BLACK CAT SYNDICATE LIMITED ABN 63 620 896 282 ANNUAL REPORT 2018 BC8 TABLE OF CONTENTS Chairman’s Letter ................................................................................................... 4 Review of Operations ............................................................................................. 6 Summary of Tenements ....................................................................................... 16 Directors’ Report ................................................................................................... 18 Auditor’s Independence Declaration ..................................................................... 29 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... 30 Consolidated Statement of Financial Position ...................................................... 31 Consolidated Statement of Changes in Equity ..................................................... 32 Consolidated Statement of Cash Flows ................................................................ 33 Notes to the Financial Statements ........................................................................ 34 Directors’ Declaration ........................................................................................... 59 Independent Auditor’s Report ............................................................................... 60 ASX Additional Information ................................................................................... 64 2 CORPORATE DIRECTORY Directors Paul Chapman Gareth Solly Les Davis Alex Hewlett Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Joint Company Secretaries Mark Pitts Dan Travers Principal Office Unit 6, 16 Nicholson Road Subiaco, Western Australia 6008 Telephone 0458 007 713 Registered Office Unit 5, 16 Nicholson Road Subiaco, Western Australia 6008 Telephone 0458 007 713 Auditor Crowe Horwath Perth Level 5, 45 St Georges Terrace Perth, Western Australia 6000 Share Registry Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth, Western Australia 6000 Telephone (08) 9323 2000 Stock Exchange Listing The Company’s shares are quoted on the Australian Securities Exchange. The home exchange is Perth, Western Australia. ASX Code BC8 – Ordinary shares Website www.blackcatsyndicate.com.au Australian Business Number 63 620 896 282 Company Information The Company was incorporated and registered under the Corporations Act 2001 in Western Australia. The Company is domiciled in Australia. 3 CHAIRMAN’S LETTER Dear Fellow Shareholder We are pleased to present the 2018 Annual Report for Black Cat Syndicate Limited (“Black Cat”). We believe Black Cat offers the following opportunity to investors: − − − − − we have a tight capital structure and we are well funded; we generate strong news flow and we are actively drilling three mineralised corridors as well as other high ranking targets; we offer scale potential as we look to define and grow resources from multiple deposits; we are in an excellent location being close to mills, infrastructure and workforce; and we have an experienced team that can transition from exploration to production. Dealing with each of these principles in turn. We have a tight capital structure and we are well funded Black Cat completed the $6 million Initial Public Offering (“IPO”) process and ASX listing on 30 January 2018. In doing so we issued 57.26 million fully paid ordinary shares and 17.46 million five year options exercisable at $0.20. We have been cost conscious with shareholder funds. At 30 June 2018, we had $3.9 million of cash at bank and had RC drilled 12,822 metres. Our RC drilling performance has us 300% ahead on drilled metres while drilling cost per metre is approximately 33% of our expectations at IPO. For our deeper diamond drilling, we have secured 50% funding (up to $138,000) from the WA Government Exploration Incentive Scheme. We generate strong news flow and we are actively drilling three mineralised corridors as well as other high ranking targets Since Black Cat’s ASX listing on 30 January 2018 we have issued 15 market sensitive announcements at the rate of ~1.5 per month. This reflects both our drilling productivity and also the extremely pleasing results achieved to date. We offer scale potential as we look to define and grow resources from multiple deposits We have three pronged strategy aimed at building JORC Resources and creating value for shareholders: - - - Advanced Targets: progress more mature targets such as along the 6km long Queen Margaret Corridor to define JORC Resources and economic deposits as quickly as possible; Emerging Targets: assess emerging targets such as along the 1.4km long Myhree-Boundary Corridor to determine their ability to become advanced targets with potential JORC Resources; and Early Targets: efficiently evaluate and prioritise more conceptual targets to ensure that scale opportunities are not overlooked. 4 CHAIRMAN’S LETTER (continued) We are in an excellent location being close to mills, infrastructure and a workforce Being only 25kms east of Kalgoorlie lowers cost and risk while increasing the likelihood of a deposit being economic. Major players in the area include Northern Star, Evolution and KCGM, ensuring that Kalgoorlie remains a long term hub for mining and exploration services. We have also steadily increased our footprint in the area with some low key ground acquisitions. We have an experienced team that can transition from exploration to production In addition to an experienced non-executive team comprised of Les Davis, Alex Hewlett and me, we have added a strong management team. Gareth Solly joined as Managing Director and while a geologist by training was also registered mine manager at the nearby and similar Daisy Milano Complex. Dr Damien Keys of Complete Target is our Chief Geological Adviser. Damien has been instrumental in developing a comprehensive geological model over the Bulong Gold Project. A first for this project. Ned Summerhayes was appointed Exploration Manager charged with both assessing opportunities and implementing our plans on the ground. As we move to 2019, other opportunities and challenges will present themselves. By focussing on the above principles, we are confident of another successful year for Black Cat. In closing, we would like to thank our local communities, employees, suppliers and other business partners. We also would like to take this opportunity to thank our fellow shareholders for your support. Yours sincerely Paul Chapman Chairman 5 REVIEW OF OPERATIONS OVERVIEW Black Cat Syndicate Limited (“Black Cat” or “the Company”) listed on the Australian Securities Exchange (“ASX”) (ASX:BC8) on 30 January 2018. The Company, being conscious of capital, finished the year with $3.9 million in cash. Black Cat seeks to maximise value for shareholders through the application of cost effective systematic and scientific exploration over areas with significant potential. Black Cat’s primary focus is on its 100% owned, 842 km Bulong Gold Project (“Bulong”) located close to infrastructure just 25kms east of Kalgoorlie by sealed road. Mains power and water run through Bulong with five regional mills, support services and a residential workforce nearby (refer Figure 1). Black Cat’s intention is to build a high quality resource base at Bulong with the aim of advancing to production as quickly as possible. Numerous highly prospective targets exist at Bulong which offer potential for the Company to define and grow resources from multiple deposits. In particular, to the south of Bulong, prospective targets are typically controlled by stratigraphic and structural corridors (refer Figure 2) which provide excellent exploration targets: − − − Queen Margaret Corridor: ~5km mineralised corridor with historic mining activity but a lack of modern exploration; Myhree-Boundary Corridor: 1.4km long corridor, historic and recent exploration providing high-grade results to the southern and northern extents with minimal exploration over the majority of the corridor; and Trump Corridor: ~1km zone 200m to the west and striking parallel to the Mhyree-Boundary Corridor. This area has seen minimal exploration and only minor historic mining. PROJECT BACKGROUND Bulong has a history of complex, unconsolidated ownership and small scale, high grade production: − − − − − mine production ceased in the early 1910s with a total of ~152,000oz @ >1 oz/t Au produced; the Queen Margaret mine was the main producer with ~96,000oz @ >1 oz/t Au. Despite the mine’s high-grade production record there has been no effective drilling below the old workings; historic mining on the six level (180m below surface) intercepted mineralised lodes 300m to the east of Queen Margaret, however this area has not seen follow up drill testing; prospectors have seen high specimen and nugget production with multiple +100oz Au nuggets discovered; and the complex and unconsolidated ownership structures have hampered exploration and mining at Bulong. Black Cat has now consolidated Bulong bringing together a number of high-grade, near term, underground production targets along with shallow open cut positions. Black Cat’s initial focus is to test the highest priority targets to validate historic results as well as to drill and study the economics of developing an open cut mine specifically at Queen Margaret. Open cut mining at Queen Margaret could subsequently allow declining from the open cut into footwall and eastern zones and development across to historic workings while assessing backfill volumes and grade. 6 REVIEW OF OPERATIONS (continued) PROJECT LOCATION Figure 1: Regional map of Kalgoorlie showing the location of the Bulong Gold Project and infrastructure OUR STRATEGY Black Cat intends to delineate economic resource inventories using systematic and scientific exploration across highly prospective projects. Black Cat is committed to: − − − − − operating in a safe and sustainable manner; applying best practice exploration techniques to unlock resource potential; building a high quality resource base at Bulong with the aim of advancing to production as quickly as possible; maximising in-ground exploration by maintaining low corporate overheads; and being ever vigilant in identifying opportunities to maximise the interests of shareholders. SAFETY AND SUSTAINABILITY The Board of Directors of Black Cat are committed to executing the Company’s strategy and operations in a safe and responsible manner. There were nil reportable incidents for Black Cat during the reporting period. 