Capricorn Metals
Annual Report 2017

Plain-text annual report

Corporate Directory Directors Heath Hellewell – Executive Chairman Guy LeClezio – Non-Executive Director Stuart Pether – Non-Executive Director Joint Company Secretaries Jonathan Shellabear Natasha Santi Registered Office & Principal Place of Business Level 1, 28 Ord Street WEST PERTH WA 6005 +61 8 9212 4600 +61 8 9212 4699 Telephone: Facsimile: Email: enquirieis@capmet.com.au Website: capmetals.com.au Share Registry Automic Pty Ltd Level 2, 267 St Georges Terrace PERTH WA 6000 Telephone: Or +61 2 9698 5414 1300 288 664 Auditor William Buck Audit (WA) Pty Ltd Level 3, 15 Labouchere Road SOUTH PERTH WA 6151 Securities Exchange Listing Australian Securities Exchange ASX Code: CMM Annual General Meeting The Annual General Meeting of Capricorn Metals Ltd will be held in the Function Room, The Celtic Club, 1st Floor, 48 Ord Street, West Perth Australia at 9 am on Thursday 23rd November 2017. Registered under the Corporations Act 2001 in the State of Western Australia on 22nd September 2006 Contents Chairman’s Letter Operating and Financial Review Directors’ Report Remuneration Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report ASX Additional Information Group Tenement Schedule Page No. 2 3 8 11 17 18 19 20 21 22 47 48 55 57 CAPRICORN METALS LTD ABN 84 121 700 105 1 Chairman’s Letter Dear Shareholders, It is with great satisfaction we present to you the Capricorn Metals Ltd 2017 Annual Report. This past reporting period has been a very busy and very exciting year, with many key achievements by staff and consultants, as we seek to realise our aim of becoming a significant new Australian gold producer. We continue working towards the delivery of the Feasibility Study for the proposed open pit mining and standalone processing facility at Karlawinda. This study will be based on our maiden Ore Reserve estimate for the Bibra deposit, completed during the year. Whilst we are confident this study will provide a positive outcome and ultimately lead to the development of the project, we see this as just the start for the Company at Karlawinda. In parallel with our ongoing development studies we have maintained a very active exploration program as we seek to realise the full potential of the Company’s assets and look to maintain the strong growth in our resource and reserve base for the proposed operation. We are excited by the endowment potential of the entire tenement area at Karlawinda. The opportunities to increase the resource at Bibra are significant. Furthermore, the advanced prospects at Francopan and K3, both of which have all the hall marks of another major mineralised system, have significant untested potential. In our opinion, there is excellent potential for significant new discoveries at Karlawinda and we intend to continue an aggressive exploration program to unlock these opportunities which should add significant value to the underlying Karlawinda Gold Project. We consider this as a rare opportunity to be at the start of defining what we believe will develop into a significant gold camp. We thank you, our shareholders, for your ongoing support and look forward to the continued transition of our Company into a profitable gold producer. Heath Hellewell CAPRICORN METALS LTD ABN 84 121 700 105 2 Operating and Financial Review OPERATIONS REVIEW Highlights  Completion of a positive Scoping Study and commencement of the Karlawinda Gold Project Feasibility Study.  Grant of Mining Lease M52/1070 following execution of Native Title Land Access Agreement for the Karlawinda Gold Project.  Upgraded Mineral Resource estimate and release of the Maiden Bibra Ore Reserve statement. Karlawinda Gold Project The Karlawinda Gold Project is located in the Pilbara region of Western Australia, 65km south-east of the town of Newman. Tenure Originally acquired in February 2016, Capricorn assumed 100% control of the key mineral tenements covering an area of 290km2 following the final payment of $1.5M to the previous project owners in August 2016. Throughout the reporting period Capricorn continued to build its tenement position at Karlawinda to its current total area of 1419km2. A Land Access agreement was executed with the single traditional claimant group, the Nyiyaparli, in November 2016. Mining lease M52/1070 was granted over the key ore deposit at Bibra and surrounding areas for potential project infrastructure in December 2016, the lease is valid for 21 years. Figure 1: Location map & tenement holdings CAPRICORN METALS LTD ABN 84 121 700 105 3 Operating and Financial Review (Cont’d) Geology The project area is underlain by a largely unexplored and only recently recognised belt of Archaean greenstone rocks that were discovered in 2005. This belt of predominantly volcanic and sedimentary rocks is located on the southern margin of the Sylvania Dome, a major structure where Archaean-aged, predominantly granitic basement rocks, thought to be part of the Pilbara Craton, are exposed at surface within surrounding younger Proterozoic aged sedimentary basins. The Bibra deposit is part of a large-scale Archaean aged gold mineralising system, mineralisation at Bibra is hosted within a package of deformed meta-sediments and meta volcanic rocks and is developed on four main parallel, shallow dipping structures. Close to surface in the weathered rock, oxide gold mineralisation has been developed over the structures from surface to a depth of approximately 60m. Approximately 5km south east of Bibra, previous drilling at the Francopan and K3 prospects has intercepted gold mineralisation with similar characteristics in similar host rocks to that which is present at Bibra. Strategy Following acquisition of the Karlawinda Gold Project, Capricorn immediately initiated a strategy to bring the project into gold production via an initial open pit mine and large scale standalone ore processing facility. Underpinning this strategy has been an aggressive program of drilling to grow the project resource base at the Bibra deposit to the current estimate of 1,114,000oz (Indicated and Inferred), a growth in resource inventory for the project of over 70% since the project acquisition. Scoping Study A Scoping Study for a mine development at Karlawinda was completed in July 2016. The study, which built on project scoping work undertaken by the previous project owners, concluded that a single large open pit mine at the Bibra deposit, feeding a 3Mtpa standalone CIL (carbon-in-leach) processing facility on site was economically the most robust of two scenarios considered. Feasibility Study Following the positive outcome from the scoping study, Capricorn commenced a Feasibility Study into the development of the Karlawinda Gold Project. This study is supported by a major 75,000m infill drilling program completed in December 2016. The aim of the program was to upgrade the confidence level in the previous Inferred Mineral Resource at Bibra to the higher confidence Indicated category. This drilling program was one of the largest drilling campaigns undertaken by the Australian gold sector in 2016. The upgraded Mineral Resource estimation at Bibra deposit currently stands at: 31 million tonnes @ 1.1g/t Au for 1,114,000 ounces of gold Based on this Mineral Resource estimate and the ongoing Feasibility Study work completed at that time, Capricorn released an Ore Reserve estimate for Bibra on 7th August 2017. The Bibra Ore Reserve is currently estimated at: 21,025,000 tonnes @ 1.06g/t Au for 713,000 ounces of gold The Karlawinda Gold Project Feasibility Study is scheduled for completion in the coming weeks. Exploration In parallel with the ongoing resource development drilling programs and feasibility work, Capricorn has maintained a very active program of exploration activities. Whilst most of the work this year was understandably focused around the Bibra deposit and its immediate extensions, the Company has been pro-actively building on an improved understanding of the mineralisation and controls at Bibra, as it continued to build up its regional datasets and refined its future exploration targets. This work has been completed in anticipation of a major exploration push for the coming year as the Company now looks towards building on the completion of the Feasibility Study and maximizing its investment at Karlawinda. Particularly exciting is the potential of the Francopan and K3 prospects where significant mineralisation is already known to occur from previous drilling and the Bundoran prospect where there are several coincident geophysical signatures with similar characteristics to the Bibra deposit. As the Company moves towards production the leverage off exploration success will be significant for shareholders. Corporate To ensure that Capricorn has the appropriate balance and blend of skills and experience between the Board and executive management, an organisational restructuring was undertaken during March 2017. The restructure has laid the foundation for the Company to move forward and deliver on its strategy to become a significant Australian gold producer. On the 6th of February 2017, Capricorn announced the execution of a binding agreement with Hawke’s Point Holdings L.P. to raise a total of $10 million in new equity through the issue of two tranches of shares at a price of 11.7c per share. CAPRICORN METALS LTD ABN 84 121 700 105 4 Operating and Financial Review (Cont’d) The investment by Hawke’s Point, which followed an extensive due diligence process, is a strong endorsement for the Karlawinda Gold Project and means that Capricorn is fully-funded through to the completion of the Feasibility Study. On the 28th April, Tranche One shares were ratified and Tranche Two shares were approved for issue at a General Meeting of shareholders. Madagascar Projects As previously reported the Company has an active divestment program for its Madagascan assets, as they are now considered non- core, with the sole focus to be on the development of the Karlawinda Gold Project. During the year, the Company made progress with the following divestment activities in Madagascar:  Sale of Madagascar Graphite Ltd to Blackearth Minerals NL (Blackearth). $75,000 cash was paid on signing of the Share Sale & Purchase Agreement in February 2017. o o Remaining consideration of $75,000 cash and 2,000,000 shares due on completion, expected by 30 November 2017. Completion requires Blackearth to complete and initial public offering and receive approval to be added to the official list of the Australia Securities Exchange. In addition, a further $1,000,000 cash is due upon a ‘decision to mine’ being made by Blackearth within 8 years of completion of this transaction;  Sale of equipment and vehicles for $17,722; and  Sale of shares in NEXT Source Materials Inc (formerly Energizer Resources Inc.) for $21,330. The principal Madagascar assets remaining to be divested include some real estate and mineral lease properties. Bibra Ore Reserve On 7 August 2017, the Company released its maiden JORC 2012 compliant Ore Reserve estimate of 21,025,000 tonnes @ 1.06g/t Au for 713,000 ounces for the Bibra deposit at the Karlawinda Gold Project (see ASX Release dated 7 August 2017), which is based on the updated April 2017 Mineral Resource estimate (ASX release 10 April 2017) of 31,331,100 tonnes @ 1.1g/t Au for 1,114,000 million ounces. BIBRA GOLD DEPOSIT JORC OPEN PIT RESERVE STATEMENT (A$1500/ounce assumption) PROVED RESERVES PROBABLE RESERVES TOTAL RESERVES Tonnes (Mt) Grade (g/t Au) Ounces (Moz) Tonnes (Mt) Grade (g/t Au) Ounces (Moz) Tonnes (Mt) Grade (g/t Au) Ounces (Moz) - - - 21 1.06 0.713 21 1.06 0.713 Date August 2017 Notes on the August 2017 Ore Reserve: 1. Reserves are a subset of Resources 2. Ore Reserves conform with and use the JORC 2012 Code definitions 3. Ore Reserves are calculated using a gold price of A$1500/ounce 4. Ore Reserves are calculated using a cut-off grade between 0.40g/t and 0.47g/t Au 5. Mining dilution, estimated by modelling to a Selective Mining Unit (SMU) with dimensions of 5m x6.25m x2.5m result in a reduction of 13% of reportable Au ounces 6. All figures are rounded to reflect appropriate levels of confidence which may result in apparent errors of summation Bibra Mineral Resource An updated Mineral Resource for the Bibra deposit was estimated in July 2016 and a further updated Mineral Resource estimate was undertaken in April 2017. The April 2017 Indicated and Inferred Resource estimate for the Bibra deposit was 31,331,100 tonnes @ 1.10g/t for 1,114,000 ounces of contained gold (see ASX release dated 10 April 2017). The resource is reported at a 0.5g/t Au cut-off grade and is constrained within an optimised open pit shell using a gold price of A$1750/oz. The Bibra JORC-2012 compliant Inferred Resource Estimate as at 30 June 2017, is as follows: BIBRA GOLD DEPOSIT JORC OPEN PIT RESOURCE ESTIMATE DATE April 2017 July 2016 Tonnes (Mt) 28.9 --- INDICATED Grade (g/t Au) 1.10 --- Ounces (Moz) 1.03 --- Tonnes (Mt) 2.4 25.5 INFERRED Grade (g/t Au) 1.06 1.10 Ounces (Moz) 0.084 0.914 Tonnes (Mt) 31.3 25.5 TOTAL Grade (g/t Au) 1.10 1.10 Ounces (Moz) 1.114 0.914 CAPRICORN METALS LTD ABN 84 121 700 105 5 Operating and Financial Review (Cont’d) BIBRA GOLD DEPOSIT JORC OPEN PIT RESOURCE ESTIMATE BY DOMAIN DOMAIN Laterite Oxide – Upper Saprolite Oxide – Lower Saprolite Transitional Fresh TOTAL Tonnes 1,544,000 2,318,000 3,075,000 2,071,600 22,322,500 31,331,100 Grade (g/t Au) 1.4 1.0 1.0 1.0 1.1 1.1 Ounces 67,600 73,000 99,850 65,270 808,380 1,114,000 Notes on the April 2017 Inferred Mineral Resource Estimate: 1. Refer to JORC 2012 Table (1) in Appendix 1 of ASX Release on 10 April 2017 for full details. 2. Discrepancy in summation may occur due to rounding. 3. The mineralisation has been wireframe modelled using a 0.3g/t Au assay cut-off grade. The resource estimate has been reported above a block grade of 0.5g/t Au. 4. The resource has been constrained by a A$1750/ounce conceptual optimal pit shell. 5. Ordinary kriging was used for grade estimation utilising Surpac software v6.6.2. 6. Grade estimation was constrained to blocks within each of the mineralised wireframes. 7. See ASX announcement dated 10th April 2016 for Inferred Resource announcement. The Bibra JORC-2012 compliant Inferred Resource Estimate as at 30 June 2016, was as follows: BIBRA GOLD JORC OPEN PIT INFERRED RESOURCE ESTIMATE Domain Laterite Saprolite Transition Fresh TOTAL Tonnes 2,100,000 4,300,000 1,500,000 17,600,000 25,500,000 Grade (g/t Au) 1.3 1.0 1.2 1.1 1.1 Ounces 85,000 142,000 58,000 629,000 914,000 Notes on the July 2016 Inferred Mineral Resource Estimate: 1. Refer to JORC 2012 Table (1) in Appendix 1 of ASX release 4 July 2016 for full details. 2. Discrepancy in summation may occur due to rounding. 