
Interest received
(940,589)
18,431
(366,548)
24,191
Net cash outflow from operating activities
16
(922,158)
(342,357)
Cash Flows from Investing Activities
Payments for exploration and evaluation
Proceeds from sale of assets
(6,339,555)
2,000
(28,818)
13,727
Net cash outflow from investing activities
(6,337,555)
(15,091)
Cash Flows from Financing Activities
Proceeds from issue of shares and other equity securities
Share issue transaction costs
6,765,000
(364,515)
438,000
(30,500)
Net cash inflow from financing activities
6,400,845
407,500
Net (decrease)/increase in cash and cash equivalents
(859,228)
50,052
Exchange Rate Adjustments
225
-
Cash and cash equivalents at the start of the year
2,048,089
1,998,037
Cash and cash equivalents at the end of the year
6
1,189,086
2,048,089
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 26
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements
present the financial information for AVZ Minerals Limited as a consolidated entity consisting of AVZ Minerals Limited
and the entities is controlled throughout the year (group or consolidated entity). The group is a for-profit entity for the
purpose of this financial report.
Basis of Preparation
(a)
The financial report is a general purpose financial report which has been prepared in accordance with the requirements
of Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board,
Accounting Interpretations and the Corporations Act 2001.
(i)
(ii)
(b)
Statement of Compliance
The financial report complies with Australian Accounting Standards which include International Financial
Reporting Standards as adopted in Australia. Compliance with these standards ensures that the consolidated
financial statements and notes as presented comply with International Financial Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of available for sale financial assets.
Basis of Consolidation
Subsidiaries
(i)
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of AVZ Minerals
Limited as at 30 June 2017 and the results of all subsidiaries for the year then ended. AVZ Minerals Limited and
its subsidiaries together are referred to in this financial report as the group or the consolidated entity.
Subsidiaries are all entities (including structured 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.
Minority interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity
interests held by persons outside the Consolidated Entity, are shown separately within the Equity section of the
consolidated Statement of Financial Position and in the consolidated Statement of Profit or Loss and Other
Comprehensive Income.
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.
Control over subsidiaries
(ii)
In determining whether the consolidated group has control over subsidiaries that are not wholly owned,
judgement is applied to assess the ability of the consolidated group to control the day to day activities of the
partly owned subsidiary and its economic outcomes. In exercising this judgement, the commercial and legal
relationships that the consolidated group has with other owners of partly owned subsidiaries are taken into
consideration. Whilst the consolidated group is not able to control all activities of a partly owned subsidiary, the
partly owned subsidiary is consolidated within the consolidated group where it is determined that the
consolidated group controls the day to day activities and economic outcomes of a partly owned subsidiary.
Changes in agreements with other owners of partly owned subsidiaries could result in a loss of control and
subsequently de-consolidation.
During the year ended 30 June 2017, AVZ Minerals Limited acquired 60% of the issued shares of Dathcom Mining
SAS by the issue of shares and cash. Under the terms of shareholders agreements the Company is at this stage
solely responsible for funding exploration activities and therefore has control over the day to day activities and
economic outcomes of Dathcom Mining SAS. Future changes to the shareholders agreements may impact on the
ability of the Company to control Dathcom Mining SAS.
AVZ Minerals Limited | 27
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
Summary of Significant Accounting Policies (continued)
(c)
Share-based Payment Transactions for the acquisition of goods and services
Share-based payment arrangements in which the Group receives goods or services as in exchange for its own
equity instruments are accounted for as equity-settled share-based payment transactions. The Group measures
the value of equity instruments granted at the fair value of the goods and services received, unless that fair value
cannot be measured reliably.
If the fair value of the goods or services received cannot be reliably measured, the transaction is measured by
the by reference to the fair value of the instruments granted.
The calculation of the fair value of equity instruments at the date at which they are granted is determined using
a Black-Scholes option pricing model, calculation of the fair value involves estimations of the relevant inputs to
the pricing model.
(d)
Financial Liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or
financial liabilities measured at amortised cost. Financial liabilities in the former category include contingent
consideration payable on business combinations, financial liabilities in the latter category include trade payables.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
Fair value is determined based on the value of the entity’s equity instruments when the related business
combination takes place.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are subsequently measured, at each reporting date, at
the fair value of the amount estimated to settle the liability. The increase or decrease in the value of the
liability, other than movements in the value of the liability which arise through part settlement of the liability
is recognised in the profit or loss.
Financial liabilities at amortised cost
Trade and other payables are recognised for amounts to be paid in the future for goods or services received,
whether or not billed to the entity. Trade accounts payable are normally settled within 60 days.
Segment reporting
(e)
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the board of directors.
Revenue recognition
(f)
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are
net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the business
activities as follows:
Interest income
(i)
Interest income is recognised as the interest accrues (using the effective interest method, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net
carrying amount of the financial asset.
Income tax
(g)
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
AVZ Minerals Limited | 28
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
Summary of Significant Accounting Policies (continued)
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for
each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising
from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these
temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction
did not affect either accounting profit or taxable profit or loss. 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 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 balances
attributable to amounts recognised directly in equity are also recognised directly in equity.
Impairment of assets
(h)
At each reporting date the group assesses whether there is any indication that an asset may be impaired. 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 suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Cash and cash equivalents
(i)
For the purpose of presentation of the statement of cash flows, 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, and bank overdrafts.
Exploration and evaluation expenditure
(j)
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of
interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current
and in respect of which:
▪
Such costs are expected to be recouped through successful development and exploitation or from sale of the area:
or
Exploration and evaluation activities in the area have not, at balance date, reached a stage which permits a
reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations
in, or relating to, the area are continuing.
▪
Accumulated costs in respect of areas of interest which are abandoned are written off in full against profit in the year
in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine
the appropriateness of continuing to carry forward costs in relation to that area of interest.
AVZ Minerals Limited | 29
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
Summary of Significant Accounting Policies (continued)
Trade and other payables
(k)
These amounts represent liabilities for goods and services provided to the company prior to the end of financial year
which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12
months.
Provisions
(l)
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably
estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of
management’s best estimate of the expenditure required to settle the present obligation at the balance date. The
discount rate used to determine the present value reflects current market assessments of the time value of money and
the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest
expense.
