Berkeley Energia Limited Annual Report 2020

Plain-text annual report

BERKELEY ENERGIA 2020 ANNUAL REPORT2020ANNUAL REPORT /INFORME ANUALBerkeley Energia LimitedLSE / ASX / BME : BKY ABN: 40 052 468 569MADRID HEAD OFFICECALLE CAPITÃ¡N HAYA 1PLANTA 15. EDIFICIO EUROCENTRO., 28020 MADRID, ESPAÑAPROJECT OFFICEBERKELEY MINERA ESPAÑA, CARRETERA SA - 322, KM 30 37495 RETORTILLOSALAMANCA, ESPAÑATELEPHONE +34 923 193 903 REGISTERED OFFICE28 THE ESPLANADEPERTH WA 6000TELEPHONE +61 8 9322 6322 WWW.BERKELEYENERGIA.COMINFO@BERKELEYENERGIA.COMDIRECTORSMr Ian Middlemas ChairmanMr Deepankar Panigrahi Non-Executive DirectorMr Nigel Jones Non-Executive Director Mr Adam Parker Non-Executive Director Mr Robert Behets Non-Executive Director (Acting Managing Director)COMPANY SECRETARYMr Dylan BrowneMADRID HEAD OFFICECalle Capitán Haya 1Planta 15. Ediﬁ cio Eurocentro., 28020 Madrid, EspañaPROJECT OFFICEBerkeley Minera España, S.A.Carretera SA-322, Km 3037495 Retortillo, Salamanca, EspañaTelephone: +34 923 193 903REGISTERED OFFICELevel 9, 28 The Esplanade, Perth WA 6000 AustraliaTelephone: +61 8 9322 6322WEBSITE AND EMAILwww.berkeleyenergia.cominfo@berkeleyenergia.comAUDITORSpainErnst & Young EspañaAustraliaErnst & Young Australia - PerthSOLICITORSSpainHerbert Smith Freehills, S.L.PUnited KingdomBryan Cave Leighton Paisner LLPAustraliaThomson GeerBANKERSSpainSantander BankAustraliaAustralia and New Zealand Banking Group LtdSHARE REGISTRYSpainIBERCLEARPlaza de la Lealtad, 1, 28014 Madrid, EspanaUnited KingdomComputershare Investor Services PLCThe Pavilions, Bridgewater Road, Bristol BS99 6ZZTelephone: +44 370 702 0000AustraliaComputershare Investor Services Pty LtdLevel 11 , 172 St Georges Terrace, Perth WA 6000Telephone: +61 8 9323 2000STOCK EXCHANGE LISTINGSSpainMadrid, Barcelona, Bilboa and Valencia Stock Exchanges(Code: BKY)United KingdomLondon Stock Exchange – Main Board (LSE Code: BKY)Australia Australian Securities Exchange (ASX Code: BKY)CORPORATE DIRECTORY | DIRECTORIO CORPORATIVODirectors’ Report 1Consolidated Statement of Proﬁ t or Loss and Other Comprehensive Income 21Consolidated Statement of Financial Position 22Consolidated Statement of Cash Flows 23Consolidated Statement of Changes in Equity 24Notes to and forming part of the Financial Statements 25Directors’ Declaration 57Auditor’s Independence Declaration 58Independent Auditor’s Report 59Corporate Governance 65Mineral Resources and Ore Reserves Statement 66ASX Additional Information 69CONTENTS | CONTENIDO DIRECTORS’ REPORT 30 JUNE 2020 The Directors of Berkeley Energia Limited submit their report on the Consolidated Entity consisting of Berkeley Energia Limited (‘Company’ or ‘Berkeley’ or ‘Parent’) and the entities it controlled at the end of, or during, the year ended 30 June 2020 (‘Consolidated Entity’ or ‘Group’). OPERATING AND FINANCIAL REVIEW Highlights Highlights for and subsequent to the year end include: • Permitting: The Company's primary focus continues to be on progressing the approvals required to commence construction of the Salamanca mine and bring it into production. In August 2020, the Urbanism License (“UL”) was granted by the Municipality of Retortillo under the terms established in the Urbanism Law and Urban Planning Regulations of Castilla y León. The UL is a land use permit needed for construction works at the Salamanca mine. The grant of the UL is a significant permitting milestone for Berkeley and a positive step in the development of the project. The Authorisation for Construction for the uranium concentrate plant as a radioactive facility (“NSC II”) is now the only pending approval required to commence full construction of the Salamanca mine. In late March 2020, the Company formally submitted updated official documentation in relation to the NSC II and has since held a number of meetings (via teleconference calls) with the Nuclear Safety Council (“NSC”) technical team to discuss and clarify minor queries on the updated documentation. As requested by the NSC, the Company has prepared written responses to these queries. Following submission of these written responses in early September, the next step in the process is for the NSC technical team to finalise its report and submit it to the NSC Board for ratification. In July 2020, the NSC issued a favourable report for the extension of the validity of the Initial Authorisation for the uranium concentrate plant as a radioactive facility (“NSC I”). NSC I was granted in September 2015, with a 5-year validity period. The next step is for the Ministry for Ecological Transition and the Demographic Challenge (“MITECO”) to approve this authorisation and set its duration period. The Company will continue to engage with the relevant authorities in a collaborative manner and maintain strong engagement with all key stakeholders in Spain, as it progresses the approvals required to commence full construction of the Salamanca mine and bring it into production. • Uranium Market: During the year, the uranium spot price rose to a high of US$33.40 per pound which represents a year to date price increase of ~30%. Uncertainty surrounding COVID-19 impacts to the nuclear fuel supply chain continue, with supply disruptions being experienced by a number of major uranium producers including Kazatomprom (Kazakhstan operations), Cameco (Cigar Lake mine), CNNC (Rössing mine) and Swakop Uranium (Husab mine). Analysts expect further tightening of market conditions as the current structural supply deficit in the global uranium market is exacerbated by these, and possible other, COVID-19 supply disruptions. The current market uncertainty is also expected to heighten concerns about the security of future supply and continued upward movement in the spot price may be a trigger for increased term market activity. ANNUAL REPORT 2020 1 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) OPERATING AND FINANCIAL REVIEW (Continued) Highlights (Continued) • COVID-19: The Spanish Government declared a National ‘State of Alarm’ relating to the COVID-19 pandemic, which began on 14 March, ended on 21 June with its borders reopening to Europe and free movement being allowed within the country. Towards the end of July, Spain began experiencing another surge in COVID-19 cases, with spikes in new daily infection rates forcing the Government to reinstate both voluntary guidelines and mandatory restrictions and place parts of the country, particularly in the north-eastern region of Catalonia, under temporary lockdown again. All of the Berkeley team based in Spain are safe and well. Consistent with current Government guidelines, the Company has maintained a ‘work from home’ policy. Subject to the status of the COVID-19 pandemic and related Government policy and guidelines, it is expected that the team will recommence working from the Madrid and Retortillo offices in October. Despite the Spanish Government suspending the term of all administrative and legal proceedings while the ‘State of Alarm’ was active, the Spanish Administration was still functioning during this time and Berkeley was able to maintain regular communication with the relevant officials from the NSC and the federal, regional and local governments to ensure the permitting processes continued to advance, as evidenced by the award of the UL. Operations Project Update The Salamanca mine is being developed to the highest international standards and the Company's commitment to health, safety and the environment remains a priority. It holds certificates in Sustainable Mining (UNE 22470-80), Environmental Management (ISO 14001), and Health and Safety (OHSAS 18001) which were awarded by AENOR, an independent Spanish government agency. Towards the end of the year, planning continued in advance of the annual internal and external audits of the Company’s Sustainable Mining and Environmental Management Systems which are scheduled to take place in the coming months. The annual evaluation of Environmental Aspects (“EA”), which was completed during the June quarter, highlighted that significant reductions had been achieved in a number of target areas, including a 38% reduction in fuel consumption, a 48% reduction in printer toner consumption, and a 85% reduction in fluorescent residue. New targets have been set for 2020-21, with a focus of further reducing the consumption of electricity, water, paper and printer toner. As part of its commitment to Sustainable Mining, the Company has commenced a Life Cycle Analysis of its operational processes, in order to determine the environmental impact of the products associated with these processes from their origin (raw materials) through to the end of their useful life. This initiative has initially focused on the analysis of the environmental impact of carbon dioxide (“CO2”) emissions generated by exploration drilling activities. To facilitate an enhanced understanding of the environmental impact of CO2 emissions and to determine which phase/activity of the life cycle is responsible for generating the most CO2 emissions, a series of graphics providing visual representation of the information have been designed. As an example, the life cycle of exploration drilling activities is represented in Figure 1 below. 2 BERKELEY ENERGIA LIMITED Figure 1 – Life Cycle of Exploration Drilling Activities The determination and quantification of the direct environmental aspects derived from the consumption of raw materials and the production of waste that occurs during the different phases of the life cycle of exploration drilling activities has also completed (Figure 2). Figure 2 – Environmental Aspects (Direct): Life Cycle of Exploration Drilling Activities The Company continued the migration its of Health and Safety Management System from OHSAS 18001 to its replacement standard, ISO 45001, a process which is targeted for completion in the second half of 2020. As part of this process, an internal audit was undertaken in the first week of August, and the external audit (by AENOR) in the first week of September. ANNUAL REPORT 2020 3 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) OPERATING AND FINANCIAL REVIEW (Continued) Operations (Continued) Project Update (Continued) The monitoring programs associated with the NSC approved pre-operational Surveillance Plan for Radiological and Environmental Affections and pre-operational Surveillance Plan for the Control of the Underground Water continued during the year. Permitting Update The Company continues to engage with all relevant authorities in a collaborative manner in order to facilitate the timely resolution of the pending approvals required to commence construction of the Salamanca mine. In August 2020, UL was granted by the Municipality of Retortillo under the terms established in the Urbanism Law and Urban Planning Regulations of Castilla y León. The UL is a land use permit needed for construction works at the Salamanca mine. The grant of the UL is a significant permitting milestone for Berkeley and a positive step in the development of the project. The NSC II permit is now the only pending approval required to commence full construction of the Salamanca mine. During the year, the Company’s Spanish executives and advisors have met with (via teleconference calls or in person once some of the COVID-19 restrictions were lifted) and had constructive dialogue with relevant officials from the NSC, the Federal Government, the Regional Government of Castilla y León, the Municipality of Retortillo, and other key stakeholders. As previously reported, at the request of the NSC, Berkeley consolidated the Company’s responses to all of the NSC’s technical queries into the official documentation, expanded the description of some sections (e.g. waste management, analysis of potential accidents, environmental radiological impact assessment, hydrological modelling), and formally submitted the updated official documentation to the NSC at the end of March. In the June quarter, the Company held a number of meetings with the NSC technical team to discuss and clarify minor queries on the updated documentation. The Company has also provided written responses and/or additional technical information to the NSC when requested. The next step in this process is for the NSC technical team to finalise their report and submit it to the NSC Board for approval. Once approved by the NSC Board, the NSC report and recommendation which is ‘compulsory and binding on radiological matters’ is provided to MITECO, who is the substantive authority responsible for the granting NSC II. In late July, the NSC issued a favourable report for the extension of the validity of NSC I for the process plant as a radioactive facility at the Salamanca project. NSC I was granted by the then Ministry of Industry, Energy and Tourism in September 2015, with a 5-year validity period. The favourable report issued by NSC considered that the circumstances and characteristics of the process plant are the same as those contained in the Initial Authorisation issued in 2015. The next step is for the MITECO to approve this authorisation and set its duration period. The Company will continue to maintain a consistent approach, ensuring that the project complies with all applicable laws and regulations, as it progresses the approvals required to commence construction of the Salamanca mine and bring it into production. Uranium Market During the year, the uranium spot price rose to a high of US$33.40 per pound which represents a year to date price increase of ~30%. Uncertainty surrounding COVID-19 impacts to the nuclear fuel supply chain continue, with supply disruptions being experienced by a number of major uranium producers including Kazatomprom (Kazakhstan operations), Cameco (Cigar Lake mine), CNNC (Rössing mine) and Swakop Uranium (Husab mine). 4 BERKELEY ENERGIA LIMITED Analysts expect further tightening of market conditions as the current structural supply deficit in the global uranium market is exacerbated by these, and possible other, COVID-19 supply disruptions. The current market uncertainty is also expected to heighten concerns about the security of future supply and continued upward movement in the spot price may be a trigger for increased term market activity. COVID-19 In the June quarter, the Spanish Government declared that the National ‘State of Alarm’ relating to the COVID-19 pandemic, which began on 14 March, would end on 21 June with its borders reopening to Europe and free movement being allowed within the country. Towards the end of July however, Spain began experiencing another surge in COVID-19 cases, with spikes in new daily infection rates forcing the Government to reinstate both voluntary guidelines and mandatory restrictions and place parts of the country, particularly in the north-eastern region of Catalonia, under temporary lockdown again. All of the Berkeley team based in Spain are safe and well. Consistent with current Government guidelines, the Company has maintained a ‘work from home’ policy. Subject to the status of the COVID-19 pandemic and related Government policy and guidelines, it is expected that the team will recommence working from the Madrid and Retortillo offices in October. Despite the Spanish Government suspending the term of all administrative and legal proceedings while the ‘State of Alarm’ was active, the Spanish Administration was still functioning during this time and Berkeley was able to maintain regular communication with the relevant officials from the NSC and the federal, regional and local governments to ensure the permitting processes continued to advance. Results of Operations The Consolidated Entity’s net loss after tax for the year ended 30 June 2020 was $42,889,000 (2019: profit of $34,431,000). Significant items contributing to the year end loss and substantial differences from the previous year include the following: (i) (ii) (iii) (iv) Exploration and evaluation expenses of $5,779,000 (2019: $8,541,000), which is attributable to the Group’s accounting policy of expensing exploration and evaluation expenditure incurred subsequent to the acquisition of the rights to explore and up to the successful completion of definitive feasibility studies and permitting for each separate area of interest. Business development expenses of $983,000 (2019: $1,295,000) which includes the Group’s investor relations activities including but not limited to public relations costs, marketing and digital marketing, broker fees, travel costs, conference fees, business development consultant fees and stock exchange admission fees. Non-cash share-based payment expense of $62,000 (2019: gain of $1,918,000) was recognised in respect of incentive securities granted to directors, employees and key consultants. The Company’s policy is to expense the incentive securities over the vesting period (which for Performance Rights is generally the life of the security). Non-cash fair value loss of $41,116,000 (2019: gain of $38,120,000) of the convertible note and unlisted options issued to the Oman Investment Authority (“OIA”) (formerly the Oman Sovereign Wealth Fund or SGRF) (‘OIA Options’). These financial liabilities increase or decrease in value as the share price of the Company fluctuates. With the share price increasing substantially during the year, the size of financial liability has increased substantially resulting in a large fair value loss for the year. During the period, the Company also revised its assumptions to convert the convertible note and assumed it will convert at £0.27 rather than £0.50, in line with the Company’s share price at 30 June 2020. This has also contributed to the increased financial liability in 2020 compared to 2019. As the convertible note and OIA Options convert into shares, the liabilities will be reclassified to equity. Commercially, the intentions of both OIA and the Company prior to completing the convertible note transaction in 2017 was to enter into an equity arrangement. The Company has however complied with the accounting standards and accounted for the convertible note as a financial liability. Under the ASX Listing Rules, the convertible note and OIA Options are defined as equity securities. ANNUAL REPORT 2020 5 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) OPERATING AND FINANCIAL REVIEW (Continued) Results of Operations (Continued) Due to the conversion terms of the convertible note leading to the issuance of a variable number of ordinary shares in the Company in return for conversion of the convertible note, the Company is required under the accounting standards to account for the convertible note as a current financial liability at fair value through profit and loss, despite the Company having no obligation to extinguish the convertible note using its cash resources. (v) Recognition of interest income of $1,480,000 (2019: $2,340,000). The decrease in interest is a direct result of lower interest rates following lower global interest rates due to market conditions and the impacts of COVID-19. Financial Position At 30 June 2020, the Group is in an extremely good financial position with cash reserves of $91,767,000 (2019: $96,587,000). The Group had net assets of $36,211,000 at 30 June 2020 (2019: $79,648,000), a decrease of 55% compared with the previous year. This decrease is consistent with the increase in the value of the derivative financial liabilities (the convertible note and OIA Options). Business Strategies and Prospects for Future Financial Years Berkeley’s strategic objective is to create long-term shareholder value with the Company's primary focus continuing to be on progressing the approvals required to commence construction of the Salamanca mine and bring it into production. To achieve its strategic objective, the Company currently has the following business strategies and prospects: • Continue to progress permitting and maintain the required licences to develop and operate at the Salamanca mine • Advance the Salamanca mine through the development phase into the main construction phase and then into production; • Progress with seeking further offtake partners. The Company has maintained its preference to combine fixed and market related pricing across its contracts in order to secure positive margins in the early years of production whilst ensuring the Company remains exposed to potentially higher prices in the future; and • Assess other mine development opportunities at the Salamanca mine. As with any other mining projects, all of these activities are inherently risky and the Board is unable to provide certainty that any or all of these activities will be able to be achieved. The material business risks faced by the Company that are likely to have an effect on the Company’s future prospects, and how the Company manages these risks, include but are not limited to the following: Mining licences and government approvals required – With the mining licence, environmental licence and the UL already obtained at the Salamanca mine, the only major approval to commence full construction at the Salamanca mine is NSC II. However, various appeals have also been made against the permits and approvals discussed above, as allowed for under Spanish law, and the Company expects that further appeals will be made against these and future authorisations and approvals in the ordinary course of events. Whilst none of these appeals have been finally determined, no precautionary or interim measures have been granted in relation to the appeals regarding the award of licences and authorisations at the Salamanca mine to date. However, the successful development of the Salamanca mine will be dependent on the granting of all permits and licences necessary for the construction and production phases, in particular the award NSC II which will allow for the construction of the plant as a radioactive facility. 