More annual reports from AVZ Minerals Limited:
2023 Report Managing Director’s Statement
Corporate Directory
Managing Director’s Statement
Corporate Directory
Managing Director’s Statement
Corporate Directory
Directors
Directors
Directors
Nigel Ferguson (Managing Director)
Nigel Ferguson (Managing Director)
Nigel Ferguson (Managing Director)
Graeme Johnston (Technical Director)
Graeme Johnston (Technical Director)
Graeme Johnston (Technical Director)
Hongliang Chen (Non-Executive Director)
Hongliang Chen (Non-Executive Director)
Hongliang Chen (Non-Executive Director)
Rhett Brans (Non-Executive Director)
Rhett Brans (Non-Executive Director)
Rhett Brans (Non-Executive Director)
Peter Huljich (Non-Executive Director)
Peter Huljich (Non-Executive Director)
Peter Huljich (Non-Executive Director)
CFO & Company Secretary
CFO & Company Secretary
CFO & Company Secretary
Leonard Math
Leonard Math
Leonard Math
Principal Place of Business & Registered Office
Principal Place of Business & Registered Office
Principal Place of Business & Registered Office
Level 2, 8 Colin Street
Level 2, 8 Colin Street
Level 2, 8 Colin Street
West Perth WA 6005
West Perth WA 6005
West Perth WA 6005
Telephone: +61 8 6117 9397
Telephone: +61 8 6117 9397
Telephone: +61 8 6117 9397
Facsimile: +61 8 6118 2106
Facsimile: +61 8 6118 2106
Facsimile: +61 8 6118 2106
Share Registry
Share Registry
Share Registry
Auditors
Auditors
Auditors
Securities Exchange Listing
Securities Exchange Listing
Securities Exchange Listing
Automic Registry Services
Automic Registry Services
Automic Registry Services
Level 2, 267 St George’s Terrace
Level 2, 267 St George’s Terrace
Level 2, 267 St George’s Terrace
Perth WA 6000
Perth WA 6000
Perth WA 6000
Telephone: 1300 288 664 (within Australia)
Telephone: 1300 288 664 (within Australia)
Telephone: 1300 288 664 (within Australia)
+61 8 9324 2099 (outside Australia)
+61 8 9324 2099 (outside Australia)
Email: hello@automic.com.au
Email: hello@automic.com.au
+61 8 9324 2099 (outside Australia)
Email: hello@automic.com.au
BDO Audit (WA) Pty Ltd
BDO Audit (WA) Pty Ltd
BDO Audit (WA) Pty Ltd
38 Station Street
38 Station Street
38 Station Street
SUBIACO WA 6008
SUBIACO WA 6008
SUBIACO WA 6008
Telephone: (08) 6382 4600
Telephone: (08) 6382 4600
Telephone: (08) 6382 4600
Australian Securities Exchange
Australian Securities Exchange
(Home branch: Perth, Western Australia)
Australian Securities Exchange
(Home branch: Perth, Western Australia)
ASX Code: AVZ, AVZO
(Home branch: Perth, Western Australia)
ASX Code: AVZ, AVZO
ASX Code: AVZ, AVZO
Website Address
Website Address
Website Address
www.avzminerals.com.au
www.avzminerals.com.au
www.avzminerals.com.au
CFO & Company Secretary
Leonard Math
Principal Place of Business & Registered Office
Level 2, 8 Colin Street
Managing Director’s Statement
Corporate Directory
Directors
Share Registry
Auditors
AVZ Minerals Limited | 1
AVZ Minerals Limited | 1
AVZ Minerals Limited | 1
Nigel Ferguson (Managing Director)
Graeme Johnston (Technical Director)
Hongliang Chen (Non-Executive Director)
Rhett Brans (Non-Executive Director)
Peter Huljich (Non-Executive Director)
West Perth WA 6005
Telephone: +61 8 6117 9397
Facsimile: +61 8 6118 2106
Automic Registry Services
Level 2, 267 St George’s Terrace
Perth WA 6000
Telephone: 1300 288 664 (within Australia)
+61 8 9324 2099 (outside Australia)
Email: hello@automic.com.au
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
Telephone: (08) 6382 4600
AVZ Minerals Limited | 1
Securities Exchange Listing
Australian Securities Exchange
(Home branch: Perth, Western Australia)
ASX Code: AVZ, AVZO
Website Address
www.avzminerals.com.au
Contents
Corporate Directory
Managing Director’s Statement
Review of Operations
Directors’ Report
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
1
3
5
19
36
38
39
40
41
42
68
69
74
AVZ Minerals Limited | 2
Managing Director’s Statement
Managing Director’s Statement
“The Manono Lithium and Tin Project is the largest
undeveloped hard-rock lithium resource in the world
in terms of grade, mine life and expandability, with
extremely compelling project economics and a DFS to
be delivered by Q1 2020.”
“The Manono Lithium and Tin Project is the largest
undeveloped hard-rock lithium resource in the world
in terms of grade, mine life and expandability, with
extremely compelling project economics and a DFS to
be delivered by Q1 2020.”
Nigel Ferguson
Nigel Ferguson
Dear Shareholders,
Dear Shareholders,
The last 12 months have been extremely decisive for your company with our Tier 1 Manono Lithium and Tin Project
moving beyond the exploration phase into a pre-development stage, with commencement of a Definitive Feasibility
Study (DFS) that is due to be completed in early 2020.
The last 12 months have been extremely decisive for your company with our Tier 1 Manono Lithium and Tin Project
moving beyond the exploration phase into a pre-development stage, with commencement of a Definitive Feasibility
Study (DFS) that is due to be completed in early 2020.
Our Manono Project has now been officially confirmed as the largest undeveloped hard-rock lithium resource in
the world - in terms of grade, mine life and expandability, with a Measured, Indicated and Inferred resource of 400
Mt at 1.65% Li2O (Spodumene), 715 ppm Sn (tin) and 34ppm Ta2O5 (tantalum).
Our Manono Project has now been officially confirmed as the largest undeveloped hard-rock lithium resource in
the world - in terms of grade, mine life and expandability, with a Measured, Indicated and Inferred resource of 400
Mt at 1.65% Li2O (Spodumene), 715 ppm Sn (tin) and 34ppm Ta2O5 (tantalum).
Whilst these numbers confirm Manono’s potential to become a world leader in the global lithium market, your
company has also discovered an exciting new standalone lithium project at Carriere de L’Este,
located
approximately 5.6km along strike from Roche Dure in the northern Manono sector.
Whilst these numbers confirm Manono’s potential to become a world leader in the global lithium market, your
company has also discovered an exciting new standalone lithium project at Carriere de L’Este, located
approximately 5.6km along strike from Roche Dure in the northern Manono sector.
Wide spaced drilling at Carriere de l’Este in December 2018 has confirmed visible Spodumene at surface and in
drill core with shallow, high-grade zones delivering greater than 2.0% Li2O over 10s of metres, within wider zones
of well mineralised Spodumene-bearing pegmatite. The spectacular assay results from Carriere de l’Este included
individual samples with grades greater than 4% Li2O, with the highest reporting 4.65% Li2O from 181m to 182m
downhole.
Wide spaced drilling at Carriere de l’Este in December 2018 has confirmed visible Spodumene at surface and in
drill core with shallow, high-grade zones delivering greater than 2.0% Li2O over 10s of metres, within wider zones
of well mineralised Spodumene-bearing pegmatite. The spectacular assay results from Carriere de l’Este included
individual samples with grades greater than 4% Li2O, with the highest reporting 4.65% Li2O from 181m to 182m
downhole.
The Carriere de l’Este discovery could deliver high-grade material for a potential mill-feed blend allowing us to
process less tonnes to achieve the same concentrate from a nearby deposit that demonstrates the same
characteristics as the Manono resource. Consequently, your company made a conscious decision not to continue
drilling for more resources – despite the huge potential that is clearly present – instead focussing our efforts on
fast-tracking the Manono Project towards production.
The Carriere de l’Este discovery could deliver high-grade material for a potential mill-feed blend allowing us to
process less tonnes to achieve the same concentrate from a nearby deposit that demonstrates the same
characteristics as the Manono resource. Consequently, your company made a conscious decision not to continue
drilling for more resources – despite the huge potential that is clearly present – instead focussing our efforts on
fast-tracking the Manono Project towards production.
In early 2019, we raised A$15 million that will see the project fully funded to a final investment decision. The capital
raising attracted strong support from Australian and global institutions as well as sophisticated investors, with the
cornerstone placements taken by a new strategic investor, Lithium Plus (A$3M), and an existing strategic partner,
Huayou Cobalt Group (A$1M). The funding will assist to achieve our goal of delivering the DFS for the Manono
Project by Q1 2020.
We also increased our equity stake by 5% in Dathcom Mining SA – the holding company of the Manono Lithium
and Tin Project. At completion of the transaction, your company will hold a 65% interest in Dathcom. We continue
to progress discussions to secure additional equity in the Manono Project from our main partner, La Congolaise
D’Exploration Miniere.
Our working relationship with Huayou Cobalt Group was strengthened during the year when we signed an
agreement that allows us to draw on Huayou Cobalt Group’s experience in the DRC and mainland China to assist
in completing our DFS for the Manono Project. The non-binding agreement promotes discussions between your
company and Huayou Cobalt Group around project financing, offtake financing, strategic services, EPCM and
transport cost efficiencies.
During the first half of the year, we completed initial metallurgical test work on material from the Roche Dure
prospect that showed it supports the potential for “high value mineralisation” – producing up to 6.3% Li2O Dense
Media Separation (DMS) concentrate. The concentrate specification showed the material is potentially suitable for
supply of a chemical grade concentrate to the growing lithium battery market. An upgrade in specification is
possible with further metallurgical test work.
Another significant milestone reached during the 2019 financial year was the release of our initial 2Mtpa Scoping
Study and later our 5Mtpa Scoping Study, which demonstrated excellent economic outcomes for the Manono
Project, with a pre-tax, pre-royalties NPV10 of approximately US$2.63 billion and an IRR of greater than 64%.
Importantly, we expect further improvements can be made to transport economics in the final DFS.
Your company also strengthened its Board and executive management team during the year in order to undertake
the necessary works program and the DFS. We promoted Graeme Johnston from a consultant role to that of
Technical Director on the Board and appointed Peter Huljich, who has extensive legal expertise and project
delivery skills in Africa, as Non-Executive Director. Mr Leonard Math also joined our team as CFO and Company
Secretary.
I would like to thank my fellow Board members, our management team, staff and consultants for their stellar efforts
to advance our world-class lithium project.
We have much to do over the coming 12 months to realise the full potential of this monster resource and I look
forward to your ongoing support and commitment.