(m)
Employee benefits
(i) Short-term obligations
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 respect of employee’s services up to the end of the reporting period
and are measured at the amounts expected to be paid when liabilities are settled. The liability for annual leave is
recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as
other payables.
(ii) Share-based payments
The company provides benefits to employees (including directors) of the company in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled
transactions’). 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 using an appropriate option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the share price at grant date and expected volatility of the underlying share,
the expected dividend yield and the risk-free interest rate for the term of the option. In valuing equity-settled
transactions, no account is taken of any performance conditions, other than conditions linked to the price of shares of
AVZ Minerals Limited (‘market conditions’).
(n) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares
for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
(o)
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit/loss attributable to equity holders 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-tax effect of interest and other financing costs associated with the 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.
(p) Goods and services tax (GST) and Value added tax (VAT)
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. Revenue, expenses and assets incurred in overseas are recorded inclusive of VAT and no receivable
or payable is recorded as the recoverability of the VAT from the relevant taxation authority is uncertain.
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.
AVZ Minerals Limited | 30
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
(q)
Summary of Significant Accounting Policies (continued)
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 AVZ Mineral’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 the statement of profit or loss and other comprehensive income, 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
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
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:
▪
date of that statement of financial position
▪
Income and expenses for the statement of profit or loss and other comprehensive income are translated at
average exchange rates (unless this 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 as a separate component of 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 are recognised in the statement of profit or loss and other
comprehensive income, 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.
(r) New accounting standards and interpretations
The following new accounting standards and interpretations have been issued, but are not mandatory for financial year
ended 30 June 2017. They have not been adopted in preparing the financial statements for the year ended 30 June
2017 and are expected to impact the entity in the period of initial application. The Group’s assessment of the impact
of these new standards and interpretations is set out below.
AASB 9 Financial Instruments. This standard and its consequential amendments are applicable to annual
•
reporting periods beginning on or after 1 January 2018 and completes phases I and III of the IASB’s project to replace
IAS 39 (AASB 139) ‘Financial Instruments: Recognition and Measurement’. This standard introduces new classification
and measurement models for financial assets, using a single approach to determine whether a financial asset is
measured at amortised cost or fair value. The accounting for financial liabilities continues to be classified and
measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating
to the entity’s own credit risk is to be presented in other comprehensive income unless it would create an accounting
mismatch. Chapter 6 ‘Hedge Accounting’ supersedes the general hedge accounting requirements in AASB 139 and
provides a new simpler approach to hedge accounting that is intended to more closely align with risk management
activities undertaken by entities when hedging financial and non-financial risks. The consolidated entity will adopt this
standard and the amendments from 1 July 2018. As the entity does not have any financial liabilities measured at fair
value through profit or loss, the amendments will not require any changes in fair value attributable to liabilities.
AVZ Minerals Limited | 31
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
1.
Summary of Significant Accounting Policies (continued)
(s) New accounting standards and interpretations (continued)
•
AASB 15 Revenue from Contracts with Customers. This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The nature of the change is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when
control of goods or services is transferred, rather than on transfer of risks and rewards as is currently the case under
IAS 18 Revenue. The Group is assessing the potential impact on its consolidated financial statements resulting from
the application of AASB 15 and due to the replacement of AASB 111. As the entity does not have any revenue from
contracts with customers, the amendments will not require any changes.
AASB 16 Leases. This standard and its consequential amendments are applicable to annual reporting periods
•
beginning on or after 1 January 2019. This Standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information
in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements
to assess the effect that leases have on the financial position, financial performance and cash flows of an entity. The
consolidated entity will adopt this standard and the amendments from 1 July 2019.
Parent Entity Financial Information
(t)
The financial information for the parent entity, AVZ Minerals Limited, disclosed in note 22 has been prepared on the
same basis as the consolidated financial statements.
AVZ Minerals Limited | 32
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
2.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates and judgements may differ from the related actual results and may have a significant effect on the carrying
amount of assets and liabilities within the next financial year and on the amounts recognised in the financial statements.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
Impairment of deferred exploration and evaluation expenditure
(a)
Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These
costs are carried forward in respect of an area that has not at balance date reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves. The Board and Management have assessed the
carrying value of the Exploration and Evaluation Expenditure to be impaired. Refer to the accounting policy stated in
note 1(j) and to note 7 for movements in the exploration and evaluation expenditure balance.
Share based payment transactions
(b)
The group measures the cost of equity-settled transactions with employees and consultants 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.
Tax in foreign jurisdictions
(c)
The consolidated entity operates in overseas jurisdictions and accordingly is required to comply with the taxation
requirements of those relevant countries. This results in the consolidated entity making estimates in relation to taxes
including but not limited to income tax, goods and services tax, withholding tax and employee income tax. The
consolidated entity estimates its tax liabilities based on the consolidated entity’s understanding of the tax law. Where
the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact
profit or loss in the period in which they are settled.
Asset Acquisition
(d)
The Consolidated Entity has determined that the acquisition of controlling interests in Dathcom Mining SAS and AVZ
Minerals Congo SARL are not deemed business acquisitions. The transactions have been accounted for as asset
acquisitions. In assessing the requirements of AASB 3 Business Combinations, the Consolidated Entity has determined
that the assets acquired do not constitute a business.
The principal assets acquired consist of the right to explore the Manono area of interest in the DRC.
When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying
amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to
the acquired assets and assumed liabilities as the initial recognition exemption for deferred tax under AASB 112
applies. No goodwill will arise on the acquisition and transaction costs of the acquisition are included in the capitalised
cost of the asset.
3.
Revenue
From continuing operations – Proceeds from sale of assets
Interest received
Total revenue from other revenue
4.
Auditor’s Remuneration
Remuneration of the auditors of the consolidated entity for:
Auditing or reviewing the financial statements:
BDO Audit (WA) Pty Ltd
-
Non-assurance services
Total remuneration of auditors
Consolidated
2017
$
2016
$
2,000
18,432
20,432
13,728
24,191
37,919
35,929
-
35,929
21,538
-
21,538
AVZ Minerals Limited | 33
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
Income Tax Expense
5.
