Bowen Coking Coal Ltd
Annual Report 2018

Plain-text annual report

(FORMERLY CABRAL RESOURCES LIMITED) ABN 72 064 874 620 And its Controlled Entities Annual Financial Report 30 June 2018 CONTENTS PAGE Corporate Directory .................................................................................................................. 3 Directors’ Report ...................................................................................................................... 4 Auditor’s Independence Declaration .......................................................................................... 20 Statement of Profit or Loss and Other Comprehensive Income ..................................................... 21 Statement of Financial Position ................................................................................................ 22 Statement of Changes in Equity ............................................................................................... 23 Statement of Cash Flows ......................................................................................................... 24 Notes to the Financial Statements ............................................................................................ 25 Directors’ Declaration ............................................................................................................. 49 Independent Auditors’ Report .................................................................................................. 50 Corporate Information ............................................................................................................ 53 Page 2 CORPORATE DIRECTORY Directors: Ariel (Eddie) King (Non-Executive Chairman) Gerhard Redelinghuys (Managing Director) Steven Formica (Non-Executive Director) James Agenbag (Non-Executive Director) Company Secretary: Mr Stephen Brockhurst Registered Office and Principal place of Business: Share Register: Auditors: Level 19 1 Eagle Street BRISBANE QLD 4000 Telephone: +61 7 3360 0837 Facsimile: +61 7 3360 0222 Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Postal Address Locked Bag A14 Sydney South NSW 1235 RSM Australia Partners Level 6 340 Adelaide Street Brisbane QLD 4000 Securities Exchange Listing: Bowen Coking Coal Limited Australian Securities Exchange Limited (Code: “BCB”) Company Numbers: ACN: 064 874 620 ABN: 72 064 874 620 Page 3 DIRECTORS' REPORT Your Directors present their report on the Bowen Coking Coal Consolidated Entity, consisting of Bowen Coking Coal Limited (Formerly Cabral Resources Limited, “BCB” or "the Company") and the entities it controlled at the end of, or during, the year ended 30 June 2018. DIRECTORS The names of the Directors of the Company at any time during or since the end of the year are:      Ariel (Eddie) King Non-Executive Chairman Gerhard Redelinghuys Managing Director (appointed 27 September 2017) James Agenbag Non-Executive Director (appointed 27 September 2017) Gregory D’Arcy Former Non-Executive Director (resigned 27 September 2017) Steven Formica Non-Executive Director PRINCIPAL ACTIVITIES The principal activities of the Bowen Coking Coal Consolidated Entity consisted of the acquisition, exploration and development of coal projects with a primary focus on Metallurgical coal. RESULTS The loss after tax for the year ended 30 June 2018 was $1,327,448 (30 June 2017: $648,291). REVIEW OF OPERATIONS On 28 September 2017 the Company successfully completed a Public Offer pursuant to the Prospectus lodged on 3 August 2017 to raise $4.6 million through the issue of 200,434,782 fully paid ordinary shares in the Company at an issue price of 2.3 cents per share. The acquisitions of Coking Coal One Pty Ltd (formerly named Bowen Coking Coal Pty Ltd) from Cape Coal Pty Ltd and the Comet Ridge Project (EPC 1230 and MLA 700005) from Acacia Coal Ltd (ASX: AJC) occurred on 28 September 2017. The Company issued 70,000,000 fully paid ordinary shares to Cape Coal Pty Ltd, and issued Acacia Coal Ltd 17,391,304 fully paid ordinary shares and paid to it the sum of $350,000, in respect of these acquisitions. Completion of the acquisition of the Cooroorah Project (MDL 453) and the Hillalong Project (EPC 1824) from Area Coal Pty Ltd, a subsidiary of Australian Pacific Coal Ltd (ASX:AQC), occurred on 2 October 2017. The Company issued 54,347,826 fully paid ordinary shares to Area Coal Pty Ltd in respect of these acquisitions. Cooroorah (MDL453, 100%) During the year, the Company’s main focus has been its 100% owned Cooroorah Project, located between Coronado Coal’s Curragh mine and the Anglo, Marubeni and Sojitz owned Jellinbah mine in the Bowen Basin, Central Queensland. Page 4 Following on from its ongoing exploration at the project, BCB announced in April 2018 an increase of 23% in the Cooroorah Resource estimate, now estimated at 154Mt (68Mt Indicated and 86Mt Inferred, see Table 1 below). The estimate also includes a Maiden Resource of 37Mt in the Mammoth seam, and a new shallow open pit target area in the Burngrove Measures on the Eastern side of the Jellinbah fault. Final rehabilitation of the drill sites and tracks were completed during the June quarter. BCB is currently working closely with Xenith Consulting and Xtract Consulting to plan follow-up drilling at Cooroorah to target an increase in the Mammoth seam Resource. The Company hopes that this follow up drilling will provide an increase in confidence level to such an extent that it could support the commencement of a Pre-feasibility study at Cooroorah. Table 2. Cooroorah Resource estimate (April 2018). Seam CASTOR MAMMOTH POLLUX PISCES TOTAL Indicated (Mt) 15 Inferred (Mt) 5 14 17 23 69 23 29 28 85 Total (Mt) 20 37 46 51 154 In June 2018, BCB announced the outcome of the maiden coal quality analysis for its intersection of the Mammoth coal seam which appears to have different characteristics to the two lower seams. Encouraging raw coal quality prompted the Company to engage M Resources, a well-known coal trader and consultancy which specialises in metallurgical coal supply to steel mills to analyse the coal for coking coal properties, as hard coking coal trades at a premium price to PCI in the market. The outcome of this analysis proved that the Mammoth seam hosts an array of highly desirable coal qualities. The primary coking coal fraction varies between 40% and 45%, with a secondary PCI product yielding between 45% and 50%. The total laboratory yield is estimated in excess of 90%, making it one of the highest yielding metallurgical coals in the Bowen Basin. Coking coal is used to make coke which in turn is used in blast furnaces to make steel. Coke manufacturers blend various types of coal with different coal qualities which impact the coal’s behaviour and contribution in the coke-making process. Outstanding qualities such as low ash, low sulphur, low phosphorus and high fluidity allows the addition of lower quality coking coals to the coke blend, thus attracting a premium on the standard price. Initial analysis suggests that the Cooroorah coking product could attract a premium for its very low ash and high CSN but would be penalised for low fluidity to ultimately end up close to the pricing benchmark for a hard coking coal 64 CSR product. Page 5 Table 3. Cooroorah coking coal compared to traded coking coal qualities(M Resources). The Company engaged John T Boyd Mining Consultants to update the Cooroorah Scoping Study with the latest resource estimate and coal quality results. The outcome of the study is expected in late August 2018. Planning for the Cooroorah follow-up exploration is underway through Xenith Consulting, and land owner engagement and cultural heritage clearance for the envisaged drill sites are in progress. Mt Hillalong and Hillalong East (100%) The Mt Hillalong Project (PC 1824) is located in the northern Bowen Basin approximately 105 km west- southwest of Mackay. The tenement is approximately 48km2 and is located to the west of the Mount Hillalong Anticline, approximately 16 km northwest of Rio Tinto’s Hail Creek Mine. Mt Hillalong contains the Rangal coal measures and Moranbah coal measures with initial focus on the Elphinstone and Hynds seams (Leichardt and Vermont equivalents) within the Rangal measures which are currently being mined at proximate mines. The seams sub-crop in the tenement and steeply dip to the west at the limb of the Hillalong anticline. As such and following shareholder approval being obtained in May 2018, BCB completed the acquisition of the Hillalong East Project from Rio Tinto Exploration Pty Ltd (“RTX”) (comprising EPCs 1860 and 2141) located adjacent to the east of the Company’s Mt Hillalong Project (See Figure 1 below, light blue areas). Tenement transfers have received indicative ministerial approval and are in the process of finalisation. Under the terms of the Agreement, the Company made a $100,000 cash payment to RTX, issued 30,000,000 ordinary fully paid shares to Cape Coal Pty Ltd, and reimbursed Cape Coal for direct legal expenses incurred in relation to the Hillalong East Project of $45,439. The Shares issued to Cape Coal are subject to an ASX-imposed 12 month escrow period from the date of issue. Page 6 Previous exploration by RTX has determined that the same coal seams from the Moranbah and Rangal Coal Measures are found at shallower depths on the Hillalong East tenement, ranging from as shallow as 24 metres to more than 370 metres at thicknesses between 2 and 5.5 metres. Exploration by RTX has also intersected seams from the Moranbah Measures from 28 metres, which will be investigated further as a secondary target. Following the acquisition, BCB engaged Xstract Mining Consultants to consolidate all the historic and Rio Tinto Exploration data into a geological model and to recommend an exploration plan to advance the Hillalong East Project. Xstract estimated an exploration target of between 61Mt and 409Mt of high quality coking coal and low volatile PCI in both Open Pit and Underground exploration targets for the Rangal and Moranbah measures. However as there has been insufficient exploration to estimate a Mineral Resource, the quantity and grade of an exploration target is conceptual in nature and it is uncertain if further exploration will result in the estimation of a Mineral Resource. Table 4. Summary of seam intersections in the Rangal Coal Measures by the