Nigel Ferguson
Managing Director
AVZ Minerals Limited | 4
Review of Operations
Review of Operations
AVZ Minerals Limited | 5
OVERVIEW
OVERVIEW
OVERVIEW
Manono Lithium and Tin Project (“Manono Project”), DRC
Manono Lithium and Tin Project (“Manono Project”), DRC
Manono Lithium and Tin Project (“Manono Project”), DRC
Highlights
Highlights
Highlights
§ Maiden Mineral Resource estimate of 259.9Mt grading 1.63% Li2O (spodumene),
§ Maiden Mineral Resource estimate of 259.9Mt grading 1.63% Li2O (spodumene),
§ Maiden Mineral Resource estimate of 259.9Mt grading 1.63% Li2O (spodumene),
confirming Manono’s potential to become a World leader in the global lithium market
confirming Manono’s potential to become a World leader in the global lithium market
confirming Manono’s potential to become a World leader in the global lithium market
§ Updated Manono Mineral Resource released highlighting a 54% increase in
§ Updated Manono Mineral Resource released highlighting a 54% increase in
§ Updated Manono Mineral Resource released highlighting a 54% increase in
Measured, Indicated & Inferred Resources to 400.4mt @ 1.66% Li2O (spodumene),
Measured, Indicated & Inferred Resources to 400.4mt @ 1.66% Li2O (spodumene),
Measured, Indicated & Inferred Resources to 400.4mt @ 1.66% Li2O (spodumene),
substantial tin and tantalum credits and low levels of deleterious elements
substantial tin and tantalum credits and low levels of deleterious elements
substantial tin and tantalum credits and low levels of deleterious elements
§ Manono Mineral Resource was further upgraded with 41.7% increase in combined
§ Manono Mineral Resource was further upgraded with 41.7% increase in combined
Measured and Indicated Resources, up from 189.8Mt to 269.0 Mt grading 1.65%
Measured and Indicated Resources, up from 189.8Mt to 269.0 Mt grading 1.65%
Li2O, 816 ppm Sn and 36 ppm Ta
Li2O, 816 ppm Sn and 36 ppm Ta
§ Manono Mineral Resource was further upgraded with 41.7% increase in combined
Measured and Indicated Resources, up from 189.8Mt to 269.0 Mt grading 1.65%
Li2O, 816 ppm Sn and 36 ppm Ta
§ Manono Scoping Studies (2Mtpa & 5Mtpa) released confirming Manono as the largest
§ Manono Scoping Studies (2Mtpa & 5Mtpa) released confirming Manono as the largest
undeveloped hard rock lithium project globally in terms of grade, mine life and
undeveloped hard rock lithium project globally in terms of grade, mine life and
expandability
expandability
§ Manono Scoping Studies (2Mtpa & 5Mtpa) released confirming Manono as the largest
undeveloped hard rock lithium project globally in terms of grade, mine life and
expandability
§
§
§
investment decision with the
Successfully raised A$15M and fully funded to final
Successfully raised A$15M and fully funded to final investment decision with the
commencement of the Definitive Feasibility Study for the Manono Lithium and Tin
commencement of the Definitive Feasibility Study for the Manono Lithium and Tin
Project
Project
Successfully raised A$15M and fully funded to final
investment decision with the
commencement of the Definitive Feasibility Study for the Manono Lithium and Tin
Project
§ Wide spaced drilling at Carrière de l’Este in the northern Manono Sector confirmed
§ Wide spaced drilling at Carrière de l’Este in the northern Manono Sector confirmed
§ Wide spaced drilling at Carrière de l’Este in the northern Manono Sector confirmed
visible spodumene in drill core with spectacular assay results
visible spodumene in drill core with spectacular assay results
visible spodumene in drill core with spectacular assay results
Further increase in equity stake in Manono Project
Further increase in equity stake in Manono Project
Further increase in equity stake in Manono Project
Board and management strengthened during the year
Board and management strengthened during the year
Board and management strengthened during the year
§
§
§
§
§
§
AVZ Minerals Limited | 6
AVZ Minerals Limited | 6
AVZ Minerals Limited | 6
OVERVIEW
Manono Lithium and Tin Project (“Manono Project”), DRC
Highlights
§ Maiden Mineral Resource estimate of 259.9Mt grading 1.63% Li2O (spodumene),
confirming Manono’s potential to become a World leader in the global lithium market
§ Updated Manono Mineral Resource released highlighting a 54% increase in
Measured, Indicated & Inferred Resources to 400.4mt @ 1.66% Li2O (spodumene),
substantial tin and tantalum credits and low levels of deleterious elements
§ Manono Mineral Resource was further upgraded with 41.7% increase in combined
Measured and Indicated Resources, up from 189.8Mt to 269.0 Mt grading 1.65%
Li2O, 816 ppm Sn and 36 ppm Ta
§ Manono Scoping Studies (2Mtpa & 5Mtpa) released confirming Manono as the largest
undeveloped hard rock lithium project globally in terms of grade, mine life and
§
Successfully raised A$15M and fully funded to final
investment decision with the
commencement of the Definitive Feasibility Study for the Manono Lithium and Tin
expandability
Project
§ Wide spaced drilling at Carrière de l’Este in the northern Manono Sector confirmed
visible spodumene in drill core with spectacular assay results
Further increase in equity stake in Manono Project
§
§
Board and management strengthened during the year
AVZ Minerals Limited | 6
Review of Operations
The financial year ended June 2019 has been a decisive one for the Company. Whilst the AVZ Board reasonably
expects the size and more importantly, the quality of the Manono JORC resource to continue to grow, the Manono
Project has now moved beyond the pure exploration stage and with the successful capital raising of A$15M in
early 2019, it is moving into the Pre-Development Phase, commencing the Definitive Feasibility Study for the
Manono Lithium and Tin Project.
The Scoping Study delivered during the year confirmed Manono as the largest undeveloped hard rock lithium
project globally in terms of grade, mine life and expandability. The Manono mineral resource is now the largest
lithium project with the highest grade owned by an ASX listed company. The economics of the Manono Project
are also extremely compelling, with a pre-tax, pre-royalties NPV (100% basis) estimated at US$1.6bn and an IRR
of over 90% for the 2Mtpa capacity. The 5Mtpa capacity Scoping Study released in May 2019 further strengthens
the economics of the Manono Project with a pre-tax, pre-royalties NPV (100% basis) estimated at US$2.63bn and
an IRR of over 64%.
Importantly, work from the Scoping Study and subsequent analysis have identified cost effective transport solutions
for Manono concentrates. The Company expects further improvements to the transport economics will be made
in the process of finalising the Manono’s Definitive Feasibility Study.
Scoping Studies
2Mtpa Scoping Study
On 9 October 2018, AVZ released results from its Manono Scoping Study undertaken by CPC Project Design Pty
Ltd (CPC) in conjunction with Alan Dickson & Associates (ADA). Highlights of the study included:
§ Case 1 (2 million tonnes per annum) pre-tax pre-royalties NPV10 of approximately US$1.6 billion (AVZ’s
60% share is approximately US$0.93 billion) with an estimated IRR greater than 90% based on ±35%
accuracy and including US$36 million in capital contingency.
§ Scope for annual production of approximately 440,000 tonnes per annum (tpa) at a minimum of 5.8%
Li2O concentrate from Case 1 throughput of 2Mtpa of pegmatite ore with low strip ratio of 0.7:1.
§ F.O.B. Operating costs to Dar-es-Salaam estimated at approximately US$355 per tonne (t) of concentrate
for 2Mtpa.
§ Metallurgical test work indicated recoveries in excess of 80% are achievable.
§ Capex estimated for Case 1 throughput at approximately US$150 to $160 Million (accurate to ±35% and
includes US$36 million contingency).
AVZ’s review of the methodology adopted for its initial Scoping Study revealed potential for significant
transportation cost savings for the transport of the lithium concentrate from Manono to the Dar es Salam port. The
possibility exists for further savings via volume discounts yet to be negotiated with transport providers.
(Please refer to the ASX announcement dated 9 October 2018 for the full report on the Scoping Study as described
above)
AVZ Minerals Limited | 7
Transport Options and Update of 2Mtpa Scoping Study
The initial proposed transportation option adopted closed, half height 20’ containers with a capacity of
approximately 30t each. These containers would be loaded at site, transferred by truck to the port town of Moba
on the west coast of Lake Tanganyika where they would then be loaded on to a custom-made barge, sailed to the
Tanzanian port of Kigoma and then offloaded directly to flat top rolling stock for railing to Dar es Salaam.
Figure 1 - Transportation Route Options
After further review,AVZ’s technical team identified the potential to utilise two-tonne “bulka bags” instead of the
half height 20’ closed containers to materially reduce costs. Further options are being investigated.
After reviewing the 2Mpta study with a view to identifying transport cost savings, AVZ found:
§
F.O.B. operating costs to Dar-es-Salaam reduced by US$58/t to US$297/t from original estimates of
approximately US$355/t of concentrate for 2Mtpa, (a 16% reduction in the total cash cost estimate) with
total transport costs now estimated at US$163/t – a 26% reduction.
§ Case 1 (2Mtpa) pre-tax pre-royalties NPV10 increased by approximately US$190 million to US$1.79
billion (AVZ’s 60% share is approximately US$1.04 billion) with an estimated IRR greater than 90% based
on ±35% accuracy and including US$36 million in capital contingency.
§ Capex estimated remained the same for Case 1 throughput at approximately US$150 to $160 million
(accurate to ±35% and includes US$36 million contingency).
(Please refer to the ASX announcements dated 19 November 2018 for the full announcement of the Updated
Scoping Study)
AVZ Minerals Limited | 8
Review of Operations
On 23 May 2019, AVZ released the results of Case 2 (5 million tonnes per annum) Scoping Study. The results
further strengthen the economics of the Manono Project:
§ Case 2 (5 million tonnes per annum) pre-tax pre-royalties NPV10 of approximately US$2.63 billion (AVZ’s
60% share is approximately US$1.55 billion) with an estimated IRR greater than 64% based on ±35%
accuracy and including US$78 million in capital contingency.
§
§
§
§
Scope for annual production of approximately 1,100,000 tonnes per annum (tpa) at a minimum of 5.8%
Li2O concentrate from Case 2 throughput of 5Mtpa of pegmatite ore with low strip ratio of 0.55:1 and a
subsequent 24% drop in mining and processing costs from US$120/t to US$91/t.
The Scoping Study yielded an exceptional and industry leading IRR of 64% having used a more
conservative Li2O price (US$750 per tonne) to reflect market changes in the last seven months.
The preferred transport route had been updated and costs were now estimated at US$223/t. The route
and costs will be further refined during the DFS program. However, the scale and quality of the mining
operation, with low mining and processing costs, allowed the project to easily bear the estimated relatively
high transport cost.
F.O.B. Operating costs to Dar-es-Salaam are estimated at approximately US$323 per tonne (t) of
concentrate for 5Mtpa.
§ Metallurgical test work indicated recoveries in excess of 80% are achievable.
§ Capex estimated for Case 2 throughput at approximately US$380 to $400 Million (accurate to ±35% and
includes US$78 million contingency).
(Please refer to the ASX announcement dated 23 May 2019 for the full report on the Scoping Study as described
above)
The Scoping Studies confirmed Manono as the largest undeveloped hard rock lithium project globally in terms of
grade, mine life and expandability, and demonstrated its potential for excellent economic outcomes. AVZ
expects the Manono Project economics can be further improved, especially regarding transport, through
negotiating volume discounts with transport providers and assessing in more detail other available transport
routes and methods, processing, power costs and recovery of tin as a by-product.
For the purpose of ASX Listing Rule 5.19.2, the Company confirms in the subsequent public report that all the
material assumptions underpinning the production target, or the forecast financial information derived from a
production target, in the initial public report referred to in rule 5.16 or rule 5.17 (as the case may be) continue to
apply and have not materially changed.
The Company confirms that it is not aware of any new information or data that materially affects the information
included in the original Scoping Study market announcement (9 October 2018), the Updated Scoping Study
market announcement (19 November 2018) and 5Mtpa Study Further Strengthens the Economic Potential market
announcement (23 May 2019) and, that all material assumptions and technical parameters underpinning the
estimates in the relevant market announcement continue to apply and have not materially changed.
AVZ Minerals Limited | 9
Roche Dure - Mineral Resource
Roche Dure - Mineral Resource
Roche Dure - Mineral Resource
On 2 August 2018, AVZ announced a maiden Mineral Resource for the Roche Dure
pegmatite at the Manono Project of 259.9Mt grading 1.63% Li2O (spodumene). This
confirmed Manono’s potential to become a world leader in the global lithium market.
On 2 August 2018, AVZ announced a maiden Mineral Resource for the Roche Dure
On 2 August 2018, AVZ announced a maiden Mineral Resource for the Roche Dure
pegmatite at the Manono Project of 259.9Mt grading 1.63% Li2O (spodumene). This
pegmatite at the Manono Project of 259.9Mt grading 1.63% Li2O (spodumene). This
confirmed Manono’s potential to become a world leader in the global lithium market.
confirmed Manono’s potential to become a world leader in the global lithium market.
On 30 November 2018, following completion of additional drilling, AVZ announced an
On 30 November 2018, following completion of additional drilling, AVZ announced an
updated Mineral Resource for the Roche Dure pegmatite of 400.4Mt at 1.66% Li2O
updated Mineral Resource for the Roche Dure pegmatite of 400.4Mt at 1.66% Li2O
contained within approximately 95% of the total strike of the Roche Dure pegmatite.
contained within approximately 95% of the total strike of the Roche Dure pegmatite.
This represented a:
This represented a:
On 30 November 2018, following completion of additional drilling, AVZ announced an
updated Mineral Resource for the Roche Dure pegmatite of 400.4Mt at 1.66% Li2O
contained within approximately 95% of the total strike of the Roche Dure pegmatite.