3. The mineralisation has been wireframe modelled using a 0.3g/t Au assay cut-off grade. The resource estimate has been reported above a block grade of 0.5g/t Au. 4. The resource has been constrained by a A$1750/ounce conceptual optimal pit shell. 5. Ordinary Kriging was used for grade estimation utilising Surpac software v6.6.2. 6. Grade estimation was constrained to blocks within each of the mineralisation wireframes. 7. See ASX announcement dated 4th July 2016 for Inferred Resource announcement. Competent Persons Statement The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled or reviewed by Mr. Michael Martin who is Chief Geologist and a full-time employee of the Company. Mr. Michael Martin is a current Member of the Australian Institute of Geoscientists and has sufficient experience, which is relevant to the style of mineralisation and types of deposit under consideration and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Martin consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. The information in this report that relates to Exploration Results or Mineral Resources is based on information reviewed by Mr. Peter Langworthy who is Executive General Manager Geology and a full-time employee of the Company. Mr. Peter Langworthy is a current Member of the Australian Institute of Mining and Metallurgy and has sufficient experience, which is relevant to the style of mineralisation and types of deposit under consideration and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Langworthy consents to the inclusion in the report of the matters based on the information in the form and context in which it appears. The information in this report that relates to Ore Reserves for Bibra is based on information compiled by Quinton de Klerk. Mr de Klerk is an employee of Cube Consulting PL and is a Fellow of the Australian Institute of Mining and Metallurgy (FAusIMM, #210114). Mr de Klerk has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity currently being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. de Klerk consents to the inclusion in this report of the matters based on the information in the form and context in which it appears. Capricorn Metals confirms that it is not aware of any new information or data that materially affects the information included in the previous ASX announcements on Resources (10/4/2017) and Metallurgy (19/6/2017) and, in the case of estimates of Mineral Resources, Ore Reserves, Plant operating costs and Metallurgy, all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons’ findings are presented have not materially changed from previous market announcements. CAPRICORN METALS LTD ABN 84 121 700 105 6 Operating and Financial Review (Cont’d) FINANCIAL REVIEW Financial Position The consolidated loss for the year was $3,293,239 (2016: $3,700,868). In addition, a payment of $75,000 was received in relation to the sale of wholly owned subsidiary Madagascar Graphite Ltd. During the year, Madagascan operations required parent company funding of $0.1 million, representing a shortfall in the self-funding strategy (2016 requirement: $0.3 million). The cash balance of the Group at 30 June 2017 was $5.5 million. Corporate Transactions Blackearth Minerals NL: In February 2017, the Company committed to the sale of the wholly owned Mauritian subsidiary, Madagascar Graphite Ltd and its assets which comprise 100% ownership of Madagascan subsidiary, Mada-Aust SARL, by way of a Share Sale & Purchase Agreement with Blackearth Minerals NL (Blackearth). The key terms of the agreement saw the payment of $75,000 non-refundable deposit on signing of the agreement. Consideration outstanding comprises a further $75,000 cash and the issue of 2,000,000 ordinary shares in Blackearth, both due on completion of the sale which requires Blackearth to successfully complete an initial public offer and receive conditional approval for admission to the official list of the Australian Securities Exchange. A further deferred consideration of $1,000,000 is payable upon a ‘decision to mine’ being made by Blackearth within 8 years of completion of this transaction. The transaction is expected to conclude by 30 November 2017. Future Prospects The group’s cash balance at 30 June 2017 will be sufficient to see the group through the planned activities in relation to the completion of the Feasibility Study at Karlawinda, during the coming year. CAPRICORN METALS LTD ABN 84 121 700 105 7 Directors’ Report The directors present their report on the Consolidated Group, comprising Capricorn Metals Ltd (referred to in these financial statements as “Parent” or “Capricorn” and its wholly owned subsidiaries (“the Group”), together with the financial report for the year ended 30 June 2017 and the audit report thereon. 1. DIRECTORS The directors of the Company at any time during or since the end of the year are set out below. Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Mr Heath HELLEWELL B.sc Hons, MAIG Non-Executive Director – Appointed 3 February 2016 Executive Chairman – From 14 March 2017 Mr Hellewell is an exploration geologist with over 22 years of experience in gold, base metals and diamond exploration predominantly in Australia and West Africa. Mr Hellewell graduated from Curtin University with an Honours Degree in Geology and is a member of the Australian Institute of Geoscientists. Mr Hellewell has previously held senior exploration positions with a number of successful mining and exploration groups including DeBeers Australia Pty Ltd and Resolute Mining Limited. Mr Hellewell joined Independence Group NL in 2000 prior to the Company’s IPO and was part of the team that identified and acquired the Tropicana project area, eventually leading to the discovery of the Tropicana and Havana gold deposits which are now subject to a production joint venture with Anglo Ashanti Australia Ltd. Mr Hellewell ultimately rose to the position of Exploration Manager at Independence Group. Most recently he was the co-founding Executive Director of Doray Minerals Limited, where he was responsible for the Company’s exploration and new business activities. Following the discovery of the Andy Well gold deposits in 2010, Doray Minerals was named “Gold Explorer of the Year” in 2011 by The Gold Mining Journal and in 2014 Heath was the co-winner of the prestigious “Prospector of the Year” award, presented by the Association of Mining and Exploration Companies. Mr Hellewell is not an independent director. During the past three years Mr Hellewell has held the following other listed company directorships:  Non-Executive Director – Core Exploration Ltd (15 September 2014 to present)  Non-Executive Director – Duketon Mining Limited (18 November 2014 to present) Mr Guy LE CLEZIO BA Non-Executive Chairman – 4 April 2007 to 14 March 2017 Non-Executive Director – From 14 March 2017 Mr Le Clezio holds a Bachelor of Arts from the University of Western Australia. He has had 20 years’ experience in the mining and exploration industry and was an Executive Director of Eyres Reed Ltd and Canadian Imperial Bank of Commerce who were leading Western Australian stockbrokers specialising in the mining industry. He was a founding director of World Titanium Resources Ltd and a former director of ASX listed Windy Knob Resources Ltd. Mr LeClezio is an independent director. During the past three years Mr Le Clezio has not held any other listed company directorships. Mr Stuart PETHER B.E Hons, MAUSIM Non-Executive Director – Appointed 14 March 2017 Mr Pether has over 25 years resources industry experience in project development, technical studies, mine operations and corporate management. He is equally skilled in open pit and underground mining in a range of commodities including gold, nickel and lead and zinc. A qualified mining engineer, he holds a Bachelor in Engineering (Mining Engineering) from the Western Australia School of Mines. Mr Pether was previously the Chief Executive Officer for Kula Gold and executive director of the 100% subsidiary Woodlark Mining Limited, the owner of the advance development project the Woodlark Island Gold Project in PNG. He held the position of Chief Operating Officer at Catalpa Resources where he was responsible for the construction, commissioning and operation of the $92 million Edna May Gold Project and represented Catalpa Resources on the Cracow Gold Mine Joint Venture committee with Newcrest Mining. Following the merger of Catalpa Resources with Conquest Mining in November 2011, forming Evolution Mining, he took up the position of Vice President, Project Development where he was responsible for technical studies and major capital projects, including the construction of the $140 million Mt Carlton Gold Project in Queensland. Prior, he worked in various mining management roles for CBH Resources, PacMin Mining Limited, Dominion Mining and Western Mining Corporation. Mr Pether is a member of the Australasian Institute of Mining and Metallurgy. CAPRICORN METALS LTD ABN 84 121 700 105 8 Directors’ Report (Cont’d) Mr Pether is not an independent director, as he is the appointed board nominee of substantial shareholder, Hawke’s Point Holdings I Limited. During the past three years Mr Pether has held no other listed company directorships. Mr Peter THOMPSON B.sc, M.Sc, MAusIMM Managing Director – Appointed 3 February 2016 – Resigned 14 March 2017 to take the role of Chief Operating Officer Mr Thompson trained as a geologist in Trinity College Dublin and Leicester University, he came to Australia in 1988 and has had a continuous career in exploration and mining for gold, nickel and copper. Employed by WMC, Anaconda Nickel, Jubilee Mines, St Barbara Ltd, Beaconsfield Gold and Central Asia Resources in a range of roles, he has overseen several discoveries, project developments, feasibility studies, acquisitions, divestments and company start-ups. Recent responsibilities as CEO of Beaconsfield Resources and Central Asia Resources have been for operating deep underground gold and heap leach start-up operations. During the past three years Mr Thompson has held the following other listed company directorships:  Chief Executive Officer & Managing Director – Central Asia Resources Ltd (4 July 2014 to 8 February 2016)  Non-Executive Director – Central Asia Resources Ltd (8 February 2016 to 5 September 2016)  Non-Executive Director – Marmota Energy Ltd (26 May 2015 to present) Mr Peter LANGWORTHY BSc(Hons), MAusIMM Non-Executive Director – 24 July 2013 to 2 February 2016 Executive Director – From 3 February 2016 – Resigned 14 March 2017 to take the role of Executive General Manager – Geology Mr Langworthy is a geologist with a career spanning 26 years in mineral exploration and project development in Australia and Indonesia. He has specific expertise in building successful teams that have been responsible for significant mineral discoveries and in integrating technically sound exploration and resource development strategies into corporate planning. His industry experience includes 12 years in senior management roles with WMC Resources, four years with PacMIn Mining as Exploration Manager, five years with Jubilee Mines where he built the team responsible for numerous discoveries at the Cosmos Nickel Mine and the Sinclair nickel project, and three years with Talisman Mining as Technical Director. At Jubilee he was part of the corporate team responsible for the growth of the company until it was taken over by Xstrata for $23/share. During the past three years Mr Langworthy has held the following other listed company directorship:  Non-Executive Chairman – Syndicated Metals Limited (20 March 2012 to present)  Non-Executive Director – Silver Mines Limited (21 June 2016 to present) Mr Jonathan SHELLABEAR B.Sc Hons, MBA Non-Executive Director – Appointed 5 December 2016 – Resigned 14 March 2017 to take the role of Chief Financial Officer. Mr Shellabear has over 25 years’ experience in the Australian and international resources industry as a senior corporate executive and investment banker specialising in the mining sector. Mr Shellabear holds a Bachelor of Science with Honours in Geology and a Master in Business Administration from the University of Western Australia. He has extensive capital markets and advisory experience in the resources sector and has held senior investment banking positions with NM Rothschild & Sons, Deutsche Bank and Resource Finance Corporation. Mr Shellabear was previously the Managing Director and Chief Executive Officer of Dominion Mining Ltd which was acquired by Kingsgate Consolidated Ltd in 2011 to create, at that time, Australia’s second largest gold company by market capitalisation. He has also held senior corporate roles with Portman Limited (now Cliffs Natural Resources) as General Manager, Business Development and Heron Resources Ltd as Managing Director and Chief Executive Officer. During the past three years Mr Shellabear has not held any other listed company directorship: 2. COMPANY SECRETARIES Mr Graeme Boden and Mrs Natasha Santi were appointed as Joint Company Secretaries on 30 September 2012. Mrs N Santi has 9 years’ experience, as an employee of Boden Corporate Services Pty Ltd, providing company secretarial and accounting services to a range of ASX listed and unlisted companies. On 1 April 2017 Mrs N Santi became a full-time employee of Capricorn Metals and ceased arrangements with Boden Corporate Services. On 11 May 2017 Mr Graeme Boden resigned as Joint Company Secretary and Mr Jonathan Shellabear, the Chief Financial Officer was appointed Joint Company Secretary. CAPRICORN METALS LTD ABN 84 121 700 105 9 Directors’ Report (Cont’d) 3. MEETINGS OF DIRECTORS During the financial year, the directors’ attendance at meetings of directors and committees of directors were as follows: Directors’ Meetings Audit A 8 8 2 6 6 2 B 8 8 2 6 6 2 A - - - - - - Committee Meetings Remuneration B A - - - - - - - - - - - - B - - - - - - Nomination A B - - - - - - - - - - Director H Hellewell G LeClezio S Pether P Thompson P Langworthy J Shellabear A = Number eligible to attend B = Number attended The Full Board sits as the Audit, Remuneration and Nomination Committees when those responsibilities are required to be fulfilled. 4. PRINCIPAL ACTIVITIES The principal activities of the consolidated entity during the financial year were mineral exploration and project evaluation. There was no change in the nature of these activities during the financial year. 5. OPERATING RESULTS The consolidated loss of the consolidated entity after providing for income tax amounted to $3,293,239 (2016: $3,700,868). 6. DIVIDENDS PAID OR RECOMMENDED No dividends were paid or recommended to be paid during the financial year (2016: Nil). 7. REVIEW OF OPERATIONS A review of the consolidated entity's operations during the year and the results of those operations are contained in the Operating and Financial Review section of this Annual Report from page 2. 