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the tax rate of 30.0% (2016: 30.0%)
(1,683,329)
(504,999)
(479,734)
(143,920)
Consolidated
2017
$
2016
$
Tax effect of amounts which are not deductible in calculating taxable income:
Non-deductible expenses
Unrecognised tax losses
Other non-deductible amounts
Differences in overseas tax rates
Movement in unrecognised temporary differences
Deductible equity raising costs
Income tax expense
(b) Deferred tax asset not recognised (1)
Tax losses
Exploration and expenditure
Other
Net deferred tax not recognised
294,659
204,834
-
17,664
(12,158)
56,828
101,584
(3,300)
-
(11,192)
-
-
2,098,549
41,836
-
2,140,385
1,892,983
16,988
-
1,909,971
1: The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing
assessable temporary differences.
6.
(a)
Cash & Cash Equivalents
Cash & cash equivalents
Cash at bank & in hand
Total cash & cash equivalents
(b) Cash at bank and in hand
Consolidated
2017
$
2016
$
1,189,086
1,189,086
2,048,089
2,048,089
Cash on hand is non-interest bearing. Cash at bank bears interest rates between 0.00% and 0.6% (2016: 0.00%
and 1.20%). Refer to note 14 for the group’s exposure to interest rate and credit risk.
AVZ Minerals Limited | 34
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
Exploration & Evaluation Expenditure
7.
Exploration and evaluation phase
Opening balance
Acquisitions (refer Note 9)
Exploration costs
Net exchange differences on translation
Impairment expense
Closing balance
Consolidated
2017
$
2016
$
-
33,377,651
1,938,933
(780,680)
(20,291)
34,515,613
-
-
28,818
-
(28,818)
-
The value of the group’s interest in exploration expenditure is dependent upon:
▪
the continuance of the company’s rights to tenure of the areas of interest;
▪
the results of future exploration; and
▪
the recoupment of costs through successful development and exploitation of the areas of interest, or
alternatively, by their sale.
8.
Financial Liabilities
Deferred Consideration
Current Liability
Principal repayment
Fair value increase/(decrease)
Total Current Liability
Non-Current Liability
Principal repayment (24 months)
Fair value increase/(decrease)
Principal repayment (36 months)
Fair value increase/(decrease)
Total Non-Current Liability
Total Liability
Consolidated
2017
$
2016
$
2,000,000
-
2,000,000
2,000,000
(405,612)
1,333,333
(384,293)
2,543,428
4,543,428
-
-
-
-
-
-
-
-
-
The value of the deferred consideration is the board’s assessment of the value of contracted future payments
issued under the agreement for the acquisition of Dathcom Mining SAS (refer Note 9). The fair value is based
on assumptions to present value the future payments based on a discount rate of 12%. The principal payments
are contractually required in U.S. dollars and have been converted to Australian dollars at 30 June 2017.
9.
Asset Acquisition
Acquisition of a 60% interest in Dathcom Mining SAS
On 23 May 2017, the Company completed the acquisition of a 60% interest in Dathcom Mining SAS.
The acquisition was completed through the following:
Purchase consideration
Cash payments
Equity consideration (280m shares at $0.029)*
Deferred cash consideration (refer Note 8)
Acquisition costs (140m shares at $0.029)*
2017
$
4,189,278
8,120,000
4,543,428
4,060,000
20,912,706
AVZ Minerals Limited | 35
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
9.
Asset Acquisition (continued)
Net assets acquired
Exploration and evaluation assets
Net identifiable assets acquired
Less: Non-controlling interest
*Refer Note 21 (c)
2017
$
32,147,843
32,147,843
(11,235,137)
20,912,706
Manono Extension Lithium, Tin and Tantalum Project
On 19 September 2016, the Company completed the acquisition of the Manono Extension Lithium, Tin, and
Tantalum Project in the DRC.
The acquisition was completed through the following:
Purchase consideration
Cash payments
Equity consideration (30m shares at $0.013)*
Equity consideration (20m shares at $0.029)*
Net assets acquired
Exploration and evaluation assets
2017
$
259,808
390,000
580,000
1,229,808
1,229,808
*Refer Note 21 (c)
10. Trade & Other Payables
Current
Trade Payables
Total current trade & other payables
The group’s exposure to liquidity risk is noted in note 14.
Consolidated
2017
$
2016
$
172,601
172,601
34,991
34,991
Consolidated
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
11. Share capital
(a) Share capital
Ordinary shares - fully paid
1,474,466,643
560,883,310
33,656,076
14,404,348
Total Share Capital
1,474,466,643
560,883,310
33,656,076
14,404,348
(b) Ordinary Shares
Ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the
number of shares held and in proportion to the amount paid up on the shares held. At shareholders meetings,
each ordinary share is entitled to one vote in proportion to the paid-up amount of the share when a poll is
called, otherwise each shareholder has one vote on a show of hands.
(c) Options
Information relating to options including details of options issued, exercised and lapsed during the financial
year and options outstanding at the end of the financial year, is set out in note 12.
(d) Performance Rights
Refer to Note 21(b) for further details in respect to the performance rights granted.