This represented a:
§ 54.1% increase in total Mineral Resources from 259.9Mt to 400.4Mt grading
§ 54.1% increase in total Mineral Resources from 259.9Mt to 400.4Mt grading
§ 54.1% increase in total Mineral Resources from 259.9Mt to 400.4Mt grading
1.66% Li2O (spodumene) containing 6.64 million tonnes of lithium oxide (Li2O),
1.66% Li2O (spodumene) containing 6.64 million tonnes of lithium oxide (Li2O),
1.66% Li2O (spodumene) containing 6.64 million tonnes of lithium oxide (Li2O),
300kt of tin as cassiterite grading 750ppm Sn and 13,200 tonnes of Tantalum
300kt of tin as cassiterite grading 750ppm Sn and 13,200 tonnes of Tantalum
300kt of tin as cassiterite grading 750ppm Sn and 13,200 tonnes of Tantalum
grading 33ppm Ta (Tantalum);
grading 33ppm Ta (Tantalum);
grading 33ppm Ta (Tantalum);
§ 117% increase in Measured Resources from 43.0Mt to 93.5Mt grading 1.69%
§ 117% increase in Measured Resources from 43.0Mt to 93.5Mt grading 1.69%
§ 117% increase in Measured Resources from 43.0Mt to 93.5Mt grading 1.69%
Li2O, 811ppm Sn and 34ppm Ta; Indicated Resources of 96.3Mt grading
Li2O, 811ppm Sn and 34ppm Ta; Indicated Resources of 96.3Mt grading
Li2O, 811ppm Sn and 34ppm Ta; Indicated Resources of 96.3Mt grading
1.64% Li2O, 759ppm Sn and 34ppm Ta;
1.64% Li2O, 759ppm Sn and 34ppm Ta;
1.64% Li2O, 759ppm Sn and 34ppm Ta;
In addition to Sn, Ta and Li2O, potentially deleterious elements like Fe2O3 and P2O5 were
In addition to Sn, Ta and Li2O, potentially deleterious elements like Fe2O3 and P2O5 were
estimated at an average grade of only 0.99% Fe2O3 and 0.30% P2O5 respectively,
estimated at an average grade of only 0.99% Fe2O3 and 0.30% P2O5 respectively,
which are some of the lowest reported grades when compared to other ASX-listed hard
which are some of the lowest reported grades when compared to other ASX-listed hard
rock deposits.
rock deposits.
In addition to Sn, Ta and Li2O, potentially deleterious elements like Fe2O3 and P2O5 were
estimated at an average grade of only 0.99% Fe2O3 and 0.30% P2O5 respectively,
which are some of the lowest reported grades when compared to other ASX-listed hard
rock deposits.
Category
Category
Category
Measured
Measured
Measured
Indicated
Indicated
Indicated
Inferred
Inferred
Inferred
Total
Total
Tonnes
Tonnes
(Millions)
(Millions)
Tonnes
(Millions)
Li2O
Li2O
%
%
Li2O
%
93.5
93.5
93.5
96.3
96.3
96.3
210.7
210.7
210.7
1.69
1.69
1.69
1.64
1.64
1.64
1.65
1.65
1.65
Sn
Sn
ppm
ppm
Sn
ppm
811
811
811
759
759
759
719
719
719
Ta
Ta
ppm
ppm
Ta
ppm
Fe2O3
Fe2O3
%
%
Fe2O3
%
P2O5
P2O5
%
%
P2O5
%
SG
SG
SG
34
34
34
34
32
32
34
34
32
0.94
0.94
0.94
0.97
0.97
0.97
1.02
1.02
1.02
0.32
0.32
0.32
0.30
0.30
0.30
0.29
0.29
0.29
2.74
2.74
2.74
2.73
2.73
2.73
2.75
2.75
2.75
400.4
400.4
1.66
1.66
750
750
33
33
0.99
0.99
0.30
0.30
2.74
2.74
Total
2.74
Table 1: Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 30 November 2018
Table 1: Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 30 November 2018
400.4
1.66
0.99
0.30
750
33
Table 1: Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 30 November 2018
AVZ Minerals Limited | 10
AVZ Minerals Limited | 10
AVZ Minerals Limited | 10
Roche Dure - Mineral Resource
On 2 August 2018, AVZ announced a maiden Mineral Resource for the Roche Dure
pegmatite at the Manono Project of 259.9Mt grading 1.63% Li2O (spodumene). This
confirmed Manono’s potential to become a world leader in the global lithium market.
On 30 November 2018, following completion of additional drilling, AVZ announced an
updated Mineral Resource for the Roche Dure pegmatite of 400.4Mt at 1.66% Li2O
contained within approximately 95% of the total strike of the Roche Dure pegmatite.
This represented a:
§ 54.1% increase in total Mineral Resources from 259.9Mt to 400.4Mt grading
1.66% Li2O (spodumene) containing 6.64 million tonnes of lithium oxide (Li2O),
300kt of tin as cassiterite grading 750ppm Sn and 13,200 tonnes of Tantalum
grading 33ppm Ta (Tantalum);
§ 117% increase in Measured Resources from 43.0Mt to 93.5Mt grading 1.69%
Li2O, 811ppm Sn and 34ppm Ta; Indicated Resources of 96.3Mt grading
1.64% Li2O, 759ppm Sn and 34ppm Ta;
In addition to Sn, Ta and Li2O, potentially deleterious elements like Fe2O3 and P2O5 were
estimated at an average grade of only 0.99% Fe2O3 and 0.30% P2O5 respectively,
which are some of the lowest reported grades when compared to other ASX-listed hard
rock deposits.
Category
Tonnes
(Millions)
Li2O
%
Sn
ppm
Ta
ppm
Fe2O3
%
P2O5
%
SG
Measured
Indicated
93.5
96.3
1.69
811
0.94
0.32
2.74
1.64
759
0.97
0.30
2.73
Inferred
210.7
1.65
719
1.02
0.29
2.75
Total
400.4
1.66
750
0.99
0.30
2.74
34
34
32
33
Table 1: Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 30 November 2018
AVZ Minerals Limited | 10
Review of Operations
On 8 May 2019, the Manono Project was confirmed as the largest Measured and Indicated Lithium Resource in
the World. The upgraded Mineral Resource reported 269Mt of Measured and Indicated Resource with grades of
1.65% Li2O, 816ppm Sn and 36ppm Ta. The highlights of the upgraded JORC Mineral Resource were:
§
A 41.7% increase in combined Measured and Indicated Resources, up from 189.8Mt to 269.0 Mt grading
1.65% Li2O, 816 ppm Sn and 36 ppm Ta
§ Overall tonnage remained unchanged but the Mineral Resource confidence improved significantly with
67% of total Mineral Resources now classified as Measured & Indicated, up from 47% previously
§
§
Improved Resource category provided further certainty to production schedules & financial modelling for
the 5Mtpa Scoping Study due for completion in the near term
Reduction in average Fe2O3 content (a potentially deleterious element) from 0.99% to 0.96% Fe2O3
§ Drilling at Roche Dure was now completed, with the exception of geotechnical and hydrogeological drilling
and future resource drilling from the pit floor once de-watered
§
The reported Measured and Indicated Lithium Resource of 269Mt at 1.65% Li2O also included tin and
tantalum at 816ppm Sn (220kt Sn in cassiterite) and 36ppm Ta (9.6kt Ta as Ta2O5)
§ Confidence in the Tin and Tantalum Resource, combined with anticipated metallurgical test work, should
allow tin and tantalum production to be included in future financial modelling of the Manono Project
This Mineral Resource included assay data from 86 drill holes on 1,600m of strike length, and geological data from
a further five drill holes (Figure 2), to enable interpretation of a geological model. Drill holes MO18DD001-
MO18DD83 were completed in 2018 and four holes were drilled in 2017.
Figure 2. Schematic of Drill Hole Locations at Roche Dure used in the Resource Estimation and Classification Categories at 590m elevation
AVZ Minerals Limited | 11
A total of 27,466m of drilled diamond core was used in the Mineral
Resources estimate. The Mineral Resource of 400Mt with an
A total of 27,466m of drilled diamond core was used in the Mineral
average grade of 1.65% Li2O (spodumene) is categorised into
Resources estimate. The Mineral Resource of 400Mt with an
Measured, Indicated and Inferred Mineral Resources as shown in
average grade of 1.65% Li2O (spodumene) is categorised into
Table 2.
Measured, Indicated and Inferred Mineral Resources as shown in
Table 2.
A total of 27,466m of drilled diamond core was used in the Mineral
Resources estimate. The Mineral Resource of 400Mt with an
average grade of 1.65% Li2O (spodumene) is categorised into
Measured, Indicated and Inferred Mineral Resources as shown in
Table 2.
Category
Category
Category
Measured
Measured
Measured
Indicated
Indicated
Indicated
Inferred
Inferred
Inferred
Total
Total
Total
Tonnes
(Millions)
Tonnes
(Millions)
Tonnes
(Millions)
107
107
107
162
162
162
131
131
131
400
400
400
Li2O
Li2O
%
Li2O
%
%
1.68
1.68
1.68
1.63
1.63
1.63
1.66
1.66
1.66
1.65
1.65
1.65
Sn
ppm
Sn
ppm
Sn
ppm
836
836
836
803
803
803
509
509
509
715
715
715
Ta
ppm
Ta
ppm
Ta
ppm
Fe2O3
Fe2O3
%
Fe2O3
%
%
36
36
36
36
36
36
30
30
30
34
34
34
0.93
0.93
0.93
0.96
0.96
0.96
1.00
1.00
1.00
0.96
0.96
0.96
P2O5
P2O5
%
P2O5
%
%
0.31
0.31
0.31
0.29
0.29
0.29
0.28
0.28
0.28
0.29
0.29
0.29
Table 2
Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 8 May 2019
Table 2 Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 8 May 2019
Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 8 May 2019
Table 2
increased
increased
Receipt of the last drill hole assay data and inclusion in the new
level of
resource modelling has significantly
Receipt of the last drill hole assay data and inclusion in the new
confidence in the central portion of the Roche Dure pegmatite given
resource modelling has significantly
level of
the significant conversion of Inferred Resources to Indicated and
confidence in the central portion of the Roche Dure pegmatite given
Indicated Resources to Measured; an increase of some 41.7%. Only
the significant conversion of Inferred Resources to Indicated and
Measured and Indicated Resources can be converted to mineable
Indicated Resources to Measured; an increase of some 41.7%. Only
reserves under the JORC Code (2012).
Measured and Indicated Resources can be converted to mineable
reserves under the JORC Code (2012).
Receipt of the last drill hole assay data and inclusion in the new
resource modelling has significantly
level of
confidence in the central portion of the Roche Dure pegmatite given
the significant conversion of Inferred Resources to Indicated and
Indicated Resources to Measured; an increase of some 41.7%. Only
Measured and Indicated Resources can be converted to mineable
reserves under the JORC Code (2012).
increased
the
the
the
AVZ Minerals Limited | 12
AVZ Minerals Limited | 12
AVZ Minerals Limited | 12
A total of 27,466m of drilled diamond core was used in the Mineral
Resources estimate. The Mineral Resource of 400Mt with an
average grade of 1.65% Li2O (spodumene) is categorised into
Measured, Indicated and Inferred Mineral Resources as shown in
Table 2.
Category
Tonnes
(Millions)
Li2O
%
Sn
ppm
Ta
ppm
Fe2O3
%
P2O5
%
Measured
107
1.68
836
0.93
0.31
Indicated
162
1.63
803
0.96
0.29
Inferred
131
1.66
509
1.00
0.28
Total
400
1.65
715
0.96
0.29
Table 2
Roche Dure Main Pegmatite Mineral Resource at a 0.5% Li2O cut-off as at 8 May 2019
36
36
30
34
Receipt of the last drill hole assay data and inclusion in the new
resource modelling has significantly
increased
the
level of
confidence in the central portion of the Roche Dure pegmatite given
the significant conversion of Inferred Resources to Indicated and
Indicated Resources to Measured; an increase of some 41.7%. Only
Measured and Indicated Resources can be converted to mineable
reserves under the JORC Code (2012).
AVZ Minerals Limited | 12
Review of Operations
Carriere de l’Este
At the exciting new Carriere de l’Este Project in the northern Manono Sector, six diamond drillholes spaced on
sections that were 200 metres apart and a minimum of 100 metres between holes were drilled in the December
quarter. The wide spacing of the holes was to determine:
§
§
§
the presence of spodumene across the orebody;
the continuity of the pegmatite to the SSW beneath cover and along strike from the original due diligence
hole MODD17001 drilled in July 2017 and;
the orientation of the orebody if possible.
The core from the six holes was cut in mid-December and the samples were prepared and sent to Perth for assay.
Carriere de l’Este is a standalone project that is located approximately 5.6 kilometres along strike from Roche Dure
in the northern Manono Sector.
The results from the six wide spaced reconnaissance drill holes received so far indicated the possibility of another
significant lithium deposit with shallow high-grade zones greater than 2.0% Li2O within wider zones of well
mineralised spodumene bearing pegmatite. Results included five individual samples with grades greater than 4%
Li2O with the highest value being from hole CD18DD006 from 181 to 182 metres downhole reporting 4.65% Li2O.
Figure 3: Location of completed diamond drill holes and high grade intercepts
AVZ Minerals Limited | 13
Figure 4: CD18DD006. 181 – 182m 4.65% contained Li2O
Figure 5: Close up of core from 181 to 182 metres. Very coarse spodumene throughout photo is out of focus
Results confirm continuity of the Carriere de l’Este pegmatite under alluvial cover and shallow dipping high
grade intersections present within wider zones of well mineralised spodumene pegmatite.
