Bowen Coking Coal Ltd
Annual Report 2019

Plain-text annual report

BOWEN COKING COAL LTD AND CONTROLLED ENTITIES ABN: 72 064 874 620 CONSOLIDATED FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Contents Cautionary Statements Corporate Information Review of Operations Directors’ Report Auditor’s Independence Declaration Shareholder Information Interests in Tenements Annual Mineral Resources Statement Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 30 June 2019 Consolidated Statement of Financial Position as at 30 June 2019 Consolidated Statement of Changes In Equity for the Year Ended 30 June 2019 Consolidated Statement of Cash Flows for the Year Ended 30 June 2019 Notes to The Consolidated Financial Statements for the Year Ended 30 June 2019 Director’s Declaration Independent Auditor’s Report Page 1 2 3 4 12 28 29 33 34 36 37 38 39 40 64 65 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Cautionary Statements Forward-looking statements This document may contain certain forward-looking statements. Such statements are only predictions, based on certain assumptions and involve known and unknown risks, uncertainties and other factors, many of which are beyond the company’s control. Actual events or results may differ materially from the events or results expected or implied in any forward-looking statement. The inclusion of such statements should not be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions or that any forward-looking statements will be or are likely to be fulfilled. Bowen Coking Coal Ltd undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this document (subject to securities exchange disclosure requirements). The information in this document does not take into account the objectives, financial situation or particular needs of any person or organisation. Nothing contained in this document constitutes investment, legal, tax or other advice. Competent Person Statement All exploration results and Mineral Resources referred to in this Annual Report have previously been announced to the market by the Company in accordance with the requirements of Chapter 5 of the ASX Listing Rules and the JORC Code 2012, including as to the requirements for a statement from a Competent Person; and the relevant announcements have been referred to in the body of the Annual Report. The Company confirms that it is not aware of any new information or data that materially affects that information. In respect of the Mineral Resources, all material assumptions and technical parameters continue to apply and have not materially changed. Page 2 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Corporate Information Directors and Company Secretary Neville Sneddon (Non-Executive Chairman) Gerhard Redelinghuys (Managing Director) Blair Sergeant (Executive Director - Corporate Development) Steven Formica (Non-Executive Director) James Agenbag (Non-Executive Director) Nicholas Jorss (Non-Executive Director) Mr Duncan Cornish (Company Secretary) Head Office and Registered Office Bowen Coking Coal Ltd Level 19, 1 Eagle Street Brisbane QLD 4000 Tel: +61 7 3360 0837 Fax: +61 7 3360 0222 www.bowencokingcoal.com.au Auditors RSM Australia Partners Level 6, 340 Adelaide Street Brisbane QLD 4000 Share Registry Link Market Services Limited Level 21, 10 Eagle Street Brisbane QLD 4000 Tel: 1300 554 474 www.linkmarketservices.com.au Stock Exchange Listing Australian Securities Exchange Ltd ASX Code: BCB Australian Company Number 064 874 620 Solicitor Colin Biggers & Paisley Pty Ltd Level 35, 1 Eagle Street Brisbane QLD 4000 Banker Westpac Banking Corporation Limited Page 3 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations The year ended 30 June 2019 proved to be an incredibly busy and productive period in the development of the Company, with material progress being made across the entire portfolio of coking coal assets held in the Bowen Basin of Queensland, Australia. This included the following highlights: • Completed a positive concept mining study on the extractability of the Cooroorah Resource, completed a drilling program at Cooroorah and twice issued upward revisions of the JORC Resource, which now stands at 177Mt; • Issued a Maiden Resource Statement for Isaac River, whereby over 90% of the resource is classified in the “Indicated” category, completed a maiden drilling program and issued a positive Scoping Report; • Issued a material Exploration Target at Hillalong, of between 61Mt and 409Mt; and • Renewed EPC 1230 at Comet Ridge for a further term of 5 years. CORPORATE The milestones highlighted above were matched by numerous achievements on the corporate front, including significant enhancements in the Board skillset, represented by the appointments of Neville Sneddon as Non-Executive Chairman, Nick Jorss as Non-Executive Director, Blair Sergeant as Executive Director responsible for Corporate Development and Duncan Cornish as CFO/Company Secretary. Each of Neville, Nick, Blair and Duncan bring years of active participation in the coal industry and a wealth of experience in managing public companies. The above-mentioned Board appointments were complimented by the addition of Michael McKee as Chief Operating Officer, who also comes with an enviable track record, specifically in the Australian coal industry. The Company’s exploration activities have been underpinned by several capital raisings at a premium to the traded price at the time, summarised as follows: 1. $1.2m in gross proceeds raised in September 2018 @ 1.6c per share; 2. In December 2018, a private placement to St Lucia Resources (an entity associated with Mr Nick Jorss and his fellow co-founders of Stanmore Coal), raising gross proceeds of $500,000, also @ 1.6c per share; and 3. $1.7m raised @ 2.1c per share in March 2019. In addition, the Company’s rapidly rising share price in the last quarter saw it move from 2.1c at the end of March ’19 to close the year at 5c, a rise of 138% for the quarter. Consequently, the Company issued 5.3m shares resulting from the conversion of options, which raised gross proceeds of a little over $100,000. As at 30 June 2019, the Company held cash at bank of $2,043,310 which in the opinion of the Board, is more than sufficient to enable it to continue executing on its stated exploration and development strategy. Page 4 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations PROJECTS Figure 1. Project Location Isaac River Project (100%) The Project covers an area of 14 km2 and is located in the Bowen Basin in Central Queensland, approximately 30 km west of Moranbah and 130 km southwest of Mackay. The 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 Gundyer resource is located to the immediate north of the Project. EPC 830 occurs south of MDL 444 and abuts Peabody’s Olive Downs North Project and is approximately 3km North of Rio Tinto’s Winchester South project. The Project is well located relative to regional infrastructure with the Peak Downs Highway located 12km north and the Goonyella rail system within 3km of the Project. Maiden Resource Statement In November 2018, the Company issued a maiden Mineral Resource estimate for Isaac River of 5.3Mt, covering the Leichhardt seam only, which included Indicated Resources of 4.2Mt (open cut) and Inferred Resources of 1.1Mt (underground). The Leichhardt seam has an average thickness of 4.7m across the Project and is sub- cropping within the boundary of MDL 444. Page 5 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations Table 1:Isaac River Project Mineral Resource Mass Seam Thickness Insitu RD Moisture Seam Lease Mt (m) t.cu.m % (adb) RAW Ash % (adb) FC % (adb) VM % (adb) TS % (adb) RAW CV kcal/kg (adb) LHD Indicated MDL 444 4.2 4.4 1.40 1.5 16.8 62.0 19.6 0.33 6779 LHD Inferred MDL 444 1.1 4.7 LHD Total MDL 444 5.3 1.45 1.44 1.5 1.5 17.6 61.2 19.7 0.31 6680 17.0 61.9 19.6 0.33 6758 Stage 1 Concept Study Following the release of Isaac River’s maiden Resource Estimate, the Company engaged Xenith Consulting (“Xenith”) to prepare a Mining Concept Study (“the Study”) on the Leichhardt seam only, referred to as Stage 1. Historic exploration confirmed that the Project hosts various coal seams which are currently being mined by abutting operations, however, coal quality data was only available for the Leichhardt seam. The Study was centred around the extractability of the Leichardt seam via open cut mining methods, followed by the potential of highwall mining and was based on utilising contract mining and accessing third party infrastructure. The key focus areas of the Study covered mine planning, operating cost, capital expenditure and product optionality. Key assumptions and recommendations of the Study: • The Study included a review of the recent Resource Estimate of 5.3Mt (4.2Mt Indicated Resources, and 1.1Mt Inferred Resources). • A margin ranking process based on a contractor truck-excavator mining method was used to identify the target area. An open-cut pit shell was created based on a maximum 100m depth of cover for an average in situ strip ratio of 11.4bcm/t. A contractor highwall mining operation with 300m deep plunges towards the end of the open-cut life was also modelled. The target areas corresponded largely to the part of the Isaac River Mineral Resource estimate in the Indicated Resource category.; • Operating costs included contractor mining rates for overburden removal, coal mining and hauling, as well as toll treatment fees for the use of a regional wash plant and train loading facility; • Coal quality analysis suggested either a high yielding single product PCI coal, or an alternative configuration to produce a primary semi hard coking coal with secondary PCI / Thermal coal through washing the top and bottom part of the Leichhardt seam separately; • Capital costs estimate provided for minimal on-site infrastructure and service equipment, a haul road to a regional wash plant and train load out facility, land compensation, and feasibility study costs. • The Study recommend the taking of fresh coal samples to test the coking properties of all the seams, as some of the historical coal samples might have been affected by delays of up to 14 months before coal quality testing was conducted. Page 6 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations The Company was delighted with the Study outcome for Stage 1 of the Isaac River Coal Project, which demonstrated a positive business case for the first stage that in turn supported the Company’s maiden drilling program, to obtain more data in order to increase the confidence level and potentially optimise the business case in moving towards project development. Maiden Drilling Program Following the release of the above-mentioned Study, the logical next stage of development was represented by the completion of a maiden drilling program at Isaac River, which commenced in April 2019 and was completed the following month. All core samples were dispatched to the lab and testing instructions finalised for coal quality analysis. First results were received just prior to year end, with the remaining results received subsequent to balance date. With the raw quality data received providing very good early indications of positive coking coal parameters, the Company is anticipating washability tests to confirm quality coking coal can be produced at Isaac River, and looks forward to progressing the project next financial year. Cooroorah Project (100%) Cooroorah is located 17 kilometres north of Blackwater, between Coronado Coal’s (ASX:CRN) Curragh mine (and MDL 162) in the West and Jellinbah Mine in the East. The Project targets the well- known Rangal measures and hosts the Aries, Castor, Pollux and Pisces seams. As with Isaac River, significant progress was made in the development of the Cooroorah Coking Coal Project. Firstly, in August 2018, the Company announced the results Mining Scoping Study, which was positive and encouraging. The positive results of the Study (and maiden drilling program completed the previous year) was followed up by an additional drilling program, which was completed in December 2018. Consequently, the JORC Resource estimate was updated resulting in an upward revision of the total resources. In addition, a subsequent review and validation of the regional historic drilling results saw the Company obtain data which demonstrated the extension of the Mammoth and Pollux seams into the Northern area of the tenement. As a result, the total Resource estimate was once again revised upward, now estimated at 177Mt, of which 96Mt (54%) is classified as Indicated and 81Mt (46%) as Inferred, of which the Mammoth seam is now estimated to be a total of 60Mt, comprising 38Mt as Indicated and 22Mt as Inferred. Coal quality analysis from the December 2018 drilling program confirmed the extension of the high- quality coal previously observed for the Mammoth seam. Core samples demonstrated the potential for a washed 3.4% ash, low sulphur, high CSN coking coal with secondary PCI product for a combined lab yield of over 90%. The analysis also demonstrated the ability to produce an unwashed Low Page 7 Insitu Density Ash Inherent Moisture Volatile Matter Fixed Carbon Calorific Value CSN Total SulphurGrindabilityChlorinePhosphorusMillion m³Million tonnes(m)(g/cc)% (adb)% (adb)% (adb)% (adb)MJ/kg% (adb)HGI% (adb)% (adb)Aries ¹241.381.6845.40.613.838.117.54.30.29560.020.03Castor11153.061.4213.51.117.668.030.52.30.44900.040.09Mammoth27384.091.4012.51.417.370.231.53.80.40900.050.07Pollux10152.401.4416.91.215.866.129.52.70.45870.040.13Pisces