6 BERKELEY ENERGIA LIMITED The Company has to date received more than 120 favourable reports and permits for the development of the mine, however with any development project, there is no guarantee that the Company will be successful in applying for and maintaining all required permits and licences to complete construction and subsequently enter into production. If the required permits and licences are not obtained, then this could have a material adverse effect on the Group's financial performance, which may lead to a reduction in the carrying value of assets and may materially jeopardise the viability of the Salamanca mine and the price of its Ordinary Shares. Further, the Company’s exploration and any future mining activities are dependent upon the maintenance and renewal from time to time of the appropriate title interests, licences, concessions, leases, claims, permits, environmental decisions, planning consents and other regulatory consents which may be withdrawn or made subject to new limitations. The maintaining or obtaining of renewals or attainment and grant of title interests often depends on the Company being successful in obtaining and maintaining required statutory approvals for its proposed activities. The Company closely monitors the status of its mining permits and licences and works closely with the relevant Government departments in Spain to ensure the various licences are maintained and renewed when required. However, there is no assurance that such title interests, licenses, concessions, leases, claims, permits, decisions or consents will not be revoked, significantly altered or not renewed to the detriment of the Company or that the renewals and new applications will be successful; The Company’s activities are subject to Government regulations and approvals – Any material adverse changes in government policies or legislation of Spain that affect uranium mining, processing, development and mineral exploration activities, income tax laws, royalty regulations, government subsidies and environmental issues may affect the viability and profitability of the Salamanca mine. No assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could adversely impact the Group’s mineral properties; Additional requirements for capital – The issue of the US$65 million Convertible Note and OIA Options to OIA has provided the Company the funds to complete the upfront capital items at the Salamanca mine, subject to the OIA Options being exercised early. Due to delays in the receipt of NSC II, the Company has been funding its ongoing working capital requirements which has reduced the amount available to fund full construction. This position will continue for so long as NSC II remains outstanding, unless the OIA Options are exercised early. As a result of the delay, the Company expects that following receipt of NSC II and in order to fully fund the full construction of the Salamanca mine into steady state production, it will be required to raise additional funding in order to meet the capital costs of the mine development and to fund working capital until positive cash flows are achieved; The Company may be adversely affected by fluctuations in commodity prices – The price of uranium has fluctuated widely since the Fukushima nuclear power plant disaster in March 2011 and is affected by further numerous factors beyond the control of the Company. Future production, if any, from the Salamanca mine will be dependent upon the price of uranium being adequate to make these properties economic. The Company currently does not engage in any hedging or derivative transactions to manage commodity price risk, but as the Company’s Project advances, this policy will be reviewed periodically; The Group’s projects are not yet in production – As a result of the substantial expenditures involved in mine development projects, mine developments are prone to material cost overruns versus budget. The capital expenditures and time required to develop new mines are considerable and changes in cost or construction schedules can significantly increase both the time and capital required to build the mine; and Global financial conditions may adversely affect the Company’s growth and profitability – Many industries, including the mineral resource industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and energy markets, and a lack of market liquidity. A slowdown in the financial markets or other economic conditions may adversely affect the Company’s growth and ability to finance its activities. ANNUAL REPORT 2020 7 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) DIRECTORS The names of Directors in office at any time during the financial year or since the end of the financial year are: Current Directors Mr Ian Middlemas Mr Robert Behets Mr Deepankar Panigrahi Mr Nigel Jones Mr Adam Parker Chairman Non-Executive Director (Acting Managing Director) Non-Executive Director Non-Executive Director Non-Executive Director Former Directors Mr Paul Atherley Managing Director and CEO (resigned effective 11 July 2019) Unless otherwise disclosed, Directors held their office from 1 July 2019 until the date of this report. CURRENT DIRECTORS AND OFFICERS Ian Middlemas Chairman Qualifications – B.Com, CA Mr Middlemas is a Chartered Accountant, a member of the Australian Institute of Company Directors and holds a Bachelor of Commerce degree. He worked for a large international Chartered Accounting firm before joining the Normandy Mining Group where he was a senior group executive for approximately 10 years. He has had extensive corporate and management experience, and is currently a director with a number of publicly listed companies in the resources sector. Mr Middlemas was appointed a Director and Chairman of Berkeley Energia Limited on 27 April 2012. During the three year period to the end of the financial year, Mr Middlemas has held directorships in Constellation Resources Limited (November 2017 – present), Apollo Minerals Limited (July 2016 – present), Paringa Resources Limited (October 2013 – present), Prairie Mining Limited (August 2011 – present), Salt Lake Potash Limited (January 2010 – present), Equatorial Resources Limited (November 2009 – present), Piedmont Lithium Limited (September 2009 – present), Sovereign Metals Limited (July 2006 – present), Odyssey Energy Limited (September 2005 – present) and Cradle Resources Limited (May 2016 – July 2019). Robert Behets Acting Managing Director, Non-Executive Director Qualifications – B.Sc (Hons), FAusIMM, MAIG Mr Behets is a geologist with over 30 years’ experience in the mineral exploration and mining industry in Australia and internationally. He was instrumental in the founding, growth and development of Mantra Resources Limited, an African focused uranium company, through to its acquisition by ARMZ for approximately A$1 billion in 2011. Prior to Mantra, Mr Behets held various senior management positions during a long career with WMC Resources Limited. Mr Behets has a strong combination of technical, commercial and managerial skills and extensive experience in exploration, mineral resource and ore reserve estimation, feasibility studies and operations across a range of commodities, including uranium, gold and base metals. He is a Fellow of The Australasian Institute of Mining and Metallurgy, a Member of the Australian Institute of Geoscientists and was also previously a member of the Australasian Joint Ore Reserve Committee (‘JORC’). Mr Behets was appointed a Director of the Company on 27 April 2012. During the three year period to the end of the financial year, Mr Behets has held directorships in Odyssey Energy Limited (August 2020 – present), Constellation Resources Limited (June 2017 – present), Apollo Minerals Limited (October 2016 – present), Equatorial Resources Limited (February 2016 – present), Piedmont Lithium Limited (February 2016 to May 2018) and Cradle Resources Limited (May 2016 to July 2017). 8 BERKELEY ENERGIA LIMITED Deepankar Panigrahi Non-Executive Director Qualifications – MS, MBA Mr Panigrahi is an Investment Manager in the Private Equity division of OIA and has extensive experience across a variety of sectors and geographies covering all stages of the private equity process, including post investment management. Mr Panigrahi holds an Undergraduate and Master’s degree in Economics with Distinction and Honours from the University of Michigan followed by an MBA from Cambridge University. Mr Panigrahi was appointed a director of the Company on 30 November 2017. Mr Panigrahi has not been a Director of another listed company in the three years prior to the end of the financial year. Nigel Jones Non-Executive Director Qualifications – MA Mr Jones has thirty years’ experience in the international mining sector. He has considerable corporate development and marketing expertise, including being responsible for the negotiation of key uranium supply agreements for Rio Tinto. Mr Jones has spent two decades at Rio Tinto, where he currently holds the position of Managing Director of the Simandou iron ore project. In previous roles he was Global Head of Business Development, Managing Director of Rio Tinto Marine, Head of Investor Relations and Marketing Director, Uranium. From 2017 to 2019, Mr Jones held the role of Head of Private Side Capital Markets at ICBC Standard Bank, leading the investment banking division of the global markets subsidiary of Industrial and Commercial Bank of China, the world's largest bank by assets. Mr Jones holds a Master’s degree in Modern Languages from Oxford University and is an alumnus of London Business School where he completed its Corporate Finance Programme. Mr Jones was appointed a Director of Berkeley Energia Limited on 7 June 2017. Mr Jones has not been a Director of another listed company in the three years prior to the end of the financial year. Adam Parker Non-Executive Director Qualifications – MA.Chem (Hons), ASIP Mr Parker joined the Company after a long and successful career in institutional fund management in the City of London spanning almost three decades, including being a co-founder of Majedie Asset Management. Mr Parker began his career in 1987 at Mercury Asset Management (subsequently acquired by Merrill Lynch and now part of BlackRock) and left in 2002 when he co-founded Majedie Asset Management. Mr Parker was instrumental in building Majedie Asset Management into the successful investment boutique that it is today. He managed funds including the Majedie UK Opportunities Fund, the Majedie UK Smaller Companies Fund and a quarter of the Majedie UK Focus Fund. Mr Parker was appointed a Director of Berkeley Energia Limited on 14 June 2017. Mr Parker has not been a Director of another listed company in the three years prior to the end of the financial year. ANNUAL REPORT 2020 9 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) CURRENT DIRECTORS AND OFFICERS (Continued) Dylan Browne Company Secretary Qualifications – B.Com, CA, AGIA ACG Mr Browne is a Chartered Accountant and Associate Member of the Governance Institute of Australia (Chartered Secretary) who is currently Company Secretary for a number of ASX and European listed companies that operate in the resources sector. He commenced his career at a large international accounting firm and has since been involved with a number of exploration and development companies operating in the resources sector, based in London and Perth, including Apollo Minerals Limited, Prairie Mining Limited and Papillon Resources Limited. Mr Browne successfully listed Prairie on the Main Board of the London Stock Exchange and the Warsaw Stock Exchange in 2015 and oversaw Berkeley’s listings on the Main Board LSE and the Madrid, Barcelona, Bilboa and Valencia Stock Exchanges. Mr Browne was appointed Company Secretary of the Company on 29 October 2015. OTHER KMP Francisco Bellón del Rosal (Francisco Bellón) Chief Operations Officer Qualifications – M.Sc, MAusIMM Mr Bellón is a Mining Engineer specialising in mineral processing and metallurgy with over 20 years’ experience in operational and project management roles in Europe, South America and West Africa. He held various senior management roles with TSX listed Rio Narcea Gold Mines during a 10 year career with the company, including Plant Manager for El Valle/Carles process facility and Operations Manager prior to its acquisition by Lundin Mining in 2007. During this period, Mr Bellón was involved in the development, construction, commissioning and production phases of a number of mining operations in Spain and Mauritania including El Valle-Boinás / Carlés (open pit and underground gold-copper mines in northern Spain), Aguablanca (open pit nickel-copper mine in southern Spain) and Tasiast (currently Kinross' world class open pit gold mine in Mauritania). He subsequently joined Duro Felguera, a large Spanish engineering house, where as Manager of the Mining Business, he managed the peer review, construction and commissioning of a number of large scale mining operations in West Africa and South America in excess of US$1 billion. Mr Bellón joined Berkeley Energia Limited in May 2011. PRINCIPAL ACTIVITIES The principal activities of the Consolidated Entity during the year consisted of mineral exploration and development. There was no significant change in the nature of those activities. DIVIDENDS No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2020 (2019: nil). EARNINGS PER SHARE Basic and diluted earnings/(loss) per share SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS 2020 Cents (9.63) 2019 Cents 9.58 Other than as disclosed below, there were no significant changes in the state of affairs of the Consolidated Entity during the year. (i) On 11 July 2019, Mr Atherley resigned as Managing Director and CEO of the Company to concentrate on his other investments in the resource sector. 10 BERKELEY ENERGIA LIMITED SIGNIFICANT EVENTS AFTER THE BALANCE DATE (i) (ii) On 24 July 2020, the Company announced that the Board of the NSC had issued a favourable report for the extension of the validity of the NSC I for the uranium concentrate plant as a radioactive facility at the Salamanca project; and On 11 August 2020, the Company announced that the UL had been granted by the Municipality of Retortillo under the terms established in the Urbanism Law and Urban Planning Regulations of Castilla y León for the Salamanca project; and (iii) On 25 August 2020, pursuant to the terms of the OIA convertible note, the Company elected to extend the mine commissioning date to 30 November 2021. Under the terms of the convertible note, if mine commissioning has not occurred by 30 November 2020, then the convertible note will automatically convert into shares at the lower of £0.50 per share or the last trading price of the Company's shares on LSE at the relevant time, subject the floor price of £0.27 per share. Other than as outlined above, as at the date of this report there are no matters or circumstances, which have arisen since 30 June 2020 that have significantly affected or may significantly affect: • • • the results of those operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity; or the state of affairs, in financial years subsequent to 30 June 2020, of the Consolidated Entity. the operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity; ENVIRONMENTAL REGULATION AND PERFORMANCE The Consolidated Entity's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve. Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities. There have been no significant known breaches by the Consolidated Entity during the financial year. In September 2012, Berkeley qualified for certification in accordance with ISO 14001 of Environmental Management, which sets out the criteria for an environmental management system, and UNE 22480 of Sustainable Mining Management, which allows for the systematic monitoring and tracking of sustainability indicators, and is useful in the establishment of targets for constant improvement. These certificates are renewed following completion of audits established by the regulations, with the most recent renewal audit successfully completed in July 2018. In addition, the Company obtained the certification on the OHSAS 18001 in September 2018, which set up the criteria for the health and safety management system at the Salamanca project site. The migration from OHSAS 18001 to ISO 45001 is underway and will be completed in the prior to the end of 2020. INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF BERKELEY Current Directors Ian Middlemas Deepankar Panigrahi Nigel Jones Adam Parker Robert Behets Interest in Securities at the Date of this Report Ordinary Shares(i) Incentive Options(ii) Performance Rights(iii) 9,300,000 - 35,000 200,000 2,490,000 - - - - 2,000,000 - - - - - Notes (i) (ii) (iii) ‘Ordinary Shares’ means fully paid ordinary shares in the capital of the Company. ‘Incentive Options’ means an unlisted option to subscribe for one Ordinary Share in the capital of the Company ‘Performance Rights’ means the right to subscribe to one Ordinary Share in the capital of the Company upon the completion of specific performance milestones by the Company. SHARE OPTIONS AND PERFORMANCE RIGHTS At the date of this report the following unlisted securities have been issued over unissued Ordinary Shares of the Company: • 200,000 Performance Rights expiring on 31 December 2021; ANNUAL REPORT 2020 11 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) 3,700,000 Incentive Options exercisable at $0.35 each on or before 31 December 2022; SHARE OPTIONS AND PERFORMANCE RIGHTS (Continued) • • • A convertible note with a principal amount US$65 million convertible between 100,880,000 and 186,815,000 shares at a price between £0.50 and £0.27 per share expiring 30 November 2021 (‘Convertible Note’); and 3,700,000 Incentive Options exercisable at $0.40 each on or before 31 December 2023; • OIA Options as follows: • • • 10,089,000 unlisted options exercisable at £0.60 each, vesting on conversion of the Convertible Note and expiring the earlier of 12 months after vesting or on 30 November 2022; 15,133,000 unlisted options exercisable at £0.75 each, vesting on conversion of the Convertible Note and expiring the earlier of 18 months after vesting or on 30 May 2023; and 25,222,000 unlisted options exercisable at £1.00 each, vesting on conversion of the Convertible Loan Note and expiring the earlier of 24 months after vesting or on 30 November 2023. These securities do not entitle the holders to participate in any share issue of the Company or any other body corporate. During the year ended 30 June 2020, 130,000 Ordinary Shares were issued as a result of the conversion of Performance Rights. No Ordinary Shares were issued as a result of the exercise or conversion of Incentive Options, the Convertible Note or OIA Options. Subsequent to the end of the financial year and up and until the date of this report, no Ordinary shares have been issued as a result of the exercise or conversion of Incentive Options, Performance Rights, OIA Options or Convertible Note. MEETINGS OF DIRECTORS The following table sets out the number of meetings of the Company's Directors and the board committees held during the year ended 30 June 2020, and the number of meetings attended by each director. During the year the Board resolved to establish a Remuneration and Nomination Committee. The Board as a whole currently performs the functions of an Audit Committee and Risk Committee, however this will be reviewed should the size and nature of the Company’s activities change. Current Directors Ian Middlemas Deepankar Panigrahi Nigel Jones Adam Parker Robert Behets Board Meetings Remuneration and Nomination Committee(i) Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended 3 3 3 3 3 3 3 3 3 3 - - - - - - - - - - Notes (i) Remuneration and Nomination Committee meetings are generally considered and approved by means of written resolutions of committee members. REMUNERATION REPORT (AUDITED) This report details the amount and nature of remuneration of each director and executive officer of the Company. Details of Key Management Personnel The Key Management Personnel (‘KMP’) of the Group during or since the end of the financial year were as follows: Current Directors Mr Ian Middlemas Mr Robert Behets Mr Deepankar Panigrahi Mr Nigel Jones Mr Adam Parker Chairman Non-Executive Director (Acting Managing Director) Non-Executive Director Non-Executive Director Non-Executive Director 12 BERKELEY ENERGIA LIMITED Former Directors Mr Paul Atherley Current KMP Mr Francisco Bellón Mr Dylan Browne Former KMP Mr Sean Wade Managing Director and CEO (resigned effective 11 July 2019) Chief Operations Officer Company Secretary Chief Commercial Officer (ceased 25 January 2020) There were no other key management personnel of the Company or the Group. Unless otherwise disclosed, the Key Management Personnel held their position from 1 July 2019 until the date of this report. Remuneration Policy The remuneration policy for the Group's KMP has been developed by the Board taking into account the size of the Group, the size of the management team for the Group, the nature and stage of development of the Group's current operations and market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. the Group is currently focused on undertaking development and construction activities; In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for key management personnel: • • • other than profit which may be generated from asset sales (if any), the Group does not expect to be undertaking profitable operations until sometime after the successful commercialisation, production and sales of commodities from one or more of its current projects, or the acquisition of a profitable mining operation. risks associated with resource companies whilst exploring and developing projects; and Remuneration and Nomination Committee The Board has established an independent Remuneration and Nomination Committee (‘Remcom’) to oversee the Group’s remuneration and nomination responsibilities and governance. The remuneration committee members consist of three independent non-executive directors being Mr Parker (as Chair), Mr Jones and Mr Behets. The Remcom’s role is to determine the remuneration of the Company’s executives, oversee the remuneration of KMP, and approve awards under the Company's new long-term incentive plan (‘Plan’). The Remcom reviews the performance of executives and KMP and sets the scale and structure of their remuneration and the basis of their service/consulting agreements. In doing so, the Remcom will have due regard to the interests of shareholders. In determining the remuneration of executives and KMP, the Remcom seeks to enable the Company to attract and retain executives of the highest calibre. In addition, the Remcom decides whether to grant incentives securities in the Company and, if these are to be granted, who the recipients should be. Remuneration Policy for Executives The Group's remuneration policy is to provide a fixed remuneration component and a performance based component (Incentive Options, Performance Rights and cash bonuses, see below). The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning KMP objectives with shareholder and business objectives. Fixed Remuneration Fixed remuneration consists of base salaries, as well as employer contributions to superannuation funds and other non-cash benefits. Non-cash benefits may include provision of motor vehicles, housing and health care benefits. Fixed remuneration will be reviewed annually by the Remcom. The process consists of a review of Company and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. ANNUAL REPORT 2020 13 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) REMUNERATION REPORT (AUDITED) (Continued) Remuneration Policy for Executives (Continued) Performance Based Remuneration – Short Term Incentive Some KMP are entitled to an annual cash bonus upon achieving various key performance indicators (‘KPI’s’), as set by the Board. Having regard to the current size, nature and opportunities of the Company, the Board has determined that these KPI’s will include measures such as successful completion of exploration activities (e.g. completion of exploration programmes within budgeted timeframes and costs), development activities (e.g. completion of feasibility studies and initial infrastructure), corporate activities (e.g. recruitment of key personnel and project financing) and business development activities (e.g. project acquisitions and capital raisings). On an annual basis, after consideration of performance against KPI’s, the Board determines the amount, if any, of the annual cash bonus to be paid to each KMP. During the financial year no bonus (2019: nil) was paid, or is payable to KMP. Performance Based Remuneration – Long Term Incentive The Group has adopted a Plan comprising the grant of Performance Rights and/or Incentive Options to reward KMP and key employees and contractors for long-term performance of the Company. Shareholders approved the new Plan in November 2019. To achieve its corporate objectives, the Group needs to attract, incentivise, and retain its key employees and contractors. The Board believes that grants of Performance Rights and/or Incentive Options to KMP will provide a useful tool to underpin the Group's employment and engagement strategy. (i) Performance Rights The Group has a Plan that provides for the issuance of unlisted Performance Rights which, upon satisfaction of the relevant performance conditions attached to the Performance Rights, will result in the issue of an Ordinary Share for each Performance Right. Performance Rights are issued for no consideration and no amount is payable upon conversion thereof. The Plan enables the Group to: (a) recruit, incentivise and retain KMP and other key employees and contractors needed to achieve the Group's business objectives; (b) link the reward of key staff with the achievement of strategic goals and the long-term performance of the Group; (c) align the financial interest of participants of the Plan with those of Shareholders; and (d) provide incentives to participants of the Plan to focus on superior performance that creates Shareholder value. Performance Rights granted under the Plan to eligible participants will be linked to the achievement by the Group of certain performance conditions as determined by the Board from time to time. These performance conditions must be satisfied in order for the Performance Rights to vest. Upon Performance Rights vesting, Ordinary Shares are automatically issued for no consideration. If a performance condition of a Performance Right is not achieved by the expiry date then the Performance Right will lapse. During the financial year, no Performance Rights were granted to KMP and key employees. No Performance Rights were converted during the financial year. 2,720,000 Performance Rights previously granted to KMP were forfeited/cancelled during the financial year. (ii) Incentive Options The Plan also enables the Group to issue Incentive Options as part of KMP and key employees and contractors remuneration and incentive arrangements in order to attract, retain and to provide an incentive linked to the performance of the Company. The Board’s policy is to grant Incentive Options to KMP with exercise prices at or above market share price (at the time of agreement). As such, Incentive Options granted to KMP are generally only of benefit if the KMP perform to the level whereby the value of the Group increases sufficiently to warrant exercising the Unlisted Options granted. Other than service-based vesting conditions (if any) and the exercise price required to exercise the Incentive Options, there are no additional performance criteria on the Unlisted Options granted to executives, as given the speculative nature of the Company’s activities and the small management team responsible for its running, it is considered the performance of the KMP and the performance and value of the Group are closely related. The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options granted as part of their remuneration package. 14 BERKELEY ENERGIA LIMITED During the financial year, 7,400,000 Incentive Options were granted to KMP and key employees under the Plan. No Incentive Options were exercised during the financial year. Performance Based Remuneration – Long Term Incentive Remuneration Policy for Non-Executive Directors The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, incentive options have been used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. The maximum aggregate amount that may be paid to Non-Executive Directors in a financial year is $350,000, as approved by shareholders at a Meeting of Shareholders held on 6 May 2009. Director’s fees paid to Non-Executive Directors accrue on a daily basis. Fees for Non-Executive Directors are not directly linked to the performance of the economic entity. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company. Given the size, nature and opportunities of the Company, Non-Executive Directors may receive Incentive Options or Performance Rights in order to secure and retain their services. Fees for the Chairman were set at $50,000 per annum (2019: $50,000) (including post-employment benefits). Fees for Non-Executive Directors’ were set at $45,000 per annum (2019: $45,000) (including post-employment benefits). These fees cover main board activities only. Non-Executive Directors may receive additional remuneration for other services provided to the Company, including but not limited to, membership of committees. During the 2020 financial year, no Incentive Options or Performance Rights were granted to Non-Executive Directors, other than to Mr Behets who is currently acting as Managing Director. The Company prohibits Non-Executive Directors entering into arrangements to limit their exposure to Incentive Options granted as part of their remuneration package. Relationship between Remuneration and Shareholder Wealth During the Group's exploration and development phases of its business, the Board anticipates that the Company will retain future earnings (if any) and other cash resources for the operation and development of its business. Accordingly, the Company does not currently have a policy with respect to the payment of dividends and returns of capital. Therefore, there was no relationship between the Board’s policy for determining, or in relation to, the nature and amount of remuneration of KMP and dividends paid and returns of capital by the Company during the current and previous four financial years. The Board does not directly base remuneration levels on the Company's share price or movement in the share price over the financial year and the previous four financial years. Discretionary annual cash bonuses are based upon achieving various non-financial KPIs as detailed under ‘Performance Based Remuneration – Short Term Incentive’ and are not based on share price or earnings. As noted above, a number of KMP have also been granted Performance Rights and Incentive Options, which generally will be of greater value should the value of the Company's shares increase (subject to vesting conditions being met), and in the case of options, increase sufficiently to warrant exercising the Incentive Options granted. ANNUAL REPORT 2020 15 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) REMUNERATION REPORT (AUDITED) (Continued) Relationship between Remuneration of KMP and Earnings As discussed above, the Group is currently undertaking exploration and development activities, and does not expect to be undertaking profitable operations until sometime after the successful commercialisation, production and sales of commodities from one or more of its current projects. Accordingly, the Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of KMP. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and Non-Executive Directors have received Performance Rights and Incentive Options in order to secure their services and as a key component of their remuneration. General Where required, KMP receive superannuation contributions (or foreign equivalent), currently equal to 9.5% of their salary, and do not receive any other retirement benefit. From time to time, some individuals have chosen to sacrifice part of their salary to increase payments towards superannuation. All remuneration paid to KMP is valued at cost to the Company and expensed. Incentive Options and Performance Rights are valued using an appropriate valuation methodology. The value of these Incentive Options and Performance Rights is expensed over the vesting period. KMP Remuneration Details of the nature and amount of each element of the remuneration of each Director and other KMP of the Company or Group for the financial year are as follows: Short-term Benefits Non-Cash Salary & Fees $ Cash Incentive $ 45,600 45,000 45,000 60,000 251,685 448,130(1) 319,659 - 219,331 1,434,405 - - - - - - - - - - Other Non- Cash Benefits (4) $ - - - - - - Post Employ- ment Benefits (5) $ 4,332 - - - Share- Based Payments (6) $ - - - - Total $ 49,932 45,000 45,000 60,000 3,903 102,352 357,940 - - 448,130 52,780 25,263 27,374 425,076 - - - - 9,581 (148,321) 9,581 71,010 52,780 33,498 (9,014) 1,511,669 Percentage of Total Remunerat- ion that Consists of Options/ Rights % Percent- age Perform- ance Related % - - - - 28.6 - 6.4 100.0 - - - - - - - - - - - 2020 Directors Ian Middlemas Deepankar Panigrahi Nigel Jones Adam Parker Robert Behets Paul Atherley(1) Other KMP Francisco Bellón Dylan Browne(2) Sean Wade(3) Total Notes (1) (2) (3) (4) (5) (6) Mr Atherley resigned effective 11 July 2019. Includes cessation payment of 12 months consultancy fee. From 1 July 2019, Mr Browne provided services as the Company Secretary through a services agreement with Apollo Group Pty Ltd (“Apollo Group”). During the year, Apollo Group was paid or is payable A$258,000 for the provision of serviced office facilities and administrative, accounting, company secretarial and transaction services to the Group Mr Wade ceased as Chief Commercial Offer on 25 January 2020. Other Non-Cash Benefits includes payments made for housing and car benefits. Contains statutory superannuation and social security. Share-based payments are measured for by using a Black-Scholes option pricing valuation method and are expensed over the vesting period of the Performance Rights or Incentive Options issued. 