Capricorn Metals
Annual Report 2019

Plain-text annual report

Corporate Directory Directors Mark Clark – Executive Chairman Mark Okeby – Non-Executive Director Myles Ertzen – Non-Executive Director Company Secretary 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: enquiries@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 at the Country Women’s Association, 1176 Hay Street, West Perth, Australia at 11am on Wednesday 20th November 2019. Registered under the Corporations Act 2001 in the State of Western Australia on 22nd September 2006 Contents Operations 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 10 16 23 24 25 26 27 28 54 55 59 63 CAPRICORN METALS LTD ABN 84 121 700 105 1 Operations Review The Directors of Capricorn metals Ltd (“Capricorn” or the “Company”) provide the following operations review. HIGHLIGHTS - PROJECT DEVELOPMENT • Mining Proposal and other key approvals obtained during the year for the Karlawinda Gold Project. • Completion of the acquisition of the Karlawinda accommodation village and mining services infrastructure with its relocation and the installation of construction accommodation completed subsequent to the end of the financial year. • Subsequent to the end of the financial year, key appointments made to development and operational management team to facilitate development of the Karlawinda Gold Project. HIGHLIGHTS - EXPLORATION • Significant exploration drilling results received from the Tramore Prospect during the year confirms a significant zone of shallow mineralisation immediately south of the proposed main Bibra open pit with new intercepts including:  12m @ 2.54g/t Au from 129m (KBRC1187)  19m @ 1.51g/t Au from 119m (KBRC1184)  20m @ 1.30g/t Au from 97m (KBRC1240)  12m @ 3.13g/t Au from 106m including 1m @ 22.35g/t (KBRC1274) • Approximately 120 square kilometres of interpreted new Archean greenstone stratigraphy known as the Mundiwindi Greenstone Belt has been identified. HIGHLIGHTS - CORPORATE • Cash position at 30 June 2019 was $9.04 million and following year end has increased to $92 million through two capital raisings via placements to institutional and sophisticated investors which raised a total of $83.26 million. This funding is expected to satisfy the equity component of the combined equity/project finance funding of the development of the Karlawinda Gold Project. • After a series of changes at board level during the year, following year end, a new board was appointed who are focused on the development the Karlawinda Gold project. In July 2019 two mining professionals were appointed to the board, Mark Clark as Executive Chairman and Mark Okeby as Non-Executive Director. In September 2019 another mining professional Myles Ertzen was appointed to the board, and at this time Non-Executive Directors Timothy Kestell, Douglas Jendry and Stuart Pether resigned. • Following year end, in August 2019 Peter Thompson resigned as Chief Operating Officer, and in September 2019 Kim Massey was appointed Chief Executive Officer and Paul Thomas was appointed Chief Operating Officer of the Company. OUTLOOK • The immediate focus of the board is on the development of the Karlawinda Gold Project which will see Capricorn transition from explorer to gold producer. CAPRICORN METALS LTD ABN 84 121 700 105 2 Operations Review (Cont’d) KARLAWINDA GOLD PROJECT The Karlawinda Gold Project is located in the Pilbara region of Western Australia, 65km south-east of the town of Newman. Figure 1: Location of the Karlawinda Gold Project Geology The Project area is underlain by a largely unexplored and only recently recognised belt of Archaean-aged 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 predominantly granitic basement rocks thought to be part of the Pilbara Craton, are exposed at surface within surrounding younger Proterozoic aged sedimentary basins. Typically, at Karlawinda the bedrock geology is obscured by a thin cover of sandy soil up to 2m thick. The Bibra deposit is part of a large-scale Archaean gold mineralising system with mineralisation 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 the acquisition of the Karlawinda Gold Project, Capricorn initiated a strategy to develop the Project as a large- scale open pit mine and stand-alone ore processing facility. Underpinning this strategy was a programme of drilling to grow the Project Mineral Resource inventory at the Bibra deposit to the current estimate of 1.5moz (Measured, Indicated and Inferred). This represents over 130% growth in resource inventory for the project since the acquisition of Karlawinda. The Company completed a Feasibility Study in October 2017 which outlined a technically and financially robust project over an initial mine life of 6.5 years with average life of mine production of around 100,000oz per annum. In June 2018 an Optimisation Study was completed utilising the updated Ore Reserve estimation of 892,000 which delivered a significant increase to the projects pre-tax NPV. In March 2019 the Company completed the purchase of a 306 room accommodation village and associated mining services infrastructure for the Karlawinda Gold Project. The village was successfully relocated to Karlawinda in August CAPRICORN METALS LTD ABN 84 121 700 105 3 Operations Review (Cont’d) 2019 and the installation of construction accommodation completed subsequent to the end of the financial year. The Company has now established a construction and operational management team who are optimising the components of the Feasibility and Optimisation Studies ahead of development commencing. Figure 2: Karlawinda Gold Project Infrastructure Layout Tenure and Permitting 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. Since that time Capricorn continued to build its tenement position at Karlawinda to its current total area of 2,042km2. A Land Access agreement was executed with the single traditional claimant group, the Nyiyaparli, in November 2016. Key operational licences and approvals were obtained during the year including the Works Approval, 5C Water Extraction Licence, Gas Pipeline Licence and Mining Proposal and Closure Plan. Exploration During the year the Company completed a reverse circulation (RC) drilling programme at the Tramore Prospect as well as regional exploration work over the 110km length of the Karlawinda Gold Project. This work consisted of systematic soil sampling and geological mapping programmes. CAPRICORN METALS LTD ABN 84 121 700 105 4 Operations Review (Cont’d) Tramore Prospect Further RC drilling at the Tramore Prospect, was completed during the year. Tramore, located immediately south of the 1.5Moz Bibra Mineral Resource, has a strike length of approximately 450m. The deposit ranges in thickness between 10m and 20m, dips at approximately 25° and is open at depth. Figure 3: Location of the Tramore Deposit Final results from this programme confirmed a significant zone of shallow mineralisation, with intercepts including: • 12m @ 2.54g/t from 129m (KBRC1187) • 19m @ 1.51g/t from 119m (KBRC1184) • 34m @ 1.07 g/t from 41m (KBRC1164) • 19m @ 1.63 g/t from 78m (KBRC1176) • 20m @ 1.3g/t from 97m (KBRC1240) • 21m @ 1.01g/t from 156m (KBRC1251) • 22m @ 1.37g/t from 155m (KBRC1270) • 19m @ 1.22g/t from 139m (KBRC1241) • 12m @ 3.13g/t from 106m including 1m @ • • • • • • • • • 22.35g/t (KBRC1274) 18m @ 1.10g/t Au from 159m (KBRC1186) 14m @ 1.02 g/t from 56m (KBRC1224) 11m @ 0.83g/t from 123m (KBRC1275) 10m @ 1.78g/t from 70m (KBRC1227) 5m @ 0.69g/t from 73m (KBRC1261) 2m @ 1.88g/t from 85m (KBRC1249) 6m @ 0.97g/t from 159m (KBRC1233) 8m @ 1.94g/t from 139m (KBRC1269) 12m@ 1.01g/t from 70m(KBRC1244) The Tramore mineralisation is hosted in both Archaean amphibolite and garnet-rich volcanoclastic sandstone. The higher- grade assays received define two high grade plunging shoots, associated with silica, carbonate, magnetite alteration and pyrite mineralisation (up to 5% pyrite). These shoots are approximately 50m to 75m in dimension along strike, plunge west parallel with the dip direction and are believed to be located in a similar structural position as the gold mineralisation at Bibra. Tramore is the most advanced prospect not currently in the Karlawinda Gold Project resource inventory. These encouraging results will be included in a resource update for Karlawinda in due course. CAPRICORN METALS LTD ABN 84 121 700 105 5 Operations Review (Cont’d) Figure 4: Tramore Prospect Cross Section 198900 and 199000 CAPRICORN METALS LTD ABN 84 121 700 105 6 Operations Review (Cont’d) New Greenstone Region Approximately 120km2 of interpreted new Archean greenstone stratigraphy known as the Mundiwindi Greenstone Belt has been identified approximately 10 kilometres to the east of the 1.5Moz Bibra gold deposit (Figure 2). Figure 5: Location of the recently identified extension to the Karlawinda Greenstone Belt This newly-identified extension to the greenstone belt doubles the known extent of greenstone lithologies at the Karlawinda Gold Project and is considered highly prospective for gold mineralisation. This area has not been subject to any previous dedicated on-ground gold exploration and the rock types observed are interpreted to be similar to those seen within the host stratigraphy of the Bibra gold deposit. It has similar metamorphic grade and structural deformation characteristics to the known area of Karlawinda greenstones, suggesting rocks from both areas are the same age and have been subject to the same tectonic regime. Soil geochemistry confirms the similarities between the two areas, with the presence of the key elements which define the Bibra stratigraphy of Cu, Ni, Cr and As. A detailed aeromagnetic survey of the newly identified Mundiwindi greenstone region was flown in May 2019. The purpose of the survey was to identify regions with similar geological and structural features consistent with the known Bibra gold deposit and Francopan gold prospect to aid in focusing surface exploration. 