ANNUAL REPORT 2018
Find out more www.azureminerals.com.au
CORPORATE DIRECTORY
ABN 46 106 346 918
Directors
Mr. Peter Ingram
Chairman
Mr. Anthony Rovira
Managing Director
Dr Wolf Martinick
Non Executive Director
Company Secretary
Mr. Brett Dickson
Solicitors
K & L Gates
Level 32
44 St Georges Terrace
Perth WA 6000
Bankers
Commonwealth Bank of Australia Limited
Share Register
Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
Perth WA 6000
Telephone: 1300 787 272
Auditors
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: 08 6382 4600
Stock Exchange Listing
Shares AZS
WWW.AZUREMINERALS.COM.AU
CONTENTS
Chairman’s Letter .........................................................................................................................2
Review of Operations ...................................................................................................................3
Directors’ Report ...........................................................................................................................8
Corporate Governance Statement .......................................................................................... 21
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income ........ 27
Consolidated Statement of Financial Position ............................................................... 28
Consolidated Statements of Changes in Equity ............................................................. 29
Consolidated Statement of Cash Flows .......................................................................... 30
Notes to the Consolidated Financial Statements ......................................................... 31
Directors’ Declaration ....................................................................................................... 54
Independent Auditor’s Report ........................................................................................ 55
Auditor’s Declaration of Independence ......................................................................... 58
ASX Additional Information ....................................................................................................... 59
Chairman’s Letter
Dear Fellow Shareholders,
I have much pleasure in presenting to you the Annual Report of Azure Minerals Limited for the year ending 30 June 2018.
Last year I commented that your company had achieved considerable success over the previous two years, with significant silver-gold
discoveries at the Alacrán project and some interesting deep exploration results achieved at the Promontorio Project. This track record
of success has continued in 2018, with significant progress made towards completion of a Scoping Study / Preliminary Economic
Assessment (PEA) at the newly acquired Oposura zinc-lead-silver project in Sonora State in Mexico.
Work at Oposura has included the drilling-up of a maiden Mineral Resource Estimate of 2.9 million tonnes at an average grade of 5.0%
zinc, 2.8% lead and 17g/t silver. In addition, the company has undertaken extensive geological, metallurgical, mining, engineering and
environmental studies. Reporting of the results of the PEA is expected in September 2018.
Your directors are excited at the possibility of taking the Oposura high-grade base metal project into production at the earliest
possible time.
At the Alacrán Project, Teck Resources exercised its right to earn back into the project and to assume operational responsibility for the
Project. Teck has undertaken a systematic program of geological, geochemical and geophysical exploration followed by drilling. The
results of this work have been encouraging and Teck has continued with its program, including further drilling which is underway at
the time of writing. We look forward to seeing the results of this work during the current exploration year.
Preliminary drilling at the Sara Alicia high-grade cobalt-gold and copper-zinc-silver project has confirmed the presence of massive and
disseminated base and precious metal mineralisation. A decision on the future of this project is under review.
The Company is currently seeking joint venture partners or buyers for the Promontorio base and precious metal project, which,
following the success at Oposura, is considered to be a non-core asset.
Your Company continues to identify and acquire advanced exploration projects in Mexico, where the Company has developed
considerable operational expertise and where the Company is highly regarded by the Mexican Government, local communities
and industry.
The Review of Operations (page 3) provides greater detail of these results.
I would like to take this opportunity to thank our Management and staff, both here in Perth and in our Mexican office. Once again they
have demonstrated high levels of competence both technically and administratively. I believe the current and following years will be
even more productive and successful.
I also thank you, our shareholders, for your continued support of the Company without which we would not be able to pursue these
exciting projects. Finally, I would like to thank my fellow Directors for their support, encouragement and enthusiasm in implementing
our strategies for success.
Your Directors encourage you to attend the Annual General Meeting and support the various resolutions to be put to the meeting on
30 November 2018.
Yours sincerely
Peter A J Ingram
Chairman
2
Azure Minerals Limited Annual Report 2018 Review of Operations
Overview
The past year has been very positive for Azure Minerals. In 2017, the Company set a clear strategy to secure advanced-stage, high-
grade projects with near-term development potential. This resulted in the Company purchasing our new flagship project, the zinc-
lead-silver Oposura Project, and also the cobalt-gold Sara Alicia project. These high-quality precious and base metal projects are both
located in northern Mexico.
Azure conducted a high-level assessment of Oposura which confirmed that historical exploration had outlined a zone of high-grade
zinc, lead and silver mineralisation and the project was purchased in August 2017. The Company adopted a strong development
approach with Oposura and within the first year had fast-tracked resource delineation drilling and mine development studies,
resulting in the publication of a maiden Mineral Resource in July and a Scoping Study which is expected to be released in September
2018. The Oposura Mineral Resource contains 2.9 million tonnes @ 5.0% zinc and 2.8% lead, for contained metal of 146,000 tonnes of
zinc and 82,000 tonnes of lead. The mineralised body remains unconstrained in several directions and Azure expects that additional
drilling will expand the Mineral Resource.
The Sara Alicia gold-cobalt project was acquired shortly after Oposura and offered Azure a low-cost yet highly-prospective opportunity
to diversify the Company’s commodity mix and enter into the battery metal sector. Azure’s drilling focused on a near-surface zone of
massive sulphides containing high grades of gold and cobalt mineralisation. The program delivered one of the world’s highest-grade
cobalt intercepts in 2017/18, returning 26.2m @ 9.50g/t Au & 1.26% Co, which included bonanza intercepts of 12.6m @ 16.8g/t Au and
6.35m @ 3.57% Co.
Lastly, work continues at the Alacrán Project through Azure’s partner and project operator Minera Teck S.A. de C.V. (“Teck”), a
100%-owned subsidiary of Canada’s largest diversified resource company, Teck Resources Limited. Teck continue to advance its
exploration programs for porphyry copper and epithermal gold-silver deposits at Alacrán and have committed to a second year
of exploration, with drilling planned in the second half of 2018. The second year represents the halfway mark of the total four-year
program, which upon completion will entitle Teck to 51% of Alacrán by sole-funding US$10 million of exploration expenditure and
making cash payments to Azure totalling US$500,000.
Figure 1: Plan showing locations of Azure Minerals’ projects in Mexico
3
Review of Operations
Oposura Project - (AZS 100% Ownership)
In August 2017, Azure announced the acquisition of 100% ownership of the Oposura zinc-lead-silver project, for a purchase price of
US$1,500,000 plus a Net Smelter Return royalty of 2.5% on future production also payable to the vendor, Grupo Minero Puma. Oposura
is an advanced-stage project where historical drilling and exploratory underground mine development identified a substantial body
of high grade, massive sulphide-hosted, zinc, lead and silver mineralisation.
Within the first year Azure made significant progress towards a mine development decision. The Company completed a successful
first-pass round of resource drilling and published the maiden mineral resource for the project. Mining and processing studies have
been significantly advanced and a Scoping Study / Preliminary Economic Assessment is expected to be published in September 2018.
Mineral Resource
Azure completed a resource drilling program comprising 157 diamond drill holes totalling 10,126m, and announced the following
Mineral Resource (refer to ASX announcement dated 4 July 2018 and appendices to this Annual Report):
Table 1: Oposura Mineral Resource Estimate
Indicated
Inferred
Total
Tonnes
Mt
2.1
0.8
2.9
Zn
%
5.3
4.3
5.0
Pb
%
2.9
2.5
2.8
Zn+Pb
%
8.2
6.8
7.8
Ag
g/t
17.2
16.5
17.0
Significantly, 75% of the contained metal is classified in the Indicated Mineral Resource category, providing confidence in the continuity
of grade and widths of the mineralised zones and enabling detailed mine production studies to be undertaken.
Mineralisation remains open in several directions, demonstrating potential for future expansion of this Mineral Resource. Further
drilling will be undertaken in the forthcoming year to upgrade the resource classifications, expand the Mineral Resource and explore
the wider property.
Figure 2: Oposura project area with Mineral Resource outlines
4
Azure Minerals Limited Annual Report 2018
Review of Operations
Scoping Study / Preliminary Economic Assessment
The Company is currently completing a Preliminary Economic Assessment (PEA) study into the development of a mining and processing
operation at Oposura. While meeting the requirements for a Scoping Study as defined under ASX/JORC standards, the PEA will be
produced in the Canadian NI43-101 report format to enhance off-take marketing and project funding opportunities in North America,
Europe and Asia.
The study has identified a variety of potential mining and processing alternatives. This optionality includes open pit and underground
mining scenarios, and the production and sale of direct shipping ore, Dense Media Separation product, separate zinc and lead-silver
concentrates, and/or a hybrid of these options.
The PEA report is expected to be completed and published in September 2018.
Geology & Mining Studies
The Oposura mineralised horizon outcrops over approximately two kilometres on the eastern, southern and western slopes of the
Oposura mountain and displays sub-horizontal to shallow northerly dips. Mineral Resource definition drilling defined two separate
mineralised zones - East Zone and West Zone.
The sub-horizontal dip of the mineralised zones results in vertical thickness being very similar to true thickness. The vertical thicknesses
of individual sulphide mineralisation lenses average 7m in East Zone and 3m in West Zone, with maximum vertical thicknesses of 20m
in East Zone and 10m in West Zone.
The overall geometry of East Zone and West Zone mineralisation is favourable for extraction using a combination of conventional
mechanised open pit and underground mining techniques. The resources can be easily accessed from surface, providing exceptional
mine scheduling flexibility and optionality, and mining could be undertaken concurrently by both open pit and underground methods
in both East Zone and West Zone. Distinct areas of higher grade mineralisation are present that could be scheduled to suit economic
circumstances and/or product marketing options.
East Zone and West Zone are separated by the approximately 500m-wide Central Zone, which has been only lightly tested by drilling
during the 1960s and 1970s. Several historical drill holes intersected zinc and lead sulphide mineralisation within the targeted
mineralised horizon. Azure will undertake drilling to test the Central Zone which, if successful, has the potential to expand the Mineral
Resource.
Metallurgical Studies
The Oposura deposit comprises massive zinc and lead sulphide mineralisation which can be upgraded by flotation of the sulphide
grains to produce separate zinc and lead concentrates.
Metallurgical testwork was undertaken on the Oposura mineralisation to identify favourable processing routes, produce commercial
grade zinc and lead concentrates, identify potential processing or contaminant issues, and to identify opportunities for optimisation.
Advanced studies comprised Dense Media Separation testwork followed by separate staged and locked cycle sulphide flotation tests.
Dense Media Separation testwork
In some parts of the Oposura deposit, thick mineralised intersections comprise bands of high-grade zinc and lead sulphide
mineralisation separated by intervals of barren host rock material. Azure’s studies indicate that some of these thick mineralised
zones may be more suitable to a “bulk” mining approach rather than “selective” mining, thereby reducing unit operating costs and
maximising resource recovery.
Dense Media Separation (DMS) is a low-cost beneficiation technology that is widely used in the mining and mineral processing
industry. It utilises differences in density between liberated particles of mineralisation and waste by rejecting low density waste and
concentrating high density mineralisation.
Testwork was undertaken to assess the suitability of DMS technology to increase the grade of material entering the milling circuit
by rejecting waste rock while retaining mineralised material. DMS is most effective in upgrading ore when there are distinct density
differences between mineralised material and waste rock, as is the case at Oposura.
Initial DMS testwork was conducted on individual drill hole intersections of varying combined zinc and lead grades, and zinc to lead
grade ratios to determine the density at which the DMS circuit could optimise ore recovery and waste rejection. Follow-up DMS
testwork was then conducted on a bulk master sample averaging 6.4% Zn, 4.2% Pb and 28.8g/t Ag that was prepared from the drill
core of eleven Mineral Resource drill holes.
This testwork demonstrated that an upgrade in both zinc and lead grades of approximately 34% could be achieved while realising an
overall recovery for both metals of 95%.
These positive results demonstrate that crushing, screening and DMS processing prior to a standard sulphide flotation treatment
support the option of utilising DMS technology at Oposura.
5
Review of Operations
Oposura Project - (AZS 100% Ownership) (Continued)
Flotation testwork
Staged flotation testwork was conducted on individual drill hole intersections of varying combined zinc and lead grades and zinc
to lead grade ratios. Follow-up staged and locked cycle flotation tests were then conducted on the bulk master composite used for
the DMS testwork. The laboratory split the bulk master composite into several sub-samples to allow multiple batch and locked cycle
flotation tests to be undertaken.
The staged flotation tests conducted on the bulk master composite were used to optimise primary and secondary grind sizes, flotation
times and reagent regimes for the separate zinc and lead concentrates. A locked cycle test was then conducted on the bulk master
composite to more closely simulate a continuously operating flotation circuit.
The result of the locked cycle test was a zinc concentrate grading 57.2% with a zinc recovery of 85.6% and a lead concentrate grading
61.4% at a lead recovery of 84.0%. Silver recovery into the lead concentrate was 67.1% at a concentrate grade of 323.8 g/t Ag.
Multi-element assays were conducted on the separate zinc and lead concentrates produced from the locked cycle test and results
indicate that deleterious elements were not present at levels that would cause concern or penalties from smelters.
The metallurgical testwork program has successfully demonstrated that clean, commercial-grade concentrates can be produced at
high metallurgical recoveries, and thereby has eliminated a potential major project risk.
Sara Alicia Project - (AZS 100% Ownership)
Following acquisition of the Sara Alicia property in August 2017, Azure commenced a strategic exploration campaign which was
predominantly focused on surface exploration and drilling. This early stage work confirmed the presence of a body of high-grade gold
and cobalt mineralisation.
Two diamond drilling programs totalling 19 holes for 1,607m were undertaken, with numerous holes intersecting wide zones of high-
grade gold and cobalt mineralisation (refer to ASX announcements dated 27 November 2017, 7 December 2017 and 31 May 2018),
including the following highlights:
Table 2: High Grade Drill Intersections from Sara Alicia
Gold
Cobalt
DSA-01: 11.40m @ 3.26g/t Au from 32.40m
DSA-01: 5.50m @ 0.13% Co from 32.40m
DSA-03: 26.20m @ 9.50g/t Au from 0.60m
Including: 12.60m @ 16.80g/t Au from 13.20m
DSA-03: 26.20m @ 1.26% Co from 0.60m
Including: 6.35m @ 3.57% Co from 15.50m
DSA-04: 19.65m @ 4.95g/t Au from 14.85m
DSA-04: 4.70m @ 0.11% Co from 20.00m
DSA-06: 13.70m @ 3.57g/t Au from 12.20m
DDA-06: 20.6m @ 0.13% Co from 3.90m
DSA-07: 3.75m @ 8.08g/t Au from 11.80m
DSA-14: 5.95m @ 0.74% Co from 0.0m
DSA-14: 3.65m @ 8.41g/t Au from 0.0m
DSA-14: 24.95m @ 0.31% Co from 9.15m
DSA-14: 19.60m @ 8.65g/t Au from 10.65m
DSA-15: 9.50m @ 0.48% Co from 3.80m
DSA-15: 8.80m @ 6.20g/t Au from 6.10m
DSA-16: 16.20m @ 0.33% Co from 9.15m
The high-grade cobalt mineralisation is hosted within a shoot of massive and semi-massive sulphides that outcrops near the top of
the Sara Alicia hill. Drilling and visual inspection of the mineralisation exposed within the old artisanal mine workings indicate that the
shoot plunges at a shallow angle towards the northwest, while also remaining unconstrained to the east and west.