AVZ Minerals Limited | 36
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
11. Share Capital (continued)
(e) Movements in share capital
Opening Balance 1 July 2015
Placement
Less: Transaction costs arising on share issues
Closing Balance at 30 June 2016
Date
Number of
Shares
$
Fair
Value
$
Total
$
13 Apr 2016
73,000,000 $0.006
487,883,310
560,883,310
13,996,848
438,000
(30,500)
14,404,348
Opening Balance 1 July 2016
Placement
Initial Consideration for the acquisition of the Manono
Extension Project (Refer note 21 (c))
Placement
Placement
Conversion of Performance Rights
Exercise of Options
Placement
Consideration for asset acquisitions (Refer note 21 (c))
Facilitation shares (Refer note 21 (c))
Additional Consideration for the acquisition of the
Manono Extension Project (Refer note 21 (c))
Conversion of Performance Rights
Reallocation of options exercised to share capital
Less: Transaction costs arising on share issues
Closing Balance at 30 June 2017
27 Sep 16
9 Nov 16
5 Dec 16
10 Feb 17
13 Feb 17
13 Feb 17
23 May 17
23 May 17
23 May 17
23 May 17
29 Jun 17
560,883,310
90,000,000 $0.009
14,404,348
810,000
$0.013
30,000,000
44,583,333 $0.012
125,000,000 $0.020
4,000,000 $0.020
35,000,000 $0.012
125,000,000 $0.020
280,000,000 $0.029
140,000,000 $0.029
390,000
535,000
2,500,000
-
420,000
2,500,000
8,120,000
4,060,000
20,000,000
$0.029
20,000,000 $0.029
- $0.012
-
1,474,466,643
580,000
580,000
136,500
(1,379,772)
33,656,076
Expiry date
Exercise
price
Balance at
start of
year
Granted
during the
year
Exercised
during the
year
Cancelled/
lapsed
during the
year
Balance at
end of the
year
12. Share Options
(a) 2017 share option details
Unlisted
Listed
30 Sep 2017
24 May 2020
1.2 cents
3.0 cents
35,000,000
-
35,000,000
-
300,001,000
300,001,000
(35,000,000)
-
(35,000,000)
-
-
-
-
300,001,000
300,001,000
Refer to Note XX
Expiry date
Exercise
price
Balance at
start of
year
Granted
during the
year
Exercised
during the
year
Cancelled/
lapsed
during the
year
Balance at
end of the
year
(b) 2016 unlisted share option details
1.2 cents
30 Sep 17
-
-
35,000,000
35,000,000
-
-
-
-
35,000,000
35,000,000
13. Reserves
(a) Total reserves
Other reserves
Foreign currency translation reserve
Total reserves
Consolidated
2017
$
2016
$
2,469,511
(1,187,063)
1,282,448
1,464,148
(673,293)
790,855
AVZ Minerals Limited | 37
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
13. Reserves (continued)
(b) Other reserves
Opening balance
Less: Exercise of Unlisted Options
Listed Options issued during the year *
Performance Rights issued as remuneration during the year**
Less: Conversion of Performance Rights
Closing balance
* Refer to note 21(a).
** Refer to note 21(b).
Consolidated
2017
$
2016
$
1,464,148
(136,500)
1,015,000
706,863
(580,000)
2,469,511
1,327,648
-
136,500
-
-
1,464,148
(c)
Foreign Currency Translation Reserve
Opening balance
Exchange difference arising on translation of foreign operations
Closing balance
(673,293)
(513,770)
(1,187,063)
(666,570)
(6,723)
(673,293)
Nature and purpose of reserves
(i) Share-based payments reserve
The share based payments reserve is used to recognise:
The fair value of options issued to employees and consultants but not exercised
The fair value of shares issues to employees
(ii) Option reserve
The Share Option Reserve contains amounts received on the issue of options over unissued capital of the company.
(iii) Foreign currency translation reserve
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled
entities. The exchange differences arising are recognised in other comprehensive income as detailed in note 1(q)
and accumulated within a separate reserve within equity. The cumulative amount is reclassified to the statement of
profit or loss and other comprehensive income when the net investment is disposed of.
14. Financial Instruments, Risk Management Objectives and Policies
The consolidated entity’s principal financial instruments comprise cash and cash equivalents. The main purpose of the
financial instruments is to earn the maximum amount of interest at a low risk to the company. The consolidated entity
also has other financial instruments such as trade debtors and creditors which arise directly from its operations. For
the year under review, it has been the consolidated entity’s policy not to trade in financial instruments. The main risks
arising from the consolidated entity’s financial instruments are interest rate risk and credit risk. The board reviews and
agrees policies for managing each of these risks and they are summarised below:
(a)
Interest Rate Risk
The group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a
result of changes in market interest rates and the effective weighted average interest rate for each class of
financial assets and financial liabilities comprises:
Consolidated
2017
Financial assets
Cash and cash equivalents
Floating
Interest Rate
Fixed
Interest
Non-
interest
bearing
Weighted
Average
Interest
Rate
%
$
$
-
-
$
-
-
0.597%
1,189,086
1,189,086
Total
$
1,189,086
1,189,086
AVZ Minerals Limited | 38
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
14.
Financial Instruments, Risk Management Objectives and Policies (continued)
Consolidated
2016
Financial assets
Cash and cash equivalents
Floating
Interest Rate
Fixed
Interest
Non-
interest
bearing
Weighted
Average
Interest
Rate
%
$
$
-
-
$
-
-
1.20%
2,048,089
2,048,089
Total
$
2,048,089
2,048,089
The maturity date for cash included in the above tables is one year or less from balance date.
(i)
Sensitivity analysis
The group’s main interest rate risk arises from cash equivalents with variable and fixed interest rates. At
30 June 2017 and 30 June 2016, the group’s exposure to interest rate risk is not deemed material.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the group. The group has adopted the policy of only dealing with credit worthy counterparties and
obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial
loss from defaults. The group does not have any significant credit risk exposure to any single counterparty or
any group of counterparties having similar characteristics. The carrying amount of financial assets recorded in
the financial statements, net of any provisions for losses, represents the group’s maximum exposure to credit
risk. All cash equivalents are held with financial institutions with a credit rating of -AA or above.
(c)
Foreign Currency Risk
The group is exposed to fluctuations in foreign currencies arising from exploration commitments in currencies
other than the group’s presentational currency (Australian Dollars).
The group operates internationally and is exposed to foreign exchange risk arising from currency exposure to
the US Dollar (USD). The group has not formalised a foreign currency risk management policy, however it
monitors its foreign currency expenditure in light of exchange rate movements, and retains the right to withdraw
from the foreign exploration commitments.
(i)
Sensitivity analysis
The group’s main foreign currency risk arises from cash equivalents held in foreign currency denominated
bank accounts and other payable amounts denominated in currencies other than the group’s functional
currency. At 30 June 2017 and 30 June 2016, the group’s exposure to foreign currency risk at the end of
the reporting period, expressed in Australian dollar, was as follows;
Cash and cash equivalents
Trade & other receivables - current
Financial Liabilities
2017
USD
$
8,750
46,450
55,200
4,543,428
4,543,428
2016
USD
$
-
-
-
-
-
AVZ Minerals Limited | 39
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
14.
Financial Instruments, Risk Management Objectives and Policies (continued)
Foreign Exchange Rate
Cash and cash equivalents
Trade & other receivables - current
Financial Liabilities
2017
2016
USD
USD
USD
USD
$
+10%
(795)
(4,223)
(5,018)
$
-10%
795
4,223
5,018
(405,425)
(405,425)
405,425
405,425
$
+10%
$
-10%
-
-
-
-
-
-
-
-
-
(d)
Liquidity risk
The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the
group aims at ensuring flexibility in its liquidity profile by maintaining the ability to undertake capital raisings. The
current trade and other payables are due and payable within 3 to 6 months.
