AVZ Minerals Limited
ABN 81 125 176 703
Annual Report 2018
AVZ Minerals Limited |
Contents
Corporate Directory
Managing Director’s Statement
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
3
13
24
25
26
27
28
29
30
54
55
59
62
AVZ Minerals Limited |
Corporate Directory
Directors
Nigel Ferguson (Managing Director)
Hongliang Chen (Non-Executive Director)
Guy Loando (Executive Director)
Rhett Brans (Non-Executive Director)
Graeme Johnston (Executive Director)
Company Secretary
Leonard Math
Principal Place of Business
& Registered Office
Level 2, Suite 9
389 Oxford Street
Mt Hawthorn WA 6016
Telephone: +61 8 6117 9397
Facsimile: +61 8 6117 9330
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
Managing Director’s Statement
Dear Shareholders,
It is with great pleasure that I present to you AVZ Minerals Limited’s Annual Report for financial year 2018, a period in
which a great deal was achieved in progressing our flagship Manono Lithium and Tin project in the Democratic Republic
of Congo.
AVZ Minerals Limited (AVZ) originally acquired the Manono Project licences in Democratic Republic of Congo (DRC)
to develop and mine a world class tin asset. This asset was first discovered by the Belgians in 1910, with mining and
transportation of product to Europe from 1919 to 1982. That the Belgians developed a world class mine and delivered
product to market at a time when the transport challenges were far greater than today, demonstrates the quality and
economics of the asset.
The potential for lithium at Manono was identified in three separate United States Geological Service reports dating
from the 1970s, as well as a Belgian Government Metallurgical study (1980) and historical test work that produced a
6.82% lithium concentrate – well above industry standards of today. Given the strategic and structural shift we have
seen in demand for lithium, driven primarily by Chinese-led electric vehicle battery growth, Manono has proven to be
a truly world-class lithium and tin deposit. China’s Ministry of Land and Resources has recognised unique qualities of
AVZ’s Manono project and dubbed it the “Escondida of Lithium”.
The maiden JORC Mineral Resource Estimate for our Manono Lithium Project was completed in early August 2018.
Using only drilling results from half of the Roche Dure pegmatite’s strike length – one of six massive pegmatites at
Manono – we have today a total Measured, Indicated and Inferred Resource of 259.9 million tonnes grading 1.63% Li2O
(spodumene), 844ppm Sn (tin) and 43ppm Ta2O5 (tantalum) for 4.25 million tonnes of contained lithium oxide (Li2O),
219,000t of contained tin and 11.2Kt of contained tantalum. This estimate includes Measured Resources of 43 million
tonnes grading 1.71% Li2O, 871ppm Sn and 42ppm Ta2O5. Drilling to date has only focused on a small part of the total
strike length, so there is enormous potential for this project to grow.
In 2017, AVZ engaged SRK Consulting to independently review Manono for its lithium potential and stated in their
conclusion that the project has “enormous potential”. The maiden JORC Mineral Resource Estimate confirmed Manono
as the largest hard rock spodumene deposit in the world. AVZ has achieved its Maiden Resource with only a fraction
of the drilling & other costs typical of other Australian Securities Exchange (ASX) listed lithium companies due to the
homogenous nature of the Manono deposit. AVZ’s Roche Dure Pegmatite lithium seams are on average 20 times thicker
than the seams found in lithium projects in Australia or Canada.
There is considerable advantage in having a significant tin component to the resource in that it is likely to help reduce
operating costs by providing a valuable by-product credit. Test work to date has shown deleterious elements are all
low, which is a further significant positive for project development. As part of mine planning, AVZ is likely to have a
supplementary focus on high grade tin concentration areas in the early years of mining to materially improve early
cashflow generated by the project.
The importance of low deleterious elements cannot be over-emphasised and is fast-becoming a basic requirement for
new battery formulations such as 8-2-2, 8-1-1 batteries and lithium solid state batteries.
We are focused on developing Manono to be a world-leading source of lithium. Our next milestone will be completion
of a Scoping Study to examine capital and operating cost estimates based on a typical hard rock spodumene concentrate
process flowsheet. This will include a high-level review of options to upgrade the spodumene concentrate, while also
working to optimise transport costs. The Scoping Study aims to progress Manono to production as quickly as possible
and it is expected to be completed in September.
AVZ completed several large capital raisings during 2018 and the Company is well funded to progress Manono, finishing
the financial year as we did with more than $16 million cash at bank. I would like to take this opportunity to thank new
and existing shareholders for your support in those capital raisings and more broadly. Your belief that AVZ can deliver
on its goals is something that we value greatly.
Finally, I would also like to thank my fellow Board members, our management team, staff and consultants for their efforts
over the past year. We have another busy year ahead as we seek to transition into a lithium producer with a genuinely
world-class operation, and I look forward to sharing that journey with you all.
Nigel Ferguson
Managing Director
AVZ Minerals Limited | 2
Review of Operations
Review of Operations
Overview
AVZ Minerals Limited is developing the Manono Lithium Project in the Democratic Republic of Congo (DRC) in central
Africa. The project hosts the historic Manono tin mine, also prospective for lithium and tantalum. AVZ secured a 60%
interest in the project in January 2017, following its acquisition of 100% of the Manono Extension Project, surrounding
the historic Manono mine, which is prospective for lithium, rare earths and base metals. AVZ also has a 60% interest in
the Tanganyika Regional Project, which comprised seven licences prospective for lithium, rare earths and base metals.
An initial seven-hole due diligence drilling program at the Manono Project demonstrated the immense size of a lithium
pegmatite and further outstanding results were received from early drilling.
During 2018, AVZ’s focus has been on completing an initial 20,000m of resource definition drilling at Manono. The
Company announced a maiden JORC Mineral Resource Estimate for the Roche Dure Pegmatite at Manono subsequent
to year-end as detailed below.
AVZ has commenced a Scoping Study to fast-track development of the project, intending to progress to production as
quickly as possible. The Scoping Study is scheduled for completion in September 2018.
Manono Project, DRC (AVZ 60%)
AVZ Minerals holds a 60% interest in PR13359, which covers approximately 188km2 and includes the historic Manono
and Kitotolo Mines, in southern DRC. It also holds 100% interests in licences PR4029 and PR4030 that surround
PR13359 and provide an additional 242.25km2 of prospective area.
Figure 1: Location Plan of Manono Lithium Project
Mineral Resource
Post year-end, on 2 August 2018, AVZ announced a maiden Mineral Resource Estimate for the Roche Dure pegmatite
at Manono, confirming the project as the world’s largest lithium deposit.
Roche Dure has total Measured, Indicated and Inferred Resources of 259.9Mt grading 1.63% Li2O (Spodumene)
containing 4.25 million tonnes of lithium oxide (Li2O), 219Kt of tin as cassiterite grading 844ppm Sn and 11.2Kt Tantalum
grading 43ppm Ta2O5 (Tantalum). This estimate confirmed Manono as the world’s largest hard rock spodumene deposit.
AVZ Minerals Limited | 3
Review of Operations
There are Measured Resources of 43Mt grading 1.71% Li2O, 871ppm Sn and 42ppm Ta2O5 and Indicated Resources of
104.7Mt grading 1.64% Li2O, 844ppm Sn and 43ppm Ta2O5.
In addition to tin, tantalum and lithium oxide, independent consultant The MSA Group estimated iron oxide, a potentially
deleterious element, at an average of 0.88%, which when compared to other hard rock lithium deposits owned by ASX-
listed companies, is one of the lowest reported based on raw assay data used for resource calculations. The Mineral
Resource was also estimated by The MSA Group.
The initial Mineral Resource was estimated on an approximate 980m strike length, or 50% of the Roche Dure pegmatite’s
strike, utilising assay data from 31 drill holes and geological data from 42 drill holes. The balance of the assay data will
be incorporated into the next Mineral Resource estimate.
Fresh
Pegmatite
Category
Tonnes
(Millions)
Li2O
%
Measured
43.0
Indicated
104.7
Inferred
Total
112.2
259.9
1.71
1.64
1.60
1.63
Sn
ppm
871
844
834
844
Ta2O5
ppm
Fe2O3
%
42
43
43
43
0.96
0.85
0.88
0.88
SG
2.73
2.73
2.73
2.73
Table 1: Manono Roche Dure – Mineral Resource at a 0.5% Li2O cut-off
Scoping Study
In June 2018, AVZ announced it had engaged Perth-based independent engineering group CPC Engineering (“CPC”) to
complete a Scoping Study for the Manono Lithium Project.
The Scoping Study aims to prepare initial capital and operating cost estimates based on a typical hard rock spodumene
concentrate process flowsheet starting at a rate of two million tonnes per annum (mtpa) and options for a 4mtpa and
a 10mtpa plant.
A second high-level review will investigate opportunities to produce a cassiterite (SnO2) concentrate as a secondary
product stream. The estimate will capture the process plant, process and non-process infrastructure as detailed below.
A review of the preliminary characterisation test-work results indicated that the Manono project process plant would
consist of the following processing stages:
Three-stage crushing circuit
Screening circuit (0.5 mm)
Reflux classification for mica removal
-
-
-
- Dense media separation (DMS)
- De-sliming (38 μm)
- Grinding and flotation
- Concentrate handling.
Process infrastructure would include:
- Water supply from bore fields local to the process plant
-
-
Power generation for the process plant (diesel power station selected as the base case)
Process plant offices, workshop, and associated infrastructure, within the process plant.
Non-process infrastructure would include:
- Accommodation camp
- Communication systems
-
Sewage/waste disposal.
The Scoping Study is expected to be complete in September 2018 after additional requirements were added to the
planned work.
AVZ Minerals Limited | 4
Review of Operations
Drilling
AVZ completed an initial due diligence drill program in June 2017 to evaluate the potential of the Manono and Kitotolo
pegmatites to contain economically significant lithium (Li) mineralisation. The program comprised seven diamond drill
holes for 1,749m of core and tested four of the six large pegmatites at the Manono Project (Figure 2).
Figure 2 Pegmatite at Manono Project
In all cases, thick intervals of pegmatite were intersected and spodumene was present within all the pegmatites. Drill-
holes MO17DD001 to MO17DD006 were completed in the Kitotolo Sector, and MO17DD007 completed in the
Manono Sector. Drill-core samples were prepared in the DRC and submitted to ALS Global Perth for assay.
Drill-holes MO17DD001 and MO17DD002 (400m north east of MO17DD001) tested the Roche Dure Pegmatite and
returned 235.03m at 1.66% Li2O and 1001 ppm Sn (MO17DD001) and 202.8m* at 1.57% Li2O and 1078ppm Sn
(MO17DD002). Drill-holes MO17DD004 (1.5km northeast of MO17DD001) and MO17DD003 (2.1km northeast 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. This drilling demonstrated the Roche Dure pegmatite had
a length of about 2,100m.