7 REVIEW OF OPERATIONS (continued) Photo 1: Warning signs erected at Bulong Gold Project, 25km east of Kalgoorlie, WA EXPLORATION PROGRAMS Black Cat is focussed on transitioning Bulong from a historic mining field to modern development through systematic exploration using technology. Black Cat completed a number of significant milestones to aid this objective since listing on 30 January 2018, including: − − − − compilation and reprocessing of all relevant datasets; development of 3D geological models for targeting purposes; ranking of all historic and new exploration targets; and commencement of cost-effective, systematic testing of high priority targets. By 30 June 2018, Black Cat had completed: − − − consolidation of landholdings with the acquisition of additional prospecting licences to the west of the historic Queen Margaret workings; low cost reverse cycle (“RC”) drilling, which commenced in the March 2018 quarter, with 199 holes drilled for 12,822m; extensive field mapping to validate geology including drone surveys; and 8 REVIEW OF OPERATIONS (continued) − successful application for Exploration Incentive Scheme (“EIS”) co-funded drilling grant under and around the Queen Margaret historic workings. Photo 2: RC Drilling at Bulong Queen Margaret Corridor The Queen Margaret Corridor was the focus of mining prior to WW1. This Corridor has negligible cover at surface leading to substantial historic mining as indicated through mapping over 500 historic shafts along 5km of strike. This Corridor was therefore the source of most of the ~152k oz of gold produced at Bulong. The Queen Margaret was the largest mine at Bulong and produced over 96,000 oz @ > 1 oz/t Au. Queen Margaret Mine Mining at Queen Margaret was almost entirely constrained to the hangingwall lode of the Queen Margaret porphyry and was mined to a depth of ~240m. Black Cat’s Phase 1 drilling was designed to prove the conceptual geology model and validate historic drilling that produced significant results. The new drilling confirmed strong mineralisation on the footwall contact of the porphyry as well as numerous internal veins linking the hangingwall and footwall mineralisation, potentially improving ounces per vertical metre (refer Figure 3). The mineralisation is open at depth and has the potential to advance to open pit development above the historic mine. 9 REVIEW OF OPERATIONS (continued) Figure 2: Geology of the Bulong Gold Project showing corridors of mineralisation 10 REVIEW OF OPERATIONS (continued) Figure 3: Schematic section showing the historic workings on the hangingwall contact of the porphyry and the footwall and internal vein sets Significant results from drilling (refer ASX announcement 26 July 2018) include: − − − − − − − − − 18QMRC095, 3 metres @ 2.16 g/t Au from 68 metres (Internal lode); 18QMRC097, 4 metres @ 3.37 g/t Au from 25 metres (Hangingwall lode); 18QMRC097, 4 metres @ 2.84 g/t Au from 51 metres (Footwall lode); 18QMRC098, 2 metres @ 2.25 g/t Au from 51 metres (Hangingwall lode); 18QMRC099, 2 metres @ 7.37 g/t Au from 52 metres (Footwall lode); 18QMRC100, 1 metre @ 7.45 g/t Au from 49 metres (Internal lode); 18QMRC100, 1 metre @ 6.47 g/t Au from 73 metres (Footwall lode); 18QMRC101, 5 metres @ 1.57 g/t Au from 67 metres (Hangingwall lode); and 18QMRC103, 6 metres @ 2.14 g/t Au from 85 metres (Footwall lode). And also (refer ASX announcement 16 May 2018), include: − − − − − − 18QMRC060, 3 metres @ 116.33 g/t Au from 0 metres (Internal lode); 18QMRC056, 4 metres @ 9.16 g/t Au from 33 metres (Internal lode); 18QMRC031, 4 metres @ 5.99 g/t Au from 42 metres (Internal lode); 18QMRC001, 6 metres @ 2.97 g/t Au from 22 metres (Internal lode); 18QMRC057, 3 metres @ 5.37 g/t Au from 32 metres (Internal lode); 18QMRC046, 3 metres @ 5.30 g/t Au from 70 metres (Footwall lode); 11 REVIEW OF OPERATIONS (continued) − − − − 18QMRC006, 1 metre @ 14.60 g/t Au from 0 metres (Internal lode); 18QMRC027, 1 metre @ 13.70 g/t Au from 31 metres (Footwall lode); 18QMRC058, 4 metres @ 2.64 g/t Au from 51 metres (Internal lode); and 18QMRC063, 2 metres @ 4.95 g/t Au from 53 metres (Internal lode). These are in addition to better historic results of: − − − − − − − − − − BAC70, 2 metres @ 34.84 g/t Au from 48 metres; 93BRC6, 7 metres @ 8.75 g/t Au from 61 metres; SBRC2, 1 metre @ 54.00 g/t Au from 0 metres; 94BRC30, 8 metres @ 4.16 g/t Au from 39 metres; BAC70, 3 metres @ 9.94 g/t Au from 22 metres; 94BRC15, 1 metre @ 27.00 g/t Au from 49 metres; 94BRC43, 1 metre @ 27.00 g/t Au from 31 metres; BAC19, 1 metre @ 25.60 g/t Au from 43 metres; BAC66, 4 metres @ 5.05 g/t Au from 29 metres; and 94BRC46, 2 metres @ 8.38 g/t Au from 62 metres. Concurrent with the drilling, detailed mapping and interpretation has been undertaken at the southern end of Queen Margaret. This has identified the existence of a NW orientated fault structure that appears to offset the Queen Margaret porphyry. This is likely the main reason that mining at Queen Margaret stopped where it did pre-WW1. Importantly, the higher grade hangingwall position on the southern side of this fault is likely unmined and represents an under-explored target. Drilling below the Queen Margaret workings will be undertaken in 2018 as will extensional RC drilling and maiden resource modelling over the shallow mineralisation. White Horse and Melbourne United The White Horse Mine is located to the north of the Queen Margaret Mine and the two mines were joined by underground development as historic mining at both mines exploited the same lode. Development to the north of the White Horse Mine failed to locate the rich hangingwall lode and no stoping is recorded. Black Cat’s interpretation of an offsetting NE fault structure (White Horse Fault) that offset the host stratigraphy was drill tested with 15 RC holes (810m). Drilling results confirm that the stratigraphy is indeed offset by ~25m and likely links to the Melbourne United workings which lie ~200m to the north in an under drilled area. Hole 18QMRC065 contained two intersections (refer ASX announcement 16 May 2018): − − 3 metres @ 1.05 g/t Au from 25 metres; and 2 metres @ 11.01 g/t Au from 31 metres. 12 REVIEW OF OPERATIONS (continued) These are the only intercepts in the offset area, while further north the Melbourne United Mine has only been lightly drilled with few intersections recorded, although 92BRC100 intersected 2m @ 27.11 g/t Au from 39m on an internal vein position and PAR002 returned 3.1m @ 5.63 g/t Au from 147.8m when drilled in 1947. This provides encouragement that mineralisation from White Horse was indeed offset by the north east striking fault to become Melbourne United. Minimal historic drilling has been undertaken in the footwall zone of the Melbourne United workings and there is potential that the footwall porphyry at Melbourne United is similarly mineralised to that at Queen Margaret. Black Cat intends to RC drill in the footwall of the historic workings at Melbourne United during 2018 and 2019. Additional drilling further along the ~5km long Queen Margaret Corridor provides evidence of multiple shallow resources which remain under explored and open at depth. Myhree-Boundary Corridor The Myhree-Boundary Corridor lies ~400m west of the Queen Margaret Corridor. There is no outcrop in this area and therefore negligible historic mining has occurred. Myhree and Boundary are ~1.4kms apart and currently define this corridor. The Myhree-Boundary Corridor contains similar host rocks and mineralisation to the Queen Margaret Corridor and has significant potential to grow to the north and south. Only three shallow RAB lines have been previously drilled between Myhree and Boundary and each contains mineralisation. Myhree Myhree is named after historic mines between the Strathfield workings on the Queen Margaret Corridor to the east and the parallel Trump workings to the west. Historic shafts have been sunk in a sporadic nature with more recent prospector scrapings also evident. Mineralisation was previously noted in shallow air core drilling completed in 1992 by General Gold. In 1999, Acacia Resources undertook RAB drilling between Myhree and Boundary intersecting mineralisation in several holes. Bulong Mining Pty Ltd drilled four 17m deep RC holes in 2012 all intersecting shallow mineralisation. No further historic work has been undertaken at Myhree. Mineralisation dips shallowly to the west (refer Figure 4) similar to both Queen Margaret and Trump and is open at depth and along strike to the north. Significant results from drilling (refer ASX announcement 23 July 2018) include: − − − − 18MYRC001, 5 metres @ 4.14 g/t Au from 7 metres; 18MYRC002, 3 metres @ 1.81 g/t Au from 19 metres; 18MYRC003, 1 metre @ 36.9 g/t Au from 14 metres; and 18MYRC004, 3 metres @ 5.61 g/t Au from 46 metres. Extensional drilling is planned at Myhree to test both along strike and at depth. 13 REVIEW OF OPERATIONS (continued) Figure 4: Cross section through 6599630mN showing new drilling at Myhree Boundary The Boundary deposit occurs in a sedimentary corridor wedged between ultramafic units, ~1.4kms to the north of Myhree. Boundary was discovered in 1991 through a soil sampling program that defined a 500m x 250m coherent anomaly at +40ppb Au**. Seventy-three RC holes were drilled in the 1990’s (on a 20m x 10m grid) and defined high grade mineralisation over 140m in strike below 20-30m of lateritic cover directly under the soil anomaly. Geological logging of new and previous drilling shows lateritic cover over the area increases to both the north and south of the Boundary deposit. Higher grades are associated with felsic porphyry units within a package of sediment. Mineralised intercepts correlate well with historic drilling and significant scope remains for extensions of mineralisation at depth and to the north and south where offsetting faults have been interpreted. Significant results from drilling (refer ASX announcement 16 August 2018) include: − − − 18BORC002, 8 metres @ 2.70 g/t Au from 33 metres; 18BORC003, 3 metres @ 10.55 g/t Au from 84 metres; and 18BORC004, 2 metres @ 7.24 g/t Au from 22 metres. These are in addition to better historic Boundary results of: − − − − − 92BRC33, 21 metres @ 8.01 g/t Au from 38 metres; NBB7, 26 metres @ 2.76 g/t Au from 41 metres; 92BRC29, 6 metres @ 11.11 g/t Au from 34 metres; 92BRC52, 21 metres @ 2.72 g/t Au from 41 metres; 92BRC88, 12 metres @ 4.09 g/t Au from 40 metres; 14 REVIEW OF OPERATIONS (continued) − − − − − NBB2, 8 metres @ 5.97 g/t Au from 49 metres; 92BRC91, 16 metres @ 2,60 g/t Au from 36 metres; 92BRC87, 18 metres @ 2,30 g/t Au from 46 metres; 92BRC31, 19 metres @ 2.10 g/t Au from 54 metres; and 92BRC32, 13 metres @ 2,61 g/t Au from 33 metres. Extensional drilling will be undertaken at Boundary to test both along strike and at depth. Where the Company refers to previous ASX announcements it confirms that it is not aware of any new information or data that materially affects the information in the original reports, and that the form and context in which the Competent Persons findings are presented have not been materially modified from the original reports. ** Information on historical results outlined in this Announcement together with JORC Table 1 information, is contained in the Independent Geologists Report within Black Cat’s Prospectus dated 27 November 2017, which was released on an announcement on 25 January 2018. 