RTX exploration program. Hole Tenement Seam FROM TO intersection Thickness (m) HILL005 EPC2141 Elphinstone 21.50 25.25 Hynds 102.76 107.36 HILL008 EPC2141 Elphinstone 24.73 Hynds 86.27 28.70 89.40 HILL002 EPC 1824 Elphinstone 319.28 323.85 HILL003 EPC1824 Elphinstone 157.35 163.05 Hynds Hynds 172.43 182.03 174.90 185.70 3.75 4.60 3.97 3.13 4.57 5.70 2.47 3.67 The Company is working with its consultants to analyse the most cost-efficient way to advance the Hillalong exploration program, which will soon commence with site approvals for the drilling program and land owner engagement. The initial program will focus on testing the areas around the shallow intersections of the Elphinstone seam for potential open pit extraction. Isaac River Project During December the Company entered into an agreement with Aquila Resources to acquire the Isaac River Project for a cash consideration of $200,000. The Isaac River Project consists of Mineral Development Licence 444 (“MDL 444”) and Exploration Permit for Coal 830 (“EPC 830”). BMA’s (BHP Mitsubishi Alliance) Daunia Mine is located to the immediate west, and Peabody’s Moorvale West resource is located to the immediate north of the Isaac River Project (Figure 2). The Isaac River Project is prospective for coal from the Leichardt seam, the main target seam in the Rangal Coal Measures which is extensively mined by numerous operating mines. The target seam was intersected in several drill holes on MDL 444 between 35m and 142m deep with seam thicknesses varying between 2m and 5.5m. The Vermont seam was also encountered in several drill holes, but is not considered a priority target at this stage due to lower quality. However, in the future it may open up some blending optionality to proximate mines and projects. Page 7 Indicative coal quality and washability analysis have been conducted on hole (E830041C) only by A&B Mylec Pty Ltd, which indicated the potential for an 8.9% ash semi-soft coking coal product with a secondary thermal coal product (6900kcal air dried) at a combined total simulated yield of 87%. Further quality tests, blending options and washability analysis are planned for 2018. A section of EPC 830 is overlain by BMA’s Mining Lease 1781 for the Daunia Mine in the south (which section is excluded from EPC 830). ML 70115, Daunia East also directly abuts MDL 444, as can be seen in Figures 2. Daunia targets the same seams from the Rangal Coal Measures (Leichhardt and Vermont) and extracts the seams via open cut mining. Drill holes and seismic lines close to the western boundary with Daunia have demonstrated the continuation of those seams into Isaac River. The Board views the Isaac River Project as having potential development synergies with regional mines which could trigger a fast-tracked development path. Discussions have commenced with potential partners to investigate development options. Figure 1. Hillalong Project Page 8 Figure 2. Isaac River Project Page 9 Lilyvale 15% JV with Stanmore Coal Ltd (ASX:SMR) Exploration planning is well under way and expected drilling has been postponed to 2019. Lilyvale is located directly adjacent to the Kestrel Mine recently acquired by EMR Capital and Adaro Energy from Rio Tinto. Previous exploration delineated a 33Mt Inferred Resource in the German Creek seam of the Moranbah Measures which demonstrated very good coking properties at very high yields comparable to Kestrel’s product. Divestment of Comet Ridge (100%) The Company spent a significant amount of time to review study work by the previous owners and to investigate the best development option for Comet Ridge. Following an approach by Springsure Creek Coal Pty Ltd (“SCC”) who holds the neighbouring tenements and rail infrastructure concluded that the development by SCC will be the best suited strategy for Comet Ridge whist still keeping exposure to the project. The Company announced in May 2018 it had entered into a binding Term Sheet with Springsure Creek Coal Pty Ltd (SCC) to sell the Comet Ridge Project (EPC1230 & MLA700005) in exchange for a $100,000 cash payment and a royalty stream of 1.25% of FOR (Free on Rail) revenue from the first 2.8Mt coal produced from Comet Ridge. SCC holds an option to buy the royalty from BCB for $3m, and BCB has an option to buy all the coal produced from Comet Ridge for trading and blending purposes. In the event that SCC does not reach this milestone and no royalty has been paid by the end of that 4- year period, and SCC has not exercised the Royalty Buy-Out, BCB can elect (at its sole discretion) to buy back the Comet Ridge Project for an amount equal to the capitalised exploration costs, with SCC also granting BCB a right to access its rail infrastructure for the purposes of loading up to 350,000 tpa of coal. The Terms Sheet is subject to certain conditions precedent and BCB will apply to the Land Court to be replaced by SCC as applicant in the court proceedings related to entering into Compensation and Conduct Agreements with landowners in respect of the Comet Ridge Project. Metallurgical Coal Markets The Board believes that Metallurgical coal is a scarce commodity with strong market fundamentals demonstrated by the fact that coal is now foreseen to become Australia’s largest export earner, even exceeding export revenue from iron ore. Trade tension between the US and China as well as logistical constraints by key suppliers created some volatility in the markets. Overall the market for metallurgical coal remained strong during the year on the back of high levels of steel production, especially from China who accounts for around 49% of global steel production. Demand is expected to remain strong for the commodity in the medium to long term based on strong growth in Asia, mainly from India. Australian supply is expected to grow from 183Mtpa in 2017/2018 to 200Mtpa in 2019/20. The high demand for metallurgical coal supported the FOB price for premium hard coking coal just below US$200 per tonne most of the year. Analysts forecast an easing of the price in the medium to long term, although recent transaction pricing for Queensland coking coal mines and tenements implied longer term prices as high as US$170 per tonne. EARNINGS PER SHARE Basic and diluted earnings per share from continuing operations (0.34) Basic and diluted earnings per share (0.34) 2018 (cents) 2017 (cents) (0.51) (0.51) Page 10 DIVIDENDS The Directors do not recommend the payment of a dividend at this time and no dividend has been paid or declared during the financial year. EVENTS SUBSEQUENT TO BALANCE DATE On 21 September 2018 the Company announced firm commitments for a capital raising to sophisticated and professional investors for a total of 74,875,000 fully paid ordinary shares at an issue price of $0.016 per share to raise approximately $1.2m before costs. Settlement of this placement is expected to take place on 27 September 2018 with the shares expected to be issued on 28 September 2018. There were no other known significant events from the end of the financial year to the date of this report. DIRECTORS’ INTERESTS Information on Directors Particulars of Directors’ interests at the date of this report Ordinary shares Performa nce Shares Options 5,000,000 Nil 15,000,000 Director / experience Eddie King - Non-Executive Chairman BComm, BEng (Mining - Hons) Mr. King is a qualified mining engineer and holds a Bachelor of Commerce and Bachelor of Engineering from The University of Western Australia. Mr. King is currently a representative for CPS Capital. Mr. King’s past experience includes being manager for an investment banking firm, where he specialised in the technical and financial requirements of bulk commodity and other resource projects. Mr. King was born in the Philippines where he has an extensive network. Other current directorships Lindian Resources Limited, European Cobalt Ltd, Drake Resources Limited and Axxis Technology Group Ltd Former directorships in last 3 years None Length of Service: 3 years 2 months Steve Formica – Non-Executive Director 8,970,807 Nil Nil Mr Formica is a successful businessman with over 30 years' experience. He has been involved in multiple business ventures either as a founding shareholder, operational Managing Director or as a Non-Executive Director. Steve is currently a director of both FPG Projects and Viridian Property Group, both successful property developers. Other current directorships Lindian Resources Limited and High Grade Metals Limited (formerly Quest Minerals Limited) Former directorships in last 3 years Enerji Limited Length of Service: 2 years 10 months Page 11 Director / experience Particulars of Directors’ interests at the date of this report Ordinary shares Performa nce Shares Options Gregory D’Arcy - Former Non-Executive Director1 500,0002 Nil 3,000,0003 BComm, GradDipAppGeol From 2008 to July 2016, Mr D’Arcy was the Managing Director of Report Card Pty Ltd which owns and operates the Australian stock market forum known as HotCopper. Mr D’Arcy was responsible for expanding the business, budgeting, making critical decisions, setting timelines and managing staff. Prior to this role he worked in commercial real estate in both Perth and Melbourne. Other current directorships None Former directorships in last 3 years None Length of Service: 2 years 5 months Gerhard Redelinghuys – Managing Director4 101,325,0005 26,000,0006 Nil B. Comm. Acc, Hons, B. Compt, GAICD. Mr Redelinghuys is the Managing Director of Cape Coal and has 24 years’ experience in financial and project development within the mining sector. After studying finance at the University of Pretoria in South Africa, Gerhard joined Price Waterhouse Coopers, before commencing his employment with EXXARO Resources Ltd (former ISCOR and KUMBA Resources) in 1995. Since 1995 he has held various senior management positions in both open cut and underground mining operations in South Africa. He has held directorships in Australia, including the position of Managing Director of Exxaro Australia Pty Ltd. In addition to his business analysis experience, Gerhard has extensive experience in mining project acquisitions and deal making on an international level. Gerhard was the owner’s representative on a multi-billion underground coal project in Queensland. In 2013, Gerhard became a graduate member of the Australian Institute of Company Directors. Other current directorships None Former directorships in last 3 years None Length of Service: 9 months 1 Resigned 27 September 2017. 