Upper17242.591.4315.61.216.465.829.22.30.35850.030.07Total Indicated67961.4315.41.216.766.829.93.00.40870.040.08Castor342.591.4213.81.117.567.730.42.20.43890.040.09Mammoth16224.231.4012.41.617.470.031.24.20.41470.030.07Pollux7113.091.4315.41.616.366.729.51.80.41180.010.08Pollux U/L ²343.051.5431.71.314.152.623.61.70.47---Pisces Upper28403.211.4516.71.417.563.829.41.80.36850.030.07Total Inferred57811.4315.91.517.265.529.72.50.39620.030.07CategoryIndicatedInferredRaw Coal QualityVolumeMassThicknessCoal Seam BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations Volatile PCI Product. The key washed coal quality parameters for the Mammoth seam are listed in Table 2 below (average of holes COR 013, COR 001 and COR 014). Table 2: Mammoth seam key washed coal quality parameters Property Primary Coking coal Secondary PCI coal Inherent Moisture (% ad) Ash (% ad) Volatile Matter (% ad) Fixed Carbon (%ad) Total Sulphur (% ad) Phosphorus (% ad) Calorific Value (kcal/kg gad) HGI CSN 1.4 3.4 18.5 76.7 0.43 0.02 88 8 Gray-King coke type G2 – G4 Reflectance Rv max. % Vitrinite content % Fluidity (ddpm) Base-acid ratio 1.57 65 5 0.13 1.5 9.7 17.1 72.0 0.38 0.05 7600 84 Yield % (Lab, dilution free) 40%-45% 45%-50% A comparison of the Cooroorah coking coal to the range of internationally traded coking coals is illustrated below: Page 8 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations The Company was extremely pleased with the outcome of the exploration program complete during the year, which not only demonstrated the continuance of the Mammoth seam to the East, but also confirmed the exceptional coal quality of this extension in the Resource. Hillalong Project (100%) EPC 1824 and EPC 2141 (“Hillalong Project”) are located in the northern Bowen Basin approximately 105 km west-southwest of Mackay. The tenements comprise 31 sub-blocks (approximately 99km2) located to the west of the Mount Hillalong anticline and is approximately 16 km northwest of Rio Tinto’s Hail Creek Mine. The Project contains sub cropping coal seams from the Rangal coal measures (“RCM”), Fort Cooper coal measures and Moranbah coal measures (“MCM”). Two economic coal seams, Elphinstone and Hynds (Leichardt and Vermont equivalents) within the Rangal measures are currently being mined nearby. Within EPC1824, the strata are interpreted to flatten out at depth. Past work by Rio Tinto Exploration (“RTX”) has shown isolated drill hole intercepts within the tenement and geophysical surveys that defined good drilling targets as the basis for further exploration by the Company. Exploration Target The Company engaged Xstract Mining Consultants (“Xstract”) to consolidate all the historic and RTX exploration data into a geological model and to recommend an exploration plan to advance the Project. In July 2018, Xstract estimated an Exploration Target* in accordance with the guidelines of the JORC Code (2012) of between 61Mt and 409Mt from the RCM and MCM as per Table 3 below. The estimate for the RCM is based on a high-quality coking coal assumption and open pit configuration with strip ratio <20:1, with the Underground target to a maximum depth of 160m (Low case) and 500m (High case). The estimate for the MCM is based on Low Volatile PCI and open pit configuration with strip ratio <15:1, with the Underground target to a maximum depth of 400m (Low case) and 550m (High case). See Table 3 below for raw coal quality assumptions. Table 3: Hillalong Project – Exploration target and coal quality assumptions Exploration Target RCM Open Cut RCM Underground Total MCM Open Cut MCM Underground Total TOTAL Low case Tonnes Low case Raw Ash Low case Raw CSN High case Tonnes High case Raw Ash (Mt) (% adb) (Mt) (% adb) High case Raw CSN 18 18 18 36 39 38 5.5 5.5 5.5 2.5 1.5 2.0 8 7 15 18 28 46 61 34 26 31 36 32 34 3.0 4.0 3.5 1.5 1.0 1.0 222 116 338 30 41 71 409 The Company is anticipating a maiden drilling program to commence in H2 2019. Page 9 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations Comet Ridge Project (EPC 1230, 100%) BCC acquired the advanced Comet Ridge project from Acacia Coal Limited which is located 60km East of Emerald and 25km South of the township of Comet. Comet Ridge is an open pit project with a JORC resource of 57Mt shallower than 50 m. BCC is targeting the Fair Hill seam and the stratigraphically lower Triumph seam to produce a coking coal with secondary thermal coal. The Fair Hill seam is a typical (for Fair Hill formation coals) predominantly dull coal and highly interbedded with carbonaceous siltstones and tuffaceous claystone. Thin bands of bright vitrinite occur throughout the coal and the Fair Hill seam can vary between 9-14m in thickness. The Triumph seam lies approximately 25m below the Fair Hill seam and is generally less banded and up to 2m in thickness. Table 4: Comet Ridge Project Resource In May 2018 the Company announced it had entered into a binding Term Sheet with Springsure Creek Coal Pty Ltd (SCC) to sell its 100% owned Comet Ridge Project (EPC830 & 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. The transaction was subject to certain conditions precedent, amongst others, entering into final transaction documents. The parties could not reach agreement on certain key commercial issues, and therefore the Company terminated the Term Sheet and abandoned the Mining Lease Application. EPC 1230 underlies Comet Ridge, and the renewal of the tenement was granted in September 2018 for a further 5 years with an annual exploration commitment of $20 000 per annum. BCB is currently considering various strategic options to realise value from this tenement. Lilyvale (15%) and Mackenzie (5%) Joint Arrangements with Stanmore Coal Ltd Lilyvale Coking Coal Project (15%) The Lilyvale project is located 25km north east of Emerald in the Bowen basin (Queensland Australia) and is in close proximity to BHP Mitsubishi Alliance’s Gregory Crinum operating coking coal mine and bordering Rio Tinto’s Kestrel mine. Cape Coal holds a 15% interest in the project, whilst the remaining 85% is held by Stanmore Coal (ASX:SMR). A desktop review of the Lilyvale project identified the German Creek (or Lilyvale) seam as potentially amenable to underground extraction based on depth and estimated seam thickness. This seam is presently mined as a high-quality coking coal at the adjacent Kestrel and nearby Gregory Crinum Page 10 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Review of Operations operations. The project is well located within 15km of existing rail infrastructure given the surrounding operating mines. Based on analysis of historical geophysical logs and bore holes in the surrounding region (including the 2 cored holes with quality data within the project area) Xenith Consulting estimated and Inferred JORC 2012 Resource of 33Mt. The Joint Arrangement estimates that the Lilyvale project hosts the German Creek seam from 336m in depth (at hole C2059) with a typical thickness across the project area of 2.2-2.5m which demonstrate attractive coking properties including CSN values of 5.5 – 6.5. The north of the project area is estimated to host the shallowest coal and is contiguous to the Kestrel mine. The Joint Arrangement is in the process of finalising a drilling program to be executed in the next financial year Mackenzie Coking Coal Project (5%) The Mackenzie Coking Coal Project in the Bowen Basin is well located for export markets as it lies on the existing Blackwater railway line to Gladstone. The project is located between the Ensham and Curragh operating mines and is adjacent to the Washpool coking coal project, which is also targeting the Burngrove Coal Formation. The project geological model contains a total of 80 bore holes. The Company has a joint arrangement with Stanmore Coal Limited (ASX:SMR) to jointly progress the Mackenzie Project. A technical review of the deposit has previously been undertaken, the key outcomes of which were: • Some areas of the deposit are disposed to dual washing which creates a primary 10% - 15% ash Coking Coal product with a secondary thermal coal product; • Better yield results are expected to be achieved by utilising best practice and alternative beneficiation techniques; • ROM pre-treatment is likely to improve product yield; and • The optimal economic approach may be to develop multiple smaller mines within the overall tenement area. No further technical work was undertaken during the financial year. Page 11 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report The directors submit their report on the consolidated entity (“Group”) consisting of Bowen Coking Coal Ltd and the entities it controlled at the end of, and during, the financial period ended 30 June 2019. Directors The following persons were directors of Bowen Coking Coal Ltd during the financial period and up to the date of this report, unless otherwise stated: Non-Executive Chairman (appointed 12-Dec-18) Neville Sneddon Gerhard Redelinghuys Managing Director Blair Sergeant Steven Formica James Agenbag Nicholas Jorss Eddie (Ariel) King Executive Director - Corporate Development (appointed 28-Sep-18) Non-Executive Director Non-Executive Director Non-Executive Director (appointed 12-Dec-18) Non-Executive Chairman (resigned 12-Dec-18) Information on Directors The board has a strong combination of technical, managerial and capital markets experience. Expertise and experience include operating and coal exploration. The names and qualifications of the current directors are summarised as follows: Neville Sneddon - Independent Non-Executive Chairman Qualifications B. Eng (Mining)(Hons), M. Eng, MAusIMM, Grad AICD Appointment Date 12 December 2018 Resignation Date Length of Service N/A 9 months Current ASX Listed Directorships Nil Former ASX Listed Directorships Stanmore Coal Limited A mining engineer with over 40 years’ experience in most facets of the Queensland and NSW resource sectors, and as the recently retired Chairman of Stanmore Coal Ltd, Mr Sneddon brings substantial Board and industry knowledge to the Company. He has developed and operated both underground and open cut mines working for Coal & Allied in the Hunter Valley and from 1997 worked in a senior role in the NSW Mines Inspectorate, covering operations in all forms of mining in the state. Moving to Queensland in 1999, Mr Sneddon accepted the position of Chief Operating Officer with Shell Coal which was acquired by Anglo American’s Australian coal operations the following year. Leaving as CEO in 2007, he held several Board positions with mining and infrastructure companies including Chairman of the operating company at Dalrymple Bay Coal Terminal near Mackay and Director of Port Waratah Coal Services, a major coal export facility at Newcastle. Mr Sneddon has also been a member of the Boards of the Queensland, NSW and National Mining Councils. His expertise has been sought by several government committees such as the NSW Mine Subsidence Board, NSW Mines Rescue Board, Queensland Ministerial Coal Mine Safety Advisory Committee and the joint federal/ state advisory committee which is developing nationally consistent mining safety legislation. Page 12 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Gerhard Redelinghuys – Managing Director Qualifications B. Comm. Acc, Hons, B. Compt, GAICD Appointment Date 27 September 2017 Resignation Date Length of Service Current ASX Listed Directorships Former ASX Listed Directorships N/A 2 years Nil Nil 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, he 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 the corporate office, as well as 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, Mr Redelinghuys has extensive experience in mining project acquisitions and deal making on an international level. He was also the owner’s representative on a multi-billion dollar underground coal project in Queensland until 2015 and is a graduate member of the Australian Institute of Company Directors. Blair Sergeant - Executive Director - Corporate Development Qualifications B. Bus, PostGradDip (CorpAdmin), MAICD, AGIA, ACIS, ASCPA Appointment Date 28 September 2018 Resignation Date Length of Service Current ASX Listed Directorships Former ASX Listed Directorships N/A 1 year Nil Nil Mr Sergeant is an experienced mining executive, having been the former Founding Managing Director of Lemur Resources Limited, an ASX listed coal exploration and development company, as well as the former Finance Director of Coal of Africa Limited, growing the company from a sub-$2m market capitalisation to over $1.5b at its peak. During his career, Mr Sergeant has also held the position of Managing Director, Non-Executive Director and/or Company Secretary for numerous listed entities across a broad spectrum of industry. Mr Sergeant graduated from Curtin University, Western Australia with a Bachelor of Business and subsequently, a Post Graduate Diploma in Corporate Administration. He is a member of the Institute of Chartered Secretaries and Administrators and the Australian Institute of Company Directors. Page 13 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Steven Formica – Independent Non-Executive Director Qualifications N/A Appointment Date 4 August 2015 Resignation Date Length of Service N/A 4 years, 1 month Current ASX Listed Directorships High Grade Metals Limited Ragnar Metals Limited Veriluma Limited Former ASX Listed Directorships Orminex Limited Lindian Resources Limited 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. Mr Formica is currently a director of both