Very high grades of gold mineralisation are hosted within this sulphide-rich shoot and drilling also confirmed that lower grade gold is
widespread in the altered rocks of the surrounding skarn system.
Azure considers that this sulphide-rich mineralisation may represent a feeder zone sourced from an underlying porphyry that extends
upwards into the overlying limestone sequence, altering it to skarn. The Company believes that there is good potential that further
drilling will expand the mineralised zone, confirming the presence of a substantial body of gold and cobalt mineralisation.
6
Azure Minerals Limited Annual Report 2018 Review of Operations
Alacrán Project - (AZS 100% Ownership, Teck Earning 51%)
Project operator Minera Teck S.A. de C.V. (“Teck”), a 100%-owned subsidiary of Canada’s largest diversified resource company, Teck
Resources Limited, is currently earning back an interest in Alacrán.
Work programs are conducted on a calendar year basis, with 2017 and 2018 representing the first two years in a total four-year period
comprising the first Option. Teck is entitled to earn back a 51% share of the project by sole-funding US$10 million of exploration
expenditure and making cash payments to Azure totalling US$500,000 within this four year period.
Upon reaching a 51% interest in the project, Teck may exercise the second Option to further increase its interest to 65% by sole
funding an additional US$5 million in expenditures over a further two years and making cash payments to Azure totalling an additional
US$1.5 million. In this case, Azure will retain a 35% contributing interest in the Alacrán project. Grupo Mexico retains a 2% NSR royalty.
Teck advised Azure in December 2017 that it had completed its first diamond drilling program at Alacrán, comprising 14 holes for
4,907m (for results, refer ASX announcement dated 10 May 2018).
Results support the potential for expansion of the Loma Bonita epithermal gold-silver mineralised system at depth east and south
towards Cerro San Simon (the Loma Bonita – Cerro San Simon Corridor), and confirm potential for porphyry copper mineralisation at
Cerro Colorado.
Teck’s Year 2 work program includes additional geological, geochemical and geophysical surveys in the first half of 2018 followed by
more diamond drilling in the second half of the year. Targets to be tested include the Loma Bonita – Cerro San Simon Corridor for
epithermal gold-silver mineralisation and Cerro Alacrán for porphyry copper mineralisation.
Figure 3: Target areas for Teck’s 2017 work program and targets planned for 2018
Other Projects - (All AZS 100% Ownership)
The Company did not undertake any significant exploration on the other assets in its portfolio during the 2017/18 financial year.
Azure continues to hold the Promontorio, El Tecolote, Panchita, San Agustin and Telix projects which are prospective for a variety of
minerals, including gold, silver, copper, zinc and graphite. These projects provide optionality for Azure and an opportunity to involve
third parties.
7
Directors’ Report
Your directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Azure Minerals
Limited (“Azure”) and the entities it controlled at the end of or during the year ended 30 June 2018.
Directors
The following persons were directors of Azure Minerals Limited during the whole of the financial year and up to the date of this report.
Peter Ingram
Anthony Rovira
Wolf Martinick
Principal Activities
During the year the principal continuing activity of the Group was exploration for precious and base minerals in Mexico.
Dividends
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.
Review of Operations
Group Overview
Azure Minerals Limited was incorporated on 19 September 2003. Its principal focus is on exploration for gold, copper, silver and zinc
in Mexico. The company has several 100% owned projects, one of which has been joint ventured. The Group has four main projects:
Alacrán (silver, gold, copper) where Teck Resources is earning a 51% interest, Oposura (zinc, lead, silver) where Azure is undertaking
a PEA/ Scoping Study, Sara Alicia where the Company is exploring for gold and cobalt, and Promontorio (copper, gold, silver)
where Azure is seeking a joint venture partner. The Group will continue to seek opportunities in Mexico, either 100% owned or in
joint venture.
Operating Results for the Year
The operating loss after income tax of the Group for the year ended 30 June 2018 was $9,220,519 (2017: $6,985,541). Included in this
loss figure is $5,813,830 (2017: $5,758,221) of exploration expenditure written off. Refer to notes 1(c) and 6 to the financial statements.
Shareholder Returns
Basic loss per share (cents)
Diluted loss per share (cents)
2018
(10.06)
(10.06)
2017
(0.42)
(0.42)
Investments for Future Performance
The future performance of the group is dependent upon exploration success, the progress of development of those projects where
precious and base metals are already present, and continued funding. To this end the group has budgeted to continue exploration at
its Mexico projects.
Review of Financial Condition
At the date of this report the consolidated entity has a sound capital structure and is in a strong position to progress its mineral
properties.
8
Azure Minerals Limited Annual Report 2018 Directors’ Report
Risk Management
The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned
with the risks and opportunities identified by the board.
The board has established an Audit and Risk Committee and has adopted a Risk Management Policy.
The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks
identified by the board. These include the following:
• Board approval of a strategic plan, which covers strategy statements designed to meet stakeholders’ needs and manage
business risk.
•
Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets.
The company undertakes risk review meetings as required with the involvement of senior management. Identified risks are weighed
with action taken to mitigate key risks.
Significant Changes in State of Affairs
During the year the company completed a share consolidation on the basis of one new share for every 20 shares held. Share options
on issue were also adjusted by the same ratio.
Additionally, the company issued 27,366,666 ordinary fully paid shares raising $7,704,528 after all expenses of the issues.
There were no other significant changes in the state of affairs of the Group during the financial year.
Significant Events After the Reporting Date
No matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the group, the results of those operations, or the state of affairs of the group in future financial years.
Likely Developments and Expected Results of Operations
The group expects to maintain the present status and level of operations.
Environmental Regulation and Performance
The company is subject to significant environmental regulation in respect to its exploration activities.
The company aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in
compliance with all environmental legislation. The directors of the company are not aware of any breach of environmental legislation
for the year under review. The directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007
which requires entities to report annual greenhouse gas emissions and energy use. The directors have assessed that the Company
has no current reporting requirements, but may be required to report in the future.
9
Directors’ Report
Information on Directors
Names, qualifications, experience and special responsibilities
Mr. Peter Anthony Ingram BSc. (appointed 12 October 2011 and on 1 December 2011 appointed Chairman)
Mr Ingram is a geologist with over fifty years experience in the mining and mineral exploration industries within Australia, including
over forty years experience in public company management. He was the founding Chairman and Managing Director of Universal
Resources Limited (now Altona Mining Limited).
Mr Ingram was a founding councilor and past President of the Association of Mining and Exploration Companies (AMEC) and has been
made an Honorary Life Member in recognition of his services to AMEC. He was also a founding director of the Australian Gold Mining
Industry Council. He has served on the board of management of the WA School of Mines at Curtin University and was instrumental in
the establishment of the Chair of Mineral Economics and Mine Management within that institution.
Mr Ingram’s previous directorships include: Managing Director of Metana Minerals NL and Eastmet Limited; Executive Chairman
of Australia Oriental Minerals NL and Glengarry Resources Limited; and Non-executive Director of Dragon Mining Limited, Metana
Petroleum Limited and Carnarvon Petroleum Limited.
Other Current Directorships
Nil
Former Directorships in the last 3 years
Altona Mining Limited
Special Responsibilities
Chairman of the Board and Chairman of the Remuneration & Nomination Committee and member of the Audit & Risk Management
Committee
Interests in Shares and Options
330,055 ordinary shares in Azure Minerals Limited
750,000 options over ordinary shares in Azure Minerals Limited
Mr. Anthony Paul Rovira, BSc (Hons) Flinders University, MAusIMM (Managing Director)
Tony Rovira has over 30 years technical and management experience in the mining industry, as an exploration and mining geologist,
and as a company executive at Board level. Since graduating from Flinders University in South Australia in 1983, Tony has worked for
companies both large and small, including BHP, Barrack Mines, Pegasus Gold and Jubilee Mines.
From 1997-2003 Tony was the General Manager of Exploration with Jubilee Mines, during which time he led the team that discovered
and developed the world class Cosmos and Cosmos Deeps nickel sulphide deposits in Western Australia. In the year 2000, the
Association of Mining and Exploration Companies awarded Tony the “Prospector of the Year Award” for these discoveries.
Tony joined Azure Minerals as the inaugural Managing Director in December 2003 and held the position of Executive Chairman from
June 2007 until December 2012. Tony is responsible for the decision to focus Azure Minerals’ activities on the world class mineral
provinces in Mexico, where the company has been operating since 2005.
Other Current Directorships
Oro Verde Limited.
Former Directorships in the last 3 years
None.
Special Responsibilities
Managing Director
Interests in Shares and Options
526,000 ordinary shares in Azure Minerals Limited, of which 109,669 are held indirectly.
1,500,000 options over ordinary shares in Azure Minerals Limited
10
Azure Minerals Limited Annual Report 2018 Directors’ Report
Information on Directors (Continued)
Dr Wolf Martinick, PhD, BSc (agric) (Appointed 1 September 2007)
Dr Martinick is an environmental scientist with over 40 years experience in mineral exploration and mining projects around the world,
attending to environmental, water, land access and indigenous people issues. He has conducted due diligence on mining projects
around the world on behalf of international financial institutions and resource companies for a variety of transactions including listings
on international stock exchanges, mergers and debt financing. He is a Fellow of the Australian Institute of Mining and Metallurgy.
He was a founding director and chairman of Weatherly International plc, an AIM listed company with copper mines in Namibia, and a
founding director of Basin Minerals Limited, an ASX listed mineral exploration company that discovered a world-class mineral project
in Victoria, Australia, that was acquired by Iluka Resources Limited in 2003.
Other Current Directorships
Oro Verde Limited– Chairman since January 2003
Former Directorships in the last 3 years
Weatherly International Plc – Director since July 2005
Sun Resources NL – Non-Executive Director since February 1996
Special Responsibilities
Chairman of the Audit and Risk Management Committee and member of the Remuneration & Nomination Committee
Interests in Shares and Options
265,000 ordinary shares in Azure Minerals Limited
750,000 options over ordinary shares in Azure Minerals Limited
Company Secretary
Brett Dickson, BBus, FCPA (Appointed 21 November 2006)
Mr Dickson is a Certified Practising Accountant with a Bachelors degree in Economics and Finance from Curtin University and has
over 25 years experience in the financial management of companies, principally companies in early stage development of its resource
or product, and offers broad financial management skills. He has been Chief Financial Officer for a number of successful resource
companies listed on the ASX. In addition he has had close involvement with the financing and development of a number of greenfield
resources projects.
Directors’ Meetings
The number of directors’ meetings held (including meetings of committees of directors) and number of meetings attended by each of
the directors of the company during the financial year are:
Meetings of Committees
Directors’ Meetings
Audit & Risk Committee
Remuneration &
Nomination Committee
A
11
11
11
B
11
11
11
A
1
-
1
B
1
-
1
A
1
-
1
B
1
-
1
Name
Peter Anthony John Ingram
Anthony Paul Rovira
Wolf Gerhard Martinick
Notes
A Number of meetings attended.
B Number of meetings held during the time the director held office or was a member of the committee during the year.
11
Directors’ Report
Remuneration Report (Audited)
The remuneration report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service agreements
D. Share-based compensation
E. Additional Information
Key management personnel (KMP) covered in this report
Name
Position
Peter Anthony John Ingram
Non-Executive Chair
Wolf Gerhard Martinick
Anthony Paul Rovira
Brett Douglas Dickson
Non-Executive Director
Executive Managing Director
Company Secretary & CFO
Term as KMP
Full financial year
Full financial year
Full financial year
Full financial year
The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporation Act 2001.
A. Principles used to determine the nature and amount of remuneration
The remuneration policy of Azure Minerals Limited has been designed to align director and executive objectives with shareholder
and business objectives by providing a fixed remuneration component and where appropriate offering specific short and long term
incentives based on key performance areas affecting the Groups results. Short-term incentives implemented by the Company are
detailed later in the report in section E. At present the Company has not implemented any specific long-term incentives and as such
the remuneration policy is not impacted by the Groups performance, including earnings in shareholder wealth (dividends, changes
in share price or return on capital to shareholders). The board of Azure Minerals Limited believes the remuneration policy to be
appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group.
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by
the board. All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation.
The board reviews executive packages annually by reference to the Groups performance, executive performance and comparable
information from industry sectors and other listed companies in similar industries.
The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract the
highest calibre of executives and reward them for performance that results in long term growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives receive a superannuation guarantee contribution required by the government, which is
currently 9.5% of cash salary, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice
part of their salary to increase payments towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the company and expensed. Shares given to directors and
executives are valued as the difference between the market price of those shares and the amount paid by the director or executive;
to date no shares have been awarded to directors or executives. Options are valued using either the Black Scholes or Binomial
methodologies.
The board policy is to remunerate non executive directors at market rates for comparable companies for time, commitment and
responsibilities. The board determines payments to the non executive directors and reviews their remuneration annually based on
market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount
of fees that can be paid to non executive directors is subject to approval by shareholders at the Annual General Meeting (currently
$200,000). In line with standard industry practice fees for non executive directors are not linked to the performance of the economic
entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company
and are able to participate in employee option plans.
12
Azure Minerals Limited Annual Report 2018 Directors’ Report
Remuneration Report (Audited)
A. Principles used to determine the nature and amount of remuneration (Continued)
A Remuneration Committee has been established and is a committee of the board. It is primarily responsible for making
recommendations to the board on:
• Non-executive directors fees
• Remuneration levels of executive directors and other key management personnel
• Key performance indicators and performance hurdles of the executive team
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests
of the Group. The Corporate Governance Statement provides further information on the role of this committee.
In the event of serious misconduct or a material misstatement in the Group’s financial statements, the Board can reduce, cancel or
defer performance-based remuneration and may also clawback performance-based remuneration paid in previous financial years.