Drill-hole MO17DD005 tested the Mpete Pegmatite, which has a strike length of at least 1km. The drill hole intersected
45.74m* at 1.59% Li2O and 1230 ppm Sn and is potentially a large source of lithium mineralisation within the Kitotolo
sector.
The Tempete Pegmatite, with a strike length 1.5km, is also potentially a significant source of lithium mineralisation within
the Kitotolo sector. Tempete was tested by drill-hole MO17DD006, intersecting 65.86m* at 1.51% Li2O.
AVZ Minerals Limited | 5
Review of Operations
MO17DD007 was drilled to test the Carriere De l’Est Pegmatite, the largest pegmatite in the Manono sector. Assay
results from this hole confirmed the mineralisation distribution and tenor evident from the spodumene present in the
drill-core, returning an intercept of 250.93m* at 1.48% Li2O and 913ppm Sn. Sampling commenced at 1.9m from which
depth the pegmatite is unweathered. Drilling results suggested the thickness of the pegmatite may be 280m.
The drilling results demonstrated that four of the largest pegmatites at Kitotolo 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, with significant tin mineralisation.
AVZ commenced a 20,000m drilling program at the Manono Lithium Project in early February and engaged an additional
drilling contractor. Four drilling rigs were operational on site by mid-March with a fifth rig mobilised from South Africa.
The drilling rig was set up approximately 90m east of drill hole MO17DD001 on line 7,000mN, at the Roche Dure
Pegmatite in the Kitotolo Sector. This allowed drilling beneath MO17DD001 to test depth extensions and thickness of
the Roche Dure Pegmatite.
Drill-holes MO18DD003, 004, 006 and 007 confirmed the thickness of the Roche Dure pegmatite, intersecting
313.88m*, 276.77m*, 284.30m* and 273.20* of pegmatite respectively, and all holes contained a high proportion of
spodumene within the pegmatite. Results from drilling reported in the second half of the year included:
Hole Id
Thickness
From (m)
% Li2O
ppm Sn
MO18DD001
MO18DD002
MO18DD003
MO18DD003
MO18DD004
MO18DD006
MO18DD007
MO18DD008
MO18DD010
MO18DD011
295.03m*
283.06m*
13.1m*
289.58m*
276.72m*
284.47m*
272.65m*
71.8m*
263.24m*
248.22m*
62.0m
63.1m
59.01m
83.3m
54.0m
76.81m
93.7m
149.5m
52.22m
144.05
1.75
1.59
1.11
1.63
1.61
1.52
1.56
1.25
1.52
1.72
856
807
496
845
947
846
631
1113
950
685
In late June, AVZ announced a record pegmatite intersection from drilling of 341.62m* including an upper interval of
weathered rock and beneath this a fresh-rock intersection of 302.10m* at 1.54% Li2O and 875ppm Sn from hole
MO18DD009.
AVZ Minerals Limited | 6
Review of Operations
Adjacent drill-hole MO18DD012 intersected 299.88m* of the Roche Dure pegmatite with the fresh-rock interval being
268.75m* at 1.55% Li2O and 751 ppm Sn.
MO18DD015 intersected 303.16m* of the Roche Dure pegmatite with the fresh-rock interval being 278.96m* at 1.58%
Li2O and 1053 ppm Sn.
In early July, AVZ reported assay results from MO18DD014 which confirmed the continuity of the Roche Dure orebody
to the southwest of the open pit. The hole intercepted 67.15m* at 1.45% Li2O and 1256ppm Sn within unweathered
pegmatite and included significant tin concentrations in weathered pegmatite including 30.15m* at 1256ppm Sn.
The intersections achieved by MO18DD013, MO18DD014 and MO18DD016 provided full sectional coverage across
the Roche Dure pegmatite because there was no impediment to drilling imposed by the Roche Dure pit, which is
northeast of the section. AVZ determined the full extent of the weathered zone as about 35-40m of weathered
pegmatite overlying the unweathered (‘fresh’) pegmatite.
However, the depth of weathering is known to vary locally and is influenced by the presence of faults, with zones of
highly fractured rock potentially being weathered to greater depths. This appears to be the case with MO18DD014,
where mild weathering extends to 68m but is restricted to fracture zones. The significant grades of tin mineralisation
present within the weathered pegmatite is likely to be of economic importance.
* Down-hole depth. Additional drilling is required to confirm the true thicknesses of the pegmatites.
Other exploration
In the December 2017 quarter, AVZ collected 12 rock-chip samples southwest of the MO17DD007 drill hole in the
spillway of the Likushi dam. Further collection was not possible without extensive earthmoving. Assay results for the
rock-chip samples ranged between 1.43% and 4.46% Li2O, with an average of 3.11% Li2O, representing very encouraging
results for potential additional tonnages of high-grade lithium mineralisation within the extensions areas.
Results from a further 18 samples at Carriere de l’Est yielded many high-grade lithium and tin assay results. The presence
of high tin grades in the weathered rock is a positive factor, as the value of the tin in the weathered material may
compensate for the expected lithium depletion of the weathered material. A significant number of the samples were
minimally weathered and the presence of a large volume of unweathered rock at (or near) surface is highly favourable.
The encouraging results supported the Company’s intention to follow resource-definition drilling of the Roche Dure
pegmatite with drilling of the Carriere de l’Est pegmatite as a secondary but very significant target.
Exploration Target
AVZ reported an Exploration Target of between 1.0Bt to 1.2Bt of 1.25% to 1.5% Li2O for the entire Manono Lithium
Project, including between 300Mt and 400Mt of 1.25% to 1.5% Li2O for the Roche Dure Pegmatite alone. It has also
reported an Exploration Target for a 1,200m strike portion of the Carriere de l’Est Pegmatite of between 200Mt and
00Mt of 1.25% to 1.5% Li2O. AVZ’s drill assessment focused on the two main pegmatite sectors with a primary focus
on Roche Dure and Carriere De l’Est.
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 Reserve.
Outlying occurrences of pegmatite are also recorded about 5km north of Manono and also to the south, offering further
potential.
Characterisation test work
AVZ commenced an initial mineral characterisation study for the Roche Dure pegmatite in the September 2017 quarter
to enable a precise knowledge of the mineral species and understand the concentrations of deleterious elements within
the pegmatite, particularly the concentrations of iron, phosphorus and fluorine. This was important in its work to define
a Mineral Resource for Roche Dure.
AVZ Minerals Limited | 7
Review of Operations
AVZ tested 444 samples of pegmatite from drill-holes MO17DD001 and MO17DD002, which passed through the full
thickness of Roche Dure Pegmatite and mostly intersected fresh rock. Of the 444 samples of pegmatite, 426 samples
were of fresh (i.e. unweathered) pegmatite and their assay results were interrogated to determine the mean concentration
of iron (expressed as iron (iii) oxide, Fe2O3) and phosphorus (expressed as phosphorus (v) oxide, P2O5).
From the pulps of the 426 samples of fresh pegmatite, every fifth pulp sample was selected to be submitted for analysis of
Fluorine (F) content, resulting in a total of 85 assays of pegmatite for F content. A single sample of greisen peripheral to
the Roche Dure Pegmatite was also assayed for F content.
In addition, 11 of the pulps of fresh pegmatite samples, as well as the one sample of greisen peripheral to the Roche Dure
Pegmatite, were selected for determination of mineralogy by Quantitative XRD analysis. The 11 pegmatite samples were
selected to represent subtly different components of the Roche Dure Pegmatite and thus attain a more comprehensive
assessment of the mineralogy of the entire pegmatite.
The Quantitative XRD determinations confirmed the impression gained through inspection of the drill core that lithium
mineralisation is comprised entirely of spodumene, although lepidolite (a lithium mica) was identified in the sample of
greisen. Most of the pegmatite sampled in this initial characterisation work (from drill holes MO17DD001 and
MO17DD002 in the Roche Dure pegmatite) had the following approximate composition:
-
-
-
-
-
-
32% quartz,
30% albite feldspar,
5% microcline feldspar,
8% muscovite mica,
20% spodumene and
5% “amorphous material”.
This provided evidence of the following characteristics at Roche Dure:
-
-
-
-
The lithium within the pegmatite is entirely (or almost entirely) contained within spodumene.
The general composition of the pegmatite is restricted to a small number of minerals, i.e. a relatively simple
composition.
The pegmatite is a homogenous LCT Albite-spodumene pegmatite having a low mica content.
The mean concentration of Li2O is high and accompanied by significant Sn.
The mean concentrations of “penalty” elements (F, Fe2O3 and P2O5) are low.
Metallurgical Test Work
Results from initial and preliminary metallurgical test work undertaken in the June 2018 quarter were encouraging. The
test work, completed at Nagrom Laboratories in Perth on two samples of coarse assay sample reject material from drill
holes MO17DD001 and MO17DD002, allowed AVZ to identify several potential processing routes to produce a
spodumene concentrate product of +6% Li2O at recoveries of 73% Dense Media Separation (DMS) to 94% Flotation.
The preliminary test work indicated a +6% spodumene concentrate could be produced at 3.35mm crush size, with a high
overall recovery utilising standard whole-of-ore Flotation or several variations of a combined DMS and Flotation process.
AVZ Minerals Limited | 8
Review of Operations
Infrastructure
The Manono Lithium Project is approximately 600km north of Lubumbashi, the capital of the Katanga Province, in the
south of the DRC. Lubumbashi is the mining capital of the DRC, acting as a hub for many of the country's biggest mining
companies. Manono can be accessed from Lubumbashi by 1.5-hour flight or by road.
Dathomir Mining Resources SARL, one of AVZ’s joint venture partners at the Manono Lithium Project, agreed to
facilitate the rehabilitation of the road from Lubumbashi to Manono.
AVZ received notification of an agreement between a Chinese affiliated investor group (CIG) and the DRC Ministry of
Infrastructure, Public Works and Reconstruction, pursuant to which the CIG will fund rehabilitation and sealing of the
road from Luambo to Manono, covering 466km of road. This infrastructure project forms part of the “One Belt and
One Road” initiative as proposed by China’s President Xi Jinping. The road from Lubumbashi to Luambo has previously
been sealed. The estimated cost to complete the works is US$285 million.
CREC, the China Railway Engineering Company, commenced work with an initial investigation of the first 250km of
road heading north from the junction with the Lubumbashi – Kolwezi road. This sector of the road includes several
bridges which will be upgraded and strengthened to accommodate trucks of up to 40 tonnes. Additional work and
inspections were undertaken on the 200km stretch on Manono side of the road. Remedial work was undertaken in the
town.
AVZ initiated investigation of the railway access and possible use for exporting product either through the traditional
southern “copper cathode” route of Lubumbashi to South Africa or north through Kalemie and to the Dar es Salaam
port in Tanzania. Upon further work we now have additional economic options available to us.
Figure 3 Transportation Route Options
AVZ Minerals Limited | 9
Review of Operations
CORPORATE
Capital Raising
In August 2017, 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 is implementing a strategy to become
a leader in the lithium battery sector.