FPG Projects and Viridian Property Group, both successful property developers. James Agenbag - Independent Non-Executive Director Qualifications B. Eng (Chemical Engineering), MBA Appointment Date 27 September 2017 Resignation Date Length of Service Current ASX Listed Directorships Former ASX Listed Directorships N/A 2 years Nil Nil Mr Agenbag has 15 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, Mr Agenbag worked as a process design engineer at EPCM companies including GRD Minproc Limited and DRA Global. In 2008, Mr Agenbag 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. Mr Agenbag also has substantial experience in beneficiation optimisation with emphasis on various technologies including some technologies where he jointly holds patent rights. Mr Agenbag has delivered technical papers within his area of expertise in the minerals processing field. He held a position responsible for the process engineering discipline across Peabody Energy Australia PCI Pty Ltd coal projects, and has been a Director of Cape Coal since 2012. Mr Agenbag 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. Page 14 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Nicholas Jorss – Non-Executive Director Qualifications BE (Hons) Civil, MBA, GDip App Fin (Sec Inst) Appointment Date 12 December 2018 Resignation Date Length of Service N/A 9 months Current ASX Listed Directorships Nil Former ASX Listed Directorships Stanmore Coal Limited Mr Jorss is the founding Managing Director of Stanmore Coal Ltd (via St Lucia). Mr Jorss served on Stanmore’s Board from its formation in June 2008 through to 26 November 2016. He has over 20 years’ experience in investment banking, civil engineering, corporate finance and project management. Mr Jorss was instrumental in the success of Stanmore Coal Ltd, which currently has a market value of around $375m. As the Founding Managing Director, Mr Jorss led Stanmore’s growth from a coal exploration company to a profitable, mid-tier producer. In his prior roles in investment banking (as a director of Pacific Road Corporate Finance) he has been involved in leading advisory mandates with corporate, government and private equity clients across industry sectors ranging from resources to infrastructure. Prior to this Mr Jorss was an engineer with Baulderstone Hornibrook where he delivered significant infrastructure and resource projects over a period of approximately eight years. Mr Jorss is a founding shareholder and Director of St Lucia Resources, Konstantin Resources, Ballymore Resources and Wingate Capital. He was previously a Director of Kurilpa Uranium, Vantage Private Equity Growth, Vantage Asset Management and WICET Holdings Pty Ltd. Mr Jorss holds a Bachelor with Honours in Civil Engineering from the University of Queensland, a Master of Business Administration from the University of NSW (AGSM) and a Graduate Diploma of Applied Finance and Investment. Eddie King – former Non-Executive Chairman Qualifications BComm, BEng (Mining - Hons) Appointment Date 23 April 2015 Resignation Date Length of Service 12 December 2018 3 years, 7 months Current ASX Listed Directorships Eastern Iron Limited European Cobalt Limited Pure Minerals Limited Six Sigma Limited Former ASX Listed Directorships Lindian Resources Limited Sultan Resources Limited Drake Resources Limited Axxis Technology Group Limited 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. Page 15 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Company Secretary Duncan Cornish –Company Secretary and CFO Appointment Date 1 May 2019 Resignation Date N/A Mr Cornish was the founding CFO and Company Secretary for Stanmore Coal Ltd (ASX:SMR), Waratah Coal Ltd (TSX and ASX:WCI) and Cokal Ltd (ASX:CKA) and is a Chartered Accountant with significant experience as a public company CFO and Company Secretary, focused on finance, administration and governance roles. He has more than 20 years’ experience in the accountancy profession both in England and Australia, mainly with the accountancy firms Ernst & Young and PricewaterhouseCoopers. He has extensive experience in all aspects of company financial reporting, corporate regulatory and governance areas, business acquisition and disposal due diligence, capital raising, company initial public offerings and company secretarial responsibilities, and has served as CFO and/or Company Secretary of several Australian and Canadian public companies. Stephen Brockhurst – former Company Secretary Appointment Date Resignation Date 22 May 2015 1 May 2019 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. Interests in Securities As at the date of this report, the interests of each director in shares and options issued by the Company are shown in the table below: Directors Shares Options ($0.025 @ 12-Dec-20) Options ($0.03 @ 12-Dec-20) Options ($0.035 @ 12-Dec-20) Neville Sneddon 2,380,952 Gerhard Redelinghuys 111,382,826# Blair Sergeant 11,335,000 Steven Formica 9,407,100 James Agenbag 110,057,826# - - - - - - - - - - - - - - - Options ($0.0338 @ 30- Jun-21) 3,500,000 14,000,000 10,500,000 2,100,000 2,100,000 Nicholas Jorss 39,957,120 10,000,000 10,000,000 10,000,000 - #Note: 110,057,826 of these shares are held by both Gerhard Redelinghuys and James Agenbag through their respective associations with Cape Coal Pty Ltd Page 16 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Principal Activities The principal activity of the Group during the period was the exploration and development of coal projects with a primary focus on Metallurgical coal. Corporate Bowen Coking Coal Ltd ACN 064 874 620 was incorporated as an Australian public company limited by shares on 6 July 1994, listing on the Australian Stock Exchange shortly thereafter. Dividends Paid or Recommended There were no dividends paid or recommended during the financial year. Review of Operations Information on the operations of the Group during the financial year and up to the date of this report is set out separately in the Annual Report under Review of Operations. Operating Results The Group’s operating loss for the financial year was $1,579,050 (2018: $1,327,448). The increased loss was caused principally by: • General corporate and administrative expenses ($631,115); • Employee benefits expense ($596,189); and • Share-based payments ($382,163). Review of Financial Condition Capital Structure As at 30 June 2018 the Company had 499,486,810 ordinary shares, 26,000,000 performance shares and 80,000,000 options on issue. During the year ended 30 June 2019, the following shares were issued: • 188,465,452 shares were issued and raised $3,427,150; • 5,322,000 shares were issued for $106,440 from the exercise of options; and • 13,000,000 Class B performance shares with a fair value of $167,794 were converted into ordinary shares for nil consideration. During the year ended 30 June 2019, the following options were issued: • 30,000,000 options were granted to a director for nil consideration on 12 December 2018. The options vest on 12 December 2019 and expire on 12 December 2020. 10,000,000 options have an exercise price of $0.025, 10,000,000 options have an exercise price of $0.03 and10,000,000 options have an exercise price of $0.035; • 35,700,000 options with an exercise price of $0.0338 were granted to directors and an officer for nil consideration on 31 May 2019. The options vested on grant date and expire on 30 June 2021. As at 30 June 2019 the Company had 706,274,262 ordinary shares, 13,000,000 performance shares and 140,378,000 options on issue. Page 17 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Financial Position At 30 June 2019, the Group’s net assets totalled $9,427,700 (2018: $7,225,304) which included cash assets of $2,043,310 (2018: $1,461,445). The movement in net assets largely resulted from the following factors: • Operating losses of $1,579,050; • Cash outflows from operating activities of $1,283,093; • Cash outflows on exploration and evaluation assets of $1,535,125; and • Net cash inflows from issue of shares of $3,400,083. Throughout the year the Group focussed on commencing exploration and development on the Group’s coal projects. The Group’s working capital, being current assets less current liabilities has increased from $1,293,092 in 2018 to $1,902,691 in 2019. Treasury policy The Group does not have a formally established treasury function. The Board is responsible for managing the Group’s finance facilities. The Group does not currently undertake hedging of any kind and is not currently directly exposed to material currency risks. Liquidity and funding The Group has sufficient funds to finance its operations and exploration activities, and to allow the Group to take advantage of favourable business opportunities, not specifically budgeted for, or to fund unforeseen expenditure. Significant Changes in State of Affairs Other than the securities issued as noted above, there were no other significant changes in the state of affairs of the Group in the financial year. Subsequent Events On 6 August 2019, the Company announced that it had agreed terms whereby the exercise of the Company’s 50 million listed options, exercisable at 4.0 cents each on or before 30 October 2019, have been fully underwritten. In addition, the Company agreed to a private placement to the Underwriter of 10 million shares at 5c per share, to raise $500,000. The placement was completed on 7 August 2019. On 19 August 2019 13,000,000 Class A Performance Shares were converted in to 13,000,000 fully paid ordinary shares, having met the conversion criteria. The conversion of the Class A Shares marks the completion of the delayed compensation milestones for the Acquisition of the tenements as stipulated in the Prospectus dated 3 August 2017 and as approved by shareholders on 10 August 2017. On 22 August 2019 the Company reported an increase in the Isaac River Resource as set out in the Annual Resource Statement. Further details can be found in the Company’s ASX announcement dated 22 August 2019. On 4 September 2019, the Company announced that an agreement has been reached with Rio Tinto Exploration Pty Limited (“RTX”) to amend the original acquisition agreement relating to EPC’s 2141 & 1860, whereby the Company will pay RTX $100,000 consideration to terminate a buy-back right and amend both the royalty rate (from 1.25% to 1.50%) and the deferred payment right. Full Page 18 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report details of the amended agreement are set out in the Company’s ASX announcement dated 4 September 2019. On 16 September 2019, the Company issued 12,000,000 unlisted performance rights to a consultant COO, with various vesting conditions and expiry dates. Subsequent to 30 June 2019 (and up to the date of this report), a total of 13,155,234 options have been exercised in to 13,155,234 ordinary shares, as follows: • 7,726,000 $0.02 options, raising $154,520; and • 5,429,234 $0.04 options, raising $217,169. Other than the matters noted above, there are no material matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Business Results The prospects of the Group in progressing their exploration projects may be affected by a number of factors. These factors are similar to most exploration companies moving through exploration phase and attempting to get projects into development. Some of these factors include: ▪ Exploration - the results of the exploration activities may be such that the estimated resources are insufficient to justify the financial viability of the projects. The Group undertakes extensive exploration and product quality testing prior to establishing JORC compliant resource estimates and to (ultimately) support mining feasibility studies. The Group engages external experts to assist with the evaluation of exploration results where required and utilises third party competent persons to prepare JORC resource statements or suitably qualified senior management of the Group. Economic feasibility modelling of projects will be conducted in conjunction with third party experts and the results of which will usually be subject to independent third party peer review. ▪ Social Licence to Operate – the ability of the Group to secure and undertake exploration and development activities within prospective areas is also reliant upon satisfactory resolution of native title and (potentially) overlapping tenure. To address this risk, the Group develops strong, long term effective relationships with landholders with a focus on developing mutually acceptable access arrangements. The Group takes appropriate legal and technical advice to ensure it manages its compliance obligations appropriately. ▪ Environmental - All phases of mining and exploration present environmental risks and hazards. The Group’s operations are subject to environmental regulations pursuant to a variety of state and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with mining operations. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The Group assesses each of its projects very carefully with respect to potential environmental issues, in conjunction with specific environmental regulations applicable to each project, prior to commencing field exploration. Periodic reviews are undertaken once field exploration commences. Page 19 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report ▪ Safety - Safety is of critical importance in the planning, organisation and execution of the Group’s exploration and development activities. The Group is committed to providing and maintaining a working environment in which its employees are not exposed to hazards that will jeopardise an employee’s health, safety or the health and safety of others associated with our business. The Group recognises that safety is both an individual and shared responsibility of all employees, contractors and other persons involved with the operation of the organisation. The Group has a Safety and Health Management system which is designed to minimise the risk of an uncontrolled safety and health event and to continuously improving safety culture within the organisation. ▪ Funding - the Group will require additional funding to continue exploration and potentially move from the exploration phase to the development phases of its projects. There is no certainty that the Group will have access to available financial resources sufficient to fund its exploration, feasibility or development costs at those times. ▪ Market - there are numerous factors involved with exploration and early stage development of its projects, including variance in commodity price and labour costs which can result in projects being uneconomical. Environmental Issues The Group is subject to significant environmental regulations under the (Federal, State and local) laws in Australia. The directors monitor the Group’s compliance with environmental obligations. The directors are not aware of any compliance breach arising during the year and up to the date of this report. Native Title Mining tenements that the Group currently holds, may be subject to Native Title claims. The Group has a policy that is respectful of the Native Title rights and will, as required, negotiate with relevant indigenous bodies. Remuneration Report (Audited) This report details the nature and amount of remuneration for each director and other key management personnel. The names of key management personnel of Bowen Coking Coal Ltd who have held office during the financial year are: Neville Sneddon Non-Executive Chairman (appointed 12-Dec-18) Gerhard Redelinghuys Managing Director Blair Sergeant Executive Director - Corporate Development (appointed 28-Sep-18) Steven Formica Non-Executive Director James Agenbag Non-Executive Director Nicholas Jorss Non-Executive Director (appointed 12-Dec-18) Eddie (Ariel) King Non-Executive Chairman (resigned 12-Dec-18) Duncan Cornish Company Secretary and Chief Financial Officer (appointed 1-May-2019) Page 20 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report The Group’s remuneration policy seeks to align director and executive objectives with those of shareholders and the business, while at the same time, recognising the early development stage of the Group and the criticality of funds being utilised to achieve development objectives. The board believes the current policy has been appropriate and effective in achieving a balance of these objectives. The Group’s remuneration policy provides for long-term incentives to be offered through a director and employee equity incentive plan. Options, shares or performance rights may be granted under this plan to align directors’, executives’, employees’ and shareholders’ interests. Two methods may be used to achieve this aim, the first being securities that vest upon reaching or exceeding specific predetermined objectives, and the second being options granted with higher exercise prices (than the share price at issue) rewarding share price growth. The board of directors is responsible for determining and reviewing the Group’s remuneration policy, remuneration levels and performance of both executive and non-executive directors. Independent external advice will be sought when required. No independent external advice was sought during the current year. Performance-Based Remuneration Performance-based remuneration includes both short-term and long-term incentives and is designed to reward key management personnel for reaching or exceeding specific objectives or as recognition for strong individual performance. Short-term incentives are available to eligible staff of the Group and may be comprised of cash bonuses, determined on a discretionary basis by the board. No short-term incentives were made available during the year. Long-term incentives are currently comprised of share options and performance rights, which are granted from time-to-time to encourage sustained strong performance in the realisation of strategic outcomes and growth in shareholder value. The exercise price of the options is determined after taking into account the underlying share price performance in the period leading up to the date of grant and if applicable, performance conditions attached to the share options. Subject to specific vesting conditions, each option is convertible into one ordinary share. The Group’s policy for determining the nature and amount of remuneration of board members and key executives is set out below. Directors Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting and is not linked to the performance of the Group. The maximum aggregate amount of fees that can be paid to non-executive directors approved by shareholders is currently $300,000. One-third, by number, of non-executive directors retires by rotation at the Company’s Annual General Meeting. Retiring directors are eligible for re-election by shareholders at the Annual General Meeting of the Company. The appointment conditions of the non-executive directors are set out and agreed in letters of appointment. Page 21 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Remuneration Report (Audited) (Continued) Executives The remuneration structure for executives is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Group. The executives receive payments provided for under an employment or service agreement, which may incentives, and equity-based performance remuneration. include cash, superannuation, short-term The Company has entered into an executive services agreement with Red House Consulting Pty Ltd, for Gerhard Redelinghuys’ 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 for cause. The executive must give 3 months’ notice to terminate the agreement. Term: Initial period of 12 months, renewed for consecutive periods of 12 months. • Remuneration: $240,000 per annum, indexed per CPI Brisbane on 1 July each year, plus an allowance of $5,000 per annum for death & disability insurance. • Other industry standard provisions for senior executive of a public listed company are included in the agreement. The Company has entered into executive services agreements with Blair Sergeant on the following material terms: • Position: Executive Director with respect to the Company’s promotion to investors, corporate development and potential acquisitions. • Commencement Date: 28 September 2018. • Remuneration: $198,000 plus superannuation per annum. The Company has a services agreement with Corporate Administration Services Pty Ltd (“CAS”) and Duncan Cornish, the Company’s CFO and Company Secretary. Under the agreement, CAS also provides accounting, bookkeeping and administrative services. Both the Company and CAS are entitled to terminate the agreement upon giving not less than three months’ written notice. The base fee under the services agreement is $120,000 per annum, in effect from 1 May 2019. Page 22 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Remuneration Report (Audited) (Continued) Remuneration Details of Key Management Personnel The remuneration of the key management personnel of Bowen Coking Coal Ltd for the year ended 30 June 2019 was as follows: Short Term Benefits Equity-settled Share-based Payments Key Management Personnel Salary & Fees Non-cash Benefits Other fees Post- Employme nt Super- annuation Shares Options Total /Rights Performa nce related % % consisting of options $ $ $ $ $ $ $ % N. Sneddon# 33,226 G. Redelinghuys 244,668 B. Sergeant 159,342 S. Formica J. Agenbag N. Jorss# E. King* D. Cornish Total Notes: 39,420 36,000 26,581 13,437 20,000 572,674 *director resigned on 12-Dec-18 #directors appointed on 12-Dec-18 - - - - - - - - - 3,156 4,412 9,248 - - 2,525 - - 19,341 - - - - - - - - - /rights % 45.0% 32.4% 34.6% 31.2% 33.2% 72.9% 0.0% 29,785 66,167 119,140 368,220 89,355 257,945 17,871 57,291 17,871 53,871 78,356 107,462 - 13,437 45.0% 32.4% 34.6% 31.2% 33.2% 72.9% 0.0% - - - - - - - - 29,785 49,785 59.8% 59.8% - 382,163 974,178 The remuneration of the key management personnel of Bowen Coking Coal Ltd for the year ended 30 June 2018 was as follows: Short Term Benefits Equity-settled Share-based Payments Key Management Personnel Salary & Fees Non-cash Benefits Post- Employme nt Super- annuation Other fees Share s Options /Rights Total Performa nce related % % consisting of options /rights $ $ $ $ $ $ $ % % G. Redelinghuys 164,764 3,333 15,653 S. Formica J. Agenbag E. King G. D’Arcy# Total Notes: 44,565 27,000 48,822 6,000 - - - - 30,000< 8,000< - - - - 291,151 3,333 15,653 38,000 - - - - - - - - - - - 183,750 74,565 35,000 48,822 6,000 348,137 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% #director resigned on 27-Sep-17 < relates to consultancy provided on an arm’s length basis at commercial rates Page 23 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Remuneration Report (Audited) (Continued) The percentage of equity-based remuneration for persons who were key management personnel of the Group during the year ended 30 June 2019 is set out below: Key Management Personnel Proportion of Remuneration Equity Based Salary and Fees N. Sneddon# G. Redelinghuys B. Sergeant S. Formica J. Agenbag N. Jorss# E. King* D. Cornish 45.0% 32.4% 34.6% 31.2% 33.2% 72.9% 0.0% 59.8% 55.0% 67.6% 65.4% 68.8% 66.8% 27.1% 100.0% 40.2% Notes: *director resigned on 12-Dec-18, #directors appointed on 12-Dec-18 Company Performance, Shareholder Wealth, and Director and Executive Remuneration During the financial year, the Company generated losses as its principal activity was mineral exploration. As the Company is still in the exploration and development stage, the link between remuneration, company performance and shareholder wealth is tenuous. Share prices are subject to the influence of commodity prices and market sentiment towards the sector, and as such, increases and decreases might occur independent of executive performance and remuneration. Options Held by Key Management Personnel Details of options held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2019 were as follows: Key Management Personnel Balance at 1 July 2018 Granted as Compensat ion Exercised Expired Balance at 30 June 2019 Total Vested 30 June 2019 Total Vested and Exercisable 30 June 2019 N. Sneddon# G. Redelinghuys B. Sergeant S. Formica J. Agenbag N. Jorss# E. King* - - - - - 3,500,000 14,000,000 10,500,000 2,100,000 2,100,000 30,000,000 15,000,000 - D. Cornish - 3,500,000 - - - - - - - - - - - - - - - - 3,500,000 3,500,000 3,500,000 14,000,000 14,000,000 14,000,000 10,500,000 10,500,000 10,500,000 2,100,000 2,100,000 2,100,000 2,100,000 2,100,000 2,100,000 30,000,000 - - 15,000,000 15,000,000 15,000,000 3,500,000 3,500,000 3,500,000 Notes: *director resigned on 12-Dec-18, #directors appointed on 12-Dec-18 Page 24 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Remuneration Report (Audited) (Continued) Options Granted as Remuneration • 30,000,000 options were granted to a director for nil consideration on 12 December 2018. The options vest on 12 December 2019 and expire on 12 December 2020. 10,000,000 options have an exercise price of $0.025, 10,000,000 options have an exercise price of $0.03 and10,000,000 options have an exercise price of $0.035; • 35,700,000 options with an exercise price of $0.0338 were granted to directors and an officer for nil consideration on 31 May 2019. The options vested on grant date and expire on 30 June 2021. Performance Shares Held by Key Management Personnel Details of performance shares held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2019 were as follows: Key Management Personnel Balance at 1 July 2018 Granted as Compensation Converted Expired Balance at 30 June 2019 Total Vested 30 June 2019 Total Vested and Convertible 30 June 2019 G. Redelinghuys * 26,000,000 J. Agenbag * 26,000,000 - - 13,000,000 13,000,000 - - 13,000,000 13,000,000 - - - - *Held at appointment. Represents the Class A and Class B Performance Shares issued to Cape Coal Pty Ltd. Performance Rights Granted as Remuneration No performance shares were granted during the year ended 30 June 2019 as remuneration. Shares Held by Key Management Personnel Details of shares held directly, indirectly or beneficially by key management personnel during the year ended 30 June 2019 were as follows: Balance at 1 July 2018 Granted as Compensation Other Changes Balance at 30 June 2019 Key Management Personnel N. Sneddon# - G. Redelinghuys 101,325,000 B. Sergeant S. Formica 3,600,000 8,970,807 J. Agenbag 100,000,000 N. Jorss# E. King* D. Cornish - 5,000,000 - - - - - - - - - 2,380,952 2,380,952 13,000,000## 114,325,000# 7,735,000 11,335,000 436,293 9,407,100 13,000,000## 113,000,000# 38,528,548 38,528,548 - 5,000,000 2,380,952 2,380,952 Notes: #13,000,000 of these shares are held by both Gerhard Redelinghuys and James Agenbag through their respective associations with Cape Coal Pty Ltd *director resigned on 12-Dec-18 #directors appointed on 12-Dec-18 Page 25 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report Remuneration Report (Audited) (Continued) Other transactions with Key Management Personnel There have been no other transactions with key management personnel during the year ended 30 June 2019. End of Remuneration Report (Audited) Options At the date of this report, the unissued ordinary shares of the Company under options are as follows: Unlisted Options Issue Date 22-Apr-16 22-Apr-16 12-Dec-18 12-Dec-18 12-Dec-18 31-May-19 TOTAL Expiry Date Exercise Price No. Under Option 30-Oct-19 30-Oct-19 12-Dec-20 12-Dec-20 12-Dec-20 30-Jun-21 $0.04 $0.02 $0.025 $0.03 $0.035 $0.0338 44,570,766 16,952,000 10,000,000 10,000,000 10,000,000 35,700,000 127,222,766 At the date of this report, there are 12,000,000 unlisted performance rights on issue, with various vesting conditions and expiry dates. There have been no unissued shares or interests under option of any controlled entity within the economic entity during or since reporting date. Option holders do not have any rights to participate in any share issue or other interests in the Company or any other entity. Directors’ Meetings The meetings (held while a director) attended by each director during the financial year were: Directors Neville Sneddon Gerhard Redelinghuys Blair Sergeant Steven Formica James Agenbag Nicholas Jorss Eddie (Ariel) King Board Meetings Attended 2 4 3 4 4 2 2 2 4 3 4 4 2 1 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. Page 26 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Directors’ Report The Company does not have an audit committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an audit committee can be adequately handled by the full Board. At such time when the Company is of sufficient size, a separate Audit and Risk Management Committee will be formed. Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Bowen Coking Coal Ltd support and, where practicable or appropriate, have adhered to the ASX Principles of Corporate Governance. The Company’s Corporate Governance Statement is the Company’s website (www.bowencokingcoal.com.au). the ASX and can be separately on found on lodged Indemnifying Directors and Auditors The Company has entered into a Deed with each of the Directors (and the Company Secretary) whereby the Company has agreed to provide certain indemnities to each Director (and the Company Secretary) to the extent permitted by the Corporations Act and to use its best endeavours to obtain and maintain directors’ and officers’ indemnity insurance, subject to such insurance being available at reasonable commercial terms. The Company has paid premiums to insure each of the directors (and the Company Secretary) of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director (or Company Secretary) of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contracts include a prohibition on disclosure of the premium paid and nature of the liabilities covered under the policy. The Company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums in respect of any person who is or has been an auditor of the Company or a related entity during the year and up to the date of this report. Proceedings on Behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-Audit Services During the financial year, RSM Australia does not provide non-audit services (2018: nil). Auditor’s Independence Declaration The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is attached to and forms part of this financial report. Signed in accordance with a resolution of the board of directors. Gerhard Redelinghuys, Director 24 September 2019 Brisbane, Queensland Page 27 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 2019, 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: 24 September 2019 Albert Loots Partner BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Shareholder Information Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 20 September 2019. (a) Distribution of equity securities The number of holders, by size of holding, in each class of security are: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Ordinary Shares Quoted Options ($0.04 @ 30-Oct-19) No. Holders No. Shares No. Holders No. Options 133 18 19 326 344 840 28,603 46,065 152,101 18,910,764 723,291,963 742,429,496 - - - 21 31 52 - - - 1,120,571 43,450,195 44,570,766 Unlisted Options ($0.02 @ 30-Oct-19) Unlisted Options ($0.025 @ 12-Dec-20) No. Holders No. Options No. Holders No. Options - - - 10 14 24 - - - 640,000 16,312,000 16,952,000 - - - - 1 1 - - - - 10,000,000 10,000,000 Unlisted Options ($0.03 @ 12-Dec-20) Unlisted Options ($0.035 @ 12-Dec-20) No. Holders No. Options No. Holders No. Perf. Rights - - - - 1 1 - - - - 10,000,000 10,000,000 - - - - 1 1 - - - - 10,000,000 10,000,000 Unlisted Options ($0.0338 @ 30-Jun-21) Performance Rights No. Holders No. Options No. Holders No. Perf. Rights - - - - 6 6 - - - - 35,700,000 35,700,000 - - - - 1 1 - - - - 12,000,000 12,000,000 There are 156 shareholders holding less than a marketable parcel of 6,849 shares. Page 29 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Shareholder Information (b) Twenty Largest Shareholders The names of the twenty largest holders of Quoted Ordinary Shares are: Number of Shares % of total Shares 110,057,826 14.8% 69,206,608 50,008,762 35,300,000 31,250,000 19,047,826 18,001,231 17,363,549 17,300,000 11,335,000 10,000,000 10,000,000 9,716,702 9,407,100 9,019,354 7,000,000 6,847,827 6,736,460 6,665,373 9.3% 6.7% 4.8% 4.2% 2.6% 2.4% 2.3% 2.3% 1.5% 1.3% 1.3% 1.3% 1.3% 1.2% 0.9% 0.9% 0.9% 0.9% 0.9% 461,263,618 62.1% 742,429,496 100.0% # Registered Name 1 2 3 4 5 6 7 8 9 10 11 12 CAPE COAL PTY LTD LATIMORE FAMILY PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED OLD FORRESTER PTY LTD ST LUCIA RESOURCES CAPITAL FUND PTY LTD AREA COAL PTY LTD BNP PARIBAS NOMINEES PTY LTD MR PAUL GABRIEL SHARBANEE CROCODILE CAPITAL OFFSHORE FUND RIO SUPER PTY LTD SAS INVESTMENTS PTY LTD BRAZIL FARMING PTY LTD 13 M RESOURCES PTY LTD 14 15 STEVSAND INVESTMENTS PTY LTD PERSHING AUSTRALIA NOMINEES PT Y LTD 17 18 19 NORFOLK ENCHANTS PTY LTD FIRST ONE REALTY PTY LTD FOLEY SUPER PTY LTD 20 MR DEANE ROBERT FIRMIN TOP 20 TOTAL Total of Securities Page 30 16 MR ROBERT JOHNSON ROACH & MRS DIANA KATHLEEN ROACH 7,000,000 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Shareholder Information The names of the twenty largest holders of Quoted Options ($0.04 @ 30-Oct-19) Shares are: # Registered Name Number of Options % of total Options 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 MRS DENISE JOY SHARBANEE FIRST ONE REALTY PTY LTD MIKADO CORPORATION PTY LTD MR JASON YIN MR GREGORY KENNETH D'ARCY MR DANIEL AARON HYLTON TUCKETT LAKE SPRINGS PTY LTD WAVELL BROCKMAN PTY LTD MR DEREK DECLAN BRUTON CROWN LUGGERS PTY LTD TANGO88 PTY LTD FINMIN SOLUTIONS PTY LTD ANNBROOK CAPITAL PTY LTD ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD STATSMIN NOMINEES PTY LTD 16 OOFY PROSSER PTY LTD 17 18 19 20 LANTECH DEVELOPMENTS PTY LTD BROWNLOW PR PTY LTD BAYTOWER HOLDINGS PTY LTD FUTURITY PRIVATE PTY LTD TOP 20 TOTAL Total of Securities 7,815,000 5,900,000 4,000,000 3,781,000 3,500,000 3,113,330 1,980,000 1,600,000 1,300,000 1,200,000 1,076,865 950,000 950,000 930,000 800,000 600,000 500,000 500,000 400,000 300,000 17.5% 13.2% 9.0% 8.5% 7.9% 7.0% 4.4% 3.6% 2.9% 2.7% 2.4% 2.1% 2.1% 2.1% 1.8% 1.3% 1.1% 1.1% 0.9% 0.7% 41,196,195 92.30% 44,570,766 100% Page 31 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Shareholder Information (c) Substantial Shareholders The Company has received substantial shareholder notices from the following entities: Name of Shareholder Ordinary Shares % of total Shares M Resources Pty Ltd and Matthew Latimore Cape Coal Pty Ltd and Gerhard Redelinghuys Crocodile Capital (and associated entities) St Lucia Resources Capital Fund Pty Ltd Nicholas Jorss (and associated entities) 87,548,303 111,382,826 50,000,000 31,250,000 38,528,548 11.86% 15.09% 7.37% 5.16% 5.46% The Company notes that, as at the date of this report, the following shareholders own substantial shareholdings (≥ 5.0%) in Bowen Coking Coal Ltd: Name of Shareholder Ordinary Shares % of total Shares M Resources Pty Ltd and Matthew Latimore Cape Coal Pty Ltd and Gerhard Redelinghuys JP Morgan Nominees Australia Pty Limited 87,548,303 111,382,826 50,008,762 11.8% 15.0% 6.7% (d) Voting rights All ordinary shares carry one vote per share without restriction. Options and performance rights do not carry voting rights. (e) Restricted securities As at the date of this report, there are 96,000,000 ordinary shares subject to ASX escrow. (f) On-market buy back There is not a current on-market buy-back in place. (g) Business objectives The Group has used its cash and assets that are readily convertible to cash in a way consistent with its business objectives. Page 32 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Interests in Tenements Bowen Coking Coal Ltd held the following interests in tenements as at the date of this report: Country Location Project Tenement Status Current Interest (%) Australia Queensland Cooroorah MDL 453 Granted Australia Queensland Mt Hillalong EPC 1824 Granted Australia Queensland Hillalong East EPC 2141 Granted Australia Queensland Hillalong East EPC 1860 Granted Australia Queensland Lilyvale EPC 1687 Granted Australia Queensland Lilyvale EPC 2157 Granted Australia Queensland Mackenzie EPC 2081 Granted Australia Queensland Comet Ridge EPC 1230 Granted Australia Queensland Isaac River MDL 444 Granted Australia Queensland Isaac River EPC830 Granted 100% 100% 100% 100% 15% 15% 5% 100% 100% 100% Page 33 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Annual Mineral Resources Statement Resources Statement on 30 June 2018 (JORC 2012, Mt) Project Tenement Cooroorah MDL 453 EPC 1687 &2157 EPC 1230 Lilyvale Comet Ridge TOTAL Measured Resource Indicated Resource Inferred Resource Total % Holding 69 9 78 85 33 43 154 33 60 100% 15% 100% 161* 247* 8 8 * Includes 28Mt attributable to Stanmore Coal Ltd as part of the Lilyvale Joint Venture Resources Statement as at 30 June 2019 (JORC 2012, Mt) Project Tenement Cooroorah MDL 453 Lilyvale Comet Ridge EPC 1687 &2157 EPC 1230 Isaac River MDL 444 & EPC830 TOTAL Measured Resource Indicated Resource Inferred Resource Total % Holding 96 9 4 81 33 43 1 177 33 60 5 100% 15% 100% 100% 109 158* 275* 8 8 * Includes 28Mt attributable to Stanmore Coal Ltd as part of the Lilyvale Joint Venture Movements: - On 1 November 2018 the Company announced its maiden Resource estimate for its 100% owned Isaac River Project following a review from historic information - On 12 February 2019 the Company announced an update to the Resource estimate of its 100% owned Cooroorah project following the 2018 exploration program, and a further update on 3 April 2019 after obtaining further information from historic drilling. On 22 August 2019 the Company reported an increase in the Isaac River Resource as set out below. Further details can be found in the Company’s ASX announcement dated 22 August 2019. Project Tenement Measured Resource Indicated Resource Inferred Resource Total % Holding Isaac River MDL 444 & EPC830 6 3 - 9 100% Other than the change to the Isaac River Project noted above, the Group confirms that it is not aware of any new information or data (since 30 June 2019) that materially affects any other Mineral Resources for the projects set out above. The Group regularly reviews its Mineral Resources and Reserves to assess their reasonableness, engaging suitably qualified competent person/s where required. A summary of the governance and controls applicable to the Group’s Mineral Resources and Reserves processes is as follows: ▪ Review and validation of drilling and sampling methodology and data spacing, geological logging, data collection and storage, sampling and analytical quality control; Page 34 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Annual Mineral Resources Statement ▪ Geological interpretation — review of known and interpreted structure, lithology and weathering controls; ▪ Estimation methodology — relevant to mineralisation style and proposed mining methodology; ▪ Comparison of estimation results with previous mineral resource models, and with results using alternate modelling methodologies; ▪ Visual validation of block model against raw composite data; and ▪ Peer review by independent consultants as required. This Annual Mineral Resources and Ore Reserves Statement: ▪ is based on, and fairly represents, information and supporting documentation prepared by competent persons (referred to on page 2); and ▪ has been approved by Mr Troy Turner who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Turner, Managing Director and a fulltime employee of Xenith Consulting Pty Ltd, has sufficient experience that is relevant to the styles of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Turner has approved this Annual Mineral Resources and Ore Reserves Statement as a whole in the form and context in which it appears in this Annual Report. Page 35 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2019 Revenue Corporate and administrative expenses Employee benefits expense Impairment of loans Share-based payments Loss before income tax expense Income tax expense Loss for the period Note 30 June 2019 30 June 2018 $ $ 2 3 3 18 4 30,521 31,106 (631,115) (1,203,367) (596,189) (155,187) (104) (382,163) - - (1,579,050) (1,327,448) - - (1,579,050) (1,327,448) Other comprehensive income Other comprehensive income/(loss) for the period, net of tax - - Total comprehensive income/(loss) for the period (1,579,050) (1,327,448) Total comprehensive income for the period attributable to the owners of the Company (1,579,050) (1,327,448) Loss per share attributable to owners of the parent company Basic