Remuneration consultants were not engaged during the year.
There is no Retirement Benefit Policy for directors, other than the payment of statutory superannuation.
B. Details of remuneration
Amount of remuneration
Details of the remuneration of the directors and key management personnel (as defined in AASB 124 Related Party Disclosures) of
Azure Minerals Limited are set out below in the following tables.
The key management personnel of Azure Minerals Limited includes the directors as disclosed earlier in this report and the following
who have authority and responsibility for planning, directing and controlling the exploration activities of the entity and the Company
Secretary, Mr B Dickson is an executive whose remuneration must be disclosed under the Corporations Act 2001.
Key management personnel of the Group
Short-Term
Post
Employment
Share-based
Payments
Total
Name
Year
Cash,
salary &
fees
Cash
Bonus
Non
monetary
benefits
Super-
annuation
Options
Share
Based
Payment %
Based
%
Directors
Peter Anthony Ingram
Chairman
Anthony Paul Rovira
Managing Director
Wolf Gerhard Martinick
Non Executive
Executives
Brett Dickson
Company Secretary
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
50,000
50,000
-
-
358,250
100,000
300,000
81,000
45,000
33,750
-
-
168,720
153,840
45,960
41,310
621,970
145,960
537,590
122,310
-
-
-
-
-
-
-
-
-
-
4,749
4,749
25,002
28,500
4,276
15,526
78,825
68,925
157,650
137,850
78,825
68,925
133,574
123,674
640,902
547,350
128,101
118,201
-
-
110,355
96,495
325,035
291,645
34,027
48,775
425,655
1,227,612
372,195
1,080,870
59.0
55.7
24.6
25.2
61.5
58.3
33.4
33.1
34.6
34.4
13
Directors’ Report
Remuneration Report (Audited)
B. Details of remuneration (Continued)
Compensation options
There were no alterations to the terms and conditions of options granted as remuneration since their grant date. There were neither
forfeitures nor shares issued on exercise of Compensation Options during 2018 or 2017. During the year 1,350,000 options (on a post
consolidation basis) were granted as remuneration and no options were exercised during the year. During the year Nil (2017: Nil)
options lapsed.
The Company’s remuneration policy prohibits directors and executives from entering into transactions or arrangements which limit
the economic risk of participating in unvested entitlements.
Retirement benefits provided for the non-executive directors in the financial statements do not form part of the above remuneration
until such time as the amount is paid to the retiring director.
Apart from the issue of options the company currently has no performance based remuneration component built into non-executive
director remuneration (2017: Nil). Performance based remuneration for executives is detailed later in section E of this report.
C. Service agreements
Remuneration and other terms of employment for the following key management personnel are formalised in service agreements,
the terms of which are set out below:
Anthony Rovira, Managing Director:
•
Term of agreement – to 1 January 2020.
• Base salary, exclusive of superannuation, of $400,000 to be reviewed annually by the remuneration committee.
• Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes an amount
equal to the amounts due for the balance of the term of the contract from the date of termination or the equivalent of 6 months
remuneration, whichever is the greater.
Brett Dickson, Company Secretary/Chief Financial Officer:
•
•
Term of agreement – to 1 January 2020.
Fixed fee, $15,300 per month.
• Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes an amount
equal to the amounts due for the balance of the term of the contract from the date of termination or the equivalent of 6 months
remuneration whichever is the greater.
Retirement Benefits
Other retirement benefits may be provided directly by the company if approved by shareholders.
D. Share based compensation
Options over shares in Azure Minerals Limited may be issued to directors and executives. The options are not issued based on
performance criteria, but are issued to directors and executives of Azure Minerals Limited, where appropriate, to increase goal
congruence between executives, directors and shareholders. There are no standard vesting conditions to options awarded with
vesting conditions, if any, at the discretion of Directors at the time of grant. Options are granted for nil consideration.
During the year 1,350,000 options (on a post consolidation basis) were issued to Directors and Executives. (2017: 1,350,000 – adjusted
for the 1:20 consolidation).
No options held by directors or executives were exercised during the financial year and no options have been exercised since the end
of the financial year. During the year 25,650,000 (2017: 21,000,000) options lapsed, both on a pre-consolidation basis. The value of the
options at lapse date was nil as the exercise price of the option was significantly in excess of the market price of the underlying share.
The value is determined at the time of lapsing, but assuming any vesting condition was satisfied.
The Company’s remuneration policy prohibits executives from entering into transactions or arrangements which limit the “at risk”
aspect of participating in unvested entitlements.
14
Azure Minerals Limited Annual Report 2018 Directors’ Report
Remuneration Report (Audited)
E. Additional Information
Performance based remuneration
Variable Remuneration – Short Term Incentive (“STI”)
Objective
The objective of the STI program is to link the achievement of the Company’s operational targets with the remuneration received by
the executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive
to the executive to achieve those operational targets and such that the cost to the Company is reasonable in the circumstances.
Structure
Actual STI payments granted to executives depend on the extent to which specific targets set at the beginning of the review period,
being a fiscal year, are met. The targets consist of a number of Key Performance Indicators (KPI’s) covering both financial and non-
financial, corporate and individual measures of performance. Typically included are measures such as contribution to exploration
success, share price appreciation, risk management and cash flow sustainability. These measures were chosen as they represent the
key drivers for the short term success of the business and provide a framework for delivering long term value.
The Board has predetermined benchmarks that must be met in order to trigger payments under the STI scheme. On an annual basis,
after consideration of performance against KPI’s, the Remuneration Committee, determines the amount, if any, of the STI to be paid
to each executive. This process usually occurs in the last quarter of the fiscal year. Payments made are delivered as a cash bonus in
the fourth quarter of the fiscal year.
STI bonus for 2017 and 2018 financial years
Key performance indicators on which performances is measured and bonus’s if any are awarded are divided into two categories;
1. General management (including safety, environment, professional development, board reporting and financial
management), with a maximum total weighting of 30%; and
2. Operations (including increasing resources, adding value to the Company’s other projects and the acquisition of new
projects) with a total maximum weighting of 70%.
The minimum amount payable for 2018 assuming executives fail to meet their KPI’s was nil and the maximum amount payable if
all KPI’s were met is $203,904. For the year ending 30 June 2018 executives were awarded 72% of their possible bonus. For 2017
executives were awarded 100% of their possible bonus. This bonus was paid in the 2018 financial year. Effective 1 January 2018 the
STI plan has been terminated.
Variable Remuneration – Long Term Incentive (“LTI”)
Objective
The objective of the LTI plan is to reward senior managers in a manner which aligns this element of remuneration with the creation of
shareholder wealth. As such LTI grants are only made to executives who are able to influence the generation of shareholder wealth.
Structure
LTI grants to executives are delivered in the form of options.
The options, when issued to executives, will not be exercisable for a price less than the then current market price of the Company’s
shares.
The grant of LTI’s is reviewed annually, though LTI’s may not be granted each year. Exercise price and performance hurdles, if any, are
determined at the time of grant of the LTI.
To date no performance hurdles have been set on options issued to executives other than time based service conditions. The Company
believes that as options are issued at not less than the current market price of the Company’s shares there is an inherent performance
hurdle on those options as the share price of the Company’s shares must increase significantly before there is any reward to the
executive.
15
Directors’ Report
Remuneration Report (Audited)
Shares issued on exercise of compensation options
There were no shares issued on exercise of compensation options during the year.
Option holdings of key management personnel
2018
Balance at
beginning
of year
Granted as
Remuneration
Options
Exercised
Shares
cancelled
from 1:20
Consolidation
Balance
at end of
year
Vested at 30 June
Vested &
Exercisable
Unvested
Directors
Wolf Gerhard Martinick
10,000,000
5,000,000
Peter Anthony Ingram
10,000,000
5,000,000
Anthony Paul Rovira
20,000,000
10,000,000
Executives
Brett Dickson
Total
14,000,000
7,000,000
54,000,000
27,000,000
Shareholdings of key management personnel
2018
-
-
-
-
-
(14,250,000)
750,000
(14,250,000)
750,000
750,000
750,000
(28,500,000)
1,500,000
1,500,000
(19,950,000)
1,050,000
1,050,000
(76,950,000)
4,050,000
4,050,000
-
-
-
-
-
Balance 1
July Ord
Granted Ord
On Exercise of
Options Ord
Shares cancelled
from 1:20
Consolidation
Balance
30 June Ord
Balance
Indirectly
Held Ord
Directors
Wolf G Martinick
Peter A Ingram
5,299,990
6,601,100
Anthony P Rovira
10,519,990
Executives
Brett Dickson
Total
-
22,421,080
-
-
-
-
-
Other Related Party Transactions
-
-
-
-
-
(5,034,990)
(6,271,045)
(9,993,990)
265,000
330,055
526,000
215,000
330,055
109,667
-
-
-
(21,300,025)
1,121,055
654,722
The Company has entered into a sub-lease agreement on normal commercial terms with Oro Verde Limited, a company of which Wolf
Martinick, Brett Dickson and Anthony Rovira are directors. During the year Oro Verde Limited paid sub-lease fees totalling $4,800
(2017: $4,800).
The Company has also entered into a sub-lease agreement on normal commercial terms with Rox Resources Limited, a company of
which Brett Dickson is a Director. During the year Rox Resources Limited paid sub-lease fees totalling $ 111,216 (2017: $90,309).
16
Azure Minerals Limited Annual Report 2018 Directors’ Report
Remuneration Report (Audited)
Directors and executive options
Set out below are summaries of current Directors & Executives options granted.
2018
Grant
Date
Expiry
Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents)
Balance at
the start of
the year
Number
Granted
during
the year
Number
Exercised
during
the year
Number
Shares
cancelled
from 1:20
Consolidation
Balance
at end of
the year
Number
Vested and
exercisable
at end of
the year
Number
19 Nov
‘15
30 Nov
‘18
28 Apr
‘16
30 Nov
‘18
7 Dec
‘16
30 Nov
‘19
20 Nov
‘17
30 Nov
‘20
120*
120*
94*
58*
2.1
2.2
1.4
1.6
26,200,000
800,000
27,000,000
-
-
-
-
27,000,000
54,000,000
27,000,000
-
-
-
-
-
(24,890,000)
1,310,000
1,310,000
(760,000)
40,000
40,000
(25,650,000)
1,350,000
1,350,000
(25,650,000)
1,350,000
1,350,000
(76,950,000)
4,050,000
4,050,000
Weighted average exercise price
$0.053**
$0.29**
$0.045**
$0.91*
-
2017
Grant
Date
Expiry
Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents)
Balance at
the start of
the year
Number
Granted
during
the year
Number
Exer-
cised
during
the year
Number
Shares
cancelled
from 1:20
Consolidation
Balance
at end of
the year
Number
Vested and
exercisable
at end of
the year
Number
25 Sept
‘13
30 June
‘17
19 Nov
‘15
30 Nov
‘18
28 Apr
‘16
30 Nov
‘18
7 Dec
‘16
30 Nov
‘19
5.8**
6.0**
6.0**
4.7**
3.2
2.1
2.2
1.4
21,000,000
26,200,000
800,000
-
-
-
-
27,000,000
48,000,000
27,000,000
-
-
-
-
-
(21,000,000)
-
-
-
-
-
26,200,000
26,200,000
800,000
800,000
27,000,000
27,000,000
(21,000,000)
54,000,000
54,000,000
Weighted average exercise price
$0.059**
$0.047**
$0.058**
$0.054**
$0.054**
* shown on a post consolidation basis
** shown on a pre-consolidation basis
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.4 years (2017: 1.8 years)
Total expenses arising from share-based payment transactions recognised during the year were as follows:
Options issued to directors and other executives
Consolidated
2018
$
2017
$
425,655
565,185
17
Directors’ Report
Remuneration Report (Audited)
Company’s Performance
Company’s share price performance
The Company’s share price performance shown in the below graph is a reflection of the Company’s performance during the year and
of general market conditions.
The variable components of the executives’ remuneration including short-term and long-term incentives are indirectly linked to the
Company’s share price performance.
The graph below shows the Company’s share price performance during the financial year ended 30 June 2018.
Loss per share
Below is information on the Company’s loss per share for the previous four financial years and for the current year ended 30 June
2018.
Basic loss per share (cents)
* After 1:20 share consolidation
2018
(10.06)*
2017
(0.42)
2016
(0.53)
2015
(0.13)
2014
(0.50)
Voting and comments made at the company’s 2017 Annual General Meeting
Azure Minerals received approximately 90% of “yes” votes on its remuneration report for the 2017 financial year. Remuneration
consultants were not engaged during the year and the company did not receive any specific feedback at the AGM or throughout the
year on its remuneration practices.
End of Audited Remuneration Report
18
Azure Minerals Limited Annual Report 2018 Directors’ Report
Loans to Directors and Executives
No loans have been provided to directors or executives.
Shares Under Option
At the date of this report there are 29,358,850 unissued ordinary shares in respect of which options are outstanding.
Balance at the beginning of the year
Share option movements during the year
Issued
Other
Exercisable at 2.9 cents, on or before 30 November 2020
41,000,000
Exercisable at 4.5 cents, on or before 11 July 2019
13,683,339
Total Number
of options
272,508,539
41,000,000
13,683,339
Shares cancelled from 1:20 Consolidation
(297,833,028)
(297,833,028)
Total options issued, exercised and lapsed in the year to 30 June 2018
Total number of options outstanding as at 30 June 2018 and at the date of this report
(243,149,689)
29,358,850
The balance is comprised of the following
Date granted
19 Nov 2015
28 Apr 2016
7 Dec 2016
7 Jul 2016
20 Nov 2017
17 Apr 2018
Total number of options outstanding at the date of this report
Expiry date
30 Nov 2018
30 Nov 2018
30 Nov 2019
11 Jul 2019
30 Nov 2020
30 Apr 2020
Exercise price
(cents)
Number of
options
120.0
120.0
94.0
110.0
58.0
45.0
1,560,000
290,000
2,050,000
9,725,511
2,050,000
13,683,339
29,358,850
No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue
of any other body corporate.
During the financial year no options were exercised by parties unrelated to the Company. Since the end of the financial year no
options have been exercised.
Indemnification And Insurance Of Directors And Officers
During the financial year, Azure Minerals Limited paid a premium of $ 18,247 (2017: $16,095) to insure the directors and secretary of
the company and its Australian based controlled entities.
The liabilities insured include 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.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the
company for all or part of those proceedings.
No Proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the
Corporations Act 2001.
19
Directors’ Report
Non Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the company and/or the Group are important.