16 BERKELEY ENERGIA LIMITED Short-term Benefits Non-Cash Post Employ- ment Benefits (2) $ Share- Based Payments (3) $ Percentage of Total Remunerat- ion that Consists of Options/ Rights % Percent- age Perform- ance Related % Total $ Other Non- Cash Benefits (1) $ - - - - - - 2019 Directors Ian Middlemas Paul Atherley Deepankar Panigrahi Nigel Jones Adam Parker Robert Behets Other KMP Francisco Bellón Sean Wade Dylan Browne Total Salary & Fees $ Cash Incentive $ 45,600 497,372 45,000 45,000 60,000 41,096 308,134 328,909 106,775 1,477,886 - - - - - - - - - - 4,332 - 49,932 - - - - (620,817) (123,445) - - - 45,000 45,000 60,000 3,904 (135,262) (90,262) - - - - - - - - - - - - - - - - 50,442 23,446 (410,483) (28,461) - - - 309,821 638,730 9,500 (139,774) (23,499) 48.6 - 48.6 - 50,442 41,182 (996,515) 572,995 Notes (1) (2) (3) Other Non-Cash Benefits includes payments made for housing and car benefits. Contains statutory superannuation and social security. Share-based payments are measured for by using a Black-Scholes option pricing valuation method and are expensed over the vesting period of the Performance Rights or Incentive Options issued. Performance Rights are linked to the achievement by the Company of certain performance conditions as determined by the Board from time to time with the Performance Rights only of any value to the holder if the performance conditions are satisfied prior to the expiry of the respective Performance Rights. During the financial year, 3,603,000 Performance Rights previously granted to KMP were forfeited and as such the previously recognised expense was reversed. Incentive Options and Performance Rights Granted to KMP Details of the value of Incentive Options and Performance Rights granted, exercised or lapsed for KMP of the Group during the year ended 30 June 2020 are as follows: No. of options & rights granted No. of options & rights vested No. of options & rights exercised/ lapsed Value of options & rights granted(1) $ Value of options & rights exercised/ lapsed(1) $ Value of options & rights included in remuneration $ - - (1,050,000) - (419,000) - 2020 Directors Paul Atherley Robert Behets 2,000,000 2,000,000 (240,000) 102,352 (74,160) 102,352 Other KMP Francisco Bellón 2,000,000 Dylan Browne Sean Wade 700,000 - 130,000 - - (750,000) (180,000) (500,000) 102,352 35,823 (288,250) (84,600) 27,374 9,581 - (370,000) (148,321) Notes (1) Values determined at the grant date per AASB 2. For details on the valuation of Incentive Options and Performance Rights, including models and assumptions used, please refer to Note 18 of the financial statements ANNUAL REPORT 2020 17 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) REMUNERATION REPORT (AUDITED) (Continued) Incentive Options and Performance Rights Granted to KMP (Continued) Details of Incentive Options granted by the Company to each KMP of the Group during the financial year are as follows: 2020 Other KMP Options Grant date Expiry date Vesting date Exercise Price $ Grant date fair value(1) $ Robert Behets Options 18 Feb 2020 31 Dec 22 18 Feb 2020 Options 18 Feb 2020 31 Dec 22 18 Feb 2020 Francisco Bellón Options 18 Feb 2020 31 Dec 22 17 Feb 2021 Options 18 Feb 2020 31 Dec 22 17 Feb 2021 Dylan Browne Options 18 Feb 2020 31 Dec 22 17 Feb 2021 Options 18 Feb 2020 31 Dec 22 17 Feb 2021 0.35 0.40 0.35 0.40 0.35 0.40 0.047 0.055 0.047 0.055 0.047 0.055 Number granted 1,000,000 1,000,000 1,000,000 1,000,000 350,000 350,000 Notes (1) (2) For details on the valuation of Incentive Options and Performance Rights, including models and assumptions used, please refer to Note 18 of the financial statements. Incentive Options were issued to (a) recruit, incentivise and retain the KMP to achieve the Group's business objectives; (b) link the reward of the KMP with the achievement of strategic goals and the long-term performance of the Group; (c) align the financial interest of the KMP with those of Shareholders; and (d) provide incentives to the KMP to focus on superior performance that creates Shareholder value. Employment Contracts with Directors and KMP Current Directors Mr Ian Middlemas, Chairman, has a letter of appointment dated 29 June 2015 confirming the terms and conditions of his appointment. Effective from 1 July 2013, Mr Middlemas has received a fee of $50,000 per annum inclusive of superannuation. Mr Nigel Jones and Mr Panigrahi, Non-Executive Directors, have letters of appointment with Berkeley Energia Limited dated 5 June 2017 and 30 September 2018 respectively confirming the terms and conditions of his appointment. Both receive a fee of $45,000 per annum. Mr Adam Parker, Non-Executive Director, has a letter of appointment with Berkeley Energia Limited dated 5 June 2017 confirming the terms and conditions of his appointment. Effective from 28 August 2017, Mr Parker receives a fee of $45,000 per annum for his Board duties and $15,000 for chairing the Remcom. Mr Robert Behets, Non-Executive Director (Acting Managing Director), has a letter of appointment dated 29 June 2015 confirming the terms and conditions of his appointment. Effective 1 July 2017, Mr Behets has received a fee of $45,000 per annum inclusive of superannuation. Mr Behets also has a services agreement with the Company dated 18 June 2012, which provides for a consultancy fee at the rate of $1,200 per day for management and technical services provided by Mr Behets. Either party may terminate the agreement without penalty or payment by giving two months’ notice. Current other KMP Mr Francisco Bellón, has a contract of employment dated 14 April 2011 and amended on 1 July 2011, 13 January 2015 and 16 March 2017. The contract specifies the duties and obligations to be fulfilled by the Chief Operations Officer. The contract has a rolling term and may be terminated by the Company giving six months’ notice, or 12 months in the event of a change of control of the Company. In addition to the notice period, Mr Bellón will also be entitled to receive an amount equivalent to statutory unemployment benefits (approximately €25,000) and statutory severance benefits (equivalent to 45 days remuneration per year worked from 9 May 2011 to 11 February 2012, and 33 days remuneration per year worked from 12 February 2012 until termination). No amount is payable in the event of termination for neglect of duty or gross misconduct. Mr Bellón receives a fixed remuneration component of €190,000 per annum plus compulsory social security contributions regulated by Spanish law, as well as the provision of accommodation in Salamanca and a motor vehicle. 18 BERKELEY ENERGIA LIMITED Equity instruments held by Key Management Personnel Incentive Options and Performance Rights holdings of KMP 2020 Directors Ian Middlemas Paul Atherley Deepankar Panigrahi Nigel Jones Adam Parker Held at 1 July 2019 Granted as Compen- sation Vested securities exercised - 1,050,000 - - - - - - - - - - - Expired - (1,050,000) - - - Held at 30 June 2020 Vested and exerciseable at 30 June 2020 - -(1) - - - - - - Robert Behets 240,000 2,000,000 (240,000) 2,000,000 2,000,000 Other KMP Francisco Bellón 750,000 2,000,000 (750,000) 2,000,000 Sean Wade Dylan Browne 630,000 180,000 - (130,000) (500,000) -(2) 700,000 - (180,000) 700,000 - - - Notes (1) (2) As at cessation date being 11 July 2019. As at cessation date being on 25 January 2020. Shareholdings of KMP 2020 Directors Ian Middlemas Paul Atherley Deepankar Panigrahi Nigel Jones Adam Parker Robert Behets Other KMP Francisco Bellón Sean Wade Dylan Browne Held at 1 July 2019 Granted as Compensation Options exercised/Rights converted On market purchase/(sale) Held at 30 June 2020 9,300,000 3,193,622 - 35,000 200,000 2,490,000 1,150,000 60,000 - - - - - - - - - - - - - - - - - 130,000 - - - - - - - - - - 9,300,000 3,193,622(1) - 35,000 200,000 2,490,000 1,150,000 190,000(2) - Notes (1) (2) As at cessation date being 11 July 2019. As at cessation date being on 25 January 2020. End of Remuneration Report. ANNUAL REPORT 2020 19 DIRECTORS’ REPORT 30 JUNE 2020 (Continued) 20 BERKELEY ENERGIA LIMITED AUDITOR’S AND OFFICERS' INDEMNITIES AND INSURANCE Under the Constitution the Company is obliged, to the extent permitted by law, to indemnify an officer (including Directors) of the Company against liabilities incurred by the officer in that capacity, against costs and expenses incurred by the officer in successfully defending civil or criminal proceedings, and against any liability which arises out of conduct not involving a lack of good faith. During the financial year, the Company has paid an insurance premium to insure Directors and officers of the Company against certain liabilities arising out of their conduct while acting as a Director or Officer of the Company. Under the terms and conditions of the insurance contract, the nature of liabilities insured against cannot be disclosed. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. NON-AUDIT SERVICES During the year, the Company’s auditor, Ernst & Young, received, or is due to receive, $88,000 (2019: $52,000) for the provision of non-audit services. The Directors are satisfied that the provision of non-audit services is compatible with the general standard and independence for auditors imposed by the Corporations Act 2001 (‘Corporations Act’). ROUNDING The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($000) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies. AUDITOR'S INDEPENDENCE DECLARATION The auditor's independence declaration is on page 58 of the Annual Financial Report. This report is made in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act. For and on behalf of the Directors ROBERT BEHETS Director 25 September 2020 Forward Looking Statement Statements regarding plans with respect to Berkeley’s mineral properties are forward-looking statements. There can be no assurance that Berkeley’s plans for development of its mineral properties will proceed as currently expected. There can also be no assurance that Berkeley will be able to confirm the presence of additional mineral deposits, that any mineralisation will prove to be economic or that a mine will successfully be developed on any of Berkeley’s mineral properties. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Note 2 18 3 5 Interest income Exploration and evaluation expenses Business development expenses Corporate and administration expenses Share-based payment expenses Fair value movement on financial liabilities Foreign exchange movements Profit/(Loss) before income tax Income tax benefit/(expense) Profit/(Loss) after income tax Other comprehensive income, net of income tax: Items that may be classified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Other comprehensive income, net of income tax Total comprehensive profit/(loss) for the year attributable to Members of Berkeley Energia Limited 2020 $000 1,480 (5,779) (983) (1,155) (62) (41,116) 4,726 (42,889) - (42,889) 2019 $000 2,340 (8,541) (1,278) (1,928) 1,918 38,120 3,800 34,431 - 34,431 (538) (538) 382 382 (43,427) 34,813 Basic and diluted earnings/(loss) per share (cents per share) 21 (9.63) 9.58 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying Notes ANNUAL REPORT 2020 21 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 ASSETS Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-current Assets Exploration expenditure Property, plant and equipment Other financial assets Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Derivative financial liabilities Other financial liabilities Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the Company Issued capital Reserves Accumulated losses TOTAL EQUITY Note 22 6 7 8 9 10 11 12 13 14 2020 $000 91,767 1,436 93,203 8,293 12,855 617 21,765 2019 $000 96,587 1,661 98,248 8,274 12,858 540 21,672 114,968 119,920 1,158 76,747 852 78,757 78,757 36,211 169,829 (1,116) (132,502) 36,211 1,952 37,756 564 40,272 40,272 79,648 169,736 (531) (89,557) 79,648 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes 22 BERKELEY ENERGIA LIMITED CONSOLIDATED STATEMENT CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 As at 1 July 2019 Effect of adoption of AASB 16 Issued Capital $000 169,736 - Balance at 1 July 2019 - restated 169,736 Total comprehensive loss for the period: Net profit/(loss) for the year Other Comprehensive Income: Exchange differences arising on translation of foreign operations Total comprehensive income/(loss) Issue of ordinary shares Share issue costs Lapse of Performance Rights Share-based payments expense - - - 110 (17) - - As at 30 June 2020 169,829 Share- Based Payments Reserve $000 Foreign Currency Translation Reserve $000 Accumulated Losses Total Equity 341 - 341 - - - - - (109) 62 294 $000 (872) (89,557) - (56) $000 79,648 (56) (872) (89,613) 79,592 - (42,889) (42,889) (538) (538) - (538) (42,889) (43,427) - - - - - - - - 110 (17) (109) 62 (1,410) (132,502) 36,211 As at 1 July 2018 Total comprehensive loss for the period: Net profit/(loss) for the year Other Comprehensive Income: Exchange differences arising on translation of foreign operations Total comprehensive income/(loss) Issue of ordinary shares Share issue costs Forfeiture of Performance Rights Lapse of Incentive Options Share-based payments expense 169,633 2,803 (1,254) (124,402) 46,780 - - - 130 (27) - - - - - - - - (3,162) (414) 1,114 341 - 34,431 34,431 382 382 - 382 34,431 34,813 - - - - - - - - 414 - 130 (27) (3,162) - 1,114 (872) (89,557) 79,648 As at 30 June 2019 169,736 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes ANNUAL REPORT 2020 23 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Note 2020 $000 2019 $000 Cash flows from operating activities Payments to suppliers and employees Interest received Net cash outflow from operating activities 22(a) Cash flows from investing activities Payments for property, plant and equipment Net cash outflow from investing activities Cash flows from financing activities Transaction costs from issue of securities Net cash (outflow)/inflow from financing activities Net (decrease)/increase in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 22(b) (8,700) 1,499 (7,201) (10,612) 2,678 (7,934) (215) (215) (1,254) (1,254) (2) (2) (7,418) 96,587 2,598 91,767 (27) (27) (9,215) 100,935 4,867 96,587 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes 24 BERKELEY ENERGIA LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in preparing the financial report of Berkeley Energia Limited (‘Berkeley’ or ‘Company’ or ‘Parent’) and its consolidated entities (‘Consolidated Entity’ or ‘Group’) for the year ended 30 June 2020 are stated to assist in a general understanding of the financial report. Berkeley is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (‘ASX’), the Main Board of the London Stock Exchange (‘LSE’) and the Madrid, Barcelona, Bilboa and Valencia Stock Exchanges (together the ‘Spanish Stock Exchanges’). The financial report of the Company for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors. (a) Basis of Preparation The financial report is a general purpose financial report, which has been prepared in accordance with Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity. The financial report has been prepared on a historical cost basis. The financial report is presented in Australian dollars. The consolidated financial statements have been prepared on a going concern basis which assumes the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. (b) Statement of Compliance The financial report complies with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board. In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. New and revised standards and amendments thereof and interpretations effective for the current reporting period that are relevant to the Group include: (i) (ii) (iii) AASB 16 Leases; Interpretation 23 Uncertainty over Income Tax Treatments; AASB 2017-7 Amendments – Long-term Interests in Associates and Joint Venture Amendments to IAS 28 and Illustrative Example – Long-term Interests in Associates and Joint Ventures; (iv) AASB 2018-1 Amendments – Annual Improvements 2015-2017 Cycle; and (v) AASB 2018-2 Amendments – Plan Amendment, Curtailment or Settlement (AASB 119). The adoption of these new and revised standards has not resulted in any significant changes to the Group's accounting policies or to the amounts reported for the current or prior periods. A discussion on the adoption of AASB 16 is included below. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 30 June 2020. Those which may be relevant to the Group are set out in the table below, but these are not expected to have any significant impact on the Group's financial statements as detailed below. ANNUAL REPORT 2020 25 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (b) Statement of Compliance (Continued) Standard/Interpretation AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business Application date of standard Application date for Group 1 January 2020 1 July 2020 AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material 1 January 2020 1 July 2020 Conceptual Framework and Financial Reporting 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework 1 January 2020 1 July 2020 1 January 2020 1 July 2020 (c) Changes in Accounting Policies AABS 16 Leases The Group applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated – i.e. it is presented, as previously reported, under AASB 117 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in AASB 16 have not generally been applied to comparative information. Definition of a lease Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining whether an Arrangement contains a Lease. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in AASB 16. On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied AASB 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under AASB 117 and IFRIC 4 were not reassessed for whether there is a lease under AASB 16. As a lessee As a lessee, the Group leases primarily property assets. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under AASB 16, the Group recognises right-of-use assets and lease liabilities for most of these leases – i.e. these leases are now on-balance sheet. At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price. However, for leases of property the Group has elected not to separate non-lease components and account for the lease and associated non-lease components as a single lease component. Leases classified as operating leases under AASB 117 Previously, the Group classified property leases as operating leases under AASB 117. On transition, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 July 2019. Right-of-use assets are measured at: • their carrying amount as if AASB 16 had been applied since the commencement date, discounted using the Group’s incremental borrowing rate at the date of initial application: the Group applied this approach to its property leases. The Group used a number of practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117. In particular, the Group: 26 BERKELEY ENERGIA LIMITED • • • • • did not recognise right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application; did not recognise right-of-use assets and liabilities for leases of low value assets (e.g. IT equipment); excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application; used hindsight when determining the lease term; and Relied on its assessment of whether leases are onerous immediately before the date of initial application. Leases classified as finance leases under AASB 117 The Group did not have any leases that were previously classified as finance leases under AASB 117. Impact on transition On transition to AASB 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in accumulated losses. The impact on transition is summarised below: Property, plant and equipment Other financial liabilities Accumulated losses As previously reported $000 12,858 - (89,557) AASB 16 adjustment $000 407 (463) (56) As restated at 1 July 2019 $000 13,265 (463) (89,613) When measuring liabilities for leases that were classified as operating leases, the Group discounted lease payments using its estimated incremental weighted average borrowing rate being 6.5%. The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows: Operating lease commitments as at 30 June 2019 Less: Commitments relating to short-term leases and leases of low-value assets Less: Non-lease related type payments included in operating lease commitments as at 30 June 2019 Lease liabilities as at 1 July 2019 (d) Principles of Consolidation $00 827 (290) (74) 463 The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Berkeley Energia Limited at reporting date. Control is achieved when the Company has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power. Where controlled entities have entered or left the group during the year, the financial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in the financial statements. In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. ANNUAL REPORT 2020 27 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (e) Business Combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The cost of a business combination is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange and the amount of any non- controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of the business combination over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. (f) Significant Accounting Judgements, Estimates and Assumptions The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: • Exploration and Evaluation Assets (Note 7) – the Group’s accounting policy for exploration and evaluation assets is set out in Note 1(u). The application of this policy requires management to make certain judgements and estimates as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves have been found and the point at which exploration and evaluation assets should be transferred to mine development properties. The determination of an area of interest also requires judgement. • Accounting for derivative financial liabilities (Note 11) – accounting for convertible notes requires judgement in respect of whether the host contract is debt or equity. Estimating fair value for financial liabilities requires the determination of the most appropriate valuation model and the determination of the most appropriate inputs to the valuation model. The assumptions used for estimating the fair value of the financial liabilities is disclosed in Note 11. 