and diluted earnings per share 14 Cents (0.26)c Cents (0.34)c The accompanying notes form part of these financial statements. Page 36 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Consolidated Statement of Financial Position As at 30 June 2019 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Prepayments Total Current Assets NON-CURRENT ASSETS Exploration and evaluation assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Total Current Liabilities Note 30 June 2019 30 June 2018 $ $ 5 6 7 8 9 2,043,310 1,461,445 89,446 15,780 66,234 12,098 2,148,536 1,539,777 7,525,010 7,525,010 5,932,212 5,932,212 9,673,546 7,471,989 245,846 245,846 246,685 246,685 TOTAL LIABILITIES 245,846 246,685 NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY 9,427,700 7,225,304 10 11 53,398,058 49,830,181 471,863 258,294 (44,442,221) (42,863,171) 9,427,700 7,225,304 The accompanying notes form part of these financial statements. Page 37 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2019 Note Issued Capital Reserve Accumulated Losses Total Equity $ $ $ $ Balance at 30 June 2017 42,064,761 800 (41,535,723) 529,838 Loss for the period Total comprehensive income Issue of shares Share-based payments Share issue costs Balance at 30 June 2018 Loss for the period Total comprehensive income Issue of shares Exercise of options Conversion of performance shares Share-based payments Recognise prior years general reserve to other income 10 18 10 10 10 18 - - 8,419,000 - - - - 257,494 (653,580) - (1,327,448) (1,327,448) (1,327,448) (1,327,448) - - - 8,419,000 257,494 (653,580) 49,830,181 258,294 (42,863,171) 7,225,304 - - 3,427,150 106,440 167,794 - - - - - - (167,794) 382,163 (800) - (1,579,050) (1,579,050) (1,579,050) (1,579,050) - - - - - - 3,427,150 106,440 - 382,163 (800) (133,507) Share issue costs (133,507) Balance at 30 June 2019 53,398,058 471,863 (44,442,221) 9,427,700 The accompanying notes form part of these financial statements. Page 38 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Consolidated Statement of Cash Flows For the Year Ended 30 June 2019 CASH FLOWS FROM OPERATING ACTIVITIES Interest receipts Other receipts/payments Payments to suppliers and employees 30 June 2019 30 June 2018 $ $ 25,708 (22,628) 26,560 - (1,286,173) (1,379,136) Net cash used in operating activities 13 (1,283,093) (1,352,576) CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares and options Loans to unrelated entities Payments for capital raising costs (1,535,125) (1,523,623) (1,535,125) (1,523,623) 3,533,590 4,610,000 - (19,922) (133,507) (580,323) Net cash provided by financing activities 13 3,400,083 4,009,755 Net increase in cash held 581,865 1,133,556 Cash at Beginning of Period Coking Coal One cash acquired 1,461,445 - 325,153 2,736 Cash at End of Year 5 2,043,310 1,461,445 The accompanying notes form part of these financial statements. Page 39 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements For the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are general purpose financial statements that have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting Standards Board. Bowen Coking Coal Ltd is a for-profit entity for the purpose of preparing the financial statements. The financial statements are presented in Australian dollars. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. The financial statements are for the consolidated entity consisting of Bowen Coking Coal Ltd and its Controlled Entities. Bowen Coking Coal Ltd is a listed public company, incorporated and domiciled in Australia. The financial statements have been prepared on an accruals basis and are based on historical cost, modified by the measurement at fair value of selected non-current assets, financial assets and liabilities. The financial report was authorised for issue on 24 September 2019 by the directors of the Company. Separate financial statements for Bowen Coking Coal Ltd as an individual entity are no longer presented following a change to the Corporations Act 2001. However, financial information required for Bowen Coking Coal Ltd as an individual entity is included in Note 23. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit orientated entities. These financial statements and notes also comply with the International Financial Reporting Standards and Interpretations as issued by the International Accounting Standards Board (‘IASB’). Historical Cost Convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment. Going Concern The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. For the year ended 30 June 2019 the Group generated a consolidated loss of $1,579,050 and incurred operating cash outflows of $1,283,093. As at 30 June 2019 the Group has cash and cash equivalents of $2,043,310 and net assets of $9,427,700. The Group’s ability to continue to adopt the going concern assumption will depend upon the Group being able to manage its liquidity requirement and by taking some or all of the following actions: 1. raising additional capital; 2. successful exploration and subsequent exploitation of the Group’s tenements; Page 40 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Going Concern (Continued) 3. reducing its working capital expenditure; and 4. disposing of non-core projects. The directors have concluded as a result of the requirement to raise funds in the future there exists a material uncertainty that may cast significant doubt regarding the Group's ability to continue as a going concern and therefore, the Group may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the current financial position of the Group, and the Group’s ability to raise further capital, the directors have a reasonable expectation that the Group will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report. Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Group be unable to continue as a going concern. Principles of Consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bowen Coking Coal Ltd ("Company" or "parent entity") as at 30 June 2019, and the results of all subsidiaries for the period then ended. Bowen Coking Coal Ltd and its subsidiaries together are referred to in these financial statements as the Group or the economic entity. The names of the subsidiaries are contained in Note 21. All subsidiaries in Australia have a 30 June financial year end and are accounted for by the parent entity at cost. Subsidiaries are all entities over which the Group has control. The Group has control over an entity when the Group is exposed to, or has a right to, variable returns from its involvement with the entity, and has the ability to use its power to affect those returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Group. Changes in ownership interests When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in the carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Page 41 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Director/Chief Executive Officer. The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis of geographical locations as these locations have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are similar with respect to any external regulatory requirements. Management currently identifies the Group as having only one reportable segment, being the exploration of mineral projects in Australia. Income Tax The income tax expense/(income) for the period comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/(assets) are therefore measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well unused tax losses. Current and deferred income tax expense/(income) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. The Company and its Australian 100% owned controlled entities have not yet formed a tax consolidated group. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Page 42 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Exploration and Evaluation Assets Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant operations in relation to the area are continuing. A regular review will be undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. A provision is raised against exploration and evaluation assets where the directors are of the opinion that the carried forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. Restoration Costs Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the exploration and mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. The economic entity is not currently liable for any future restoration costs in relation to current areas of interest. Consequently, no provision for restoration has been deemed necessary. Impairment of Assets At each reporting date, the economic entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to profit or loss. Financial Instruments Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets. Page 43 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial Instruments (Continued) Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non- cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method, or cost. Fair value is the price that would be received to sell an asset or paid to transfer an asset. Amortised cost is calculated as: (a) the amount at which the financial asset or financial liability is measured at initial recognition; (b) less principal repayments; (c) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (d) less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The economic entity does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Page 44 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial Instruments (Continued) Impairment At each reporting date, the economic entity assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in profit or loss. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks and other short- term highly liquid investments with original maturities of less than 3 months. Issued Capital Ordinary shares are classified as equity. Transaction costs (net of tax where the deduction can be utilised) arising on the issue of ordinary shares are recognised in equity as a reduction of the share proceeds received. Share Based Payments The economic entity makes equity-settled share based payments to directors, employees and other parties for services provided or the acquisition of exploration assets. Where applicable, the fair value of the equity is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using the Black and Scholes option valuation pricing model which incorporates all market vesting conditions. Where applicable, the number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Where the fair value of services rendered by other parties can be reliably determined, this is used to measure the equity-settled payment. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST (or overseas VAT), except where the amount of GST incurred is not recoverable. In these circumstances the GST (or overseas VAT) is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis except for the GST component of investing and financing activities which are disclosed as operating cash flows. Foreign Currency Transactions and Balances Functional and presentation currency The functional and presentation currency of Bowen Coking Coal Ltd and its Australian subsidiaries is Australian dollars ($A). Page 45 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign Currency Transactions and Balances (Continued) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year- end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were measured. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Group Companies The financial results and position of foreign operations whose functional currency is different from the economic entity’s presentation currency are translated as follows: ▪ assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; ▪ ▪ income and expenses are translated at average exchange rates for the period; retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are recognised in other comprehensive income. Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present. The carrying amount of plant and equipment is reviewed periodically by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Page 46 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Plant and Equipment (Continued) Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Consolidated Entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for plant and equipment is 33%. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. Employee Benefits Short-term employee benefit obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled wholly within 12 months after the end of the reporting period are recognised in liabilities in respect of employees' services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Earnings Per Share (EPS) Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period adjusted for any bonus elements in ordinary shares issued during the period. 