(Refer to full drilling results announcement on the ASX dated 19 February 2019 and 5 March 2019)
AVZ Minerals Limited | 14
Review of Operations
Metallurgical Sampling
Positive Preliminary Metallurgical Test Work.
During the first half of the year, initial metallurgical test work was
completed on coarse assay reject material from holes MO17DD001 and
MO17DD002. The simple spodumene mineralogy of the Roche Dure
pegmatite responds well to a range of industry standard concentration
techniques.
Initial “mineral characterisation” investigations of the Roche Dure
Pegmatite, supports the potential for high value mineralisation within the
Roche Dure pegmatite. Roche Dure Pegmatite is essentially homogenous
and spodumene confirmed as the lithium mineral species present within
the pegmatite.
The mean concentrations of deleterious elements are low with 0.1% F,
0.3% P2O5 and 0.4% Fe2O3 and should allow the Manono concentrate to
trade at a premium to other products on the market.
Figure 5: Rock Chip Sample collected showing white spodumene
(the large, long prism to right of the blue pen) in a quartz feldspar matrix
AVZ Minerals Limited | 15
The initial metallurgical test work demonstrated the Roche Dure prospect at the Manono Lithium Project could
produce up to 6.3% Li2O DMS concentrate (+3.35mm) using standard metallurgical laboratory test standards.
The concentrate specification showed the material is potentially suitable for supply of a chemical grade concentrate
to the growing lithium battery market.
An upgrade in specification is possible through further metallurgical test work.
Following this, five dedicated wide diameter (PQ sized) holes were drilled into the Roche Dure orebody to give
wide-spaced coverage across the orebody. This intact core weighing approximately 13 tonnes was packed and
shipped in a sea container for transport to the Nagrom metallurgical laboratory in Perth, Western Australia.
The metallurgical test regime in Perth will gather information required for the optimal recovery of the spodumene,
as well as the physical rock characteristics needed for the process plant design, especially the front-end
comminution circuit. Additionally, there will be a series of tests developed to estimate the likely tin and tantalum
recovery from the ore which will allow AVZ to quantify the future credits to be recovered from the tin and tantalum
production.
In May 2019, the 13 tonnes bulk metallurgical sample from Roche Dure arrived safely at the Nagrom Laboratory
in Perth after quarantine clearance from AQIS in Fremantle.
Competent Person’s Statement
The information in this report that relates that relates to geology and the exploration results is based on information compiled
by Mr. Michael Cronwright, a Competent Person whom 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 was a full-time
employee of The MSA Group Pty Ltd. Mr Cronwright 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.
Cronwright consents to the inclusion in the report of the matters based on his information in the form and context in which it
appears.
The Mineral Resource estimate has been completed by Mrs Ipelo Gasela (BSc Hons, MSc (Eng)) who is a geologist with 14
years’ experience in mining geology, Mineral Resource evaluation and reporting. She is a Senior Mineral Resource Consultant
for The MSA Group (an independent consulting company), is registered with the South African Council for Natural Scientific
Professions (SACNASP) and is a Member of the Geological Society of South Africa (GSSA). Mrs Gasela 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. Mrs Ipelo consents to the inclusion in the report of the matters based on her
information in the form and context in which it appears.
AVZ Minerals Limited | 16
Review of Operations
Corporate
Fully Funded to Final Investment Decision at the Manono Lithium and Tin Project
In February 2019, AVZ successfully raised A$15 million before costs through a combination of a Share Purchase
Plan and Placement (“Capital Raising”). The Capital Raising was completed at 3.8 cents per share. The Placement
was cornerstone by new strategic investor Lithium Plus and existing strategic investor Huayou Cobalt Group with
further strong support from Australian and global institutions as well as sophisticated investors.
AVZ welcomed the new strategic investment by Lithium Plus who subscribed for $3 million in the Placement for an
initial 3.46% interest in the Company. Zhejiang Huayou Cobalt Co., Ltd (SHA:603799, Mkt Cap US$4.5bn) through
its group company Huayou International Mining (Hong Kong) Limited, (Huayou Cobalt Group) continued its support
of AVZ Minerals by subscribing for $1 million in the Placement to maintain a 9.40% interest in the Company.
Funds from the Placement and SPP will be used to execute the Company’s strategy to fast-track the Manono
Lithium and Tin Project towards production. The Company expects the funding to assist in achieving its goal of
delivering the Definitive Feasibility Study for the Manono Project by Q1 2020.
Patersons Securities Limited acted as Lead Manager to the Placement.
Equity Stake Increase in the Manono Project
On 24 June 2019, AVZ announced it had executed a Share Sale Purchase Agreement (“Agreement”) with
Dathomir Mining Resources SARL (“Dathomir”) to increase AVZ’s equity in the Manono Lithium and Tin Project
(Licence PR13359). Following ongoing discussions over the last few months, Dathomir agreed to sell a 5% equity
share in Dathcom Mining SA (“Dathcom”) to AVZ for a total consideration of US$5,500,000. Dathcom holds 100%
of the Manono Lithium and Tin Project concession.
Under this Agreement, the purchase represented a highly accretive transaction for AVZ shareholders with minimal
upfront payment. The first tranche payment of US$500,000 was to be paid within 14 days of execution and the
balance of the consideration could be paid at any time within a period of 36 months from execution of the
Agreement.
At the completion of the transaction, AVZ’s equity interest in the Project licence increased to 65%, representing
an NPV10 value added, based on the recent 5Mtpa Scoping Study of some US$130M to approximately US$1.68Bn
for AVZ’s 65% equity interest (based on ±35% accuracy and including US$78M in capital contingency).
An Extraordinary General Meeting of Dathcom was convened in August 2019 and shareholders approved the sale
of the additional equity within Dathcom to AVZ.
Strategic Relationship with Huayou Cobalt Group
In June 2019, AVZ entered into a strategic relationship with Zhejiang Huayou Cobalt Co. Ltd (SHA:603799, Mkt
Cap US$4.5bn) through its group company Huayou International Mining (Hong Kong) Limited, (“Huayou Cobalt
Group”).
AVZ Minerals Limited | 17
Under the agreement, AVZ will be able to draw on Huayou Cobalt Group’s experience in the DRC and mainland
China to assist AVZ in completing the Definitive Feasibility Study for the Manono Lithium and Tin Project in the
Democratic Republic of Congo (DRC). Huayou will also be able to provide advice and assistance with respect to
project financing, offtake financing, strategic services, EPCM and cost effective transport of product to final
recipients.
Huayou Cobalt Group is one of the world’s largest manufacturers of cobalt chemicals for use in batteries and has
extensive in-country experience with a number of established cobalt mining and processing operations within the
DRC. Huayou is also a 9.40% shareholder in AVZ.
The strategic relationship has been designed to promote the following between AVZ and Huayou Cobalt Group:
§ Discussions to advance Manono to production including, but not limited to, the Definitive Feasibility Study;
project financing; off-take and EPCM; and
§ Consideration of any other ways in which a relationship between the two parties may be beneficial for all
stakeholders.
The strategic relationship agreement is non-binding and non-exclusive.
Board and Management Changes
In July 2018, AVZ announced the appointment of Mr Graeme Johnston as a Technical Director and Mr Leonard
Math as CFO and Company Secretary (replacing Mathew O’Hara).
The Board was further strengthened in May 2019 with the appointment of Mr Peter Huljich as Non-Executive
Director. Mr Huljich has over 25 years’ experience in legal, natural resources and banking sectors with a particular
expertise in capital markets, mining, commodities and African related matters. He has worked in London for
several prestigious investment banks, including Goldman Sachs, Barclays Capital, Lehman Brothers and
Macquarie Bank with a focus on Commodities and Equity and Debt Capital Markets. He has extensive on-the-
ground African mining, oil and gas and infrastructure experience as the Senior Negotiator and Advisor for Power,
Mining and Infrastructure at Industrial Promotion Services, the global infrastructure development arm of the Aga
Khan Fund for Economic Development (AKFED). Mr Huljich holds Bachelor of Commerce and an LLB from the
University of Western Australian and is a Graduate of the Securities Institute of Australia with National Prizes in
Applied Valuation and Financial Analysis. He is also a graduate of the AICD Company Directors Course.
During the year, the management team in Dathcom Mining SA (60% owned subsidiary by AVZ Minerals) was also
strengthened with the appointment of Mr Serge Ngandu as Director of Corporate Affairs. Mr Ngandu is a
metallurgist with 34 years experience in the African mining industry covering various commodities including PGMs,
uranium and base metals as well as in the design, commissioning and operation of mineral processing plants. He
was formerly a Director of Hatch – Industrial Minerals (2004-06), Project Director for Areva Resources Centrafrique
(2008-12), and a Business Development Executive for Worley Parsons from 2012 where he was focussed on
project development opportunities in Africa, including the DRC.
From 2016, he was a Partner focusing on business development and metallurgy for DRC at Madini Metals, a
specialist African mine developer and operator.
AVZ Minerals Limited | 18
Directors’ Report
DIRECTORS’ REPORT
Your directors submit their report on the consolidated entity consisting of AVZ Minerals Limited (AVZ) and the
entities it controlled (the Group or the ‘consolidated entity’) for the financial year ended 30 June 2019. 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
Rhett Brans
Peter Huljich
Graeme Johnston
Guy Loando
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 1 May 2019)
Technical Director (appointed 30 July 2018)
Non-Executive Director (resigned 1 May 2019)
2. Company Secretary
Leonard Math was appointed joint Company Secretary on 9 July 2018 and 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 $5,263,570 (2018: $5,616,964).
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.
AVZ Minerals Limited | 19
6.
Review of Operations
Refer pages 5 – 18 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 and
deliver a positive Definitive Feasibility Study for the Manono Lithium and Tin Project. The Company may conduct
some exploration activity on the Company’s existing mineral projects, including diamond and RC drill program
focussed on resource definition drilling at the Manono Project.
Due to the inherent risky nature of the Company’s activities, the Directors are unable to comment on the likely
results or success of this strategy. The Company’s activities are also subject to numerous risks, mostly outside the
Board’s and management’s control. These risks can be specific to the Company, generic to the mining industry
and generic to the stock market as a whole. The key risks, expressed in summary form, affecting the Company
and its future performance include but are not limited to:
§ geological and technical risk posed to exploration and commercial exploitation success;
§
§
security of tenure including licence renewal (no assurance can be given that the licence renewals and licence
applications that have been submitted will be successful), and inability to obtain regulatory or landowner
consents;
change in commodity prices and market conditions;
§ environmental and occupational health and safety risks;
§
§
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.
AVZ Minerals Limited | 20
Directors’ Report
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 12 July 2019, 13,950,000 Performance Rights vested after the following milestones were met:
§ 100Mt Measured JORC Mineral Resource
§ 150Mt Measured Indicated JORC Mineral Resource
In addition, 3,000,000 fully paid ordinary shares were issued in lieu of marketing and corporate services to be
provided to the Company.
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.
9. Likely Developments and Expected Results of Operations
The group will continue its mineral exploration and development activity at and around its principal exploration
projects, being the Manono Lithium and Tin Project and the Manono Extension Project.
10. Environmental Regulation
The group is aware of its environmental obligations with regards to its exploration activities and ensures that it
complies with all regulations when carrying out any exploration work including with the national Greenhuse and
Energy Reporting Act 2007.
AVZ Minerals Limited | 21
11.
Information on Directors and Company Secretaries (including Director’s interests at the date of this report)
Nigel Ferguson
Managing Director
Qualifications
BSc (University of Tasmania), FAusIMM, MAIG
Experience
Mr Ferguson is a geologist with 31 years of experience having worked in
senior management positions for the past 18 years in a variety of
locations. He has experience in the exploration and definition of precious
and base metal mineral resources throughout the world, including DRC,
Zambia, Tanzania, Saudi Arabia, South East Asia and Central America.
He has been active in the DRC since 2004 in gold and base metals
exploration and resource development.
Interest in Securities
Fully Paid Ordinary Shares
Performance Rights
40,478,070
9,000,000
Directorships in last 3 years
Okapi Resources Ltd (since 29 May 2017)
AJN Resources Inc. (since 12 June 2018)
Hongliang Chen
Non-Executive Director
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)
AVZ Minerals Limited | 22
Directors’ Report
Graeme Johnston
Technical Director (appointed 30 July 2018)
Qualifications
Experience
BSc in Geology (Glasgow University), M.Sc in Structural Geology (Royal School
of Mines, London)
Mr Johnston is a geologist with over 31 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 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 Project.