2 According to final directors interest notice (Appendix 3Z) announced 29 September 2017. 3 According to final directors interest notice (Appendix 3Z) announced 29 September 2017. 4 Appointed 27 September 2017. 5 Gerhard Redelinghuys and James Agenbag have beneficial interests in and are directors of Cape Coal Pty Ltd. Cape Coal Pty Ltd holds 100,000,000 ordinary shares, 13,000,000 Class A performance shares and 13,000,000 Class B performance shares. 6 Gerhard Redelinghuys and James Agenbag have beneficial interests in and are directors of Cape Coal Pty Ltd. Cape Coal Pty Ltd holds 100,000,000 ordinary shares, 13,000,000 Class A performance shares and 13,000,000 Class B performance shares. Page 12 Director / experience Particulars of Directors’ interests at the date of this report Ordinary shares Performa nce Shares Options James Agenbag – Non-Executive Director7 100,000,0008 26,000,0009 Nil B. Eng, Chemical Engineering. Mr Agenbag has 14 years’ experience in the mining industry covering all phases of business and project development, process design, including the commissioning and optimisation of processing facilities across multiple commodities. After completing his Chemical Engineering degree at the University of Stellenbosch in 2003, James worked as a process design engineer at EPCM companies including GRD Minproc Limited and DRA Global. In 2008, James moved to Australia to help build DRA’s Brisbane office. His responsibilities included research and development of new business and client management in Southern Africa, Australia and Indonesia. James also has substantial experience in beneficiation optimisation with emphasis on various technologies including some technologies where he jointly holds patent rights. James has delivered technical papers within his area of expertise within the chemical engineering area. More recently, he has been responsible for the process engineering discipline across Peabody Energy Australia PCI Pty Ltd coal projects. James has been accredited with ECSA as a Professional Engineer. He is a Member of IEAust (Chem), and is an active Member of the South African and Australian Coal Processing Societies. Other current directorships None Former directorships in last 3 years None Length of Service: 9 months COMPANY SECRETARY Mr. Brockhurst has over fifteen years of experience in the finance and corporate advisory industry and has been responsible for the due diligence process and preparation of prospectuses on a number of initial public offers. His experience includes corporate and capital structuring, corporate advisory, and company secretarial services, capital raising, ASX and ASIC compliance requirements. Mr. Brockhurst has served on various boards and is acting as a company secretary for numerous ASX listed and unlisted companies. 7 Appointed 27 September 2017. 8 Gerhard Redelinghuys and James Agenbag have beneficial interests in and are directors of Cape Coal Pty Ltd. Cape Coal Pty Ltd holds 100,000,000 ordinary shares, 13,000,000 Class A performance shares and 13,000,000 Class B performance shares. 9 Gerhard Redelinghuys and James Agenbag have beneficial interests in and are directors of Cape Coal Pty Ltd. Cape Coal Pty Ltd holds 100,000,000 ordinary shares, 13,000,000 Class A performance shares and 13,000,000 Class B performance shares. Page 13 Meetings of Directors The number of meetings held during the year and the number of meetings attended by each Director whilst in office are as follows: Directors’ meetings Audit Committee Meetings Remuneration Committee Meetings No. held while in office No. attended No. held while in office No. attended No. held while in office No. attended Eddie King Gerhard Redelinghuys 3 2 3 2 James Agenbag 2 2 2 2 - Gregory D’Arcy Steve Formica 1 3 1 3 - - - - - - - - - - - - - - - - - - - - - - - It is noted that the Directors were able to attend to business of the Company during the year by circulated resolution and telephone meetings as permitted by the Company’s Constitution in place of conducting meetings. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Other than those disclosed in this annual report no significant changes in the state of affairs of the Company occurred during the financial year. REMUNERATION REPORT – AUDITED The Remuneration Report, which has been audited, outlines the key management personnel remuneration arrangements for BCB in accordance with the requirements of the Corporations Act and its Regulations. The remuneration report is set out under the following main headings:       Key management personnel disclosed in this report Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share based compensation Additional disclosures relating to key management personnel Page 14 Key management personnel disclosed in this report Non-executive and executive directors:      Eddie King: Non-Executive Chairman Gerhard Redelinghuys: Managing Director10 James Agenbag: Non-Executive Director11 Gregory D’Arcy: Non-Executive Director12 Steve Formica: Non-Executive Director Principles used to determine the nature and amount of remuneration The Board determines the remuneration of Executive and Non-Executive Directors from time to time. Executive remuneration and other terms of employment are reviewed annually having regard to performance, relevant comparative information and independent expert advice. Remuneration packages are set at levels that are intended to attract and retain Executives capable of managing the Consolidated Entity’s business activities and operations. Currently, no element of any Director’s remuneration is dependent on the satisfaction of a performance condition. Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-Executive Directors’ fees and payments are reviewed annually by the Board. The Board has also drawn on external sources of information to ensure Non-Executive Directors’ fees and payments are appropriate and in-line with the market for comparable companies for time, commitment and responsibilities. Fees for Non-Executive Directors are not linked to the performance of BCB. Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is currently set by the Constitution of the Company at $300,000. This maximum can be changed by Company shareholders in general meeting. All Directors receive a superannuation guarantee contribution required by the government, which was 9.5% for the year ended 30 June 2018, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation or elect to receive their Directors’ fees by way of consultancy fees for which no superannuation guarantee contribution applies. Remuneration paid to all Directors is valued at the cost to the Company and expensed. The value of any unlisted options granted to Directors is brought to account over the vesting period of the options. Independent advice on the appropriateness of remuneration packages is obtained should the Board of Directors consider it necessary. Remuneration packages are based on fixed remuneration, performance based remuneration and equity based remuneration in the year ended 30 June 2018. In relation to any element of the remuneration of key management personnel or executives which consists of securities, the Board has no policy in relation to those persons limiting their exposure to risk in relation to the securities. No other element of remuneration for key management personnel or executives was dependent on a performance condition as the Board determined that these elements were fair and appropriate remuneration. 10 Appointed 27 September 2017 11 Appointed 27 September 2017 12 Resigned 27 September 2017 Page 15 Details of Remuneration Details of the remuneration of the Directors, other key management personnel of the Consolidated Entity and specified executives of the Consolidated Entity for the years ended 30 June 2018 and 30 June 2017 respectively are set out on the following tables: 30 June 2018 Salary, fees & entitle- ments $ Entitle- ments $ Super- annuation and other entitlements $ Other transactions $ Eddie King 48,822 - - Gerhard Redelinghuys 164,764 3,333 15,653 - - Total $ 48,822 183,750 James Agenbag Gregory D’Arcy Steve Formica 27,000 6,000 44,565 - - - - - - 8,00013 35,000 - 6,000 30,00014 74,565 291,151 3,333 15,653 38,000 348,137 30 June 2017 Super- annuation and other entitlements $ Entitle- ments $ Termination benefits $ - - - - - - - - - - - - Salary, fees & entitle- ments $ 60,000 57,000 24,000 141,000 Total $ 60,000 57,000 24,000 141,000 Eddie King Steve Formica Gregory D’Arcy Service Agreements The Company has entered into an executive services agreement with Redhouse Consulting Pty Ltd, for Gerhard Redelinghuys’s services on the following material terms: Position: Managing Director and CEO.   Commencement Date: 11 October 2017.   Notice period: The Company must give 3 months’ notice to terminate the agreement other than Term: Initial period of 12 months. for cause. The executive must give 3 months’ notice to terminate the agreement.  Salary: $220,000 per annum (plus superannuation), base salary.  Other industry standard provisions for senior executive of a public listed company are included in the agreement. 13 Relates to consultancy provided on an arm’s length basis at commercial rates. 14 Relates to consultancy provided on an arm’s length basis at commercial rates. Page 16 Share based compensation No options over ordinary shares in the Company were provided as remuneration to Directors and other key management personnel of the Consolidated Entity and specified executives of the Company and Consolidated Entity in this or the previous reporting period. No ordinary shares in the Company were provided as a result of an exercise of remuneration options to Directors and other key management personnel of the Consolidated Entity in this or the previous reporting period. Additional disclosures relating to key management personnel The movement during the reporting period in the number of ordinary shares of the Company held directly, indirectly or beneficially, by each Director or key management personnel, including their personally-related entities is as follows: Shares Director Eddie King Gerhard Redelinghuys James Agenbag Held at 30 June 2017 2,000,000 - - Gregory D’Arcy 500,000 Steve Formica - Received during the year on the exercise of options - - - - - Note: Shares held on a post consolidated basis Other changes Held at Resignation Held at 30 June 2018 3,000,00015 N/A 5,000,000 101,325,00016 N/A 101,325,000 100,000,00017 N/A 100,000,000 - 500,000 500,000 8,970,80718 N/A 8,970,807 15 On-market purchases. 