15 SUMMARY OF TENEMENTS As at 1 October 2018 Lease Location Project Name Area (km2) Status % Interest E25/0499 E25/0512 E25/0520 E27/0532 M25/0024 M25/0083 M25/0091 M25/0129 P25/2286 P25/2287 P25/2288 P25/2293 P25/2367 P25/2368 P25/2369 P25/2377 P25/2378 P25/2463 P27/2326 P27/2327 P27/2328 P25/2253 P25/2254 P25/2478 P25/2479 P25/2480 P25/2481 Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Bulong Ramsgate Woodline West Anomaly 38 Thrust Queen Margaret Woodline Boundary Boundary/Federation Trump Bulong Bulong Bulong North Princess West Queen Margaret West Virgin Dam Virgin Dam North Virgin Dam West Balagundi Hampton Hill Hampton Hill Hampton Hill Hampton Hill Hampton Hill East Bulong East Bulong East Bulong East Bulong E28/2809 Avoca Downs Rowes Find 0.04 0.04 0.04 0.08 4.86 0.73 0.83 1.79 1.22 1.35 1.01 0.53 2.00 1.96 1.70 1.99 1.93 1.35 1.78 1.78 1.64 1.22 1.22 1.21 1.92 1.83 1.68 39.8 Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Live Pending Pending Pending Pending Pending Pending Pending 100% ~ 100% ~ 100% + 100% ~ 100% 100% 100% 100% 100% 100% ~ 100% ~ 100% ~ 100% 100% 100% 100% ~ 100% ~ 100% 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% + Interest acquired pursuant to the exercise of an option on 24 January 2018 - lease transfers are pending. ~ Interest acquired pursuant to the completion of a conditional purchase agreement on 17 January 2018 - lease transfers are pending. 16 CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2018 17 DIRECTORS’ REPORT The Directors’ present their report on Black Cat Syndicate Limited (“Black Cat” or “the Company”) and the entity it controlled (“the Group”) at the end of, and during the period ended 30 June 2018. DIRECTORS The names and details of the Directors’ of Black Cat during the financial year and until the date of this report are: Paul Chapman (Non-Executive Chairman) B.Comm, ACA, Grad. Dip. Tax, MAICD, MAusIMM (Appointed 4 August 2017) Paul is a chartered accountant with over 30 years’ experience in the resources sector gained in Australia and the United States. Paul has experience across a range of commodity businesses including gold, nickel, uranium, manganese, bauxite/alumina and oil/gas and has held Managing Director and other senior management roles founding shareholder/director of the following ASX listed companies: Reliance Mining Limited; Encounter Resources Limited; Rex Minerals Limited; Silver Lake Resources Limited and Paringa Resources Limited. Paul is currently a director of Western Australia based explorer, Encounter Resources Limited (ASX:ENR) and resigned as non-executive director of Brazilian copper/gold producer Avanco Resources Limited (ASX:AVB) on 10 August 2018 following a successful takeover by OZ Minerals Limited. in public companies. Paul was a Gareth Solly (Managing Director) B.Sc (Geology) First Class Honours, Dip. Business (Appointed 1 January 2018) Gareth has 18 years’ mining industry experience covering numerous orebody types in both underground and surface environments with a proven ability in leading mine geology, resource development and near mine exploration teams. This includes 11 years’ senior management experience in roles of Registered Manager, Chief Geologist and Group Geology Manager in organisations including Saracen Gold Mines Limited (ASX:SAR), Silver Lake Resources Limited (ASX:SLR) and Norilsk Nickel. Of particular relevance, Gareth was the Chief Geologist and later Resident Manager at Mount Monger which is similar in many ways to Bulong and involved managing a workforce of approximately 200. Les Davis (Non-Executive Director) M.Sc (Min Econs) (Appointed 4 August 2017) Les has a master’s degree in Mineral Economics from Curtin University of Western Australia and over 38 years’ mining industry experience including 17 years’ hands-on experience in mine development and narrow vein mining. Les' career incorporates over 20 years’ senior management and executive experience including roles as Mine Manager, Technical Services Manager, Concentrator Manager, Resident Manager and General Manager Expansion Projects with organisations including WMC Resources Limited, Reliance Mining Limited and Consolidated Minerals Limited and is the founding Managing Director of ASX listed Silver Lake Resources Limited (ASX:SLR). Alex Hewlett (Non-Executive Director) B.Sc, MAusIMM (Appointed 4 August 2017) Alex has a degree in Earth Science from the University of Western Australia and is a member of the Australian Institute of Mining and Metallurgy. Alex is currently the Chief Executive Officer of ASX listed gold and base metal explorer Hammer Metals Limited (ASX:HMX) which is an active explorer in the Mount Isa region of Queensland. Alex, has resigned as a director of Hammer Metals Limited effective 1 October 2018. Alex is also chairman of ASX listed explorer Spectrum Rare Earths Limited (ASX:SPX). 18 DIRECTORS’ REPORT (continued) COMPANY SECRETARIES Mark Pitts (Joint Company Secretary) BBus, FCA, GAICD (Appointed 9 November 2017) Mark has over 30 years’ experience in business administration and corporate compliance. Having started his career with KPMG, Mark has worked at a senior management level in a variety of commercial and consulting roles including mining services, healthcare and property development. The majority of the past 15 years has been spent working for or providing services to publicly listed companies in the junior resources sector. Mark is a registered company auditor and holds a Bachelor of Business Degree from Curtin University, is graduate of the Australian Institute of Company Directors and is a Fellow of Chartered Accountants Australia and New Zealand. Dan Travers (Joint Company Secretary): BSc (Hons), FCCA (Appointed 23 November 2017) Dan is a Fellow of the Association of Chartered Certified Accountants with over 10 years’ experience in the administration and accounting of publicly listed companies following significant public practice experience. Dan holds undergraduate degrees with honours in both Mathematics and Accounting and is an employee of Endeavour Corporate Limited, which specialises in the provision of company secretarial and accounting services to ASX listed entities in the mining and exploration industry. DIRECTORS’ INTERESTS As at the date of this report the Directors’ interests in shares and unlisted options of the Company are as follows: Director Directors’ Interests in Ordinary Shares Directors’ Interests in Unlisted Options P Chapman G Solly L Davis A Hewlett 3,430,001 1,200,000 2,750,000 2,880,000 2,880,001 1,200,000 2,400,000 2,880,000 Included in the Directors’ interests in Unlisted Options, there are 9,360,001 options that are vested and exercisable as at the date of signing this report, subject to other ASX and voluntary restrictions. DIRECTORS’ MEETINGS The number of meetings of the Company’s Directors’ held during the period ended 30 June 2018, and the number of meetings attended by each Director are as follows: Director Board of Directors’ Meetings Eligible to Attend Attended P Chapman G Solly L Davis A Hewlett 5 5 5 4 5 5 5 5 19 DIRECTORS’ REPORT (continued) PRINCIPAL ACTIVITIES The principal activity of the Company during the financial period was mineral exploration in Western Australia. There were no significant changes in these activities during the financial period. RESULTS OF OPERATIONS Financial Position and Performance The consolidated net loss after income tax for the financial period was $749,702. At the end of the financial period the Group had $3,878,872 in cash and at call deposits. Capitalised mineral exploration and evaluation expenditure is $1,862,294. REVIEW OF ACTIVITIES Exploration Exploration activities for the financial period have been focussed on the Bulong Gold Project located ~30kms from Kalgoorlie, Western Australia. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Company and the Group during or since the end of the financial period. OPTIONS OVER UNISSUED CAPITAL Unlisted Options As at the date of this report 17,460,001 unissued ordinary shares of the Company are under option as follows: Number of Options Granted 17,460,001 Exercise Price 20 cents each Expiry Date 25 January 2023 All options on issue at the date of this report are unlisted, vested and exercisable, subject to separate ASX and voluntary restrictions. During the financial period the Company granted 5,500,000 unlisted options over unissued shares to brokers and advisers to the Initial Public Offering (“IPO”) completed during the period. In addition, 11,960,001 unlisted options were issued as securities attaching to share issues prior to the IPO. Subsequent to the end of the financial period the Company issued 400,000 unlisted options to employees of the Company pursuant to the Company’s Incentive Plan. During, or since the end of, the financial period: - - no options have been cancelled; and no shares have been issued on the exercise of options. 20 DIRECTORS’ REPORT (continued) Options do not entitle the holder to: - - participate in any share issue of the Company or any other body corporate; and any voting rights until the options are exercised into ordinary shares. ISSUED CAPITAL Ordinary fully paid shares DIVIDENDS Number of Shares on Issue 2018 57,260,002 No dividend has been paid and no dividend is recommended for the financial period ended 30 June 2018. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors’ of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Company expects to maintain exploration programs at its Bulong Gold Project in Western Australia. Disclosure of any further information has not been included in this report because, in the reasonable opinion of the Directors, to do so would be likely to prejudice the business activities of the Group and is dependent upon the results of the future exploration and evaluation. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group holds various exploration licences to regulate its exploration activities in Australia. These licences include conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration activities. So far as the Directors’ are aware, all exploration activities have been undertaken in compliance with all relevant environmental regulations. REMUNERATION REPORT (AUDITED) Remuneration paid to Directors and Officers of the Company is set by reference to such payments made by other ASX listed companies of a similar size and operating in the mineral exploration industry. In addition, reference is made to the specific skills and experience of the Directors’ and Officers’. Details of the nature and amount of remuneration of each Director, and other Key Management Personnel if applicable, are disclosed annually in the Company’s Annual Report. 