Interest in Securities
Fully Paid Ordinary Shares
Performance Rights
5,849,737
8,100,000
Directorships in last 3 years
Nil
Rhett Brans
Non-Executive Director
Qualifications
Dip. Engineering (Civil)
Experience
Mr Brans is an experienced director and civil engineer with over 46 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
Fully Paid Ordinary Shares 1,963,158
Performance Rights
4,500,000
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)
AVZ Minerals Limited | 23
Peter Huljich
Non-Executive Director (appointed 1 May 2019)
Qualifications
BCom/LLB, GD-AppFin, GAICD
Experience
Mr Huljich has over 25 years’ experience in the legal, natural resources and
banking sectors with a particular expertise in capital markets, mining,
commodities and African related matters. He has worked in London for
several prestigious investment banks, including Goldman Sachs, Barclays
focus on
Capital, Lehman Brothers and Macquarie Bank with a
Commodities and Equity and Debt Capital Markets and has extensive on-
the-ground African mining, oil and gas and infrastructure experience as the
Senior Negotiator and Advisor for Power, Mining and Infrastructure at
Industrial Promotion Services, the globall infrastructure development arm
of the Aga Khan Fund for Economic Development (AKFED) whilst resident
in Nairobi, Kenya. Mr Huljich holds Bachelor of Commerce and an LLB
from the University of Western Australian and is a Graduate of the
Securities Institute of Australia with National Prizes in Applied Valuation and
Financial Analysis. Mr Huljich is also a graduate of the AICD Company
Directors Course.
Interest in Securities
Performance Rights 4,500,000*
* Subject to shareholder approval
Directorships in last 3 years
Kogi Iron Limited (since 7 May 2019)
Leonard Math
CFO & Company Secretary (appointed 9 July 2018)
Qualification
B.Com, CA
Experience
Mr Math a Chartered Accountant with more than 14 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.
Interest in Securities
Fully Paid Ordinary Shares
Performance Rights
630,487
4,000,000
AVZ Minerals Limited | 24
Directors’ Report
Former Directors and Company Secretary:
Guy Loando
Non-Executive Director (resigned 1 May 2019)
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.
Mathew O’Hara
Company Secretary (resigned 4 September 2018)
Qualification
B.Com, CA
Experience
Mr O’Hara is a Chartered Accountant and holds a Bachelor of Commerce
Degree from University of Western Australia.
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
Managing Director
Rhett Brans
Peter Huljich
Non-Executive Director
Non-Executive Director
Graeme Johnston
Technical Director
Leonard Math
Hongliang Chen
Guy Loando
CFO and Company Secretary
Non-Executive Director
Non-Executive Director
Appointment date:
2 February 2017
5 February 2018
1 May 2019
30 July 2018
9 July 2018
21 August 2017
21 August 2017
AVZ Minerals Limited | 25
(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 appointed Managing Director effective 5 February 2018 and
receives 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.
The other service or consulting agreements in place with key management personnel are summarised
below:
Mr Johnston - Technical Director
§ No term of agreement
§ Receives a monthly fee of $20,833 (plus GST)
§ 6-month termination period unless there is a breach or unremedied continued neglect of the terms of
the agreement in which there is a one-month termination period.
AVZ Minerals Limited | 26
Directors’ Report
Mr Math - Chief Financial Officer and Company Secretary
§ No term of agreement.
§ Receives a monthly fee of $13,000 (plus GST).
§ 6-month termination period unless there is a breach or unremedied continued neglect of the terms of
the agreement in which there is a one-month termination period.
At this stage, due to the size of the Company, no remuneration consultants have been used. The Board’s
remuneration policies are outlined below:
Fixed Remuneration
All executives receive a base cash salary which is based on factors such as length of service and experience
as well as other fringe benefits. If entitled, all executives also receive a superannuation guarantee
contribution required by the government, which is currently 9.50% and do not receive any other retirement
benefits.
Short-term Incentives (STI)
Under the group’s current remuneration policy, executives can from time to time receive short-term
incentives in the form of cash bonuses. No short term incentives were paid in the current financial year. The
Board is responsible for assessing whether Key Performance Indicators (“KPI’s”) are met. The Board
considers market rates of salaries for levels across the Group, which have been based on industry data
provided by a range of employment agencies.
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.
Performance rights
Performance rights in AVZ Minerals Limited are granted by the Board under the AVZ Mineral Limited Rights
Share Trust (RST). Performance rights are issued for no consideration and vest according to a set of
performance criteria being met. The vesting of the performance rights is determined at the Board’s
discretion.
AVZ Minerals Limited | 27
ii.
Non-Executive Directors
The Board’s 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 $650,000 per
annum which was approved by shareholders at the 30 November 2018 annual 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-executives may receive options or performance rights subject to shareholder approval, to
further align directors’ interests with shareholders.
(b) Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration
Performance rights issued during the years are detailed in Note 22 of the financial statements.
Voting and comments made at the Company’s 2018 Annual General Meeting
At the 2018 Annual General Meeting the Company remuneration report was passed by the requisite majority of
shareholders.
AVZ Minerals Limited | 28
Directors’ Report
(c) Details of Key Management Personnel Remuneration
2019
Name
Short term employee benefits
Salary
$
Consulting fees
$
Post
employment
Share based
payments
Total
$
$
$
Remuneration
consisting of
share based
payments
%
Fixed
remuneration
%
Executive Director
Nigel Ferguson
Technical Director
Graeme Johnston1
-
300,000
-
338,7395
638,739
53
47
-
225,333
-
519,511
744,844
70
30
Non-Executive Directors:
Hongliang Chen
-
-
-
-
-
Rhett Brans
54,795
139,500
5,205
194,4156
393,915
Peter Huljich3
Guy Loando4
-
-
10,000
45,000
-
-
26,145
36,145
-
45,000
-
49
72
-
-
51
28
100
CFO & Company Secretary
Leonard Math2
-
113,935
-
179,701
293,636
61
39
TOTAL
54,795
833,768
5,205
1,258,511
2,152,279
1: Graeme Johnston was appointed on 30 July 2018.
Leonard Math was appointed on 9 July 2018.
2:
Peter Huljich was appointed on 1 May 2019. No fees were paid to Mr Huljich during the year however fees of $10,000 due to him have
3:
been accrued.
4:
5:
6:
Guy Loando resigned on 1 May 2019.
This figure is reduced by $200,364 relating to 12,000,0000 performance rights which were cancelled during the period.
This figure is reduced by $75,136 relating to 4,500,000 performance rights which were cancelled during the period.
AVZ Minerals Limited | 29
2018
Name
Short term employee
benefits
Salary Consulting fees
Post
employment
Share based
payments
Total
Remuneration
consisting of
share based
payments
Fixed
remuneration
$
$
$
$
$
%
%
Executive Director:
Klaus Eckhof1
Nigel Ferguson2
Guy Loando3
Non-Executive Directors:
Hongliang Chen3
-
-
-
-
Rhett Brans4
Patrick Flint5
22,410
90,594
180,000
257,000
55,000
-
-
-
Gary Steinepreis6
-
18,500
-
-
-
-
2,129
8,606
-
-
180,000
626,510
883,510
-
-
40,085
-
-
55,000
-
64,624
99,200
18,500
-
71
-
-
62
-
-
100
29
-
38
100
100
TOTAL
113,004
510,500
10,735
666,595
1,300,834
1:
2:
3:
4:
5:
6:
Klaus Eckhof resigned on 26 June 2018.
Nigel Ferguson commenced as Managing Director on 5 February 2018, prior to that date he was an Executive Director.
Hongliang Chen and Guy Loando were both appointed on 21 August 2017.
Rhett Brans was appointed on 5 February 2018.
Patrick Flint resigned on 6 March 2018.
Gary Steinepreis resigned on 21 August 2017.
Share-based compensation
The number of performance rights granted to and vested by key management personnel as part of compensation
during the year ended 30 June 2019 are set out below:
Name
Nigel Ferguson
Rhett Brans
Graeme Johnston
Peter Huljich
Leonard Math
Number of rights granted during
the year 2019
Number of rights vested during
the year 2019
12,000,000
6,000,000
8,000,000
4,500,0002
4,000,000
3,000,0001
1,500,0001
4,000,0001
-
1,000,0001
1: The vesting condition of defining a JORC measured and indicated resource of 150mt with at least 1% Li2O was met during the period.
2: These Performance Rights have been granted and issued as at 30 June 2019 but are subject to Shareholder approval.
AVZ Minerals Limited | 30
Directors’ Report
Values of rights over ordinary shares granted, exercised and lapsed for key management personnel as part of
compensation during the year ended 30 June 2019 are set out below:
Name
Nigel Ferguson
Rhett Brans
Graeme Johnston
Peter Huljich
Leonard Math
Value of rights granted
during the year
$
Value of rights vested
during the year
960,000
480,000
640,000
378,000
320,000
240,000
120,000
410,000
-
80,000
(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 | 31
Ordinary shares
Balance at the start
of the year
Received as
remuneration
Acquired
(Disposed)
Other movements
Balance at the
end of the year
2019
Key Management Personnel:
Nigel Ferguson1
16,083,333
Hongliang Chen
-
Guy Loando4
Rhett Brans2
Graeme Johnston3
Peter Huljich
Leonard Math
40,000,000
-
-
-
-
-
-
-
-
-
-
-
1,394,737
20,000,000
37,478,070
-
-
-
(40,000,000)
-
-
463,158
-
463,158
394,737
1,455,000
1,849,737
-
630,487
-
-
-
630,487
1: Nigel Ferguson acquired 1,000,000 shares from the market in November 2018 and an additional 394,737 shares at the February 2019 SPP capital raising.
20,000,000 performance rights vested during the year.
2: Rhett Brans acquired 200,000 shares in December 2018 and an additional 263,158 shares at the February 2019 SPP capital raising.
3: Graeme Johnston held 1,455,000 prior to becoming a Director. He acquired an additional 394,737 shares at the February 2019 SPP capital raising.
4: Guy Loando held 40,000,000 shares at the date of his resignation.
(v)
Performance 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, apart from those issued as a result of
performance rights vesting.
Performance rights
2019
Balance at the
start of the
year
Granted
during the
year
Exercised/
Cancelled during
the year
Balance at the
end of the year
Performance
Rights vested
% Vested
Key Management Personnel
Nigel Ferguson
32,000,000
12,000,0003
(32,000,000)
12,000,000
3,000,0004
25%
Hong Liang Chen
Guy Loando
Rhett Brans
-
-
-
-
-
-
-
-
4,500,000
6,000,0003
(4,500,000)
6,000,000
1,500,0004
Graeme Johnston
4,100,0001
8,000,0003
12,100,000
4,000,0004
-
-
25%
33%
-
Peter Huljich
Leonard Math
-
-
4,500,0002
4,000,0003
4,500,000
-
4,000,000
1,000,0004
25%
AVZ Minerals Limited | 32
Directors’ Report
1: 4,100,000 performance rights were held at date of appointment as Director.
2: These Performance Rights have been granted and issued as at 30 June 2019. The issue of these
Performance Rights is subject to Shareholder approval. These Performance Rights will vest in three equal
tranches as follows:
i.
ii.
Tranche 1 – Completion of Feasibility Study on the Manono Project;
Tranche 2 – Execution of an offtake agreement for at least 25% of the product from Manono Project;
and
Tranche 3 – Completion of Manono project financing.
iii.
3: These Performance Rights were issued on 3 December 2018 following shareholders’ approval at
2018 AGM on 30 November 2018 and will vest in four equal tranches as follows:
i.
Tranche 1 – Definition of a 150Mt measured and indicated mineral resource in accordance with JORC
Guidelines with a minimum 1% Li2O being delineated within the Manono Project area;
Tranche 2 – Completion of Feasibility Study on the Manono Project;
Tranche 3 – Execution of an offtake agreement for at least 25% of the product from Manono Project;
and
Tranche 4 – Completion of Manono project financing.
ii.
iii.
iv.
4: The vesting conditions for these Performance Rights were met during 2019 upon the Company defining a
JORC measured and indicated resource of 150mt with at least 1% Li2O.
The valuation inputs for the Performance Rights granted to key management personnel during the year are shown
below:
Number
Granted
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price on
Valuation Date
($)
Total Fair
Value
($)
% Vested
Issued on 3 December 2018
Tranche 1
7,500,000
30/11/2018
Tranche 2
7,500,000
30/11/2018
Tranche 3
7,500,000
30/11/2018
Tranche 4
7,500,000
30/11/2018
Nil
Nil
Nil
Nil
03/12/2021
0.08
600,000
100%
03/12/2021
0.08
600,000
03/12/2021
0.08
600,000
03/12/2021
0.08
600,000
Issued on 3 June 2019
Tranche 1-3
4,500,000
3/6/2019
Nil
03/06/2022
0.084
378,000
1. A probability of 20% was applied to Tranches 2 to 4 on the likelihood of the vesting condition being met
within the period.
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.