28 BERKELEY ENERGIA LIMITED • Share-Based Payments (Note 18) - The Group initially measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instrument at the date at which they are granted. Estimating fair value for share-based payment transactions requires the determination of the most appropriate valuation model. This estimate also requires the determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield. The assumption and models used for estimating the fair value for share-based payment transactions are disclosed in Note 18. • Functional currency of foreign operations (Note 1(h)) - determination of the functional currency of foreign subsidiaries requires judgement regarding the primary currency of labour, material and exploration spend in that subsidiary. (g) Revenue Recognition Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. (h) Foreign Currency Translation Both the functional and presentation currency of Berkeley at 30 June 2020 was Australian Dollars. The following table sets out the functional currency of the subsidiaries (unless dormant) of the Group: Company Name Berkeley Exploration Limited Berkeley Minera Espana, S.L.U Berkeley Exploration Espana, S.L.U Functional Currency A$ Euro Euro Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to the income statement with the exception of exchange differences on intercompany loans which are not expected or planned to be repaid. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and tax credits attributable to exchange differences on those borrowings are also recognised in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Where the functional currency of a subsidiary of Berkeley Energia Limited is not Australian Dollars the assets and liabilities of the subsidiary at reporting date are translated into the presentation currency of Berkeley at the rate of exchange ruling at the balance sheet date and the income statements are translated by applying the average exchange rate for the year. Any exchange differences arising on this retranslation are taken directly to the foreign currency translation reserve in equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity and relating to that particular foreign operation is recognised in the Statement of Profit or Loss and Other Comprehensive Income. (i) Income Tax The income tax expense for the year is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. ANNUAL REPORT 2020 29 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. (i) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Tax (Continued) Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose on goodwill or 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 liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Parent Entity 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 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. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against tax liabilities and the deferred tax liabilities relate to the same taxable entity and the same taxation authority. (j) Cash and Cash Equivalents ‘Cash and cash equivalents’ includes cash on hand, deposits held at call with financial institutions, and other short- term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (k) Impairment of Non-Current Assets The Group assesses at each reporting date whether there is an indication that a non-current asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to dispose and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets of groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at a revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. 30 BERKELEY ENERGIA LIMITED The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (l) Trade and Other Receivables Trade receivables are recognised and carried at original invoice amount less any Expected Credit Loss (‘ECL’). Receivables from related parties are recognised and carried at the nominal amount due and are interest free. (m) Financial Assets (i) Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (‘OCI’), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, less transaction costs. (ii) Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: • • • • • Financial assets at amortised cost (relevant to the Group); Financial assets at fair value through OCI with recycling of cumulative gains and losses (not relevant to the Group); Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments – not relevant to the Group); and Financial assets at fair value through profit or loss (relevant to the Group). Financial assets at amortised cost (debt instruments) The Group measures financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost includes GST and other taxes receivables, interest receivable and security deposits. Impairment The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original EIR. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). ANNUAL REPORT 2020 31 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (m) Financial Assets (Continued) Impairment (Continued) For receivables due in less than 12 months, the Group recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. Given the nature of financial assets held by the Group, it considers a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. (n) Property, Plant and Equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Property, plant and equipment is depreciated on a reducing balance or straight line basis at rates based upon the individual assets effective useful life as follows: Plant and equipment Property (buildings and land) Life 2 - 13 years 50 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance 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. An item of plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal. Gains and losses on disposals are determined by comparing the net disposal proceeds with carrying amount of the asset. These are included in the profit or loss in the period the asset is derecognised. (o) Trade and Other Payables Trade payables and other payables are carried at amortised cost and represent liabilities for the goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days. Payables are carried at amortised cost. (p) Financial liabilities (i) Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings or payables. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. 32 BERKELEY ENERGIA LIMITED The Group’s financial liabilities include trade and other payables and financial instruments. (ii) Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss This is the category most relevant to the Group. Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in AASB 9 are satisfied. The Group has designated the convertible note and OIA Options as financial liabilities at fair value through profit or loss (termed Financial Derivatives in the notes). Loans and borrowings This is the category least relevant to the Group. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are then recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. (iii) Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another liability on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. (q) Employee Leave Benefits Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve months of the reporting date are recognised in provisions 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. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Employee benefits payable later than 12 months have been measured using the projected unit credit valuation method. (r) Issued Capital Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received by the Company. 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. (s) Dividends Provision is made for the amount of any dividend declared on or before the end of the year but not distributed at balance date. ANNUAL REPORT 2020 33 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. (t) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Earnings per Share (EPS) Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with 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. (u) Exploration and Evaluation Expenditure Expenditure on exploration and evaluation is accounted for in accordance with the 'area of interest' method. Exploration and evaluation expenditure encompasses expenditures incurred by the Group in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. For each area of interest, expenditure incurred in the acquisition of rights to explore is capitalised, classified as tangible or intangible, and recognised as an exploration and evaluation asset. Exploration and evaluation assets are measured at cost at recognition and are recorded as an asset if: (i) the rights to tenure of the area of interest are current; and (ii) at least one of the following conditions is also met: • • the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation expenditure incurred by the group subsequent to the acquisition of the rights to explore is expensed as incurred, up to until a decision to develop or mine is made. A provision for unsuccessful exploration and evaluation is created against each area of interest by means of a charge to the income statement. The recoverable amount of each area of interest is determined on a bi-annual basis and impairment recorded in respect of that area adjusted so that the net carrying amount does not exceed the recoverable amount. For areas of interest that are not considered to have any commercial value, or where exploration rights are no longer current, the capitalised amounts are derecognised and any remaining balance charged against profit or loss. When a decision is made to proceed with development, the accumulated exploration and evaluation asset will be tested for impairment and transferred to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced. Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. Impairment Capitalised exploration costs are reviewed each reporting date to establish whether an indication of impairment exists. If any such indication exists, the recoverable amount of the capitalised exploration costs is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. 34 BERKELEY ENERGIA LIMITED (v) Goods and Services Tax (‘GST’) Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (w) Share Based Payments (i) Equity settled transactions: The Group provides benefits to directors, employees, consultants and other advisors of the Group in the form of share-based payments, whereby the directors, employees, consultants and other advisors render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using an appropriate method (e.g. binomial model or Black-Scholes option pricing model). In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Berkeley (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group's best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. ANNUAL REPORT 2020 35 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (x) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 2. REVENUE Interest income 3. FAIR VALUE MOVEMENTS Notes 2020 $000 2019 $000 1,480 1,480 2,340 2,340 Fair value gain(/loss) on financial liabilities through profit and loss 11(b) (41,116) 38,120 The fair value movements are a result of the change in fair value measurements of the convertible note and unlisted options issued to OIA. These financial liabilities increase or decrease in size as the share price of the Company fluctuates. With the share price increasing substantially year, the size of financial liability has increased materially resulting in a large fair value loss for the year. As the convertible note and OIA Options convert into shares, the liabilities will be reclassified to equity and will require no cash settlement by the Company. Please refer to Note 11 for further disclosure. 4. EXPENSES Profit/(Loss) from ordinary activities before income tax expense includes the following specific expenses: (a) Expenses Depreciation and amortisation - Plant and equipment - Lease amortisation (b) Employee Benefits Expense Salaries, wages and fees Defined contribution/Social Security Share-based payments (refer Note 18(a)) Total Employee Benefits Expense 2020 $000 2019 $000 (184) (163) (347) (3,101) (559) (62) (3,722) (245) - (245) (6,922) (651) 2,048 (5,525) 36 BERKELEY ENERGIA LIMITED 5. INCOME TAX EXPENSE (a) Recognised in the Income Statement Current income tax Current income tax expense in respect of the year Deferred income tax Relating to origination and reversal of temporary differences Income tax reported in the income statement (b) Reconciliation Between Tax Expense and Accounting Profit/(Loss) Before Income Tax Accounting profit/(loss) before income tax At the domestic income tax rate of 27.5% (2019: 30%) Expenditure not allowable for income tax purposes Income not assessable for income tax purposes Effect of increase in tax rate Foreign currency exchange gains and other translation adjustments Temporary differences previously not brought to account Temporary differences not brought to account Income tax (benefit)/expense reported in the income statement (c) Deferred Income Tax Deferred income tax relates to the following: Deferred Tax Liabilities Accrued interest Unrealised foreign exchange Deferred tax assets used to offset deferred tax liabilities Deferred Tax Assets Accrued expenditure Capital allowances Tax losses available to offset against future taxable income Deferred tax assets used to offset deferred tax liabilities Deferred tax assets not brought to account 2020 $000 2019 $000 - - - (42,889) (11,794) 12,817 (858) - - 2,726 (2,891) - 1 35 (36) - 13 11,281 9,852 (36) (21,110) - - - - 34,431 10,329 241 (12,011) (1,778) (894) 461 3,652 - 6 1,460 (1,466) - 12 11,536 13,607 (1,466) (23,689) - This future income tax benefit will only be obtained if: • • • future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; the conditions for deductibility imposed by tax legislation continue to be complied with; and no changes in tax legislation adversely affect the Company in realising the benefit ANNUAL REPORT 2020 37 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 5. INCOME TAX EXPENSE (Continued) (d) Tax Consolidations As Berkeley Energia Limited is the only Australian company in the Group, tax consolidation is not applicable. 6. CURRENT ASSETS – OTHER RECEIVABLES GST and other taxes receivable Interest receivable Other 7. NON-CURRENT ASSETS – EXPLORATION EXPENDITURE The Group has mineral exploration costs carried forward in respect of areas of interest(1)(2): Areas in exploration at cost: Balance at the beginning of year Foreign exchange differences Balance at end of year 2020 $000 1,324 1 111 1,436 8,274 19 8,293 2019 $000 1,533 18 110 1,661 8,203 71 8,274 Notes: (1) The value of the exploration interests is dependent upon the discovery of commercially viable reserves and the successful development or alternatively sale, of the respective tenements. An amount of €6m (A$8.994m) was capitalised in respect of fees paid to ENUSA under the Co-operation Agreement relating to the tenements within the State Reserves. The Company reached agreement with ENUSA in July 2012 in the form of an Addendum to the Consortium Agreement signed in January 2009. The Addendum includes the following terms: • The Consortium now consists of State Reserves 28 and 29; • Berkeley's stake in the Consortium has increased to 100%; • ENUSA will remain the owner of State Reserves 28 and 29, however the exploitation rights have been assigned to Berkeley, together with authority to submit all applications for the permitting process; • The Company is now the sole and exclusive operator in the Addendum Reserves, with the right to exploit the contained uranium resources and has full ownership of any uranium produced; • ENUSA will receive a production fee equivalent to 2.5% of the net sale value (after marketing and transport costs) of any uranium produced within the Addendum Reserves; • Berkeley has waived its rights to mining in State Reserves 2,25, 30, 31, Hoja 528-1 and the Saelices El Chico Exploitation Concession, and has waived any rights to management of the Quercus plant; and • The Co-operation Agreement with ENUSA, signed on 29 January 2009, has been terminated. The Group’s accounting policy is to account for contingent consideration on asset acquisitions as contingent liabilities. (2) In June 2016, the Company completed an upfront royalty sale to major shareholder Resource Capital Funds (‘RCF’). The royalty financing comprised the sale of a 0.375% fully secured net smelter royalty over the project for US$5 million (A$6.7million) which was deducted from exploration expenditure. 38 BERKELEY ENERGIA LIMITED 8. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT Carrying amount at 1 July 2019 Effect of adoption of AASB 16 Carrying amount at 1 July 2019 (adjusted) Additions Disposals Depreciation and amortisation Foreign exchange differences Carrying amount at 30 June 2020 - at cost - accumulated depreciation and amortisation Carrying amount at 1 July 2018 Additions Disposals Depreciation and amortisation Foreign exchange differences Carrying amount at 30 June 2019 - at cost - accumulated depreciation and amortization Land and Buildings Plant and equipment Right-of- use assets $000 10,738 - 10,738 - - (34) 94 10,798 11,062 (264) 10,427 66 - (33) 278 10,738 10,965 (227) $000 2,120 - 2,120 215 (394) (150) 22 1,813 3,467 $000 - 407 407 - - (163) - 244 407 (1,654) (163) - - - - - - - - 1,107 1,189 (5) (212) 41 2,120 3,647 (1,527) 2020 $000 Total $000 12,858 407 13,265 215 (394) (347) 116 12,855 14,936 (2,081) 11,534 1,255 (5) (245) 319 12,858 14,612 (1,754) 2019 $000 9. NON-CURRENT ASSETS – OTHER FINANCIAL ASSETS Security bonds 617 540 10. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES Trade creditors 1,158 1,158 1,952 1,952 All trade and other payables are current. There are no overdue amounts. Trade creditors are non-interest bearing and settled on 30 day terms. Accrued expenses are non-interest bearing and have an average term of six months. ANNUAL REPORT 2020 39 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 11. DERIVATIVE FINANCIAL LIABILITIES (a) Financial liabilities at fair value through profit and loss Convertible note OIA Options 2020 $000 2019 $000 75,331 1,416 76,747 35,972 1,784 37,756 On 30 November 2017, the Company issued an interest-free and unsecured US$65 million convertible note which can be converted into ordinary shares at £0.50 per share upon commissioning of the Salamanca mine, or by OIA at any time at their choosing. Should the Company raise further equity prior to conversion of the convertible note at a price below £0.50 then the conversion price of the convertible note will be reset to the issue price of the equity raising, subject to a floor price of £0.27 per share. Under the terms of the convertible note, if mine commissioning has not occurred by 30 November 2020, then the convertible note will automatically convert into shares at the lower of £0.50 per share or the last trading price of the Company's shares on LSE at the relevant time, subject to conversion at the floor price of £0.27 per share. However pursuant to the terms of the convertible note, the Company has elected to extend the mine commissioning date to 30 November 2021. The exchange rate fixed in the contract is US$1.00: £0.776. Due to the conversion terms of the convertible note leading to the issuance of a variable number of ordinary shares in the Company in return for conversion of the convertible note, the Company is required under the accounting standards to account for the convertible note as a financial liability through profit and loss. The Company has no obligation to extinguish the convertible note using its cash reserves and it is only repayable in an event of breach of the terms of the investment agreement which includes a breach of a representation or warranty (at the date of signing the agreement), a breach of covenants, insolvency of the Company or the Company ceasing to conduct business or ceasing being listed on a recognised stock exchange. As part of the convertible note transaction, the Company also issued OIA with 50,443,124 unlisted options which are exercisable at an average price of £0.85 per share contributing an additional US$55 million of funding if exercised in the future. Consolidated 30 June 2019 Consolidated 30 June 2020 Opening Balance $000 Fair Value Change $000 Foreign Exchange Loss/(Gain) $000 (b) Reconciliation Convertible note OIA Options Total fair value 35,972 1,784 37,756 41,487 (371) 41,116 (2,128) 3 (2,125) Total $000 75,331 1,416 76,747 Consolidated 30 June 2018 Consolidated 30 June 2019 Opening Balance $000 Fair Value Change $000 Foreign Exchange Loss/(Gain) $000 Convertible note OIA Options Total fair value 69,552 5,257 74,809 (34,570) (3,550) (38,120) 990 77 1,067 Total $000 35,972 1,784 37,756 40 BERKELEY ENERGIA LIMITED (c) Fair Value Estimation The fair values of the OIA Options was determined using a binomial option pricing model. The fair value of the convertible note has been calculated using a probability-weighted payout approach on the basis that it is currently highly probable that the convertible note will be converted at the £0.27 conversion price. The fair value movement of both the OIA Options and the convertible note has been recognised in the Statement of Profit or Loss. The reporting date fair values of the convertible note and OIA Options were estimated using the following assumptions: Convertible note (Fair Value Level 2 Measurements): Conversion price Valuation date share price Number of shares (probability weighted average) (‘000) Fair value per share OIA Options (Fair Value Level 3 Measurements): 2020 £0.270 £0.225 186,815 $0.403 2019 £0.500 £0.198 100,880 $0.357 30 June 2020 Exercise price Valuation date share price Dividend yield(1) Volatility(2) Risk-free interest rate Number of OIA Options Estimated Expiry date Fair value (£) Fair value ($) 30 June 2019 Exercise price Valuation date share price Dividend yield(1) Volatility(2) Risk-free interest rate Number of OIA Options Estimated Expiry date Fair value (£) Fair value ($) Tranche 1 Tranche 2 Tranche 3 £0.600 £0.225 - 55% (0.08%) 10,088,625 30 Nov 2022 £0.018 $0.033 £0.750 £0.225 - 55% (0.09%) 15,132,973 31 May 2023 £0.017 $0.030 £1.000 £0.225 - 55% (0.09%) 25,221,562 30 Nov 2023 £0.014 $0.025 Tranche 1 Tranche 2 Tranche 3 £0.600 £0.198 - 55% 0.64% 10,088,625 30 Nov 2022 £0.023 $0.042 £0.750 £0.198 - 55% 0.64% 15,132,973 31 May 2023 £0.021 $0.038 £1.000 £0.198 - 55% 0.64% 25,221,562 30 Nov 2023 £0.017 $0.031 Notes (1) (2) The dividend yield reflects the assumption that the current dividend payout will remain unchanged. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. Historical volatility is deemed to be the only significant unobservable input used in the fair value measurements of the OIA Options. The higher the volatility, the higher is the fair value of the OIA option moves due to the increased uncertainty. A 3% (2019: 3%) increase (decrease) in the historical volatility would increase in fair value of the OIA options by $302,000 (2019: $347,000) while a 3% decrease of the historical volatility decrease the fair value of OIA options by $276,000 (2019: $321,000). ANNUAL REPORT 2020 41 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 12. CURRENT LIABILITIES – OTHER FINANCIAL LIABILITIES Provisions(1) Lease liability 2020 $000 569 283 852 Notes: (1) Reforestation provision to plant 30,000 young oak trees as part of the environmental licence at the project. 2020 $000 13. ISSUED CAPITAL (a) Issued and Paid up Capital 2019 $000 564 - 564 2019 $000 258,605,000 (2019: 258,475,000) fully paid ordinary shares 169,829 169,736 (b) Movements in Ordinary Share Capital During the Past Two Years: Date 1 Jul 19 6 Dec 19 Details Opening Balance Issue of shares Jul 19 to Jun 20 Share issue costs 30 Jun 20 Closing Balance 1 Jul 18 Opening Balance 17 Aug 18 Issue of shares 14 Jun 19 Issue of shares Jul 18 to Jun 19 Share issue costs 30 Jun 19 Closing Balance Number of Shares ‘000 $000 258,475 169,736 130 - 258,605 258,334 81 60 - 110 (17) 169,829 169,633 80 50 (27) 258,475 169,736 (c) Terms and conditions of Ordinary Shares (i) General The ordinary shares (‘Shares’) are ordinary shares and rank equally in all respects with all ordinary shares in the Company. The rights attaching to the Shares arise from a combination of the Company's Constitution, statute and general law. Copies of the Company's Constitution are available for inspection during business hours at its registered office. (ii) Reports and Notices Shareholders are entitled to receive all notices, reports, accounts and other documents required to be furnished to shareholders under the Company's Constitution, the Corporations Act and the Listing Rules. 42 BERKELEY ENERGIA LIMITED (iii) Voting Subject to any rights or restrictions at the time being attached to any shares or class of shares of the Company, each member of the Company is entitled to receive notice of, attend and vote at a general meeting. Resolutions of members will be decided by a poll. On a poll each eligible member has one vote for each fully paid share held and a fraction of a vote for each partly paid share determined by the amount paid up on that share. (iv) Variation of Shares and Rights Attaching to Shares Shares may be converted or cancelled with member approval and the Company's share capital may be reduced in accordance with the requirements of the Corporations Act. Class rights attaching to a particular class of shares may be varied or cancelled with the consent in writing of holders of 75% of the shares in that class or by a special resolution of the holders of shares in that class. (v) Unmarketable Parcels The Company may procure the disposal of Shares where the member holds less than a marketable parcel of Shares within the meaning of the Listing Rules (being a parcel of shares with a market value of less than $500). To invoke this procedure, the Directors must first give notice to the relevant member holding less than a marketable parcel of Shares, who may then elect not to have his or her Shares sold by notifying the Directors. (vi) Changes to the Constitution The Company's Constitution can only be amended by a special resolution passed by at least three quarters of the members present and voting at a general meeting of the Company. At least 28 days' written notice specifying the intention to propose the resolution as a special resolution must be given. (vii) Listing Rules Provided the Company remains admitted to the Official List of the Australian Securities Exchange Ltd, then despite anything in the Constitution, no act may be done that is prohibited by the Listing Rules, and authority is given for acts required to be done by the Listing Rules. The Company's Constitution will be deemed to comply with the Listing Rules as amended from time to time. 14. RESERVES Share-based payments reserve Foreign currency translation reserve (a) Nature and Purpose of Reserves Share-based payments reserve Note 14(b) 2020 $000 294 (1,410) (1,116) 2019 $000 341 (872) (531) The share-based payments reserve records the fair value of share-based payments made by the Company. Foreign currency translation reserve Exchange differences arising on translation of a foreign controlled entity are taken to the foreign currency translation reserve, as described in Note 1(h). The reserve is recognised in profit and loss when the net investment is disposed of. ANNUAL REPORT 2020 43 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 14. RESERVES (Continued) (b) Movements in Incentive Options and Performance Rights during the Past Two Years: Date 1 Jul 19 10 Aug 18 31 Dec 19 2 Feb 20 18 Feb 20 18 Feb 20 Details Opening Balance Conversion of Performance Rights Lapse of Performance Rights Cancellation of Performance Rights Issue of $0.35 Incentive Options Issue of $0.40 Incentive Options Jul 19 to Jun 20 Share-based payments expense 30 Jun 20 Closing Balance 1 Jul 18 10 Aug 18 31 Dec 18 30 Jun 19 14 Jun 19 Opening Balance Grant of Performance/share Rights Expiry of Performance Rights Expiry of £0.20 Incentive Options (3,500) Conversion of share rights Jul 18 to Jun 19 Share-based payments expense 30 Jun 19 Closing Balance (c) Terms and conditions of Incentive Options Number of Incentive Options ‘000 Number of Performance/ share Rights ‘000 - - - - 3,700 3,700 - 7,400 3,500 - - - - - 5,873 (130) (5,443) (100) - - - 200 8,246 1,290 (3,603) - (60) - 5,873 $000 341 - (109) - - - 62 294 2,803 - (3,162) (414) - 1,114 341 Incentive Options granted as share-based payments have the following terms and conditions: • Each Incentive Option entitles the holder to the right to subscribe for one Share upon the exercise of each • • Incentive Option; The Incentive Options granted as share-based payments at the end of the financial year have the following exercise prices and expiry dates: o 3,700,000 Incentive Options expiring exercisable at $0.35 on or before 31 December 2022; and o 3,700,000 Incentive Options expiring exercisable at $0.40 on or before 31 December 2023. The Incentive Options are exercisable at any time prior to the Expiry Date, subject to vesting conditions being satisfied (if applicable); • Shares issued on exercise of the Incentive Options rank equally with the then Shares of the Company; • Application will be made by the Company to ASX for official quotation of the Shares issued upon the exercise • of the Incentive Options; If there is any reconstruction of the issued share capital of the Company, the rights of the Incentive Option holders may be varied to comply with the ASX Listing Rules which apply to the reconstruction at the time of the reconstruction; and • No application for quotation of the Incentive Options will be made by the Company. (d) Terms and conditions of Performance Rights The unlisted Performance Rights are granted based upon the following terms and conditions: • each Performance Right automatically converts into one Ordinary Share upon vesting of the Performance Right; each Performance Right is subject to performance conditions (as determined by the Board from time to time) which must be satisfied in order for the Performance Right to vest; the Performance Rights on issue as at 30 June 2020 each vest separately on completion of the Commercial Production Milestone means achievement of quarterly commercial production (as per the final definitive feasibility study) from the Salamanca Project (expiry 31 December 2021). if a performance condition of a Performance Right is not achieved by the earlier of the milestone date or the expiry date then the Performance Rights will lapse; • • • • Ordinary Shares issued on conversion of the Performance Rights rank equally with the then Ordinary Shares of the Company; 44 BERKELEY ENERGIA LIMITED • • application will be made by the Company to ASX for official quotation of the Ordinary Shares issued upon conversion of the Performance Rights; if there is any reconstruction of the issued share capital of the Company, the rights of the Performance Right holders may be varied to comply with the ASX Listing Rules which apply to the reconstruction at the time of the reconstruction; no application for quotation of the Performance Rights will be made by the Company; and • • without approval of the Board, Performance Rights may not be transferred, assigned or novated, except, upon death, a participant's legal personal representative may elect to be registered as the new holder of such Performance Rights and exercise any rights in respect of them. 15. PARENT ENTITY INFORMATION Current assets Total assets Current liabilities Total liabilities Net Assets Issued Capital Reserves Accumulated losses Total equity Profit of the parent entity Total comprehensive Profit of the parent entity 2020 $000 91,693 106,975 77,225 77,225 29,750 169,829 294 (140,373) 29,750 (43,773) (43,773) 2019 $000 96,345 111,525 37,950 37,950 73,575 169,736 341 (96,502) 73,575 35,025 35,025 The Parent Company had no guarantees, commitments or contingencies at 30 June 2020 other than as disclosed elsewhere in this report (2019: None). 16. RELATED PARTY DISCLOSURES (a) Subsidiaries The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table: Name of Controlled Entity Place of Incorporation Equity Interest Berkeley Exploration Ltd Berkeley Minera Espana S.L.U Berkeley Exploration Espana S.L.U (b) Ultimate Parent Berkeley Energia Limited is the ultimate parent of the Group. (c) Key Management Personnel UK Spain Spain 2020 % 100 100 100 2019 % 100 100 100 Details relating to Key Management Personnel, including remuneration paid, are included at Note 17. (d) Transactions with Related Parties in the Consolidated Group Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. ANNUAL REPORT 2020 45 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 17. KEY MANAGEMENT PERSONNEL (a) Details of Key Management Personnel The Key Management Personnel of the Group during or since the end of the financial year were as follows: Current Directors Ian Middlemas Robert Behets Deepankar Panigrahi Nigel Jones Adam Parker Former Directors Paul Atherley Current KMP Francisco Bellón Dylan Browne Former KMP Sean Wade Chairman Non-Executive Director (Acting Managing Director) Non-Executive Director Non-Executive Director Non-Executive Director Managing Director (resigned effective 11 July 2019) Chief Operating Officer Company Secretary Chief Commercial Officer (ceased effective 25 January 2020) There were no other key management personnel of the Company or the Group. Unless otherwise disclosed, the Key Management Personnel held their position from 1 July 2019 to 30 June 2020. (b) Key Management Personnel Compensation Short-term benefits Post-employment benefits Share-based payments 18. SHARE-BASED PAYMENTS (a) Recognised Share-Based Payment Expense Net gain/(expense) arising from equity-settled share-based payment transactions (incentive securities) Consultancy service costs settled by equity-settled share- based payment transactions (shares) Shares issued to employees in Spain as part of a Spanish employee share award Lapse of unvested performance rights Total share-based payments recognised during the year 2020 $ 2019 $ (1,487,185) (1,528,328) (33,498) 9,014 (1,511,669) (41,182) 996,515 572,995 2020 $000 (62) (109) - 109 (62) 2019 $000 2,048 (50) (80) - 1,918 46 BERKELEY ENERGIA LIMITED (b) Summary of Incentive Options and Performance Rights Granted as Share-based Payments The following Incentive Options were granted as share-based payments during the last two years (2019: nil): Options 2020 Series Series 1 Series 2 Number Grant Date Issue Date Expiry Date Exercise Price $ Fair Value $ 3,700,000 18 Feb 2020 18 Feb 2020 31 Dec 2022 3,700,000 18 Feb 2020 18 Feb 2020 31 Dec 2023 0.35 0.40 0.047 0.055 The following table illustrates the number and weighted average exercise prices (‘WAEP’) of Incentive Options issued as share-based payments at the beginning and end of the financial year: Options Outstanding at beginning of year Granted during the year Exercised during the year Expired during the year Outstanding at end of year 2020 ‘000 - 2020 WAEP - 7,400 $0.375 - - - - 2019 ‘000 3,500 - - 2019 WAEP $0.411 - - (3,500) $0.411 7,400 $0.375 - - The outstanding balance of Incentive Options as at 30 June 2020 is represented by: • • 3,700,000 Incentive Options expiring exercisable at $0.35 on or before 31 December 2022; and 3,700,000 Incentive Options expiring exercisable at $0.40 on or before 31 December 2023. The following table illustrates the number and weighted average exercise prices (‘WAEP’) of Performance Rights issued as share-based payments at the beginning and end of the financial year: Performance/share Rights Outstanding at beginning of year Granted during the year Lapsed during the year Cancelled during the year Converted during the year Outstanding at end of year 2020 ‘000 5,873 - (5,443) (100) (130) 200 2020 WAEP - - - - - - 2019 ‘000 8,246 1,290 (3,603) - (60) 5,873 2019 WAEP - - - - - The outstanding balance of Performance Rights as at 30 June 2020 is represented by: • 200,000 Performance Rights expiring on 31 December 2021. ANNUAL REPORT 2020 47 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 18. SHARE-BASED PAYMENTS (Continued) (b) Summary of Incentive Options and Performance Rights Granted as Share-based Payments (Continued) The following Performance Rights were granted as share-based payments during the last two years (2020: nil): Rights 2019 Series Series 1 Series 2 Series 3 Series 4 Number Grant Date Issue Date Expiry Date Exercise Price Fair Value $ 300,000 10 Aug 18 10 Aug 18 31 Dec 19 100,000 10 Aug 18 10 Aug 18 30 Jun 20 100,000 10 Aug 18 10 Aug 18 31 Dec 20 