Details of the amount paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for audit and non-audit services provided during the
year are set out below.
The Board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied
that the provisions of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity
of the auditor
• None of the services undermine the general principals relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices
and non-audit firms:
1. Audit Services
BDO Audit (WA) Pty Ltd
Audit and review of financial reports
Salles Sáinz-Grant Thornton, S.C.
Consolidated
2018
$
2017
$
44,000
40,575
Audit and review of financial reports of Mexican subsidiaries
27,662
37,886
2. Non audit Services
Audit-related services
BDO Audit (WA) Pty Ltd
Attendance at Annual General Meeting
-
350
Taxation Services
BDO Corporate Tax (WA) Pty Ltd
Tax compliance services
Total remuneration for non-audit services
Auditor’s Independence
12,710
11,105
12,710
11,455
A copy of the auditor’s independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 58.
Auditor
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the directors.
Peter Ingram
Chairman
Perth, 11 September 2018.
20
Azure Minerals Limited Annual Report 2018 Corporate Governance Statement
Azure Minerals Limited ABN 46 106 346 918 (Company) has established a corporate governance framework, the key features of which
are set out in this statement. In establishing its corporate governance framework, the Company has referred to the recommendations
set out in the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 3rd edition. The Company
has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its
corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has
made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting
regime where, after due consideration, the Company's corporate governance practices do not follow a recommendation, the Board
has explained it reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has
adopted instead of those in the recommendation.
The following governance-related documents can be found on the Company's website at:
http://www.azureminerals.com.au/ corporate/corporate-governance/
Charters
Board
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Policies and Procedures
Policy and Procedure for the Selection and (Re)Appointment of Directors
Process for Performance Evaluations
Policy on Assessing the Independence of Directors
Securities Trading Policy
Code of Conduct (summary)
Compliance Procedures (summary)
Procedure for the Selection, Appointment and Rotation of External Auditor
Shareholder Communication and Investor Relations Policy
Risk Management Policy (summary)
Diversity Policy (summary)
Policy on Continuous Disclosure (summary)
The Company reports below on whether it has followed each of the recommendations during the 2017/2018 financial year (Reporting
Period). The information in this statement is current at 11 September 2018. This statement was approved by a resolution of the Board
on 11 September 2018.
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1
The Company has established the respective roles and responsibilities of its Board and management, and those matters expressly
reserved to the Board and those delegated to management and has documented this in its Board Charter, which is disclosed on the
Company’s website.
Recommendation 1.2
The Company undertakes appropriate checks before appointing a person, or putting forward to shareholders a candidate for election
as a director and provides shareholders with all material information in its possession relevant to a decision on whether or not to
elect or re-elect a director. The checks which are undertaken, and the information to be provided to shareholders are set out in the
Company’s Policy and Procedure for the Selection and (Re)Appointment of Directors, which is disclosed on the Company’s website.
The Board did not appoint any directors during the Reporting Period. The Company provided shareholders with all material information
in relation to the re-election of Mr Peter Ingram as a director at its 2017 Annual General Meeting.
21
Corporate Governance Statement
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT (CONTINUED)
Recommendation 1.3
The Company has a written agreement with each director and senior executive setting out the terms of their appointment. The
material terms of any employment, service or consultancy agreement the Company, or any of its child entities, has entered into with
its Managing Director, any of its directors, and any other person or entity who is related party of the Managing Director or any of
its directors has been disclosed in accordance with ASX Listing Rule 3.16.4 (taking into consideration the exclusions from disclosure
outlined in that rule).
Recommendation 1.4
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of
the Board as outlined in the Company’s Board Charter. The Company Secretary’s role is also outlined in the consultancy agreement
between the Company Secretary and the Company.
Recommendation 1.5
The Company has a Diversity Policy. However, the Diversity Policy does not include requirements for the Board to set measurable
objectives for achieving gender diversity and to assess annually both the objectives and the Company’s progress in achieving them.
Nor has the Board set measurable objectives for achieving gender diversity. Given the Company’s stage of development as an
exploration company, the number of employees in Australia and the nature of the labour market in Mexico, the Board considers that
it is not practical to set measurable objectives for achieving gender diversity.
The respective proportions of men and women on the Board, in senior executive positions and across the whole organisation are
set out in the following table. “Senior executive” for these purposes means a person who makes, or participates in the making of,
decisions that affect the whole or a substantial part of the business or has the capacity to affect significantly the company’s financial
standing. For the Reporting Period, this included the Managing Director and the Company Secretary & Chief Financial Officer:
Whole organisation (including Board members)
Senior executive positions
Board
Recommendation 1.6
Proportion of women
3 out of 18 (17%)
0 out of 3 (0%)
0 out of 3 (0%)
The Chair is responsible for evaluation of the Board and, when deemed appropriate, Board committees and individual directors.
The evaluations are undertaken in accordance with the Company’s Process for Performance Evaluations, which is disclosed on the
Company’s website.
During the Reporting Period an evaluation of the Board, its committees, and individual directors took place in accordance with the
process disclosed in the Company’s Process for Performance Evaluations.
Recommendation 1.7
The Managing Director is responsible for evaluating the performance of senior executives in accordance with the process disclosed in
the Company’s Process for Performance Evaluations.
During the Reporting Period an evaluation of the Company Secretary & Chief Financial Officer (the Company’s sole senior executive,
other than the Managing Director) took place in accordance with the process disclosed in the Company’s Process for Performance
Evaluations.
The Nomination and Remuneration Committee is responsible for evaluating the Managing Director.
During the Reporting Period, an evaluation of the Managing Director took place in accordance with the process disclosed in the
Company’s Process for Performance Evaluations.
22
Azure Minerals Limited Annual Report 2018 Corporate Governance Statement
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1
The Board has established a Nomination and Remuneration Committee comprising the Company’s two independent non-executive
directors, Peter Ingram (Chairman) and Wolf Martinick. The Nomination and Remuneration Committee is not structured in accordance
with Recommendations 2.1 and 8.1 as it has only two members. However, the Board considers that the committee’s composition is
appropriate as it comprises the Board’s two independent non-executive directors, and does not include an executive director.
Details of director attendance at Nomination and Remuneration Committee meetings held during the Reporting Period are set out in
a table in the Directors’ Report on page 11.
The Board has adopted a Nomination Committee Charter which describes the role, composition, functions and responsibilities of the
Nomination Committee and is disclosed on the Company’s website. As noted above, the Board has combined the Nomination and
Remuneration committees.
Recommendation 2.2
Significant geological experience, environmental management experience and professional skills including leadership, governance
and strategy are the skills and diversity which the Board is looking to achieve in its membership, and these are collectively held by
current members of the Board.
While the Company is at exploration stage, it does not wish to increase the size of the Board, and considers that the Board weighted
towards technical experience is appropriate at this stage of the Company’s development. The Board may bring in external consultants
with specialist knowledge as and when required to address any areas where the Board does not collectively possess the relevant
attribute.
Recommendation 2.3
The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles &
Recommendations. The independent directors of the Company are Peter Ingram and Wolf Martinick.
The length of service of each director is set out in the Directors’ Report on page 10.
Recommendation 2.4
The Board has a majority of directors who are independent.
Recommendation 2.5
The independent Chair of the Board is Peter Ingram, who is not also Managing Director of the Company.
Recommendation 2.6
No new directors or senior executives were appointed during the Reporting Period. However, the Company has an induction program,
coordinated by the Company Secretary. The goal of the program is to assist new directors to participate fully and actively in Board
decision-making at the earliest opportunity, and to assist senior executives to participate fully and actively in management decision-
making at the earliest opportunity.
The Nomination and Remuneration Committee regularly reviews whether the directors as a group have the skills, knowledge and
familiarity with the Company and its operating environment required to fulfil their role on the Board and the Board committees
effectively using a Board skills matrix. Where any gaps are identified, the Nomination and Remuneration Committee considers what
training or development should be undertaken to fill those gaps. In particular, the Nomination and Remuneration Committee ensures
that any director who does not have specialist accounting skills or knowledge has a sufficient understanding of accounting matters
to fulfil his or her responsibilities in relation to the Company’s financial statements. Directors also receive ongoing education on
developments in accounting standards.
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
Recommendation 3.1
The Company has established a Code of Conduct for its directors, senior executives and employees, a summary of which is disclosed
on the Company’s website.
23
Corporate Governance Statement
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
Recommendation 4.1
The Board has established an Audit and Risk Committee comprised of the Company’s two independent non-executive directors, Wolf
Martinick (Chairman) and Peter Ingram. The Audit and Risk Committee is not structured in compliance with Recommendations 4.1
and 7.1 as it has only two members. However, the Board considers that the committee’s composition is appropriate as it comprises
the Board’s two independent non-executive directors, and it is chaired by an independent chair that is not also chair of the Board.
Details of each of the director’s qualifications are set out in the Directors’ Report on page 10. Each of the members of the Audit and
Risk Committee consider themselves to be financially literate and have an understanding of the industry in which the Company’s
operates. The Company’s Chief Financial Officer, Mr Brett Dickson, is a Certified Practising Accountant with a Bachelor degree in
Economics and is invited to attend Audit and Risk Committee meetings by invitation.
The Company has also established a Procedure for the Selection, Appointment and Rotation of its External Auditor, which is disclosed
on the Company’s website. The Board is responsible for the initial appointment of the external auditor and the appointment of a new
external auditor when any vacancy arises. Candidates for the position of external auditor must demonstrate complete independence
from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant
to the Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Board.
Details of director attendance at Audit and Risk Committee meetings held during the Reporting Period are set out in a table in the
Directors’ Report on page 11.
The Board has adopted an Audit and Risk Committee Charter which describes the Audit and Risk Committee’s role, composition,
functions and responsibilities, and is disclosed on the Company’s website.
Recommendation 4.2
Before the Board approved the Company financial statements for the half year ended 31 December 2017 and the full-year ended
30 June 2018, it received from the Managing Director and the Chief Financial Officer a declaration that, in their opinion, the financial
records of the Company for the relevant financial period have been properly maintained and that the financial statements for the
relevant financial period comply with the appropriate accounting standards and give a true and fair view of the financial position and
performance of the Company and the consolidated entity and that the opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively (Declaration).
The Board did not receive a Declaration for each of the quarters ending 30 September 2017, 31 December 2017, 31 March 2018 and 30
June 2018 because in the Board’s view its quarterly reports are not financial statements to which the Declaration can be appropriately
given.
Recommendation 4.3
Under section 250RA of the Corporations Act, the Company’s auditor is required to attend the Company’s annual general meeting
at which the audit report is considered and must arrange to be represented at that meeting by a person who is a suitably qualified
member of the audit team that conducted the audit and is in a position to answer questions about the audit. Each year, the Company
writes to the Company’s auditor to inform them of the date of the Company’s annual general meeting. In accordance with section
250S of the Corporations Act, at the Company’s annual general meeting where the Company’s auditor or their representative is at the
meeting, the Chair allows a reasonable opportunity for the members as a whole at the meeting to ask the auditor (or its representative)
questions relevant to the conduct of the audit; the preparation and content of the auditor’s report; the accounting policies adopted by
the Company in relation to the preparation of the financial statements; and the independence of the auditor in relation to the conduct
of the audit. The Chairman also allows a reasonable opportunity for the auditor (or their representative) to answer written questions
submitted to the auditor under section 250PA of the Corporations Act.
A representative of the Company’s auditor, BDO attended the Company’s annual general meeting held on 20 November 2017.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
Recommendation 5.1
The Company has established written policies and procedures for complying with its continuous disclosure obligations under the
ASX Listing Rules. A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures are disclosed on the
Company’s website.
24
Azure Minerals Limited Annual Report 2018 Corporate Governance Statement
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
Recommendation 6.1
The Company provides information about itself and its governance to investors via its website at www.azureminerals.com.au.
Recommendation 6.2
The Company has designed and implemented an investor relations program to facilitate effective two-way communication with
investors. The program is set out in the Company’s Shareholder Communication and Investor Relations Policy.
Recommendation 6.3
The Company has in place a Shareholder Communication and Investor Relations Policy which outlines the policies and processes that
it has in place to facilitate and encourage participation at meetings of shareholders.
Recommendation 6.4
Shareholders are given the option to receive communications from, and send communications to, the Company and its share registry
electronically. The Company engages its share registry to manage the majority of communications with shareholders. Shareholders
are encouraged to receive correspondence from the Company electronically, thereby facilitating a more effective, efficient and
environmentally friendly communication mechanism with shareholders. Shareholders not already receiving information electronically
can elect to do so through the share registry, Computershare Investor Services Pty Ltd at www.computershare.com.au
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
Recommendation 7.1
As noted above, the Board has established a combined Audit and Risk Committee. Please refer to the disclosure above under
Recommendation 4.1 in relation to the Audit and Risk Committee.
Recommendation 7.2
The Board reviews the Company’s risk management framework annually to satisfy itself that it continues to be sound, to determine
whether there have been any changes in the material business risks the Company faces and to ensure that the Company is operating
within the risk appetite set by the Board. The Board carried out these reviews during the Reporting Period.
Recommendation 7.3
The Company does not have an internal audit function. To evaluate and continually improve the effectiveness of the Company’s risk
management and internal control processes, the Board relies on ongoing reporting and discussion of the management of material
business risks as outlined in the Company’s Risk Management Policy, a summary of which is disclosed on the Company’s website.
Recommendation 7.4
As the Company is not in production, the Company has not identified any material exposure to any environmental and/or social
sustainability risks. However, the Company does have a material exposure to the following economic risks:
• Market risk – movements in commodity prices. The Company manages its exposure to market risk by monitoring market
conditions, and making decisions based on industry experience; and
•
Future capital risk – cost and availability of funds to meet the Company’s business requirements. The Company manages this
risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.
The Board has adopted a Risk Management Policy and Risk Management Procedures. Under the Risk Management Policy, the
Board oversees the processed by which risks are managed. This includes defining the Company’s risk appetite, monitoring of risk
performance and those risks that may have a material impact to the business. Management is responsible for the implementation of
the risk management and internal control system to manage the Company’s risk and to report to the Board whether those risks are
being effectively managed.
The Company’s system to manage its material business risks includes the preparation of a risk register by management to identify the
Company’s material business risks, analyse those risks, evaluate those risks (including assigning a risk owner to each risk) and treat
those risks. Risks and their management are to be monitored and reviewed at least annually by senior management. The risk register
is to be updated and a report submitted to the Managing Director. The Managing Director is to provide a risk report at least annually
to the Board.
A summary of the Company’s Risk Management Policy is disclosed on the Company’s website.