The placement to Huayou comprised 186 million shares at an issue price of 7 cents per share, and 186 million attaching
options exercisable at 10 cents and expiring 15 April 2019.
In the second tranche, AVZ raised a further $1.98 million in October 2017, following receipt of shareholder approval,
from institutional and sophisticated investors by issuing 28,285,714 shares at an issue price of 7 cents per share, together
with 28,285,714 attaching options exercisable at 10 cents and expiring 15 April 2019.
The placement funds were used for the planned drilling and initial metallurgical testwork programs at the Manono
Lithium Project as well as ongoing corporate and administration costs.
During the March 2018 quarter, AVZ completed a $15 million placement to a North American institutional client of
Cantor Fitzgerald Canada Corporation. A total of 60 million shares at an issue price of 25 cents per share, together
with 30 million attaching options exercisable at 30.5 cents, expiring 24 months from the date of issue, were issued under
the placement.
Funds were used for AVZ’s 20,000m Phase 2 drilling and pre-feasibility programs at the Manono Lithium Project, as well
as ongoing corporate and administration costs. The securities were issued under AVZ’s existing placement capacity in
accordance with Listing Rule 7.1.
Board and Management Changes
In August 2017, AVZ announced the appointment to the Board of Mr Hongliang Chen (as a nominee of Huayou) and
Mr Guy Loando (as a nominee of AVZ’s largest shareholder, Dathomir Resources SARL).
Mr Gary Steinepreis resigned as a director and company secretary. Mr Mathew O’Hara was appointed company
secretary.
In February 2018, AVZ appointed senior technical specialist, Nigel Ferguson as Managing Director and Mr Rhett Brans
as a Non-Executive Director.
Nigel transitioned from the role of Technical Director to Managing Director to be responsible for managing the daily
operations of AVZ, with a focus on advancing the Manono Lithium Project.
Rhett is an experienced director and civil engineer with more than 45 years’ project development experience. He has
strong experience in guiding feasibility work followed by planned development and commissioning to help AVZ drive
the Manono project forward.
In March 2018, Patrick Flint resigned as a Non-Executive Director.
In June 2018, Klaus Eckhof resigned as Executive Chairman of the company. AVZ is seeking a suitable candidate to
replace Mr Eckhof in the role and expand the Board by enhancing the skillsets available to the Company.
Post year-end in July 2018, AVZ announced the appointment of Graeme Johnston as Technical Director. Graeme is a
geologist with over 30 years’ experience operating Australia, the Middle East, Romania, Malaysia and recently the DRC.
Qualifying with a BSc in Geology from Glasgow University and an MSc in Structural Geology from the Royal School of
Mines, London, he emigrated to Western Australia in 1986 and worked on various gold projects before joining Rio
Tinto (Hamersley Iron) at their Tom Price iron mine as the Site Geotechnical Engineer.
Following this, Graeme was part of the Rio Tino mine development team that opened up the Yandicoogina, fines iron
ore mine before leaving Rio Tinto after 5 years’ service, to diversify his experience.
AVZ Minerals Limited | 10
Review of Operations
Working mainly in orebody development and near mine-site investigations, Graeme’s technical experience is focused
on the transition between orebody delineation and mine opening. In this regard he has worked on over five projects
that resulted in new mines being commissioned.
Graeme was the Principal Geologist with Midwest Corporation in 2005 during its sale to Sinosteel Corporation for
US$1.4 billion and was their first local Chief Geologist. In mid-2006, Graeme assisted in founding ASX listed Ferrowest
Limited, where he was the Technical Director for 9 years until the end of 2016. During this time, he contributed to the
successful completion of the Feasibility Study for the Yalgoo Pig Iron Project east of Geraldton.
Graeme joined the AVZ team in May 2017 as Project Manager in charge of the day to day operations at the Manono
Lithium Project managing four drill rigs and a team of up to 75 personnel.
Conversion of Options and Performance Rights
During the September quarter, AVZ issued 55,115,438 ordinary shares following the exercise of listed options
(at 3 cents each).
AVZ also issued 7,500,000 ordinary shares following the conversion of performance rights.
In the December quarter, AVZ issued 24,697,411 ordinary shares following the exercise of listed options (at 3 cents
each) and 6,857,141 ordinary shares following the exercise of unlisted options (at 10 cents each).
During the March quarter, AVZ issued 14,183,997 ordinary shares following the exercise of listed options (at 3 cents
each).
In the June quarter, AVZ issued 2,346,666 ordinary shares following the exercise of listed options (at 3 cents each).
Following the appointment of Mr Ferguson and Mr Brans and subject to shareholder approval, AVZ proposed to issued
Mr Ferguson (or his nominee) 12 million Performance Rights and Mr Brans (or his nominee) 4.5million Performance
Rights to vest in three tranches upon certain milestones being achieved. However, in the June quarter, the Board
proposed that the vesting conditions of these proposed Performance Rights above be changed to be aligned with the
Company’s objective which is to increase the value of the Project.
The new proposed Performance Rights shall vest in four equal tranches upon the following milestones being achieved:
1) Tranche 1 shall vest upon definition of a 150Mt Measured and Indicated Mineral Resource in accordance with
JORC Guidelines (as that term is defined for the purposes of JORC Guidelines for lithium) of lithium oxide
(Li2O) that meets the agreed minimum specification of greater than 1% lithium oxide (Li2O) being delineated
within the Manono Project Area (being the licence area of PR13359) within 12 months of the date of issue of
the Employee Performance Rights.
2) Tranche 2 shall vest upon the completion of Feasibility Study on the Manono Lithium Project.
3) Tranche 3 shall vest upon executing an offtake agreement for at least 25% of the product from the Manono
Lithium Project.
4) Tranche 4 shall vest upon the completion of the Manono Lithium Project financing.
AVZ also proposed that Mr Brans’ Performance Rights amount be increased from 4.5 million to 6 million reflecting Mr
Brans’ increased involvement with the Company’s operations.
In addition, subject to shareholders’ approving the Company’s Employee and Contractor Incentive Plan (“Plan”), the
Board has agreed to issue 18.8 million Performance Rights to current and new employees and contractors of the
Company. The Performance Rights will be issued under the Plan and shall vest in four equal tranches with the same
vesting conditions as detailed above. The proposed Performance Rights above will expire 3 years from the date of issue.
The Board recognises the importance of providing incentives not only to motivate but also to retain and attract
employees and contractors.
Agreement with JNS Capital Corp
The Company entered into an agreement with JNS Capital Corp for the provision of marketing and promotional services
in North America for an initial six-month term with a further six-month period on execution of a renewal agreement.
AVZ Minerals Limited | 11
Review of Operations
Airguide contract renewed
AVZ re-engaged Airguide International Pte Ltd as its Strategic Advisor for China for an additional 12 months.
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.
Cash Balance
At 30 June 2018, AVZ’s cash balance was approximately $16.3 million.
Competent Persons Statement
The information in this document to which this statement is attached that relates to the estimation and reporting of the
Roche Dure Mineral Resource at the Manono Lithium Project, is based upon information compiled by Mr Anton
Geldenhuys. Mr Geldenhuys (BSc Hons, MEng) who is a geologist with 17 years’ experience in exploration and mining
as well as Mineral Resource evaluation and reporting. He is a Principal Mineral Resource Consultant with The MSA
Group (an independent consulting company), is a member in good standing with the South African Council for Natural
Scientific Professions (SACNASP 400313/04) and is a Member of the Geological Society of South Africa (GSSA 965136).
Mr Geldenhuys has the appropriate relevant qualifications and experience to be considered a Competent Person for
the activity being undertaken as defined in the 2012 edition of the JORC Code. Mr Geldenhuys consents to the inclusion
in the report of matters based on his information in the form and context in which it appears.
The information in the document to which this statement is attached that relates to the geology of the Roche Dure
pegmatite is based upon information compiled by Mr Michael Cronwright, who is a fellow of The Geological Society of
South Africa and Pr. Sci. Nat. (Geological Sciences) registered with the South African Council for Natural Professions.
Mr Cronwright is a Principal Consultant with The MSA Group (Pty) Ltd (an independent consulting company). Mr
Cronwright has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and
to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the JORC Code. Mr
Cronwright consents to the inclusion in the report of matters based on his information in the form and context in which
it appears.
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 | 12
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 2018. In order to comply with the provisions of the
Corporations Act 2001, the Directors’ report as follows:
1. Directors
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.
Nigel Ferguson
Hongliang Chen
Guy Loando
Rhett Brans
Graeme Johnston
Patrick Flint
Gary Steinepreis
Klaus Eckhof
Managing Director
Non-Executive Director (appointed 21 August 2017)
Executive Director (appointed 21 August 2017)
Non-Executive Director (appointed 5 February 2018)
Technical Director (appointed 30 July 2018)
Non-Executive Director (resigned 6 March 2018)
Non-Executive Director (resigned 21 August 2017)
Executive Chairman (resigned 26 June 2018)
2. Company Secretary
Mathew O’Hara was appointed Company Secretary on 21 August 2017 at which date Gary Steinepreis resigned. Leonard
Math was appointed joint Company Secretary on 9 July 2018. Mathew O’Hara resigned as Company Secretary on 4
September 2018.
3. Principal Activities
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 $5,616,964 (2017: $1,683,329 loss).
5. Dividends Paid or Recommended
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.
6.
Review of Operations
Refer pages 3 – 12 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 complete the feasibility
study and continue exploration activity to increase the Mineral Resource at the Manono Lithium Project.
AVZ Minerals Limited | 13
Directors’ Report
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
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.
7. Significant Changes in the State of Affairs
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.
8. Events Occurring after the Reporting Date
On 19 July 2018, 20,000,000 Shares were issued to Nigel Ferguson following the vesting conditions for 20,000,000
Performance Rights being met.
Subsequent to year end, Mr Graeme Johnston was appointed as Technical Director on 30 July 2018. Mr Leonard Math
was appointed joint Company Secretary on 9 July 2018 and Mr Mathew O’Hara resigned as Company Secretary on 4
September 2018.
There is no other matter or circumstance other than disclosed above 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.
9. Likely Developments and Expected Results of Operations
The group will continue its mineral exploration activity at and around its principal exploration projects, being the
Manono Lithium Project and the Manono Lithium 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. Information on Directors and Company Secretaries (including Director’s interests at the date of
this report)
Nigel Ferguson
Qualifications
Experience
Managing 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
AVZ Minerals Limited | 14
Directors’ Report
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
36,083,333
Performance Rights 12,000,000 (subject to shareholders approval)
Directorships in last 3 years
Okapi Resources Ltd (since 29 May 2017)
AJN Resources Corp (“CSE” since 2 September 2016)
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
Rhett Brans
Qualifications
Experience
Non-Executive Director (appointed 5 February 2018)
Dip. Engineering (Civil)
Mr Brans is an experienced director and civil engineer with over 45 years’ experience
in project developments. Throughout his career, Mr Brans has been involved in the
management of feasibility studies and the design and construction of mineral treatment
plants across a range of commodities and geographies including for gold in Ghana,
copper in the DRC and graphite in Mozambique. He has extensive experience as an
owner’s representative for several successful mine feasibility studies and project
developments.