21 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) Remuneration Committee The Board has adopted a formal Remuneration Committee Charter which provides a framework for the consideration of remuneration matters. The Company does not have a separate remuneration committee and as such all remuneration matters are considered by the Board as a whole, with no Member deliberating or considering such matter in respect of their own remuneration. In the absence of a separate Remuneration Committee, the Board is responsible for: 1. 2. Setting remuneration packages for Executive Directors, Non-Executive Directors and other Key Management Personnel; and Implementing employee incentive and equity based plans and making awards pursuant to those plans. Non-Executive Remuneration The Company’s policy is to remunerate Non-Executive Directors, at rates comparable to other ASX listed companies in the same industry, for their time, commitment and responsibilities. Non-Executive Remuneration is not linked to the performance of the Company, however to align Directors’ interests with shareholders’ interests, remuneration may be provided to Non-Executive Directors in the form of equity based long term incentives: 1. 2. 3. 4. Fees payable to Non-Executive Directors are set within the aggregate amount approved by shareholders at the Company’s Annual General Meeting; Non-Executive Directors’ fees are payable in the form of cash and superannuation benefits; Non-Executive superannuation benefits are limited to statutory superannuation entitlements; and Participation in equity based remuneration schemes by Non-Executive Directors is subject to consideration and approval by the Company’s shareholders. The maximum Non-Executive Directors fees, payable in aggregate are currently set at $300,000 per annum. Executive Director and Other Key Management Personnel Remuneration Executive remuneration consists of base salary, plus other performance incentives to ensure that: 1. 2. Remuneration packages incorporate a balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the Company’s circumstances and objectives; and A proportion of remuneration is structured in a manner to link reward to corporate and individual performances. Executives are offered a competitive level of base salary at market rates (based on comparable ASX listed companies) and are reviewed regularly to ensure market competitiveness. To date the Company has not engaged external remuneration consultants to advise the Board on remuneration matters. 22 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) Incentive Plans The Company provides long term incentives to Directors and Employees pursuant to the Black Cat Syndicate Incentive Option Plan, which was approved by shareholders on 14 October 2017. The Board, acting in remuneration matters: 1. 2. 3. Ensures that incentive plans are designed around appropriate and realistic performance targets and provide rewards when those targets are achieved; Reviews and approves existing incentive plans established for employees; and Approves the administration of the incentive plans, including receiving recommendations for, and the consideration and approval of grants pursuant to such incentive plans. Engagement of Non-Executive Directors Non-Executive Directors conduct their duties under the following terms: 1. 2. A Non-Executive Director may resign from his/her position and thus terminate their contract on written notice to the Company; and A Non-Executive Director may, following resolution of the Company’s shareholders, be removed before the expiration of their period of office (if applicable). Payment is made in lieu of any notice period if termination is initiated by the Company, except where termination is initiated for serious misconduct. In consideration of the services provided by Paul Chapman as Non-Executive Chairman, the Company will pay $60,000 including statutory superannuation per annum. In consideration of the services provided by Les Davis and Alex Hewlett as Non-Executive Directors’, the Company will pay each $40,000 including statutory superannuation per annum. Messrs Chapman, Davis and Hewlett are also entitled to fees for other amounts as the Board determines where they perform special duties or otherwise perform extra services or make special exertions on behalf of the Company. There were no such fees paid during the financial period ended 30 June 2018. Engagement of Executive Director The Company has entered into an executive service agreement with Gareth Solly in respect of his engagement as Managing Director on the following material terms and conditions: - is effective for three years from 1 January 2018 and receives a base salary of $220,000 per annum plus statutory superannuation and may also receive an annual short term performance based bonus which may be calculated as a percentage of current base salary, the performance criteria, assessment and timing of which is negotiated annually with the Non-Executive Directors; and - subject to shareholder approval, may participate in the Black Cat Syndicate Incentive Option Plan and other long term incentive plans adopted by the Board. 23 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) Short Term Incentive Payments Each year, the Non-Executive Directors’ set the Key Performance Indicators (“KPI’s”) for the Executive Director. The KPI’s are chosen to align the reward of the individual Executive to the strategy and performance of the Company. Performance objectives, which may be financial or non-financial, or a combination of both, are weighted when calculating the maximum short term incentives payable to Executives. At the end of the year, the Non-Executive Directors’ will assess the actual performance of the Executives against the set Performance Objectives. The maximum amount of the short term Incentive, or a lesser amount depending on actual performance achieved is paid to the Executives as a cash payment. No short term incentives are payable to Executives where it is considered that the actual performance has fallen below the minimum requirement. Shareholding Qualifications The Directors are not required to hold any shares in Black Cat under the terms of the Company’s constitution. However, as shown above, all Directors’ do hold interests in Black Cat’s shares which are subject to ASX and voluntary restrictions. Group Performance In considering the Company’s performance, the Board provides the following indices in respect of the current financial periods and previous financial periods: Profit/(Loss) for the period attributable to shareholders Closing share price at 30 June 2018 $(749,702) $0.255 As an exploration company the Board does not consider the profit/(loss) attributable to shareholders as one of the performance indicators when implementing Short Term Incentive Payments. In addition to technical and economic exploration success, the Board considers the effective management of safety, environmental and operational matters and the acquisition and consolidation of high quality landholdings, as more appropriate indicators of management performance for the 2018 financial period. Remuneration Disclosures Paul Chapman The Key Management Personnel of the Company have been identified as: − − − − Non-Executive Director; and Non-Executive Chairman; Non-Executive Director. Managing Director; Alex Hewlett Gareth Solly Les Davis 24 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) The details of the remuneration of each Director and member of Key Management Personnel of the Company is as follows: 30 June 2018 Short Term Base Salary $ Short Term Incentive $ Post Employ- ment Superann- uation Contribu- tions $ P Chapman G Solly L Davis A Hewlett Total 23,131 110,000 15,421 15,421 163,973 - - - - - 2,169 10,450 1,446 1,446 15,511 Remuneration Disclosures Details of Performance Related Remuneration Other Long Term Value of Options $ Total $ 25,300 120,450 16,867 16,867 179,484 - - - - - Value of Options as Proportion of Remuneration % - - - - - During the period, short term incentive payments were paid to executive directors as follows: Short Term Incentive Payments - Cash Bonuses Paid 2017/2018 Financial Period G Solly $nil No performance indicators, other than those shown above, had been set for the 2017/2018 financial period. Options Granted as Remuneration No options have been issued as remuneration during, or since the end of, the financial period. The fair value of options issued as remuneration is allocated to the relevant vesting period of the options. Options are provided at no cost to the recipients. No options were exercised by Key Management Personnel during the financial period. Exercise of Options Granted as Remuneration During the year, no ordinary shares were issued in respect of the exercise of options previously granted as remuneration to Directors or Key Management Personnel of the Company. 25 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) Equity Instrument Disclosures Relating to Key Management Personnel Option Holdings Key Management Personnel have the following interests in unlisted options over unissued shares of the Company: 2018 Name Directors P Chapman G Solly L Davis A Hewlett Balance at Start of the Period Received Suring the Period as Remuneration Other Changes During the Period2 Balance at the End of the Period Vested and Exercisable at the End of the Period1 - - - - - - - - 2,880,001 2,880,001 2,880,001 1,200,000 1,200,000 1,200,000 2,400,000 2,400,000 2,400,000 2,880,000 2,880,000 2,880,000 1 All options are subject to ASX or voluntary escrow restrictions at the date of this report. 2 Options issued to Directors and included in the disclosures above were issued as attaching securities to pre-IPO capital raisings and as such have been ascribed nil value. Share Holdings The number of shares in the Company held during the financial period by Key Management Personnel of the Company, including their related parties are set out below. There were no shares granted during the reporting period as compensation. 2018 Name Balance at Start of the Year Received During the Year on Exercise of Options Other Changes During the Year Balance at the End of the Year Directors P Chapman G Solly L Davis A Hewlett - - - - - - - - 3,520,001 1,200,000 2,750,000 2,880,000 3,520,001 1,200,000 2,750,000 2,880,000 Loans Made to Key Management Personnel No loans were made to Key Management Personnel, including personally related entities during the reporting period. 