25
Corporate Governance Statement
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
Recommendation 8.1
As noted above, the Board has established a combined Nomination and Remuneration Committee. Please refer to the disclosure
above under Recommendation 2.1 in relation to the Nomination and Remuneration Committee.
The Board has adopted a Remuneration Committee Charter which describes the role, composition, functions and responsibilities of
the Remuneration Committee and is disclosed on the Company’s website. As noted above, the Board has combined the Nomination
and Remuneration committees.
Recommendation 8.2
Details of remuneration, including the Company’s policy on remuneration and “clawback policy” regarding the lapsing of performance-
based remuneration in the event of fraud or serious misconduct and the clawback of the performance-based remuneration in the
event of a material misstatement in the Company’s financial statements, are contained in the “Remuneration Report” which forms of
part of the Directors’ Report and commences at page 12 of the Company’s Annual Report for year ended 30 June 2018.
Recommendation 8.3
The Company established an Employee Share Option Plan during the Reporting Period. The Company’s Securities Trading Policy
includes a statement on the Board’s policy that participations in the Company’s equity based remuneration schemes are prohibited
from entering into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating
in the scheme.
26
Azure Minerals Limited Annual Report 2018 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
YEAR ENDED 30 JUNE
Notes
Consolidated
Revenue from continuing activities
Expenditure
Depreciation
Salaries and employee benefits expense
Directors fees
Exploration expenses
Exploration expenses reimbursed
Travel expenses
Promotion expenses
Administration expenses
Consulting expenses
Insurance expenses
Share based payment expense
Other expenses
Loss from continuing operations before income tax
Income tax expense
Loss from continuing operations after income tax
Loss is attributable to:
The owners of Azure Minerals Limited
Other comprehensive loss
Items that may subsequently be reclassified to profit or loss
5
6
6
6
26
7
2018
($)
85,748
(56,841)
(917,284)
(95,000)
(5,813,830)
-
(326,319)
(84,801)
(303,960)
(247,491)
(24,078)
(646,365)
(790,298)
2017
($)
442,421
(57,545)
(700,776)
(95,000)
(5,758,221)
1,353,280
(319,836)
(107,071)
(349,838)
(398,432)
(22,507)
(565,185)
(406,831)
(9,220,519)
(6,985,541
-
-
(9,220,519)
(6,985,541)
(9,220,519)
(6,985,541)
Exchange differences on translation of foreign operations
(619,125)
(103,010)
Other comprehensive loss for the year net of tax
Total comprehensive loss for the Year
Total comprehensive loss is attributable to:
The owners of Azure Minerals Limited
Loss per share from continuing operations attributable to the
ordinary equity holders of the company
(619,125)
(619,125)
(103,010)
(103,010)
(9,839,644)
(7,088,551)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
22
(10.06)
(10.06)
(0.42)
(0.42)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the Notes to
the Financial Statements
27
Consolidated Statement of Financial Position
AT 30 JUNE 2018
Notes
2018
($)
2017
($)
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Available for sale investments
Plant and equipment
Capitalised exploration expenditure
Total Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Non-Current Liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
18
8
9
10
11
13
14
14
15
16
16
6,593,163
810,207
7,403,370
948
174,278
7,940,514
8,115,740
9,699,949
960,236
10,660,185
948
211,321
6,131,024
6,343,293
15,519,110
17,003,478
268,193
154,141
422,334
81,425
81,425
334,284
97,445
431,729
67,647
67,647
503,759
499,376
15,015,351
16,504,102
80,732,475
3,398,910
(69,116,034)
15,015,351
73,027,947
3,371,670
(59,895,515)
16,504,102
The above Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements.
28
Azure Minerals Limited Annual Report 2018 Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2018
30 June 2018
Issued Share
Capital
$
Share
Option
Reserve
$
Available for
Sale Assets
Reserve
$
Accumulated
Losses
$
Total
$
Foreign
Currency
Translation
Reserve
$
Balance at 1 July 2017
73,027,947
4,515,403
(39,996)
(1,103,737)
(59,895,515)
16,504,102
Loss for period
Other comprehensive loss
Exchange differences on translation
of foreign operations
Total other comprehensive loss
Total comprehensive loss for
the period
-
-
-
-
Transactions with owners in their
capacity as owners:
Issue of share capital, net of
transaction costs
Share based payments
7,704,528
-
Total transactions with owners
7,704,528
-
-
-
-
-
646,365
646,365
-
-
-
-
-
-
-
-
(9,220,519)
(9,220,519)
(619,125)
(619,125)
-
-
(619,125)
(619,125)
(619,125)
(9,220,519)
(9,839,644)
-
-
-
-
-
-
7,704,528
646,365
8,350,893
Balance as at 30 June 2018
80,732,475
5,161,768
(39,996)
(1,722,862)
(69,116,034)
15,015,351
30 June 2017
Issued Share
Capital
$
Share
Option
Reserve
$
Available for
Sale Assets
Reserve
$
Accumulated
Losses
$
Total
$
Foreign
Currency
Translation
Reserve
$
Balance at 1 July 2016
65,581,982
3,950,218
(39,996)
(1,000,727)
(52,909,974)
15,581,503
Loss for period
Other comprehensive loss
Exchange differences on translation
of foreign operations
Total other comprehensive loss
Total comprehensive loss for
the period
-
-
-
-
Transactions with owners in their
capacity as owners:
Issue of share capital, net of
transaction costs
7,445,965
-
-
-
-
-
Share based payments
-
Total transactions with owners
7,445,965
565,185
565,185
-
-
-
-
-
-
-
-
(6,985,541)
(6,985,541)
(103,010)
(103,010)
-
-
(103,010)
(103,010)
(103,010)
(6,985,541)
(7,088,551)
-
-
-
-
-
-
7,445,965
565,185
8,011,150
Balance as at 30 June 2018
73,027,947
4,515,403
(39,996)
(1,103,737)
(59,895,515)
16,504,102
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
29
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Other revenue
Expenditure on mining interests
Reimbursement of exploration expenditure
Net Cash Outflow from Operating Activities
Cash flows from investing activities
Payments for plant and equipment
Acquisition Payments for projects
Proceeds from sale of plant and equipment
Proceeds from sale of projects
Net Cash (Outflow) Inflow from Investing Activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Share issue costs
Net Cash Inflow from Financing Activities
Notes
2018
($)
2017
($)
(2,836,787)
(2,469,194)
80,211
-
(5,651,775)
-
18(b)
(8,408,351)
146,261
132,144
(5,849,257)
1,017,087
(7,022,959)
(18,076)
(26,892)
-
140,190
95,222
7,810,085
(470,205)
7,339,880
412,143
9,387,160
(99,354)
9,699,949
(38,988)
(2,203,012)
16,928
-
(2,225,072)
8,210,000
(505,472)
7,704,528
(2,928,895)
9,699, 949
(177,891)
6,593,163
Net Increase/(Decrease) in Cash and Cash Equivalents
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and Cash Equivalents at End of Year
18(a)
The above Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements.
30
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements
for Azure Minerals Limited as an individual entity and the consolidated entity consisting of Azure Minerals Limited and its subsidiaries.
Basis of Preparation
This general purpose financial report has been prepared in accordance with the Australian Accounting Standards, and interpretations
issued by the Australian Accounting Standards Board and the Corporations Act 2001. Azure Minerals Limited is a for-profit entity for
the purpose of preparing the financial statements.
Compliance with IFRSs
The consolidated financial statements of Azure Minerals Limited and the separate financial statements of Azure Minerals Limited
also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention except for available-for-sale financial asset which
is accounted for at fair value.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed in note 3.
(a) Principles of consolidation
Subsidiaries
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 deconsolidated from the date that control ceases.
The acquisitions method of accounting is used to account for business combinations by the Group.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances and transactions, including unrealised profits arising from intra group transactions, have been eliminated
in full. Unrealised losses are eliminated unless costs cannot be recovered.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Azure Minerals Limited.
(b) Property, plant and equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment
losses.
Plant and equipment
Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors
to ensure it is not in excess of the recoverable amount from these assets.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
31
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Property, plant and equipment (Continued)
Depreciation
Depreciation of plant and equipment is calculated on a reducing balance basis so as to write off the net costs of each asset over the
expected useful life. The rates vary between 20% and 40% per annum.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
statement. When revalued assets are sold, it is group policy to transfer the amounts included in other reserves in respect of those
assets to retained earnings.
(c) Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward
where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development
and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not reached a stage
that permits reasonable assessment of the existence of economically recoverable reserves.
Where an area of interest is abandoned or the directors decide that it is not commercial, any accumulated acquisition costs in respect
of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each
accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.
d) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership
that are transferred to entities in the economic entity are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased
property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated
between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over their estimated useful lives.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged on a straight
line basis over the period of the lease.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease
term.
(e) Income tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items.
It is calculated using the tax rates that have been enacted or are substantially enacted by the statement of financial position date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from
the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit
or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case
the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which
deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change
will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to
enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
32
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable
from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of
an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
g) Foreign currency translation
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which
that entity operates. The consolidated financial statements are presented in Australian dollars which is Azure Minerals Limited’s
functional and presentation currency. The functional currency of Australian subsidiary (Azure Mexico Pty Ltd) is the Australian dollar.
The functional currency of the Mexican overseas subsidiaries (Minera Piedra Azul CV de SA, Minera Azure CV de SA, Minera Capitana
CV de SA and Servicios AzuPerth CV de SA) is the Mexican Peso.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost
continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at
the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit or loss, except where deferred in equity
as a qualifying cash flow or net investment hedge.
Group companies
The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency
are translated as follows:
•
•
assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; and
income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation
reserve in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation
is disposed.
(h) Trade and other payables
Liabilities for trade creditors are recognised initially at fair value and subsequently at amortised cost.
Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on
an accrual basis.
(i) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These
benefits include wages and salaries, annual leave, and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled wholly within
twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be
paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash
outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future
cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating
the terms of the related liability, are used.
33
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Employee benefits (Continued)
Share-based payments
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions,
whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are
granted. The fair value is determined by an internal valuation using a Binomial option pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Group, will ultimately
vest. This opinion is formed based on the best available information at reporting date. No adjustment is made for the likelihood of
market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated
as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award.
(j) Revenue recognition
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets.
(k) Contributed Equity
Ordinary shares are classified as equity.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds
received
(l) Earnings per share (EPS)
Basic earnings per share
Basic EPS is calculated as the profit attributable to equity holders of the company, excluding any costs of servicing equity other than
ordinary shares, divided by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any
bonus elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect of interest and
other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive potential ordinary shares.
(m) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with
original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short term borrowings in current
liabilities on the statement of financial position.
(n) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.
34
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Interests in joint ventures
The Groups share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of
the consolidated income statement and statement of financial position.
(p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting 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 Executive Chairman.
(q) Investments and Financial assets
Classification
The Group classifies its financial assets in the following categories: loans and receivables. The classification depends on the purpose
for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market
and are recognised at fair value on initial recognition. They are included in current assets, except for those with maturities greater than
12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables in the statement of financial position (note 8).
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated
in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures
or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated
as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them
for the medium to long term.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or
sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Loans and receivables are carried at amortised cost using effective interest method.
Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is
impaired. Impairment losses are recognised in the profit or loss. Debts which are known to be uncollectible are written off by reducing
the carrying amount directly.
(r) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivative, and trading and available-for-sale
securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group
is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined
using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing
at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.
Other techniques, such as estimated discounted cash flow, are used to determined fair value for the remaining financial instruments.
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward
exchange contracts is determined using forward exchange market rates at the reporting date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to
their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the Group for similar financial instruments.
35
Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Provisions
Provisions for legal claims, and make good obligations are recognised when the Group 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.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
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.
(t) Adoption of new and amended accounting standards
A number of new or amended standards became applicable for the current reporting period and the Group had to change its
accounting policies as a result of the adoption of the following standards:
•
•
AASB 9 Financial Instruments; and
AASB 15 Revenue from Contracts with Customers.
The impact of the adoption of these standards and the new accounting policies are disclosed in Note 2d below. The impact of
these standards, and the other new and amended standards adopted by the Group, has not had a material impact on the amounts
presented in the Group’s financial statements.
(u) Changes in accounting policies
This note explains the impact of the adoption of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers
on the group’s financial statements and also discloses the new accounting policies that have been applied from 1 January 2018, where
they are different to those applied in prior periods.
AASB 9 Financial Instruments – Impact of Adoption
Impairment of financial assets
The Group’s financial assets subject to AASB 9’s new expected credit loss model are cash and trade receivables, which arise from the
provision of services and sale of goods.
The impact of the impairment requirements of AASB 9 on cash and cash equivalents has not resulted in a material impact to the
financial statements.
Under AASB 9, the Group was required to revise the impairment methodology used in the calculation of its provision for doubtful
debts to the expected credit loss model. This change in methodology has not had a material impact on the financial statements. The
Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for
all trade receivables. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is
no reasonable expectation of recovery include, amongst others, the failure or a debtor to engage in a repayment plan with the Group,
and a failure to make contractual payments for a period of greater than 120 days past due.
AASB 9 Financial Instruments – Accounting Policies Applied from 1 January 2018
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
those to be measured at amortised cost.
The classification depends on how the Group manages the financial assets and the contractual terms of the cash flows. At half year
end, all of the Group’s financial assets have been classified as those to be measured at amortised cost.
36
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) Changes in accounting policies (Continued)
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at FVPL are expensed in profit or loss.
Impairment
From 1 January 2018, the Group assesses expected credit losses associated on a forward looking basis. For trade receivables, the
Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
AASB 15 Revenue from Contracts with Customers – Impact of Adoption
The Group has adopted AASB 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes to accounting
policies but no adjustments to the amounts recognised in the financial statements.
AASB 15 Revenue from Contracts with Customers – Accounting policies
Group revenues consist of the following elements:
• physical products which are sent to the customer, where revenue is recognised upon shipment or arrival of goods, dependent
on the terms that have been agreed with the customer;
cloud services fees, which are recognised over the service period;
software license fees, which are recognised over the license period;
maintenance fees, for which contracts are generally one year with revenue recognised over the contract period; and
installation fees, which are recognised upon the completion of product installation.
•
•
•
•
In relation to cloud services, software licence, and maintenance fees, the Group recognises a contract liability where payments
received exceed the services rendered.
The Group has no material contracts where the period between the transfer of the promised goods or services to the customer and
payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time
value of money.
AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It
instead requires an entity to bring most leases onto its balance sheet in a similar way to how existing finance leases are treated under
AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its balance sheet for most leases. There
are some optional exemptions for leases with a period of 12 months or less and for low value leases.
Lessor accounting remains largely unchanged from AASB 117.
Since the release of this standard, the Group has not yet made an assessment of the impact of this standard.
The application date of this standard is for annual reporting periods beginning on or after 1 January 2019.
2 . FINANCIAL RISK MANAGEMENT
Overview
The Company and Group have exposure to the following risks from their use of financial instruments:
•
•
credit risk
liquidity risk
• market risk
This note presents information about the Company’s and Group’s exposure to each of the above risks, their objectives, policies and
processes for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Management monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks.
37
Notes to the Consolidated Financial Statements
2 . FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and cash and cash equivalents. For the Company it
arises from receivables due from subsidiaries.
Cash and Cash Equivalents
The Group manages its credit risk on cash and cash equivalents by only dealing with banks licensed to operate in Australia.
Trade and other receivables
As the Group operates in the mining exploration sector, it generally does not have trade receivables and therefore is not exposed to
credit risk in relation to trade receivables.
Presently, the Group undertakes exploration and evaluation activities exclusively in Mexico. At the reporting date there were no
significant concentrations of credit risk.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to
credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Impairment losses
Note
8
18
Consolidated Carrying Amount
2018
$
810,207
6,593,163
2017
$
960,236
9,699,949
None of the Company’s other receivables are past due (2017: nil).
The Group operates in the mining exploration sector and generally does not have trade receivables and is therefore not materially
exposed to credit risk in relation to trade receivables. Other receivables are principally value added taxes withheld by third parties
and due to the Group from sovereign governments, as such the Group does not consider it is exposed to any significant credit risk.
The allowance accounts in respect of other receivables is used to record impairment losses unless the Group is satisfied that no
recovery of the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the financial
asset directly. At 30 June 2018 the Group does not have any collective impairments on its other receivables.
The Group places its cash deposits with institutions with a credit rating of AA or better and only with major banks.
Guarantees
Group policy is to provide financial guarantees only to wholly-owned subsidiaries. There are no guarantees outstanding (2017: Nil)
38
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
2 . FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.
Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 180 days,
including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably
be predicted, such as natural disasters.
The following are the contractual maturities of financial liabilities at amortised cost:
Consolidated
30 June 2018
Carrying
amount
Contractual
cash flows
6 mths
or less
6-12 mths
1-2 years
2-5 years More than
5 years
Trade and other payables
268,193
268,193
268,193
30 June 2017
Trade and other payables
334,284
334,284
334,284
-
-
-
-
-
-
-
-
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk on purchases that are denominated in a currency other than the respective functional currencies
of Group entities, primarily the United Sates Dollar (USD) and Mexican Peso (MxP).
The Group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or
payments that are denominated in a foreign currency.
The Group’s investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature.
Exposure to currency risk
The Group’s exposure to foreign currency risk at reporting date was as follows, based on notional amounts:
Trade receivables
Trade payables
Gross statement of financial position
Forward exchange contracts
Net exposure
The following significant exchange rates applied during the year:
2018
USD
-
99,118
99,118
-
99,118
2017
USD
-
79,388
79,388
-
79,388
AUD/USD
Average rate
Reporting date spot rate
2018
1.2904
2017
1.3280
2018
1.3501
2017
1.3010
39
Notes to the Consolidated Financial Statements
2 . FINANCIAL RISK MANAGEMENT (CONTINUED)
Exposure to currency risk (Continued)
Sensitivity analysis
Over the reporting period there have been significant movements in the Australian dollar when compared to other currencies, it is
therefore considered reasonable to review sensitivities base on a 10% movement in the Australian dollar. A 10 percent strengthening
of the Australian dollar against the following currencies at 30 June would have increased equity and decrease loss, before tax, by the
amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2017.
Consolidated
30 June 2018
USD
30 June 2017
USD
Profit or loss
9,912
7,939
A 10 percent weakening of the Australian dollar against the above currencies at 30 June would have had the equal but opposite effect
on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk
Interest rate risk is the risk that the Groups financial position will be adversely affected by movements in interest rates that will increase
the costs of floating rate debt or opportunity losses that may arise on fixed rate borrowings in a falling interest rate environment. The
Group does not have any borrowings therefore is not exposed to interest rate risk in this area. Interest rate risk on cash and short
term deposits is not considered to be a material risk due to the short term nature of these financial instruments.
At the reporting date the interest rate profile of the Company’s and the Group’s interest-bearing financial instruments was:
Variable rate instruments
Short term cash deposits
Consolidated Carrying Amount
2018
2017
6,454,118
9,464,501
Cash flow sensitivity analysis for variable rate instruments
The Group has reviewed the likely movements in interest rates and considers that a movement of +/- 100 basis points is reasonable.
Group Sensitivity
At 30 June 2018 if interest rates had changed +/- 100 basis points from year end rates with all other variables held constant, equity and
post tax profit would have been $ 65,932 higher /lower (2017 – change of 100 basis points $96,999 higher/lower).
40
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
2 . FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are
as follows:
Consolidated
2018
2017
Carrying amount
Fair value
Carrying amount
Fair value
Trade and other receivables
Cash and cash equivalents
Other financial assets
810,207
6,593,163
-
810,207
6,593,163
-
960,236
9,699,949
-
960,236
9,699,949
-
Trade and other payables
(268,193)
(268,193)
(334,284)
(334,284)
The methods and assumptions used to estimate the fair value of instruments are:
Cash and cash equivalent: The carrying amount approximates fair value because of their short-term to maturity.
Receivables and payables: The carrying amount approximates fair value.
Capital Management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to
provide returns for shareholders and benefits of other stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
3. CRITICAL ACCOUNTING ESTIMATES AND SIGNIFICANT JUDGEMENTS
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The
key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets
and liabilities within the next annual reporting period are:
Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred apart from acquisition costs which are carried forward
where right of tenure of the area of interest is current. The future recoverability of exploration and evaluation expenditure is dependent
on a number of factors, including whether the Group decides to exploit the related lease itself, or, if not, whether it successfully
recovers the related exploration and evaluation assets through sale.
Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which
could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to
commodity prices.
To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and
net assets will be reduced in the period in which this determination is made.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences when management considers that it is probable that future
taxable profits will be available to utilise those temporary differences. Currently no deferred tax assets have been recognised as it is
not probable that future taxable profits will be available to utilise those temporary differences.
Share options
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined using the binominal formula. For options issued in this financial
year, the assumptions detailed as per Note 26 were used.
Receivables
Impairments on receivables are made when a judgement is made that the likely hood of recovery is low. Consideration is given to
the length of time the debt has been outstanding, the debtors past history of payment together with any legal advice received on the
probability of recovery in making that determination.
41
Notes to the Consolidated Financial Statements
4. SEGMENT INFORMATION
The Company currently does not have production and is only involved in exploration. As a consequence, activities in the operating
segments are identified by management based on the manner in which resources are allocated, the nature of the resources provided
and the identity of service line manager and country of expenditure. Discrete financial information about each of these areas is
reported to the executive management team on a monthly basis.
Based on this criteria, management has determined that the company has one operating segment being mineral exploration in Mexico.
As the company is focused on mineral exploration, the Board monitors the company based on actual versus budgeted exploration
expenditure incurred by area of interest. These areas of interest meet aggregating criteria and are aggregated into one reporting
sector. This internal reporting framework is the most relevant to assist the Board with making decisions regarding the company and
its ongoing exploration activities, while also taking into consideration the results of exploration work that has been performed to date.
Revenue from external sources
Reportable segment profit (loss)
Reportable segment assets
Reportable segment liabilities
Reconciliation of reportable segment loss
Reportable segment profit (loss)
Other profit
Unallocated:
- Salaries and wages
- Travel and accommodation
- Office costs
- Other corporate expenses
- Share based payments
- Depreciation
Loss before tax
Reconciliation of reportable segment assets
Reportable segment assets
Unallocated:
- Cash
- Trade and other receivables
- Investments
- Office plant and equipment
30 June 2018
$
30 June 2017
$
-
(5,846,640)
8,776,997
(198,237)
-
(4,172,310)
7,162,893
(158,774)
(5,846,640)
(4,172,310)
(1,012,284)
(326,319)
(790,983)
(580,180)
(646,365)
(17,748)
(795,776)
(319,836)
(707,761)
(403,484)
(565,185)
(21,189)
(9,220,519)
(6,985,541)
8,776,997
7,162,893
6,593,163
9,699,949
87,481
948
60,521
76,701
948
62,987
Total assets
15,519,110
17,003,478
Reconciliation of reportable segment liabilities
Reportable segment liabilities
Unallocated:
- Trade and other payables
- Provisions
Total liabilities
(198,237)
(158,774)
(69,956)
(235,566)
(503,759)
(175,510)
(165,092)
(499,376)
42
Azure Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
5. REVENUE FROM CONTINUING OPERATIONS
Other revenues
Bank interest
Back-in right on project
Rental and overhead fees
Other
Total revenues from continuing operations
6. EXPENSES
Loss before income tax includes the following specific expenses
Depreciation of plant and equipment
Exploration expenditure
Exploration expenditure reimbursement
Operating lease expenses
Superannuation
7. INCOME TAX
(a) Income tax expense
Current tax
Deferred tax
(b) Numerical reconciliation of income tax expense to prima facie tax
payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 27.5% (2017: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Share-based payments
Sundry items
Movement in unrecognised temporary differences
Difference in overseas tax rates
30 June 2018
$
30 June 2017
$
80,150
-
-
5,598
85,748
170,087
140,190
132,144
-
442,421
30 June 2018
$
30 June 2017
$
56,841
5,813,830
-
64,948
53,096
57,545
5,758,221
(1,353,280)
36,758
37,825
30 June 2018
$
30 June 2017
$
-
-
-
-
-
-
30 June 2018
$
30 June 2017
$
(9,220,519)
(2,535,643)
(6,985,541)
(2,095,662)
177,750
83,607
(2,274,286)
(92,584)
-
169,556
110,122
(1,815,984)
(102,256)
-
Tax effect of current year tax losses for which no deferred tax asset has been
recognised
2,366,870
1,918,240
Income tax expense
-
-
43
Notes to the Consolidated Financial Statements
7. INCOME TAX (CONTINUED)
(c) Unrecognised temporary differences
Deferred Tax Assets (at 30%)
On Income Tax Account
Prepayments
Depreciation of plant and equipment
Provisions
Carry forward tax losses
Carry forward tax losses – foreign
Other – tenement
Deferred Tax Liabilities (at 30%)
30 June 2018
$
30 June 2017
$
3,512
(11,674)
64,781
8,727,853
8,181,177
600,100
17,565,749
-
3,395
(12,583)
57,028
8,203,290
5,854,477
654,600
14,760,207
-
Deferred income tax assets have not been recognised as it is not probable that future profit will be available against which deductible
temporary differences can be utilised.
In addition to the above Australian estimated future income tax benefits the consolidated entity has incurred significant expenditure
in Mexico, some of which should give rise to taxable deductions. At this stage the company is unable to reliably estimate the quantity
of such future tax benefits.
There are no franking credits available.
8. TRADE AND OTHER RECEIVABLES
Current
Prepayment of insurance premiums
Sundry Receivables (a)
2018
$
2017
$
12,770
797,437
810,207
14,890
945,346
960,236
(a) These amounts generally arise from activities outside the usual operating activities. Interest is not usually charged and collateral is
not obtained. For the Group the receivable principally arises from consumption taxes paid to third party suppliers for which a refund
from tax authorities is expected.
The carrying amount of trade and other receivables are assumed to approximate their fair values due to their short-term nature.
There are no impaired sundry receivables and no past due but not impaired receivables.
(b) Refer to note 2 for information on the risk management policy of the Group and the credit quality of the Groups receivables
9. AVAILABLE FOR SALE INVESTMENTS
Listed shares at fair value (a)
Wolfeye Resource Corp.
2018
$
948
2017
$
948
(a) Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon
rate. Wolfeye Resource Corp. is listed on the Toronto Venture Exchange. Fair value has been determined directly by reference to
published quotations on active markets (Level 1). The fair value of these financial assets has been based on the closing quoted bid
prices at reporting date, excluding transaction costs. Also refer to Note 2 – Financial Risk Management.
44
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
9. AVAILABLE FOR SALE INVESTMENTS (CONTINUED)
At Cost
Impairment
Fair value adjustment to reserve (Note 16)
Fair value at 30 June
10. PLANT AND EQUIPMENT
At 1 July 2016
Cost
Accumulated Depreciation
Net Book Amount
Year ended 30 June 2017
Opening net book value
Additions
Disposals
Depreciation on disposals
Depreciation charge
Foreign exchange translation adjustment
Closing net book value
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book value
Additions
Disposals
Depreciation on disposals
Depreciation charge
Foreign exchange translation adjustment
2018
$
40,944
-
(39,996)
948
2017
$
40,944
-
(39,996)
948
Furniture, fittings
and equipment
$
Motor Vehicles
$
Exploration
Equipment
$
Total
$
306,276
(176,164)
130,112
130,112
16,249
-
-
(35,792)
(317)
110,252
322,373
(212,121)
110,252
110,252
30,120
(75,745)
75,025
(34,122)
(2,540)
110,431
(57,116)
53,315
53,315
-
-
-
(13,739)
(1,135)
38,441
109,481
(71,040)
38,441
38,441
-
(23,731)
13,349
(13,298)
(2,032)
12,729
79,326
(66,597)
12,729
100,549
(29,936)
70,613
517,256
(263,216)
254,040
70,613
981
(2,883)
2,883
(8,014)
(952)
62,628
97,855
(35,227)
62,628
62,628
9,052
(4,280)
4,242
(9,422)
(3,661)
58,559
96,748
(38,189)
58,559
254,040
17,230
(2,883)
2,883
(57,545)
(2,404)
211,321
529,709
(318,388)
211,321
211,321
39,172
(103,756)
92,616
(56,842)
(8,233)
174,278
445,352
(271,074)
174,278
45
Closing net book value
102,990
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
269,278
(166,288)
102,990
Notes to the Consolidated Financial Statements
11. CAPITALISED EXPLORATION EXPENDITURE (NON-CURRENT)
At Cost
Reconciliations
2018
$
2017
$
7,940,514
6,131,024
Movement in the carrying amounts of capitalised exploration expenditure between the beginning and end of the current financial year
Opening net book amount
Additions(a)
Disposals
Foreign exchange translation adjustment
Closing net book amount
2018
$
6,131,024
2,203,013
-
(393,523)
7,940,514
2017
$
6,104,133
26,891
-
-
6,131,024
(a) The following payments were made to acquire projects during the Year: $1,943,946 (Oposura), $180,234 (Sara Alicia), $46,624(EL
Sahuaro) and $32,209 (Promontorio).