8. FINANCIAL POSITION The net assets of the Group have increased by $6,9897,009 to $30,107,548 during the financial year. This significant increase is largely due to net capital raising proceeds of $9,612,383 and the capitalisation of exploration expenditure. The directors believe the group is in a financial position to progress its current objectives and strategies. 9. SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than as set out elsewhere in the report, there were no significant changes in the state of affairs. 10. SUBSEQUENT EVENTS There were no material events arising subsequent to 30 June 2017, to the date of this report which may significantly affect the operations of the consolidated entity, the results of those operations and the state of affairs of the consolidated entity in the future, other than:  22 September 2016, 6,000,000 unlisted incentive options were issued under the Incentive Option Plan to Chief Financial Officer, Mr J Shellabear. The options are exercisable at $0.15 per share and expire on 5 May 2021. 11. FUTURE DEVELOPMENTS Likely future developments in the operations of the consolidated entity are referred to in the Operating and Financial Review section of this Annual Report. 12. ENVIRONMENTAL ISSUES Mining and exploration operations in Madagascar and Australia are subject to environmental regulation under the Laws of each country. The Group’s current activities generally involve disturbance associated with exploration drilling programmes in Australia, with only low-level activities in Madagascar. There have been no breaches of the Group’s obligations under environmental laws. CAPRICORN METALS LTD ABN 84 121 700 105 10 Directors’ Report (Cont’d) 13. DIRECTORS INTERESTS As at the date of this report, the interests of the Directors in shares and options of the Company were: Director H Hellewell G LeClezio S Pether No. of Shares 102,757,655 19,444,276 250,000 No. of Unlisted Options 1,000,000 1,000,000 - 14. CORPORATE GOVERNANCE The Company’s corporate governance statement can be found at the following URL: http://capmetals.com.au/wp-content/uploads/2017/09/170929-CMM-Corporate-Governance-Statement.pdf 15. REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for each Key Management Personnel of Capricorn Metals Ltd. The remuneration policy was approved by the Board. Executives receive a base salary, superannuation, fringe benefits, performance incentives and retirement benefits as relevant or appropriate to their position. The remuneration committee reviews executive packages annually by reference to Company performance, executive performance, comparable information from industry sectors and other listed companies and independent advice. The performance of executives is reviewed annually, by the remuneration committee. Executives may be granted unlisted share options from time to time, as determined by the Board. The Board expects that the remuneration structure implemented will result in the Company being able to attract and retain executives to manage the consolidated entity. It will also provide executives with the necessary incentives to work towards sustainable growth in shareholder value. The payment of bonuses, options and other incentive payments are reviewed by the remuneration committee annually as part of the review of executive remuneration, and a recommendation is put to the Board for approval. The Board can exercise its discretion in relation to approving incentives, bonuses and options and can recommend changes to the committee's recommendations. Any changes must be justified by reference to measurable performance criteria. Details of Remuneration for Year Ended 30 June 2017: Executive Director & Executive Management At 30 June 2017, the senior executives of the Company, who are full time employees, had conditions of employment as set out below. Either party may terminate their agreement without cause by giving written notice of three months. There is no termination fee payable other than during the term of notice. Name Position Mr Heath Hellewell Mr Jonathan Shellabear Mr Peter Langworthy Mr Peter Thompson Executive Chairman Chief Financial Officer Salary Package per annum Annual leave days per annum Options (1) $246,375 25 1,000,000 $317,550 20 - Executive General Manager – Geology $246,375 30 7,300,000 Chief Operating Officer $317,550 20 8,500,000 Note: (1) In addition to their contracted remuneration set out above 6,000,000 (2016: 10,800,000) unlisted Options were issued as incentives during the year ended 30 June 2017 (see (b) equity issued as part of remuneration). Non-Executive Directors The base fee for a non-executive director is $40,000 per annum. The Company makes contributions at the statutory minimum rate to superannuation funds nominated by directors, in addition to the base fee. In addition to the base non-executive director fee, Mr G LeClezio was also issued 1,000,000 unlisted options during the year ended 30 June 2017. The aggregate amount of remuneration payable to all non-executive directors was set prior to ASX listing, at $200,000 per annum. Directors’ fees cover all main board activities and committee memberships. CAPRICORN METALS LTD ABN 84 121 700 105 11 Directors’ Report (Cont’d) (a) Remuneration for Key Management Personnel of the consolidated entity during the year was as follows: 2017 Non-Executive Directors: G LeClezio S Pether (1) H Hellewell (2) J Shellabear (3) Executive Directors: H Hellewell P Thompson (4) P Langworthy (5) Management: P Thompson (4) P Langworthy (5) J Shellabear (3) J L Marquetoux Company Secretaries: G Boden & N Santi (6) N Santi (7) Total Key Management Personnel Short Term Benefits Salary & Director Fees $ Other Service Fees $ Post-Employment Benefits Share Based Expense Superannuation $ Annual Leave $ Value of Options $ Total $ Performance related % 40,000 12,775 29,200 9,570 75,000 160,000 100,000 426,545 96,667 75,000 96,667 152,031 420,365 - 33,750 33,750 880,660 - 4,000 - - - - - 4,000 - - - - - 128,998 - 128,998 132,998 3,800 - - 909 7,125 13,077 9,500 34,411 9,183 7,125 9,183 - 25,491 - 3,206 3,206 63,108 - - - - 8,334 - - 8,334 16,550 24,472 8,590 - 49,612 - 2,999 2,999 60,945 7,324 - - - 7,324 - - 14,648 291,699 237,021 - - 528,720 - 436 436 51,124 16,775 29,200 10,479 97,783 173,077 109,500 479,604 414,099 343,618 114,440 152,031 1,024,188 128,998 40,391 169,389 543,804 1,681,515 14.33 - - - 7.49 - - 70.44 68.98 - - 1.08 Notes: (1) (2) (3) (4) (5) (6) Mr Stuart Pether was appointed a Non-Executive Director on 14 March 2017. Mr H Hellewell transitioned from Non-Executive Director to Executive Chairman on 14 March 2017. Mr J Shellabear was appointed a Non-Executive Director on 5 December 2016. Mr Shellabear transitioned from Non-Executive Director to Chief Financial Officer on 14 March 2017 and was appointed Joint Company Secretary on 11 May 2017. Mr P Thompson transitioned from Managing Director to Chief Operating Officer on 14 March 2017. Mr P Langworthy transitioned from Executive Director to Executive General Manager – Geology on 14 March 2017. Payments made to Mr Graeme Boden through Boden Corporate Services Pty Ltd (BCS) include time spent on Company activities, including accounting and administration by G Boden and other employees of BCS, including N Santi as Joint Company Secretary (until 31 March 2017, see 7 below). Mr G Boden resigned as Joint Company Secretary on 11 May 2017. (7) Ms Natasha Santi ceased employment with Boden Corporate Services Pty Ltd and became a direct employee of the Company from 1 April 2017, continuing in the role of Joint Company Secretary. There were no bonuses paid to any Key Management Personnel during the year. CAPRICORN METALS LTD ABN 84 121 700 105 12 Directors’ Report (Cont’d) 2016 Non-Executive Directors: G LeClezio H Hellewell P Woods (1) Executive Directors: P Thompson (2) P Langworthy (3) Management: J L Marquetoux Company Secretaries: G Boden & N Santi (4)(5) Total Key Management Personnel Short Term Benefits Salary & Director Fees $ Other Service Fees $ Post-Employment Benefits Share Based Expense Superannuation $ Annual Leave $ Value of Options $ Total $ Performance related % 40,950 18,250 24,628 100,000 48,450 232,278 169,783 - 402,061 3,000 - - - - 3,000 - 130,134 133,134 2,850 - 1,299 8,045 3,563 15,757 - - - - - 8,423 4,738 13,161 - - - - - 64,258 51,407 115,665 - - 15,757 13,161 115,665 46,800 18,250 25,927 180,726 108,158 379,861 169,783 130,134 679,778 - - - 35.56 47.53 - - Dr P Woods resigned as a director on 3 February 2016. Mr P Thompson was appointed Managing Director on 3 February 2016. Notes: (8) (9) (10) Mr P Langworthy transitioned from a Non-Executive Director to an Executive Director role on 3 February 2016. (11) Mr G Boden resigned as a director on 3 February 2016. Mr Boden did not receive payment of a director’s fee. (12) Payments made to G Boden through Boden Corporate Services Pty Ltd (BCS) include time spent on Company activities, including accounting and administration by G Boden and other employees of BCS, including N Forde as Joint Company Secretary. There were no bonuses paid to any Key Management Personnel during the year. CAPRICORN METALS LTD ABN 84 121 700 105 13 Directors’ Report (Cont’d) (b) Equity issued as part of remuneration: Options: During the year ended 30 June 2017, 7,800,000 (2016: 10,800,000) unlisted options, were issued to Key Management Personnel. The options have the following terms and vesting profiles. 7,000,000 options exercisable at $0.20 on or before 31 May 2020, subject to the following vesting periods : - - - 2,333,333 (one third) vest on 25 November 2017; 2,333,333 (one third) vest on 25 November 2018; and 2,333,334 (one third) vest on 25 November 2019. 800,000 options exercisable at $0.15 on or before 5 May 2021, subject to the following vesting periods: - - - 266,666 (one third) vest on 11 May 2018; 266,667 (one third) vest on 11 May 2019; and 266,667 (one third) vest on 11 May 2020. Details of the options issued are as follows: Key Management Person H Hellewell G LeClezio P Thompson P Langworthy N Santi Vested No. Granted No. 1,000,000 1,000,000 2,500,000 2,500,000 800,000 7,800,000 - - - - - - Grant Date 25/11/2016 25/11/2016 25/11/2016 25/11/2016 13/06/2017 Value per Option at Grant Date $0.021 $0.021 $0.021 $0.021 $0.021 Exercise Price Expiry Date 31/05/2020 31/05/2020 31/05/2020 31/05/2020 05/05/2021 $0.20 $0.20 $0.20 $0.20 $0.15 (c) Movements in share and options holdings, held by key management personnel: Movements in options over equity instruments: The movement during the reporting period in the number of options over ordinary shares in the Entity held, directly, indirectly or beneficially, by each key management person, including their related parties is as follows: Balance 1 July 2016 Granted as Remuneration Exercised Expired Balance 30 June 2017 Vested During the Year Vested & Exercisable 30 June 2017 Directors: H Hellewell G LeClezio S Pether (1) Management: P Thompson P Langworthy J Shellabear JL Marquetoux Company Secretaries: G Boden (2) N Santi - 2,000,000 - 2,000,000 6,000,000 4,800,000 - 250,000 11,050,000 1,000,000 1,000,000 - 2,000,000 2,500,000 2,500,000 - - 5,000,000 750,000 250,000 1,000,000 - 800,000 800,000 - (1,000,000) - (1,000,000) - (1,000,000) - (1,000,000) 1,000,000 1,000,000 - 2,000,000 8,500,000 7,300,000 - - 15,800,000 - - - - - - - - 2,000,000 1,600,000 - - 3,600,000 2,000,000 1,600,000 - - 3,600,000 - - - (250,000) (250,000) (750,000) (250,000) (1,000,000) - 800,000 800,000 - - - - - - - - - - - - - - 14,050,000 7,800,000 (1,000,000) (2,250,000) 18,600,000 3,600,000 3,600,000 Note: (1) (2) S Pether was appointed a director on 14 March 2017. G Boden resigned as company secretary on 11 May 2017. CAPRICORN METALS LTD ABN 84 121 700 105 14 Directors’ Report (Cont’d) Movements in Share Holdings: The movement during the reporting period in the number of ordinary shares in the Entity held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: Acquired Options Exercised Disposed Balance 30 June 2017 Directors: H Hellewell G LeClezio S Pether (1) Management: P Thompson P Langworthy J Shellabear JL Marquetoux Company Secretaries: G Boden (2) N Santi Balance 1 July 2016 102,757,655 16,444,276 N/A 119,201,931 6,279,974 5,104,903 - - 11,384,877 1,000,000 - 1,000,000 - 2,000,000 250,000 2,250,000 388,100 - - - 388,100 - - - - 1,000,000 - 1,000,000 - - - - - - - - 131,586,808 2,638,100 1,000,000 Note: (1) (2) S Pether was appointed a director on 14 March 2017. G Boden resigned as company secretary on 11 May 2017. (d) Related Party Transactions with Key Management Personnel: - - - - - - - - - - - - - 102,757,655 19,444,276 250,000 122,451,931 6,668,074 5,104,903 - - 11,772,977 N/A - - 134,224,908 Apart from details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year end. Transactions between related parties are on usual commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The aggregate amounts recognised during the year relating to key management personnel and their related parties are as follows: Key Management Person P Langworthy (1) G Boden (2) Transaction Exploration programme management Corporate services 2017 $ 1,937,760 128,998 2,066,758 2016 $ 644,037 130,134 774,171 Note: (1) (2) OMNI GeoX Pty Ltd, of which Mr P Langworthy is a Director and shareholder, provides services in relation to the management and execution of the exploration programme, for which fees were billed on hourly rates the same as for other clients, as were due and payable under normal terms. The agreement may be terminated by one months’ notice. Boden Corporate Services Pty Ltd, of which Mr G Boden is a director, provided services in company secretarial, accounting and administration roles for which service fees were billed based on normal market rates, and were due and payable under normal terms. Boden Corporate provided these services from 1 October 2013 to 31 May 2017. Amounts payable to key management personnel at the reporting date arising from these contract services were as set out below: Current payables: Trade and other payables 2017 $ 2016 $ 62,611 62,611 95,914 95,914 CAPRICORN METALS LTD ABN 84 121 700 105 15 Directors’ Report (Cont’d) Company Performance The following table shows the gross revenue, profits, dividends and share price at the end of financial year for the past five financial years ending 30 June: Consolidated Entity Revenue Net Profit/(Loss) Share Price at Year End Dividends Paid 2013 664,831 (3,262,572) 1.9c - 2014 1,831,271 229,752 2.8c - 2015 1,334,642 (602,534) 1.8c - 2016 700,637 (3,700,868) 15.0c - 2017 425,592 (3,293,239) 8.1c - The Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of key management personnel. - - END OF AUDITED REMUNERATION REPORT - - 16. NON-AUDIT SERVICES No fees were paid or payable to William Buck Audit (WA) Pty Ltd for non-audit services during the year ended 30 June 2017 (2016: Nil). 