26 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (continued) Other Transactions with Key Management Personnel There were no other transactions with Key Management Personnel. End of Remuneration Report OFFICERS’ INDEMNITIES AND INSURANCE During the year, the Company paid an insurance premium to insure certain officers of the Company. The officers of the Company covered by the insurance policy include the Directors named in this report. The Directors’ and Officers’ Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of the Company. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy. The Company has not provided any insurance for an auditor of the Company. 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 Group, or to intervene in any proceedings to which the Company or Group 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 or Group with leave of the Court under Section 237 of the Corporations Act 2001. NON-AUDIT SERVICES During the year Crowe Horwath, the Company’s auditor, has not performed any other services in addition to their statutory duties, other than as stated below. Total Remuneration Paid to Auditors During the Financial Period: Audit and review of the Company’s financial statements Other services – Investigating Accountants’ Report Total 2018 $ 15,000 6,500 21,500 The Board considers any non-audit services provided during the year by the auditor and satisfies itself that the provision of any non-audit services during the year by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: 27 DIRECTORS’ REPORT (continued) − − all non-audit services are reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor; and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. AUDITOR’S INDEPENDENCE DECLARATION A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act is set out on the following page. This report is made in accordance with a resolution of the Directors. Dated at Perth this 28th day of September 2018. Gareth Solly Managing Director 28 AUDITOR’S INDEPENDENCE DECLARATION 29 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Consolidated Period Ended 30 June 2018 $ Note Other income Total income Employee expenses Employee expenses recharged to exploration Legal and professional Corporate advisory Marketing and promotion Depreciation expense Share issue expenses Administration and other expenses Exploration costs written off Profit/(Loss) before income tax Income tax benefit Profit/(Loss) after tax Other comprehensive income 5 6 6 7 Total comprehensive income/(loss) for the year Earnings per share for loss attributable to the ordinary equity holders of the Company Basic earnings/(loss) per share Diluted earnings/(loss) per share 28 28 20,374 20,374 (250,766) 104,384 (72,056) (96,851) (9,022) (4,344) (156,328) (164,781) (120,312) (749,702) - (749,702) - (749,702) (2.1) (2.1) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 30 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 Consolidated 2018 $ Note Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Property, plant and equipment Capitalised mineral exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Employee entitlements Total current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Share based payments reserve Total equity 8 9 11 12 14 15 16 17 3,878,872 33,928 3,912,800 46,071 1,869,294 1,915,365 5,828,165 313,729 12,836 326,565 326,565 5,501,600 5,792,125 (749,702) 459,177 5,501,600 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 31 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Consolidated Issued Capital $ Accumulated Losses $ Share Based Payments Reserve $ Total $ - - - 5,792,125 - (749,702) - - - (749,702) - - 459,177 459,177 - 5,792,125 2018 Balance at the start of the financial period Comprehensive income for the financial period Movement in equity in remuneration reserve respect of options vested Transactions with equity holders in their capacity as equity holders: Shares issued (net of costs) Balance at the end of the financial period 5,792,125 (749,702) 459,177 5,501,600 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 32 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Consolidated Period Ended 30 June 2018 $ Note Cash flows from operating activities Interest received Payments to suppliers and employees Net cash from/(used in) operating activities 27 Cash flows from investing activities Payments to acquire exploration assets Payments for exploration and evaluation Payments for plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from the issue of shares Payments for share issue costs Net cash from/(used in) financing activities Net increase/(decrease) in cash held Cash at the beginning of the financial period Cash at the end of the financial period 8 8 6,303 (381,269) (374,966) (932,500) (758,221) (50,414) (1,741,135) 6,650,426 (655,453) 5,994,973 3,878,872 - 3,878,872 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 33 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 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 throughout the reporting period, unless otherwise stated. The financial report includes financial statements for the consolidated entity consisting of Black Cat Syndicate Limited and its subsidiary (“the Group”). (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Equivalents to International Financial Reporting Standards (“AIFRS”), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The financial report is presented in Australian dollars and all values are rounded to the nearest dollar. The separate financial statements of the parent entity have not been presented within this financial report as permitted by the Corporations Act 2001. The financial report of the Group was authorised for issue in accordance with a resolution of Directors on 28 September 2018. Statement of Compliance The consolidated financial report of Black Cat Syndicate Limited complies with Australian Accounting Standards, which include AIFRS, in their entirety. Compliance with AIFRS ensures that the financial report also complies with International Financial Reporting Standards (“IFRS”) in their entirety. Adoption of New and Revised Accounting Standards The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. The adoption of the Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. New standards and interpretations not yet adopted The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application date or future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows: − AASB 9 Financial Instruments This standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 Financial Instruments introduces new classification and measurement models for financial assets. The Group currently has no material exposure to other financial assets and financial liabilities affected by the requirements of AASB 9 Financial Instruments. 34 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) This standard is applicable to annual reporting periods beginning on or after 1 January 2018 and as such the Group will adopt this standard from 1 July 2018. The Group does not expect there to be a material impact from the adoption of AASB 9. − AASB 15 Revenue from Contracts with Customers The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and prescribes specific presentation and disclosure requirements. The Group does not currently have any contracts with customers in place and as such its exposure to the requirements of AASB 15 Revenue from Contracts with Customers is limited. This standard is applicable to annual reporting periods beginning on or after 1 January 2018 and as such the Group will adopt this standard from 1 July 2018. The Group does not expect there to be a material impact from the adoption of AASB 15. − AASB 16 Leases The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases, and requires, subject to certain exemptions, the recognition of a ‘right-of-use asset’ and a corresponding lease liability, and the subsequent depreciation of the ‘right-of-use’ asset. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The Group is currently not party to any material operating or finance lease arrangements and as such its exposure to the requirements of AASB 16 Leases is limited. This standard is applicable to annual reporting periods beginning on or after 1 January 2019 and as such the Group will adopt this standard from 1 July 2019. Other than the recognition of a lease liability in respect of its existing operating lease, the Group does not expect there to be a material impact from the adoption of AASB 16. Reporting Basis and Conventions These financial statements have been prepared under the historical cost convention, and on an accrual basis. 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. Principles of Consolidation The financial statements of subsidiary companies are included in the consolidated financial statements from the date control commences until the date control ceases. The financial statements of subsidiary companies are prepared for the same reporting period as the parent company, using consistent accounting policies. 35 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation. Investments in subsidiary companies are accounted for at cost in the individual financial statements of the Company. (b) Segment Reporting Operating segments are identified, and segment information disclosed, where appropriate, on the basis of internal reports reviewed by the Company’s board of directors, being the Group’s Chief Operating Decision Maker, as defined by AASB 8. (c) Revenue Recognition and Receivables Interest Income Interest income is recognised on a time proportion basis and is recognised as it accrues. (d) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary timing differences at the tax rates expected to apply when the assets are recovered, or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to those timing differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 36 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) (e) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (Note 24). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease. (f) Impairment of Assets Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (g) Cash and Cash Equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (h) Government Grants Government grants are recognised at fair value where there is reasonable assurance that the grant will be received, and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are deducted from the carrying value of the relevant asset. Amounts receivable from the Australian Tax Office in respect of research and development tax concession claims are recognised in the year in which the claim is lodged with the Australian Tax Office. Amounts receivable are allocated in the financial statements against the corresponding expense or asset in respect of which the research and development concession claim has arisen. (i) Fair Value Estimation The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. 