Interest in Securities
Performance Rights 6,000,000 (subject to shareholders approval)
Directorships in last 3 years
Australian Potash Limited (since 9 May 2017)
Carnavale Resources Ltd (since 17 September 2013)
Syrah Resources Ltd (12 June 2013 to 31 December 2017)
Monument Mining Limited (21 November 2015 to 16 December 2016)
RMG Limited (19 January 2015 to 13 September 2016)
Graeme Johnston
Qualification
Experience
Executive Director (appointed 30 July 2018)
BSc in Geology (Glasgow University), M.Sc in Structural Geology (Royal School of
Mines, London)
Mr Johnston is a geologist with over 30 years’ experience operating mostly in Australia
and also the Middle East, Romania and Malaysia. Graeme was the Principal Geologist
with Midwest Corporation in 2005 during its sale to Sinosteel Corporation and was
their first local Chief Geologist. In mid 2006, Graeme assisted in founding ASX listed
Ferrowest Limited where he was the Technical Director for 9 years until the end of
AVZ Minerals Limited | 15
Directors’ Report
2016. During this time, he contributed to the successful completion of the Feasibility
Study for the Yalgoo Pig Iron Project. Graeme joined the AVZ team in May 2017 as
Project Manager in charge of the day to day operations at the Manono Lithium Project.
Interest in Securities
Fully Paid Ordinary Shares 1,455,000
Performance Rights 12,100,000 (8,000,000 are subject to shareholders approval)
Directorships in last 3 years
Ferrowest Limited (20 February 2006 to 18 December 2015)
Leonard Math
Qualification
Experience
Company Secretary (appointed 9 July 2018)
B.Com, CA
Mr Math is a Chartered Accountant with more than 13 years of resources industry
experience. He previously worked as an auditor at Deloitte and is experienced with
public company responsibilities including ASX and ASIC compliance, control and
implementation of corporate governance, statutory
financial reporting and
shareholder relations.
He has previously acted as a Director, Chief Financial Officer and Company Secretary
of a number of ASX listed Company.
He is currently a Non-Executive Director of an ASX, AIM and JSE listed Company,
Kore Potash Plc.
Former Directors and Company Secretary:
Klaus Eckhof
Qualifications
Experience
Executive Chairman (resigned 26 June 2018)
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.
Gary Steinepreis
Qualifications
Non-Executive Director / Company Secretary (resigned 21 August 2017)
B.Com, CA
Experience
Patrick Flint
Qualifications
Experience
Mr Steinepreis is a Chartered Accountant and holds a Bachelor of Commerce Degree
from the University of Western Australia.
Non-Executive Director (resigned 6 March 2018)
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.
Mathew O’Hara
Qualification
Company Secretary (appointed 21 August 2017, resigned 4 September 2018)
B.Com, CA
Experience
Mr O’Hara is a Chartered Accountant and holds a Bachelor of Commerce Degree
from University of Western Australia.
AVZ Minerals Limited | 16
Directors’ Report
12. Audited Remuneration Report
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:
Nigel Ferguson
Hongliang Chen
Guy Loando
Rhett Brans
Gary Steinepreis
Patrick Flint
Klaus Eckhof
Appointment date:
Managing Director
2 February 2017
Non-Executive Director 21 August 2017
Executive Director 21 August 2017
5 February 2018
Non-Executive Director
Resigned 21 August 2017
Non-Executive Director
Resigned 6 March 2018
Non-Executive Director
Resigned 26 June 2018
Executive Chairman
Nigel Ferguson was Executive Director from 2 February 2017 to 4 February 2018 and was appointed Managing Director
effective from 5 February 2018. Rhett Brans was appointed Non-Executive Director from 5 February 2018. Klaus Eckhof
resigned from the Board on 26 June 2018, Patrick Flint resigned on 6 March 2018 and Gary Steinepreis resigned on 21
August 2017.
(a)
Remuneration Policy
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.
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 Ferguson provides management services via Ridgeback Holdings Pty Ltd as trustee for the Ferguson Family
Trust (Ridgeback). Mr Ferguson was an Executive Director from 2 February 2017 to 4 February 2018 and
received a monthly fee of $16,150 (plus GST). Mr Ferguson was appointed Managing Director effective 5 February
2018 and received a monthly fee of $25,000 (plus GST). The current 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.
AVZ Minerals Limited | 17
Directors’ Report
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.
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
Specifically in relation to performance rights, this effectively links directors’ performance to the share price
performance and therefore to the interests of the shareholders. For this reason, there are no performance conditions
prior to grant, but instead an incentive to increase the value to all shareholders.
Performance rights issued during the years are detailed in Note 22(b) of the financial statements.
Voting and comments made at the Company’s 2017 Annual General Meeting
At the 2017 Annual General Meeting the Company remuneration report was passed by the requisite majority of
shareholders (100% by a show of hands).
AVZ Minerals Limited | 18
Directors’ Report
(c)
Details of Key Management Personnel Remuneration
2018
Name
Executive Directors:
Klaus Eckhof1
Nigel Ferguson2
Guy Loando3
Non-Executive
Directors:
Hongliang Chen3
Rhett Brans4
Patrick Flint5
Gary Steinepreis6
TOTAL
Short term employee
benefits
Salary
Consulting
fees
$
$
Post
employ-
ment
$
Share
Based
Payments
$
Total
$
Performance
related
remuneration
%
Fixed
remun-
eration
%
-
-
-
180,000
257,000
55,000
-
-
-
-
626,510
-
180,000
883,510
55,000
-
22,410
90,594
-
113,004
-
-
-
18,500
510,500
-
2,129
8,606
-
10,735
-
40,085
-
-
-
64,624
99,200
18,500
666,595 1,300,834
-
71
-
-
62
-
-
100
29
100
38
100
100
1: Klaus Eckhof resigned on 26 June 2018.
2: Nigel Ferguson commenced as Managing Director on 5 February 2018, prior to that date he was an Executive Director.
3: Hongliang Chen and Guy Loando were both appointed on 21 August 2017.
4: Rhett Brans was appointed on 5 February 2018.
5: Patrick Flint resigned on 6 March 2018.
6: Gary Steinepreis resigned on 21 August 2017
2017
Name
Short term employee
benefits
Salary
Consulting
fees
$
$
Post
employ-
yment
$
Share
Based
Payments
$
Total
$
Performance
related
remuneration
%
Fixed
remun-
eration
Executive Director:
Klaus Eckhof1
Nigel Ferguson2
Non-Executive
Directors:
Klaus Eckhof1
Gary Steinepreis
Patrick Flint
Charles Thomas3
TOTAL
-
-
150,000
100,761
-
-
2,320,000
382,959
2,470,000
483,720
-
-
78,622
-
78,622
4,000
64,000
-
4,000
322,761
-
-
7,378
-
7,378
-
-
290,000
-
2,992,959
4,000
64,000
376,000
4,000
3,401,720
94
79
-
-
77
-
6
21
100
100
23
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.
AVZ Minerals Limited | 19
Directors’ Report
Share-based compensation
The number of performance rights granted to and vested by directors as part of compensation during the year ended
30 June 2018 are set out below:
Name
Nigel Ferguson
Rhett Brans
Number of rights granted
during the year 2018
12,000,0001
Number of rights vested
during the year 2018
20,000,0002
4,500,0001
1: These Performance Rights have been granted but have not been issued as at 30 June 2018. The issue of these Performance Rights is subject to
Shareholder approval.
2: The vesting conditions for the 20,000,000 Performance Rights were met on 7 June 2018 however no exercise notice had been received prior to
30 June 2018. On 19 July 2018, 20,000,000 Shares were issue following an exercise notice being received.
Values of rights over ordinary shares granted, exercised and lapsed for directors as part of compensation during the
year ended 30 June 2018 are set out below:
Name
Nigel Ferguson
Rhett Brans
Value of rights granted
during the year
$
Value of rights vested
during the year
$
Value of rights lapsed
during the year
$
232,0001
87,0001
580,0002
-
-
-
1: These Performance Rights have been granted but have not been issued as at 30 June 2018. The issue of these Performance Rights is subject to
Shareholder approval.
2: The vesting conditions for the 20,000,000 Performance Rights were met on 7 June 2018 however no exercise notice had been received prior to
30 June 2018. On 19 July 2018, 20,000,000 Shares were issued following an exercise notice being received.
(d)
Key Management Personnel Compensation – other transactions
(i)
Options provided as remuneration and shares issued on exercise of such options.
No options were provided as remuneration during the year.
(ii)
Loans to key management personnel
No loans were made to any director or other key management personnel of the group, including related parties
during the financial year.
(iii)
Other transactions with key management personnel
No other transactions were made to any director or other key management personnel of the group, including
related parties during the financial year.
(iv)
Ordinary shareholdings
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.
AVZ Minerals Limited | 20
Directors’ Report
Ordinary shares
Balance at the
start of the year
Received as
remuneration
Acquired /
(Disposed)
Other
movements
Balance at the
end of the year
2018
Directors of AVZ Minerals Limited:
Klaus Eckhof1
Nigel Ferguson
Hongliang Chen
Guy Loando2
Rhett Brans
Patrick Flint1
Gary Steinepreis1
88,000,000
16,083,333
-
-
-
18,000,000
20,495,533
-
-
-
-
-
-
-
(57,500,000)
(30,500,000)
-
-
-
-
-
(4,000,000)
-
-
-
16,083,333
-
40,000,000
40,000,000
-
(14,000,000)
(20,495,533)
-
-
-
1: At the date of resignation Klaus Eckhof held 30,500,000 Ordinary Shares, Patrick Flint held 14,000,000 Ordinary Shares and Gary Steinepreis
held 20,495,533 Ordinary Shares.
2: Guy Loando held 40,000,000 Ordinary Shares prior to becoming a Director.
(v)
Peformance Rights
The number of performance rights 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 performance rights granted during the year as remuneration.
Performance rights
2018
Balance at
the start of
the year
Granted
During the
year
Performance
Rights vested
Balance at
the end of
the year
% Vested
Vested and
exercisable
Directors of AVZ Minerals Limited:
Klaus Eckhof
-
-
-
-
Nigel Ferguson
20,000,0001
12,000,0002
20,000,0001
32,000,000
-
62.5%
-
20,000,000
Hongliang Chen
Guy Loando
Rhett Brans
Patrick Flint
Gary Steinepreis
-
-
-
-
-
-
-
4,500,0002
-
-
-
-
-
-
-
-
-
4,500,000
-
-
-
-
0%
-
-
-
-
-
-
-
1: The vesting conditions for the 20,000,000 Performance Rights were met on 7 June 2018 however no exercise notice had been received prior to
30 June 2018. On 19 July 2018, 20,000,000 Shares were issue following an exercise notice being received for nil consideration.