17. INDEMNIFYING OFFICERS AND AUDITORS The Company has established an insurance policy insuring Directors and officers of the Company against any liability arising from a claim brought by a third party against the Company or its Directors and officers, and against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as a Director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. In accordance with a confidentiality clause under the insurance policy, the amount of the premium paid to insurers will not be disclosed. This is permitted under S300(9) of the Corporation Act 2001. No indemnity has been obtained for the auditor of the group. 18. SHARE OPTIONS At the date of this report, the unissued ordinary shares of Capricorn Metals Ltd under option are as follows: Grant Date 20 April 2016 25 November 2016 9 March 2017 5 May 2017 13 June 2017 Date of Expiry 31 May 2020 31 May 2020 5 May 2021 5 May 2021 5 May 2021 Exercise Price $0.10 $0.20 $0.15 $0.15 $0.15 No. Under Option 10,800,000 7,000,000 18,284,101 10,205,927 9,400,000 55,690,028 1,000,000 options at a price of $0.15 per share were exercised during the year ended 30 June 2017 (2016: Nil). 19. 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. 20. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2017 has been received and can be found on page 17 of the annual report. Signed in accordance with a resolution of the Board of Directors. Mr H Hellewell Executive Chairman Perth, Western Australia 28 September 2017 CAPRICORN METALS LTD ABN 84 121 700 105 16 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2017 Revenue Other Income Fair value loss on other financial assets Gain/(loss) on disposal of other financial assets Employee benefits expense Depreciation expense Foreign currency gain Administration costs Exploration expenditure Share-based payments Reversal of impairment of receivable Impairment of other financial assets Impairment of assets & liabilities related to subsidiary disposal group Impairment of deferred exploration and evaluation expenditure Loss before income tax expense Income tax expense Net loss attributable to members of the parent entity Other Comprehensive Income: Items that may be re-classified to profit or loss: - Adjustment from translation of foreign controlled entities - Revaluation of property asset Total comprehensive loss for the year attributable to members of the parent entity Note 2(a) 2(b) 4 3 9 20 4 10 12 5 2017 $ 2016 $ 189,214 236,378 (22,632) 5,357 (1,048,075) (73,727) 74 (1,316,337) (152,479) (545,221) 7,328 (66,885) (85,848) 248,099 452,538 (216,868) (51,554) (685,981) (62,673) 338 (707,937) (257,535) (115,665) 22,673 - - (417,000) (2,322,216) (3,289,853) (3,696,781) (3,386) (4,087) (3,293,239) (3,700,868) 16,357 16,287 20,395 2,167,734 (3,260,595) (1,512,739) Earnings per share: Basic loss per share (cents per share) Diluted loss per share (cents per share) 19 19 (0.65) (0.65) (1.36) (1.36) The accompanying notes form part of these financial statements CAPRICORN METALS LTD ABN 84 121 700 105 18 Consolidated Statement of Financial Position As at 30 June 2017 Current Assets Cash and cash equivalents Other current receivables Other current assets Other financial assets Assets classified as held for sale Total Current Assets Non-Current Assets Property, plant & equipment Deferred exploration and evaluation costs Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Other liability Short-term provisions Total Current Liabilities Non-Current Liabilities Trade and other payables Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Note 2017 $ 2016 $ 6 8 7 4 10 9 12 13 14 15 16 17 18 5,541,663 196,169 23,964 70,139 5,831,935 5,050,000 10,881,935 373,498 20,668,339 21,041,837 11,755,911 119,232 44,426 175,629 12,095,198 - 12,095,198 4,819,707 8,565,465 13,385,172 31,923,772 25,480,370 1,346,353 2,398 89,057 1,437,808 1,867,017 2,305 25,931 1,895,253 378,416 378,416 374,578 374,578 1,816,224 2,269,832 30,107,548 23,210,539 42,121,506 2,327,978 (14,341,936) 32,509,123 1,750,113 (11,048,697) 30,107,548 23,210,539 The accompanying notes form part of these financial statements. CAPRICORN METALS LTD ABN 84 121 700 105 19 Consolidated Statement of Changes in Equity For the year ended 30 June 2017 Balance at 1 July 2015 Loss for the year Other comprehensive income Total comprehensive income Issue of shares Cost of capital raised Share based payments Balance at 30 June 2016 Balance at 1 July 2016 Loss for the year Other comprehensive income Total comprehensive income Issue of shares Cost of capital raised Share based payments Balance at 30 June 2017 Note Issued Capital $ 14,733,538 Accumulated Losses $ (7,347,829) Foreign Currency Translation Reserve $ Asset Revaluation Reserve $ (754,034) - - - - 18,412,074 (636,489) - 32,509,123 (3,700,868) - (3,700,868) - - - - (11,048,697) - 20,395 20,395 - - - (733,639) - 2,167,734 2,167,734 - - - - 2,167,734 Option Reserve $ 200,353 - - - - - - 115,665 316,018 Total $ 6,832,028 (3,700,868) 2,188,129 (1,512,739) 18,412,074 (636,489) 115,665 23,210,539 32,509,123 (11,048,697) (733,639) 2,167,734 316,018 23,210,539 - - - 10,150,000 (537,617) - 42,121,506 (3,293,239) - (3,293,239) - - - (14,341,936) - 16,357 16,357 - - - (717,282) - 16,287 16,287 - - - 2,184,021 - - - - - 545,221 861,239 (3,293,239) 32,644 (3,260,595) 10,150,000 (537,617) 545,221 30,107,548 The accompanying notes form part of these financial statements 16 16 17 16 16 17 CAPRICORN METALS LTD ABN 84 121 700 105 20 Consolidated Statement of Cash Flows For the year ended 30 June 2017 Cash flows from Operating Activities Payments to suppliers and employees Payments for exploration expenditure Interest received Royalties received Other Income Net cash used in operating activities Cash flows from Investing Activities Payments for property, plant and equipment Proceeds on sale of fixed assets Proceeds on sale of financial assets Option payment received on potential sale of exploration permits Deposit received on sale of Subsidiary Proceeds on sale of potential future royalty Capitalised exploration expenditure Payment for the acquisition of the Karlawinda tenements Cash acquired on acquisition of Greenmount Resources Pty Ltd Net cash used in investing activities Cash flows from Financing Activities Proceeds received from the issue of shares Costs of capital raised Deferred payments under share purchase agreement Security deposit Net cash flows provided by financing activities Net (decrease)/increase in cash held Cash and cash equivalent at the beginning of the year Effect of exchange rates on cash holdings in foreign currencies Cash directly associated with assets classified as held for sale Cash and cash equivalents at the end of the year Note 2017 $ 2016 $ (1,916,351) (121,330) 93,723 108,929 71,127 (1,763,902) (175,138) 17,887 21,330 30,323 75,000 - (12,405,323) (1,500,000) - (13,935,921) 10,150,000 (537,617) (26,162) (98,364) 9,487,857 (1,558,667) (273,398) 34,161 91,360 185,691 (1,520,853) (44,488) 49,550 200,771 - - 305,960 (1,511,517) - 88,225 (911,499) 14,133,644 (636,489) (47,996) (40,000) 13,409,159 (6,211,966) 10,976,807 11,755,911 778,206 336 (2,618) 898 - 5,541,663 11,755,911 21 6 10 6 The accompanying notes form part of these financial statements. CAPRICORN METALS LTD ABN 84 121 700 105 21 Notes to the Consolidated Financial Statements For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements were authorised for issue on 28 September 2017 by the Directors of the Company. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless otherwise stated. The consolidated financial statements of Capricorn Metals Ltd for the year ended 30 June 2017 comprises the Company and its subsidiaries (together referred to as the ‘Group’ or ‘Consolidated Entity’). Capricorn Metals Ltd is a listed public company, incorporated and domiciled in Australia. The Group is a for profit entity for financial reporting purposes under Australian Accounting Standards. Basis of Preparation: Going Concern The financial statements have been prepared on a going concern basis which assumes the settlement of liabilities and the realisation of assets in the ordinary course of business. For the year ended 30 June 2017 the Group has incurred a loss of $3,293,239 (2016: $3,700,868) and at 30 June 2017 the Group had working capital of $4,394,127, excluding assets held for sale, (30 June 2016: $9,860,658) including a cash and cash equivalents balance of $5,541,663 (30 June 2016: $11,755,911). Net cash used in operating and investing activities in the year to 30 June 2017 was $15,699,823 (2016: $2,432,352). The Directors believe that it is appropriate to prepare the financial report on a going concern basis because, although a capital raising may be required to fund further exploration and development expenditure, the Directors are confident that a sufficient capital raising can be completed, as has been demonstrated during 2017, through the successful placement to raise $10 million. Further, if a sufficient capital raising cannot be made, the Company is able to reduce expenditure within the available cash balance. Reporting Basis and Conventions Except for the cash flow information, the financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied. Accounting Policies: (a) Principles of Consolidation The consolidated financial statements incorporate the financial statements of the Parent Entity and Entities (including special purpose entities) controlled by the Parent Entity (its subsidiaries). The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 27. The financial statements of the subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group. Unrealised gains or transactions between the group and its associates are eliminated to the extent of the group’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. 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 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 controlled entity 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. (b) Income Tax The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the reporting date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax CAPRICORN METALS LTD ABN 84 121 700 105 22 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the statement of profit and loss and other comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated 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. (c) Property, 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. Property: Land and Buildings are measured using a revaluation model in accordance with paragraph 31 of AASB 116 Property, Plant and Equipment. The entire class of property, plant and equipment to which land and buildings belong is subject to review and revalued on the basis of independent valuations. Any revaluation adjustment to the carrying amount of land and buildings is recognised in other comprehensive income and accumulated in equity under the heading of asset revaluation reserve. Plant and equipment: Plant and equipment are measured on the cost basis less depreciation and impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation: The depreciable amount of all fixed assets including capitalised lease assets, is depreciated on a reducing balance commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Buildings Plant and Equipment Computers Motor vehicles Field equipment Depreciation Rate 1% 7.5% - 50% 20% 20% 40% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of the reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. (d) Assets held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through the sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets, deferred tax assets, employee benefits assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity- accounted investee is no longer equity accounted. (e) Exploration, Evaluation and Development Expenditure Exploration, evaluation and development expenditure incurred is either written off as incurred or accumulated in respect of each identifiable area of interest. Tenement acquisition costs are initially capitalised. Costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area, sale of the respective areas of interest or where activities in the area have not yet reached a stage, which permits reasonable assessment of the existence of economically recoverable reserves. CAPRICORN METALS LTD ABN 84 121 700 105 23 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Accumulated costs in relation to an abandoned area are written off in full against profit 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. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the discounting on the provision is recorded as a finance cost on the statement of profit or loss and other comprehensive income. (f) Financial Instruments Recognition and measurement: Financial instruments are initially measured at fair value on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Financial assets at fair value through profit or loss: Financial assets are classified as “fair value through profit or loss” when they are held for trading for the purpose of short-term profit taking. Such assets are subsequently measured at fair value with changes in carrying amount being included in the statement of profit or loss and other comprehensive income. Financial liabilities: Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Fair value: Fair value is determined based on current bid process for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment: At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. In the case of available- for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the statement of profit or loss and other comprehensive income. (g) Impairment of Debtors Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Group in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Group. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short‐term discounting is not applied in determining the allowance. The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of profit or loss and other comprehensive income. (h) Impairment of Assets At each reporting date, the group 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 assets, 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 the statement of profit or loss and other comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. CAPRICORN METALS LTD ABN 84 121 700 105 24 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (i) Interests in Joint Ventures The Groups interests in the joint venture entity is recorded using the equity method of accounting in the consolidated financial statements. Details of the Groups interest is provided in Note 11. (j) Foreign Currency Transactions and Balances Functional and presentation currency: The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transaction 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. Exchange differences arising on the translation of monetary items are recognised in the statement of profit or loss and other comprehensive income. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the statement of profit or loss and other comprehensive income. Group companies: The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows: - - - Assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; Income and expenses are translated at average exchange rates for the period, when the average rate approximates the rate at the date of the transaction; and Retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of profit or loss and other comprehensive income in the period in which the operation is disposed of. (k) Employee Benefits Short-term employee benefits: Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and annual leave entitlements. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and annual leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ long service leave entitlements are recognised as provisions in the statement of financial position. Other long-term employee benefits: Provision is made for employees’ long service leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on corporate bonds that have maturity dates that approximate the terms of the obligations. Any re-measurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. Defined contribution superannuation benefits: All employees of the Group, located in Australia receive defined contribution superannuation entitlements, for which the Group pays the fixed superannuation guarantee contribution (currently 9.50% of the employee’s average ordinary salary) to the employee’s superannuation fund of choice. All contributions in respect of employees’ defined contribution entitlements are recognised as an expense when they become payable. The Group’s obligation with respect to employees’ defined contribution entitlements is limited to its obligation for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are measured at the CAPRICORN METALS LTD ABN 84 121 700 105 25 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the Group’s statement of financial position. Equity-settled compensation: The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’) refer to Note 20. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing model. The fair value of performance rights determined by consideration of the Company’s share price at the grant date and consideration of the specific non-market vesting conditions applicable to the performance rights. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award. (l) Provisions Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. (m) Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. (n) Revenue and Other Income Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Revenue from the rendering of a service is recognised upon the delivery of the service to the customers. Revenue from Royalties are recognised upon delivery of goods to customers or to the minimum monthly contractual amount. Rental income is recognised on a straight line basis over the period of the lease term so as to reflect a constant periodic return on the property. Revenue is measured at fair value of the consideration received or receivable to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be measured reliably. All revenue is stated net of the amount of goods and services tax (GST). (o) Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. (p) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (q) Value Added Tax (VAT) Revenues, expenses and assets are recognised net of the amount of VAT, except where the amount of VAT incurred is not recoverable from the Madagascan tax authority. In these circumstances 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 VAT. CAPRICORN METALS LTD ABN 84 121 700 105 26 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Cash flows are presented in the statement of cash flow on a gross basis, except for the VAT component of investing and financing activities, which are disclosed as operating cash flows. (r) Contributed Equity Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (s) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (t) Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial report 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 group. Key Estimates: Impairment The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Impairment of investments in subsidiaries arises where the carrying value of the asset exceeds the net asset position of the subsidiaries and impairment is recognised to the value of the deficit. Impairment of Intangible assets is recognised upon managements’ best estimate that the carrying value exceeds the fair value of the asset considering future cash flows and profits arising from the asset. Share-Based Payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing model, using the assumptions detailed in Note 20. The fair value of performance rights is determined by the share price at the date of valuation and consideration of the probability of the vesting condition being met. Key Judgements: Exploration and Evaluation Expenditure Tenement acquisition costs are initially capitalised and then amortised with other exploration and evaluation expenditure written off as incurred. Costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area, sale of the respective areas of interest or where activities in the area have not yet reached a stage, which permits reasonable assessment of the existence of economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. The Directors believe that the capitalised exploration expenditure should not be written off at reporting date as the tenements areas have been reviewed for impairment indicators and Directors believe no indicators of impairment exist. Non-Current Receivables Non-Current Receivables includes the tax (VAT) recoverable from the Madagascan tax authority. The Directors believe the full amount to be non- recoverable at 30 June 2017 and therefore a provision for impairment has been made. Accrued Expenses Accrued expenses are amounts in respect of the Share Sale Agreement with WTR Holdings Pty Ltd (formerly Madagascar Resources NL). The liability is only repayable from 70% of the labradorite royalty cash receipts by Mada-Aust SARL and is split between current and non-current portions. The directors believe the royalty generating operations will continue at a rate which will pay the liability in accordance with the agreement. The current portion of the liability is based on the estimate of the next financial year’s cash receipts with the remaining balance not expected to be settled in the next financial year treated as non-current. (u) Other receivables Other receivables include amounts due from customers for services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(g) for further discussion on the determination of impairment losses. (v) Other payables Other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. CAPRICORN METALS LTD ABN 84 121 700 105 27 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (w) Adoption of New and Revised Accounting Standards The Group has adopted all of the new and revised pronouncements which became mandatory for annual reporting periods beginning on or after 1 July 2016. Standards and interpretations issued, but not yet adopted: Certain new accounting standards and interpretations have been published that are not yet mandatory for 30 June 2017 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations, most relevant to the consolidated entity, are set out below. Mandatory application date/ Date adopted by Company Must be applied for reporting periods commencing on or after 1 January 2018. Therefore the application date for the Company will be for the reporting period commencing on 1 July 2018. Must be applied for annual reporting periods beginning on or after 1 January 2018. Therefore the application date for the Company will be for the reporting period commencing on 1 July 2018. Must be applied for reporting periods commencing on or after 1 January 2019. Therefore the application date for the Company will be for the reporting period commencing on 1 July 2019. Title of standard Nature of change Impact AASB 9 Financial Instruments AASB 15 Revenue from contracts with customers AASB 16 (issued February 2016) Leases Given the nature of the Company’s financial assets and financial liabilities, the Company does not expect the impact to be significant. Based on the Company’s assessment, the impact is not considered to be significant. The major sources of revenue relate to royalty income from labradorite quarrying contracts, where a minimum monthly fee is payable and from rental income generated by the lease of office space in the Group property asset. Due to the nature of the revenue received, the timing of revenue recognition is expected to be consistent with the current practice. The group is expecting the standard will impact the financial statements as they do currently have lease obligations totalling $786,666 at 30 June 2017. A preliminary assessment indicates that these arrangements will meet the definition of a lease under AASB 16, and hence the Group will recognise right-of-use assets and corresponding liabilities in respect of all leases. AASB 9 addresses the classification, measurement and de-recognition of financial assets and financial liabilities, impairment of financial assets and hedge accounting. An entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather than on transfer of risks and rewards as is currently the case under AASB 118 Revenue. AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its balance sheet in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its balance sheet for most leases. There are some optional exemptions for leases with a period of 12 months or less and for low value leases. Lessor accounting remains largely unchanged from AASB 117. Other standards not yet applicable There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. CAPRICORN METALS LTD ABN 84 121 700 105 28 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 2 – REVENUE (a) Revenue: - royalties - rental - other Total Revenue (b) Other Income: - net Interest received - non-refundable deposit (1)(2) - Option payment (3) - sale of fixed assets - sale of potential future royalty Total Other Income Total Revenue 2017 $ 2016 $ 113,963 65,362 9,889 189,214 87,422 75,000 56,234 17,722 - 236,378 425,592 119,052 117,367 11,680 248,099 46,176 53,126 - 47,276 305,960 452,538 700,637 Note: (1) Jupiter Mines Et Minerals SARL entered into a leasing arrangement for Labradorite permit 5394 with Mada-Aust SARL which saw the payment of a non-refundable deposit totalling $53,126. (2) Blackearth Minerals NL entered into a share sale and purchase agreement to acquire Capricorn’s wholly owned Madagascan subsidiary Mada- Aust SARL. An initial non-refundable deposit of $75,000 was paid on signing of the agreement. (3) AAA International Madagascar SARL entered into an option agreement to negotiate for the purchase of all or part labradorite mining permit 19932. Upon signing of the agreement, a non-refundable deposit of USD 50,000 payable for the one year option term. NOTE 3 – EXPENSES (a) Employee benefits expense: Australia Non-executive directors’ fees Executive directors’ salary Other salaries Superannuation Annual leave entitlements Other employment expenses Salary capitalised as exploration and evaluation expenditure Mauritius Directors remuneration Madagascar Country manager - J L Marquetoux Payroll 2017 $ 2016 $ 95,545 335,000 443,417 76,535 78,296 7,737 (382,641) 653,889 12,000 12,000 152,031 230,155 382,186 97,729 137,500 - 15,757 10,634 - (39,603) 222,017 7,000 7,000 169,783 287,181 456,964 Total employee benefits expense 1,048,075 685,981 CAPRICORN METALS LTD ABN 84 121 700 105 29 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 4 – OTHER FINANCIAL ASSETS During the year ended Energizer Resources Inc changed its name to NEXT Source Materials Inc. Listed Shares in NEXT Source Materials Inc Unlisted Warrants in NEXT Source Materials Inc Listed shares in NEXT Source Materials Inc: At 1 July Fair value increase/(decrease) Shares sold At 30 June 2017 $ 2016 $ 70,139 - 70,139 83,369 92,260 175,629 2017 2016 Number $ Number $ 1,237,000 - (237,000) 1,000,000 83,369 2,743 (15,973) 70,139 3,500,000 - (2,263,000) 1,237,000 402,937 (67,243) (252,325) 83,369 Financial assets, revalued at fair value through the profit and loss using the closing quoting bid prices at the end of the reporting period represent 1,000,000 (30 June 2016: 1,237,000) fully paid ordinary shares in Canadian company, NEXT Source Materials Inc. Disposal of listed shares: Shares disposed Proceeds received (Loss)/gain on disposal Fair value of listed shares and assumptions: Fair value per listed share Closing quoting bid price per share Foreign exchange rate – Australian Dollar per 1 Canadian Dollar * The values set out in the table above are subject to rounding. Unlisted Warrants in NEXT Source Materials Inc: Balance at 1 July Fair value decrease Fair value decline Balance at 30 June 2017 $ (15,973) 21,330 5,357 2016 $ (252,325) 200,771 (51,554) 2017 $0.701 CAD $0.070 1.00198 2016 $0.067 CAD $0.065 1.03686 2017 $ 2016 $ 92,260 (25,375) (66,885) - 241,885 (149,625) - 92,260 The Company holds 3,500,000 Warrants in NEXT Source Materials Inc, convertible at USD $0.14 per warrant and expire 15 April 2019. The fair value of the warrants was revalued through the profit and loss using the Black and Scholes valuation method. At 30 June 2017, the Directors have considered it is unlikely that, despite the fair value of this investment, any value will be realised and have assessed carrying value of this investment as nil. Fair value of unlisted warrants and assumptions: Fair value per unlisted warrant Closing quoting bid price per share Foreign exchange rate – Australian Dollar per 1 Canadian Dollar Exercise price per warrant Foreign exchange rate – Australian Dollar per 1 US Dollar Risk free interest rate Expected volatility Expected life (days) * The values set out in the table above are subject to rounding. 