600,000 10 Aug 18 10 Aug 18 31 Dec 21 - - - - 0.740 0.740 0.740 0.740 (c) Weighted Average Remaining Contractual Life At 30 June 2020, the weighted average remaining contractual life for Incentive Options on issue that had been granted as share-based payments was 3 years (2019: nil). The weighted average remaining contractual life for Performance Rights issued as share-based payments was 1.5 years (2019: 0.74 years). (d) Range of Exercise Prices At 30 June 2020, the range of exercise prices for Incentive Options on issue that had been granted as share-based payments was $0.35 and $0.40 (2019: nil). Performance Rights have no exercise price. (e) Weighted Average Fair Value The weighted average fair value of Incentive Options granted as share-based payments during the year ended 30 June 2020 was $0.051 (2019: nil issued). No Performance Rights were issued in 2020 (2019 weighted average fair value of Performance Rights issued: $0.740). (f) Option and Performance Rights Pricing Model The fair value of the equity-settled share Incentive Options Rights granted is estimated as at the date of grant using the binomial option valuation model taking into account the terms and conditions upon which the Incentive Options are granted. The fair value of the equity-settled share Performance Rights granted is estimated as at the date of grant with reference to the share price on that date. 7,400,000 Incentive Options were granted as share-based payments in the financial year ended 30 June 2020 (2019: nil). Nil Performance Rights (2019: 1,100,000) were issued as share-based payments in the financial year ended 30 June 2020. The following table lists the inputs to the valuation models used for Incentive Options and Performance Rights granted by the Group during the last two years: Options 2020 Inputs Exercise price (A$) Grant date share price (A$) Dividend yield(1) Volatility(2) Risk-free interest rate Grant date Expiry date Expected life of rights(3) (years) Fair value at grant date (A$) Series 1 Series 2 0.350 0.175 - 70% 0.72% 18 Feb 20 31 Dec 22 2.87 0.047 0.400 0.175 - 70% 0.72% 18 Feb 20 31 Dec 23 3.87 0.055 48 BERKELEY ENERGIA LIMITED Rights 2019 Inputs Exercise price (A$) Grant date share price (A$) Dividend yield(1) Volatility(2) Risk-free interest rate Grant date Milestone date Expiry date Expected life of rights(3) (years) Fair value at grant date (A$) Performance Rights Share Rights Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 - - - - - - - 0.740 0.740 0.740 0.740 0.850 0.850 0.850 - - - - - - - - - - - - - - - - - - - - - 10 Aug 18 10 Aug 18 10 Aug 18 10 Aug 18 23 Mar 18 23 Mar 18 23 Mar 18 31 Dec 18 30 Jun 19 31 Dec 19 31 Dec 20 1 May 19 1 May 20 1 May 21 31 Dec 19 30 Jun 20 31 Dec 20 31 Dec 21 1 May 19 1 May 20 1 May 21 1.39 0.740 1.89 0.740 2.39 0.740 3.39 0.740 0.80 0.850 1.80 0.850 2.80 0.850 Notes: (1) (2) (3) The dividend yield reflects the assumption that the current dividend payout will remain unchanged. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The expected life of the Performance Right is based on the Milestone Date of the Performance Rights as this is when the vesting condition is expected to be satisfied. 19. REMUNERATION OF AUDITORS Amounts received or due and receivable by Ernst & Young Australia for: - an audit or review of the financial reports of the Company and any other entity in the Consolidated Group - preparation of income tax return Amounts received or due and receivable by related practices of Ernst & Young for: - an audit or review of the financial reports of the Company - other services in relation to the Company Other auditors for: - an audit or review of the financial reports Total Auditors Remuneration 20. SEGMENT INFORMATION 2020 $ 2019 $ 40,500 7,000 33,000 7,000 38,310 80,751 10,334 176,895 49,366 45,764 7,187 142,317 The Consolidated Entity operates in one operating segment and one geographical segment, being uranium exploration in Spain. This is the basis on which internal reports are provided to the Directors for assessing performance and determining the allocation of resources within the Consolidated Entity. The corporate and administrative functions based in Australia are considered incidental to Consolidated Entity’s uranium exploration activities in Spain. The Groups revenues are all earned in Australia. (a) Reconciliation of Non-Current Assets by geographical location United Kingdom Spain 2020 $000 288 21,477 21,765 2019 $000 83 21,589 21,672 ANNUAL REPORT 2020 49 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 21. EARNINGS PER SHARE The following reflects the income data used in the calculations of basic and diluted earnings per share: Net profit/(loss) used in calculating basic and diluted earnings per share (a) Weighted Average Number of Shares 2020 $000 (42,889) 2019 $000 34,431 The following reflects the share data used in the calculations of basic and diluted earnings per share: Number of Shares 2020 ‘000 Number of Shares 2019 ‘000 Weighted average number of ordinary shares 258,549 258,408 Weighted average number of ordinary shares to be issued upon conversion of convertible note Effect of dilutive securities(1) Weighted average number of ordinary shares and potential ordinary shares used in calculating basic and diluted earnings per share 186,815 - 100,880 - 445,364 359,288 Notes: (1) At 30 June 2020, 7,400,000 Incentive Options, 200,000 Performance Rights and 50,443,000 OIA Options (which represent 58,043,000 potential ordinary shares) were considered not dilutive as they would decrease the loss per share. (b) Conversions, Calls, Subscriptions or Issues after 30 June 2020 There have been no conversions to, calls of, or subscriptions for ordinary shares, since the reporting date and before the completion of this financial report. 50 BERKELEY ENERGIA LIMITED 22. STATEMENT OF CASH FLOWS (a) Reconciliation of Net Loss Before Income Tax Expense to Net Cash Flows from Operating Activities Net profit/(loss) before income tax expense Adjustment for income and expense items Depreciation & amortisation Share-based payments expense Other non-cash expenses/(gain) Foreign exchange movement Changes in operating assets and liabilities (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables (Increase)/decrease in other financial assets Net cash outflow from operating activities (b) Reconciliation of Cash and Cash Equivalents Cash at bank and on hand Bank short term deposits 2020 $000 (42,889) 313 62 40,827 (4,726) 78 (794) (72) (7,201) 91,717 50 91,767 2019 $000 34,431 245 (1,918) (38,120) (3,800) 188 1,040 - (7,934) 6,955 89,632 96,587 (c) Credit Standby Arrangements with Banks At balance date, the Company had no used or unused financing facilities (2019: None). (d) Non-cash Financing and Investment Activities 30 June 2020 An amount of $109,000 was recognised as a share-based payment for the issue of shares to a consultant as part of their consulting fee. Please refer to Note 18(a) for further disclosure. 30 June 2019 An amount of $80,000 and $50,000 was recognised as a share-based payment for the issue of shares to employees in Spain as part of a Spanish employee share award program and a consultant as part of their annual fee respectively. Please refer to Note 18(a) for further disclosure. ANNUAL REPORT 2020 51 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 23. FINANCIAL INSTRUMENTS (a) Overview The Group's principal financial instruments comprise receivables, payables, security deposits, other financial liabilities, cash and short-term deposits. The main risks arising from the Group's financial instruments are interest rate risk, equity price risk, foreign currency risk, credit risk and liquidity risk. This note presents information about the Group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Other than as disclosed, there have been no significant changes since the previous financial year to the exposure or management of these risks. The Group manages its exposure to key financial risks in accordance with the Group's financial risk management policy. Key risks are monitored and reviewed as circumstances change (e.g. acquisition of a new project) and policies are revised as required. The overall objective of the Group's financial risk management policy is to support the delivery of the Group's financial targets whilst protecting future financial security. Given the nature and size of the business and uncertainty as to the timing and amount of cash inflows and outflows, the Group does not enter into derivative transactions to mitigate the financial risks. In addition, the Group's policy is that no trading in financial instruments shall be undertaken for the purposes of making speculative gains. As the Group's operations change, the Directors will review this policy periodically going forward. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board reviews and agrees policies for managing the Group's financial risks as summarised below. (b) 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. This risk arises principally from cash and cash equivalents and trade and other receivables. There are no significant concentrations of credit risk within the Group. The carrying amount of the Group's financial assets represents the maximum credit risk exposure, as represented below: Current Assets Cash and cash equivalents Trade and other receivables Non-current Assets Other financial assets 2020 $000 91,767 1,436 93,203 617 617 2019 $000 96,587 1,661 98,248 540 540 93,820 98,788 The Group does not have any significant customers and accordingly does not have any significant exposure to ECLs. Trade and other receivables are expected to be collected in full and the Group has no history of ECLs. As at 30 June 2020, other receivables comprise GST/VAT receivable, accrued interest and other miscellaneous receivables. Where possible the Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to ECLs is not significant. The Group’s receivables balance consists of GST/VAT refunds from recognised government entities with minimal credit risk. While and interest receivables and cash and cash equivalents are due and/or held with reputable financial institutions that are rated the equivalent of investment grade and above. 52 BERKELEY ENERGIA LIMITED (c) Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board's approach to managing liquidity is to ensure, as far as possible, that the Group will always have sufficient liquidity to meet its liabilities when due. At 30 June 2020 and 2019, the Group has sufficient liquid assets to meet its financial obligations. The contractual maturities for cash settled financial liabilities, including estimated interest payments, are provided below. There are no netting arrangements in respect of financial liabilities. ≤ 6 months $000 6 - 12 months $000 1 - 5 years $000 ≥ 5 years $000 Total $000 2020 Financial Liabilities Trade and other payables Lease liability 2019 Financial Liabilities Trade and other payables (d) Interest Rate Risk 1,158 283 1,441 1,952 1,952 - - - - - - - - - - - - - - - 1,158 283 1,441 1,952 1,952 The Group's exposure to the risk of changes in market interest rates relates primarily to cash and cash equivalents with a floating interest rate. These financial assets with variable rates expose the Group to cash flow interest rate risk. All other financial assets and liabilities, in the form of receivables, security deposits and payables are non-interest bearing. At balance date, the variable interest rate exposure of the Group's was: Interest-bearing Financial Instruments Cash at bank and on hand Bank short term deposits 2020 $000 91,717 50 91,767 2019 $000 6,955 89,632 96,587 The Group's cash at bank and on hand and short term deposits had a weighted average variable interest rate at year end of 0.01% (2019: 2.26%). The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk. Interest rate sensitivity A sensitivity of one per cent has been selected as this is considered reasonable given the current level of both short term and long term interest rates. A 1% movement in interest rates at the reporting date would have increased (decreased) profit and loss by the amounts shown below based on the average amount of interest bearing financial instruments held. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2019. ANNUAL REPORT 2020 53 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 23. FINANCIAL INSTRUMENTS (Continued) (d) Interest Rate Risk (Continued) Interest rate sensitivity (Continued) Profit or Loss Other Comprehensive Income 1% Increase $000 1% Decrease $000 1% Increase $000 1% Decrease $000 2020 Group Cash and cash equivalents 917 (917) 2019 Group Cash and cash equivalents 966 (966) - - - - (e) Foreign Currency Risk The Group also has transactional currency exposures. Such exposure arises from transactions denominated in currencies other than the functional currency of the entity. The Group currently does not engage in any hedging or derivative transactions to manage foreign currency risk. The Group is also exposed to foreign currency risk on the Euro, Sterling and US Dollar cash and cash equivalents that it holds. Sensitivity analysis for currency risk A sensitivity of 10 per cent has been selected as this is considered reasonable given historic and potential future changes in foreign currency rates. This has been applied to the net financial instruments of Berkeley Minera Espana, S.L.U and Berkeley Exploration Espana, S.L.U. and to the Euro and Sterling cash and cash equivalents that the Group holds. This sensitivity analysis is prepared as at balance date. A 10% strengthening/weakening of the Australian dollar against the Euro at 30 June 2020 would have increased/(decreased) the net financial assets of the Spanish controlled entities by A$88,000/(A$88,000) (2019: A$28,000/(A$28,000)). There would be no impact on profit or loss arising from these changes in the currency risk variables as all changes in value are taken to a reserve. A 10% strengthening/weakening of the Australian dollar against the Euro at 30 June 2020 would have increased/(decreased) the cash and cash equivalents and profit or loss of the Group by A$2,400/(A$2,400) (2019: A$1,100/(A$1,100)). A 10% strengthening/weakening of the Australian dollar against the Sterling at 30 June 2020 would have increased/(decreased) the cash and cash equivalents and profit or loss of the Group by A$18,000/(A$18,000) (2019: A$309,000/(A$309,000)). A 10% strengthening/weakening of the Australian dollar against the US Dollar at 30 June 2020 would have increased/(decreased) the cash and cash equivalents and profit or loss of the Group by A$9,052,000/(A$9,052,000) (2019: A$9,271,000/(A$9,271,000)). The above analysis assumes that all other variables, in particular interest rates, remain constant. The analysis for 2019 has been performed on the same basis. (f) Commodity Price Risk The Group is exposed to uranium commodity price risk. These commodity prices can be volatile and are influenced by factors beyond the Group's control. As the Group is currently engaged in exploration and business development activities, no sales of commodities are forecast for the next 12 months, and accordingly, no hedging or derivative transactions have been used to manage commodity price risk. 54 BERKELEY ENERGIA LIMITED (g) Capital Management The Group defines its Capital as total equity of the Group, being $36,211,000 as at 30 June 2020 (2019: $79,648,000). The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while financing the development of its project through primarily equity-based financing. The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Given the stage of development of the Group, the Board's objective is to minimise debt and to raise funds as required through the issue of new shares. There were no changes in the Group's approach to capital management during the year. The Group is not subject to externally imposed capital requirements. (h) Fair Value The net fair value of financial assets and financial liabilities approximates their carrying value. The methods for estimating fair value are outlined in the relevant notes to the financial statements. Please refer to Note 11 for further disclosure. (i) Equity Price Risk The Group is exposed to equity securities price risk. This arises from the convertible note and OIA Options held by the Group and classified in the Statement of Financial Position as financial liabilities through profit and loss, refer to Note 11. Equity price sensitivity A sensitivity of 10% has been selected as this is considered reasonable given the recent trading of the Company’s shares. The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. This analysis assumes that all other variables remain constant. Profit or loss Other Comprehensive Income 10% increase $000 10% decrease $000 20% increase $000 20% decrease $000 (7,533) (422) 7,533 364 (3,597) (457) 3,597 457 - - - - - - - - 2020 Group Convertible note OIA Options 2019 Group Convertible note OIA Options 24. CONTINGENT LIABILITIES Other than the production fee arrangement with ENUSA disclosed in Note 7, the Group had no contingent liabilities at 30 June 2020 (2019: Nil). ANNUAL REPORT 2020 55 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (Continued) 25. COMMITMENTS During the financial year, management has identified the following material commitments for the Group: Payable within 1 year $000 Payable after 1 year and less than 5 years $000 2020 Operating Commitments 2019 Operating Commitments 285 459 235 368 Total $000 520 827 Operating commitments include costs (excluding lease costs) for the provision of serviced offices and short term minimum operational supply agreements. The disclosed amounts are based on the current terms of agreements and based on current levels of operating activities. Agreements entered into by the Group generally provide early termination clauses for the cancellation of agreements allowing the Group to modify the ongoing level of expenditure to an amount significantly less than the disclosed commitments above. 