2: These Performance Rights have been granted but have not been issued as at 30 June 2018. The issue of these Performance Rights is subject to
Shareholder approval. These Performance Rights will vest in three equal tranches as follows:
(i)
(ii)
(iii)
Tranche 1 – Performance Rights shall vest if the 10-day volume weighted average share price (VWAP) for the Shares on the ASX
is $0.34 or higher for the period commencing 6 months from the date of issue;
Tranche 2 – Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is $0.40 or higher for the period
commencing 6 months from the date of issue; and
Tranche 3 – Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is $0.44 or higher for the period
commencing 6 months from the date of issue.
AVZ Minerals Limited | 21
Directors’ Report
The valuation inputs for the Performance Rights granted during the year are shown below:
Number
Granted
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Risk
free rate
Underlying
Share Price
on Valuation
Date ($)
Total Fair
Value ($)
%
Vested
Tranche 1
5,500,000
6-Feb-18
Nil
5-Feb-21
2.09%
0.093
Tranche 2
5,500,000
6-Feb-18
Nil
5-Feb-21
2.09%
0.093
Tranche 3
5,500,000
6-Feb-18
Nil
5-Feb-21
2.09%
0.093
137,500
99,000
82,500
Nil
Nil
Nil
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
Directors Meetings
Number Eligible to Attend
Meetings Attended
Nigel Ferguson
Hongliang Chen (appointed 21 August 2017)
Guy Loando (appointed 21 August 2017)
Rhett Brans (appointed 5 February 2018)
Patrick Flint (resigned 6 March 2018)
Gary Steinepreis (resigned 21 August 2017)
Klaus Eckhof (resigned 26 June 2018)
14. Insurance of Officers
4
4
4
-
4
-
4
4
1
2
-
4
-
4
During the financial year, AVZ Minerals Limited paid a premium of $36,693 (2017: $7,377) 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.
AVZ Minerals Limited | 22
Directors’ Report
15. Shares under Option
Unissued ordinary shares of AVZ Minerals Limited under option as at the date of this report are as follows:
Expiry date
Exercise
price
Balance at
start of year
Issued during
the period
Exercised during
the period
Balance at end
of the period
15-Apr-2019
24-May-2020
28-Feb-2020
10.0 cents
3.0 cents
30.5 cents
-
300,001,000
-
214,285,714
-
30,000,000
(6,857,141)
(96,351,951)
-
207,428,573
203,649,049
30,000,000
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 denied that any of its past announcements concerning the Manono licence were misleading or deceptive or
likely to mislead or deceive and pursuant to Order 2 of the Orders of Justice Chaney dated 3 April 2018, the proceedings
were dismissed.
17. Auditor’s Independence Declaration
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 25 and forms part of this directors’ report for the year ended 30
June 2018.
18. Non-Audit Services
During the years ended 30 June 2018 and 30 June 2017 there were no non-audit services provided by the
Company’s external auditor BDO Audit (WA) Pty Ltd.
Signed in accordance with a resolution of the Board of Directors.
Nigel Ferguson
Managing Director
Perth, Western Australia
28 September 2018
AVZ Minerals Limited | 23
Corporate Governance Statement
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 2018, 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 | 24
Auditor’s Independence Declaration
AVZ Minerals Limited | 25
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 30 June 2018
Consolidated
Note
2018
$
2017
$
Revenue from continuing operations
4
169,121
20,432
Administrative costs
Directors and consultancy expenses
Share-based payment expense
Occupancy expenses
Compliance and regulatory expenses
Insurance expenses
Depreciation expense
Exploration impaired
Movement in fair value of financial liabilities
Loss on disposal of subsidiary
Loss before income tax
Income tax expense
(783,615)
(823,343)
(2,433,570)
(4,129)
(331,474)
(36,693)
(130,745)
(96,605)
(469,111)
(676,800)
(387,892)
(296,133)
(706,863)
(25,600)
(258,106)
(8,876)
-
(20,291)
-
-
(5,616,964)
(1,683,329)
-
-
9
6
Loss after income tax for the year
(5,616,964)
(1,683,329)
Other comprehensive income:
Items that may be reclassified to profit or loss
Exchange differences arising on translation of foreign operations
Realisation of foreign currency translation reserve
Other comprehensive income
1,702,335
676,800
2,379,135
(778,843)
-
(778,843)
Total comprehensive loss for the year
(3,237,829)
(2,462,172)
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
(5,564,666)
(52,298)
(5,616,964)
(1,682,272)
(1,057)
(1,683,329)
(3,627,804)
389,975
(3,237,829)
(2,196,042)
(266,130)
(2,462,172)
Basic and diluted loss per share attributable to owners of AVZ
Minerals Limited (cents per share)
16
(0.34)
(0.21)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
AVZ Minerals Limited | 26
Consolidated Statement of Financial Position
As at 30 June 2018
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Mineral exploration and evaluation
Property, plant and equipment
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
2018
$
2017
$
7
8
9
16,336,516
88,900
1,189,086
82,179
16,425,416
1,271,265
49,690,995
954,577
34,515,613
-
50,645,572
67,070,988
34,515,613
35,786,878
10
11
1,315,880
2,027,027
172,601
2,000,000
3,342,907
2,172,601
11
1,022,043
2,543,428
1,022,043
4,364,950
62,706,038
2,543,428
4,716,029
31,070,849
66,973,014
4,827,688
(20,203,478)
51,597,224
11,108,814
33,656,076
1,282,448
(14,638,812)
20,299,712
10,771,137
62,706,038
31,070,849
Equity
Share capital
Reserves
Accumulated losses
Capital and reserves attributable to owners of AVZ Minerals Ltd
Non-controlling interests
12
14
20
Total Equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 27
Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2018
Contributed
Equity
Accumulated
Losses
Other
Reserve
$
$
$
Foreign
Currency
Reserve
$
Total
$
Non-
controlling
Interests
$
Total Equity
$
33,656,076
-
(14,638,812)
(5,564,666)
2,469,511
-
(1,187,063)
-
20,299,712
(5,564,666)
10,771,137
(52,298)
31,070,849
(5,616,964)
-
-
-
-
-
(5,564,666)
-
-
-
676,800
676,800
-
676,800
1,312,360
1,312,360
389,975
1,702,335
1,989,160
(3,575,506)
337,677
(3,237,829)
Balance at 1 July 2017
Loss for the year
Effect of translation of
foreign operations to group
presentation currency upon
disposal of subsidiaries
Exchange differences on
translation of foreign
operations
Total comprehensive
income/(loss)
for the year
Transactions with owners in their capacity as owners:
28,443,165
420,000
3,576,273
877,500
-
-
-
-
-
1,678,032
-
(121,952)
-
-
-
-
28,443,165
2,098,032
3,576,273
755,548
-
-
-
-
28,443,165
2,098,032
3,576,273
755,548
33,316,938
66,973,014
-
(20,203,478)
1,556,080
4,025,591
-
802,097
34,873,018
51,597,224
-
11,108,814
34,873,018
62,706,038
14,404,348
-
(12,956,540)
(1,682,272)
1,464,148
-
(673,293)
-
2,238,663
(1,682,272)
(197,870)
(1,057)
2,040,793
(1,683,329)
Contributions of equity
(net of transaction costs)
Share-based payments
Exercise of Options
Conversion of Performance
Rights
Total transactions with
owners in their capacity as
owners
Balance at 30 June 2018
Balance at 1 July 2016
Loss for the year
Exchange differences on
translation of foreign
operations
Total comprehensive
income/(loss)
for the year
5,385,228
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
Exercise of Options
Conversion of Performance
Rights
Non-controlling interests on
acquisition of subsidiary
Total transactions with
owners in their capacity as
owners
Balance at 30 June 2017
13,150,000
-
136,500
19,251,728
33,656,076
580,000
-
-
-
-
(1,682,272)
-
-
-
-
1,721,863
(136,500)
(580,000)
-
(513,770)
(513,770)
(265,073)
(778,843)
(513,770)
(2,196,042)
(266,130)
(2,462,172)
-
-
-
-
-
-
5,385,228
13,150,000
1,721,863
-
-
-
-
-
-
-
-
5,385,228
13,150,000
1,721,863
-
-
11,235,137
11,235,137
-
-
-
-
-
-
-
(14,638,812)
1,005,363
2,469,511
-
(1,187,063)
20,257,091
20,299,712
11,235,137
10,771,137
31,492,228
31,070,849
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
AVZ Minerals Limited | 28
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
Note
Consolidated
2018
$
2017
$
Cash Flows from Operating Activities
Payments to suppliers and employees (inclusive of GST)
Interest received
(2,128,571)
169,121
(940,589)
18,431
Net cash outflow from operating activities
17
(1,959,450)
(922,158)
Cash Flows from Investing Activities
Payments for exploration and evaluation
Payments for property, plant and equipment
Payment of deferred consideration
Proceeds from sale of assets
(12,283,811)
(1,085,323)
(1,963,469)
-
(6,339,555)
-
-
2,000
Net cash outflow from investing activities
(15,332,603)
(6,337,555)
Cash Flows from Financing Activities
Proceeds from issue of shares and other equity securities
Proceeds from exercise of options
Share issue transaction costs
30,000,000
3,576,273
(1,136,836)
6,765,000
-
(364,515)
Net cash inflow from financing activities
32,439,437
6,400,845
Net increase/(decrease) in cash and cash equivalents
15,147,384
(859,228)
Exchange rate adjustments
46
225
Cash and cash equivalents at the start of the year
1,189,086
2,048,089
Cash and cash equivalents at the end of the year
7
16,336,516
1,189,086
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 29
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
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.
(a)
Basis of Preparation
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.
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).
ii.
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.
(b) Going concern
The financial report has been prepared on a going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and settlement of liabilities in the normal course of business.
The consolidated entity has incurred a net loss of $3,237,829 and experienced net cash outflows from operating
activities of $1,959,450, net outflows from investing activities of $15,332,603 and net cash inflows from financing
activities of $32,439,437 for the year ended 30 June 2018. Subsequent to year end the company incurred
significant expenditure in relation to exploration on its Manono Project, accordingly the company will need to
raise additional funds in the year to meet its budgeted exploration activity.
The ability of the consolidated entity to continue as a going concern is dependent upon the successful raising of
capital or alternatively, financial support from its shareholders. These conditions indicate a material uncertainty
that may cast significant doubt on the Group’s ability to continue as a going concern and therefore whether it
will be able to pay its debts as and when they fall due and realise its assets and extinguish it’s liabilities in the
normal course of business at the amounts stated in the financial report.
The Directors believe that the consolidated entity will continue as a going concern based on expected capital
raising. As a result, the financial report has been prepared on a going concern basis which contemplates the
continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of
business.
Should the consolidated entity not be able to continue as a going concern, it may be required to realise its assets
and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those
stated in the financial statements and that the financial report does not include any adjustments relating to the
recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity
not continue as a going concern.