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. (j) Property, Plant and Equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the 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 37 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight line or diminishing value methods to allocate their cost, net of residual values, over their estimated useful lives, as follows: Asset Class Depreciation Rate Field equipment and vehicles Office equipment 20% 33% The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet 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 (Note 1(f)). Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. (k) Mineral Exploration and Evaluation Expenditure Mineral exploration and evaluation expenditure are written off as incurred or accumulated in respect of each identifiable area of interest and capitalised. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: − − such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively by its sale; or exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in relation to, the area of interest is continuing. In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the discounting on the provision is recorded as a finance cost in the income statement. Farm-in arrangements (in the exploration and evaluation phase) For exploration and evaluation asset acquisitions (farm-in arrangements) in which the Group has made arrangements to fund a portion of the selling partner's (farmer’s) exploration and/or future development expenditures (carried interests), these expenditures are reflected in the financial statements as and when the exploration and development work progresses. 38 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) Farm-out arrangements (in the exploration and evaluation phase) The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its exploration and evaluation farm-out arrangements but redesignates any costs previously capitalised in relation to the whole interest as relating to the partial interest retained. Monies received pursuant to farm-in agreements are treated as a liability on receipt and until such time as the relevant expenditure is incurred. (l) Trade and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition. (m) Employee Benefits Wages, Salaries and Annual Leave Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Long Service Leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future salaries, experience of employee departures and periods of service. Expected future payments are discounted at the corporate bond rate with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Share Based Payments Share based compensation payments are made available to Directors and employees. The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. A discount is applied, where appropriate, to reflect the non- marketability and non-transferability of unlisted options, as the Black-Scholes option pricing model does not incorporate these factors into its valuation. The fair value of the options granted is adjusted to reflect market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of 39 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital. Upon the cancellation of options on expiry of the exercise period, or lapsing of vesting conditions, the balance of the share based payments reserve relating to those options is transferred to accumulated losses. (n) Issued Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (o) Earnings Per Share (i) Basic earnings per share Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after 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. (p) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as a part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flow. (q) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. No comparative information has been provided for the Group as the parent and economic entity only came into existence on 4 August 2017. 40 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 1 Summary of Significant Accounting Policies (continued) (r) Investments and Other Financial Assets (i) 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 stated at amortised cost using the effective interest rate method. (ii) Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. (s) Fair Value Estimation A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods: (i) Trade and other receivables The nominal value less estimated credit adjustments of trade receivables are assumed to approximate their fair values. (ii) Trade and other payables 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. Note 2 Financial Risk Management The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information about the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy. (a) 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 transactions with customers and investments. Trade and Other Receivables The current nature of the business activity of the Group does not result in trading receivables. The receivables that the Group does experience through its normal course of business are short term and the most significant recurring by quantity is receivable from the Australian Taxation Office, the risk of non-recovery of receivables from this source is considered to be negligible. 41 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 2 Financial Risk Management (continued) Cash Deposits The Directors believe any risk associated with the use of predominantly only one bank is addressed through the use of at least an A-rated bank as a primary banker and by the holding of a portion of funds on deposit with alternative A-rated institutions. Except for this matter the Group currently has no significant concentrations of credit risk. (b) 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 its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid finance resources to finance the Company’s current and future operations, and consideration is given to the liquid assets available to the Company before commitment is made to future expenditure or investment. (c) 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 any return. Interest Rate Risk The Group has significant cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the Group requires the cash assets to be sufficiently liquid to cover any planned or unforeseen future expenditure, which prevents the cash assets being committed to long term fixed interest arrangements; the Group does mitigate potential interest rate risk by entering into short to medium term fixed interest investments. Foreign Exchange Risk The Group does not have any direct contact with foreign exchange fluctuations other than their effect on the general economy and capital markets. Note 3 Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. Accounting for Capitalised Exploration and Evaluation Expenditure The Group’s accounting policy is stated at Note 1(k). There is some subjectivity involved in the carrying forward as capitalised or writing off to the income statement exploration and evaluation expenditure, however management give due consideration to areas of interest on a regular basis and are confident that decisions to either write off or carry forward such expenditure reflect fairly the prevailing situation. For the period ended 30 June 2018 the Group wrote off exploration expenditure of $120,312. 42 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 3 Critical Accounting Estimates and Judgements (continued) Accounting for Share Based Payments The values of amounts recognised in respect of share based payments have been estimated based on the fair value of the equity instruments granted. Fair values of options issued are estimated by using an appropriate option pricing model. There are many variables and assumptions used as inputs into the models. If any of these assumptions or estimates were to change this could have a significant effect on the amounts recognised. See Note 17 for details of inputs into option pricing models in respect of options issued during the reporting period. Note 4 Segment Information The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors in assessing performance and determining the allocation of resources. Reportable segments disclosed are based on aggregating operating segments, where the segments have similar characteristics. The Group’s sole activity is mineral exploration and resource development wholly within Australia, therefore it has aggregated all operating segments into the one reportable segment being mineral exploration. The reportable segment is represented by the primary statements forming these financial statements. 43 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 5 Other Income Operating Activities Interest received and receivable Note 6 Loss for the Year Consolidated Period ended 30 June 2018 $ 20,374 20,374 Loss Before Income Tax Includes the Following Specific Benefits/(Expenses) Depreciation: Motor vehicles and field equipment Office equipment Employee expenses: Wages and salaries Non-Executive directors’ fees Superannuation Other employment expenses Note 7 Income Tax a) Income Tax Expense Current income tax: Current income tax charge (benefit) Current income tax not recognised Deferred income tax: Relating to origination and reversal of timing differences Deferred income tax benefit not recognised Income tax expense/(benefit) reported in the income statement b) Reconciliation of Income Tax Expense to Prima Facie Tax Payable Profit/(Loss) from continuing operations before income tax expense Tax at 30% Tax effect of permanent differences: Non-deductible share issue costs Capital raising costs claimed Net deferred tax asset benefit not brought to account Tax (benefit)/expense 44 3,764 580 4,344 159,677 53,973 24,280 12,836 250,766 (470,073) 470,073 (380,649) 380,649 - (749,702) (224,911) 46,898 (40,527) (218,540) - NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 7 Income Tax (continued) c) Deferred Tax – Balance Sheet Liabilities Prepaid expenses Capitalised exploration expenditure Assets Revenue losses available to offset against future taxable income Employee provisions Accrued expenses Deductible equity raising costs Net deferred tax asset not recognised d) Deferred Tax – Income Statement Liabilities Prepaid expenses Capitalised exploration expenditure Assets Deductible equity raising costs Accruals Increase in tax losses carried forward Employee provisions Deferred tax benefit/(expense) movement for the period not recognised Consolidated Period Ended 30 June 2018 $ (4,221) (268,999) (273,220) 470,073 3,851 17,838 162,107 653,869 380,649 (4,221) (268,999) 162,107 17,838 470,073 3,851 380,649 The deferred tax benefit of tax losses not brought to account will only be obtained if: (i) (ii) The Company derives future assessable income of a nature and an amount sufficient to enable the benefit from the tax losses to be realised; The Company continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) No changes in tax legislation adversely affect the Company realising the benefit from the deduction of the losses. All unused tax losses of $1,566,911 were incurred by Australian entities. The Company has received an allocation pursuant to the Junior Mineral Exploration Incentive (“JMEI”) Scheme for the financial year ended 30 June 2019, which if utilised by the Company will result in the Company foregoing a corresponding portion of its tax losses for that period. 