7,843-line kilometres were flown on 50 metre line spacing at a height of 30 metres, covering an area of 350km2. This survey, along with geochemical soil sampling has been successful in determining prospective areas of the Mundiwindi greenstone region (Figure 6). Processing and interpretation of the new magnetic data is ongoing and is expected to generate new drilling targets in this area. CAPRICORN METALS LTD ABN 84 121 700 105 7 Operations Review (Cont’d) Figure 6: TMI Aeromagnetic image of Mundiwindi Greenstone belt, in the Eastern part of Karlawinda. Regional Soil Geochemistry An extensive programme of regional geochemistry was conducted across approximately 450km2 of the tenement package during the year. This programme has highlighted the potential for new areas of gold mineralisation with the identification of several priority geochemical targets and confirms the prospectivity and scale of the exploration opportunities at Karlawinda. The new targets identified including Jim’s Find, Woggagina and Jigalong are all located within 50km of the proposed Karlawinda Gold Project processing facility and, in the case of the western prospects, are located close to the proposed Karlawinda Gold Project access road. Figure 7: Soil sampling coverage at the Karlawinda Gold Project and priority one targets highlighted in yellow CAPRICORN METALS LTD ABN 84 121 700 105 8 Operations Review (Cont’d) CORPORATE During the year the Company negotiated debt financing for the Karlawinda Gold Project but was not able to raise the required equity funding for the development of the project. In January 2019 the Company received a notice from two shareholders, holding more than a 5% interest in the Company, requisitioning a meeting of shareholders to remove three Capricorn directors from the board. At that meeting of shareholders in March 2019 Ms Debra Bakker, Mr Geoff Rogers and Mr Peter Benjamin were removed from the Board, Mr Warren Hallam resigned and Mr Doug Jendry and Mr Tim Kestell were appointed to the board. The board subsequently evaluated selling the Karlawinda Gold Project but decided that developing the project was the preferred course of action and initiated a process to achieve that objective. In July 2019, the Company appointed Mr Mark Clark and Mr Mark Okeby to the Board as Executive Chairman and a Non-Executive Director respectively. Both directors have significant experience and knowledge of gold project development and operation. At the same time the Company announced a placement to raise $18.26 million to pave the way for the development of the Karlawinda Gold Project. This placement and a subsequent placement announced in August to raise a further $65 million were successfully completed. As part of the process of strengthening the depth of the Company’s gold project development and operational management, in September 2019 another mining professional, Mr Myles Ertzen was appointed to the board, with Mr Timothy Kestell, Mr Douglas Jendry and Mr Stuart Pether resigning as Non-Executive Directors. In the same month Mr Kim Massey was appointed Chief Executive Officer and Mr Paul Thomas appointed Chief Operating Officer of the Company. Previously, in August 2019, Peter Thompson resigned as Chief Operating Officer. Additional management appointments have also been made including Mr Steve Evans as General Manager of Operations and executives to head the project development team. Subsequent to the end of the financial year the Company also completed security and related documentation with Macquarie to enable it to enter into 200,000 ounces of gold hedging at an average delivery price of A$2,249 per ounce. The hedge has a maturity date of 31 December 2019, by which time it is expected that a project loan facility will have been finalised and the gold hedging will be rolled into a delivery programme matching debt quantum and amortisation and life of mine production plans. FINANCIAL REVIEW Financial Position The net loss attributable to members of the parent entity for the year was $23,817,278 (2018: $3,118,429). The cash balance of the Group at 30 June 2019 was $9.04 million. Future Prospects The group’s cash balance at 30 June 2019, in conjunction with the additional $83.26m raised subsequent to year end is expected to be sufficient to see the group through the process of reaching a final decision to mine and commencing development activities at Karlawinda, during the coming year. CAPRICORN METALS LTD ABN 84 121 700 105 9 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”)(“the Company”), together with the financial report for the year ended 30 June 2019 and the audit report thereon. 1. DIRECTORS The Directors of the Company at any time during and 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 Mark Clark B.Bus CA Executive Chairman – Appointed 8 July 2019 Mr Clark has 28 years’ experience in corporate advisory and public company management. He was a director of successful Australian gold miner Equigold from April 2003 and was Managing Director from December 2005 until Equigold’s $1.2 billion merger with Lihir Gold in June 2008. He was closely involved in the development and operation of Equigold’s gold mines in both Australia and Ivory Coast. Mr Clark was appointed Managing Director of Regis Resources in May 2009 and Executive Chairman in November 2016. He retired as an executive of Regis in October 2018. Mr Clark oversaw the development of Regis’ three operating gold mines at the Duketon Gold Project, which culminated in the project producing well over 300,000 ounces of gold per annum. In Mark’s time at Regis, the company grew from a small explorer with a market capitalisation of around $40 million to the significant gold producer it is today with a market capitalisation in the order of $2.5 billion. Mr Clark is well known in the industry for his strong financial stewardship and focus on delivering shareholder returns. Mr Clark is a member of the Chartered Accountants Australia and New Zealand. Mr Clark is not an independent director. During the past three years Mr Clark has held the following other listed company directorships: • Executive Director of Regis Resources Limited (May 2009 to October 2018) Mr Donald Mark Okeby LLM Non-Executive Director – Appointed 8 July 2019. Mr Okeby began his career in the resources industry in the 1980s as a corporate lawyer advising companies on resource project acquisitions, financing and development. He has a Masters of Law (LLM) and over 30 years experience as a director of ASX listed mining and exploration companies. He is currently a director of Red Hill Iron Ltd (appointed in 2016) and previously has been a director of Hill 50 Ltd, Abelle Limited, Metals X Limited, Westgold Resources Limited, Lynas Corporation Ltd and Regis Resources Limited. Mr Okeby joined the board of Regis Resources in July 2009 as a non-executive director and was a major contributor on the board that transformed Regis from a small gold explorer to one of Australia’s largest gold producers as it is today. Mr Okeby has a deep knowledge of the Australian resources landscape and the regulatory regimes around mine development and operation. He also has significant experience in the commercial and legal aspects of project development, financing and corporate transactions. Mr Okeby is an independent director. During the past three years Mr Okeby has held the following other listed company directorships: • Non-Executive Director of Red Hill Iron Limited (August 2015 to present) • Non-Executive Director of Regis Resources Limited (July 2009 to February 2019) Mr Myles Ertzen B.Sc Grad Dip App Fin Non-Executive Director – Appointed 13 September 2019. Mr Ertzen was from 2009 until December 2018 a senior executive at Regis having had project and business development roles, culminating in the role of Executive General Manager – Growth from which he resigned in December 2018. Prior to Regis, Myles held a number of senior operations roles for gold mining and development companies and has significant experience in the permitting, CAPRICORN METALS LTD ABN 84 121 700 105 10 Directors’ Report (Cont’d) development and operations of gold projects in Western Australia. Myles has various regulatory and technical qualifications in mining, management and finance. Mr Ertzen is an independent director. During the past three years Mr Ertzen has not held any other listed company directorships. Mr Stuart Pether B.E Hons, MAUSIM Non-Executive Director – Resigned 13 September 2019. 