Recovery of the capitalised amount is dependent upon successful development and commercial exploitation, or alternatively, sale.
12. 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(a):
Name
Country of incorporation Class of shares
Equity Holding*
Azure Mexico Pty Ltd
Minera Piedra Azul, S.A. de C.V
Minera Capitana S.A. de C.V
Azu-Perth S.A. de C.V.
Minera Azure, S.A. de C.V.
Australia
Mexico
Mexico
Mexico
Mexico
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
*Percentage of voting power is in proportion to ownership.
13. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Joint venture contribution received in advance
2018
%
2017
%
100
100
100
100
100
100
100
100
100
100
2018
$
268,193
-
268,193
2017
$
334,284
-
334,284
Information about the Groups financial risk management policies is disclosed in note 2.
The carrying amount of trade and other payables are assumed to approximate their fair values due to their short-term nature.
46
Azure Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
14. PROVISIONS
Current
Employee benefits
Non-Current
Employee benefits
2018
$
154,141
81,425
2017
$
97,445
67,647
The provisions for employee benefits include accrued annual leave and long service leave. For long service leave it covers all
unconditional entitlements where employees have completed the required period of service. Based on past experience employee
entitlements that represent annual leave are presented as current and employee entitlements that are in relation to long serve leave
are present as non-current.
15. CONTRIBUTED EQUITY
(a) Share capital
Ordinary shares fully paid
2018
Number of shares
Consolidated
2017
Number of shares
$
$
Total consolidated contributed equity
110,999,992
80,732,475
1,672,653,595
73,027,947
(b) Movements in ordinary share capital
Consolidated
1 July opening balance
Issue at $0.038 per share
Issue at $0.031 per share
Shares cancelled from 1:20 share
consolidation
Issue at $0.30 per share
Share issue expenses
30 June closing balance
2018
Number of shares
2017
Number of shares
$
1,672,653,595
73,027,947
1,464,260,045
-
-
(1,589,020,269)
-
-
-
27,366,666
-
8,210,000
(505,472)
207 993 950
400,000
-
-
-
110,999,992
80,732,475
1,672,653,995
Funds raised from the share issues during the 2018 were used to progress the company’s exploration activities
(c) Movements in unlisted options on issue - 2017
Exercise Price
(cents)
Expiry
Opening Balance
Issued
Lapsed
Shares cancelled
from 1:20
Consolidation
5.8
6.0
4.7
4.5
5.5
30 June 2017
25,000,000
30 November 2018
37,000,000
-
-
30 November 2019
-
41,000,000
(25,000,000)
-
-
30 November 2016
25,924,075
-
(25,924,075)
11 September 2019
-
194,508,539
-
87,924,075
235,508,539
(50,924,075)
-
-
-
-
-
-
$
65,581,982
7,903,770
12,400
-
-
(470,205)
73,027,947
Closing
Balance
-
37,000,000
41,000,000
-
194,508,539
272,508,539
47
Notes to the Consolidated Financial Statements
15. CONTRIBUTED EQUITY (CONTINUED)
(c) Movements in unlisted options on issue (Continued) - 2018
Exercise Price
(cents)
Expiry
Opening Balance
Issued
Lapsed
120*
94*
58*
110*
45**
30 November 2018
37,000,000
30 November 2019
41,000,000
-
-
30 November 2020
-
41,000,000
11 September 2019
194,508,539
-
30 April 2020
-
13,683,339
272,508,539
54,683,339
-
-
-
-
-
-
Shares cancelled
from 1:20
Consolidation
Closing
Balance
(35,150,000)
1,850,000
(38,950,000)
2,050,000
(38,950,000)
2,050,000
(184,783,028)
9,725,511
-
13,683,339
(297,833,028)
29,358,850
*Exercise price adjusted for the 1:20 consolidation completed on 30 November 2017.
** Issued after the 1:20 share consolidation
Further information on options issued is set out in Note 26.
(d) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person
or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. For further information on Capital Management
refer to Note 2.
16. RESERVES AND ACCUMULATED LOSSES
Accumulated losses
Balance at beginning of year
Loss for the year
Balance at end of year
Share-based payments reserve
Balance at beginning of year
Movement during the year
Balance at end of year
Available-for-sale assets reserve
Balance at beginning of year
Revaluation
Balance at end of year
Foreign currency translation reserve
Balance at beginning of year
Movement during the year
Balance at end of year
48
2018
$
2017
$
59,895,515
9,220,519
69,116,034
52,909,974
6,985,541
59,895,515
4,515,403
646,365
5,161,768
3,950,218
565,185
4,515,403
(39,996)
-
(39,996)
(1,103,737)
(619,125)
(1,722,862)
(39,996)
-
(39,996)
(1,000,727)
(103,010)
(1,103,737)
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
16. RESERVES AND ACCUMULATED LOSSES (CONTINUED)
(a) Nature and purpose of reserves
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options issued but not exercised.
Available-for-sale assets reserve
This reserve records fair value changes on available-for-sale investments. Amounts are recognised in profit or loss when the associated
assets are sold or impaired.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the statements of
foreign subsidiaries.
17. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made.
18. STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents (refer note 2)
Cash and cash equivalents comprises:
- cash at bank and in hand
- short-term deposits
Closing cash and cash equivalents balance
2018
$
139,045
6,454,118
6,593,163
2017
$
235,448
9,464,501
9,699,949
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates.
(b) Reconciliation of the net loss after income tax to the net cash flows
from operating activities
Net loss
Depreciation of non current assets
Share based payment expense
Non-cash exploration expense
Proceeds from sale of project
Profit on sale of equipment
Changes in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
(c) Non-cash financing and investing activities
There have been no non-cash financing and investing activities during the 2018 year (2017: Nil).
2018
$
2017
$
(9,220,519)
(6,985,541)
56,840
646,365
-
11,330
(16,928)
(2,297,776)
(3,123)
2,344,986
70,474
57,545
565,185
12,400
(140,190)
-
330,760
3,781
(890,440)
23,541
(8,408,351)
(7,022,959)
49
Notes to the Consolidated Financial Statements
19. COMMITMENTS
(a) Exploration commitments
The company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an
interest in. Outstanding exploration commitments which are expected to be met in the normal course of business are as follows:
Not later than one year
(b) Lease expenditure commitments
Operating leases (non cancellable):
Minimum lease payments:
not later than one year
later than one year and not later than five years
Aggregate lease expenditure contracted for at reporting date
2018
$
101,528
2017
$
100,821
2018
$
2017
$
141,780
212,670
354,450
119,076
297,690
416,766
The property lease is a non-cancellable lease with a five-year term ending 31 December 2020, rent is payable monthly in advance. The
lease allows for subletting of all leased areas and excess office space has been sub-let the related third parties as disclosed in Note
25(c).
20. CONTINGENCIES
There are no material contingent liabilities or contingent assets of the company at reporting date (2017: Nil).
21. EVENTS OCCURING AFTER REPORTING DATE
No matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the group, the results of those operations, or the state of affairs of the group in future financial years.
22. LOSS PER SHARE
(a) Reconciliation of earnings to profit or loss
Net loss
Loss used in calculating basic loss per share
2018
$
(9,220,519)
(9,220,519)
2017
$
(6,985,541)
(6,985,541)
(b) Weighted average number of ordinary shares outstanding during the
year used in calculating basic loss per share
Number of shares
2018
Number of shares
2017
Weighted average number of ordinary shares used in calculating basic loss per share
91,637,139
1,668,981,646
(c) Effect of dilutive securities
Options on issue at reporting date could potentially dilute basic earnings per share in the future. The effect in the current year is to
decrease the loss per share hence they are considered antidilutive. Accordingly diluted loss per share has not been disclosed.
50
Azure Minerals Limited Annual Report 2018
Notes to the Consolidated Financial Statements
23. AUDITOR’S REMUNERATION
Amounts received or due and receivable by BDO Audit (WA) Pty Ltd or associated
entities for:
Tax compliance services
An audit or review of the financial report of the entity
Remuneration of other auditors of subsidiaries
Audit or review of financial report of subsidiaries
24. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Compensation of key management personnel by compensation
Short-term
Post employment
Share-based payment
2018
$
10,455
44,000
54,455
2017
$
11,105
40,925
52,030
27,662
37,885
2018
$
767,930
34,027
425,655
2017
$
659,900
48,775
372,195
1,227,612
1,080,870
For further information refer to the Remuneration Report included as part of the Directors’ Report.
25. RELATED PARTY DISCLOSURES
(a) Parent entity
The ultimate parent entity within the Group is Azure Minerals Limited.
(b) 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(a):
Name
Country of incorporation
Class of shares
Equity Holding*
Azure Mexico Pty Ltd
Minera Piedra Azul, S.A. de C.V
Minera Capitana, S.A. de C.V
Servicios AzuPerth, S.A. de C.V
Mineral Azure S.A. de C.V.
Australia
Mexico
Mexico
Mexico
Mexico
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2018
%
100
100
100
100
100
2017
%
100
100
100
100
100
*Percentage of voting power is in proportion to ownership
No other provision for doubtful debts have been raised in relation other outstanding balances, and no other expense has been
recognised in respect of bad or doubtful debts due from related parties.
(c) Other Related Transactions
The Company has entered into a sub-lease agreement on normal commercial terms with Oro Verde Limited, a company of which
Wolf Martinick and Brett Dickson are directors. During the year Oro Verde Limited paid sub-lease fees totalling $4,800 (2017: $4,800).
The Company has also entered into a sub-lease agreement on normal commercial terms with Rox Resources Limited, a company of
which Brett Dickson is a Director. During the year Rox Resources Limited paid sub-lease fees totalling $ 111,216 (2017: $90,309).
51
Notes to the Consolidated Financial Statements
26. SHARE-BASED PAYMENTS
No options have been issued pursuant to an Employee Share plan.
Employee and consultants option plan
The establishment of the Azure Minerals Limited – Employees and Contractors Option Incentive Plan (“Plan”) was approved
by shareholders at the Annual General Meeting. The plan is designed to provide long-term incentives for employees and certain
contractors to deliver long term shareholder returns. Participation in the plan is at the Boards discretion and no individual has a
contractual right to participate in the plan or to receive guaranteed benefits. In addition, under the Plan, the Board determines the
terms of the options including exercise price, expiry date and vesting conditions, if any.
Options granted under the plan carry no dividend or voting rights. When exercised, each option is convertible into an ordinary share
of the company with full dividend and voting rights. No options are on issue pursuant to the plan.
(a) Director, executive and employee options
Set out below are summaries of current directors, executives & employees options granted.
Grant
Date
Expiry
Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents)
Balance at
the start of
the year
Number
Granted
during
the year
Number
Exercised
during
the year
Number
Lapsed
during the
year
Number
Balance at
end of the
year
Number
Vested and
exercisable
at end of
the year
Number
2017
25 Sept
‘13
19 Nov
‘15
28 Apr
‘16
7 Dec
‘16
30 June
‘17
30 Nov
‘18
30 Nov
‘18
30 Nov
‘19
5.8
6.0
6.0
4.7
3.2
2.1
2.2
1.4
25,000,000
31,200,000
5,800,000
-
-
-
-
41,000,000
62,000,000
41,000,000
Weighted average exercise price
$0.059
$0.047
2018
19 Nov
‘15
28 Apr
‘16
7 Dec
‘16
20 Nov
’17
30 Nov
‘18
30 Nov
‘18
30 Nov
‘19
30 Nov
‘20
6.0
6.0
4.7
2.9
2.1
2.2
1.4
1.6
31,200,000
5,800,000
41,000,000
-
-
-
-
41,000,000
78,000,000
41,000,000
Weighted average exercise price
$0.053
$0.029
-
-
-
-
-
-
-
-
-
-
-
-
(25,000,000)
-
-
-
-
-
31,200,000
31,200,000
5,800,000
5,800,000
41,000,000
41,000,000
(25,000,000)
78,000,000
78,000,000
$0.058
$0.053
$0.053
-
-
-
-
-
-
31,200,000
31,200,000
5,800,000
5,800,000
41,000,000
41,000,000
41,000,000
41,000,000
119,000,000 119,000,000
$0.045
$0.045
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.4 years (2017: 1.8 years).
52
Azure Minerals Limited Annual Report 2018 Notes to the Consolidated Financial Statements
26. SHARE-BASED PAYMENTS (CONTINUED)
(a) Director, executive and employee options (Continued)
Fair value of options granted.
During the 2018 financial year the weighted average fair value of the options granted was 1.58 cents. The price was calculated by using
the Binominal Option valuation methodology applying the following inputs:
Weighted average exercise price (cents)
Weighted average life of the option (years)
Weighted average underlying share price (cents)
Expected share price volatility (%)
Risk free interest rate (%)
2018
2.9
3.0
2.6
100
1.9
2017
4.7
3.0
2.7
100
1.9
Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future
trends, which may not eventuate.
The life of the options is based on historical exercise patterns, which may not eventuate in the future.
Total expenses arising from share-based payment transactions recognised during the year were as follows:
Options issued to directors and executives
27. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Consolidated
2018
$
646,365
2017
$
565,185
Statement of Financial Position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholder’s equity
Issued capital
Reserves
Accumulated loses
2018
$
2017
$
15,104,818
15,167,137
(224,097)
(305,522)
16,780,414
16,844,704
(340,602)
(340,602)
14,861,615
16,504,102
80,732,475
5,121,772
(70,992,632)
14,861,615
73,027,947
4,475,407
(60,999,252)
16,504,102
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017.
(c) Contracted commitments for the acquisition of property, plants or equipment
The parent entity did not have any commitments for the acquisition of property, plants or equipment.
53
Directors’ Declaration
The directors of the company declare that:
(1) The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
b. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the
year ended on that date.
(2) There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable.
(3) The directors have been given the declaration by the chief executive officer and chief financial officer as required by section 295A
of the Corporations Act 2001.