AVZ Minerals Limited | 30
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1.
Summary of Significant Accounting Policies (continued)
(c)
Basis of Consolidation
i.
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of AVZ Minerals
Limited as at 30 June 2018 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.
ii.
Control over subsidiaries
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.
(d)
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
an appropriate option pricing model, calculation of the fair value involves estimations of the relevant inputs to
the pricing model.
(e)
Financial Liabilities
i.
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.
AVZ Minerals Limited | 31
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
ii.
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.
(f) Segment reporting
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.
(g)
Revenue recognition
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:
i.
Interest income
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.
(h)
Income tax
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.
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.
(i) Impairment of assets
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.
AVZ Minerals Limited | 32
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1.
Summary of Significant Accounting Policies (continued)
(j) Cash and cash equivalents
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.
(k)
Exploration and evaluation expenditure
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 reporting 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.
(l) Trade and other payables
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.
(m)
Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. The
assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
financial year end. Depreciation is calculated on a diminishing value basis over the estimated useful life of the
assets as follows:
Vehicles, IT equipment and furniture – 5 years
(n)
Provisions
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 reporting 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.
(o)
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.
AVZ Minerals Limited | 33
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1.
Summary of Significant Accounting Policies (continued)
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’).
(p)
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.
(q)
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.
(r)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment. Trade receivables are generally due for settlement
within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable
are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised
when there is objective evidence that the consolidated entity will not be able to collect all amounts due according
to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days
overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment
allowance is the difference between the asset's carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not
discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
AVZ Minerals Limited | 34
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1.
Summary of Significant Accounting Policies (continued)
(s) 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.
(t) 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
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate
•
at the date of that statement of financial position
Income and expenses for 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.
AVZ Minerals Limited | 35
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
1.
Summary of Significant Accounting Policies (continued)
(u)
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 2018. They have not been adopted in preparing the financial statements for the year ended
30 June 2018 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. The consolidated entity will adopt this standard and the
amendments from 1 July 2018. There is an impact expected on receivables and the impact is likely to be a
potential increase in the receivable allowance, but the Company is still assessing the impact.
• 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.
(v)
Parent Entity Financial Information
The financial information for the parent entity, AVZ Minerals Limited, disclosed in note 23 has been prepared
on the same basis as the consolidated financial statements.
AVZ Minerals Limited | 36
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
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.
a) Impairment of deferred exploration and evaluation expenditure
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 reporting 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 (k) and to note 8 for movements in the exploration and evaluation expenditure balance.
b) Share based payment transactions
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 an appropriate option pricing model.
c) Tax in foreign jurisdictions
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.
d) Control over subsidiaries
During the prior 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 solely responsible
for funding exploration activities. AVZ has power over Dathcom, is exposed to variable returns and has the ability to
use its powers to affect the amount of its return. Future changes to the shareholders agreements may impact on the
ability of the Company to control Dathcom Mining SAS.
AVZ Minerals Limited | 37
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
3.
Net loss on disposal of foreign subsidiaries
On 30 August 2017, the Company deconsolidated its 95% interest in its three Namibian subsidiaries, Himba Iron
Exploration (Pty) Ltd, Eris Mining (Pty) Ltd and Tumba Base Metals X (Pty) Ltd, via voluntary cancellation and
deregistration. The Company recognised a loss on disposal of $676,800 for the half-year, and the subsidiaries were
deconsolidated from the Group at 31 December 2017. The loss takes into account the foreign currency translation loss
of $676,800, which has been realised and transferred from the foreign currency translation reserve to profit or loss.
4.
Revenue
From continuing operations – Proceeds from sale of assets
Interest received
Total revenue from other revenue
5.
Auditor’s Remuneration
Remuneration of the auditors of the consolidated entity for:
Auditing or reviewing the financial statements:
-
BDO Audit (WA) Pty Ltd
Total remuneration of auditors
Consolidated
2018
$
2017
$
-
169,121
169,121
2,000
18,432
20,432
43,049
43,049
35,929
35,929
AVZ Minerals Limited | 38
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Income Tax Expense
6.
(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% (2017: 30.0%)
(5,616,964)
(1,685,089)
(1,683,329)
(504,999)
Consolidated
2018
$
2017
$
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 (i)
Tax losses
Other
Net deferred tax not recognised
1,141,719
568,914
-
-
(16,196)
(9,348)
294,659
204,834
-
-
17,664
(12,158)
-
-
2,589,953
27,688
2,617,641
2,098,549
41,836
2,140,385
(i) The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable
temporary differences.
7.
(a)
Cash & Cash Equivalents
Cash & cash equivalents
Cash at bank & in hand
Total cash & cash equivalents
(b) Cash at bank and in hand
Consolidated
2018
$
2017
$
16,336,516
16,336,516
1,189,086
1,189,086
Cash on hand is non-interest bearing. Cash at bank bears interest rates between 0.01% and 2.10% (2017:
0.00% and 0.6%). Refer to Note 15 for the group’s exposure to interest rate and credit risk.
AVZ Minerals Limited | 39
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Exploration & Evaluation Expenditure
8.
Exploration and evaluation phase
Opening balance
Acquisitions (refer Note 1(k))
Exploration costs
Net exchange differences on translation
Impairment expense
Closing balance
Consolidated
2018
$
2017
$
34,515,613
1,963,469
13,423,875
(115,357)
(96,605)
49,690,995
-
33,377,651
1,938,933
(780,680)
(20,291)
34,515,613
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.
9.
Property, plant and equipment
Plant and equipment
At cost
Less: accumulated depreciation
Reconciliation
Balance at beginning of period
Additions
Disposals
Depreciation expense
Foreign currency translation difference movement
Closing balance
10. Trade & Other Payables
Current
Trade Payables
Total current trade & other payables
The group’s exposure to liquidity risk is noted in Note 15.
Consolidated
2018
$
2017
$
1,085,322
(130,745)
954,577
-
1,085,322
-
(130,745)
-
954,577
-
-
-
-
-
-
-
-
Consolidated
2018
$
2017
$
1,315,880
1,315,880
172,601
172,601
AVZ Minerals Limited | 40
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
11.
Financial Liabilities
Deferred Consideration
Current Liability
Principal
Principal repayments*
Fair value increase/(decrease) on repayment
Transfer between current/non-current
Total Current Liability
Non-Current Liability
Principal
Transfer between current/non-current
Fair value increase/(decrease)
Total Non-Current Liability
Total Liability
Consolidated
2018
$
2017
$
2,000,000
(1,963,469)
(36,531)
2,027,027
2,027,027
2,543,428
(2,027,027)
505,642
1,022,043
3,049,070
2,000,000
-
-
2,000,000
3,333,333
-
(789,905)
2,543,428
4,543,428
*During the year ended 30 June 2018, the Company paid US$1,500,000 (A$1,963,469) to La Congolaise
D’Exploitation Miniere SA in deferred consideration under the terms of the Joint Venture Agreement.
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. 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 2018.
Consolidated
Consolidated
2018
Shares
2017
Shares
2018
$
2017
$
12. Share capital
(a) Share capital
Ordinary shares - fully paid
1,868,461,449
1,474,466,643
66,973,014
33,656,076
Total Share Capital
1,868,461,449
1,474,466,643
66,973,014
33,656,076
(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 13.
(d) Performance Rights
Refer to Note 22 (b) for further details in respect to the performance rights granted.
AVZ Minerals Limited | 41
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
12. Share Capital (continued)
(e) Movements in share capital
Opening Balance 1 July 2016
Placement
Initial Consideration for the acquisition of the Manono
Extension Project
Placement
Placement
Conversion of Performance Rights
Exercise of Options
Placement
Consideration for asset acquisitions
Facilitation shares
Additional Consideration for the acquisition of the
Manono Extension Project
Conversion of Performance Rights
Reallocation of options exercised to share capital
Less: Transaction costs arising on share issues
Closing Balance at 30 June 2017
Opening Balance 1 July 2017
Placement
Conversion of Performance Rights
Placement
Consideration shares for capital raising services
Conversion of Performance Rights
Placement
Exercise of Unlisted Options during the year*
Exercise of Listed Options during the year**
Less: Transaction costs arising on share issues
Closing Balance at 30 June 2018
*Unlisted options exercisable at $0.10 on or before 15 April 2019
**Listed options exercisable at $0.03 on or before 24 May 2020
Number of
Fair
Date
Shares
$
Value
$
Total
$
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
560,883,310
90,000,000
30,000,000
44,583,333
125,000,000
4,000,000
35,000,000
125,000,000
280,000,000
140,000,000
23-May-17
29-Jun-17
20,000,000
20,000,000
-
-
1,474,466,643
18-Aug-17
31-Aug-17
13-Oct-17
13-Oct-17
2-Feb-18
28-Feb-18
1,474,466,643
186,000,000
7,500,000
28,285,714
6,000,000
3,000,000
60,000,000
6,857,141
96,351,951
-
1,868,461,449
0.009
0.013
0.012
0.020
0.020
0.012
0.020
0.029
0.029
0.029
0.029
0.012
0.070
0.033
0.070
0.070
0.210
0.250
0.100
0.030
14,404,348
810,000
390,000
535,000
2,500,000
-
420,000
2,500,000
8,120,000
4,060,000
580,000
580,000
136,500
(1,379,772)
33,656,076
33,656,076
13,020,000
247,500
1,980,000
420,000
630,000
15,000,000
685,714
2,890,559
(1,556,835)
66,973,014
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
13. Share Options
(a) 2018 share option details
Unlisted
Unlisted
Listed
28 Feb 2020 30.5 cents
15 Apr 2019 10.0 cents
3.0 cents
24 May 2020
(b) 2017 share option details
Unlisted
Listed
30 Sep 2017
24 May 2020
1.2 cents
3.0 cents
30,000,0001
-
- 214,285,7141
-
244,285,714
300,001,000
300,001,000
-
(6,857,141)
(96,351,951)
(103,209,092)
35,000,000
-
35,000,000
-
300,001,000
300,001,000
(35,000,000)
-
(35,000,000)
1: Free attaching options issued as part of capial raisings undertaken during the year.
-
-
-
-
-
-
30,000,000
207,428,573
203,649,049
441,077,622
-
300,001,000
300,001,000
AVZ Minerals Limited | 42
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Refer to Note XX
14. Reserves
(a) Total reserves
Other reserves
Foreign currency translation reserve
Total reserves
(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
(c)
Foreign Currency Translation Reserve
Opening balance
Exchange difference arising on translation of foreign operations
Realisation of foreign currency translation reserve
Closing balance
Consolidated
2018
$
2017
$
4,025,591
802,097
4,827,688
2,469,511
(1,187,063)
1,282,448
2,469,511
-
-
1,678,032
(121,952)
4,025,591
1,464,148
(136,500)
1,015,000
706,863
(580,000)
2,469,511
(1,187,063)
1,312,360
676,800
802,097
(673,293)
(513,770)
-
(1,187,063)
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(t) 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.