26. SUBSEQUENT EVENTS (i) (ii) On 24 July 2020, the Company announced that the Board of the NSC had issued a favourable report for the extension of the validity of the NSC I for the uranium concentrate plant as a radioactive facility at the Salamanca project; On 11 August 2020, the Company announced that the UL had been granted by the Municipality of Retortillo under the terms established in the Urbanism Law and Urban Planning Regulations of Castilla y León for the Salamanca project; and (iii) On 25 August 2020, pursuant to the terms of the OIA convertible note, the Company elected to extend the mine commissioning date to 30 November 2021. Under the terms of the convertible note, if mine commissioning has not occurred by 30 November 2020, then the convertible note will automatically convert into shares at the lower of £0.50 per share or the last trading price of the Company's shares on LSE at the relevant time, subject the floor price of £0.27 per share. Other than as outlined above, as at the date of this report there are no matters or circumstances, which have arisen since 30 June 2020 that have significantly affected or may significantly affect: • • • the results of those operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity; or the state of affairs, in financial years subsequent to 30 June 2020, of the Consolidated Entity. the operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity; 56 BERKELEY ENERGIA LIMITED DIRECTORS’ DECLARATION ANNUAL REPORT 2020 57 In accordance with a resolution of the Directors of Berkeley Energia Limited, I state that: (1) In the opinion of the Directors: (a) the financial statements, notes and the additional disclosures included in the directors' report designated as audited of the Consolidated Entity are in accordance with the Corporations Act 2001 including: (i) giving a true and fair view of the Consolidated Entity's financial position as at 30 June 2020 and of its performance for the year ended on that date; and (ii) complying with accounting standards and the Corporations Act 2001; (iii) complying with International Financial Reporting Standards; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (2) To the best of the Directors’ knowledge, the Directors’ report includes a fair review of the development and performance of the business and the financial position of the Group, together with a description of the principal risks and uncertainties that the Group faces. (3) This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020. On behalf of the Board. ROBERT BEHETS Director 25 September 2020 AUDITOR'S INDEPENDENCE DECLARATION AuditorsIndependenceDec Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s independence declaration to the directors of Berkeley Energia Limited As lead auditor for the audit of the financial report of Berkeley Energia Limited for the financial year ended 30 June 2020, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Berkeley Energia Limited and the entities it controlled during the financial year. Ernst & Young Pierre Dreyer Partner 25 September 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PD:JG:BKY:006 58 BERKELEY ENERGIA LIMITED INDEPENDENT AUDITOR’S REPORT INDEPENDENTAUDITOR’SREPORT Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor's report to the members of Berkeley Energia Limited Opinion We have audited the financial report of Berkeley Energia Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) b) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its consolidated financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation PD:JG:BKY:008 ANNUAL REPORT 2020 59 INDEPENDENT AUDITOR’S REPORT (Continued) We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Convertible note arrangement Why significant How our audit addressed the key audit matter The Group issued a convertible note and options in the 2018 financial year which has been classified as a financial liability through profit and loss. The details of the convertible note and options, including the assumptions adopted in its valuation, are disclosed in Note 12. The accounting treatment for convertible notes and options are complex and require the exercise of judgement in determining the classification of the host contract as debt or equity and in valuing the financial liability. Due to the magnitude of this financial liability, the complexity of the accounting treatment and the related estimation uncertainty, this was considered a key audit matter. We evaluated the Group’s accounting treatment of the convertible note. In obtaining sufficient audit evidence, we: ► Reviewed management’s assessment of the applicable accounting treatment for the convertible note and options ► Inspected the terms of the convertible note and options, including the terms of conversion ► Assessed the methodologies, inputs and assumptions used by the Group in determining the fair value of the financial liability. In doing so we involved our own valuation specialists ► Considered the adequacy of the Group’s disclosures in respect of the convertible note and options, including the fair value measurement of the financial liability. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 60 BERKELEY ENERGIA LIMITED 2. Carrying value of capitalised exploration and evaluation assets and property, plant and equipment Why significant How our audit addressed the key audit matter As disclosed in Note 7, as at 30 June 2020, the Group held exploration and evaluation assets of $8.3 million. In addition, as disclosed in note 8, the Group held $12.8 million in property, plant and equipment. The property, plant and equipment balance includes land and buildings and other fixed assets acquired in relation to the Salamanca Project, and are an integral part of the exploration and evaluation activities. The carrying value of exploration and evaluation assets and property, plant and equipment are assessed for impairment by the Group when facts and circumstances indicate that the assets may exceed their recoverable amount. The determination as to whether there are any impairment indicators to require exploration and evaluation assets to be assessed for impairment involves a number of judgements including whether the Group has tenure, intends to perform ongoing exploration and evaluation activity and whether there is sufficient information for a decision to be made that the area of interest is not commercially viable. During the year, the Group determined that there had been no indicators of impairment. The determination as to whether there are any indicators to require property, plant and equipment to be assessed for impairment involves judgement in considering whether external or internal sources of information suggest that an asset may be impaired. During the year, the Group determined that there had been no indicators of impairment. Due to the magnitude of these balances and the related recoverability uncertainty, this was considered a key audit matter. In performing our procedures, we: ► Considered the Group’s right to explore in the relevant exploration area, which included obtaining and assessing supporting documentation such as license agreements and correspondence with relevant government agencies ► Considered the Group’s intention to carry out further exploration and evaluation activity in the relevant exploration area, which included an assessment of the Group’s cash flow forecast models, discussions with senior management and directors regarding the intentions and strategy of the Group ► Assessed recent exploration and evaluation activity in the relevant license area to determine if there are any negative indicators that would suggest a potential impairment of the asset ► Considered whether the exploration activities within each area of interest had reached a stage where the commercially viable resource estimates could be made ► Compared the Group’s market capitalisation relative to its net assets ► Considered the nature of the property, plant and equipment and whether there were any potential indicators of impairment, and ► Assessed the adequacy of the disclosure included in the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ANNUAL REPORT 2020 61 INDEPENDENT AUDITOR’S REPORT (Continued) Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 62 BERKELEY ENERGIA LIMITED ► ► ► ► ► ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ANNUAL REPORT 2020 63 INDEPENDENT AUDITOR’S REPORT (Continued) Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 19 of the directors' report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Berkeley Energia Limited for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Pierre Dreyer Partner Perth 25 September 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 64 BERKELEY ENERGIA LIMITED CORPORATE GOVERNANCE Berkeley Energia Limited and the entities it controls believe corporate governance is important for the Company in conducting its business activities. The Board of Berkeley has adopted a suite of charters and key corporate governance documents which articulate the policies and procedures followed by the Company. These documents are available in the Corporate Governance section of the Company’s website, www.berkeleyenergia.com. These documents are reviewed annually to address any changes in governance practices and the law. The Company’s Corporate Governance Statement 2020, which explains how Berkeley complies with the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations – 3rd Edition’ in relation to the year ended 30 June 2020, is available in the Corporate Governance section of the Company’s website, www.berkeleyenergia.com and will be lodged with ASX together with an Appendix 4G at the same time that this Annual Report is lodged with ASX. In addition to the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations – 3rd Edition’ the Board has taken into account a number of important factors in determining its corporate governance policies and procedures, including the: • • • • Board’s experience in the relevant sector; • relatively simple operations of the Company, which is focused on developing a single uranium property; cost verses benefit of additional corporate governance requirements or processes; size of the Board; organisational reporting structure and limited number of reporting functions, operational divisions and employees; relatively simple financial affairs with limited complexity and quantum; relatively moderate market capitalisation and economic value of the entity; and direct shareholder feedback. • • • ANNUAL REPORT 2020 65 MINERAL RESOURCES AND ORE RESERVES STATEMENT 1. MINERAL RESOURCES Berkeley’s Mineral Resource Statement as at 30 June 2020 and 30 June 2019 is grouped by deposit, all of which form part of the Salamanca mine in Spain as follows: Resource Tonnes U3O8 U3O8 Tonnes U3O8 U3O8 2020 2019 Deposit Name Retortillo Zona 7 Las Carbas Cristina Caridad Villares Villares North Category Measured Indicated Inferred Total Measured Indicated Inferred Total Inferred Inferred Inferred Inferred Inferred Total Retortillo Satellites Inferred Alameda Villar Alameda Nth Zone 2 Alameda Nth Zone 19 Alameda Nth Zone 21 Indicated Inferred Total Inferred Inferred Inferred Inferred Total Alameda Satellites Inferred Gambuta Salamanca mine Inferred Measured Indicated Inferred Total (Mt) 4.1 11.3 0.2 15.6 5.2 10.5 6.0 21.7 0.6 0.8 0.4 0.7 0.3 2.8 20.0 0.7 20.7 5.0 1.2 1.1 1.8 9.1 12.7 9.3 41.8 31.5 82.6 (ppm) (Mlbs) (Mt) (ppm) (Mlbs) 498 395 368 422 674 761 364 631 443 460 382 672 388 492 455 657 462 446 472 492 531 472 394 597 516 425 490 4.5 9.8 0.2 14.5 7.8 17.6 4.8 30.2 0.6 0.8 0.4 1.1 0.2 3.0 20.1 1.0 21.1 4.9 1.3 1.2 2.1 9.5 4.1 11.3 0.2 15.6 5.2 10.5 6.0 21.7 0.6 0.8 0.4 0.7 0.3 2.8 20.0 0.7 20.7 5.0 1.2 1.1 1.8 9.1 11.1 12.7 12.3 47.5 29.5 89.3 9.3 41.8 31.5 82.6 498 395 368 422 674 761 364 631 443 460 382 672 388 492 455 657 462 446 472 492 531 472 394 597 516 425 490 4.5 9.8 0.2 14.5 7.8 17.6 4.8 30.2 0.6 0.8 0.4 1.1 0.2 3.0 20.1 1.0 21.1 4.9 1.3 1.2 2.1 9.5 11.1 12.3 47.5 29.5 89.3 (*) All figures are rounded to reflect appropriate levels of confidence. Apparent differences occur due to rounding. The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves As a result of the annual review of the Company’s Mineral Resources, there has been no change to the Mineral Resources reported for the Salamanca mine. 66 BERKELEY ENERGIA LIMITED 2. ORE RESERVES The Company’s Ore Reserves as at 30 June 2020 and 30 June 2019, reported in accordance with the 2012 Edition of the JORC Code, for the Salamanca mine are as follows: Deposit Name Retortillo Zona 7 Alameda Total 2020 2019 Reserve Category Tonnes (Mt) U3O8 (ppm) U3O8 (Mlbs) Tonnes (Mt) U3O8 (ppm) U3O8 (Mlbs) Proved Probable Total Proved Probable Total Proved Probable Total Proved Probable Total (*) 4.0 11.9 15.9 6.5 11.9 18.4 0.0 26.4 26.4 10.5 50.3 60.7 397 329 325 542 624 595 0.0 327 327 487 391 408 3.5 7.9 11.4 7.8 16.4 24.2 0.0 19.0 19.0 11.3 43.4 54.6 4.0 11.9 15.9 6.5 11.9 18.4 0.0 26.4 26.4 10.5 50.3 60.7 397 329 325 542 624 595 0.0 327 327 487 391 408 3.5 7.9 11.4 7.8 16.4 24.2 0.0 19.0 19.0 11.3 43.4 54.6 As a result of the annual review of the Company’s Ore Reserves, there has been no change to the Ore Reserves reported for the Salamanca mine. 3. GOVERNANCE OF MINERAL RESOURCES AND ORE RESERVES The Company engages external consultants and Competent Persons (as determined pursuant to the JORC Code (2004 and 2012 editions)) to prepare and estimate the Mineral Resources and Ore Reserves. Management and the Board review these estimates and underlying assumptions for reasonableness and accuracy. The results of the Mineral Resource and Ore Reserve estimates are then reported in accordance with the requirements of the JORC Code and other applicable rules (including ASX Listing Rules). Where material changes occur during the year to the project, including the project’s size, title, exploration results or other technical information, previous Mineral Resource and Ore Reserve estimates and market disclosures are reviewed for completeness. The Company generally reviews its Mineral Resources and Ore Reserves as at 30 June each year. Where a material change has occurred in the assumptions or data used in previously reported Mineral Resources or Ore Reserves, then where possible a revised Mineral Resource or Ore Reserve estimate will be prepared as part of the annual review process. However, there are circumstance where this may not be possible (e.g. an ongoing drilling programme), in which case a revised Mineral Resource or Ore Reserve estimate will be prepared and reported as soon as practicable. ANNUAL REPORT 2020 67 MINERAL RESOURCES AND ORE RESERVES STATEMENT (Continued) 4. COMPETENT PERSONS STATEMENT The information in this report that relates to Ore Reserve Estimates for the Salamanca mine, is based on, and fairly represents, information compiled or reviewed by Mr Francisco Bellon, a Competent Person who is a member of the Australasian Institute of Mining and Metallurgy. Mr Bellon is the Chief Operating Officer for Berkeley and a holder of shares, options and performance rights in Berkeley. Mr Bellon has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Bellon consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. The information in this report that relates to the Mineral Resources for the Salamanca mine (which includes Retortillo, Zona 7, the Retortillo Satellites, Alameda, Alameda Satellites and the Gambuta deposits) is based on, and fairly represents, information compiled or reviewed by Mr Enrique Martínez, a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Martínez is Berkeley’s Geology Manager and a holder of shares and performance rights in Berkeley. Mr Martínez has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Martínez consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Forward Looking Statements This announcement may include forward-looking statements. These forward-looking statements are based on Berkeley’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Berkley, which could cause actual results to differ materially from such statements. Berkeley makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement. 68 BERKELEY ENERGIA LIMITED ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 31 August 2020. 1. TWENTY LARGEST HOLDERS OF LISTED SECURITIES The names of the twenty largest holders of each class of listed securities are listed below: Ordinary Shares Name BNP Paribas Nominees Pty Ltd Computershare Clearing Pty Ltd Argonaut Securities (Nominees) Pty Ltd Arredo Pty Ltd J P Morgan Nominees Australia Pty Limited Mr Robert Arthur Behets + Mrs Kristina Jane Behets HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited Josselin Pty Ltd Zero Nominees Pty Ltd Mr Francisco De Paula Bellon Del Rosal Mr Gerardo Javier Colilla Peletero Mrs Margaret Jadwiga Ellis Mr William Frederick Pitt + Mr Benjamin Archer Pitt Bnp Paribas Nominees Pty Ltd Mr Jay Hughes + Mrs Linda Hughes Yangtze Investment Pty Ltd Argonaut Securities (Nominees) Pty Ltd Redrie Pty Ltd Mejulie Pty Ltd Total Top 20 Others Total Ordinary Shares on Issue No of Ordinary Shares Held 170,407,130 27,090,872 16,328,757 9,300,000 6,952,876 2,000,000 1,455,385 1,447,564 1,000,000 1,000,000 750,000 750,000 625,000 606,000 583,651 525,000 508,305 500,000 400,000 375,000 242,605,540 15,999,880 258,605,420 Percentage of Issued Shares 65.89 10.48 6.31 3.60 2.69 0.77 0.56 0.56 0.39 0.39 0.29 0.29 0.24 0.23 0.23 0.20 0.20 0.19 0.15 0.15 93.81 6.19 100.00 ANNUAL REPORT 2020 69 ASX ADDITIONAL INFORMATION (Continued) 2. DISTRIBUTION OF EQUITY SECURITIES An analysis of numbers of holders of listed securities by size of holding as at 31 August 2020 is listed below: Distribution Number of Shareholders Number of Shares Ordinary Shares 1 1,001 5,001 10,001 100,001 – – – – – 1,000 5,000 10,000 100,000 and over Totals 348 365 166 255 51 1,185 92,906 1,005,551 1,324,295 8,162,253 248,020,415 258,605,420 There were 265 holders of less than a marketable parcel of ordinary shares. 3. SUBSTANTIAL SHAREHOLDERS Substantial Shareholder notices have been received from the following at 31 August 2020: Substantial Shareholder Anglo Pacific Group PLC 4. UNQUOTED SECURITIES Number of Shares 17,607,159 The names of the security holders holding 20% or more of an unlisted class of security at 31 August 2020, other than those securities issued or acquired under an employee incentive scheme, are listed below: Holder £0.60 OIA Options Expiring 30-Nov-22 £0.75 OIA Options Expiring 30-May-23 £1.00 OIA Options Expiring 30-Nov-23 £0.27 - £0.50 Convertible Note Expiring 30-Nov-2021 Singapore Mining Acquisition Co Pte Ltd 10,088,625 15,132,937 25,221,562 186,814,815 Others (holding less than 20%) - - - - Total Total holders 5. VOTING RIGHTS 10,088,625 15,132,937 25,221,562 186,814,815 1 1 1 1 See Note 13 of the Notes to the Financial Statements. 6. ON-MARKET BUY BACK There is currently no on-market buy back program for any of Berkeley's listed securities. 70 BERKELEY ENERGIA LIMITED 7. EXPLORATION INTERESTS As at 31 August 2020, the Company has an interest in the following tenements: Location Spain Salamanca Cáceres Badajoz Tenement Name Percentage Interest Status D.S.R Salamanca 28 (Alameda) D.S.R Salamanca 29 (Villar) E.C. Retortillo-Santidad E.C. Lucero I.P. Abedules I.P. Abetos I.P. Alcornoques I.P. Alisos I.P. Bardal I.P. Barquilla I.P. Berzosa I.P. Campillo I.P. Castaños 2 I.P. Ciervo I.P. Dehesa I.P. El Águlia I.P. El Vaqueril I.P. Espinera I.P. Horcajada I.P. Lis (partial) I.P. Mailleras I.P. Mimbre I.P. Pedreras E.P. Herradura I.P. Conchas I.P. Almendro I.P. Ibor I.P. Olmos I.P. Don Benito Este I.P. Don Benito Oeste 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Application 100% 100% 100% 100% 100% Granted Granted Granted Pending Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Pending Granted Granted Granted Granted Granted ANNUAL REPORT 2020 71 BERKELEY ENERGIA 2020 ANNUAL REPORT2020ANNUAL REPORT /INFORME ANUALBerkeley Energia LimitedLSE / ASX / BME : BKY ABN: 40 052 468 569MADRID HEAD OFFICECALLE CAPITÃ¡N HAYA 1PLANTA 15. EDIFICIO EUROCENTRO., 28020 MADRID, ESPAÑAPROJECT OFFICEBERKELEY MINERA ESPAÑA, CARRETERA SA - 322, KM 30 37495 RETORTILLOSALAMANCA, ESPAÑATELEPHONE +34 923 193 903 REGISTERED OFFICE28 THE ESPLANADEPERTH WA 6000TELEPHONE +61 8 9322 6322 WWW.BERKELEYENERGIA.COMINFO@BERKELEYENERGIA.COM

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