2017 $0.019 CAD $0.070 1.00198 USD $0.14 1.30091 1.725% 100% 654 2016 $0.026 CAD $0.067 1.03686 USD $0.14 1.34363 1.550% 100% 1,019 CAPRICORN METALS LTD ABN 84 121 700 105 30 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 5 - INCOME TAX (a) Income Tax Expense The prima facie tax expense/(benefit) on Profit/(Loss) from ordinary activities is reconciled as follows: The Components of tax expense comprise: - Current Tax - Deferred Tax – temporary differences 2017 $ 2016 $ 1,960 1,425 3,386 2,690 1,397 4,087 The Prima facie tax on Loss before income tax at 27.50% (2016: 30%) (904,710) (1,109,034) Add/(subtract) the tax effect of: - Tax attributable to foreign subsidiary - Other assessable income not included as accounting income - Non-deductible expenses - Accounting income not included as assessable income - Other deductible expenses - Deferred tax assets / (liabilities) not brought to account Income tax expense / (benefit) attributable to entity (b) Recognised Deferred Tax Balances Deferred Tax Asset Deferred Tax Liability (c) Unrecognised Deferred Tax Balances The following deferred tax assets have not been brought to account: Unrecognised deferred tax assets comprise: - Deferred tax assets attributable to tax losses - Transaction costs on equity issue 3,386 3,304 458,114 (22,196) (14,995) (424,227) 3,386 - - - 4,087 292,523 190,181 (3,605) (83,007) 712,942 4,087 - - - 5,663,748 - 5,663,748 1,735,082 152,819 1,887,901 The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise these benefits. NOTE 6 – CASH AND CASH EQUIVALENTS Cash at bank NOTE 7 – OTHER CURRENT ASSETS Prepayments Other Total Other Current Assets NOTE 8 – OTHER CURRENT RECEIVABLES Interest Other receivables Bank guarantees (1) Total Other Current Receivables Note: 2017 $ 5,541,663 2016 $ 11,755,911 2017 $ 2016 $ 22,963 1,001 23,964 41,312 3,114 44,426 2017 $ 2016 $ 5,714 52,091 138,364 196,169 12,015 67,217 40,000 119,232 (1) Bank guarantees are made up of the following: - - $40,000 is held as security for the credit card facility and bears 2.2% interest $98,364 is held as security for the office lease and bears 2.2% interest. CAPRICORN METALS LTD ABN 84 121 700 105 31 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 9 – PROPERTY, PLANT AND EQUIPMENT Plant & Equipment – At cost Less accumulated depreciation Total Plant & Equipment Field Equipment – At cost Less accumulated depreciation Total Field Equipment Motor Vehicles – At cost Less accumulated depreciation Total Motor Vehicles Total Plant and Equipment Land and Buildings – At cost Fair value re-measurement (1) Less accumulated depreciation Total Land & Buildings 2017 $ 2016 $ 441,246 (167,862) 273,384 218,941 (118,827) 100,114 29,699 (29,699) - 376,376 (201,282) 175,094 337,629 (195,335) 142,294 181,175 (178,856) 2,319 373,498 319,707 - - - - 2,500,000 2,167,734 (167,734) 4,500,000 Total Property, Plant and Equipment 373,498 4,819,707 Note: (1) See Note 10. (a) Movements in carrying amounts Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year: Land & Buildings $ 2,347,774 Plant & Equipment $ 164,581 Field Equipment $ 146,377 - - (15,508) 2,167,734 - 4,500,000 - (16,287) 16,287 (4,500,000) - - 40,043 (122) (29,408) - - 175,094 159,629 - (38,867) - (22,472) - 295,856 11,358 (2) (15,439) - - 142,294 20,443 (165) (18,573) - (43,885) - 143,999 Motor Vehicles $ 6,787 - (2,150) (2,318) - - 2,319 2,319 - - - - (2,319) - Total $ 2,665,519 51,401 (2,274) (62,673) 2,167,734 - 4,819,707 182,072 (165) (73,727) 16,287 (4,566,357) (2,319) 373,498 Carrying amount at 30 June 2015 Additions Disposals Depreciation expense Fair value re-measurement (1) Currency translation differences Carrying amount at 30 June 2016 Additions Disposals Depreciation expense Fair value re-measurement (1) Reclassified as held for sale (1) Currency translation differences Carrying amount at 30 June 2017 Note: (1) See Note 10. CAPRICORN METALS LTD ABN 84 121 700 105 32 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 10 – ASSETS HELD FOR SALE Assets held for sale comprises: Property Asset (1) Subsidiary disposal group:(2) tenement holdings operating & fixed assets liabilities Impairment of assets & liabilities Total Assets Held for Sale (1) Property Asset 2017 $ 4,500,000 4,500,000 550,000 186,347 (100,499) (85,848) 550,000 5,050,000 The Company intends to dispose of a freely held property asset located in Antanarirvo, Madagascar within the next 12 months. The Board of Directors have determined a fair value of $4,500,000 for the Group’s freehold land and buildings based on the market valuation performed by Messrs Cabinet D’Expertise Razafindratandra in October 2015 of 11,323,422,000 Ariary (AUD $4,899,899). Messrs Cabinet D’Expertise Razafindratandra have appropriate qualifications and recent experience in the fair value measurement of properties in the relevant locations. The fair value of the freehold land was determined based on the market comparable approach that reflects recent transaction prices for similar properties. (2) Subsidiary Disposal Group In February 2017, the Company committed to the sale of a wholly owned Mauritian subsidiary, Madagascar Graphite Ltd and its assets which comprise 100% ownership of Madagascan subsidiary, Mada-Aust SARL, by way of a Share Sale & Purchase Agreement with Blackearth Minerals NL (Blackearth). The key terms of the agreement saw the payment of $75,000 non-refundable deposit on signing of the agreement. Consideration outstanding comprises a further $75,000 cash and the issue of 2,000,000 ordinary shares in Blackearth, both due on completion of the sale which requires Blackearth to successfully complete an initial public offer and receive conditional approval for admission to the official list of the Australian Securities Exchange. Further deferred consideration of $1,000,000 is payable upon a ‘decision to mine’ being made by Blackearth within 8 years of completion of this transaction. The fair value of the disposal is equal to the consideration due under the Share Sale & Purchase Agreement totaling $550,000. NOTE 11 – INTERESTS IN JOINT VENTURES The Company had been in various joint venture arrangements with Canadian TSX listed company, NEXT Source Materials Inc (formerly Energizer Resources Inc) (“NEXT”). At the commencement of the 2016 financial year the only elements of that relationship which remained in effect were: - A payment by NEXT of CAD $1,000,000 upon the commencement of commercial production at the Molo graphite project. - A royalty calculated as 1.5% of Net Smelter Return on all production from Molo. On 29 April 2016, Capricorn sold the royalty to a third party, for upfront cash consideration of CAD $300,000, with an additional CAD $1,000,000 payable by the third party in the event that NEXT commences commercial production at Molo. The potential production payments (CAD $2,000,000) have not been included as contingent assets, as the fair value at the date of this report is nil. The former joint venture tenements remain in the name of Capricorn subsidiaries, pending registration of the transfers which have been lodged with the Madagascan government. CAPRICORN METALS LTD ABN 84 121 700 105 33 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 12 – DEFERRED EXPLORATION & EVALUATION COSTS Madagascar: At 1 July Impairment Reclassified as held for sale asset (2) At 30 June Australia: At 1 July Acquisition of Karlawinda Gold Project (1) Capitalised exploration expenditure At 30 June 2017 $ 2016 $ 967,000 (417,000) (550,000) - 7,598,465 - 13,069,874 20,668,339 3,289,216 (2,322,216) - 967,000 - 5,700,000 1,898,465 7,598,465 Total Deferred Exploration & Evaluation Costs 20,668,339 8,565,465 Note: (1) (2) The Karlawinda Gold Project was acquired through the acquisition of Greenmount Resources Pty Ltd on 3 February 2016. See Note 28. See Note 10. NOTE 13 – CURRENT TRADE & OTHER PAYABLES Unsecured liabilities: Trade Payables Accrued Payables – Operating (1) (2) Accrued Payables – World Titane Holdings Ltd (3) Total Current Trade & Other Payables 2017 $ 2016 $ 939,466 376,887 30,000 1,346,353 231,629 1,575,388 60,000 1,867,017 Note: (1) (2) (3) 2016: Includes the final instalment of $1,500,000, due to Independence Group NL for the completion of the acquisition of the Karlawinda Gold Project tenements by wholly owned subsidiary, Greenmount Resources Pty Ltd. 2017: Includes $330,584 of stamp duty payable in relation to the acquisition of Greenmount Resources Pty Ltd. Accrued payables include amounts in respect of the Share Purchase Agreement with WTR Holdings Pty Ltd (formerly Madagascar Resources NL) estimated to be payable within the next 12 months. WTR Holdings Pty Ltd transferred its receivable to World Titane Holdings Ltd (WTH) in December 2016. The liability owed to WTH is only repayable from 70% of the labradorite royalty cash receipts actually received by Mada- Aust SARL from the one remaining specified lessee. NOTE 14 – SHORT TERM PROVISIONS Provision for annual leave: Opening 1 July Additional provisions Amounts used Foreign exchange adjustments Liabilities directly associated with assets classified as held for sale Closing 30 June Number of employees at year end: Australia Madagascar 2017 $ 2016 $ 25,931 128,135 (54,005) 479 (11,483) 89,057 9 15 24 16,893 37,197 (28,704) 545 - 25,931 2 21 23 CAPRICORN METALS LTD ABN 84 121 700 105 34 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 15 – NON-CURRENT TRADE & OTHER PAYABLES Unsecured liabilities: Accrued Payables (1) Total Non-Current Trade & Other Payables 2017 $ 2016 $ 378,416 378,416 374,578 374,578 Note: (1) Accrued payables are amounts in respect of the Share Purchase Agreement with WTR Holdings Pty Ltd (formerly Madagascar Resources NL). This portion of the liability is only repayable from 70% of the labradorite royalty cash receipts actually received by Mada-Aust SARL and is not expected to be settled in the next financial year. The agreement provides that repayment is due only from amounts received in cash from royalty payers. Two of the three companies ceased operations during 2011 and have returned the tenements to the Company. The term of the remaining royalty agreement ends 30 June 2030. NOTE 16 – ISSUED CAPITAL 572,379,458 fully paid ordinary shares (2016: 485,909,373) Ordinary shares: At 1 July Shares issued during the year: - 2 December 2015 (1) - 3 February 2016 (2) - 3 February 2016 (3) - 5 May 2016 (4) - 19 September 2016 (5) - 10 March 2017 (6) - 5 May 2017 (7) Costs of capital raised At 30 June 2017 $ 42,121,506 42,121,506 2016 $ 32,509,123 32,509,123 2017 2016 No. $ No. $ 485,909,373 32,509,123 165,346,421 14,733,538 - - - - 1,000,000 54,852,304 30,617,781 - 572,379,458 - - - - 150,000 6,417,720 3,582,280 (537,617) 42,121,506 6,290,055 171,636,476 45,454,546 97,181,875 - - - - 485,909,373 131,475 4,146,955 1,500,000 12,633,644 - - - (636,489) 32,509,123 There are no preference shares on issue. Note: (1) 2 December 2015: 6,290,055 fully paid ordinary shares were issued to directors, subsequent to shareholder approval received on 26 November 2015. The shares were issued as payment for accrued director fees totalling $131,475. The shares were issued as follows: Shares Issued 1,097,499 1,493,181 1,646,250 2,053,125 6,290,055 Issue Price (per share) $0.030 $0.022 $0.020 $0.016 (2) (3) (4) (5) (6) (7) 3 February 2016: 171,636,476 shares were issued for the acquisition of Greenmount Resources Pty Ltd. See Note 28. 3 February 2016: 45,454,546 shares were issued at a price of $0.033 per share on completion of a placement. 5 May 2016: 97,181,875 shares were issued at a price of $0.13 per share on completion of a placement. 19 September 2016: 1,000,000 shares were issued at a price of $0.15 per share on the exercise of unlisted options by Non-Executive Director, Mr G LeClezio. 10 March 2017: 54,852,304 shares were issued at a price of $0.117 per share as completion of Tranche 1 of the placement to Hawke’s Point Holdings I Limited. In addition, 18,284,101 free attaching options were also issued with an exercise price of $0.15 per share and an expiry date of 5 May 2020. 5 May 2017: 30,617,781 shares were issued at a price of $0.117 per share as completion of Tranche 2 of the placement to Hawke’s Point Holdings I Limited. In addition, 10,205,927 free attaching options were also issued with an exercise price of $0.15 per share and an expiry date of 5 May 2020. CAPRICORN METALS LTD ABN 84 121 700 105 35 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 16 – ISSUED CAPITAL (Cont’d) Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The Company does not have authorised capital or par value in respect of its shares. Stock Exchange Listing: Total issued capital is 572,379,458 (2016: 485,909,373) shares, of which 572,379,458 (2016: 314,272,897) are listed on the Australian Securities Exchange (ASX) at the date of this report. Options: The following options were on issue during the year: 2017 2016 Weighted Av. Exercise Price Number of Options Weighted Av. Exercise Price Number of Options (a) Options exercisable at $0.15 on or before 30 November 2016: Balance at beginning of year Exercised Lapsed Balance at end of year (b) Options exercisable at $0.10 on or before 31 May 2020: Balance at beginning of year Issued during the year Balance at end of year (c) Options exercisable at $0.20 on or before 31 May 2020: Balance at beginning of year Issued during the year Balance at end of year (d) Options exercisable at $0.15 on or before 5 May 2021: Balance at beginning of year Issued during the year Balance at end of year Fair value: $0.15 $0.15 $0.15 - $0.10 - $0.10 - $0.20 $0.20 - $0.15 $0.15 7,500,000 (1,000,000) (6,500,000) - 10,800,000 - 10,800,000 - 7,000,000 7,000,000 - 31,890,028 31,890,028 $0.15 - $0.15 - $0.10 $0.10 - - - - - - 7,500,000 - 7,500,000 - 10,800,000 10,800,000 - - - - - - The fair value of services rendered in return for share options granted is based on the fair value of share options granted, measured using the Black- Sholes option pricing formula. There were 38,890,028 share options granted during the year ended 30 June 2017 (2016: 10,800,000). Fair Value of Options & Assumptions: Grant date Expiry date Number granted Fair Value at grant date (per option) Share Price at grant date Exercise price Expected share price volatility Expected life of option (days) Expected dividends Risk free interest rate Directors 29/11/16 31/05/20 7,000,000 $0.021 $0.100 $0.200 60% 1,283 - 1.97% Employees 13/06/17 05/05/21 3,400,000 $0.021 $0.088 $0.150 50% 1,422 - 1.84% CAPRICORN METALS LTD ABN 84 121 700 105 36 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 17 – RESERVES Share based payment reserve: Opening balance 1 July Share based payments for the year Closing balance 30 June 2017 $ 2016 $ 316,018 545,221 861,239 200,353 115,665 316,018 This reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration. Refer to Note 20 and the Remuneration Report for further details. Foreign currency translation reserve: Opening balance 1 July Translation movement for the year Closing balance 30 June This reserve records exchange differences arising on translation of foreign controlled subsidiaries. Asset revaluation reserve: Opening balance 1 July Revaluation movement for the year Closing balance 30 June 2017 $ 2016 $ (733,639) 16,357 (717,282) (754,034) 20,395 (733,639) 2017 $ 2016 $ 2,167,734 16,287 2,184,021 - 2,167,734 2,167,734 This reserve records fair value re-measurement recorded on the Groups land & building asset held in Madagascar. NOTE 18 – ACCUMULATED LOSSES Opening balance 1 July Loss for the year Closing balance 30 June NOTE 19 – EARNINGS PER SHARE Earnings used in calculating basic and diluted earnings per share: - Loss attributable to members of the parent entity Basic and diluted loss per share: - cents per share Weighted average number of ordinary shares outstanding at 30 June As at 30 June 2017 there are 49,690,028 (2016: 18,300,000) unlisted options on issue. 