15. 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:
AVZ Minerals Limited | 43
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Consolidated
2018
Financial assets
Cash and cash equivalents
Consolidated
2017
Financial assets
Cash and cash equivalents
Weighted
Average
Interest Rate
Floating
Interest Rate
Fixed
Interest
Non-
interest
bearing
Total
%
$
1.538%
16,336,516
16,336,516
$
-
-
$
$
-
-
16,336,516
16,336,516
Weighted
Average
Interest Rate
Floating
Interest Rate
Fixed
Interest
Non-
interest
bearing
%
$
0.597%
1,189,086
1,189,086
$
-
-
$
-
-
Total
$
1,189,086
1,189,086
The maturity date for cash included in the above tables is one year or less from reporting date.
(i)
Sensitivity analysis
The group’s main interest rate risk arises from cash equivalents with variable and fixed interest rates. At
30 June 2018 and 30 June 2017, 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.
Sensitivity analysis
(i)
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 2018 and 30 June 2017, 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 and other receivables - current
Trade and other payables
Financial Liabilities
2018
USD
$
2017
USD
$
268,211
4,344
272,555
8,750
46,450
55,200
1,139,996
3,049,070
4,189,066
-
4,543,428
4,543,428
AVZ Minerals Limited | 44
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Foreign Exchange Rate
Cash and cash equivalents
Trade and other receivables - current
Trade and other payables
Financial Liabilities
2018
2017
USD
$
+10%
(24,383)
(395)
(24,778)
USD
$
-10%
USD
$
+10%
24,383
395
24,778
(795)
(4,223)
(5,018)
USD
$
-10%
795
4,223
5,018
(98,518)
(277,188)
(375,706)
98,518
277,188
375,706
-
(405,425)
(405,425)
-
405,425
405,425
(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.
Contractual
maturities of
financial liabilities
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
$
At 30 June 2018
Trade and other
payables
Financial liabilities
At 30 June 2017
Trade and other
payables
Financial liabilities
1,315,880
-
1,315,880
-
2,027,027
2,027,027
-
1,022,043
1,022,043
-
-
-
172,601
172,601
-
2,000,000
2,000,000
-
1,594,388
1,594,388
-
949,040
949,040
-
-
-
-
-
-
1,315,880
3,049,070
4,364,950
1,315,880
3,049,070
4,364,950
172,601
4,543,428
4,716,029
172,601
4,543,428
4,716,029
(e) Net fair value
The carrying value and net fair values of financial assets and liabilities at reporting date are:
Consolidated
Financial assets:
Cash and cash equivalents
Trade and other receivables - current
Financial liabilities:
Trade and other payables - current
Financial liabilities - current
Financial liabilities - non-current
2018
2017
Carrying
Amount
$
Net fair
Value
$
Carrying
Amount
$
Net fair
Value
$
16,336,516
88,900
16,425,416
16,336,516
88,900
16,425,416
1,189,086
82,179
1,271,265
1,189,086
82,179
1,271,265
1,315,880
2,027,027
1,022,043
4,364,950
1,315,880
2,027,027
1,022,043
4,364,950
172,601
2,000,000
2,543,428
4,716,029
172,601
2,000,000
2,543,428
4,716,029
(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)
AVZ Minerals Limited | 45
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
ii)
iii)
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).
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 11 for assumptions made in relation to determining fair
value of financial liabilities.
16. 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:
Consolidated
2018
$
2017
$
(5,616,964)
(1,683,329)
1,659,053,738
795,324,040
cents per share
cents per share
Basic and diluted loss per share
(0.34)
(0.21)
Diluted earnings per share is equal to basic loss per share as the company is in a loss position.
17. 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 exploration expenses
Share-based payment
Movement in fair value of financial liabilities
Loss on disposal of subsidiary
Changes in assets and liabilities:
(Increase) in operating receivables and prepayments
Increase/(Decrease) in trade and other payables
Consolidated
2018
$
2017
$
(5,616,964)
(1,683,329)
130,475
96,605
2,433,570
469,111
676,800
(49,369)
(99,678)
-
20,291
706,863
-
-
(54,485)
86,502
Net cash outflows from Operating Activities
(1,959,450)
(922,158)
Non-cash investing and financing activities
Issue of ordinary shares for capital raising services*
Issue of ordinary shares as consideration for asset acquisition
Issue of listed options for capital raising services
420,000
-
-
420,000
-
13,150,000
1,015,000
14,165,000
*Refer Note 22 (c)
18. 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.
AVZ Minerals Limited | 46
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
Geographical information
All non-current assets are based in the DRC.
19. Commitments and Contingencies
There are no commitments or contingent liabilities outstanding at the end of the year.
20. 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(c):
Name of entity
Country of
incorporation
Class
of shares
Himba Iron Exploration (Pty) Ltd
Eris Mining (Pty) Ltd
Tumba Base Metals X (Pty) Ltd
AVZ International Pty Ltd
AVZ Minerals Congo SARL
Dathcom Mining SAS
Namibia
Namibia
Namibia
Australia
DRC
DRC
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding1
2018
-
-
-
100
100
60
2017
%
95
95
95
100
100
60
1: The proportion of ownership interest is equal to the proportion of voting power held.
(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
Himba Iron Exploration
(Pty) Ltd
Tumba Base Metals X
(Pty) Ltd
30 June 2018
30 June 2017
30 June 2018
30 June 2017
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
-
-
-
-
-
-
-
-
-
-
-
1,197,548
-
1,197,548
(1,197,548)
(63,870)
-
-
-
-
-
-
-
-
-
-
-
25,774
-
25,774
(25,774)
(1,375)
Eris Mining
(Pty) Ltd
Dathcom Mining
SAS
30 June 2018
30 June 2017
30 June 2018
30 June 2017
-
-
-
-
-
-
-
-
-
76,714
76,714
2,573,103
-
2,573,103
(2,496,389)
(133,590)
272,555
38,025,132
38,297,687
1,142,879
16,154,710
17,297,589
21,000,098
11,108,814
55,200
31,378,395
31,433,595
1,929,965
-
1,929,965
29,503,630
10,771,137
AVZ Minerals Limited | 47
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
21. 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 20.
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 22)
Total key management personnel compensation
2018
$
2017
$
623,504
10,735
795,116
1,429,355
401,383
7,378
2,992,959
3,401,720
Details of remuneration disclosures are provided within the audited remuneration report which can be
found on pages 17 to 22 of the directors’ report.
(d) Other transactions with key management personnel
The following transactions occurred with Director related parties:
Consolidated
2018
$
2017
$
Payment to GTT Ventures
-
19,838
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.
22. Share Based Payments
(a) Options
For the year ended 30 June 2018:
During the year ended 30 June 2018, no options were issued as a share based payments. 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 13.
For the year ended 30 June 2017:
During the year ended 30 June 2017, 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.
AVZ Minerals Limited | 48
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
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
For the year ended 30 June 2018:
On 5 June 2017, the Company issued 15,000,000 unlisted Performance Rights to Airguide International Pte Limited,
7,500,000 of these Performance Rights vested on 31 August 2017 and were converted to Ordinary Shares.
On 12 October 2017, 5,000,000 unlisted Performance Rights were issued to employees of the Company. These
Performance Rights shall vest upon definition of a 100Mt Measured Mineral Resource in accordance with JORC
Guidelines (as that term is defined for the purposes of JORC Guidelines for lithium) of lithium oxide (Li2O) that meets
the agreed minimum specification of greater than 1% lithium oxide (Li2O) being delineated within the Manono Project
Area (being the licence area of PR13359) within 12 months of the date of issue of the Employee Performance Rights.
On 13 December 2017, 3,000,000 unlisted Performance Rights were issued to JNS Capital Corp for promotional and
marketing services in North America. These Performance Rights shall vest if the 10-day volume weighted average share
price (VWAP) for the Shares on the ASX is $0.30 or higher from the date of issue. All 3,000,000 Performance Rights
vested on 2 February 2018 and were converted to Ordinary Shares.
On 6 February 2018, 20,850,000 unlisted Performance Rights were granted to directors and employees of the
Company, with the vesting terms as below:
(iv)
(v)
(vi)
Tranche 1 – 6,950,000 Performance Rights shall vest if the 10-day volume weighted average share price
(VWAP) for the Shares on the ASX is $0.34 or higher for the period commencing 6 months from the
date of issue;
Tranche 2 – 6,950,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.40 or higher for the period commencing 6 months from the date of issue; and
Tranche 3 – 6,950,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.44 or higher for the period commencing 6 months from the date of issue.
Of the 20,850,000 unlisted Performance Rights, 16,500,000 were granted, but not yet issued, to directors (12,000,000
to Nigel Ferguson and 4,500,000 to Rhett Brans). The issue of these is subject to shareholder approval which is yet to
be sought.
On 15 May 2018, 3,000,000 unlisted Performance Rights were issued to JNS Capital Corp, with the vesting terms as
below:
(i)
(ii)
(iii)
Tranche 1 – 1,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.34 or higher for the period commencing 6 months from the date of issue;
Tranche 2 – 1,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.40 or higher for the period commencing 6 months from the date of issue; and
Tranche 3 – 1,000,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.44 or higher for the period commencing 6 months from the date of issue.
On 16 May 2018, 7,500,000 unlisted Performance Rights were issued to Airguide International Pte Limited, with the
vesting terms as below:
(i)
Tranche 1 – 2,500,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.34 or higher for the period commencing 6 months from the date of issue;
AVZ Minerals Limited | 49
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
(ii)
(iii)
Tranche 2 – 2,500,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.40 or higher for the period commencing 6 months from the date of issue; and
Tranche 3 – 2,500,000 Performance Rights shall vest if the 10-day VWAP for the Shares on the ASX is
$0.44 or higher for the period commencing 6 months from the date of issue.