Less than
6 months
$
6-12
months
$
Between 1
and 2
years
$
Between 2
and 5 years
$
Over 5
years
$
Total
contractual
cashflows
$
Carrying
amount
liabilities
$
172,601
172,601
-
2,000,000
2,000,000
-
1,594,388
1,594,388
-
949,040
949,040
34,991
-
-
-
-
-
-
-
172,601
4,543,428
4,716,029
172,601
4,543,428
4,716,029
34,991
34,991
Contractual
maturities of
financial liabilities
At 30 June 2017
Trade and other
payables
Financial liabilities
At 30 June 2016
Trade and other
payables
(e) Net fair value
The carrying value and net fair values of financial assets and liabilities at balance date are:
Consolidated
2017
2016
Financial assets
Cash and cash equivalents
Trade & other receivables - current
Financial Liabilities
Trade and other payables - current
Financial liabilities - current
Financial liabilities – Non-current
Carrying
Amount
$
1,189,086
82,180
1,271,266
172,601
2,000,000
2,543,428
4,716,029
Net fair
Value
$
Carrying
Amount
$
Net fair
Value
$
1,189,086
82,180
1,271,266
172,601
2,000,000
2,543,428
4,716,029
2,048,089
27,695
2,075,784
2,048,089
27,695
2,075,784
34,991
-
-
34,991
34,991
-
-
34,991
(f)
Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or
for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements
by level of the following fair value measurement hierarchy:
i) Quoted prices in active markets for identical assets or liabilities (level 1)
ii)
Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
(level 3).
iii)
AVZ Minerals Limited | 40
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
14.
Financial Instruments, Risk Management Objectives and Policies (continued)
Due to their short-term nature, the carrying amount of the current receivables and current payables is
assumed to approximate their fair value. Refer to note 8 for assumptions made in relation to determining fair
value of financial liabilities.
15. Earnings per Share
(a)
Earnings/(Loss)
Loss used in the calculation of basic and diluted EPS
(b) Weighted average number of ordinary shares (‘WANOS’)
WANOS used in the calculation of basic and diluted earnings per
share:
Basic and diluted loss per share
Consolidated
2017
$
2016
$
(1,683,329)
(479,734)
795,324,040
503,640,141
cents per share
(0.21)
cents per share
(0.09)
Diluted earnings per share is equal to basic loss per share as the company is in a loss position.
16. Cash Flow Information
Reconciliation of cash flows from operating activities with loss
from ordinary activities after income tax:
Loss for the year
Depreciation
Impairment of plant and equipment
Impairment of exploration expenses
Share-based payment
Proceeds from sale of assets
Changes in assets and liabilities:
(Increase) in operating receivables & prepayments
Increase/(Decrease) in trade and other payables
Consolidated
2017
$
2016
$
(1,683,329)
(479,734)
-
-
20,291
706,863
-
(54,485)
86,502
3,977
467
28,818
136,500
(13,727)
(293)
(18,365)
Net cash outflows from Operating Activities
(922,158)
(342,357)
Non-cash investing and financing activities
Issue of ordinary shares as consideration for asset acquisition**
Issue of listed options for capital raising services*
13,150,000
1,015,000
14,165,000
-
-
-
*Refer Note 21 (a)
**Refer Note 21 (c)
17. Segment Information
Identification of reportable operating segments
The Group is organised into one operating segment, being exploration in the DRC. This is based on the internal
reports that are being reviewed and used by the Board of Directors (who are identified as the Chief Operating
Decision Makers (CODM)) in assessing performance and in determining the allocation of resources.
As a result, the operating segment information is as disclosed in the statements and notes to the financial statements
throughout the report.
Geographical information
All non-current assets are based in the DRC.
AVZ Minerals Limited | 41
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
18. Commitments and Contingencies
There are no commitments or contingent liabilities outstanding at the end of the year.
19. Subsidiaries and non-controlling entities
(a) 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):
Name of entity
Himba Iron Exploration (Pty) Ltd 2
Eris Mining (Pty) Ltd 2
Tumba Base Metals X (Pty) Ltd 2
AVZ International Pty Ltd
AVZ Minerals Congo SARL
Dathcom Mining SAS
Country of
incorporation
Class
of shares
Namibia
Namibia
Namibia
Australia
DRC
DRC
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding1
2017
%
95
95
95
100
100
60
2016
%
95
95
95
-
-
-
1: The proportion of ownership interest is equal to the proportion of voting power held.
2: Applications to deregister these entities were made before year end and granted after balance date.
(b) Non-controlling entities
The following table sets out the summarised financial information for each subsidiary that has non-controlling
interests. Amounts disclosed are before intercompany eliminations (AASB 12.B11)
Summarised statement of
Financial Position
Current Assets
Non-current Assets
Total Assets
Current Liabilities
Non-current Liabilities
Total Liabilities
Net Liabilities
Accumulated NCI
Summarised statement of
Financial Position
Current Assets
Non-current Assets
Total Assets
Current Liabilities
Non-current Liabilities
Total Liabilities
Net Assets/(Liabilities)
Accumulated NCI
Himba Iron Exploration
(Pty) Ltd
Tumba Base Metals X
(Pty) Ltd
30 June 2017
30 June 2016
30 June 2017
30 June 2016
-
-
-
1,197,548
-
1,197,548
(1,197,548)
(63,870)
-
-
-
1,092,148
-
1,092,148
(1,092,148)
(63,870)
-
-
-
25,774
-
25,774
(25,774)
(1,375)
-
-
-
23,506
-
23,506
(23,506)
(1,375)
Eris Mining
(Pty) Ltd
Dathcom Mining
SAS
30 June 2017
30 June 2016
30 June 2017
30 June 2016
-
76,714
76,714
2,573,103
-
2,573,103
(2,496,389)
(133,590)
20,257
69,962
90,220
2,347,587
-
2,347,587
(2,257,367)
(132,625)
55,200
31,378,395
31,433,595
1,929,965
-
1,929,965
29,503,630
10,969,972
-
-
-
-
-
-
-
-
AVZ Minerals Limited | 42
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
19. Subsidiaries and non-controlling entities (continued)
Summarised statement of
Financial Position
AVZ Minerals Congo SARL
30 June 2017
30 June 2016
Current Assets
Non-current Assets
Total Assets
Current Liabilities
Non-current Liabilities
Total Liabilities
Net Assets/(Liabilities)
Accumulated NCI
1,218,576
1,218,576
-
-
-
1,218,576
-
-
-
-
-
-
-
-
-
20. Related Party Information
(a)
(b)
(c)
Parent entity
The ultimate parent entity within the group is AVZ Minerals Limited.