2017 $ (11,048,697) (3,293,239) (14,341,936) 2016 $ (7,347,829) (3,700,868) (11,048,697) 2017 $ 2016 $ (3,293,239) (3,700,868) Cents Cents (0.65) (1.36) Number Number 508,216,370 271,652,335 As the Group incurred a loss for the year (2016: Loss), the options on issue have no dilutive effect, therefore the diluted earnings per share is equal to the basic earnings per share. 49,690,028 (2016: 18,300,000) unlisted options which could potentially dilute the basic earnings per share in the future have been excluded from the diluted earnings per share calculation as they are not dilutive for the current year presented. CAPRICORN METALS LTD ABN 84 121 700 105 37 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 20 – SHARE BASED PAYMENTS Options: All options refer to options over ordinary shares of Capricorn Metals Ltd which are exercisable on a one for one basis. During the year ended 30 June 2017, 10,400,000 options were granted to key management personnel & employees of the Company (2016: 10,800,000 options). The fair value of the options is calculated at the grant date using a Black–Scholes pricing model and allocated to each reporting period in accordance with the vesting profile of the options. The value recognised is the portion of the fair value of the options allocated to the reporting period. The factors and assumptions used in determining the fair value on grant date of options issued during the financial year as follows: Granted during 2017: Number of Options Grant Date Expiry Date Fair Value per Option Exercise Price Share Price on Grant Date Risk Free Interest Rate (%) Estimated Volatility (%) Number Vested as at 30 June 2017 7,000,000 (1) 29/11/2016 31/05/2020 3,400,000 (2) 13/06/2017 31/05/2021 $0.021 $0.021 $0.200 $0.150 $0.100 $0.088 1.97% 1.84% 60% 50% - - In the table above, the following vesting profiles have been adopted: (1) 2,333,333 vest on 29 November 2017, 2,333,333 vest on 29 November 2018 and 2,333,334 vest on 29 November 2019. (2) 1,133,333 vest on 11 May 2018, 1,133,333 vest on 11 May 2019 and 1,133,334 vest on 11 May 2020. Granted during 2016 and outstanding at 30 June 2017: Number of Options Grant Date Expiry Date Fair Value per Option Exercise Price Share Price on Grant Date Risk Free Interest Rate (%) Estimated Volatility (%) Number Vested as at 30 June 2017 10,800,000 20/04/16 31/05/20 $0.105 $0.100 $0.140 2.01 100 3,600,000 In the table above, the following vesting profile has been adopted: 3,600,000 vest on 20 April 2017, 3,600,000 vest on 20 April 2018 and 3,600,000 vest on 20 April 2019. The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. No dividends have been assumed to be paid during the life of the options. No options were exercised during the year (2016: Nil). Expenses arising from share-based payment transactions: Total expenses arising from share-based payment transactions recognised during the period were as follows: Options 2017 $ 2016 $ 545,221 115,665 CAPRICORN METALS LTD ABN 84 121 700 105 38 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 21 – NOTE TO THE STATEMENT OF CASH FLOWS Reconciliation of cash flow from operations, with loss after income tax: Loss after income tax Non-cash flows in result: Depreciation Impairment Fair value gain on financial assets Foreign currency translation Share based payment Cash flows in result not classified as cash flows from operations: Profit on sale of fixed assets Profit/(Loss) on sale of financial assets Profit on sale of potential future royalty Option payment received on potential sale of exploration permits Deposit received on sale of Subsidiary Changes in assets and liabilities: Increase in income taxes payable (Increase) in other current assets Increase/(Decrease) in payables and accruals Cashflow used by Operations Non-cash investing and financing activities: 2017 $ (3,293,239) 2016 $ (3,700,868) 73,727 558,885 22,632 (6,965) 545,221 (17,722) (5,357) - (56,234) (75,000) 1,426 (137,910) 626,634 (1,763,902) 62,673 2,322,216 216,868 19,497 115,665 (47,276) 51,555 (305,960) - - 1,397 (204,929) (51,691) (1,520,853) There were no non-cash investing and financing activities during the year ended 30 June 2017. During the year ended 30 June 2016, 171,636,476 ordinary shares were issued for the acquisition of Greenmount Resources Pty Ltd (See Note 28). NOTE 22 – COMMITMENTS Exploration Commitments Madagascar The Group has no statutory obligations to perform minimum exploration work on its tenements; however, the Company needs to maintain an active work program to retain its interests. For the 2017 calendar year tenement rents of approximately $85,000 per annum were payable to maintain ownership over the tenement areas. 33% of the tenement rents were recouped from other parties. Australia The Group is obligated to meet the minimum expenditure commitments on its tenements held in Western Australia or may face forced relinquishment of all or part of the tenement. As at 30 June 2017 there are 7 granted tenements with an annual expenditure commitment totalling $310,000 and one granted mining lease with an annual expenditure commitment of $297,600. Operating Lease Commitments The Group leases office premises in West Perth, Western Australia under normal commercial lease arrangements. The office lease was entered into for an initial 5 year period commencing 1 May 2017. In addition, the Group entered into a lease arrangement on a printer from 22 May 2017. The lease is for a term of 5 years. Lease Commitments: Group as lessee Operating leases: - Within one year - Later than one year but not later than five years Aggregate lease expenditure contracted for at reporting date but not recognised as liabilities Other commitments Capricorn Metals Ltd has bank guarantees totalling $138,364. See Note 8. CAPRICORN METALS LTD ABN 84 121 700 105 2017 $ 2016 $ 141,268 645,398 786,666 - - - 39 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 23 – CONTINGENT ASSETS AND LIABILITIES There were no contingent assets or liabilities at 30 June 2017 (2016: Nil). NOTE 24 – EVENTS SUBSEQUENT TO REPORTING DATE There were no material events arising subsequent to 30 June 2017 to the date of this report which may significantly affect the operations of the consolidated entity, the results of those operations and the state of affairs of the consolidated entity in the future, other than:  22 September 2016, 6,000,000 unlisted incentive options were issued under the Incentive Option Plan to Chief Financial Officer, Mr J Shellabear. NOTE 25 – FINANCIAL INSTRUMENTS (a) Capital risk management: Management controls the capital of the Group in order to ensure that the Group can fund its operations and continue as a going concern. There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. (b) Market risk: The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable. The Group does not speculate in the trading of derivative instruments. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous year. (c) Foreign currency risk: The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Group’s functional and presentation currency. As a result of subsidiary companies being registered in Madagascar, the Group's statement of financial position can be affected by movements in the AUD$/Ariary exchange rates. The Group do not seek to hedge this exposure. There is no formal foreign currency management policy, however the Group monitors its foreign currency expenditure and foreign subsidiary requirements. The following table shows the foreign currency risk on the financial assets and liabilities of the Groups operations denominated in currencies other than the functional currency of the operations. 2017 Cash Receivables Payables Statement of Financial Position exposure 2016 Cash Receivables Payables Statement of Financial Position exposure MGA 5,891 49,520 (14,185) 41,226 MGA 34,227 67,217 (12,661) 88,783 Net Financial Assets/(liabilities) in AUD AUD EURO USD 5,535,579 146,649 (1,332,168) 4,350,060 - - - - 193 - - 193 Total AUD 5,541,663 196,169 (1,346,353) 4,391,479 Net Financial Assets/(liabilities) in AUD EURO USD AUD 11,721,401 52,015 (1,854,356) 9,919,060 88 - - 88 Total AUD 11,755,911 119,232 (1,867,017) 10,008,126 195 - - 195 CAPRICORN METALS LTD ABN 84 121 700 105 40 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 25 – FINANCIAL INSTRUMENTS (Cont’d) (d) Interest rate risk: At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments was: Variable rate instruments: - Financial assets Cash flow sensitivity analysis for variable rate instruments: 2017 $ 2016 $ 5,541,663 11,755,911 A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2016. Variable rate instruments (e) Liquidity risk: 2017 2016 100 bp increase 55,416 100 bp decrease (55,416) 100 bp increase 117,559 100 bp decrease (117,559) Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate facilities are maintained. The following are the contractual maturities of the Group’s financial liabilities: Trade and other payables: - at 30 June 2017 - at 30 June 2016 (f) Credit risk: Carrying Amount $ Contractual Cash Flows $ 6 Months or Less $ 1,346,353 1,867,017 (1,346,353) (1,867,017) (1,346,353) (1,867,017) Credit risk is managed to ensure that customers are of sound credit worthiness and monitoring is used to recover aged debts and assess receivables for impairment. Credit terms are generally 30 days from the invoice date. The Group has no significant concentration of credit risk with any single party with the exception of the TVA receivable from the Madagascan government relating to taxes paid on the Business Sale Agreement and Long Term Lease Agreement. These taxes are recoverable long term in accordance with existing Madagascan taxation law. The Group has assessed the non-current TVA receivable as non-recoverable, and has recorded a provision for impairment of the full amount. Risk is also minimized by investing surplus funds in financial institutions with a high credit rating. CAPRICORN METALS LTD ABN 84 121 700 105 41 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 25 – FINANCIAL INSTRUMENTS (Cont’d) (g) Financial instruments measured at fair value: The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: - quoted prices in active markets for identical assets or liabilities (Level 1); - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and - inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). Level 1 Level 2 Level 3 Total 30 June 2017 Financial assets: Available-for-sale financial assets: - listed investments - unlisted warrants 30 June 2016 Financial assets: Available-for-sale financial assets: - listed investments - unlisted warrants 70,139 - 70,139 83,369 - 83,369 - - - - 92,260 92,260 - - - - - - 70,139 - 70,139 83,369 92,260 175,629 Included within Level 1 of the hierarchy are the NEXT Source Materials Inc shares listed on the Toronto Stock Exchange. The fair values of these financial assets have been based on the closing quoted bid prices at the end of the reporting period, excluding transaction costs. In determining the fair value of unlisted investments included in Level 2 of the hierarchy, which include unlisted warrants held in NEXT Source Materials Inc, the Black Scholes option pricing model has been used to calculate a fair value based on the income approach valuation and inputs as set out in Note 4. No transfers between the levels of the fair value hierarchy occurred during the current or previous reporting period. The directors consider that the carrying value of all financial assets and financial liabilities are recognised in the consolidated financial statements approximate to their fair value. (h) Financial liability and financial asset maturity analysis: Financial liabilities – Due for payment: Payables Payable for Share Purchase Agreement Total expected outflows Financial Assets – Cash flows realisable: Cash Assets Receivables Total Inflow on Financial Instruments Within 1 year 1 to 5 years Total 2017 $ 2016 $ 2017 $ 2016 $ 2017 $ 2016 $ 1,508,307 30,000 1,538,307 1,835,254 60,000 1,895,254 - 378,416 378,416 - 374,578 374,578 5,544,281 70,139 276,116 5,890,536 11,755,911 175,629 119,232 12,050,772 - - - - - - - - 1,508,307 408,416 1,916,723 5,544,281 70,139 276,116 5,890,536 1,835,254 434,578 2,269,832 11,755,911 175,629 119,232 12,050,772 CAPRICORN METALS LTD ABN 84 121 700 105 42 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 26 – STATEMENT OF OPERATIONS BY SEGMENT 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 (as the chief operating decision makers) in assessing performance and determining the allocation of resources. The group is managed primarily on the basis of geographical location as the Group’s operations inherently have different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments are therefore disclosed as geographical segments being Australia, Madagascar and Mauritius. Basis for accounting for purpose of reporting by operating segments:  Accounting policies adopted: Unless otherwise stated, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group outlined in Note 1.  Intersegmental transactions: Intersegment loans are recognised at the consideration received net of transaction costs. Intersegment loans are not adjusted to fair value based on market interest rates. 