Number
Granted
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price on
Valuation Date
($)
Total Fair
Value ($)
%
Veste
d
Employees
5,000,000
12-Oct-17
Nil
12-Oct-18
0.125
625,000
Nil
JNS Capital Corp
3,000,000
13-Dec-17
Nil
31-Mar-18
0.210
630,000 100%
Director/ Employees -
Tranche 1
Director/ Employees -
Tranche 2
Director/ Employees -
Tranche 3
6,950,000
6-Feb-18
Nil
5-Feb-21
0.093
6,950,000
6-Feb-18
Nil
5-Feb-21
0.093
6,950,000
6-Feb-18
Nil
5-Feb-21
0.093
536,250
458,600
417,450
Nil
Nil
Nil
JNS Capital - Tranche 1
1,000,000
15-May-18
JNS Capital - Tranche 2
1,000,000
15-May-18
JNS Capital - Tranche 3
1,000,000
15-May-18
Airguide - Tranche 1
2,500,000
16-May-18
Airguide - Tranche 2
2,500,000
16-May-18
Airguide - Tranche 3
2,500,000
16-May-18
Nil
Nil
Nil
Nil
Nil
Nil
15-May-19
0.160
29,000
Nil
15-May-19
0.160
23,500
Nil
15-May-19
0.160
20,600
Nil
30-Nov-21
0.155
189,750
Nil
30-Nov-21
0.155
176,500
Nil
30-Nov-21
0.155
168,750
Nil
Assumptions on vesting period and expense for Performance Rights issued during year ended 30 June 2018
Total Fair Value
($)
Vesting period
(days)
Expense to 30 June 2018
($)
Employee
JNS Capital Corp
Director/ Employee - Tranche 1,
2 and 3
JNS Capital Corp - Tranche 1, 2
and 3
625,000
630,000
1,412,300
73,100
Airguide - Tranche 1, 2 and 3
535,000
For the year ended 30 June 2017:
365
Already vested
1,095
365
1,095
625,000
630,000
185,727
9,213
18,605
On 23 May 2017, 30,000,000 unlisted Performance Rights were issued to Mr Nigel Ferguson, with the vesting terms as
below:
(i)
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;
AVZ Minerals Limited | 50
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
(ii)
(iii)
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 $0.03 or higher from the date of issue. These Performance Rights vested
and were converted to Ordinary Shares during the year ended 30 June 2017.
On 5 June 2017, the Company issued 15,000,000 Performance Rights to Airguide International Pte Limited (Airguide),
the Company’s Strategic Adviser for facilitating and advising the Company on its commercial agreements with relevant
counter-parties in China. The Airguide Performance Rights shall vest as follows:
(i)
(ii)
7,500,000 upon execution of the first memoranda of understanding and/or letter of intent in respect of
an offtake agreement with an Airguide introduced party; and
7,500,000 upon execution of the first binding offtake partnership, development finance or prepayment
finance agreement with an Airguide introduced party.
Number
Granted
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price on
Grant Date ($)
Total Fair
Value ($)
%
Vested
10,000,000
23-May-17
Nil
22-May-18
0.029
290,000
100%
10,000,000
23-May17
Nil
22-May-18
0.029
290,000
Nil
10,000,000
23-May17
Nil
22-May-18
0.029
Nigel Ferguson -
Tranche 1
Nigel Ferguson -
Tranche 2
Nigel Ferguson -
Tranche 3
Patrick Flint
10,000,000
23-May-17
Nil
22-May-18
0.029
Airguide International
Pte Limited
15,000,000
5-Jun-17
Nil
5-Jun-18
0.033
290,000
Nil
290,000
100%
495,000
Nil
Assumptions on vesting period and expense for Performance Rights issued during year ended 30 June
2017
Total Fair Value
($)
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
183
365
Already vested
365
290,000
61,973
30,986
290,000
33,904
(c) Shares issued as Share Based Payments
AVZ Minerals Limited | 51
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
On 13 October 2017, 6,000,000 Ordinary Shares were issued to Dathomir Mining Resources Sarl at $0.07 each in
consideration for services performed in relation to a placement. The fair value of these shares is $420,000.
23.
(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
2018
$
2017
$
16,152,860
37,744,914
53,897,774
1,216,065
24,212,960
25,429,025
2,200,028
1,022,043
3,222,071
2,172,601
2,543,428
4,716,029
50,675,703
20,712,996
66,973,014
(20,322,902)
4,025,591
50,675,703
33,656,076
(15,412,591)
2,469,511
20,712,996
(4,910,310)
-
(4,910,310)
(1,662,187)
-
(1,662,187)
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.
24. Events Occurring after the Reporting Date
On 24 July 2018, 20,000,000 Shares were issued to Nigel Ferguson following the vesting conditions for 20,000,000
Performance Rights being met.
On 30 July 2018, Mr Graeme Johnston was appointed as Technical Director. Mr Leonard Math was appointed joint
Company Secretary on 9 July 2018 and Mr Mathew O’Hara resigned as Company Secretary on 4 September 2018.
On 5 February 2018, the Company announced that, subject to shareholders approval, it will issue Nigel Ferguson
12,000,000 unlisted Performance Rights and Rhett Brans 4,500,000 unlisted Performance Rights which shall vest in three
equal tranches upon certain VWAP conditions being met. During July 2018, the Board proposed to change the vesting
conditions for these Performance Rights and increase the unlisted Performance Rights to be issued to Rhett Brans from
4,500,000 to 6,000,000. The new proposed Performance Rights shall vest in four equal tranches upon the following
milestones being achieved:
1) Tranche 1 shall vest upon definition of a 150Mt Measured and Indicated Mineral Resource in accordance with
JORC Guidelines (as that term is defined for the purposes of JORC Guidelines for lithium) of lithium oxide
(Li2O) that meets the agreed minimum specification of greater than 1% lithium oxide (Li2O) being delineated
within the Manono Project Area (being the licence area of PR13359) within 12 months of the date of issue of
the Employee Performance Rights.
2) Tranche 2 shall vest upon completion of a Feasibility Study on the Manono Project.
3) Tranche 3 shall vest upon executing an offtake agreement for at least 25% of the product from the Manono
Project.
4) Tranche 4 shall vest upon completion of the Manono Project financing.
AVZ Minerals Limited | 52
Notes to the Consolidated Financial Statements for the year ended 30 June 2018
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 | 53
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 26 to 53 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 2018 and of its performance for the
financial year ended on that date; and
(b) the audited remuneration disclosures set out on pages 17 to 22 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.
Nigel Ferguson
Managing Director
Perth, Western Australia
28 September 2018
AVZ Minerals Limited | 54
Audit report
AVZ Minerals Limited | 55
Audit report
AVZ Minerals Limited | 56
Audit report
AVZ Minerals Limited | 57
Audit report
AVZ Minerals Limited | 58
Shareholder Information
Shareholding
The distribution of members and their holdings of equity securities
17 September 2018 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: 2,103
Twenty Largest Shareholders
The names of the twenty largest ordinary fully paid shareholders are as follows:
Shareholder
Citicorp Nominees PL
JP Morgan Nominees Australia Ltd
BNP Paribas Nominee PL
BNP Paribas Nominees PL
HSBC Custody Nominees Australia Ltd
Langford Michael
Ridgeback Holdings PL
Pershing Australia Nominees PL
Custodial SVCS Ltd
Guo Kai
Robinson David Grant
Richardson Kyle
Good Luck Family PL
Wu Xin Jian
Griffiths Kevin
Richard James Brady + Wil
Cheng Cuntong
Cai Xiaoli
Soos Peter
Yu Gilbert Luy
Baxter Stephen Paul + S
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
133
1,933
1,560
4,569
1,746
9,941
Number
% Held of Issued
Ordinary Capital
226,314,860
162,141,802
109,099,017
99,859,176
63,214,164
36,620,458
36,083,333
17,126,900
15,561,710
14,600,000
11,858,115
9,410,506
7,952,803
7,307,000
7,267,327
7,250,000
6,700,000
6,590,000
6,511,623
6,500,000
6,250,000
11.98%
8.59%
5.78%
5.29%
3.35%
1.94%
1.91%
0.91%
0.82%
0.77%
0.63%
0.50%
0.42%
0.39%
0.38%
0.38%
0.35%
0.35%
0.34%
0.34%
0.33%
Number
240,000,000
186,000,000
%
12.71%
9.85%
AVZ Minerals Limited | 59
their holdings of
listed options
in
the holding company as at
Shareholder Information
Optionholding
The distribution of members and
17 September 2018 is as follows:
Number Held
1- 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Twenty Largest optionholders
The names of the twenty largest $0.03 listed optionholders are as follows:
Optionholder
Langford Michael
Perry Phillip R + T
Griffith Benjamin
Fenton Brian Edwards
BKG Fenton PL
Gasson Mark
Hargreaves Darren J
Soos Peter
Robmp PL
Rudd Alan Paul
Ellis Paul James
Cargoclear International PL
Lane Peter
Allard Laurence A + LA
Eastwood Shane Allen
Top Class Holdings PL
Tradelink Food Brokers PL
Richardson EA + Walter L
Divin Paul Venda
Desgail PL
Jones Jason Neville
Substantial Optionholders
The names of the substantial optionholders:
Shareholder
Langford Michael
Perry Phillip R + T
On-Market Buy-Back
There is no current on-market buy-back.
Restricted Securities
There are no restricted ordinary shares in escrow.
Class of Equity Securities
$0.03 Listed Options
5
24
39
207
222
497
Number
% Held of $0.03
Listed Options
20,000,000
10,600,000
8,188,888
5,900,002
5,859,166
5,000,000
5,000,000
4,277,342
3,900,000
3,596,145
3,400,000
3,140,000
3,123,199
2,993,500
2,950,000
2,650,000
2,500,000
2,450,000
2,200,000
2,030,000
2,000,000
9.82%
5.21%
4.02%
2.90%
2.88%
2.46%
2.46%
2.10%
1.92%
1.77%
1.67%
1.54%
1.53%
1.47%
1.45%
1.30%
1.23%
1.20%
1.08%
1.00%
0.98%
Number
20,000,000
10,600,000
%
9.82%
5.21%
AVZ Minerals Limited | 60
Shareholder Information
Unquoted equity securities – Options
Number on issue Number of holders
Unlisted options exercisable at $0.10 expiring on, or before, 15 April
2019
Unlisted options exercisable at $0.305 expiring on, or before, 28
February 2020
207,428,573
30,000,000
20
1
Holders of more than 20% of unlisted options
Number of
unlisted options
Percentage
of unlisted options
Huayou International Mining (Hong Kong) Ltd
186,000,000
89.67%
Unquoted equity securities – performance rights
Number on issue
Number of holders
Performance Rights shall vest upon execution of the first binding
offtake partnership, development finance or prepayment finance
agreement with an Airguide introduced party
Performance Rights shall vest upon definition of a 100Mt Measured
Mineral Resource, in accordance with JORC Guidelines, of lithium
oxide (Li2O) that meets the agreed minimum specification of greater
than 1% lithium oxide (Li2O) being delineated within the Manono
Project Area within 12 months of the date of issue
Performance Rights shall vest if the 10-day VWAP of Shares on the
ASX is $0.34 or higher during the period commencing 6 months
from the date of issue
Performance Rights shall vest if the 10-day VWAP of Shares on the
ASX is $0.40 or higher during the period commencing 6 months
from the date of issue
Performance Rights shall vest if the 10-day VWAP of Shares on the
ASX is $0.44 or higher during the period commencing 6 months
from the date of issue
Holders of more than 20% of unlisted performance rights
7,500,000
5,000,000
4,950,000
4,950,000
4,950,000
1
5
5
5
5
Number of
performance
rights
Percentage
of performance
rights
Airguide International Pte Ltd
15,000,000
54.85%
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 ri
AVZ Minerals Limited | 61
Schedule of Tenements
Information required under ASX Listing Rule 5.3.3
List of current mining and exploration tenements:
Country / Project
Tenement
Interest
Status
DRC – Manono Project
PR 13359
60%
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 | 62