Subsidiaries
Interests in subsidiaries are set out in note 19.
Key management personnel
The key management personnel compensation is as follows:
Key Management Personnel Compensation
Summary remuneration
Short-term benefits
Post-employment benefits
Share-based payments (Refer Note 21 (b) and (c))
Total key management personnel compensation
2017
$
2016
$
401,383
7,378
2,992,959
3,401,720
203,877
3,123
-
207,000
Details of remuneration disclosures are provided within the audited remuneration report which can be
found on pages 14 to 20 of the directors’ report.
(d) Other transactions with key management personnel
The following transactions occurred with Director related parties:
Consolidated
2017
$
2016
$
Payment to GTT Ventures
Share-based payment - unlisted options issued to GTT Ventures
Outstanding balances arising from recharges/purchases with Director Related Parties
Current payables (purchases)
19,838
-
35,937
136,500
-
3,300
Terms and conditions of related party transactions
Transactions between related parties are on commercial terms and conditions, no more favourable than those
available to other parties unless otherwise stated.
AVZ Minerals Limited | 43
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
21. Share Based Payments
(a) Options
No options were issued to current directors and executives as part of their remuneration during the year.
50,000,000 listed options were issued during the year to the Company’s lead manager and as part of the placement. The
options have an exercise price of 3 cents each and expire on 24 May 2020. The option value was calculated using the
Black-Scholes Model. The value of the options has been determined using the Black-Scholes Model as they were issued
in accordance with an agreement rather than on receipt of a vendor invoice and there is not an active market for listed
options. The option reserve records items recognised on valuation of director, employee and contractor share options.
Information relating to the details of options issued, exercised and lapsed during the financial year and options
outstanding at the end of the financial year, is set out in note 12.
The assessed fair values of the options were determined using a Black-Scholes option pricing model, taking into account
the exercise price, term of option, the share price at grant date and expected price volatility of the underlying share,
expected dividend yield and the risk-free interest rate for the term of the option. The inputs to the model used were:
Dividend Yield
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Option exercise price ($)
Share price at grant date ($)
Value of option ($)
-
120
1.0
3
0.03
0.029
0.0203
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that
may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends,
which may also not necessarily be the actual outcome.
(b) Performance Rights
On 23 May 2017, 30,000,000 unlisted Performance Rights were issued to Mr Nigel Ferguson, with the vesting terms as
below:
(iv)
(v)
(vi)
Tranche 1 – 10,000,000 Performance Rights shall vest if the 10-day volume weighted average share price
(VWAP) for the Shares on the ASX is $0.03 or higher from the date of issue;
Tranche 2 – 10,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.05 or higher during the period commencing 12 months from the date of issue; and
Tranche 3 – 10,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.075 or higher during the period commencing 12 months from the date of issue
During the year ended 30 June 2017, the first tranche of 10,000,000 Performance Rights vested and were converted
to Ordinary Shares.
Mr Patrick Flint was issued 10,000,000 unlisted Performance Rights on 23 May 2017, convertible to ordinary shares if
the 10-day VWAP for the Shares on the ASX is $0.03 or higher from the date of issue. These Performance Rights vested
and were converted to Ordinary Shares during the year ended 30 June 2017.
On 5 June 2017, the Company issued 15,000,000 Performance Rights to Airguide International Pte Limited (Airguide),
the Company’s Strategic Adviser for facilitating and advising the Company on its commercial agreements with relevant
counter-parties in China. The Airguide Performance Rights shall vest as follows:
(i)
(ii)
7,500,000 upon execution of the first memoranda of understanding and/or letter of intent in respect of
an offtake agreement with an Airguide introduced party; and
7,500,000 upon execution of the first binding offtake partnership, development finance or prepayment
finance agreement with an Airguide introduced party.
AVZ Minerals Limited | 44
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
21. Share Based Payments (continued)
Director
and Other
KMP
Nigel
Ferguson -
Tranche 1
Nigel
Ferguson -
Tranche 2
Nigel
Ferguson -
Tranche 3
Number
Issued
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Total Fair
Value ($)
%
Vested
Underlying
Share Price
on Grant
Date ($)
10,000,000
23/05/2017
Nil
22/05/2018
0.029
290,000
100
10,000,000
23/05/2017
Nil
22/05/2018
0.029
290,000
10,000,000
23/05/2017
Nil
22/05/2018
0.029
290,000
0
0
Patrick Flint
10,000,000
23/05/2017
Nil
22/05/2018
0.029
290,000
100
Airguide
International
Pte Limited
15,000,000
5/06/2017
Nil
5/06/2018
0.033
495,000
0
Assumptions on vesting period and expense
Director and Other KMP
Total Fair Value ($)
Vesting period (days)
Expense to 30 June
2017 ($)
Nigel Ferguson - Tranche 1
Nigel Ferguson - Tranche 2
Nigel Ferguson - Tranche 3
Patrick Flint
Airguide International Pte
Limited
290,000
290,000
290,000
290,000
495,000
Already vested
290,000
183
365
61,973
30,986
Already vested
290,000
365
33,904
(c) Shares issued as Share Based Payments
Manono Project
The following shares were issued in relation to the acquisition of the Manono Lithium, Tin and Tantalum Project,
DRC:
•
•
•
80m facilitation shares issued to Klaus Eckhof at $0.029 ($2,320,000) on 6 April 2017 (date of shareholder
approval).
60m shares issued to third parties at $0.029 ($1,740,000) on 6 April 2017 (date of shareholder approval).
280m shares issued to third parties (including 40m to Mr Guy Loando) at $0.029 ($8,120,000) on 6 April
2017 (date of shareholder approval).