16 Includes on-market purchases and issue to Cape Coal of consideration of purchase rights in respect of Hillalong East project. 17 Issue to Cape Coal of consideration of purchase rights in respect of Hillalong East project. 18 On-market purchases. Page 17 Options & Performance Shares Director Eddie King Gerhard Redelinghuys* James Agenbag* Gregory D’Arcy Steve Formica Held at 30 June 2017 15,000,000 - - - - End of Remuneration Report SHARE OPTIONS Received on grant of options Other changes Held at Resignation Held at 30 June 2018 - - - - - - N/A 15,000,000 26,000,00019 26,000,00020 1,780,000 - N/A 26,000,000 N/A 26,000,000 N/A N/A 1,780,000 - At the date of this report, the unissued ordinary shares of the Company under option are as follows: Date of Expiry Exercise Price Number under Option 30 October 2019 $0.04 30 October 2019 $0.02 50,000,000 30,000,000 During the year ended 30 June 2018, no ordinary shares were issued on the exercise of options. No shares have been issued as a result of the exercise of options since year end. ENVIRONMENTAL REGULATION BCB is not aware of any breaches in relation to environmental matters. LIKELY DEVELOPMENTS AND ANNOUNCEMENTS The Directors have excluded from this report any further information on the likely developments in the operations of the Company and the expected results of those operations in future financial years, as the Directors believe that it would be speculative and prejudicial to the interests of the Company. INDEMNIFICATION AND INSURANCE OF OFFICERS During the year, the Company paid premiums in respect of a contact insuring all the directors and officers of the Company against liabilities, past present and future. In accordance with normal commercial practice, the disclosure of the total amount of premiums under and the nature of the liabilities covered by the insurance contract is prohibited by a confidentiality clause in the contract. 19 Held at appointment. Represents the Class A and Class B Performance Shares issued to Cape Coal Pty Ltd. 20 Held at appointment. Represents the Class A and Class B Performance Shares issued to Cape Coal Pty Ltd. *Performance Shares Page 18 CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of Corporate Governance. Refer to the Company’s Corporate Governance Statement at www.bowencokingcoal.com.au. NON AUDIT SERVICES The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: - - all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. During the year ended, 30 June 2018 no fees were paid to Nexia Sydney Partnership (former auditor) nor RSM Australia Partners for non-audit services. (2017:Nil) AUDITOR INDEPENDENCE Section 307C of the Corporations Act 2001 requires our auditors, RSM Australia Partners to provide the Directors of the Company with an Independence Declaration in relation to the audit of the Financial Report. The Directors received the Independence Declaration set out on page 20 for the year ended 30 June 2018. Signed in accordance with a resolution of the Directors. Dated: 27 September 2018 Eddie King Non-Executive Chairman Page 19 RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7888 F +61 (0) 7 3221 7666 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Bowen Coking Coal Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Brisbane, Queensland Dated: 27 September 2018 Albert Loots Partner THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2018 Other income Administration expenses Employee benefits expense Impairment of loans Loss before income tax Income tax benefit Consolidated Note 2018 $ 2017 $ 2 3 4 31,106 13,487 (1,203,367) (433,040) (155,187) (141,000) - (87,738) (1,327,448) (648,291) - - Loss attributable to owners of the Company (1,327,448) (648,291) Other comprehensive income, net of tax - - Total comprehensive loss attributable to members of the Company (1,327,448) (648,291) Basic and diluted loss per share 5 (0.34) ¢ (0.51) ¢ The accompanying notes form part of these financial statements. Page 21 STATEMENT OF FINANCIAL POSITION as at 30 June 2018 Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-Current assets Exploration expenditure Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Borrowings Total current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves Accumulated losses TOTAL EQUITY Consolidated Note 2018 $ 2017 $ 6 7 8 1,461,445 66,234 12,098 1,539,777 9 5,932,212 5,932,212 325,153 31,731 234,882 591,766 - - 7,471,989 591,766 10 11 242,672 61,928 4,013 246,685 246,685 - 61,928 61,928 7,225,304 529,838 12 13 49,830,181 42,064,761 258,294 800 (42,863,171) (41,535,723) 7,225,304 529,838 The accompanying notes form part of these financial statements. Page 22 STATEMENT OF CHANGES IN EQUITY for the financial year ended 30 June 2018 Consolidated Contributed equity $ Note Reserves $ Accumulated losses $ Total equity $ Balance as at 1 July 2016 42,084,401 800 (40,887,432) 1,197,769 Total comprehensive loss for the year - - (648,291) (648,291) Transactions with owners in their capacity as owners Issue of ordinary shares (net) 12 (19,640) - - (19,640) Balance as at 30 June 2017 42,064,761 800 (41,535,723) 529,838 Balance as at 1 July 2017 42,064,761 800 (41,535,723) 529,838 Total comprehensive loss for the year - - (1,327,448) (1,327,448) Transactions with owners in their capacity as owners Issue of ordinary shares (net) Share based payments 12 9 7,765,420 - - 257,494 - - 7,765,420 257,494 Balance as at 30 June 2018 49,830,181 258,294 (42,863,171) 7,225,304 The accompanying notes form part of these financial statements. Page 23 STATEMENT OF CASH FLOWS for the financial year ended 30 June 2018 Consolidated Note 2018 $ 2017 $ Cash flows from operating activities Payments to suppliers, employees and creditors (inclusive of GST) (1,379,136) (657,911) Payments for exploration expenses (1,173,623) - Interest received 26,560 18,166 Net cash outflows from operating activities 21 (2,526,199) (639,745) Cash flows from investing activities Payments for exploration assets (350,000) (160,000) Net cash outflows from investing activities (350,000) (160,000) Cash flows from financing activities Loans to unrelated entities (19,922) (87,738) Proceeds from issue of shares and options Payments for capital raising costs 12 12 4,610,000 - (580,323) (75,349) Net cash outflows from investing activities 4,009,755 (163,087) Net increase / (decrease) in cash held 1,133,556 (962,832) Cash and cash equivalents at 1 July Coking Coal One cash acquired 325,153 1,287,985 2,736 - Cash at 30 June 6 1,461,445 325,153 The accompanying notes form part of these financial statements. Page 24 NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principals accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Bowen Coking Coal Limited is a company domiciled in Australia. The financial statements are for the Consolidated Entity consisting of Bowen Coking Coal Limited and its subsidiaries. The Consolidated Entity is a for-profit entity and is primarily involved in mineral exploration. a. Basis of Preparation These general purpose financial statements have been prepared in accordance with the Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. The financial report has been prepared on an accrual basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The presentation currency is Australian dollars. i. Compliance with IFRS The consolidated financial statements of Bowen Coking Coal Limited also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). ii. Going Concern This report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. The Consolidated Entity incurred a net loss for the year ended 30 June 2018 of $1,327,448 and incurred net cash outflows from operating activities of $2,526,199. At 30 June 2018, cash and cash equivalents was $1,461,445. In considering the above, the Directors have reviewed the Consolidated Entity’s financial position and are of the opinion that the use of the going concern basis of accounting is appropriate. The financial report does not contain any adjustments relating to the recoverability and classification of recorded assets or to the amounts or classification of recorded assets or liabilities that might be necessary should the Consolidated Entity not be able to continue as a going concern. Page 25 b. Principals of Consolidation- Subsidiaries The consolidated financial statements comprise the financial statements of Bowen Coking Coal Limited and its subsidiaries at 30 June each year (“the Consolidated Entity”). Subsidiaries are entities over which the Consolidated Entity has the power to govern the financial and operational policies generally accompanying a shareholding of more than one half of the voting rights. Potential voting rights that are currently exercisable or convertible are considered when assessing control. Consolidated financial statements include all subsidiaries from the date that control commences until the date that control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. Unrealised losses are also eliminated unless costs cannot be recovered. Minority interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income and statement of financial position respectively. Subsidiaries are accounted for in the parent entity at cost. c. Foreign Currency Translation i. Functional and Presentation Currency Items included in the financial statements of each of the Consolidated Entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Bowen Coking Coal Limited’s functional and presentation currency. ii. Transactions and Balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss and other comprehensive income within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss and other comprehensive income on a net basis within the other income and other expenses. Non-monetary items that are measured at their fair value in a foreign currency are translated using exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. iii. Consolidated Entity The results and financial positions of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.  