45 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 8 Current Assets - Cash and Cash Equivalents Cash at bank and on hand Deposits at call Consolidated 2018 $ 1,878,873 1,999,999 3,878,872 (a) Reconciliation to Cash at the End of the Year The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows: Cash and cash equivalents per statement of cash flows (b) Deposits at Call 3,878,872 Amounts classified as deposits at call are short term deposits depending upon the immediate cash requirements of the Group and earn interest at the respective short term interest rates. (c) Cash Balances Not Available for Use There are no amounts included in cash and cash equivalents above that are pledged as guarantees or otherwise unusable by the Group. Note 9 Current Assets – Receivables a) Trade and Other Receivables Other receivables GST recoverable 14,383 19,545 33,928 Details of fair value and exposure to interest risk are included at Note 19. Note 10 Non-Current Assets – Investment in Controlled Entity a) Investment in Controlled Entity Subsidiary Company Country of Incorporation Ownership Interest Black Cat (Bulong) Pty Ltd Australia 2018 100% Black Cat (Bulong) Pty Ltd was incorporated in Western Australia on 4 August 2017. The ultimate controlling party of the group is Black Cat Syndicate Limited. 46 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 11 Non-Current Assets – Property, Plant and Equipment Motor Vehicles and Field Equipment $ Note Office Equipment $ Total $ Cost at the start of the financial period Additions Cost at the end of the financial period Accumulated depreciation at the start of the financial period Depreciation expense for the financial period Accumulated depreciation at the end of the financial period Net book value at the start of the financial period Net book value at the end of the financial period - 45,167 45,167 - (3,764) (3,764) - 41,403 - 5,248 5,248 - (580) (580) - 4,668 - 50,415 50,415 - (4,344) (4,344) - 46,071 No items of property, plant and equipment have been pledged as security by the Group. Consolidated 30 June 2018 $ Note 12 Non-Current Assets – Capitalised Mineral Exploration and Evaluation Expenditure In the Exploration and Evaluation Phase Capitalised exploration costs at the start of the period Total acquisition costs for the period (Note 13) Total exploration costs for the period Total exploration written off for the period Capitalised exploration costs at the end of the period - 1,042,095 947,511 (120,312) 1,869,294 The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. The capitalised exploration expenditure written off includes expenditure written off on surrender of, or intended surrender of, tenements. 47 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 13 Acquisition of Exploration Assets The Group completed the acquisition of exploration assets pursuant to the IPO in January 2018. The terms of the acquisitions were as follows: − − on 17 January 2018, the Group completed the acquisition of various mineral tenements (which comprised mining leases and exploration/prospecting licences) from the Emex Trust pursuant to an acquisition agreement for consideration of $150,000, 1,000,000 ordinary fully paid shares and a 1% gross revenue royalty; and on 24 January 2018, the Group completed the acquisition of the Bulong Gold Project (which comprised a number of exploration and prospecting licences) from Bulong Mining Pty Ltd on the exercise of an option by payment of $700,000. In addition to the above transactions, the Group incurred further acquisition costs in respect of deposit and option fees of $80,000, and stamp duty of $12,095 in respect of settlement of the above agreements. Note 14 Current Liabilities – Trade and Other Payables Trade payables and accruals Other payables Consolidated 30 June 2018 $ 299,601 14,128 313,729 Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included at Note 19. Note 15 Employee Entitlements a) Current Liabilities Liability for annual leave Note 16 Issued Capital a) Ordinary Shares 12,836 12,836 The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares respectively held by them. 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. Ordinary shares have no par value. There is no limit to the authorised share capital of the Company. 48 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 16 Issued Capital (continued) 30 June 2018 Issue Price No $ b) Share Capital Issued share capital c) Share Movements During the Period Balance at the start of the financial period Shares issued on incorporation Shares issued to pre-IPO investors Share issued to brokers pursuant to IPO Shares issued to pre-IPO investors Shares issued pursuant to IPO Shares issued to acquire exploration assets (Note 13) Less share issue costs Balance at the end of the financial period - $1.00 $0.011 $0.011 $0.10 $0.20 $0.10 - Note 17 Options and Share Based Payments Incentive Option Plan 57,260,002 5,792,125 - 1 19,760,001 2,500,000 4,000,000 30,000,000 1,000,000 - - 1 222,300 28,125 400,000 6,000,000 100,000 (958,301) 57,260,002 5,792,125 The establishment of the Black Cat Syndicate Limited Directors Incentive Plan (‘the Plan”) was last approved by shareholders of the Company on 14 October 2017. All eligible Directors, executive officers and employees of Black Cat Syndicate Limited who have been continuously employed by the Company are eligible to participate in the Plan. The Plan allows the Company to issue options to eligible persons. The options can be granted free of charge and are exercisable at a fixed price in accordance with the Plan. At the date of this report no securities have been issued pursuant to the terms and conditions of the Plan. Other Options As at the date of this report 17,460,001 unissued ordinary shares of the Company are under option as follows: Number of Options Granted 17,460,001 Exercise Price 20 cents each Expiry Date 25 January 2023 All options on issue at the date of this report are vested and exercisable, subject to separate ASX and voluntary restrictions. 49 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 17 Options and Share Based Payments (continued) During the financial period the Company granted 5,500,000 unlisted options over unissued shares to brokers and advisers to the IPO completed during the period. In addition, 11,960,001 unlisted options were issued as securities attaching to share issues prior to the IPO. Subsequent to the end of the financial period the Company issued 400,000 unlisted options to employees of the Company pursuant to the Company’s Incentive Plan. During, or since the end of, the financial period; - - no options have been cancelled; and no shares have been issued on the exercise of options. Options do not entitle the holder to: - - participate in any share issue of the Company or any other body corporate; and any voting rights until the options are exercised into ordinary shares. Reconciliation of Movement of Options Over Unissued Shares During the Period Including Weighted Average Exercise Price (WAEP) Options outstanding at the start of the period Options issued during the period Options exercised during the period Options cancelled and expired unexercised during the period Options outstanding at the end of the period 2018 No WAEP (cents) - 17,460,001 - - 17,460,001 - 20.0 - - 20.0 Weighted Average Contractual Life The weighted average contractual life for un-exercised options is 55 months. Basis and Assumptions Used in the Valuation of Options The 5,500,000 options issued to brokers as lead manager to the IPO during the period were valued using the Black-Scholes option valuation methodology. Date Granted Number of Options Granted Exercise Price (cents) Expiry Date Risk Free Interest Rate Used Volatility Applied Value of Options 24 Nov 2017 2,500,000 12 Jan 2018 3,000,000 20 20 25 Jan 2023 2.24% 100% $8,591 25 Jan 2023 2.24% 100% $450,586 $459,177 50 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 17 Options and Share Based Payments (continued) No valuation has been undertaken for the 11,960,001 unlisted options issued attaching to the pre IPO share placements and as such not considered to be provided as consideration or remuneration. Consolidated 2018 Accumulated Losses $ Equity Remuneration Reserve (i) $ Note 18 Reserves and Accumulated Losses Balance at the beginning of the year Profit/(Loss) for the period Movement in equity remuneration reserve in respect of options issued Balance at the end of the year - (749,702) - (749,702) - - 459,177 459,177 (i) The equity remuneration reserve is used to recognise the fair value of options issued and vested but not exercised. Note 19 Financial instruments Credit Risk The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made, Note 2(a). Impairment Losses The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the reporting period. Interest Rate Risk At the reporting date the interest profile of the Group’s interest-bearing financial instruments was: Variable rate instruments Cash and cash equivalents Carrying Amount $ 3,878,872 51 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 19 Financial instruments (continued) Cash Flow Sensitivity Analysis for Variable Rate Instruments A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. 2018 Variable rate instruments Liquidity Risk Profit or loss Equity 1% Increase 1% Decrease 1% Increase 1% Decrease 19,394 (19,394) 19,394 (19,394) The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements, Note 2(b): Consolidated Carrying Amount Contractual Cash Flows < 6 Months 6-12 Months 1-2 Years 2-5 Years > 5 Years $ $ $ $ $ $ $ 2018 Trade and other payables 299,601 299,601 299,601 299,601 299,601 299,601 - - - - - - - - Fair Values Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows: Cash and cash equivalents Trade and other payables Consolidated 2018 Carrying Amount $ Fair Value $ 3,878,872 (299,601) 3,878,872 (299,601) 3,479,271 3,479,271 The Group’s policy for recognition of fair values is disclosed at Note 1(s). 