Manono Extention Project
The following shares were issued in relation to the acquisition of the Manono Extention Lithium, Tin and Tantalum
Project, DRC:
•
•
30m shares issued to third parties at $0.013 ($390,000) on 9 November 2016.
20m shares issued to third parties at $0.029 ($580,000) on 23 May 2017.
AVZ Minerals Limited | 45
Notes to the Consolidated Financial Statements for the year ended 30 June 2017
22.
(a)
(b)
(c)
(d)
Parent Entity Information
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-Current Liabilities
Total liabilities
Net Assets
Equity
Contributed equity
Accumulated losses
Reserves
Total equity
Total Comprehensive loss for the year
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Company
2017
$
2016
$
1,216,065
24,212,960
25,429,025
2,172,601
2,543,428
4,716,029
2,055,527
96,605
2,152,132
34,041
-
34,041
20,712,996
2,118,091
33,656,076
(15,412,591)
2,469,511
20,712,996
14,404,348
(13,750,404)
1,464,148
2,118,091
(1,662,187)
-
(1,662,187)
(435,787)
-
(435,787)
The parent entity has not guaranteed any loans for any entity during the year. The parent entity does not have any
contingent liabilities, or capital commitments.
23. Events Occurring after the Reporting Date
On 10 August 2017, the Company reached an agreement with Huayou International Mining (Hong Kong) Limited
(Huayou) for Huayou to invest $13.02 million and acquire an 11% interest in AVZ (Capital Raising)
The placement to Huayou comprised 186 million shares at an issue price of 7 cents per share, together with 186 million
attaching options exercisable at 10 cents and expiring 15 April 2019 to raise $13,020,000. Huayou also exercised the
right to appoint Hongliang Chen to the AVZ Board.
AVZ issued 186 million shares and 86 million attaching unlisted options to Huayou under its existing placement capacity.
The remaining 100 million attaching options will be issued to Huayou subject to shareholder approval on 12 October
2017.
In addition, AVZ also proposes to raise, subject to shareholder approval on 12 October 2017, up to a further $1.98
million from institutional and sophisticated investors by the issue of up to 28,285,714 shares at an issue price of 7 cents
per share, together with up to 28,285,714 attaching unlisted options exercisable at 10 cents and expiring 15 April 2019.
The shareholder meeting is also seeking approval to the issue of 5,000,000 employee performance rights and 6,000,000
ordinary shares in consideration for an introduction fee in connection with the Capital Raising.
Between 1 July 2017 and the date of this report, the Company issued a total of 54,415,438 ordinary shares following
the exercise of listed options. The Company also issued 7,500,000 ordinary shares following the conversion of
performance rights.
Other than the above, there has been no matter or circumstance that has arisen that has significantly affected, or may
significantly affect:
•
•
•
the group’s operations in future financial years, or
the results of those operations in future financial years, or
the group’s state of affairs in future financial years.
AVZ Minerals Limited | 46
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 23 to 46 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 group’s financial position as at 30 June 2017 and of its performance for the
financial year ended on that date; and
(b) the audited remuneration disclosures set out on pages 14 to 20 of the directors’ report comply with section 300A
of the Corporations Act 2001; and
(c) at the date of this declaration, 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
(d) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued
by the International Accounting Standards Board.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Klaus Eckhof
Executive Chairman
Mount Hawthorn, Western Australia
29 September 2017
AVZ Minerals Limited | 47
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
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Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of AVZ Minerals Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of AVZ Minerals Limited and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2017, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial report, including a summary of significant accounting policies and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
AVZ Minerals Limited | 48
Accounting for Exploration and Evaluation Assets
Key audit matter
How the matter was addressed in our audit
At 30 June 2017 the carrying value of the capitalised
Our procedures included, but were not limited to:
exploration and evaluation asset was $34,515,613 (30
June 2016: Nil), as disclosed in Note 7.
•
Obtaining a schedule of the areas of interest
held by the Group and assessing whether the
As the carrying value of the Exploration and Evaluation
rights to tenure of those areas of interest
Asset represents a significant asset of the Group, we
remained current at balance date;
considered it necessary to assess whether any facts or
circumstances exist to suggest that the carrying
amount of this asset may exceed its recoverable
amount.
•
Considering the status of the ongoing
exploration programmes in the respective
areas of interest by holding discussions with
management, and reviewing the Group’s
Judgement is applied in determining the treatment of
exploration budgets, ASX announcements and
exploration expenditure in accordance with Australian
director’s minutes;
Accounting Standard AASB 6 Exploration for and
Evaluation of Mineral Resources. In particular:
•
Considering whether any such areas of
interest had reached a stage where a
Whether the conditions for capitalisation are
reasonable assessment of economically
satisfied;
recoverable reserves existed;
Which elements of exploration and evaluation
•
Verifying, on a sample basis, evaluation
expenditures qualify for recognition; and
expenditure capitalised during the year for
Whether facts and circumstances indicate that
the exploration and expenditure assets should
compliance with the recognition and
measurement criteria of AASB 6;
be tested for impairment.
•
Considering whether any facts or
circumstances existed to suggest impairment
testing was required; and
• We also assessed the adequacy of the related
disclosures in Note 1(j) & 2 (a) and Note 7 to
the financial report.
AVZ Minerals Limited | 49
Accounting for Acquisition of Dathcom Mining SAS
Key audit matter
How the matter was addressed in our audit
On 23 May 2017 the Group obtained a controlling
Our procedures included, but were not limited to:
interest in the Manono project by acquiring a 60%
interest in Dathcom Mining SAS for purchase
consideration of $20,912,706.
Obtaining an understanding of the
transaction, including an assessment of
whether the transaction constituted an asset
The Group treated the transaction as an asset
or business acquisition;
acquisition, rather than a business acquisition.
Reviewing the sale and purchase agreement
Accounting for this transaction is complex and requires
to understand key terms and conditions;
management to exercise judgement to determine the
appropriate accounting treatment including whether
the acquisition should be classed as an asset or
business acquisition, estimating the fair value of net
assets acquired and estimating the fair value of the
purchase consideration.