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. Page 47 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) New and Amended Standards and Interpretations For Future Periods The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the AASB that are necessary for the current reporting period. The following Accounting Standards and Interpretations are most relevant to the entity: AASB 15 Revenue from Contracts with Customers AASB 15 supersedes AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. The adoption of AASB 15 has not impacted the amounts disclosed within the financial statements. AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The adoption of this standard has not impacted the amounts disclosed in these financial statements. Critical Accounting Estimates and Judgements The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the economic entity. Key Judgements: Exploration and Evaluation Assets The economic entity performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. These reviews are based on detailed surveys and analysis of exploration and drilling results performed to reporting date. Exploration and evaluation assets at 30 June 2019 were $7,525,010. Page 48 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 2: REVENUE Revenue from operating activities: Interest received from other persons Excess capital raising funds received NOTE 3: EXPENSES Included in expenses are the following items: Accounting and audit fees ASX, ASIC, share registry expenses Consulting fees Insurance Legal fees Marketing Occupancy costs Other Travel expenses Employee benefits expense comprises: Directors and senior management fees Provision for leave entitlement 30 June 2019 30 June 2018 $ $ 25,707 4,814 30,521 31,106 - 31,106 30 June 2019 30 June 2018 $ $ 151,613 66,231 128,050 48,610 54,829 61,385 17,790 50,179 52,428 587,014 9,175 195,314 54,680 373,152 28,566 28,247 154,035 15,641 99,836 73,480 335,603 - Page 49 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 4: INCOME TAX EXPENSE 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 (Loss) from ordinary activities before income tax expense Income tax benefit calculated at domestic rate of 30% (2018: 27.5%) Tax effect of permanent differences: Non-deductible items Non-assessable income 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 Unused revenue losses for which no deferred tax asset has been recognised Unused capital losses for which no deferred tax asset has been recognised 30 June 2019 30 June 2018 $ $ - - - - - - (1,579,050) (1,327,448) (473,715) (365,048) 162,146 (46,572) - (56,586) 58,988 414,727 6,959 - (30,152) (44,529) (67,722) 432,770 - - 13,173,627 12,172,105 3,682,968 3,682,968 16,856,595 15,855,073 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 50 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 5: CASH AND CASH EQUIVALENTS Cash at bank and on hand Short term deposits NOTE 6: RECEIVABLES Current: Other receivables NOTE 7: OTHER CURRENT ASSETS Current: Prepayments Other NOTE 8: EXPLORATION AND EVALUATION ASSETS Exploration and evaluation expenditure carried forward in respect of areas of interest are: Acquisitions - at cost Exploration and evaluation phase - at cost Movement in exploration and evaluation assets: Acquisitions: Opening balance - at cost Acquisition costs during the period (see below) Total acquisitions costs Exploration and evaluation phase – at cost: Opening balance - at cost Capitalised exploration expenditure Deposit – Isaac River project Total exploration and evaluation phase – at cost: 30 June 2019 30 June 2018 $ 693,310 1,350,000 2,043,310 $ 411,445 1,050,000 1,461,445 30 June 2019 30 June 2018 $ $ 89,446 89,446 66,234 66,234 30 June 2019 30 June 2018 $ $ 15,780 - 15,780 11,514 584 12,098 30 June 2019 30 June 2018 $ $ 4,219,997 3,305,013 7,525,010 4,131,531 88,466 4,219,997 1,800,681 1,504,332 - 3,305,013 4,131,531 1,800,681 5,932,212 - 4,131,531 4,131,531 - 1,750,681 50,000 1,800,681 Carrying amount at the end of the year 7,525,010 5,932,212 Page 51 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 8: EXPLORATION AND EVALUATION ASSETS (Continued) 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 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 was 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 Identifiable assets acquired: Cash and cash equivalents Trade and other receivables Exploration expenditure Trade and other payables 30 June 2018 $ 165,637 1,610,000 89,700 167,794 750,000 1,250,000 98,400 4,131,531 2,736 6,141 4,227,331 (104,677) 4,131,531 Recoverability of the carrying amount of exploration assets is dependent on the successful development and commercial exploitation of projects, or alternatively, through the sale of the areas of interest. Page 52 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 9: TRADE AND OTHER PAYABLES Current: Trade payables and accrued expenses Short term employee benefits Other Total payables (unsecured) 30 June 2019 30 June 2018 $ $ 236,671 9,175 - 245,846 242,672 - 4,013 246,685 The average credit period on purchases of goods and services is 30 days. No interest is paid on trade payables. NOTE 10: CONTRIBUTED EQUITY Fully paid ordinary shares 2019 2018 No. of Shares $ No. of Shares $ Balance at the beginning of period 499,486,810 49,830,181 127,312,898 42,064,761 Share issues: Placement – 28 September 2017 Cape Coal acquisition September 2017 – 28 Acacia Coal acquisition September 2017 – 28 Area Coal acquisition – 2 October 2017 Cape Coal acquisition – 11 May 2018 Placement – 28 September 2018 Placement – 12 December 2018 Placement – 20 March 2019 and 31 May 2019 Conversion of Class B performance shares – 9 April 2019 Exercise of options – May & June 2019 Transaction costs associated with share issues (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) - - - - - - - - - - 200,434,782 4,610,000 70,000,000 1,610,000 17,391,304 400,000 54,347,826 1,250,000 30,000,000 549,000 74,875,000 1,198,000 31,250,000 500,000 82,340,452 1,729,150 13,000,000 167,794 5,322,000 106,440 - (133,507) - - - - - - - - - - - (653,580) Balance as at 30 June 706,274,262 53,398,058 499,486,810 49,830,181 Page 53 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 10: CONTRIBUTED EQUITY (continued) Fully paid ordinary shares (Continued) Ordinary shareholders are entitled to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amount paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll. Ordinary shares have no par value. Notes for the above table: (a) (b) (c) (d) (e) (f) (g) (h) (i) 200,434,782 shares issued at $0.023 each in the placement on 28 September 2017, raising $4,610,000. 70,000,000 shares with a fair value of $1,610,000 issued to Cape Coal Pty Ltd at no consideration, as part of consideration to acquire Coking Coal One Pty Ltd. The shares were valued at $0.023 per share. 17,391,304 shares with a fair value of $400,000 issued to Acacia Coal Pty Ltd at no consideration, as part of consideration to acquire the Comet Ridge Project (MLA 700005 and EPC1230). The shares were valued at $0.023 per share. 54,347,826 shares with a fair value of $1,250,000 issued to Area Coal Pty Ltd at no consideration, as part of consideration to acquire the Cooroorah Project (MDL 453) AND Hillalong Project (EPC1824). The shares were valued at $0.023 per share. 30,000,000 shares with a fair value of $549,000 issued to Cape Coal Pty Ltd at no consideration, as part of consideration to acquire the Hillalong East tenements (EPC2141 and EPC1860). The shares were valued at $0.0183 per share. 74,875,000 shares issued at $0.016 each in the placement on 28 September 2018, raising $1,198,000. 31,250,000 shares issued at $0.016 each in the placement on 12 December 2018, raising $500,000. 82,340,452 shares issued at $0.021 each in the placement issued on 20 March 2019 (for 72,680,952 shares) and 31 May 2019 (for 9,659,500 shares), raising $1,729,150. 13,000,000 Class B performance shares with a fair value of $167,794 converted into ordinary shares at no consideration. (j) 5,322,000 shares were issued upon exercise of options at $0.02 each, raising $106,440. Listed Options Listed Share Options $0.04 50,000,000 $0.04 50,000,000 Note Weighted average exercise price 30 June 2019 No. of Options Weighted average exercise price 30 June 2018 No. of Options Balance at the beginning of the reporting period No change during the period Exercisable at end of year $0.04 50,000,000 $0.04 50,000,000 $0.04 50,000,000 $0.04 50,000,000 Page 54 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 10: CONTRIBUTED EQUITY (continued) Unlisted Options Unlisted Share Options $0.029 90,378,000 $0.02 30,000,000 Note Weighted average exercise price 30 June 2019 No. of Options Weighted average exercise price 30 June 2018 No. of Options Balance at the beginning of the reporting period Change of options during the period: Issued to a director Issued to directors & an officer Exercised during the period Exercisable at end of year Performance Shares $0.02 30,000,000 $0.02 30,000,000 18 18 $0.03 30,000,000 $0.0338 35,700,000 $0.02 $0.029 (5,322,000) 90,378,000 - - - - - - $0.02 30,000,000 Weighted average exercise price Note Unlisted Performance Shares Balance at the beginning of the reporting period Changes of Performance Shares during the period: Issued to Cape Coal Pty Ltd Converted Balance at end of year Capital Management 8 10 - - - - - 30 June 2019 No. of Performance Shares 13,000,000 26,000,000 - 13,000,000 13,000,000 Weighted average exercise price - - - - - 30 June 2018 No. of Performance Shares 26,000,000 - 26,000,000 - 26,000,000 Exploration companies such as Bowen Coking Coal Ltd are funded almost exclusively by share capital. Management controls the capital of the Group to ensure it can fund its operations and continue as a going concern. Capital management policy is to fund its exploration activities principally by way of equity, and where required, debt and/or project finance. No dividend will be paid while the Group is in exploration stage. There are no externally imposed capital requirements. There have been no other changes to the capital management policies during the year. NOTE 11: RESERVES Share-Based Payments Reserve The share-based payment reserve is used to recognise the fair value of options and performance shares issued to consultants. This reserve can be reclassified as retained earnings if options lapse. Page 55 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 12: OPERATING SEGMENTS Segment Information Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on geographic basis, that is, the location of the respective areas of interest (tenements) in Australia. Operating segments are determined on the basis of financial information reported to the board of directors which is at the consolidated entity level. The Group does not have any products or services that it derives revenue from. The Group’s exploration and development activities in Australia is the Group’s sole focus. Accordingly, management currently identifies the Group as having only one reportable segment, being the exploration of mineral projects in Australia. There have been no changes in the reporting segments during the year. Accordingly, all significant operating decisions are based upon analysis of the consolidated entity as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole. NOTE 13: CASH FLOW INFORMATION 30 June 2019 30 June 2018 $ $ A. Reconciliation of Cash Flow from Operations with Loss after Income Tax: Loss after income tax (1,579,050) (1,327,448) Non-cash flows in loss from ordinary activities: Impairment of loans Equity settled compensation Changes in operating assets and liabilities: (Increase)/Decrease in receivables (Increase)/Decrease in prepayments and other assets 104 382,163 (22,628) (4,370) (34,503) 222,784 Increase/(decrease) in payables and accruals (59,312) (213,409) Cash flows from operations (1,283,093) (1,352,576) Page 56 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 13: CASH FLOW INFORMATION (Continued) B. Non-cash Financing Activities Share issue: - - - - - 70,000,000 shares with a fair value of $1,610,000 issued to Cape Coal Pty Ltd at no consideration, as part of consideration to acquire Coking Coal One Pty Ltd. The shares were valued at $0.023 per share. 17,391,304 shares with a fair value of $400,000 issued to Acacia Coal Pty Ltd at no consideration, as part of consideration to acquire the Comet Ridge (MLA 700005 and EPC1230). The shares were valued at $0.023 per share. 54,347,826 shares with a fair value of $1,250,000 issued to Area Coal Pty Ltd at no consideration, as part of consideration to acquire the Cooroorah project (MDL 453) AND Hillalong project (EPC1824). The shares were valued at $0.023 per share. 30,000,000 shares with a fair value of $549,000 issued to Cape Coal Pty Ltd at no consideration, as part of consideration to acquire the Hillalong East tenements (EPC2141 and EPC1860). The shares were valued at $0.0183 per share. 