AVZ Minerals Limited | 33
-
-
-
-
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
Nigel Ferguson
Hongliang Chen
Guy Loando
Rhett Brans
Graeme Johnston
Peter Huljich
14.
Insurance of Officers
Directors Meetings
Number Eligible to Attend
Meetings Attended
4
4
3
4
4
1
4
-
2
4
4
1
During the financial year, AVZ Minerals Limited paid a premium of $41,634 (2018: $36,693) to insure the directors
and secretary of the Company and its controlled entities.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be
brought against the officers in their capacity as officers of entities in the Group, and any other payments arising
from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities
that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else or to cause detriment to the company.
It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those
relating to other liabilities.
15. 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
24-May-2020
28-Feb-2020
5-Mar-2021
5-Sep-2021
5-Mar-2022
3.0 cents
203,649,049
30.5 cents
30,000,000
4.75 cents
5.7 cents
6.65 cents
-
-
-
-
-
5,000,000
5,000,000
5,000,000
-
-
203,649,049
30,000,000
4,000,000
-
-
1,000,000
5,000,000
5,000,000
No option holder has any right under the options to participate in any other share issue of the Company or any
other entity.
AVZ Minerals Limited | 34
Directors’ Report
16. Proceedings on behalf of the Company
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings.
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 financial report. This Independence
Declaration is set out on page 36 and forms part of this directors’ report for the year ended 30 June 2019.
18. Non-Audit Services
During the years ended 30 June 2019 and 30 June 2018 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
27 September 2019
AVZ Minerals Limited | 35
Auditor’s Independence Declaration
AVZ Minerals Limited | 36
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Profit or Loss and Other Comprehensive Income
FINANCIAL
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
AVZ Minerals Limited | 37
AVZ Minerals Limited | 37
AVZ Minerals Limited | 37
FINANCIAL
STATEMENTS
AVZ Minerals Limited | 37
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 30 June 2019
Revenue from continuing operations
3
117,562
169,121
Consolidated
Note
2019
$
2018
$
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
(1,172,828)
(817,423)
(2,336,178)
(90,688)
(181,344)
(64,464)
(300,281)
-
(417,926)
-
(783,615)
(823,343)
(2,433,570)
(4,129)
(331,474)
(36,693)
(130,745)
(96,605)
(469,111)
(676,800)
(5,263,570)
(5,616,964)
-
-
8
5
Loss after income tax for the year
(5,263,570)
(5,616,964)
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
3,092,572
-
3,092,572
1,702,335
676,800
2,379,135
Total comprehensive loss for the year
(2,170,998)
(3,237,829)
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
(5,144,410)
(119,160)
(5,263,570)
(5,564,666)
(52,298)
(5,616,964)
(2,677,637)
506,639
(2,170,998)
(3,627,804)
(389,975)
(3,237,829)
Basic and diluted loss per share attributable to owners of AVZ Minerals
Limited (cents per share)
16
(0.26)
(0.34)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
AVZ Minerals Limited | 38
Consolidated Statement of Financial Position
As at 30 June 2019
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
Provisions
Financial liabilities
Total Current Liabilities
Non-Current Liabilities
Financial liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Reserves
Accumulated losses
Consolidated
Note
2019
$
2018
$
6
7
8
9
10
11
8,750,641
16,336,516
207,100
88,900
8,957,741
16,425,416
74,184,250
49,690,995
1,348,416
954,577
75,532,666
50,645,572
84,490,407
67,070,988
278,946
3,423
1,315,880
-
2,138,357
2,027,027
2,420,726
3,342,907
11
5,074,286
1,022,043
5,074,286
1,022,043
7,495,012
4,364,950
76,995,395
62,706,038
12
14
81,097,191
66,973,014
9,630,639
4,827,688
(25,347,888)
(20,203,478)
Capital and reserves attributable to owners of AVZ Minerals Ltd
65,379,942
51,597,224
Non-controlling interests
20
11,615,453
11,108,814
Total Equity
76,995,395
62,706,038
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 39
8
3
0
,
6
0
7
,
2
6
)
0
7
5
,
3
6
2
,
5
(
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7
5
,
2
9
0
,
3
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9
7
,
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6
)
0
6
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,
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(
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,
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,
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,
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)
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(
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,
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,
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-
7
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,
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,
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Consolidated Statement of Cash Flows
For the Year Ended 30 June 2019
Consolidated
Note
2019
$
2018
$
Cash Flows from Operating Activities
Payments to suppliers and employees (inclusive of GST)
Interest received
(2,316,115)
(2,128,571)
110,744
169,121
Net cash outflow from operating activities
17
(2,205,371)
(1,959,450)
Cash Flows from Investing Activities
Payments for exploration and evaluation
Payments for property, plant and equipment
Payment of deferred consideration
(16,749,727)
(12,283,811)
(639,950)
(1,085,323)
(2,115,075)
(1,963,469)
Net cash outflow from investing activities
(19,504,752)
(15,332,603)
Cash Flows from Financing Activities
Proceeds from issue of shares and other equity securities
Proceeds from exercise of options
Share issue transaction costs
15,000,000
30,000,000
190,000
3,576,273
(1,065,823)
(1,136,836)
Net cash inflow from financing activities
14,124,177
32,439,437
Net (decrease)/increase in cash and cash equivalents
(7,585,946)
15,147,384
Exchange rate adjustments
71
46
Cash and cash equivalents at the start of the year
16,336,516
1,189,086
Cash and cash equivalents at the end of the year
6
8,750,641
16,336,516
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
AVZ Minerals Limited | 41
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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 $5,263,570 (2018: $5,616,964) and experienced net cash outflows from
operating activities of $2,205,371 (2018: $1,959,450), net outflows from investing activities of $19,504,752 (2018:
$15,332,603) and net cash inflows from financing activities of $14,124,177 (2018: $32,439,437) for the year ended 30
June 2019.
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 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 | 42
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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 2019 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.
During 30 June 2017, AVZ Minerals Limited acquired 60% of the issued shares of Dathcom Mining SAS by the issue of
shares and cash. Under the terms of shareholders agreements the Company is at this stage solely responsible for
funding exploration activities and therefore has control over the day to day activities and economic outcomes of
Dathcom Mining SAS. Future changes to the shareholders agreements may impact on the ability of the Company to
control Dathcom Mining SAS. During 30 June 2019, the Company acquired additional 5% of the issued shares of
Dathcom Mining SAS by cash.
(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 a Black-
Scholes option pricing model, calculation of the fair value involves estimations of the relevant inputs to the pricing model.
AVZ Minerals Limited | 43
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(e)
Financial Instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Financial Assets
Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction
price (excludes estimates of variable consideration) as defined in AASB 15, as the contracts of the Group do not contain
significant financing components. Impairment losses are recognised based on lifetime expected credit losses in profit
or loss.
Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial
recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due
to their short term nature. A provision for impairment is established based on 12-month expected credit losses unless
there has been a significant increase in credit risk when lifetime expected credit losses are recognised. The amount of
any provision is recognised in profit or loss.
Financial Liabilities and Equity
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
All other loans including convertible loan notes are initially recorded at fair value, which is ordinarily equal to the proceeds
received net of transaction costs. These liabilities are subsequently measured at amortised cost, using the effective
interest rate method.
Effective Interest Rate Method
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
(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 recognised when or as the Group transfers control of goods or services to a customer at the amount to
which the Group expected to be entitled. If the consideration promised includes a variable amount, the Group
estimates the amount of consideration to which it will be entitled.
AVZ Minerals Limited | 44
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(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.
(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.
AVZ Minerals Limited | 45
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
(l)
Summary of Significant Accounting Policies (continued)
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.
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.
AVZ Minerals Limited | 46
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(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) 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.
(s)
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.
AVZ Minerals Limited | 47
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(s)
Foreign currency translation (continued)
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.
(t)
Share based payments
Equity settled transactions
The Group provides benefits to employees (including senior executives) of the Group in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares (equity-settled
transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using an appropriate valuation
technique, further details of which are given in the remuneration report.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked
to the price of the shares of AVZ Minerals Limited.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:
(i)
(ii)
the extent to which the vesting period has expired; and
the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made
for the likelihood of market performance conditions being met as the effect of these conditions is included in
the determination of fair value at grant date. The Statement of Profit or Loss and Other Comprehensive Income
charge or credit for a period represents the movement in cumulative expense recognised as at the beginning
and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional
upon a market condition.
AVZ Minerals Limited | 48
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(t)
Share based payments (continued)
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not
been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-
based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if
they were a modification of the original award, as described in the previous paragraph.
(u)
New accounting standards and interpretations
Adoption of new and revised standards
In the year ended 30 June 2019, the Directors have reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to the Company and effective for the current reporting periods beginning on or
after 1 July 2018.
As a result of this review, the Group has initially applied AASB 9 and AASB 15 from 1 July 2018.
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and makes changes to a number of
areas including classification of financial instruments, measurement, impairment of financial assets and hedge
accounting model. Financial instruments are classified as either held at amortised cost or fair value. Financial
instruments are carried at amortised cost if the business model concept can be satisfied. All equity instruments are
carried at fair value and the cost exemption under AASB 139 which was used where it was not possible to reliably
measure the fair value of an unlisted entity has been removed. Equity instruments which are non-derivative and not held
for trading may be designated as fair value through other comprehensive income (FVOCI). Previously classified
available-for-sale investments, now carried at fair value are exempt from impairment testing and gains or loss on sale
are no longer recognised in profit or loss.
The AASB 9 impairment model is based on expected loss at day 1 rather than needing evidence of an incurred loss,
this is likely to cause earlier recognition of bad debt expenses. Most financial instruments held at fair value are exempt
from impairment testing.
The Group has applied AASB 9 with the effect of initially applying this standard recognised at the date of initial
application, being 1 July 2018 and has elected not to restate comparative information. Accordingly, the information
presented for 30 June 2018 has not been restated.
There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or
comparative periods.
AVZ Minerals Limited | 49
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
1.
Summary of Significant Accounting Policies (continued)
(u)
New accounting standards and interpretations (continued)
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations and it applies
to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards.
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised,
including in respect of multiple element arrangements. The core principle of AASB 15 is that it requires identification of
discrete performance obligations within a transaction and associated transaction price allocation to these obligations.
Revenue is recognised upon satisfaction of these performance obligations, which occur when control of goods or
services is transferred, rather than on transfer of risks or rewards. Revenue received for a contract that includes a
variable amount is subject to revised conditions for recognition, whereby it must be highly probable that no significant
reversal of the variable component may occur when the uncertainties around its measurement are removed.
The Group has adopted AASB 15 using the modified retrospective method of adoption (without practical expedients)
with the effect of initially applying this standard recognised at the date of initial application, being 1 July 2018.
Accordingly, the information presented for 30 June 2018 has not been restated. The effect of the application of AASB
15 has been applied to all contracts at date of initial application.
There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or
comparative periods.
Standards and Interpretations in issue not yet adopted
The Directors have also reviewed all of the new and revised Standards and Interpretations in issue not yet adopted for
the year ended 30 June 2019.
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117:
Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the
requirement for leases to be classified as operating or finance leases.
The main changes introduced by the new Standard are as follows:
•
•
•
•
•
recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12
months of tenure and leases relating to low-value assets);
depreciation of right-of-use assets in line with AASB 116 : Property, Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease
liability using the index or rate at the commencement date;
application of a practical expedient to permit a lessee to elect not to separate non-lease components and
instead account for all components as a lease; and
inclusion of additional disclosure requirements.
AASB 16 is effective from annual reporting periods beginning on or after 1 January 2019. A lessee can choose to apply
the Standard using a full retrospective or modified retrospective approach. Although the Directors anticipate that the
adoption of AASB 16 will impact the Group's financial statements, the Company is still in the process of assessing the
impact.
(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 | 50
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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 (j) and to Note 7 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 for options is determined by an internal valuation
using a Black-Scholes option pricing model. The fair value of Performance Rights is determined by using the underlying share
price at grant date.
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) Deferred consideration
Deferred consideration is required to be paid at any time over a three year period. As such management have made judgements
around the financing component associated with the deferred consideration, and an estimated repayment date to assess the
present value of the deferred consideration.
3.
4.
Revenue
Interest received
Sale of equipment
Total revenue from other revenue
Auditor’s Remuneration
Remuneration of the auditors of the consolidated entity for:
Auditing or reviewing the financial statements:
BDO Audit (WA) Pty Ltd
-
Non-assurance services
Total remuneration of auditors
Consolidated
2019
$
2018
$
110,744
6,818
117,562
169,121
-
169,121
45,405
-
45,405
43,049
-
43,049
AVZ Minerals Limited | 51
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
Income Tax Expense
5.