52 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 20 Dividends No dividends were paid or proposed during the financial period ended 30 June 2018. The Company has no franking credits available as at 30 June 2018. Note 21 Key Management Personnel Disclosures (a) Directors and Key Management Personnel The following persons were directors of Black Cat Syndicate Limited during the financial year: (i) Non-Executive Chairman Paul Chapman Executive Director (ii) Gareth Solly, Managing Director (iii) Non-Executive Directors Les Davis Alex Hewlett There were no other persons employed by or contracted to the Company during the financial year, having responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly. (b) Key Management Personnel Compensation A summary of total compensation paid to Key Management Personnel during the year is as follows: Total short-term employment benefits Total share based payments Total post-employment benefits Period Ended 30 June 2018 $ 163,973 - 15,511 179,484 (c) Other Transactions with Key Management Personnel The Group has entered into a two year agreement with Stone Poneys Nominees Pty Ltd, an entity associated with Paul Chapman, in respect of the lease for the Group’s offices. The annual cost of the lease, inclusive of variable outgoings is approximately $26,253 per annum, further details of the lease agreement are provided in Note 24b. The lease is considered to be entered into on normal commercial terms. During the period Tracey Chapman, a related party of Paul Chapman, provided administration support services to the Group amounting to $46,674 (inclusive of superannuation). 53 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 22 Remuneration of Auditors Audit and review of the Company’s financial statements Other services – Investigating Accountant’s Report Total Note 23 Contingencies (i) Contingent Liabilities Period Ended 30 June 2018 $ 15,000 6,500 21,500 There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2018 other than: Royalties The Group is subject to a 1% gross revenue royalty in respect of minerals produced from the following tenements: E25/499, E25/512, E27/532, P25/2287, P25/2288, P25/2293, P25/2377 and P25/2378. In addition, there may be other historical agreements relating to certain other tenements of the Group, which may, or may not, create an obligation on the Group to pay royalties on some or all minerals derived from some tenements upon commencement of production. Native Title and Aboriginal Heritage Native title claims have been made with respect to certain areas which include tenements in which the Group has an interest. The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the Group or its projects. Agreement is being or has been reached with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the Group has an interest. (ii) Contingent Assets There were no material contingent assets as at 30 June 2018. Note 24 Commitments (a) Exploration The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may be varied as a result of renegotiations of the terms of the exploration licences or their relinquishment. The minimum exploration obligations are less than the normal level of exploration expected to be undertaken by the Group. As at balance date, total exploration expenditure commitments on tenements held by the Group have not been provided for in the financial statements and which cover the following twelve month period amount to $252,560. 54 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 24 Commitments (continued) (b) Operating Lease Commitments The Company has entered into a two year lease on its office Suite 6, 16 Nicholson Road, Subiaco on effective from 30 January 2018 at $26,253 per annum, inclusive of variable outgoings (refer Note 21). Operating lease commitments are as follows: Due within one year Due after one year but not more than five years Due after more than five years 30 June 2018 $ 26,253 13,127 - 39,380 (c) Contractual Commitments There are no material contractual commitments as at 30 June 2018 not otherwise disclosed in the Financial Statements. Note 25 Related Party Transactions Transactions with Directors during the period are disclosed at Note 21 – Key Management Personnel. There are no other related party transactions, other than those already disclosed elsewhere in this financial report. Note 26 Events Occurring After the Balance Sheet Date There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. 55 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 27 Reconciliation of Loss After Tax to Net Cash Inflow from Operating Activities Consolidated Period Ended 30 June 2018 $ Profit/(Loss) from ordinary activities after income tax Depreciation Exploration cost written off and expensed Share issue costs expensed Movement in assets and liabilities: (Increase)/Decrease in receivables (Increase)/Decrease in accrued income Increase/(Decrease) in payables Increase/(Decrease) in employee leave liabilities Net cash outflow from operating activities Non-Cash Investing and Financing Activities (749,702) 4,344 141,088 156,328 (4,219) (14,071) 78,430 12,836 (374,966) During the reporting period the Company issued 1,000,000 ordinary fully paid shares in respect of part consideration for the acquisition of exploration assets (refer Note 13). The Company issued a total of 5,500,000 unlisted options to the lead manager to the Initial Public Offer in part consideration for services provided (refer Note 17). Note 28 Earnings Per Share a) Basic Earnings Per Share Loss per share attributable to ordinary equity holders of the Company b) Diluted Earnings Per Share Loss per share attributable to ordinary equity holders of the Company c) Loss Used in Calculation of Basic and Diluted Loss Per Share Consolidated profit/(loss) after tax from continuing operations 56 Consolidated Period Ended 30 June 2018 Cents (2.1) Cents (2.1) $ (749,702) NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 28 Earnings Per Share (continued) d) Weighted Average Number of Shares Used as the Denominator Weighted average number of shares used as the denominator in calculating basic earnings per share Weighted average number of shares used as the denominator in calculating diluted earnings per share Note 29 Parent Entity Information Financial Position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities NET ASSETS Equity Issued Capital Share based payments reserve Accumulated losses TOTAL EQUITY Profit/(Loss) for the year Other comprehensive income Total comprehensive income 57 Consolidated Period Ended 30 June 2018 No. 35,603,274 35,603,274 30 June 2018 $ 3,794,863 1,985,408 5,730,571 100,661 - 100,661 5,629,910 5,792,125 459,177 (621,392) 5,629,910 (621,392) - (621,392) NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018 Note 29 Parent Entity Information (continued) Guarantees Entered Into by the Parent Entity in Relation to the Debts of its Subsidiaries No guarantees have been entered into by the parent entity in relation to the debts of its subsidiary company. Contingent Liabilities For full details of contingencies see Note 23. Commitments For full details of commitments see Note 24. 58 DIRECTORS’ DECLARATION In the opinion of the Directors of Black Cat Syndicate Limited (“the Company”): : (a) the financial statements and notes set out on pages 30 to 58 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and give a true and fair view of the financial position as at 30 June 2018 and of the performance for the period ended on that date of the Group. (b) (c) (d) the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001. there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. the financial statements comply with International Financial Reporting Standards as set out in Note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial period ended 30 June 2018. This declaration is made in accordance with a resolution of the Directors. Signed at Perth this 28th day of September 2018. Gareth Solly Managing Director 59 INDEPENDENT AUDITOR’S REPORT 60 INDEPENDENT AUDITOR’S REPORT (continued) 61 INDEPENDENT AUDITOR’S REPORT (continued) 62 INDEPENDENT AUDITOR’S REPORT (continued) 63 ASX ADDITIONAL INFORMATION Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 1 October 2018. A. DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of shareholders by size of holding: Ordinary Fully Paid Shares Distribution Number of Shareholders Securities Held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 More than 100,000 Totals 2 53 107 313 103 578 2 155,945 993,492 12,903,740 43,206,823 57,260,002 There are 30 shareholders holding less than a marketable parcel of ordinary shares. B. SUBSTANTIAL SHAREHOLDERS An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below: Holder of Relevant Interest P Chapman A Hewlett Issued Ordinary Shares Number of Shares % of Shares 3,520,001 2,880,000 6.15% 5.03% 64 ASX ADDITIONAL INFORMATION (continued) C. TWENTY LARGEST SHAREHOLDERS The names of the twenty largest holders of quoted shares are listed below: Shareholder Name Elefantino Pty Ltd LB and AF DavisStone Poneys Nominees Pty Ltd Suaron Capital Pty Ltd Briken Nominees Pty Ltd Ashok Parekh J and T Hardy
Ivanhoe Investments Pty Ltd PB and CA Johnston Nameo Pty Ltd Chemco Superannuation Fund Pty Ltd Emex (WA) Pty Ltd Patina Resources Pty Ltd Pareto Nominees Pty Ltd WG and TJ Martin Kobia Holdings Pty Ltd Fiona Solly Gareth Solly Stone Poneys Nominees Pty Ltd Equity Trustees Limited Total D. UNQUOTED SECURITIES Options over Unissued Shares Ordinary Shares - Quoted Number of Shares % of Shares 2,880,000 2,400,000 2,168,889 2,000,000 1,600,000 1,380,000 1,280,000 1,280,000 1,280,000 1,280,000 1,000,000 1,000,000 1,000,000 755,000 700,000 600,000 600,000 600,000 590,000 546,000 5.03% 4.19% 3.79% 3.49% 2.79% 2.41% 2.24% 2.24% 2.24% 2.24% 1.75% 1.75% 1.75% 1.32% 1.22% 1.05% 1.05% 1.05% 1.03% 0.95% 24,939,889 43.56% Number of Options Exercise Price Expiry Date Number of Holders 400,000 400,000 22 cents 31 July 2022 2 65 ASX ADDITIONAL INFORMATION (continued) E. VOTING RIGHTS In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have one vote. There are no voting rights in respect of options over unissued shares. F. RESTRICTED SECURITIES There are 24,007,878 ordinary fully paid shares on issue which are subject to escrow agreements, as follows: − − − − 9,815,000 shares restricted until 15 October 2018; 2,000,000 shares restricted until 24 November 2018; 1,000,000 shares restricted until 17 January 2019; and 11,192,878 shares restricted until 17 January 2020. There are 17,460,001 unlisted options expiring on 17 January 2023 on issue that are subject to escrow agreements, as follows: − − 2,600,000 options restricted until 15 October 2018; and 14,860,001 options restricted until 17 January 2020. G. USE OF FUNDS Pursuant to the requirements of ASX Listing Rule 4.10.19 the Company has used all funds raised from its IPO in a manner that is consistent with the prospectus and objectives outlined in the IPO document. 66