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 to this 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. Mr Pether was not an independent director, as he was 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 Timothy Kestell B.Comm Non-Executive Director – Appointed 5 March 2019; resigned 13 September 2019. Mr Kestell has over 20 years’ experience in capital markets including working for Australian stockbrokers Euroz Securities Limited and Patersons. In the past decade, Mr Kestell has played a key role in forming and/or re capitalising publicly listed companies, helping raise over $70m in the process. Mr Kestell holds a Bachelor of Commerce degree and is currently a director of Blue Capital Limited. Mr Kestell was an independent director. During the past three years Mr Kestell has held the following other listed company directorships: • Non-Executive Directors of Hylea Metals Limited (formerly Riva Resources Limited) (September 2017 to present). • Non-Executive Director of Neon Capital Limited (delisted from the ASX on 24 February 2017) (December 2014 to present). Mr Douglas Jendry AAppGeol Non-Executive Director – Appointed 5 March 2019; resigned 13 September 2019. Mr Jendry is a qualified geologist and a member of the Australian Institute of Mining and Metallurgy with over 40 years of onshore and offshore oil and gas experience. He has significant international experience, primarily in the Czech Republic, USA, Papua New Guinea and Colombia. Mr Jendry was an independent director. During the past three years Mr Jendry has held no other listed company directorships Mr Geoffrey Rogers B Juris LLB Non-Executive Director – Appointed 8 November 2018; removed at a general meeting of shareholders held 5 March 2019. Mr Rogers is a corporate and resources lawyer with over 35 years’ experience advising both Australian and international clients involved in the resources industry. CAPRICORN METALS LTD ABN 84 121 700 105 11 Directors’ Report (Cont’d) Mr Rogers was a corporate and resources partner at the law firm Mallesons Stephen Jaques (now King & Wood Mallesons) for 27 years until his retirement in 2012. Mr Rogers has considerable experience in joint ventures, mergers and acquisitions, fund raising, project acquisition and development and regulatory issues in the resources industry. During the period since 2012, Mr Rogers has run his own private practice as well as being in-house counsel for Panoramic Resources Limited. Mr Rogers was an independent director. During the past three years Mr Rogers has held no other listed company directorships Mr Peter Benjamin B.Sc. (Hons), Grad Dip (Exploration), Dip Bus Admin, GAICD, MAusIMM, FAIM Non-Executive Director – Appointed 8 November 2018; removed at a general meeting of shareholders held 5 March 2019. Mr Benjamin is a geologist with over 40 years' experience in senior exploration, project, operational and executive management roles for both junior and mid-tier resources companies. These roles have included significant experience in the development and subsequent operations for open pit and underground precious, base metal and bulk mineral mines throughout Australia. He is a competent person for gold, copper, silver, lead and zinc and mineral sands. Mr Benjamin was an independent director. During the past three years Mr Benjamin has held the following other listed company directorships: • Managing Director – Kalamazoo Resources Limited (February 2013 to July 2018) Mr Warren Hallam B.App Sci (Metallurgy), M.Sc (Min Econ) Managing Director – Appointed 19 February 2019; resigned 5 March 2019. Mr Hallam is a Metallurgist and has worked in various technical, managerial and financial roles across a broad range of commodities predominately copper, nickel, tin, gold and iron ore. Mr Hallam has held previous Directorships with Westgold Resources Limited, Aziana Limited and was the Managing Director of Metals Exploration Limited and Metals X Limited. Mr Hallam was not an independent director. During the past three years Mr Hallam has held the following other listed company directorships: • Westgold Resources Limited (March 2010 to February 2017) • Managing Director - Metals X Limited (December 2016 to November 2018) • Managing Director and Chief Executive Officer – Millennium Minerals Limited (August 2019 to present). Mr Heath Hellewell B.Sc(Hons), MAIG Executive Chairman – Resigned 8 November 2018. 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 has previously held senior exploration positions with a number of successful mining and exploration groups including DeBeers Australia Pty Ltd, Resolute Mining Limited, Independence Group NL and Doray Minerals Limited. Mr Hellewell was not an independent director. During the past three years Mr Hellewell has held the following other listed company directorships: • Non-Executive Director – Core Lithium Ltd (15 September 2014 to present) • Non-Executive Director – Duketon Mining Limited (18 November 2014 to present) Mr Peter Langworthy BS.c(Hons), MAusIMM Non-Executive Director – Resigned 8 November 2018. Previously Mr Langworthy held the following positions within Capricorn: • Executive General Manger – Geology – 14 March 2017 to 2 February 2018 • Executive Director – From 3 February 2016 – Resigned 14 March 2017 • Non-Executive Director – 24 July 2013 to 2 February 2016 CAPRICORN METALS LTD ABN 84 121 700 105 12 Directors’ Report (Cont’d) Mr Langworthy is a geologist with a career spanning 26 years in mineral exploration and project development in Australia and Indonesia. His industry experience includes 12 years in senior management roles with WMC Resources, four years with PacMIn Mining as Exploration Manager, and Jubilee Mines. Mr Langworthy was not an independent director. 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) • Managing Director – Gateway Mining Limited (March 2018 to present) Ms Debra Bakker M.App.Fin, B.Bus (Fin Acc), Grad Dip FINSIA, GAICD Non-Executive Director – Removed at a general meeting of shareholders held 5 March 2019. Ms Bakker is an experienced banker and corporate finance executive with over 25 years of experience dedicated to the mining sector. She held senior positions with Barclays Capital, Standard Bank London Group and Commonwealth Bank’s natural resources team in WA. Ms Bakker was an independent director. During the past three years Ms Bakker has held the following other listed company directorships: • Non-Executive Director of Independence Group NL (December 2016 to present) • Non-Executive Director of Azumah Resources Limited (July 2018 to present) 2. COMPANY SECRETARIES Mrs Natasha Santi was appointed as Joint Company Secretary on 30 September 2012. Mrs Santi had 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, including Capricorn Metals from July 2012. On 1 April 2017, Mrs Santi became a full-time employee of Capricorn Metals and ceased arrangements with Boden Corporate Services. Mr Jonathan Shellabear, the Chief Financial Officer was appointed Joint Company Secretary on 11 May 2017 and resigned on 5 March 2019. 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. 3. MEETINGS OF DIRECTORS During the financial year, the Directors’ attendance at meetings of Directors and committees of Directors were as follows: Directors’ Meetings A 2 12 2 6 4 4 1 6 6 B 2 11 2 6 4 4 1 6 6 Director H Hellewell S Pether P Langworthy D Bakker G Rogers P Benjamin W Hallam T Kestell D Jendry A = Number eligible to attend B = Number attended CAPRICORN METALS LTD ABN 84 121 700 105 13 Directors’ Report (Cont’d) 4. PRINCIPAL ACTIVITIES The principal activities of the Group 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 net loss attributable to members of the parent entity after providing for income tax amounted to $23,817,336 (2018: $3,118,429). 6. DIVIDENDS PAID OR RECOMMENDED No dividends were paid or recommended to be paid during the financial year (2018: Nil). 7. REVIEW OF OPERATIONS A review of the Group's operations during the year and the results of those operations are contained in the Operations Review section of this Annual Report from page 2. 8. FINANCIAL POSITION The net assets of the Group have decreased by $12,166,435 to $23,817,336 during the financial year. This significant decrease is largely due to the impairment of capitalised exploration expenditure totalling $17,203,245, impairment to held for sale assets totalling $1,600,000 and offset by net capital raising proceeds of $11,754,344 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 below and elsewhere in the report, there were no significant changes in the state of affairs. • • • 27 February 2019: 32,508,128 shares were issued at a price of $0.063 per share on completion of a shareholder share purchase plan. 16 April 2019: 32,716,703 shares were issued at a price of $0.065 per share on completion of the institutional component of a shareholder entitlement offer. 7 May 2019: 123,372,188 shares were issued at a price of $0.065 per share on completion of the shareholder entitlement offer. CAPRICORN METALS LTD ABN 84 121 700 105 14 Directors’ Report (Cont’d) 10. SUBSEQUENT EVENTS There were no material events arising subsequent to 30 June 2019, to the date of this report which may significantly affect the operations of the Group, the results of those operations and the state of affairs of the Group in the future, other than: • On 3 July 2019 a placement to raise up to $18.26m by the issue of 280,922,429 new shares at a price of $0.065 per share was announced. The placement was completed in two tranches with 108,707,208 new shares raising $7.07m completed on 5 July 2019 and 172,215,221 new shares to raise $11.19m completed on 30 August 2019. • On 8 July 2019 Mr Mark Clark was appointed to the Board as Executive Chairman and Mr Mark Okeby appointed as a Non- Executive Director. • On 13 August 2019 a placement to raise up to $65.00m by the issue of 406,250,000 new shares at an issue price of $0.16 per share was announced. The placement was to be completed in two tranches with tranche one completed on 20 August 2019 by the issue of 125,426,127 new shares to raise $20.07m. A shareholder meeting held on 24 September 2019 has approved the completion of tranche two of the placement which will see the issue of a further 280,823,873 new shares to raise a further $44.93m. Tranche two settled on 27 September 2019, with shares quoted from Monday 30 September 2019. • On 14 August 2019 Capricorn announced the completion of 200,000 ounces of gold hedging with a 31 December 2019 maturity and a price of A$2,249 per ounce. The hedge has a maturity of 31 December 2019, by which time it is expected that a project debt facility will have been finalised and the gold hedging will be rolled into a delivery programme matching debt quantum and amortisation and life of mine production plans. Hedging of 200,000 ounces represents coverage of approximately 2 years of anticipated gold production out of a current mine life of 8.5 years on the current Ore Reserve of 892,000 ounces of gold (Ore Reserve estimated using an A$1,600/oz gold price). • On 30 August 2019 50,000,000 unquoted options, exercisable at $0.12 per share, with an expiry date of 30 August 2022 were issued to Directors, Mr Mark Clark (40,000,000 options) and Mr Mark Okeby (10,000,000 options) subsequent to shareholder approval received on 27 August 2019. • On 13 September 2019 a number of Board and management changes occurred, which include: o Appointment of Mr Myles Ertzen as a Non-Executive Director. o Resignations of Mr Timothy Kestell, Mr Douglas Jendry and Mr Stuart Pether as Non-Executive Directors of the Company. o Appointment of Mr Kim Massey as Chief Executive Officer. o Appointment of Mr Paul Thomas as Chief Operating Officer, commencing 1 October 2019. o Appointment of Mr Stephen Evans as General Manager of Operations. 