Assessing management’s determination of
the fair value of consideration paid and
agreeing the consideration to supporting
documentation;
Evaluating management’s assessment of the
fair value of net assets acquired;
Agreeing that no goodwill was recognised
and that costs associated with the
acquisition were capitalised in order to be in
line with the correct accounting policy for
asset acquisitions; and
We have also assessed the adequacy of the
related disclosures in Note 1(b)(ii) & 2(d) and
Note 9 to the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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, 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 the directors 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 control as the directors determine is necessary to enable the preparation of the
AVZ Minerals Limited | 50
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are 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 the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
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 this 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 (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_files/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 19 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of AVZ Minerals Limited, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Dean Just
Director
Perth, 29 September 2017
AVZ Minerals Limited | 51
Shareholder Information
Shareholding
The distribution of members and their holdings of equity securities
20 September 2017 is as follows:
in the holding company as at
Number Held
1- 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Holders of less than a marketable parcel: 267
Twenty Largest Shareholders
The names of the twenty largest ordinary fully paid shareholders are as follows:
Shareholder
Dathomir Mining Resources Sarl
Huayou International Mining (Hong Kong) Ltd
JP Morgan Nominees Australia Ltd
HSBC Custody Nominees Australia Ltd
BNP Paribas Nominee Pty Ltd (IB)
BNP Paribas Nominees Pty Ltd (DRP)
Citicorp Nominees Pty Ltd
Langford Michael
Pershing Australia Nominees Pty Ltd
Mason John H + KA
Guo Kai
Flint Patrick
Reeves Shane
CommSec Nominees Pty Ltd
Custodial SVCS Ltd
Gasson Mark
Samilisa Nominees Pty Ltd
Ridgeback Holdings Pty Ltd
Richardson Kyle
Khnaizer Walid
Substantial Shareholders
The names of the substantial shareholders:
Shareholder
Dathomir Mining Resources Sarl
Huayou International Mining (Hong Kong) Ltd
Class of Equity Securities
Fully Paid Ordinary Shares
56
299
582
1,957
978
3,872
Number
% Held of Issued
Ordinary Capital
240,000,000
186,000,000
117,121,400
110,502,001
87,717,257
43,081,800
30,607,372
26,500,000
21,300,000
19,278,800
14,392,656
14,000,000
13,937,044
13,118,045
12,175,547
12,000,000
10,000,000
10,000,000
9,410,506
8,200,000
999,342,428
Number
240,000,000
186,000,000
13.93%
10.80%
6.80%
6.42%
5.09%
2.50%
1.78%
1.54%
1.24%
1.12%
0.84%
0.81%
0.81%
0.76%
0.71%
0.70%
0.58%
0.58%
0.55%
0.48%
58.04%
%
13.94
10.80
Optionholding
The distribution of members and
20 September 2017 is as follows:
their holdings of
listed options
in
the holding company as at
Number Held
1- 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Class of Equity Securities
$0.03 Listed Options
1,027
30,000
311,142
9,450,037
235,093,356
244,885,562
AVZ Minerals Limited | 52
Shareholder Information
Twenty Largest optionholders
The names of the twenty largest $0.03 listed optionholders are as follows:
Optionholder
Langford Michael
Fenton Brian Edward
Gasson Mark
PR Perry Nominees Pty Ltd
BKG Fenton Pty Ltd
Griffith Benjamin
JP Morgan Nominees Australia Ltd
Yu Gilbert
Soos Peter
Hayres Gavin V + Yip A
Steer Rebecca Jayne
Teo Tze Hao
Nicholls Laurie
Jekor Pty Ltd
Heuser JM + Gillam VM
Lane Peter
Top Class Holdings Pty Ltd
Cossack Holdings Australia Pty Ltd
Tradelink Food Brokers Pty Ltd
BNP Paribas Nomine Pty Ltd
Substantial Optionholders
The names of the substantial optionholders:
Shareholder
Langford Michael
On-Market Buy-Back
There is no current on-market buy-back.
Restricted Securities
There are no restricted ordinary shares in escrow.
Number
% Held of $0.03
Listed Options
20,000,000
7,210,000
6,500,000
6,484,008
6,000,000
5,392,000
5,000,000
4,500,000
4,226,702
3,400,000
3,300,000
3,239,011
3,140,000
3,049,260
3,000,000
2,700,000
2,600,000
2,500,000
2,500,000
2,455,543
97,196,524
8.17%
2.94%
2.65%
2.65%
2.45%
2.20%
2.04%
1.84%
1.73%
1.39%
1.35%
1.32%
1.28%
1.25%
1.23%
1.10%
1.06%
1.02%
1.02%
1.00%
39.69%
Number
20,000,000
%
8.17
Unquoted equity securities – options
Unlisted options, $0.10 options issued on 15 August 2017, expiring
on or before 15 April 2019
Holders of more than 20% of unlisted options
Number
on issue
Number of
holders
86,000,000
1
Number of
unlisted
options
Percentage
of unlisted
options
Huayou International Mining (Hong Kong) Ltd
86,000,000
100%
AVZ Minerals Limited | 53
Shareholder Information
Unquoted equity securities – performance rights
Performance Rights shall vest if the 10-day volume weighted average
price of Shares on the ASX is $0.05 or higher during the period
commencing 12 months from the date of issue
Performance Rights shall vest if the 10-day volume weighted average
price of Shares on the ASX is $0.075 or higher during the period
commencing 12 months from the date of issue
Performance Rights shall vest upon execution of the first binding
offtake partnership, development finance or prepayment finance
agreement with an Airguide introduced party
Holders of more than 20% of unlisted performance rights
Ridgeback Holdings Pty Ltd
Airguide International Pte Ltd
Number
on issue
Number of
holders
10,000,000
10,000,000
7,500,000
1
1
1
Number of
performance
rights
Percentage
of performance
rights
20,000,000
7,500,000
72.7%
27.3%
Voting Rights
The voting rights attaching to each class of equity securities are set out below:
(i)
Ordinary Shares
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.
(ii)
Performance Rights and Unlisted Options
These securities have no voting rights.
AVZ Minerals Limited | 54
Schedule of Tenements
Information required under ASX Listing Rule 5.3.3
List of current mining and exploration tenements:
Country / Project
Tenement
Interest
DRC – Manono Project
PR 13359
60%
Status
Granted
DRC – Manono Extension
Project
PR 4029, PR 4030
100%
Granted
DRC-Katanga Regional
PR 12206, PR 12436,
PR 12449, PR 12450,
PR 12454, PR 12459,
PR 12461
60%
Granted
AVZ Minerals Limited | 55