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the tax rate of 30% (2018: 30%)
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*
Tax losses
Exploration and expenditure
Other
Net deferred tax not recognised
Consolidated
2019
$
2018
$
(5,263,570)
(1,579,071)
(5,616,964)
(1,685,089)
925,518
697,989
-
-
(566)
(43,871)
1,141,719
568,914
-
-
(16,196)
(9,348)
-
-
3,165,963
211,811
-
3,377,774
2,589,953
27,688
-
2,617,641
*The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing
assessable temporary differences.
Cash & Cash Equivalents
Cash & cash equivalents
Cash at bank & in hand
Total cash & cash equivalents
Consolidated
2019
$
2018
$
8,750,641
8,750,641
16,336,516
16,336,516
Cash at bank and in hand
Cash on hand is non-interest bearing. Cash at bank bears interest rates between 0.01% and 2.7% (2018: 0.01% and 2.10%).
Refer to Note 15 for the group’s exposure to interest rate and credit risk.
6.
(a)
(b)
Exploration & Evaluation Expenditure
7.
Exploration and evaluation phase
Opening balance
Acquisition during the year (i)
Exploration costs
Net exchange differences on translation
Impairment expense
Closing balance
Consolidated
2019
$
2018
$
49,690,995
5,860,721
18,833,154
(200,620)
-
74,184,250
34,515,613
-
15,387,344
(115,357)
(96,605)
49,690,995
i. On 24 June 2019, the company announced that it has executed a Share Sale Purchase Agreement with Dathomir
Mining Resources SARL to increase the group’s equity in the Manono Lithium and Tin Project for a total consideration
of US$5,500,000. The total consideration converted to AU$ at 24 June 2019 was AU$5,860,721.
AVZ Minerals Limited | 52
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
Consolidated
2019
$
2018
$
7.
Exploration & Evaluation Expenditure (continued)
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 exploration of the areas of interest, or
alternatively, by their sale.
Property, plant and equipment
8.
Plant and equipment
At cost
Less: accumulated depreciation
Reconciliation
Opening balance
Additions
Disposals
Depreciation expense
Foreign currency translation difference movement
Closing balance
9.
Trade & Other Payables
Current
Trade Payables
Total current trade & other payables
The group’s exposure to liquidity risk is noted in Note 15.
10.
Provisions
Current
Employee Benefits
Total current provisions
The group’s provision for employee benefits represents annual leave payable.
Consolidated
Consolidated
2019
$
2018
$
1,872,271
(523,855)
1,348,416
954,577
641,530
-
(300,281)
52,590
1,348,416
1,085,322
(130,745)
954,577
-
1,085,322
-
(130,745)
-
954,577
Consolidated
2019
$
2018
$
278,946
278,946
1,315,880
1,315,880
Consolidated
2019
$
2018
$
3,423
3,423
-
-
AVZ Minerals Limited | 53
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
11.
Financial Liabilities
Acquisition of a 60% interest in Dathcom Mining SAS on 23 May 2017
Deferred Consideration
Current Liability
Principal
Principal repayments*
Fair value increase/(decrease) on repayment
Transfer between current/non-current
At 30 June
Non-Current Liability
Principal
Transfer between current/non-current
Fair value increase/(decrease)
At 30 June
Total
Consolidated
2019
$
2018
$
2,027,027
(2,115,075)
(78,544)
1,592,048
1,425,456
1,022,043
(1,592,048)
570,005
-
1,425,456
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
*During the year ended 30 June 2019, the company paid US$1,500,000 (A$2,115,075) to La Congolaise D’Exploitation
Miniere SA in deferred consideration under the terms of the Joint Venture Agreement. The key terms of the Joint Venture
Agreement were disclosed in the company’s ASX announcement dated 2 February 2017.
Acquisition of 5% interest in Dathcom Mining SAS on 24 June 2019
Deferred Consideration
Current Liability
Principal
At 30 June
Non-Current Liability
Principal
At 30 June
Total
712,901
712,901
5,074,286
5,074,286
5,787,187
-
-
-
-
-
On 24 June 2019, the Company announced that it had executed a Share Sale Purchase Agreement (“Agreement”) with
Dathomir Mining Resources SARL to increase the Group’s equity in the Manono Lithium and Tin Project for a total
consideration of US$5,500,000. Under the Agreement, the first tranche payment of US$500,000 is to be paid within 14 days
of execution and the balance of the consideration can be paid at any time within 36 months from execution of the 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 2019.
Total Deferred Consideration
Total current liability
Total non-current liability
Total Liability
2,138,357
5,074,286
7,212,643
2,027,027
1,022,043
3,049,070
AVZ Minerals Limited | 54
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
Consolidated
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
Share capital
12.
(a) Share capital
Ordinary shares - fully paid
Total Share Capital
2,287,198,459
2,287,198,459
1,868,461,449
1,868,461,449
81,097,191
81,097,191
66,973,014
66,973,014
(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.
(a) Movements in share capital
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
Opening Balance 1 July 2018
Conversion of Performance Rights
Share Purchase Plan
Placement
Exercise of Listed Options during the year***
Less: Transaction costs arising on share issues
Closing Balance at 30 June 2019
Date
Number of
Shares
$
Fair
Value
$
Total
$
18-Aug-17
31-Aug-17
13-Oct-17
13-Oct-17
2-Feb-18
28-Feb-18
19-Jul-18
25-Feb-19
4-Mar-19
7-Jun-19
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
1,868,461,449
20,000,000
137,250,166
257,486,844
4,000,000
-
2,287,198,459
0.070
0.033
0.070
0.070
0.210
0.250
0.100
0.030
0.038
0.038
0.048
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
66,973,014
5,215,507
9,784,500
190,000
(1,065,830)
81,097,191
*Unlisted options exercisable at $0.10 on or before 15 April 2019
**Listed options exercisable at $0.03 on or before 24 May 2020
***Unlisted Options exercisable at $0.0475 on or before 5 March 2021
AVZ Minerals Limited | 55
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
Expiry date
Exercise
price
(cents)
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
2019
Unlisted
28 Apr 2020
Unlisted
15 Apr 2019
Listed
24 May 2020
Unlisted
5 Mar 2021
Unlisted
5 Sep 2021
Unlisted
5 Mar 2022
2018
Unlisted
28 Apr 2020
Unlisted
15 Apr 2019
Listed
24 May 2020
30.5
10.0
3.0
4.75
5.7
6.65
30.5
10.0
3.0
30,000,000
207,428,573
203,649,049
-
-
-
-
-
-
-
-
-
5,000,000
5,000,000
5,000,000
(4,000,000)
-
-
-
30,000,000
(207,428,573)
-
-
-
-
-
203,649,049
1,000,000
5,000,000
5,000,000
441,077,622
15,000,000
(4,000,000)
(207,428,573)
244,649,049
-
-
30,000,000
-
214,285,714
(6,857,141)
300,001,000
-
(96,351,951)
300,001,000
244,285,714
(103,209,092)
-
-
-
-
30,000,000
207,428,573
203,649,049
441,077,622
14.
Reserves
Other reserves (a)
Foreign currency translation reserve (b)
Total reserves
(a) Other reserves (i)
Opening balance
Unlisted Options issued during the year
Performance Rights issued as remuneration during the year
Less: Conversion of Performance Rights
Closing balance
(b)
Foreign Currency Translation Reserve (ii)
Opening balance
Exchange difference arising on translation of foreign operations
Realisation of foreign currency translation reserve
Closing balance
Nature and purpose of reserves
Consolidated
2019
$
2018
$
6,361,769
3,268,870
9,630,639
4,025,591
802,097
4,827,688
4,025,591
587,718
1,748,460
-
6,361,769
802,097
2,466,773
-
3,268,870
2,469,511
-
1,678,032
(121,952)
4,025,591
(1,187,063)
1,312,360
676,800
802,097
(i) Option reserve
The Share Option Reserve contains amounts received on the issue of options over unissued capital of the company. It 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) 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(r) 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.
AVZ Minerals Limited | 56
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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:
Consolidated
2019
Financial assets
Weighted
Average Interest
Rate
Floating
Interest Rate
Fixed
Interest
%
$
$
Non-
interest
bearing
$
Total
$
Cash and cash equivalents
1.708%
8,750,641
8,750,641
-
-
-
-
8,750,641
8,750,641
Weighted
Average Interest
Rate
Floating
Interest Rate
Fixed
Interest
Non-
interest
bearing
Total
%
$
$
$
$
Consolidated
2018
Financial assets
Cash and cash equivalents
1.538%
16,336,516
16,336,516
-
-
-
-
16,336,516
16,336,516
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 2019 and 30 June 2018, 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.
AVZ Minerals Limited | 57
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
15.
Financial Instruments, Risk Management Objectives and Policies
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
2019 and 30 June 2018, the group’s exposure to foreign currency risk at the end of the reporting period, expressed in
Australian dollar, was as follows:
Cash and cash equivalents
Trade & other receivables - current
Trade and other payables
Financial Liabilities
2019
USD
$
173,370
55,398
228,768
-
7,212,643
7,212,643
2018
USD
$
268,211
4,344
272,555
1,139,996
3,049,070
4,189,066
A reasonably possible strengthening (weakening) of the USD at 30 June 2019 would have affected the measurement
of financial instruments denominated in a foreign currency and affected equity and profit or loss for the Group by the
amounts shown below, expressed in Australian dollar. This analysis assumes all other variables remain constant.
Cash and cash equivalents
Trade & other receivables - current
Trade and other payables
Financial Liabilities
2019
2018
USD
$
+10%
(15,771)
(5,039)
(20,810)
-
(655,755)
(655,755)
USD
$
-10%
15,771
5,039
20,810
-
655,755
655,755
USD
$
+10%
(24,383)
(395)
(24,778)
(98,518)
(277,188)
(375,706)
USD
$
-10%
24,383
395
24,778
98,518
277,188
375,706
(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
cash flows
$
Carrying
amount
liabilities
$
At 30 June 2019
Trade and other
payables
Financial liabilities
At 30 June 2018
Trade and other
payables
Financial liabilities
278,946
-
278,946
-
2,138,357
2,138,357
-
-
-
-
7,129,007
7,129,007
1,315,880
-
-
2,027,027
-
1,022,043
1,315,880
2,027,027
1,022,043
-
-
-
-
-
-
-
-
-
278,946
9,267,364
9,546,310
278,946
9,267,364
9,546,310
1,315,880
3,049,070
4,364,950
1,315,880
3,049,070
4,364,950
AVZ Minerals Limited | 58
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
15.
Financial Instruments, Risk Management Objectives and Policies (continued)
(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
2019
Carrying
Amount
$
Net fair
Value
$
2018
Carrying
Amount
$
Net fair
Value
$
8,750,641
207,100
8,957,741
278,946
2,138,357
5,074,286
7,491,589
8,750,641
207,100
8,957,741
16,336,516
88,900
16,425,416
16,336,516
88,900
16,425,416
278,946
2,138,357
5,074,286
7,495,012
1,315,880
2,027,027
1,022,043
4,364,950
1,315,880
2,027,027
1,022,043
4,364,950
(f)
Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level
of the following fair value measurement hierarchy:
i) Quoted prices in active markets for identical assets or liabilities (level 1)
ii)
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3).
iii)
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.
(a)
Earnings per Share
Earnings/(Loss)
Loss used in the calculation of basic and diluted EPS ($)
Consolidated
2019
$
2018
$
(5,263,570)
(5,616,964)
(b) Weighted average number of ordinary shares (‘WANOS’)
WANOS used in the calculation of basic and diluted earnings per share:
2,017,918,212
1,659,053,738
Basic and diluted loss per share
(0.26)
(0.34)
Diluted earnings per share is equal to basic loss per share as the company is in a loss position.
cents per share cents per share
AVZ Minerals Limited | 59
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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)/Decrease in operating receivables and prepayments
Increase/(Decrease) in trade and other payables
Consolidated
2019
$
2018
$
(5,263,570)
(5,616,964)
300,281
-
2,336,178
417,926
-
5,011
(1,197)
130,745
96,605
2,433,570
469,111
676,800
(49,369)
(99,948)
Net cash outflows from Operating Activities
(2,205,371)
(1,959,450)
Non-cash investing and financing activities
Issue of ordinary shares for capital raising services
-
-
420,000
420,000
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.
Geographical information
All non-current assets are based in the DRC.
19. Commitments and Contingencies
The Company entered into a lease for its office on 1 March 2019 expiring on 28 February 2022.
Office operating lease rentals are payable as follows:
Within one year
After one year but not more than three years
Total operating lease commitments
There are no other commitments or contingent liabilities outstanding at the end of the year.