11. FUTURE DEVELOPMENTS Likely future developments in the operations of the Group are referred to in the Operations 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. 13. DIRECTORS INTERESTS As at the date of this report, the interests of the Directors in shares and options of the Company were: Director M Clark D M Okeby M Ertzen No. of Shares 69,230,770 23,076,924 18,057,692 No. of Unquoted Options 40,000,000 10,000,000 - CAPRICORN METALS LTD ABN 84 121 700 105 15 Directors’ Report (Cont’d) 14. 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 Board 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 Board. Executives may be granted unquoted share options or performance rights 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 Group. 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 Board annually as part of the review of executive remuneration. 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 2019 Executive Director & Executive Management During the year ended 30 June 2019, the senior executives of the Company had conditions of employment as set out below. Either party may terminate their agreement without cause by giving written notice of three months by the Executive or six months by the Company. There is no termination fee payable other than during the term of notice. Mr Peter Thompson resigned as Chief Operating Officer on 9 August 2019. Name Position Mr Heath Hellewell Mr Warren Hallam Executive Chairman Managing Director Total Salary Package per annum $246,375 Annual leave days per annum Options – Granted 20/04/2016 Options – Granted 25/11/2016 Options – Granted 22/09/2017 Bonus Paid (2) Appointed Resigned 25 - 1,000,000 - - 14 March 2017 8 November 2018 $470,531 20 - - - - 19 February 2019 5 March 2019 Mr Jonathan Shellabear Chief Financial Officer $317,550 20 - - 6,000,000 - 14 March 2017 5 March 2019 Mr Peter Thompson Chief Operating Officer $317,550 20 6,000,000 2,500,000 - $11,908 14 March 2017 9 August 2019 Note (1) (2) The issue of options to Executives is a discretionary form of remuneration that may be offered by the Company from time to time to incentivise the individual. There is no contractual requirement for the offer of options to be made. In May 2019 the board resolved to pay a bonus equal to 3.75% of each employee’s total remuneration package. The bonus was paid as recognition for each employee’s continued support of the Company through the various corporate changes which took place throughout the year and further, to incentivise employees for the coming year. Non-Executive Directors The base fee for a Non-Executive Director is $43,600 per annum, this is inclusive of any contributions to superannuation funds nominated by Directors. In addition to the base Non-Executive Director fee, Mr Stuart Pether was also issued 1,000,000 unquoted options during the year ended 30 June 2018. No unquoted options were issued to Non-Executive Directors during the year ended 30 June 2019. 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 16 Directors’ Report (Cont’d) (a) Remuneration for Key Management Personnel of the Group during the year was as follows 2019 Non-Executive Directors: S Pether P Langworthy (1) D Bakker (2) P Benjamin (3) G Rogers (4) T Kestell (5) D Jendry (6) Executive Directors: H Hellewell (7) W Hallam (8) Management: P Thompson (9) J Shellabear (10) Company Secretaries: N Santi Short Term Benefits Salary & Director Fees $ Other Service Fees (11) $ Post-Employment Benefits Share Based Expense Superannuation $ Annual Leave $ Value of Options $ Total $ Performance related % 43,800 14,222 39,167 13,748 13,748 8,871 8,871 141,876 133,437 417,740 308,927 330,575 639,502 135,000 - - 37,500 - 15,000 - - - - 52,500 - - - - - 1,351 3,721 - - - - 11,977 12,534 29,583 20,531 14,067 34,598 12,825 77,006 - - - - - - - 8,331 - 8,331 25,770 17,527 43,297 11,997 63,625 8,561 (121,663) - - - - - (9,035) - (122,137) 54,383 (31,997) 22,386 52,361 (106,090) 80,388 13,748 28,748 8,871 8,871 153,149 153,853 386,017 409,611 394,169 739,783 16.35 114.68 - - - - - (5.90) - 13.28 (9.69) 4,639 164,461 2.82 (95,112) 1,290,261 Total Key Management Personnel 1,192,242 52,500 P Langworthy ceased as a Non-Executive Director on 8 November 2018. D Bakker ceased as a Non-Executive Director on 5 March 2019. P Benjamin was appointed as a Non-Executive Director on 8 November 2018 and ceased on 5 March 2019. G Rogers was appointed as a Non-Executive Director on 8 November 2018 and ceased on 5 March 2019. T Kestell was appointed as a Non-Executive Director on 5 March 2019 and resigned 13 September 2019. D Jendry was appointed as a Non-Executive Director on 5 March 2019 and resigned 13 September 2019. H Hellewell ceased as Executive Chairman on 8 November 2018. Note (1) (2) (3) (4) (5) (6) (7) (8) W Hallam was appointed as Managing Director on 19 February 2019 and ceased on 5 March 2019. (9) (10) (11) Other services fees cover additional professional services provided by Mr Rogers and Ms Bakker during their appointment as Non-Executive Directors assisting the Company executives with activities during the time P Thompson received a bonus of $11,908 paid during the year, included in Short Term Benefits. P Thompson resigned 9 August 2019. J Shellabear ceased as Chief Financial Officer and Joint Company Secretary 5 March 2019. which there was no Managing Director of Chief Executive Officer appointed. CAPRICORN METALS LTD ABN 84 121 700 105 17 Directors’ Report (Cont’d) 2018 Non-Executive Directors: G LeClezio (1) S Pether P Langworthy (2) D Bakker (3) Executive Directors: H Hellewell Management: P Thompson P Langworthy (2) J Shellabear J L Marquetoux (4) Company Secretaries: N Santi Short Term Benefits Salary & Director Fees $ Other Service Fees $ Post-Employment Benefits Share Based Expense Superannuation $ Annual Leave $ Value of Options $ Total $ Performance related % 23,333 43,800 16,667 13,690 226,326 323,816 297,501 118,966 297,501 94,653 808,621 135,000 - 7,200 - - - 7,200 - - - - - - 2,217 - 1,583 1,301 20,049 25,150 20,049 11,695 20,049 - 51,793 12,825 89,768 - - - - 25,001 25,001 25,770 17,495 25,770 - 69,035 11,997 5,707 6,578 - - 8,750 21,035 144,550 120,015 75,757 - 340,322 31,257 57,578 18,250 14,991 280,126 402,202 487,870 268,171 419,077 94,653 1,269,771 18.26 11.42 - - 3.12 29.63 44.75 18.08 - 10,229 170,051 6.02 106,033 371,586 1,842,024 Total Key Management Personnel 1,267,437 7,200 Note (1) (2) (3) (4) . G LeClezio resigned as Non-Executive Director on 2 February 2018. P Langworthy resigned as Executive General Manager – Geology and was appointed as a Non-Executive Director on 2 February 2018. D Bakker was appointed as a Non-Executive Director on 26 February 2018. J L Marquetoux services ceased with the completion of the sale of subsidiary Mada Aust SARL to BlackEarth Minerals NL on 18 January 2018. CAPRICORN METALS LTD ABN 84 121 700 105 18 Directors’ Report (Cont’d) (b) Equity issued as part of remuneration Options During the year ended 30 June 2019 no (2018: 7,000,000) options were issued to Key Management Personnel. (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 Key Management Personnel, including their related parties is as follows: Balance 1 July 2018 Granted as Remuneration Forfeited (11) Lapsed (12) Balance 30 June 2019 Vested During the Year Vested & Exercisable 30 June 2019 Directors: H Hellewell (1) W Hallam (2) S Pether (3) P Langworthy (4) D Bakker (5) P Benjamin (6) G Rogers (7) T Kestell (8) D Jendry (9) Management: P Thompson J Shellabear (10) Company Secretaries: N Santi 1,000,000 - 1,000,000 7,300,000 - - - - - 9,300,000 8,500,000 6,000,000 14,500,000 800,000 800,000 24,600,000 - - - - - - - - - - - - - - - - (666,667) - - (3,266,667) - - - - - (3,933,333) (333,333) - - (4,033,333) - - - - - (4,366,666) - (4,000,000) (4,000,000) - (2,000,000) (2,000,000) - - 1,000,000 - - - - - - 1,000,000 8,500,000 - 8,500,000 - - 333,333 - - - - - - 333,333 - - 666,666 - - - - - - 666,666 2,833,333 - 2,833,333 7,666,666 - 7,666,666 - - - - 800,000 800,000 266,667 266,667 533,334 533,334 (7,933,333) (6,366,666) 10,300,000 3,433,333 8,866,666 H Hellewell ceased to be a director on 8 November 2018. Note (1) (2) W Hallam was appointed a director on 19 February 2019 and subsequently ceased to be a director on 5 March 2019. (3) (4) (5) (6) (7) (8) (9) (10) (11) Unvested options are forfeited immediately on cessation of employment. (12) S Pether resigned 13 September 2019. P Langworthy ceased to be a director on 8 November 2018. D Bakker ceased to be a director on 5 March 2019. P Benjamin was appointed a director on 8 November 2018 and subsequently ceased to be a director on 5 March 2019. G Rogers was appointed a director on 8 November 2018 and subsequently ceased to be a director on 5 March 2019. T Kestell was appointed a director on 5 March 2019 and resigned 13 September 2019. D Jendry was appointed a director on 5 March 2019 and resigned 13 September 2019. J Shellabear ceased as Chief Financial Officer and Company Secretary on 5 March 2019. Vested options lapse 30 days after the cessation of employment, if they options have not been exercised prior. CAPRICORN METALS LTD ABN 84 121 700 105 19 Directors’ Report (Cont’d) Movements in Share Holdings The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by Key Management Personnel, including their related parties, is as follows: Balance 1 July 2018 Acquired Options Exercised Disposed Balance 30 June 2019 Directors: H Hellewell (1) W Hallam (2) S Pether