Page 26   Income and expenses for each income statement and statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). All resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. d. Revenue Recognition Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. The following specific recognition criteria must also be met before revenue is recognised:  Interest revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial asset.  Revenue from dividends is recognised when the Consolidated Entity’s right to receive payment is established. e. Income Taxes The income tax expense for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets are recognised for all differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Bowen Coking Coal Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Page 27 f. Impairment of Assets At each reporting date the Consolidated Entity assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, the recoverable amount is determined and impairment losses are recognised in the statement of profit or loss and other comprehensive income where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing 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 assets. Where it is not possible to estimate the recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs. g. Cash and Cash Equivalents For presentation purposes of the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. h. Trade Receivables Trade receivables are recognised at fair value as the amounts receivable are due for settlement no more than 30 days from the date of recognition. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is raised where there is some doubt over collection. i. Investments in Other Financial Assets The Consolidated Entity classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date. i. Financial Assets at Fair Value through Profit or Loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a financial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date. Financial assets at fair value through profit or loss are carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value are included in the statement of profit or loss and other comprehensive income in the period in which they arise. The fair value of investments traded in active markets is determined by reference to quoted market bid prices at balance date. The fair value of investments not traded in an active market is determined using valuation techniques including reference to recent arm’s length transactions, net asset backing and current market value of another similar instrument. Page 28 ii. Loan and Receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Consolidated Entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than twelve months after balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. Receivables are stated at their cost less impairment losses. iii. Held-to-Maturity Investments Held-to-maturity investments are non derivative financial assets with fixed or determinable payments and fixed maturities that the Consolidated Entity’s management has the positive intention and ability to hold to maturity. iv. Available for Sale Financial Assets Available for sale financial assets, comprising principally marketable equity securities, are non derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within twelve months. Available-for-sale financial assets are carried at fair value. Unrealised gains and losses arising from changes in fair value are recognised in equity. When sold the accumulated fair value adjustments are included in the statement of profit or loss and other comprehensive income as gains and losses from investment securities. j. Intangible Assets i. Exploration and Evaluation Expenditure Expenditure on acquisition, exploration and evaluation relating to an area of interest is carried forward where rights to tenure of the area of interest are current and:   It is expected that expenditure will be recouped through successful development and exploitation of the area of interest or alternatively by its sale; and/or Exploration and evaluation activities are continuing in an area of interest but at balance date have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Where the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised “mine properties in development”. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment. If facts and circumstances suggest that the carrying amount of any recognised exploration and evaluation assets may be impaired, the entity must perform impairment tests on those assets in accordance with AASB 136 “Impairment of Assets’. Impairment of exploration and evaluation assets is to be assessed at a cash generating unit or group of cash generating units level provided this is no larger than an area of interest. Any impairment loss is to be recognised as an expense in accordance with AASB 136. Accumulated costs in relation to an abandoned area are written off to the statement of profit or loss and other comprehensive income in the period in which the decision to abandon the area is made. Page 29 k. Earnings per Share i. Basic Earnings per Share Basic earnings per share is determined by dividing the net result attributable to members of the Company by the weighted average number of ordinary shares outstanding during the financial year. ii. Diluted Earnings per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. l. Employee Benefits i. Short-Term Obligations Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Consolidated Entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. ii. Share Based Payment Benefits Share based compensation benefits are provided to Directors and employees via share or option plans in place from time to time. The fair value of options granted under the Plans is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The fair value of the options is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (e.g. profitability or transaction specific targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the statement of profit or loss and other comprehensive income with a corresponding adjustment to equity. m. Lease Payments Leases where the lessor retains substantially all the risks and rewards of ownership of the net asset are classified as operating leases. Payments under operating leases (net of incentives received from the lessor) are charges to the statement of profit or loss and other comprehensive income on a straight line basis over the period of the lease. Page 30 n. Trade and other Payables Trade and other payables represent liabilities for goods and services provided to the Consolidated Entity prior to year-end and which are unpaid. These amounts are unsecured and have 30 to 60 day payment terms. o. Goods and Services Tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. p. Contributed Equity Ordinary shares are classified as equity. Costs attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration. q. Fair Value Fair values may be used for financial asset and liability measurement as well as for sundry disclosures. Fair values for quoted financial instruments traded in active markets are based on quoted market prices at the date of the statement of financial position. The quoted market price for financial assets is the current bid price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. r. Non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, the must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down on the non-current assets and assets of disposal groups to fair value less cost of disposal. A gain is recognised for any subsequent increase in fair value less costs of disposal of non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Page 31 Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of the assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. s. Changes in accounting policies and disclosure In the year ended 30 June 2018, the Consolidated Entity has reviewed 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. It has been determined by the Consolidated Entity that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Consolidated Entity accounting policies. t. New Standards and Interpretations AASB 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The Consolidated Entity will adopt this standard from 1 July 2018. The Consolidated Entity has assessed the current impact on financial assets as nil due to the financial assets already being measured in accordance with the new standard at 30 June 2018. The Company has assessed the current impact on financial liabilities as nil due to the financial liabilities at 30 June 2018 (trade and other payables) not being affected by the Company’s own credit risk. As and when the Company acquires more financial assets and liabilities, it will account for them in accordance with AASB 9. Page 32 AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Consolidated Entity will adopt this standard from 1 July 2018. The Consolidated Entity has assessed the impact as nil due to there being no revenue from contracts with customers as the Consolidated Entity are mining exploration companies. u. New Standards and Interpretations not yet Adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Consolidated Entity for the annual reporting period ended 30 June 2018. The Consolidated Entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated Entity, are set out below. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). Page 33 In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The Consolidated Entity has assessed the impact as nil due to there currently being no leases. As and when the Consolidated Entity enters into lease agreements, it will account for them in accordance with AASB 16. v. Use of Estimates and Judgements The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. i. Exploration and evaluation costs Exploration and evaluation costs have been capitalised on the basis that the Consolidated Entity will commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resource. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest. Factors that could impact the future commercial production at the mine include the level of reserves and resources, future technology changes which could impact the cost of mining, future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. Page 34 Consolidated 2018 $ 2017 $ 31,106 31,106 13,487 13,487 Consolidated 2018 $ 2017 $ 275,037 422,242 28,566 180,417 154,035 59,226 83,844 376,959 5,200 9,880 - - 29,948 11,053 1,203,367 433,040 2. OTHER INCOME Interest 3. EXPENSES Administration Accounting, legal and compliance costs Consulting fees Insurance Management fees Marketing Other Travel costs Page 35 4. INCOME TAX BENEFIT 4.1 Income Tax Benefit Current tax Deferred tax Income tax benefit attributable to (loss) from continuing operations 4.2 Numerical Reconciliation of Income Tax Benefit to Prima Facie Tax Payable Consolidated 2018 $ 2017 $ - - - - - - (Loss) from ordinary activities before income tax expense (1,327,448) (648,291) Income tax benefit calculated at domestic rate of 27.5% (2017 – 27.5%) (365,048) (178,280) Tax effect of permanent differences: Non-deductible items Movement in unrecognised temporary differences deductible equity raising costs Income tax adjusted for permanent differences Tax effect of losses not recognised Income tax expense 4.3 Tax Losses 6,959 90,162 (30,152) (44,529) (67,722) 432,770 - (8,582) (96,700) 96,700 - - Unused revenue losses for which no deferred tax asset has been recognised 12,172,105 10,138,363 Unused capital losses for which no deferred tax asset has been recognised 3,682,968 3,682,968 15,855,073 13,821,331 The Company is of the opinion that tax and capital losses from prior periods will continue to be available to the Consolidated Entity. These losses have not been recognised as a deferred tax asset as there is uncertainty that future taxable profits will be available against which the losses can be utilised. The future income tax benefit will only be obtained if: a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; b) the conditions for deductibility imposed by tax legislation continue to be applied with; and c) no changes in tax legislation adversely affect the Company in realising the benefit. Page 36 5. LOSS PER SHARE Consolidated 2018 cents 2017 cents Basic and diluted loss per share (0.34) (0.51) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share 389,648,811 127,312,898 2018 No. 2017 No. Loss used in calculating basic and dilutive EPS (1,327,448) (648,291) 2018 $ 2017 $ 6. CASH AND CASH EQUIVALENTS Cash at bank and on hand Deposits at call Consolidated 2018 $ 2017 $ 411,445 1,050,000 1,461,445 217,700 107,453 325,153 Deposits at call are interest bearing. Deposits at call have a fixed interest rates of 1.50% and 2.05% respectively and maturity of 3 months. 7. TRADE AND OTHER RECEIVABLES Current Other receivables Consolidated 2018 $ 2017 $ 66,234 66,234 31,731 31,731 Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. Page 37 8. OTHER ASSETS Current Bowen Coking coal pre-acquisition and due diligence costs Other Prepaid expenses 9. EXPLORATION EXPENDITURE Non-Current Acquisition – Cape Coal Pty Ltd Deposit – Isaac River Project Exploration expenditure Consolidated 2018 $ 2017 $ - 584 11,514 12,098 4,131,531 50,000 1,750,681 5,932,212 165,638 69,244 234,882 - - - - On 28 September 2017, the Company completed the acquisition from Cape Coal Pty Ltd (Cape Coal) of all of the issued capital of Coking Coal One Pty Ltd (formerly Bowen Coking Coal Pty Ltd) (CCO). The Company has issued to Cape Coal 70,000,000 ordinary fully paid shares, 13,000,000 Class A Performance Shares and 13,000,000 Class B Performance Shares. On 28 September 2017, CCO completed the acquisition of MLA 700005 and EPC 1230 (Comet Ridge Project) from Acacia Coal Limited (ACN 009 092 068) (Acacia Coal). The Company issued 17,391,304 ordinary fully paid shares to Acacia Coal, and paid the sum of $350,000 in cash. On 28 September 2017, CCO completed the acquisition of the Cooroorah Project (MDL 453) and Hillalong Project (EPC1824) from Australian Pacific Coal Ltd. The Company issued 54,347,826 ordinary fully paid shares to Area Coal Pty Ltd, a subsidiary of Australian Pacific Coal Ltd. The acquisition of Coking Coal One Pty Ltd has been treated as an asset acquisition via the issue of equity under AASB 2 Share-based Payment (“AASB 2”). Consideration: Pre-acquisition costs transferred from other current assets 70,000,000 ordinary shares – Cape Coal Pty Ltd 13,000,000 class A performance shares – Cape Coal Pty Ltd 13,000,000 class B performance shares – Cape Coal Pty Ltd 17,391,304 ordinary shares and $350,000 cash component – Acacia Coal Limited 54,347,826 ordinary shares - Area Coal Pty Ltd Stamp duty on tenement acquisitions 165,637 1,610,000 89,700 167,794 750,000 1,250,000 98,400 4,131,531 - - - - - - - - Page 38 Identifiable assets acquired: Cash and cash equivalents Trade and other receivables Exploration expenditure Trade and other payables Consolidated 2018 $ 2017 $ 2,736 6,141 4,227,331 (104,677) 4,131,531 - - - - - On 28 September 2017, the Company issued 26,000,000 performance shares which will each convert to one ordinary share upon completion of the following milestones within 24 months: Class A: (i) (ii) Class B: (i) the Total JORC-Compliant Resource Base being increased, following Completion, by delineation of a further 30,000,000 tonnes mineral resources of at least inferred category, or at least 30,000,000 tonnes of the Company’s existing mineral resources being upgraded to at least the next higher category, in accordance with the JORC Code, in each case on the Initial BCC Projects only; and the Company’s Share price achieving a 30 day VWAP of at least 5 cents. the Total JORC-Compliant Resource Base being increased, following Completion, by delineation of a further 50,000,000 tonnes mineral resources of at least inferred category, or at least 50,000,000 tonnes of the Company’s existing mineral resources being upgraded to the next higher category, in accordance with the JORC Code, in each case on the Initial BCC Projects only. No consideration will be payable upon the vesting of the Performance Shares. Based on the above, the performance share valuations have been calculated as follows: Class No. of Shares Grant Date Lapse Date Fair Value Total Value A B 13,000,000 28/9/2017 28/9/2019 $0.0069 $89,700 13,000,000 28/9/2017 28/9/2019 $0.0129 $167,794 Fair value: this was determined with reference to the prevailing share price at the grant date. Probability: for each performance milestones described above, the Directors assessment of the probability of achievement and eventually vesting as at the date of acquisition. In determining the probability of the Consolidated Entity achieving each of the respective milestones for Class A and B performance shares, which would permit vesting of the performance shares, the Directors took into account that risk factors that were outlined in the prospectus dated 3 August 2017, at the date of acquisition. Page 39 10. TRADE AND OTHER PAYABLES Current Trade creditors and accruals 11. BORROWINGS Current Other Consolidated 2018 $ 2017 $ 242,672 242,672 61,928 61,928 4,013 4,013 - - 2018 No 2017 No 2018 $ 2017 $ 12. CONTRIBUTED EQUITY Ordinary shares 499,486,810 127,312,898 49,830,181 42,064,761 Movements in share capital Opening balance 1 July 127,312,898 127,312,898 42,064,761 42,084,401 Placement – 28 September 2017 200,434,782 Cape Coal acquisition – 28 September 2017 Acacia Coal acquisition – 28 September 2017 70,000,000 17,391,304 Area Coal acquisition – 2 October 2017 54,347,826 Cape Coal acquisition – 11 May 2018 30,000,000 Capital raising costs - - - - - - - 4,610,000 1,610,000 400,000 1,250,000 549,000 - - - - - (653,580) (19,640) Closing balance 30 June 499,486,810 127,312,898 49,830,181 42,064,761 Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or proxy, at a meeting of the Company. Page 40 Capital risk management The Consolidated Entity’s capital comprises share capital, reserves less accumulated losses amounted to equity of $7,225,304 at 30 June 2018 (2017: $529,838). The Consolidated Entity manages its capital to ensure its ability to continue as a going concern and to optimise returns to its shareholders. The Consolidated Entity was ungeared at year end and not subject to any externally imposed capital requirements. Share options At 30 June 2018, there were 50,000,000 listed options exercisable at $0.04 on or before 30 October 2019 (2017: 50,000,000) and 30,000,000 unlisted options exercisable at $0.02 on or before 30 October 2019 on issue (2017: 30,000,000). No options were issued, exercised or expired during the financial year. 13. RESERVES Share Option Reserve Balance at 1 July Options issued Balance at 30 June Share Based Payments Reserve Balance at 1 July Share based payments Balance at 30 June Total Reserves Nature and Purpose of Reserves i. Share Option Reserve Consolidated 2018 $ 2017 $ 800 - 800 - 257,494 800 258,294 800 - 800 - - - 800 The share option reserve is used to recognise the fair value of options issued but not exercised. Page 41 14. PARENT ENTITY INFORMATION Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves Retained earnings Loss for the year Other comprehensive income Total comprehensive income Consolidated 2018 $ 2017 $ 1,519,139 7,416,154 166,028 166,028 591,766 591,766 61,928 61,928 49,830,181 42,064,761 258,294 800 (42,838,349) (41,535,723) 7,250,126 529,838 (1,302,626) (648,291) - - (1,302,626) (648,291) 15. INVESTMENT IN SUBSIDIARIES Equity holding Name of subsidiary Country of incorporation Class of shares 2018 % 2017 % Northern Yeelirrie Pty Limited Australia Ordinary Cabral Brazil Pty Limited Australia Ordinary Cabral Metais Ltda Brazil Ordinary Coking Coal One Pty Ltd Australia Ordinary 100 -1 100 100 100 -1 100 - 1 Deregistered on 20 November 2016 Page 42 16. REMUNERATION OF AUDITORS Amounts received, or due and receivable by: The current auditor of the parent entity (RSM Australia Partners – Australian Firm) - for auditing and reviewing the financial reports of the entity or any entity in the Consolidated Entity The former auditor of the parent entity (Nexia Sydney Partnership – Australian Firm) - for auditing and reviewing the financial reports of the entity or any entity in the Consolidated Entity Consolidated 2018 $ 2017 $ 22,000 - - 22,000 32,236 32,236 17. CONTINGENT LIABILITIES There are no contingent liabilities of the Company as at 30 June 2018 (2017: Nil). 18. COMMITMENTS FOR EXPENDITURE Exploration commitments within 1 year Consolidated 2018 $ 2017 $ 258,252 258,252 - - 19. KEY MANAGEMENT PERSONNEL AND RELATED PARTY INFORMATION 19.1 Key Management Personnel Remuneration Short term employee benefits Consolidated 2018 $ 2017 $ 306,804 306,804 141,000 141,000 Details of Directors’ and key personnel remuneration are set out in the Remuneration Report in the Directors’ Report. 