Consolidated
2019
$
2018
$
67,975
84,865
152,840
-
-
-
AVZ Minerals Limited | 60
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
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(b):
Name of entity
AVZ International Pty Ltd
AVZ Minerals Congo SARL
AVZ Power
Dathcom Mining SA*
Country of
incorporation
Australia
DRC
DRC
DRC
Class
of shares
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding1
2019
100
100
100
60
2018
%
100
100
-
60
1: The proportion of ownership interest is equal to the proportion of voting power held.
* On 16 August 2019, the structure of Dathcom Mining SAS has changed to Dathcom Mining SA
(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
Dathcom Mining SAS
30 June 2019
30 June 2018
Current Assets
Non-current Assets
Total Assets
Current Liabilities
Non-current Liabilities
Total Liabilities
Net Assets/(Liabilities)
Accumulated NCI
122,715
74,176,652
74,299,367
3,042
34,665,203
34,668,245
39,631,122
11,615,453
272,555
38,025,132
38,297,687
1,142,879
16,154,710
17,297,589
21,000,098
11,108,814
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
Consolidated
2019
$
2018
$
888,563
5,205
1,258,511
2,152,279
623,504
10,735
795,116
1,429,355
Details of remuneration disclosures are provided within the audited remuneration report which can be found on
pages 25 to 33 of the Directors’ report.
AVZ Minerals Limited | 61
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
22.
Share Based Payments
Options (a)
Performance Rights (b)
Total share based payments
(a) Options
For the year ended 30 June 2019:
Consolidated
2019
$
587,718
1,748,460
2,336,178
2018
$
275,490
2,158,080
2,433,570
During the year ended 30 June 2019, 15,000,000 unlisted options were issued to Patersons Securities Limited for being an
advisor and underwriter for the February 2019 capital raising. The total fair value of the options was estimated at $587,718 as
at the date of grant using the Black-Scholes model taking into account the terms and conditions upon which the options were
granted.
Number granted
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Exercise price (cents)
Share price at grant date (cents)
Fair value at grant date (cents)
Tranche 1
Tranche 2
Tranche 3
5,000,000
103
1.75
2.13
4.75
6.5
3.78
5,000,000
103
1.72
2.63
5.7
6.5
3.8
5,000,000
110
1.69
3.13
6.65
6.5
4.1
No options were issued to current directors and executives as part of their remuneration during the year. 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 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.
(b) Performance Rights
For the year ended 30 June 2019:
On 24 July 2018, 20,000,000 unlisted Performance Rights were converted into shares when the vesting condition was met.
On 30 November 2018, 35,800,000 unlisted Performance Rights were granted to directors, employees and contractors of the
Company, with the vesting terms as below:
(i)
(ii)
(iii)
(iv)
Tranche 1 – 8,950,000 Performance Rights vested upon the Company defining a 150Mt measured and indicated
mineral resource in accordance with the JORC Guidelines with a minimum 1% Li2O being delineated within the
Manono Project area;
Tranche 2 – 8,950,000 Performance Rights shall vest upon completion of a Feasibility Study on the Manono
Project;
Tranche 3 – 8,950,000 Performance Rights shall vest upon executing an offtake agreement for at least 25% of
the product from Manono Project; and
Tranche 4 – 8,950,000 Performance Rights shall vest upon the completion of the Manono Project financing.
AVZ Minerals Limited | 62
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
22.
Share Based Payments (continued)
(b) Performance Rights (continued)
For the year ended 30 June 2019:
Number
Issued
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price
on Grant
Date ($)
Total Fair
Value ($)
% Vested
Tranche 1
8,950,000
Tranche 2
8,950,000
Tranche 3
8,950,000
Tranche 4
8,950,000
30 Nov-18
30 Nov-18
30 Nov-18
30 Nov-18
Nil
Nil
Nil
Nil
3-Dec-21
3-Dec-21
3-Dec-21
3-Dec-21
0.08
0.08
0.08
0.08
716,000
100%
716,000
716,000
716,000
Nil
Nil
Nil
The share based payments of the above 35,800,000 unlisted Performance Rights were expensed to the statement of profit or
loss and other comprehensive income at a discount of 10% to Tranche 2, 20% to Tranche 3 and 30% to Tranche 4.
On 3 June 2019, 8,000,000 unlisted Performance Rights were issued to a contractor of the Company, with the vesting terms
as below:
(i)
Tranche 1 – 2,000,000 Performance Rights shall vest upon successfully converting the Manono Project licence from
PR to PE and lodgement of the Bankable Feasibility Study with the DRC and Provincial Government;
Tranche 2 – 2,000,000 Performance Rights shall vest on completion and acceptance of the Mining Convention by the
DRC Government, ensure Manono Project licence remains in good standing with the relevant government departments,
Tranche 3 – 4,000,000 Performance Rights shall vest upon the issue of a legally binding exoneration on corporate and
regional tax and import duty on major capital items for a period of 3 years from start-up – in event that the company
secures a longer period a further tranche will be awarded pro-rata, i.e. 6 years a further 2 million.
(ii)
(iii)
Number
Issued
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price
on Grant
Date ($)
Total Fair
Value ($)
% Vested
Tranche 1
2,000,000
3-Jun-19
Tranche 2
2,000,000
3-Jun-19
Tranche 3
4,000,000
3-Jun-19
Nil
Nil
Nil
3-Jun-22
3-Jun-22
3-Jun-22
0.08
0.08
0.08
160,000
160,000
320,000
Nil
Nil
Nil
On 3 June 2019, 3,000,000 unlisted Performance Rights were issued to an employee of the Company, with the vesting terms
as below:
(i)
Tranche 1 – 1,500,000 Performance Rights shall vest upon delivering a positive and definitive transport route(s) for
export of product to be included in the Definitive Feasibility Study – Manono Project and completing the 3 months
probationary period;
Tranche 2 – 1,500,000 Performance Rights shall vest on completion and delivery of a positive Definitive Feasibility Study
– Manono Project and completing the 3 months probationary period.
(ii)
The employee resigned after year end and the Performance Rights were cancelled as a consequence. The fair value of the
options granted was $240,000 based on the share price of $0.08 at grant date.
AVZ Minerals Limited | 63
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
22.
Share Based Payments (continued)
(b) Performance Rights (continued)
For the year ended 30 June 2019:
On 3 June 2019, 4,500,000 unlisted Performance Rights were issued to a director of the Company, with the vesting terms as
below. These Performance Rights are subject to shareholders approval:
(i)
Tranche 1 – 1,500,000 Performance Rights shall vest upon Performance Rights shall vest upon the completion of
Feasibility Study on the Manono Project;
(ii) Tranche 2 – 1,500,000 Performance Rights shall vest executing an offtake agreement for at least 25% of the product
from the Manono Project;
(iii) Tranche 3 – 1,500,000 Performance Rights shall vest upon the completion of the Manono Project financing.
Number
Issued
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price
on Grant
Date ($)
Total Fair
Value ($)
% Vested
Tranche 1
1,500,000
3-Jun-19
Tranche 2
1,500,000
3-Jun-19
Tranche 3
1,500,000
3-Jun-19
Nil
Nil
Nil
3-Jun-22
3-Jun-22
3-Jun-22
0.08
0.08
0.08
120,000
120,000
120,000
Nil
Nil
Nil
The share based payments of the above 4,500,000 unlisted Performance Rights were expensed to the statement of profit or
loss and other comprehensive income at a discount of 10% to Tranche 1, 20% to Tranche 2 and 30% to Tranche 3.
Assumptions on vesting period and expense for Performance Rights issued during year ended 30 June 2019
Total Fair Value
($)
Vesting period
(days)
Expense to 30 June 2019
($)
2,778,000
704,000
640,000
1,095
1,095
1,095
1,203,795
393,201
63,764
Key Management Personnel
Employees
Ongeza Mining
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.
AVZ Minerals Limited | 64
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
22.
Share Based Payments (continued)
(b) Performance Rights (continued)
For the year ended 30 June 2018:
On 6 February 2018, 4,350,000 unlisted Performance Rights were issued to employees of the Company, with the vesting
terms as below:
(i)
Tranche 1 – 1,450,000 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 – 1,450,000 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 – 1,450,000 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.
(ii)
(iii)
(i)
On 15 May 2018, 3,000,000 unlisted Performance Rights were issued to JNS Capital Corp, with the vesting terms as below:
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.
(iii)
(ii)
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;
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 $0.44
or higher for the period commencing 6 months from the date of issue.
(ii)
(iii)
AVZ Minerals Limited | 65
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
22.
Share Based Payments (continued)
(b) Performance Rights (continued)
For the year ended 30 June 2018:
Number
Issued
Grant Date
Exercise
Price
Expiry Date of
Milestone
Achievements
Underlying
Share Price
on Grant
Date ($)
Total Fair
Value ($)
%
Vested
Employees
5,000,000
12-Oct-17
JNS Capital Corp
3,000,000
13-Dec-17
Employees - Tranche 1
1,450,000
6-Feb-18
Employees - Tranche 2
1,450,000
6-Feb-18
Employees - Tranche 3
1,450,000
6-Feb-18
JNS Capital Corp - Tranche 1
1,000,000
15-May-18
JNS Capital Corp - Tranche 2
1,000,000
15-May-18
JNS Capital Corp - Tranche 3
1,000,000
15-May-18
Airguide - Tranche 1
2,500,000
16-May-18
Airguide - Tranche 2
2,500,000
16-May-18
Airguide - Tranche 3
2,500,000
16-May-18
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
12-Oct-18
0.125
625,000
Nil
31-Mar-18
0.210
630,000
100%
5-Feb-21
0.240
194,010
5-Feb-21
0.240
182,555
5-Feb-21
0.240
175,740
15-May-19
0.160
29,000
15-May-19
0.160
23,500
15-May-19
0.160
20,600
30-Nov-21
0.155
189,750
30-Nov-21
0.155
176,500
30-Nov-21
0.155
168,750
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Assumptions on vesting period and expense for Performance Rights issued during year ended 30 June 2018
Total Fair Value
($)
Vesting period
(days)
Expense to
30 June 2018
($)
Employee
JNS Capital Corp
Employee - Tranche 1, 2 and 3
JNS Capital Corp - Tranche 1, 2 and 3
Airguide - Tranche 1, 2 and 3
625,000
630,000
552,305
73,100
535,000
365
Already vested
1,095
365
1,095
625,000
525,000
72,632
9,213
18,605
AVZ Minerals Limited | 66
Notes to the Consolidated Financial Statements for the year ended 30 June 2019
23.
Parent Entity Information
(a)
Assets
Current assets
Non-current assets
Total assets
(b)
Liabilities
Current liabilities
Non-Current Liabilities
Total liabilities
Net Assets
(c)
Equity
Contributed equity
Accumulated losses
Reserves
Total equity
(d)
Total Comprehensive loss for the year
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Company
2019
$
2018
$
8,660,943
60,933,316
69,594,259
16,152,860
37,744,914
53,897,774
2,349,584
5,074,286
7,423,870
2,200,028
1,022,043
3,222,071
62,170,389
50,675,703
81,097,191
66,973,014
(25,288,571)
(20,047,413)
6,361,769
3,750,102
62,170,389
50,675,703
(4,965,669)
(4,910,310)
-
-
(4,965,669)
(4,910,310)
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 12 July 2019, 13,950,000 Performance Rights vested after the following milestones were met:
§
§
100Mt Measured JORC Mineral Resource
150Mt Measured Indicated JORC Mineral Resource
In addition, 3,000,000 fully paid ordinary shares were issued in lieu of marketing and corporate services to be provided to the
Company.
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 | 67
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 37 to 67 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 2019 and of its performance for the
financial year ended on that date; and
(b) the audited remuneration disclosures set out on pages 25 to 33 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
27 September 2019
AVZ Minerals Limited | 68
Independent Auditor’s Report
AVZ Minerals Limited | 69
AVZ Minerals Limited | 70
Independent Auditor’s Report
AVZ Minerals Limited | 71
AVZ Minerals Limited | 72
ASX Additional Information
AVZ Minerals Limited | 73
ASX Additional Information
Shareholding
The distribution of members and their holdings of equity securities in the holding company as at 7 October 2019 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
Fully Paid Ordinary Shares
Number of Holders
Number of Shares
152
1,614
1,409
4,451
2,140
9,766
19,989
5,258,090
11,384,653
179,264,566
2,108,221,161
2,304,148,459
Holders of less than a marketable parcel: 3,354 with a total of 18,585,104 shares amounting to 0.81% of the Issued Capital.
Twenty Largest Shareholders
The names of the twenty largest ordinary fully paid shareholders are as follows:
Shareholder
Number
% Held of Issued
Ordinary Capital
Citicorp Nominees PL
JP Morgan Nominees Australia PL
Lithium Plus Pty Ltd
HSBC Custody Nominees Australia Ltd
BNP Paribas Nominees PL
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