13,000,000 Class B performance shares with a fair value of shares at no $167,794 converted consideration. into ordinary NOTE 14: EARNINGS PER SHARE - - - - 1,610,000 400,000 1,250,000 549,000 167,794 30 June 2019 30 June 2018 $ $ Net loss used in the calculation of basic and diluted EPS attributable to owners of the parent company Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS (1,579,050) (1,327,448) 597,920,773 389,648,811 Options are considered potential ordinary shares. Options issued are not presently dilutive and were not included in the determination of diluted earnings per share for the period. NOTE 15: COMMITMENTS (a) Exploration Commitments The Group has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group. The following commitments exist at balance date but have not been brought to account. If the relevant option to acquire a mineral tenement is relinquished the expenditure commitment also ceases. The Group has the option to negotiate new terms or relinquish the tenements and also to meet expenditure requirements by joint venture or farm-in arrangements. Page 57 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 15: COMMITMENTS (Continued) Exploration Commitments (Continued) Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years Total commitment (b) Operating Lease Commitments The Group has no operating leases. (c) Capital Commitments The Group has no capital commitments. NOTE 16: CONTINGENT LIABILITIES 30 June 2019 30 June 2018 $ 464,025 1,311,925 - $ 523,000 859,000 - 1,775,950 1,382,000 There were no contingent liabilities at the end of the reporting period. NOTE 17: RELATED PARTY TRANSACTIONS Parent Entity Bowen Coking Coal Ltd is the legal parent and ultimate parent entity of the Group. Subsidiary Interest in subsidiaries are disclosed in Note 22. Key Management Personnel Short-term employee benefits Share-based payments 30 June 2019 30 June 2018 $ $ 592,014 382,163 974,177 306,804 - 306,804 Page 58 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 18: SHARE-BASED PAYMENTS Director and Employee Share-based Payments Share based payment expense recognised during the year: Share based payment expense recognised during the period: Allocation of value of options issued to a director in Dec 2018 (1) Options issued to key management personnel in May 2019 (2) 30 June 2019 30 June 2018 $ $ 78,356 303,807 382,163 - - - Notes for the above table, relating to the years ended 30 June 2019 are: 1. 30,000,000 options were granted to a director for nil consideration on 12 December 2018. The options vest on 12 December 2019 and expire on 12 December 2020. 10,000,000 options have an exercise price of $0.025, 10,000,000 options have an exercise price of $0.03 and 10,000,000 options have an exercise price of $0.035. The weighted average fair value of options granted during the period was 0.48 cents. The fair values at grant date were determined by using a Black-Scholes option pricing model that takes into account the share price at grant date, exercise price, expected volatility, option life, expected dividends, the risk free rate, the impact of dilution, the fact that the options are not tradeable. The inputs used for the Black-Scholes option pricing model for options granted were as follows: • grant dates: 12 December 2018 • share price at grant date: 1.6 cents • exercise prices: 10,000,000 options for 2.5 cents; 10,000,000 options for 3.0 cents; 10,000,000 options for 3.5 cents • expected volatility: 100% • expected dividend yield: nil • risk free rate: 1.957% 2. 35,700,000 options with an exercise price of $0.0338 were granted to directors and an officer for nil consideration on 31 May 2019. The options vested on grant date and expire on 30 June 2021. The weighted average fair value of options granted during the period was 0.85 cents. The fair values at grant date were determined by using a Black-Scholes option pricing model that takes into account the share price at grant date, exercise price, expected volatility, option life, expected dividends, the risk free rate, the impact of dilution, the fact that the options are not tradeable. The inputs used for the Black-Scholes option pricing model for options granted were as follows: • grant dates: 31 May 2019 • share price at grant date: 2.6 cents • exercise prices: 3.38 cents • expected volatility: 100% • expected dividend yield: nil • risk free rate: 1.12% Page 59 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 19: AUDITOR’S REMUNERATION Remuneration for the auditor of the parent entity: RSM Australia Partners and its related entities: Auditing or reviewing the financial reports NOTE 20: FINANCIAL RISK MANAGEMENT (a) Financial Risk Management Policies 30 June 2019 30 June 2018 $ $ 31,510 31,510 22,000 22,000 The Group's financial instruments comprises cash balances, receivables and payables, loans to and from subsidiaries and a loan from a related party. The main purpose of these financial instruments is to provide finance for Group operations. Treasury Risk Management Key executives of the Company meet on a regular basis to analyse exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework. Management is responsible for developing and monitoring the risk management policies and reports to the board. Financial Risks The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks are managed through monitoring of forecast cash flows, interest rates, economic conditions and ensuring adequate funds are available. Interest Rate Risk The Group's exposure to interest rate risk, which is the risk that a financial instrument's cash flows or fair value will fluctuate as a result of changes in market interest rates, arises in relation to the Group's bank balances. This risk is managed through the use of variable rate bank accounts. Liquidity Risk Liquidity risk is the risk that the Group will not be able meet its financial obligations as they fall due. This risk is managed by ensuring, to the extent possible, that there is sufficient liquidity to meet liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation. The Group's activities are funded from equity and where required and available debt and/or project finance. There is no requirement to repay principal or pay interest on the related party loan during the loan term. Page 60 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 20: FINANCIAL RISK MANAGEMENT (Continued) (a) Financial Risk Management Policies (Continued) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is their carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit risk arises from exposures to deposits with financial institutions and sundry receivables. Credit risk is managed and reviewed regularly by key executives. The key executives monitor credit risk by actively assessing the rating quality and liquidity of counter parties: ▪ only banks and financial institutions with an ‘A’ rating are utilised; and ▪ all other entities are rated for credit worthiness taking into account their size, market position and financial standing. At 30 June 2019, there was no concentration of credit risk, other than bank balances. Foreign Currency Risk The Group has no material exposure to foreign currency risk at the end of the reporting period. (b) Financial Instrument Composition and Contractual Maturity Analysis Financial assets: Within 6 months: cash & cash equivalents (i) receivables (i) prepayments Financial liabilities: Within 6 months: payables (i) 30 June 2019 30 June 2018 $ $ 2,043,310 1,461,445 89,446 15,780 66,234 12,098 2,148,536 1,539,777 245,846 245,846 246,685 246,685 (i) Non-interest bearing. The contractual cash flows do not differ to the carrying amount. (c) Net Fair Values Fair values of financial assets and financial liabilities are materially in line with carrying values. Page 61 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 20: FINANCIAL RISK MANAGEMENT (Continued) (d) Sensitivity Analysis The Company has performed sensitivity analysis relating to its exposure to interest rate risk. At year end, the effect on profit and equity as a result of a 1% change in the interest rate, with all other variables remaining constant, is immaterial. NOTE 21: SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1: Country of incorporation Australia Brazil Australia Ownership interest 30 June 2019 30 June 2018 100% 100% - 100% 100% 100% Coking Coal One Pty Ltd Cabral Metais Ltd Northern Yeelirrie Pty Ltd * * Deregistered on 1 May 2019. NOTE 22: SUBSEQUENT EVENTS On 6 August 2019, the Company announced that it had agreed terms whereby the exercise of the Company’s 50 million listed options, exercisable at 4.0 cents each on or before 30 October 2019, have been fully underwritten. In addition, the Company agreed to a private placement to the Underwriter of 10 million shares at 5c per share, to raise $500,000. The placement was completed on 7 August 2019. On 19 August 2019 13,000,000 Class A Performance Shares were converted in to 13,000,000 fully paid ordinary shares, having met the conversion criteria. The conversion of the Class A Shares marks the completion of the delayed compensation milestones for the Acquisition of the tenements as stipulated in the Prospectus dated 3 August 2017 and as approved by shareholders on 10 August 2017. On 22 August 2019 the Company reported an increase in the Isaac River Resource as set out in the Annual Resource Statement. Further details can be found in the Company’s ASX announcement dated 22 August 2019. On 4 September 2019, the Company announced that an agreement has been reached with Rio Tino Exploration Pty Limited (“RTX”) to amend the original acquisition agreement relating to EPC’s 2141 & 1860, whereby the Company will pay RTX $100,000 consideration to terminate a buy-back right and amend both the royalty rate (from 1.25% to 1.50%) and the deferred payment right. Full details of the amended agreement are set out in the Company’s ASX announcement dated 4 September 2019. On 16 September 2019, the Company issued 12,000,000 unlisted performance rights to a consultant COO, with various vesting conditions and expiry dates. Subsequent to 30 June 2019 (and up to the date of this report), a total of 13,155,234 options have been exercised in to 13,155,234 ordinary shares, as follows: • 7,726,000 $0.02 options, raising $154,520; and • 5,429,234 $0.04 options, raising $217,169. Page 62 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2019 NOTE 22: SUBSEQUENT EVENTS (Continued) Other than the matters noted above, there are no other matters or circumstances that have arisen since the end of the year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. NOTE 23: PARENT ENTITY INFORMATION The following information relates to the parent entity, Bowen Coking Coal Ltd at 30 June 2019. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Reserves Accumulated losses Total equity Loss for the period Other comprehensive income for the period 30 June 2019 30 June 2018 $ 2,000,941 7,525,010 9,525,951 116,559 - $ 1,519,139 5,897,015 7,416,154 166,028 - 116,559 166,028 9,409,392 7,250,126 53,398,058 49,830,181 471,863 258,294 (44,460,529) (42,838,349) 9,409,392 7,250,126 (1,560,804) (1,302,626) - - Total comprehensive income for the period (1,560,804) (1,302,626) The Company has no contingent liabilities, nor has it entered into any guarantees in relation to the debts of its subsidiaries. The Company has not entered into any contractual commitments for the acquisition of property, plant and equipment. The Company and its Australian controlled entities have formed a tax consolidated group as at the date of this report. NOTE 24: COMPANY DETAILS The registered office and principal place of business is: Level 19, 1 Eagle Street Brisbane, Queensland, 4000 Australia NOTE 25: DIVIDENDS & FRANKING CREDITS There were no dividends paid or recommended during the financial year. There are no franking credits available to the shareholders of the Company. Page 63 BOWEN COKING COAL LTD - ACN 064 874 620 ANNUAL REPORT 2019 Director’s Declaration The directors of the Company declare that: 1. The attached financial statements and notes are in accordance with the Corporations Act 2001, including: a. complying with Accounting Standards which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of their performance for the financial year ended on that date. 2. The chief executive officer and chief financial officer have each declared that: a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view. 3. In the directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the board of directors. Gerhard Redelinghuys Director Dated 24 September 2019 Brisbane, Queensland Page 64 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 2019, 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 2019 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. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates the Group incurred a loss after tax of $1,579,050 and had net cash outflows from operating and investing activities of $1,283,093 and $1,535,125 respectively for the year ended 30 June 2019. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our conclusion is not modified in respect of this matter. 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. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter Carrying Value of Capitalised Exploration Expenditure Refer to Note 8 in the financial statements The Group has capitalised exploration expenditure with a carrying value of $7.525,010 as at 30 June 2019. How our audit addressed this matter Our audit procedures in relation to the carrying value of capitalised exploration costs included: We determined this to be a key audit matter due to the significant management in assessing the carrying value in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, including: judgment involved • Determination of whether expenditure can be specific mineral that associated with resources, and expenditure is allocated to an area of interest; the basis on which finding • 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. Other Information • 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. • 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 2019 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. 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. Page 66 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/auditorsresponsibilities/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 21 to 26 of the directors' report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Bowen Coking Coal Limited, for the year ended 30 June 2019, 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: 24 September 2019 Albert Loots Partner Page 67 

Continue reading text version or see original annual report in PDF format above