P Langworthy (3) D Bakker (4) P Benjamin (5) G Rogers (6) T Kestell (7) D Jendry (8) Management: P Thompson J Shellabear (9) Company Secretary N Santi 102,969,129 n/a 355,737 22,776,576 - n/a n/a n/a n/a 126,101,442 6,279,548 4,146,154 10,425,702 - - - - 71,148 - - - - 22,191,935 - 22,263,083 865,667 238,096 1,103,763 - - 136,527,144 23,366,846 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - n/a n/a 426,885 n/a n/a n/a n/a 31,461,935 - 31,888,820 7,145,215 n/a 7,145,215 - - 39,034,035 H Hellewell ceased to be a director on 8 November 2018. Note (1) (2) W Hallam was appointed a director on 19 February 2019 and subsequently ceased to be a director on 5 March 2019. (3) (4) (5) (6) (7) (8) (9) P Langworthy ceased to be a director on 8 November 2018. D Bakker ceased to be a director on 5 March 2019. P Benjamin was appointed a director on 8 November 2018 and subsequently ceased to be a director on 5 March 2019. G Rogers was appointed a director on 8 November 2018 and subsequently ceased to be a director on 5 March 2019. T Kestell was appointed a director on 5 March 2019. D Jendry was appointed a director on 5 March 2019. J Shellabear ceased as Chief Financial Officer and Company Secretary on 5 March 2019. (d) Related Party Transactions with Key Management Personnel Apart from details disclosed in this note, no Director has entered into contracts 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 on 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 Personnel P Langworthy (1) Transaction Exploration programme management 2019 $ 27,005 27,005 2018 $ 314,364 314,364 Note: (1) 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. P Langworthy ceased to be a key management person and related party on 8 November 2018. 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 2019 $ 2018 $ - - 35,646 35,646 20 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: Group Revenue Net Profit/(Loss) Share Price at Year End Dividends Paid 2015 1,334,642 (602,534) 1.8c - 2016 700,637 (3,700,868) 15.0c - 2017 425,592 (3,293,239) 8.1c - 2018 241,770 (3,118,429) 6.6c - 2019 207,158 (23,817,278) 8.9c - 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 - - 15. 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 2019 (2018: Nil). 16. 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. 17. 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 23 November 2017 27 August 2019 Date of Expiry 31 May 2020 31 May 2020 5 May 2021 5 May 2021 5 May 2021 23 November 2021 30 August 2022 Exercise Price $0.100 $0.200 $0.147 $0.147 $0.150 $0.097 $0.120 No. Under Option 6,000,000 2,500,000 18,284,101 10,205,927 3,400,000 1,000,000 50,000,000 91,390,028 No options were exercised during the year ended 30 June 2019 (2018: Nil) A total of 7,936,666 options were forfeited and 6,366,666 options lapsed during the year ended 30 June 2019 (2018: 1,000,000). 18. 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. CAPRICORN METALS LTD ABN 84 121 700 105 21 Directors’ Report (Cont’d) 19. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found on page 23 of the annual report. Signed in accordance with a resolution of the Board of Directors. Mr M Clark Executive Chairman Perth, Western Australia 30 September 2019 CAPRICORN METALS LTD ABN 84 121 700 105 22 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF CAPRICORN METALS LTD I declare that, to the best of my knowledge and belief during the year ended 30 June 2019 there have been: — no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and — no contraventions of any applicable code of professional conduct in relation to the audit. William Buck Audit (WA) Pty Ltd ABN 67 125 012 124 Robin Judd Director Dated this 30th day of September 2019 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Revenue Other Income Grant Income Disposal of subsidiary group Gain/(loss) on disposal of other financial assets Fair value loss on financial assets Employee benefits expense Depreciation expense Administration costs Finance costs Exploration expenditure Reversal of impairment of receivable Impairment of held for sale asset Impairment of capitalised exploration 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 listed company shares Note 2(a) 2(b) 27 10 3 8 9 11 5 2019 $ 2018 $ 159,794 186,222 47,364 - - - 55,548 75,678 (38,304) (3,224) (62,000) - (1,605,062) (1,891,664) (54,973) (68,369) (1,311,114) (992,399) (1,605,000) - (596,113) (473,946) 14,132 33,447 (1,600,000) (17,203,245) - - (23,816,217) (3,117,011) (1,061) (1,418) (23,817,278) (3,118,429) (22,324) - 42,654 (210,000) Total comprehensive loss for the year attributable to members of the parent entity (23,839,602) (3,285,775) Earnings per share: Basic loss per share (cents per share) Diluted loss per share (cents per share) 18 18 (3.04) (3.04) (0.47) (0.47) The accompanying notes form part of these financial statements CAPRICORN METALS LTD ABN 84 121 700 105 24 Consolidated Statement of Financial Position As at 30 June 2019 Current Assets Cash and cash equivalents Other current receivables Other current assets Assets classified as held for sale Total Current Assets Non-Current Assets Property, plant & equipment Other financial assets Deferred exploration and evaluation costs Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Other liability Employee benefits 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 2019 $ 2018 $ 5 7 6 9 8 10 11 12 13 14 15 16 17 9,039,767 270,262 64,280 9,374,309 2,900,000 12,274,309 1,803,042 128,000 12,078,608 14,009,650 5,586,437 235,994 59,862 5,882,293 4,500,000 10,382,293 332,202 190,000 26,483,890 27,006,092 26,283,959 37,388,385 2,028,152 3,086 134,672 2,165,910 902,826 2,479 165,320 1,070,625 300,713 300,713 333,989 333,989 2,466,623 1,404,614 23,817,336 35,983,771 62,633,017 487,941 (39,303,622) 50,878,673 381,442 (15,276,344) 23,817,336 35,983,771 The accompanying notes form part of these financial statements. CAPRICORN METALS LTD ABN 84 121 700 105 25 Consolidated Statement of Changes in Equity For the year ended 30 June 2019 Balance at 1 July 2017 Note Issued Capital $ 42,121,506 Accumulated Losses $ (14,341,936) Foreign Currency Translation Reserve $ (717,282) Asset Revaluation Reserve $ 2,184,021 Re-classification to Assets Held for Sale Restated at 1 July 2017 16 - 42,121,506 2,184,021 (12,157,915) Loss for the year Other comprehensive income Total comprehensive income Issue of shares Cost of capital raised Share based payments Balance at 30 June 2018 - - - 9,128,944 (371,777) - 50,878,673 (3,118,429) - (3,118,429) - - - (15,276,344) 15 15 16 - (717,282) - 42,654 42,654 - - - (674,628) Balance at 1 July 2018 50,878,673 (15,276,344) (674,628) New accounting standards adjustment to opening balances Restated at 1 July 2018 1(v) - 50,878,673 Loss for the year Other comprehensive income Total comprehensive income Issue of shares Cost of capital raised Share based payments Balance at 30 June 2019 - - - 12,193,778 (439,434) - 62,633,017 15 15 16 (210,000) (15,486,344) (23,817,278) - (23,817,278) - - - (39,303,622) - (674,628) - (22,324) (22,324) - - - (696,952) (2,184,021) - - - - - - - - - - - - - - - - - - Investment Revaluation Reserve $ Option Reserve $ - - - - (210,000) (210,000) - - - (210,000) 861,239 - 861,239 - - - - - 404,831 1,266,070 Total $ 30,107,548 - 30,107,548 (3,118,429) (167,346) (3,285,775) 9,128,944 (371,777) 404,831 35,983,771 (210,000) 1,266,070 35,983,771 210,000 - - 1,266,070 - - - - - - - - - - - - (81,177) 1,184,893 - 35,983,771 (23,817,278) (22,324) (23,839,602) 12,193,778 (439,434) (81,177) 23,817,336 The accompanying notes form part of these financial statements CAPRICORN METALS LTD ABN 84 121 700 105 26 Consolidated Statement of Cash Flows For the year ended 30 June 2019 Cash flows from Operating Activities Payments to suppliers and employees Payments for exploration expenditure Payments for stamp duty on acquisition of Greenmount Resources Pty Ltd Interest received Royalties received Grant income received Other income Net cash used in operating activities Cash flows from Investing Activities Payments for property, plant and equipment Payments for acquisition of accommodation village & mining infrastructure Proceeds on sale of financial assets Consideration/ deposit received on sale of Subsidiary Payments for capitalised exploration expenditure Net cash used in investing activities Cash flows from Financing Activities Proceeds received from the issue of shares Costs of capital raised Payments under share purchase agreement Net cash flows provided by financing activities Net increase/(decrease) in cash held Cash and cash equivalent at the beginning of the year Effect of exchange rates on cash holdings in foreign currencies Cash and cash equivalents at the end of the year Note 2019 $ 2018 $ (3,076,039) (636,626) - 45,132 67,869 15,136 112,957 (3,471,571) (28,153) (1,500,000) - - (3,260,316) (4,788,469) 12,193,778 (439,434) (40,721) 11,713,623 (2,168,134) (458,481) (330,584) 56,700 69,498 60,542 99,805 (2,670,654) (34,470) - 66,915 75,000 (6,103,732) (5,996,287) 9,128,944 (371,777) (44,427) 8,712,740 3,453,583 45,799 5,586,437 5,541,663 (253) (1,025) 9,039,767 5,586,437 20 5 6 The accompanying notes form part of these financial statements. CAPRICORN METALS LTD ABN 84 121 700 105 27 Notes to the Consolidated Financial Statements For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements for the year ended 30 June 2019, comprises Capricorn Metals Ltd (referred to in these financial statements as “Parent” or “Capricorn”) and its wholly owned subsidiaries (“the Group”)(“the Company”). 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. 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 30 September 2019 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. Basis of Preparation: 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 and Entities controlled by the Parent (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 26. 