2017 Revenue Revenue Other income Total segment revenue Result Segment Result Profit/(Loss) before Income tax Assets Segment Assets Segment Liabilities Other Acquisition of non-current assets Depreciation expense 2016 Revenue Revenue Other income Total segment revenue Result Segment Result Profit/(Loss) before Income tax Assets Segment Assets Segment Liabilities Other Acquisition of non-current assets Depreciation expense Australia Madagascar Mauritius Elimination Consolidated Entity - 162,626 162,626 189,214 73,752 262,966 - - - - - - 189,214 236,378 425,592 (3,017,516) (3,017,516) (133,581) (130,195) (24,500) (24,500) (117,642) (117,642) (3,293,239) (3,289,853) 26,043,170 (1,799,513) 2,519,807 (19,917) 178,393 19,790 1,679 53,937 Australia Madagascar Mauritius - 351,819 351,819 249,099 100,719 348,818 - - - - - - - 3,360,795 3,206 31,923,772 (1,816,224) - - 180,072 73,727 Elimination Consolidated Entity - - - 248,099 452,538 700,637 (2,936,913) (2,936,913) (785,522) (781,435) (29,192) (29,192) 50,759 50,759 (3,700,868) (3,696,781) 26,137,230 (2,239,568) 2,673,365 (70,105) 45,858 2,609 5,543 60,064 - - - - (3,330,225) 39,842 25,480,370 (2,269,831) - - 51,401 62,673 CAPRICORN METALS LTD ABN 84 121 700 105 43 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 27 – RELATED PARTY DISCLOSURES (a) Key Management Personnel: Mr H Hellewell Executive Chairman Transitioned from Non-Executive Director to Executive Chairman – 14 March 2017 Mr G LeClezio Non-Executive Director Transitioned from Non-Executive Chairman to Non-Executive Director – 14 March 2017 Mr Stuart Pether Non-Executive Director Appointed 14 March 2017 Mr P Thompson Chief Operating Officer Transitioned from Managing Director to Chief Operating Officer – 14 March 2017 Mr P Langworthy Executive General Manager - Geology Transitioned from Technical Director to Executive General Manager - Geology – 14 March 2017 Mr J Shellabear Chief Financial Officer Joint Company Secretary Mr J Marquetoux CFO & Gerant (Madagascar) Appointed Non-Executive Director 5 December 2017. Transitioned from Non- Executive Director to Chief Financial Officer – 14 March 2017. Appointed Joint Company Secretary 11 May 2017. Mr G Boden Joint Company Secretary Resigned as Company Secretary – 11 May 2017. Mrs N Santi Joint Company Secretary Key Management Personnel Remuneration: Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report. The total remuneration paid to Key Management Personnel of the Group during the year are as follows: Short term benefits Other service fees Post – employment benefits Share Based Payments Annual Leave 2017 $ 2016 $ 880,660 132,998 63,108 543,804 60,945 1,681,515 402,061 133,134 15,757 115,665 13,161 679,778 (b) Related Party Transactions with Key Management Personnel: Apart from details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year end. Transactions between related parties are on usual commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The aggregate amounts recognised during the year relating to key management personnel and their related parties are as follows: Key Management Person P Langworthy (1) G Boden (2) Transaction Exploration programme management Corporate services 2017 $ 1,937,760 128,998 2,066,758 2016 $ 644,037 130,134 774,171 Note: (1) (2) OMNI GeoX Pty Ltd, of which Mr P Langworthy is a Director and shareholder, provides services in relation to the management and execution of the exploration programme, for which fees were billed on hourly rates the same as for other clients, as were due and payable under normal terms. The agreement may be terminated by one months’ notice. Boden Corporate Services Pty Ltd, of which Mr G Boden is a director, provided services in company secretarial, accounting and administration roles for which service fees were billed based on normal market rates, and were due and payable under normal terms. Boden Corporate provided these services from 1 October 2013 to 31 May 2017. Amounts payable to key management personnel at the reporting date arising from these contract services were as set out below: Current payables: Trade and other payables CAPRICORN METALS LTD ABN 84 121 700 105 2017 $ 2016 $ 62,611 62,611 95,914 95,914 44 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 27 – RELATED PARTY DISCLOSURES (Cont’d) (c) Controlled Entities: The consolidated financial statements include the financial statements of Capricorn Metals Ltd and the subsidiaries set out in the following table. Subsidiaries Mada-Aust SARL Mazoto Minerals SARL (1) Energex SARL Mining Services SARL St Denis Holdings SARL Madagascar Graphite Ltd (2) MGY Mauritius Ltd (3) Malagasy Graphite Holdings Ltd (4) Greenmount Resources Pty Ltd (5) % Ownership Country Madagascar Madagascar Madagascar Madagascar Madagascar Mauritius Mauritius Australia Australia Principal activity Exploration Exploration Dormant Exploration Services Commercial Property Investment Holding Investment Holding Investment Holding Exploration 2017 100% 100% 100% 100% 100% 100% 100% 100% 100% 2016 100% 100% 100% 100% 100% 100% 100% 100% 100% Note: (1) (2) (3) (4) (5) A 1% interest is held in trust for Capricorn Metals Ltd. Incorporated 23 November 2015. Incorporated 12 November 2015. Incorporated 30 October 2015. Acquired 3 February 2016 (See Note 28). The subsidiaries noted above are all controlled entities and are dependent on the parent entity for financial support. During the year no loans were capitalised as investment (2016: Nil). Additional loans were made as follows: - Madagascan operations: $96,867 (2016: $332,687). - Australian operations: $14,442,874 (2016: 1,922,766) At the year end, total net loans from the parent company to these subsidiaries amount to $20,274,370 (2016: $513,770). Loans to subsidiaries total $27,348,526 (2016: $7,000,060) with a provision for impairment of $7,074,157 (2016: $6,486,290). NOTE 28 – ASSET ACQUISITION Acquisition of Subsidiary Company – Greenmount Resources Pty Ltd On 3 February 2016, Capricorn Metals Ltd acquired all the voting shares of Greenmount Resources Pty Ltd (“Greenmount”) by Share Sale Agreement. The acquisition of Greenmount was considered an asset acquisition for accounting purposes as the acquired assets did not meet the definition of a business as defined in the Australian Accounting Standards. The directors have determined that the fair value consideration of the acquisition was $4,146,955. The fair value consideration of the acquisition is based upon the following: Independent Valuation of Karlawinda Gold Project Outstanding acquisition liabilities Other net assets acquired Fair value The consideration paid was 171,636,476 ordinary shares. $ 5,700,000 (1,635,540) 4,064,460 82,495 4,146,955 CAPRICORN METALS LTD ABN 84 121 700 105 45 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2017 NOTE 29 – PARENT ENTITY DISCLOSURES The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. Assets: Current Assets Non-Current Assets Total Assets Liabilities: Current Liabilities Non-Current Liabilities Total Liabilities Shareholders’ Equity: Issued Capital Reserves Accumulated Losses Total Shareholders’ Equity 2017 $ 2016 $ 5,263,524 25,752,655 31,016,179 612,860 378,416 991,276 42,121,506 861,239 (12,957,842) 30,024,903 11,942,159 11,579,970 23,522,129 297,126 374,578 671,704 32,509,123 316,018 (9,974,716) 22,850,425 Statement of Comprehensive Income: Net loss attributable to members of the parent entity (2,983,126) (2,914,529) Total comprehensive loss for the year attributable to members of the parent entity (2,983,126) (2,914,529) The Parent entity has not entered into any contractual commitments for the acquisition of property plant and equipment at the date of this report. Guarantees entered into by Parent entity: As at 30 June 2017, the Group has the following financial guarantees: - - $40,000 is held as security for the credit card facility and bears 2.2% interest $98,364 is held as security for the office lease and bears 2.2% interest. NOTE 30 – AUDITORS REMUNERATION Amount payable to William Buck Audit (WA) Pty Ltd - Auditing or reviewing the financial report 2017 $ 2016 $ 27,050 24,050 Amounts payable to other audit firms for the audit and review of the financial reports of subsidiary companies was $6,315 (2016: $3,671) CAPRICORN METALS LTD ABN 84 121 700 105 46 Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 18 to 46 are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards and the Corporations Regulations 2001; and (b) give a true and fair view of the financial position as at 30 June 2017 and of the performance for the year ended on that date of the consolidated entity; 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 report also complies with International Financial Reporting Standards as disclosed in Note 1; and (d) the financial statements and notes for the financial year give a true and fair view; 3. 4. the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply with the Corporations Act 2001 and the Corporations Regulations 2001. 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 and is signed for and on behalf of the Directors by: Mr H Hellewell Executive Chairman Perth, Western Australia 28 September 2017 CAPRICORN METALS LTD ABN 84 121 700 105 47 ASX Additional Information 1. Listed Shares The shareholder information set out below was applicable as at 22 September 2017. a) Distribution of Share Holdings Size of Holding No. of Shareholders No. of Shares 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Shareholders 38 53 175 642 342 1,250 7,837 207,892 1,426,082 28,372,375 542,365,272 572,379,458 There are 99 Shareholders with less than a marketable parcel at a price of $0.09, totalling 258,155 shares. b) Voting Rights The voting rights attached to the ordinary shares are governed by the Constitution. On a show of hands every person present who is a Member or representative of a Member shall have one vote and on a poll, every Member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. None of the options have any voting rights. c) Twenty Largest Shareholders Shareholder Citicorp Nominees Pty Limited Centrepeak Resources Group Pty Ltd Nedlands Nominees Pty Ltd Merrill Lynch (Australia) Nominees Pty Limited Harmanis Holdings Pty Ltd Ellenbrook Investments Pty Ltd Resource Discovery Pty Ltd J P Morgan Nominees Australia Limited BNP Paribas Noms Pty Ltd Running Water Limited Citicorp Nominees Pty Limited Mr Jules LeClezio Mr Bradley James Drabsch Pershing Australia Nominees Pty Ltd Peter Robert Thompson OMNI GeoX Pty Ltd Mutual Investments Pty Ltd Sassey Pty Ltd HSBC Custody Nominees (Australia) Limited Quantum Holdings Pty Ltd Precision Opportunities Fund Ltd Top Twenty Shareholders Total Issued Capital d) Substantial Shareholders No. of Shares 86,040,627 74,221,378 28,536,277 23,102,817 17,851,616 17,671,673 14,135,322 13,374,738 12,725,246 12,690,513 11,800,757 11,700,000 8,711,936 8,578,435 5,522,398 5,104,903 5,000,000 5,000,000 4,719,163 4,550,000 4,500,000 375,537,799 572,379,458 The names of the substantial shareholders listed in the Company’s share register as at 22 September 2017 were: Shareholder Hawke’s Point Holdings I Limited Centrepeak Resources Group Pty Ltd Acorn Capital Limited Total e) On Market Buy-Back There is currently no on-market buy-back in place No. of Shares 85,470,085 74,221,378 34,704,712 94,396,175 % 15.03 12.97 4.99 4.04 3.12 3.09 2.47 2.33 2.22 2.22 2.06 2.04 1.52 1.50 0.96 0.89 0.87 0.87 0.82 0.79 0.79 65.61 100.00 % 14.93 12.97 6.06 33.96 CAPRICORN METALS LTD ABN 84 121 700 105 55 ASX Additional Information (Cont’d) 2. a) Unquoted Securities – Options Distribution of Option Holdings Size of Holding 100,001 and over Total Optionholders b) Voting Rights No. of Optionholders 13 13 No. of Options 55,690,028 55,690,028 Unlisted options do not entitle the holder to any voting rights. c) Holder of More Than 20% of Unquoted Options As at 22 September 2017 the Company has on issue 55,690,028 Unquoted Options over ordinary shares. The names of security holders holding more that 20% of a class of Unquoted Option are listed below. Optionholder Jericho Exploration Pty Ltd Peter Robert Thompson Hawke’s Point Holdings I Limited Holders individually less than 20% Total Exercisable at $0.10 Expiring 31/05/2020 4,800,000 6,000,000 - - 10,800,000 Exercisable at $0.20 Expiring 31/05/2020 2,500,000 2,500,000 - 2,000,000 7,000,000 Exercisable at $0.15 Expiring 05/05/2021 - - 28,490,028 9,400,000 37,890,028 d) Details of options on issue The following Unquoted Options are on issue: No. of Options 3,600,000 3,600,000 3,600,000 2,333,333 2,333,333 2,333,334 18,284,101 10,205,927 3,133,333 3,133,333 3,133,334 55,690,028 Exercise Price $0.10 $0.10 $0.10 $0.20 $0.20 $0.20 $0.15 $0.15 $0.15 $0.15 $0.15 Vesting Date 20/04/2017 20/04/2018 20/04/2019 25/11/2017 25/11/2018 25/11/2019 09/03/2017 05/05/2017 11/05/2018 11/05/2019 11/05/2020 Expiry Date 31/05/2020 31/05/2020 31/05/2020 31/05/2020 31/05/2020 31/05/2020 05/05/2021 05/05/2021 05/05/2021 05/05/2021 05/05/2021 CAPRICORN METALS LTD ABN 84 121 700 105 56 Tenement Schedule Australia: Lease Project Company Blocks 1 Status Date of Grant/ Application Expiry Tenements E52/1711 E52/2247 E52/2398 E52/2409 E52/3323 E52/3363 E52/3364 E52/3450 E52/3474 E52/3533 E52/3541 E52/3543 E52/3554 E52/3562 E52/3571 Total Blocks Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Miscellaneous Licences L52/174 L52/175 L52/177 L52/178 L52/179 L52/180 L52/181 Mining Lease M52/1070 Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount Greenmount 33 16 15 8 11 36 44 16 128 109 7 8 19 20 10 480 22.17 ha 39.07 ha 12.20 ha 21.41 ha 127.83 ha 20.63 ha 1.00 ha Granted Granted Granted Granted Granted Granted Granted Granted Granted Application Application Application Application Application Application Application Application Application Application Application Application Application 05/08/2004 21/07/2009 28/04/2010 15/06/2010 11/03/2016 13/01/2017 07/03/2017 13/01/2017 03/07/2017 23/03/2017 19/04/2017 20/04/2017 29/05/2017 16/06/2017 10/08/2017 25/08/17 25/08/17 25/08/17 25/08/17 25/08/17 14/09/17 15/09/17 04/08/2018 20/07/2019 27/04/2020 14/06/2020 10/03/2021 12/01/2022 06/03/2022 12/01/2022 02/07/2022 - - - - - - - - - - - - - Karlawinda Greenmount 2975.07 ha Granted 23/11/2016 22/11/2037 Note: 1. The area measurement for one block can vary between 2.8 – 3.2 km2 Madagascar: Title Number 3432 5391 5392 5393 5394 19932 25093 25094 25095 25605 25606 39750 39751 Permit Type PR PE PE PE PE PE PE PE PE PR PR PR PR Total Carres Grant Date 21-Sep-15 20-Nov-02 20-Nov-02 20-Nov-02 20-Nov-02 10-Mar-06 18-Jan-07 18-Jan-07 18-Jan-07 18-Jun-01 18-Jun-01 21-Sep-15 21-Sep-15 Expiry Date 20-Sep-18 19-Nov-42 19-Nov-42 19-Nov-42 19-Nov-42 09-Mar-46 17-Jan-47 17-Jan-47 17-Jan-47 17-Jun-11 17-Jun-11 20-Sep-18 20-Sep-18 Term (Years) 3 40 40 40 40 40 40 40 40 10 10 3 3 Project Name Ampanihy - Central (Big 'S') Ampanihy - Ianapera Ampanihy - Ianapera Ampanihy - Ianapera Ampanihy - Maniry Ampanihy - Maniry Ampanihy - Ianapera Ampanihy - Ianapera Ampanihy - Maniry Ampanihy - Maniry Ampanihy - Maniry Ampanihy - Central (Big 'S') Ampanihy - Central (Big 'S') Total Carres (New - 0.391km2) 48 16 16 16 48 112 16 16 48 80 16 16 160 608 Interest % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Note 5 5 4,5 5 3,5 5 5 2 1,5 1,5 5 5 Note: 1. 2. 3. 4. 5. Renewal awaiting confirmation from BCMM. All annual fees have been paid up to 31 December 2017. Leased to SQNY – Royalty and partial tenement fees payable to subsidiary Mada-Aust SARL. Leased to Jupiter Mines and Minerals – Royalty and annual tenement fees payable to MDA. Leased to Hery Lala Alain Raharinavio – Royalty on small blocks. Subject to sale to Blackearth Minerals NL upon the completion of the sale of Madagascar Graphite Ltd under the Share Sale & Purchase Agreement. CAPRICORN METALS LTD ABN 84 121 700 105 57 

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