19.2 Other Transactions with Key Management Personnel There were no other transactions with key management personnel during the year (2017: nil). Page 43 20. SEGMENT INFORMATION a. Description of Segments Management has determined the operating segments based on the reports reviewed by those responsible for decision making which are used to make strategic decisions. The management team have identified one reportable segment based on geographical factors for the year ended 2018 being Australia (2017: two segments - one segment in Australia and one segment in Brazil). b. Segment Information Provided to those Responsible for Decision Making The segment information provided to those responsible for decision making for the reportable segments for the year ended 30 June 2018 are as follows: 2018 Total segment revenue Inter-segment revenue Revenue from external customers Adjusted EBITDA Depreciation and amortisation Impairment Share of loss from associates Total segment assets Total assets includes: Investment in associates Exploration and tenements Additions to non-current assets (other than financial assets and deferred tax) Australia AUD Total AUD - - - - - - (1,358,554) (1,358,554) - - - - - - 7,225,304 7,225,304 - - - - - - Total segment liabilities 246,685 246,685 Page 44 The segment information provided to those responsible for decision making for the reportable segments for the year ended 30 June 2017 are as follows: c. 2017 Total segment revenue Inter-segment revenue Revenue from external customers Adjusted EBITDA Depreciation and amortisation Impairment Share of loss from associates Total segment assets Total assets includes: Investment in associates Exploration and tenements Additions to non-current assets (other than financial assets and deferred tax) Total segment liabilities Other Segment Information i. Segment Revenue Australia AUD Total AUD - - - - - - (574,040) (574,040) - - (87,738) (87,738) - - 591,766 591,766 - - - - - - 61,928 61,928 Segment revenue reconciles to total revenue from continuing operations as follows: Total segment revenue Intersegment eliminations Interest revenue Gain on effectuation of DOCA 2018 $ 2017 $ - - - - 31,106 13,487 - - Total revenue from continuing operations (note 2) 31,106 13,487 ii. Adjusted EBITDA The measurement of adjusted EBITDA excludes the non-recurring expenditure from the operating segment such as restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. Furthermore the measure excludes the effects of equity-settled share-based payments and unrealised gains/(losses) on financial instruments. Interest income and expenditure are not allocated to segments, as this type of activity is driven by a central treasury function in managing the cash position of the Consolidated Entity. Page 45 A reconciliation of adjusted EBITDA to operating loss is provided as follows: Adjusted EBITDA Impairment Interest 2018 $ 2017 $ (1,358,554) (574,040) - (87,738) 31,106 13,487 Loss from continuing operations (1,327,448) (648,291) iii. Segment Assets The amounts provided to those responsible for decision making with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Reportable segments’ assets are reconciled to total assets as follows: Segment assets Intersegment eliminations 2018 $ 2017 $ 7,225,304 591,766 - - Total assets as per statement of financial position 7,225,304 591,766 iv. Segment Liabilities The amounts provided to those responsible for decision making with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. Reportable segments’ liabilities are reconciled to total liabilities as follows: Segment liabilities Intersegment eliminations 2018 $ 2017 $ 246,685 61,928 - - Total liabilities as per statement of financial position 246,685 61,928 Page 46 21. RECONCILIATION OF LOSS FROM CONTINUING OPERATIONS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Consolidated 2018 $ 2017 $ Loss from continuing and discontinued operations (1,327,448) (648,291) Impairment of loans Changes in Assets and Liabilities - 87,738 Decrease/(increase) in trade and other receivables Decrease/(increase) in other assets (34,503) 222,784 Decrease/(increase) in exploration expenditure (1,654,881) 22,446 - - Increase/(decrease) in trade and other creditors 267,849 (101,638) Net cash outflows from operating activities (2,526,199) (639,745) 22. EVENTS SUBSEQUENT TO BALANCE DATE On 21 September 2018 the Company announced firm commitments for a capital raising to sophisticated and professional investors for a total of 74,875,000 fully paid ordinary shares at an issue price of $0.016 per share to raise approximately $1.2m before costs. Settlement of this placement is expected to take place on 27 September 2018 with the shares expected to be issued on 28 September 2018. There were no other known significant events from the end of the financial year to the date of this report. 23. FINANCIAL INSTRUMENTS 23.1 Financial Risk Management The Consolidated Entity’s financial instruments consist of deposits with banks, trade receivable and payables, investments at fair value and loans to and from subsidiaries and associates. Derivative financial instruments are not currently used by the Consolidated Entity. Senior executives meet regularly to analyse and monitor the financial risk associated with the financial instruments used by the Consolidated Entity. The Managing Director and Chief Executive Officer reports regularly to the Board which appraises the adequacy of the risk management strategies and also creates policies for risk management. The Consolidated Entity’s activities expose it to market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. Market Risk a. Foreign Exchange Risk The Consolidated Entity has no material exposure to foreign currency risk at the end of the reporting period. Page 47 b. Interest Rate Risk The Consolidated Entity does not have any exposure to interest rate risk as there were no external borrowings at 30 June 2018 (2017: nil). Any borrowings were intercompany related and unsecured and interest free and therefore there is no exposure to interest rate risk associated with these amounts. Interest bearing assets are all short term liquid assets and the only interest rate risk is the effect on interest income by movements in the interest rate. There is no other material interest rate risk. c. Liquidity Risk The Consolidated Entity manages liquidity risk by maintaining cash reserves, placing funds on fixed term deposits with reputable financial institutions, having limited borrowings or debt and having, to the extent possible, the investments in instruments that are tradeable in highly liquid markets. All trade and other payables are expected to be paid within one year of balance date. The Consolidated Entity’s credit risk primarily arises from cash and deposits with Australian ADIs. The credit risk of financial assets of the Consolidated Entity which have been recognised on the statement of financial position, other than investments in shares, is generally the carrying amount, net of any provision for doubtful debts. There is no collateral or security held for those assets at balance date. There are no financial assets that are past due or impaired. 23.2 Net Fair Value of Financial Assets and Liabilities The carrying amount of the Consolidated Entity’s financial assets and financial liabilities in the financial statements approximates their fair values as at balance date. Page 48 DIRECTORS’ DECLARATION In the directors' opinion: 1. the financial statements and accompanying notes set out on pages 21 to 48 are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards and the Corporations Regulations 2001; and b. give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2018 and of its performance for the year ended on that date; 2. the financial statements and notes also comply with International Financial Reporting Standards (IFRS), as disclosed in Note 1(a)(i) to the financial statements; 3. there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable 4. the directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors by: Eddie King Non-Executive Chairman Perth, 27 September 2018 Page 49 RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 GPO Box 1108 Brisbane QLD 4001 T +61 (0) 7 3225 7888 F +61 (0) 7 3221 7666 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Bowen Coking Coal Limited Opinion We have audited the financial report of Bowen Coking Coal Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and 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: (i) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial performance for the year then ended; and (ii) 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 (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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. 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 judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report and in forming our opinion thereon, and we do not provide a separate opinion on these matters. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation Key Audit Matter Carrying Value of Capitalised Exploration Expenditure Refer to Note 9 in the financial statements The Group has capitalised exploration expenditure with a carrying value of $5.675m. We determined this to be a key audit matter due to the significant management judgment involved in assessing the carrying value in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, including:  Determination of whether expenditure can be associated with finding specific mineral resources, and the basis on which that expenditure is allocated to an area of interest;  Assessing whether any indicators of impairment  are present; and  Determination of whether exploration activities have progressed to the stage at which the existence of an economically recoverable mineral reserve may be determined. How our audit addressed this matter Our audit procedures in relation to the carrying value of capitalised exploration costs included:  Ensuring that the right to tenure of the areas of interest was current through confirmation with the relevant government departments;  Critically assessing and evaluating management’s assessment that no indicators of impairment existed;  Agreeing a sample of the additions to capitalised exploration expenditure during the year to supporting documentation, and ensuring that the amounts were capitalised correctly; and Through discussions with the Group’s Directors, and review of the Group’s ASX announcements and other relevant documentation, assessing management’s determination that exploration activities have not yet progressed to the point where the existence or otherwise of an economically recoverable mineral resource may be determined. Acquisition of Coking Coal One Pty Ltd (formerly named Bowen Coking Coal Pty Ltd) Refer to Note 9 in the financial statements During the year the Company completed the acquisition of Coking Coal One Pty Ltd (formerly named Bowen Coking Coal Pty Ltd) pursuant to the issue of 70,000,000 ordinary fully paid shares, 13,000,000 Class A Performance Shares and 13,000,000 Class B Performance Shares. Our audit procedures in relation to the Company’s accounting for the acquisition of Coking Coal One Pty Ltd included:  Reviewing the acquisition agreement to obtain an understanding of the transaction and the related accounting considerations; The Company determined the acquiree did not meet the definition of a business under AASB 3 Business Combinations as at the date of the transaction. We identified the acquisition of Coking Coal One Pty Ltd as a key audit matter as it is a significant transaction that occurred during the period and the judgement involved in determining whether the acquiree met the definition of a business under AASB 3 Business Combinations.  Critically evaluating management’s determination that Bowen Coking Coal Limited was the acquiring entity and that the acquired entity did not meet the definition of a business;  Evaluating the timing and appropriateness of the accounting treatment and the consideration of the acquisition based on the agreement; and  Assessing the compliance of the financial presentation and disclosures with the requirements of Australian Accounting Standards. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2018, but does not include the financial report and the 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. 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. Page 2 of 3 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 ability of the Group to continue as a going concern, disclosing, as applicable, matters related 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. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 18 of the directors' report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Bowen Coking Coal Limited, for the year ended 30 June 2018, 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. RSM AUSTRALIA PARTNERS Brisbane, Queensland Dated: 27 September 2018 Albert Loots Partner Page 3 of 3 CORPORATE INFORMATION The information contained below is as at 20 September 2018. NUMBER OF SHAREHOLDERS AND OPTION HOLDERS Shares As at 20 September 2018, there were 603 shareholders holding a total of 499,486,810 fully paid ordinary shares. Options As at 20 September 2018, there were 50,000,000 Quoted Options exercisable at $0.04 on or before 30 October 2019 held by 67 holders. As at 20 September 2018, there were 30,000,000 Unquoted Options exercisable at $0.02 on or before 30 October 2019 held by 55 holders. Performance Shares As at 20 September 2018, there are 13,000,000 Class A Performance Shares and 13,000,000 Class B Performance Shares held by 1 holder – Cape Coal Pty Ltd. Class A Performance Shares convert into Ordinary Shares on a 1:1 ratio upon the delineation of an increase in JORC-compliant inferred resources of at least 30 million tonnes coal on the Company’s projects, and a 30 day VWAP share price hurdle of 5 cents. Class B Performance Shares convert into Ordinary Shares on a 1:1 ratio upon the delineation of an increase in JORC-compliant inferred resources of at least 50 million tonnes coal on the Company’s projects. The Performance Shares have a term of 24 months from their date of issue, 11 October 2017, being expiration on 11 October 2019. NON-MARKETABLE PARCELS There were no holders of less than a marketable parcel of ordinary shares, amounting to nil ordinary shares. DISTRIBUTION OF EQUITY SECURITIES Analysis of number of share and option holders by size of holding: Fully paid ordinary shares Range 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 and over Page 53 Number of holders Number of shares 121 18 3 194 267 603 26,456 47,066 21,178 13,404,244 485,987,866 499,486,810 Quoted Options exercisable at $0.04 on or before 30 October 2019 Range 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 and over Unquoted Options exercisable at $0.02 on or before 30 October 2019 Range 1 1,001 5,001 10,001 - - - - 1,000 5,000 10,000 100,000 100,001 and over Number of holders Number of options - - - 33 34 67 - - - 1,289,000 48,211,000 50,000,000 Number of holders Number of shares - - - 22 33 55 - - - 1,439,000 28,561,000 30,000,000 No holder has a 20% or more holding in the unquoted Options exercisable at $0.02 on or before 30 October 2019. VOTING RIGHTS The relevant conditions about voting rights attaching to each share are set out in Article 9.22 of the Constitution as follows: “Subject to any rights or restrictions for the time being attached to any class or classes of shares and to this constitution: a. b. On a show of hands, each Member present in person and each other person present as a proxy, attorney or Representative of a Member has one vote; and On a poll, each Member present in person has one vote for each fully paid share held by the Member and each person present as proxy, attorney or Representative of a Member has one vote for each fully paid share held by the Member that the person represents, but a Member is not entitled to vote at a general meeting in respect of shares which are the subject of a current Restriction Agreement for so long as any breach of that agreement subsists Page 54 SUBSTANTIAL SHAREHOLDERS The Company has the following substantial shareholders as at 20 September 2018: Name CAPE COAL PTY LTD AREA COAL LIMITED Number of ordinary shares held 100,000,000 54,347,826 Percentage of issued shares 20.02% 10.88% TWENTY LARGEST SHAREHOLDERS The names of the twenty largest holders of ordinary fully paid shares are set out below: Name 1. CAPE COAL PTY LTD 2. AREA COAL LIMITED 3. MRS LILY MAH 4. ACACIA COAL LIMITED Number of ordinary shares held 100,000,000 54,347,826 18,843,478 17,391,304 Percentage of issued shares 20.02% 10.88% 3.77% 4.19% 5. MR PAUL GABRIEL SHARBANEE 15,500,000 3.10% 6. BNP PARIBAS NOMINEES PTY LTD 12,209,298 2.44% 7. RIO SUPER PTY LTD 10,835,000 8. MR GOH GEOK KHIM 10,000,000 2.17% 2.00% 9. V7 INVESTMENT & DEVELOPMENT 9,000,000 1.80% 10. MRS DENISE JOY SHARBANEE 9,000,000 1.80% 11. STEVSAND INVESTMENTS PTY LTD 12. FIRST ONE REALTY PTY LTD 13. MR TYLER JOHN FORMICA 14. SACCO DEVELOPMENTS AUSTRALIA PTY LIMITED 8,970,807 1.80% 6,347,827 5,500,000 1.27% 1.10% 5,388,427 1.08% 15. MR DAVID JOHN FRANKLYN & MRS LUCILLE CORINNE FRANKLYN 5,000,000 1.00% 16. MR ARIEL EDWARD KING 17. ROVIGNO PTY LTD 18. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 19. MISS EUN JOO LEE 20. KALGOORLIE MINE MANAGEMENT PTY LTD 5,000,000 5,000,000 4,879,951 4,355,244 4,000,000 1.00% 1.00% 0.98% 0.87% 0.80% 311,569,162 63.07% Page 55 TWENTY LARGEST OPTION HOLDERS ($0.04 OPTIONS) Name Number of options held Percentage of issued options 1. MR ARIEL EDWARD KING 2. FIRST INVESTMENTS PARTNERS PTY LTD 3. TANGO88 PTY LTD 4. FIRST ONE REALTY PTY LTD 5. MR GREGORY KENNETH D’ARCY 6. MR JASON YIN 7. MR TYLER JOHN FORMICA 10,000,000 6,260,000 6,000,000 3,900,000 3,500,000 2,231,000 2,000,000 8. LAKE SPRINGS PTY LTD 3,700,000 9. JOMOT PTY LTD 10. GREENWOOD RESOURCES PTY LTD 11. MR DAVID CHARLES NEESHAM & MRS PAMELA CHRISTINE NEESHAM 12. MR STEVEN JOHN DIGGERMAN 13. FOUCART PTY LTD 14. MR MARK RICHARD JENSEN 15. MR BRETT JAMES RUDD 16. CINQUE HOLDINGS PTY LTD 17. MR MOHAMED GABR 18. LANTECH DEVELOPMENTS PTY LTD 19. MR EDMUND TECK HWANG LIM 20. MR THOMAS SAMUEL LATAGE LAMBETH & MISS RU YI LI 1,110,000 1,000,000 1,000,000 1,000,000 940,000 800,000 600,000 500,000 500,000 500,000 462,000 457,143 20.00% 12.52% 12.00% 7.80% 7.00% 4.46% 4.00% 7.40% 2.22% 2.00% 2.00% 2.00% 1.88% 1.60% 1.20% 1.00% 1.00% 1.00% 0.92% 0.91% 46,460,143 92.91% RESTRICTED SECURITIES The Company has the following restricted securities on issue: Name ordinary shares Performance shares Escrow release date CAPE COAL PTY LTD 100,000,000 26,000,000 24 months from date of ASX re-quotation ACACIA COAL LIMITED 17,391,304 AREA COAL LIMITED 54,347,826 - - 12 months from date of issue 12 months from date of issue Page 56 Use of Funds Between the date of listing on ASX and the date of this report the Company has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its business objectives and as set out in the Prospectus dated 3 August 2017. INTERESTS IN EXPLORATION TENEMENTS Tenement Number Project Name Tenement Location Bowen Coking Coal Interest Held EPC 1824 HILLALONG BOWEN BASIN, QUEENSLAND MDL 453 EPC 1687 EPC 2157 EPC 2081 EPC 1230 MLA 7005 EPC2141 EPC 1860 MDL 444 EPC 830 COOROORAH BOWEN BASIN, QUEENSLAND LILYVALE BOWEN BASIN, QUEENSLAND LILYVALE BOWEN BASIN, QUEENSLAND MACKENZIE BOWEN BASIN, QUEENSLAND COMET RIDGE BOWEN BASIN, QUEENSLAND COMET RIDGE BOWEN BASIN, QUEENSLAND HILLALONG EAST BOWEN BASIN, QUEENSLAND HILLALONG EAST BOWEN BASIN, QUEENSLAND ISAAC RIVER BOWEN BASIN, QUEENSLAND ISAAC RIVER BOWEN BASIN, QUEENSLAND 100% 100% 15% 15% 5% 100% 100% 100%1 100%1 100% 100% 1 Acquisition cost and duties paid. Indicative Ministerial Consent for the transfer received, final transfer underway. Page 57 COMPANY SECRETARY Mr Stephen Brockhurst REGISTERED OFFICE Level 19, Waterfront Place 1 Eagle Street BRISBANE QLD 4000 Telephone: +617 3360 0837 ADMINISTRATION OFFICE Level 11 216 St Georges Terrace PERTH WA 6000 Telephone: +618 9481 0389 Facsimile: +618 9463 6103 Website: bowencokingcoal.com.au SHARE REGISTRAR Link Market Services Limited Level 12 680 George Street Sydney NSW 2000 Postal Address Locked Bag A14 Sydney South NSW 1235 Telephone: Facsimile: +612 8280 7111 +612 9287 0303 DX 1120 Sydney Website: www.linkmarketservices.com.au Email: registrars@linkmarketservices.com.au STOCK EXCHANGE QUOTATION The Company’s shares are quoted only on the Australian Securities Exchange (code “BCB”). Page 58 

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