(4) The Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with
International Financial Reporting Standards.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:
Peter Ingram
Chairman
Perth, 11 September 2018
54
Azure Minerals Limited Annual Report 2018 Independent Auditor’s Report
55
Independent Auditor’s Report
56
Azure Minerals Limited Annual Report 2018 Independent Auditor’s Report
57
Declaration of Independence
58
Azure Minerals Limited Annual Report 2018 ASX Additional Information
The number of shareholders, by size of holding, in each class of share as at 4th September 2018 are:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
The number of shareholders holding less than a marketable parcel of shares are:
b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
18
20
HSBC CUSTODY NOMINEES LIMITED
DEUTSCHE BALATON AKTIENGESELLSCHAFT
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
YANDAL INVESTMENTS PTY LTD
DELPHI UNTERNEHMENSBERATUNG AKTIENGESELLSCHAFT
J & B SMITH SUPERANNUATION PTY LTD
BNP PARIBAS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
DR LYNDSAY GEORGE MCDONALD GORDON
MR BRIAN GREGORY WALSH
MR PETER MURRAY NICHOLAS
CS FOURTH NOMINEES PTY LIMITED
SENESCHAL (WA) PTY LTD
MR GARRY TEMPLE
MR NEIL JAMES WADDINGTON
MR DIRK KEIZER + MRS LENA KEIZER
STADJOY PTY LTD
MR JOHN WILLIAM ROGERS
MR ANTHONY PAUL ROVIRA
Ordinary shares
Number of holders
Number of shares
1,155
1,063
463
961
130
3,772
1,735
497,801
3,019,342
3,580,402
31,033,658
72,868,789
110,999,992
1,549,363
Listed ordinary shares
Number of shares
Percentage of
ordinary shares
10,658,836
10,000,000
7,709,337
6,378,451
5,000,000
3,781,877
1,020,000
955,548
908,487
700,481
629,500
570,000
505,000
500,000
500,000
464,112
462,792
450,001
433,257
416,333
9.60
9.01
6.95
5.75
4.50
3.41
0.92
0.86
0.82
0.63
0.57
0.51
0.45
0.45
0.45
0.42
0.42
0.41
0.39
0.38
(c) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act
2001 are:
52,044,012
46.89
Deutsche Balaton Aktiengesellschaft
Drake Private Investments LLC
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Number of Shares
14,742,670
5,843,113
59
ASX Additional Information
(e) Schedule of interests in mining tenements
Project Common Name
Oposura
El Monstruo De Plomo
Don Genaro
El Crestón De Plomo
Candelaria
El Hueco
Campo De Plomo
Oposura Número 2
Oposura Número 4
Oposura Número 6
El Encinal
Sara Alicia
El Tecolote
El Tecolote III
Sara Alicia
El Tecolote
Promontorio
Hidalgo
Promontorio
El Magistral
Promontorio 1
Promontorio 2
Promontorio 3
Promontorio 4
Promontorio 5
Promontorio 6
Promontorio 7
Promontorio 8
Promontorio 9
Promontorio 10
Promontorio 11
Promontorio 12
Promontorio 13
El Sahuaro
Oso Negro
Panchita
Dona Panchita
Oso Negro
Panchita
San Augustin
San Augustin1
Kino 3
Kino 2
Kino 4
Kino 8
Kino 9
Kino 10
Kino 11
Kino 15
Hidalgo No. 4
Kino 16
Alacran1
60
Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
Tenement
Percentage held
180473
180474
180475
180476
180477
180602
180603
180604
180605
223473
165539
243923
234586
235270
235269
218881
245495
245496
245497
245505
245500
245498
245506
245507
245501
245499
245502
245503
245504
243322
application
212767
192097
238325
166312
166313
166314
166315
166316
166317
166318
166365
166366
166367
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Azure Minerals Limited Annual Report 2018 ASX Additional Information
Project Common Name
Alacran1
Hidalgo No. 3
Hidalgo No. 2
Hidalgo No. 5
Hidalgo No. 6
Hidalgo No. 8
Hidalgo No. 7
Hidalgo
Hidalgo No. 9
San Simon
San Simon No. 2
El Alacran
Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
All Minerals
Tenement
Percentage held
166368
166369
166370
166371
166372
166373
166374
166375
166376
166377
201817
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
¹ Teck Resources Limited has elected to exercise its back-in right to earn a 51% interest in the Alacrán concessions.
Tables of Minerals Resources
Mineral Resources Estimation Governance Statement
Governance of Azure’s mineral resources is a responsibility of the Executive Management of the Company.
The Promontorio, Cascada, Mesa de Plata and Loma Bonita mineral resources have not changed since last year. The Oposura mineral
resource is a new resource this financial year and its first estimate was released to ASX on 4 July 2018.
Azure has ensured that its mineral resources estimates are subject to appropriate levels of governance and internal controls. The
mineral resources reported have been estimated by independent external consultants who are experienced in best practices in
modelling and estimation methods. The consultants have also undertaken reviews of the quality and suitability of the underlying
information used to generate the resource estimations. Additionally, the Company carries out regular internal peer reviews of
processes and contractors engaged.
Azure has reported its Promontorio mineral resources on an annual basis in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Resources (the JORC code) 2004 Edition.
Azure has reported its Oposura, Cascada and Mesa de Plata mineral resources on an annual basis in accordance with the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Resources (the JORC code) 2012 Edition.
Competent Persons named by Azure are members of the Australian Institute of Mining and Metallurgy and/or the Australian Institute
of Geoscientists and/or of a “Recognised Professional Organisation”, as included in a list on the JORC and ASX websites.
Oposura Project
Table 1: Oposura Resource Estimate - June 2018 - using a 1.5% Zinc Equivalent Cut-Off Grade
(first released to ASX on 4 July 2018)
Zone
East
West
Total
Indicated Mineral Resource
Inferred Mineral Resource
Total Mineral Resource
Tonnes
Grade
Tonnes
Grade
(Mt)
0.5
1.6
2.1
Zn
(%)
5.0
5.4
5.3
Pb
(%)
3.7
2.6
2.9
Ag
(g/t)
19.4
16.5
17.2
(Mt)
0.5
0.3
0.8
Zn
(%)
4.8
3.3
4.3
Pb
(%)
2.7
2.1
2.5
Ag
(g/t)
16.7
14.3
16.5
Tonnes
(Mt)
1.0
1.9
2.9
Grade
Pb
(%)
3.2
2.6
2.8
Ag
(g/t)
18.5
16.2
17.0
Zn
(%)
4.9
5.0
5.0
61
ASX Additional Information
Tables of Minerals Resources (Continued)
Alacrán Project
Table 2: Mesa de Plata JORC Code Measured and Indicated Mineral Resource
(first released to ASX on 1 December 2016)
Measured Mineral Resource
Indicated Mineral Resource
Total Mineral Resource
Zone
High Grade
Mid-Grade
Total
Tonnes
(Mt)
Silver
(g/t Ag)
(Moz)
Tonnes
(Mt)
Silver
(g/t Ag)
(Moz)
1.21
8.43
9.64
307.4
43.0
76.2
12.0
11.7
23.6
0.54
0.28
0.82
201.7
36.2
145.4
3.5
0.3
3.8
Tonnes
(Mt)
1.75
8.71
10.46
Silver
(g/t Ag)
(Moz)
274.7
42.8
81.6
15.5
12.0
27.4
Table 3: Loma Bonita JORC Code Indicated and Inferred Mineral Resource
(first released to ASX on 21 December 2016)
Cut-Off Grade
(g/t Au)
JORC Code
Classification
Tonnes (Mt)
≥ 0.5
Indicated Mineral Resource
Inferred Mineral Resource
Total
≥ 0.21
Indicated Mineral Resource
Inferred Mineral Resource
Total
2.87
0.5
3.4
4.20
1.2
5.4
Gold
Silver
(g/t)
1.25
1.0
1.2
0.95
0.6
0.9
(kOz)
115.7
15
131
128.5
22
150
(g/t)
33.9
18
32.0
30.1
18
28
(Moz)
3.14
0.3
3.4
4.07
0.7
4.8
Promontorio Project
Table 4: Cascada Mineral Resource above a 0.5% Cu Equivalent Cut-off within the Resource Constraining Shell
(first released to ASX on 7 May 2015)
Within Constraining Shell
Cut off > 0.5% CuEq
Classification
Indicated
Inferred
Total
Tonnage
(tonnes)
810,000
1,140,000
1,950,000
Grade
Contained Metal
Cu
(%)
1.1
0.7
0.9
Au
(g/t)
1.4
1.7
1.6
Ag
(g/t)
28
26
27
CuEq
Cu
(tonnes)
9,000
8,400
Au
(oz)
36,000
63,200
Ag
(oz)
720,000
960,000
CuEq
(tonnes)
15,900
20,000
17,400
99,200
1,680,000
35,900
(%)
2.0
1.8
1.8
Table 5: Cascada Mineral Resource above a 1.0% Cu Equivalent Cut-off below the Resource Constraining Shell
Below Constraining Shell
Cut off > 1.0% CuEq
Classification
Indicated
Inferred
Total
Tonnage
(tonnes)
30,000
80,000
110,000
Grade
Contained Metal
Cu
(%)
1.0
1.3
1.2
Au
(g/t)
0.8
2.7
2.3
Ag
(g/t)
17
22
21
CuEq
Cu
(%)
1.5
2.7
2.4
(tonnes)
300
1,100
1,400
Au
(oz)
700
7,300
8,000
Ag
(oz)
20,000
60,000
80,000
CuEq
(tonnes)
400
2,300
2,700
62
Azure Minerals Limited Annual Report 2018 ASX Additional Information
Promontorio Project (Continued)
Table 6: Cascada Mineral Resource Total within and below the Resource Constraining Shell
Total Resource
Grade
Contained Metal
Classification
Indicated
Inferred
Total
Tonnage
(tonnes)
840,000
1,230,000
2,070,000
Cu
(%)
1.1
0.8
0.9
Au
(g/t)
1.4
1.8
1.6
Ag
(g/t)
27
26
27
Table 7: Promontorio Project Mineral Resource
(first released to ASX on 10 May 2013)
CuEq
Cu
(tonnes)
9,200
9,500
Au
(oz)
Ag
(oz)
CuEq
(tonnes)
36,700
740,000
16,300
70,500
1,020,000
22,300
18,700
107,200
1,760,000
38,600
Total Resource
Grade
Contained Metal
CuEq
Cu
(tonnes)
Au
(oz)
Ag
(oz)
CuEq
(tonnes)
Classification
Indicated
Inferred
Total
Tonnage
(tonnes)
610,000
230,000
840,000
Cu
(%)
2.7
1.8
2.5
Au
(g/t)
1.7
1.5
1.6
Ag
(g/t)
56
56
56
(%)
1.9
1.8
1.9
(%)
4.4
3.3
4.1
16,700
32,500
1,090,000
26,700
4,100
11,300
410,000
7,500
20,800
43,800
1,500,000
34,200
63
ASX Additional Information
Competent Person Statement:
Information in this report that relates to previously reported Exploration Results has been crossed-referenced in this report to the date that it
was reported to ASX.
The information in this report that relates to the Mineral Resource for the Promontorio deposit was prepared and first disclosed to the ASX on
10 May 2013 under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information
has not materially changed since it was last reported.
The information in this report that relates to Mineral Resources for the Cascada deposit is extracted from the report “Cascada Mineral
Resource Estimate” created and released to ASX on 7 May 2015 and is available to view on www.asx.com.
The information in this report that relates to Mineral Resources for the Mesa de Plata deposit is extracted from the report “Mesa de Plata
Mineral Resource” created and released to ASX on 1 December 2016 and is available to view on www.asx.com.
The information in this report that relates to Mineral Resources for the Loma Bonita deposit is extracted from the report “Loma Bonita Mineral
Resource” created and released to ASX on 21 December 2016 and is available to view on www.asx.com.
The information in this report that relates to Mineral Resources for the Oposura deposit is extracted from the report “Oposura Mineral
Resource” created and released on the ASX on 4 July 2018 and is available to view on www.asx.com.
The Company confirms that it is not aware of any new information or data that materially affects the information included in the original
market announcements and that all material assumptions and technical parameters underpinning the estimates in the relevant market
announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent
Person’s findings are presented have not been materially modified from the original market announcements.
Copper Equivalency Statements:
Promontorio:
Copper Equivalent (CuEq) was based on the following assumed metal prices that were guided by the three year averages at the data cut-off
date 2 April 2013: US$3.25/lb for Cu, US$1,450/oz for Au and US$27.50/oz for Ag.
The CuEq grade accounts for the following metal recoveries: 97.9% for Cu, 93.4% for Au, and 97.0% for Ag.
It is Azure’s belief that all elements included in the metal equivalent calculation have a reasonable potential to be recovered.
The following formula was used to calculate the Copper Equivalent grade: CuEq (%) = (Cu% x 0.979) + (Au (g/t) x 0.6077) + (Ag (g/t) x 0.0120).
Cascada:
Copper Equivalent (CuEq) was based on the following assumed metal prices that were guided by the three year averages at the data cut-off
date of 30 October 2014: US$3.40/lb for Cu, US$1,470/oz for Au and US$25.00/oz for Ag.
The CuEq grade accounts for the following metal recoveries: 95.0% for Cu, 75.0% for Au, and 85.0% for Ag.
It is Azure’s belief that all elements included in the metal equivalent calculation have a reasonable potential to be recovered.
The following formula was used to calculate the Copper Equivalent grade: CuEq (%) = (Cu% x 0.95) + (Au (g/t) x 0.4729) + (Ag (g/t) x 0.0091).
Zinc Equivalency Statement:
Oposura:
Zinc Equivalency % US$:
Zinc equivalent values in US$ are determined by the following factors:
Zn Eq = ((%Zn x 0.875 x 0.85)+(%Pb x 0.85 x 0.95)+(g/t Ag x 0.67 x 0.70))/(%Zn x 0.875 x 0.85)
Commodity prices used in this MRE:
Zinc $3,107.50/t, Lead $2,411/t (spot price, LME, 2018. www.lme.com, cited 0:00 GMT 20/06/2018)
Silver $16.20/oz (spot price, NYSE, 2018. www.kitco.com, cited 0:00 GMT 20/06/2018)
Concentrate recoveries used in this MRE: Zn 87.5%, Pb 85%, Ag 67% (Locked Cycle and Batch Flotation tests: Azure Minerals Ltd, 2018.)
Smelter recoveries used in this MRE: Zn 85%, Pb 95%, Ag 70% (International Benchmarks: Azure Minerals Ltd, 2018)
It is the opinion of Azure Minerals Ltd that all the elements included in the calculation have a reasonable potential to be recovered and sold
64
Azure Minerals Limited Annual Report 2018 AZURE
M I N E R A L S L I M I T E D
Address:
Level 1, 34 Colin Street
West Perth, WA 6005
Postal address:
PO Box 493
West Perth, WA 6872
P: +61 8 9481 2555
F: +61 8 9485 1290
E: admin@azureminerals.com.au
www.azureminerals.com.au