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 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. CAPRICORN METALS LTD ABN 84 121 700 105 28 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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 Group 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. Buildings and infrastructure The value of property, plant and equipment is measured as the cost of the asset, less accumulated depreciation and impairment. The cost of the asset also includes the cost of replacing parts that are eligible for capitalisation, the cost of major inspections and an initial estimate of the cost of dismantling and removing the item from site at the end of its useful life. 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 Plant and Equipment Computers Motor vehicles Field equipment Depreciation Rate 7.5% - 50% 20% 20% 40% The depreciation rate for the recently acquired second-hand accommodation village and mining infrastructure buildings, relocated to Group tenure during September 2019, have not yet been assessed. The appropriate depreciation rate which will be applicable after the installation (when the asset is ready for use), including the expected life of the asset is expected to be determined at the time of installation. 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 capitalised only when that expenditure is attributable to a defined area of interest for which the Group has the rights to explore, evaluate and develop. 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 29 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 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 Financial instruments are initially measured at fair value plus transaction costs, except where the instruments is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Classification and Subsequent Measurement Classification and Subsequent Measurement Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method or cost. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as (i) the amount at which the financial asset or financial liability is measured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (iv) less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carry amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The Group does not designate any interest in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial statements. (i) Financial assets at fair value through profit and loss or through other comprehensive Income Financial assets are classified at ‘fair value through profit or loss’ or ‘fair value through other comprehensive Income’ when they are either held for trading for purposes of short term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss if electing to choose ‘fair value through profit or loss’ or other comprehensive income if electing ‘fair value through other comprehensive income’. (ii) Financial Liabilities The Group’s financial liabilities include trade and other payables, provisions for cash bonus and other liabilities. All financial liabilities are recognised initially at fair value and, in the case payables, net of directly attributable transaction costs. Such liabilities are subsequently measured at fair value with changes in carrying value being included in profit or loss if electing to choose ‘fair value through profit or loss’ or other comprehensive income if electing ‘fair Value through other comprehensive income’. Fair value Fair value is determined based on current bid prices for all quoted investments. Derecognition Financial assets are derecognised where the contractual rights to receipts of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risk and benefits associated with the asset. Financial Liabilities are recognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. CAPRICORN METALS LTD ABN 84 121 700 105 30 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (g) Impairment of Debtors The company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. (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. (i) 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, being activities outside of Australia, 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. (j) 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. CAPRICORN METALS LTD ABN 84 121 700 105 31 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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. As at 30 June 2019 the Company does not have any employees entitled to long service leave, or a pro-rata entitlement to long service leave. 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 (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 19. 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 reporting 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. (k) 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. (l) 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. CAPRICORN METALS LTD ABN 84 121 700 105 32 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (m) Revenue and Other Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. 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. Other revenue is recognised when it is received or when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax (GST). (n) 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. (o) 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. (p) 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. 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. (q) 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. (r) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (s) 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 19. 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. CAPRICORN METALS LTD ABN 84 121 700 105 33 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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 a defined area of interest for which the Group has the rights to explore, evaluate and develop, the sale of the respective areas of interest or where activities in the area of interest 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 on peripheral exploration tenements, outside of the defined mining lease should be written off at the reporting date as there are no immediate plans to develop outside of the mining lease. 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 from SQNY International 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 next financial year’s cash receipts with the remaining balance not expected to be settled in the next financial year treated as non-current. Deferred Tax Assets The Directors have considered it prudent not to bring to account the deferred tax asset of income tax losses until it is probable of deriving assessable income of a nature and amount to enable such benefit to be realised. Held for Sale Assets The held for sale property asset, reclassified from property, plant and equipment at 30 June 2017, remains unsold as at 30 June 2019. An annual valuation prepared by an expert is used by the directors in the assessment of the carrying amount of the held for sale asset and the requirement to impair the carrying value. (t) 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. 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. (u) 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. (v) Earnings Per Share Basic earnings per share (EPS) is calculated by dividing the income or loss attributable to the members of the Company for reporting period, after exclusion of any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the half year, adjusted for any bonus elements. Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after-tax effect of interest recognised associated with the dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares adjusted for any bonus elements. (w) Adoption of New and Revised Accounting Standards The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period, being the year ended 30 June 2019. There have been no new and revised standards that have had a significant impact on the measurement or disclosure requirements of the Group, except as noted below. New and revised Standards adopted by the Group AASB 9 Financial Instruments AASB 9 Financial Instruments replaces parts of AASB 139 bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. CAPRICORN METALS LTD ABN 84 121 700 105 34 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) The Group has applied AASB 9 from 1 July 2018. The cumulative impact of applying AASB 9 is recognised at the date of initial application as an adjustment to the opening balance of retained earnings. The Group has elected not to adjust comparative information. AASB 9 introduced new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and are solely payments of principal and interest (SPPI). All other financial instrument assets are to be classified and measured at fair value through profit or loss (FVTPL) unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for trading) in other comprehensive income (OCI). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements more closely align the accounting treatment with the risk management activities of the Group. Impairment requirements use an ‘expected credit loss’ (ECL) model to recognise an allowance. Impairment is measured under a 12- month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. A summary of the key impacts of adopting AASB 9 follows: Classification and measurement The Group continued measuring at fair value all financial assets previously held at fair value under AASB 139. Equity investments Listed equity investments previously classified as Available-for-Sale financial assets are now classified and measured as financial assets at FVTPL. As a consequence, the reclassification the fair value reserve at 1 July 2018 relating to Available-for-Sale financial assets was transferred to retained earnings (see below). Impact on statement of financial position The following table summarises the impact, net of tax, of transition to AASB 9 on reserves and accumulated losses at 1 July 2018. Investment Revaluation Reserve Closing balance under AASB 139 (30 June 2018) Equity instruments reclassified as financial assets at FVTPL Opening balance under AASB 9 (1 July 2018) Accumulated Losses Closing balance under AASB 139 (30 June 2018) Equity instruments reclassified as financial assets at FVTPL Opening balance under AASB 9 (1 July 2018) $ (210,000) 210,000 - $ (15,276,344) (210,000) (15,486,344) Classification of financial assets and financial liabilities on the date of initial application of AASB 9 The following table shows the original measurement categories under AASB 139 and the new measurement categories under AASB 9 for each class of the Consolidated Entity’s financial assets and financial liabilities as at 1 July 2018. Original classification under AASB 139 New classification under AASB 9 Original carrying amount under AASB 139 New carrying amount under AASB 9 Financial Assets Equity investments Cash and cash equivalents Other current receivables Other current assets Total financial assets Financial Liabilities Trade and other payables Total financial liabilities Available-for-sale Loans and receivables Loans and receivables Loans and receivables FVTPL Amortised cost Amortised cost Amortised cost Amortised cost Amortised cost AASB 15 Revenue from Contracts with Customers 190,000 5,586,437 235,994 59,862 6,072,293 902,826 902,826 190,000 5,586,437 235,994 59,862 6,072,293 902,826 902,826 AASB 15 Revenue from Contracts with Customers applied to the Group from 1 July 2018 and replaced AASB 118 Revenue which covers revenue arising from the sale of goods and the rendering of services. The new standard is based on the principle that revenue is recognised when control of a service, or goods, transfers to a customer. CAPRICORN METALS LTD ABN 84 121 700 105 35 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) The Company completed its assessment of the implications of adopting the new standard and concluded that, due to the nature of the Group’s services, there has been no changes to the timing of the Group’s revenue recognition. The Group’s accounting policy under AASB 15 is as follows. Revenue is recognised when the Group satisfies its performance obligations by transferring its products and services to the customer, and the revenue can be reliably measured at the fair value of the consideration received. 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 2019 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 Group, are set out below. Mandatory application date/ Date adopted by Company 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 16 (issued February 2016) Leases The group is expecting the standard will impact the financial statements as they do currently have lease obligations totalling $540,237 at 30 June 2019. 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 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 36 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 2 – REVENUE (a) Revenue - royalties - rental - other Total Revenue (b) Other Income - net interest received - foreign currency gain Total Other Income Total Revenue (a) Revenue - royalties - rental - other Total Revenue (b) Other Income - net interest received - foreign currency gain Total Other Income Total Revenue NOTE 3 – EXPENSES (a) Employee benefits expense Australia Non-executive directors’ fees Executive directors’ salary Other salaries Superannuation Net reduction to annual leave entitlements Other employment expenses Share based payments Salary capitalised as exploration and evaluation expenditure Mauritius Directors remuneration Madagascar Country manager - J L Marquetoux Payroll Australia $ Madagascar $ 2019 $ - - - - 47,213 - 47,213 47,213 43,246 116,085 463 159,794 139 12 151 43,246 116,085 463 159,794 47,352 12 47,364 159,945 207,158 Australia $ Madagascar $ 2018 $ - - - - 55,442 - 55,442 55,442 90,164 95,814 244 186,222 61 45 106 90,164 95,814 244 186,222 55,503 45 55,548 186,283 241,770 Note 2019 $ 2018 $ 19 194,929 275,864 1,583,915 153,958 (30,529) 262,962 (81,177) (779,456) 1,580,466 6,000 6,000 - 18,596 18,596 104,690 226,326 1,282,092 151,786 76,030 93,490 404,831 (719,722) 1,619,523 10,500 10,500 94,653 166,988 261,641 Total employee benefits expense 1,605,062 1,891,664 CAPRICORN METALS LTD ABN 84 121 700 105 37 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 4 - 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 2019 $ 2018 $ 1,061 - 1,061 1,418 - 1,418 The Prima facie tax on Loss before income tax at 27.50% (2018: 27.50%) (6,549,460) (857,568) 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 1,061 1,242 505,890 (1,853) (83,249) (422,030) 1,061 - - - 1,418 1,571 2,256,832 (131,867) (146,279) (1,980,257) 1,418 - - - 13,914,405 - 13,914,405 7,728,573 - 7,728,573 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 5 – CASH AND CASH EQUIVALENTS Cash at bank NOTE 6 – OTHER CURRENT ASSETS Prepayments Other Total Other Current Assets 2019 $ 9,039,767 2018 $ 5,586,437 2019 $ 68,927 (4,647) 64,280 2018 $ 58,389 1,473 59,862 CAPRICORN METALS LTD ABN 84 121 700 105 38 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 7 – OTHER CURRENT RECEIVABLES Interest Other receivables Bank guarantees (1) Total Other Current Receivables 2019 $ 6,737 125,161 138,364 270,262 2018 $ 4,517 93,113 138,364 235,994 Note (1) Deposits held for bank guarantees are made up of the following: - - $40,000 is held as security for the credit card facility and bears 2.35% (2018: 2.35%) interest. $98,364 is held as security for the office lease and bears 2.35% (2018: 2.35%) interest. NOTE 8 – 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 Buildings & Infrastructure – At cost (1) Less accumulated depreciation Total Buildings & Infrastructure Total Plant and Equipment 2019 $ 462,369 (257,780) 204,589 248,346 (149,893) 98,453 29,699 (29,699) - 1,500,000 - 1,500,000 2018 $ 458,447 (216,359) 242,088 227,296 (137,182) 90,114 29,699 (29,699) - - - - 1,803,042 332,202 Note (1) Used accommodation village and some mining infrastructure, acquired on 31 March 2019, has not yet come into use by the Group. Depreciation expense for these assets will commence once these assets are utilised. (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: Carrying amount at 30 June 2017 Additions Disposals Depreciation expense Carrying amount at 30 June 2018 Additions Disposals Depreciation expense Carrying amount at 30 June 2019 Plant & Equipment $ 273,384 Field Equipment $ 100,114 17,201 - (48,497) 242,088 6,649 (1,886) (42,262) 204,589 11,673 (1,801) (19,872) 90,114 21,050 - (12,711) 98,453 Motor Vehicles $ Buildings & Infrastructure $ - - - - - - - - - - - - - - 1,500,000 - - 1,500,000 CAPRICORN METALS LTD ABN 84 121 700 105 Total $ 373,498 28,874 (1,801) (68,369) 332,202 1,527,699 (1,886) (54,973) 1,803,042 39 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 9 – ASSETS HELD FOR SALE Property Asset Impairment Total Assets Held for Sale 2019 $ 4,500,000 (1,600,000) 2,900,000 2018 $ 4,500,000 - 4,500,000 The Company intends to dispose of a freely held property asset located in Antanarirvo, Madagascar within the next 12 months. This property of 19,373m2 containing a number of buildings, including offices, warehouses and villa accommodation, is a unique asset with limited potential buyers. At the time the property was classified as a held for sale asset the Board of Directors had 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. To assess the requirement for any impairment of the carrying value of the asset, a new valuation was completed by Messrs Cabinet D’Expertise Audit Techniques Et Conseils Qualities in September 2019 of 7,435,591,258 Ariary (AUD $2,962,597). On the basis of the current valuation, and consideration for the unique nature of the property, the Directors considered it prudent to impair the carrying value of this asset by $1,600,000 (2018: Nil). The fair value of the freehold land was determined based on the market comparable approach that reflects recent transaction prices for similar properties. NOTE 10 – OTHER FINANCIAL ASSETS Part of the consideration for the sale of the subsidiary group comprising Madagascar Graphite Ltd and Mada-Aust SARL was the issue of 2,000,000 fully paid ordinary shares in the capital of BlackEarth Minerals NL. See Note 29. The shares received are restricted from trading for a period of 24 months from the ASX Listing of BlackEarth Minerals NL (Listing date: 19 January 2018). Non-Current At 1 July Acquisition of 2,000,000 shares in BlackEarth Minerals NL Fair value adjustment At 30 June 2019 $ 2018 190,000 - (62,000) 128,000 - 400,000 (210,000) 190,000 Financial assets, revalued at fair value through profit or loss (2018: classified as Available-For-Sale financial assets and revalued at fair value through other comprehensive income (reclassified 1 July 2018 see Note 1(w))) using the closing quoting bid prices at the end of the reporting period represent 2,000,000 (30 June 2018: 2,000,000) fully paid ordinary shares in Australian company, BlackEarth Minerals NL. Fair value of listed shares and assumptions Fair value per listed share Closing quoting bid price per share 2019 2018 $0.064 $0.064 $0.095 $0.095 CAPRICORN METALS LTD ABN 84 121 700 105 40 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 11 – DEFERRED EXPLORATION & EVALUATION COSTS At 1 July Capitalised exploration expenditure Impairment (1) At 30 June Note (1) The Board has made a decision to impair the value of exploration expenditure capitalised on the peripheral exploration tenements of the Karlawinda Gold Project. The Board believes it prudent to write-off all capitalised exploration expenditure on the Karlawinda Gold Project that has not been incurred post acquisition on mining lease M52/1070. The Board has formed this view as the current resource estimate, ore reserves and completed feasibility and optimization study are all contained within the boundary of M52/1070. The Board has no immediate plans to develop outside of this tenement. 2019 $ 26,483,890 2,797,963 (17,203,245) 12,078,608 2018 $ 20,668,339 5,815,551 - 26,483,890 2019 $ 2018 $ 345,209 1,660,388 22,555 2,028,152 792,701 80,125 30,000 902,826 NOTE 12 – CURRENT TRADE & OTHER PAYABLES Unsecured liabilities Trade Payables Accrued Payables – Operating (1) Accrued Payables – World Titane Holdings Ltd (2) Total Current Trade & Other Payables Note (1) (2) Includes a facility fee of $1,605,000 payable to Macquarie Bank. This liability was incurred with the signing of the Macquarie Bank term sheet in December 2018 and is payable in the half year ended December 2019. Accrued payables include amounts in respect of the Share Purchase Agreement with WTR Holdings Pty Ltd (formerly Madagascar Resources NL) payable within the next 12 months. The liability owed to WTH is only repayable from 70% of the labradorite royalty cash receipts received from the one remaining specified lessee. NOTE 13 – EMPLOYEE BENEFITS Provision for annual leave Opening 1 July Additional provisions Amounts used Foreign exchange adjustments Closing 30 June Number of employees at year end NOTE 14 – NON-CURRENT TRADE & OTHER PAYABLES Unsecured liabilities Accrued Payables (1) Total Non-Current Trade & Other Payables Note (1) Australia Madagascar 2019 $ 2018 $ 165,320 127,742 (158,381) (9) 134,672 7 5 12 89,057 162,995 (86,725) (7) 165,320 10 5 15 2019 $ 2018 $ 300,713 300,713 333,989 333,989 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 from one specified lessee and is not expected to be settled in the next financial year. CAPRICORN METALS LTD ABN 84 121 700 105 41 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 15 – ISSUED CAPITAL 936,533,344 fully paid ordinary shares (2018: 747,936,325) 2019 $ 62,633,017 62,633,017 2018 $ 50,873,673 50,873,673 Ordinary shares At 1 July Shares issued during the year: - 6 December 2017 (1) - 27 December 2017 (2) - 27 February 2019 (3) - 16 April 2019 (4) - 7 May 2019 (5) Costs of capital raised At 30 June There are no preference shares on issue. 2019 2018 No. $ No. $ 747,936,325 50,878,673 572,379,458 42,121,506 - - 32,508,128 32,716,703 123,372,188 - 936,533,344 - - 2,048,000 3,182,170 6,963,608 (439,434) 62,633,017 137,095,083 38,461,784 - - - - 747,936,325 7,128,944 2,000,000 - - - (371,777) 50,878,673 Note (1) (2) (3) (4) (5) 6 December 2017: 137,095,083 shares were issued at a price of $0.052 per share on completion of a placement to sophisticated investors. 27 December 2017: 38,461,781 shares were issued at a price of $0.052 per share subsequent to the completion of a shareholder share purchase plan. 27 February 2019: 32,508,128 shares were issued at a price of $0.063 per share subsequent to the completion of a shareholder share purchase plan. 16 April 2019: 32,716,703 shares were issued at a price of $0.065 per share subsequent to the completion of the institutional portion of a 1 for 5 shareholder entitlement offer to shareholders. 7 May 2019: 123,372,188 shares were issued at a price of $0.065 per share subsequent to the completion of the retail portion of a 1 for 5 shareholder entitlement offer to shareholders. 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 936,533,344 (2018: 747,936,325) shares, of which all are listed on the Australian Securities Exchange (ASX) at 30 June 2019. Options The following unquoted options were on issue during the year: Number of Options As at 30 June 2019 (a) Exercisable at $0.10 on or before 31 May 2020 (b) Exercisable at $0.20 on or before 31 May 2020 (c) Exercisable at $0.15 on or before 5 May 2021 (d) Exercisable at $0.097 on or before 23 November 2021 Balance 1 July 2018 10,800,000 6,000,000 37,890,028 1,000,000 55,690,028 CAPRICORN METALS LTD ABN 84 121 700 105 Issued Forfeited Lapsed Balance 30 June 2019 Number Vested Number to Vest - - - - - (1,600,000) (3,200,000) 6,000,000 6,000,000 - (2,333,334) (1,166,666) 2,500,000 1,666,666 833,334 (4,000,000) (2,000,000) 31,890,028 30,756,694 1,133,334 - - 1,000,000 333,333 666,667 (7,933,334) (6,366,666) 41,390,028 38,756,693 2,633,335 Contractual life remaining (days) 336 336 675 877 42 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 15 – ISSUED CAPITAL (Cont’d) Number of Options As at 30 June 2018 Balance 1 July 2017 10,800,000 6,000,000 37,890,028 - - - - 1,000,000 54,690,028 1,000,000 (a) Exercisable at $0.10 on or before 31 May 2020 (b) Exercisable at $0.20 on or before 31 May 2020 (c) Exercisable at $0.15 on or before 5 May 2021 (d) Exercisable at $0.097 on or before 23 November 2021 Fair value Issued Forfeited Lapsed Balance 30 June 2018 Number Vested Number to Vest Contractual life remaining (days) 701 701 - - - - - - 10,800,000 7,200,000 3,600,000 - 6,000,000 1,999,999 4,000,001 - 37,890,028 31,623,361 6,266,667 1,040 - 1,000,000 - 1,000,000 1,242 - 55,690,028 38,823,360 9,866,668 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 no share options granted during the year ended 30 June 2019 (2018: 7,000,000). NOTE 16 – RESERVES Share based payment reserve Opening balance 1 July Share based payments for the year Options forfeited during the year Closing balance 30 June 2019 $ 2018 $ 1,266,070 140,534 (221,711) 1,184,893 861,239 404,831 - 1,266,070 This reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration. Refer to Note 19 and the Remuneration Report for further details. Foreign currency translation reserve Opening balance 1 July Translation movement for the year Closing balance 30 June 2019 $ 2018 $ (674,628) (22,324) (696,952) (717,282) 42,654 (674,628) This reserve records exchange differences arising on translation of foreign controlled subsidiaries. Asset revaluation reserve Opening balance 1 July Re-classification to asset held for sale (1) Restated at 1 July Revaluation movement for the year Closing balance 30 June Note (1) Refer to Note 9. 2019 $ 2018 $ 2,184,021 (2,184,021) - - - - - - - - CAPRICORN METALS LTD ABN 84 121 700 105 43 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 16 – RESERVES (Cont’d) This reserve records fair value re-measurement recorded on the Groups land & building asset held in Madagascar. Investment revaluation reserve Opening balance 1 July New accounting standards adjustment to opening balance (Note 1(w)) Closing balance 30 June 2019 $ 2018 $ (210,000) 210,000 - - (210,000) (210,000) This reserve records fair value re-measurement recorded on 2,000,000 fully paid ordinary shares held in ASX Listed company BlackEarth Minerals NL (“BEM”). The BEM shares are subject to a 24-month escrow period, during which they are restricted from sale by the Company. The escrow period commenced on 18 January 2018. NOTE 17 – ACCUMULATED LOSSES Opening balance 1 July Re-classification to asset held for sale (1) Restated at 1 July New accounting standards adjustment to opening balance (Note 1(w)) Loss for the year Closing balance 30 June Note (1) Refer to Note 9. NOTE 18 – 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 2019 there are 41,390,028 (2018: 55,690,028) unquoted options on issue. 2019 $ (17,460,365) - - (210,000) (23,817,278) (39,303,622) 2018 $ (14,341,936) 2,184,021 (12,157,915) - (3,118,429) (15,276,344) 2019 $ 2018 $ (23,817,278) (3,118,429) Cents Cents (3.04) (0.47) Number 783,866,053 Number 669,247,998 As the Group incurred a loss for the year (2018: Loss), the options on issue have no dilutive effect, therefore the diluted earnings per share is equal to the basic earnings per share. CAPRICORN METALS LTD ABN 84 121 700 105 44 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 19 – 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 2019, no options were granted to Key Management Personnel & employees of the Company (2018: 7,000,000 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 2018 and outstanding at 30 June 2019: Number of Options Grant Date Expiry Date Fair Value per Option Exercise Price Share Price on Grant Date Risk Free Interest Rate (%) Estimated Volatility (%) 6,000,000 (1) 22/09/2017 05/05/2021 1,000,000 (2) 23/11/2017 23/11/2021 $0.022 $0.020 $0.150 $0.097 $0.091 $0.067 2.20% 2.04% 50% 50% 30 June 2019 Number Lapsed/ Forfeited (3) 6,000,000 - Number Vested - 333,333 In the previous table, the following vesting profiles have been adopted: (1) (2) (3) 2,000,000 vest on 11 May 2018, 2,000,000 vest on 11 May 2019 and 2,000,000 vest on 11 May 2020. 333,333 vest on 23 November 2018, 333,333 vest on 23 November 2019 and 333,334 vest on 23 November 2020. The unvested options (4,000,000) were forfeited on cessation of employment and vested options (2,000,000) lapsed 30 days after cessation of employment as they were not exercised. 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 (2018: Nil). Total expenses arising from share-based payment transactions recognised during the period were as follows: Options NOTE 20 – 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 of assets held for sale Impairment of capitalised exploration expenditure Fair value loss on financial assets Foreign currency translation Share based payment Loss on disposal of fixed assets Cash flows in result not classified as cash flows from operations Profit/(Loss) on sale of financial assets Loss on disposal of subsidiary group Changes in assets and liabilities (Increase) in other current assets Increase/(Decrease) in payables and accruals Cashflow used by Operations Non-cash investing and financing activities 2019 $ (81,177) 2018 $ 404,831 2019 $ 2018 $ (23,817,278) (3,118,429) 54,973 1,600,000 17,203,245 62,000 (22,071) (81,177) 1,886 - - 68,369 - - - 43,679 404,831 1,802 3,224 38,304 27,302 1,499,549 (3,471,571) 91,282 (203,716) (2,670,654) There were no non-cash investing and financing activities during the year ended 30 June 2019 (30 June 2018: Nil) CAPRICORN METALS LTD ABN 84 121 700 105 45 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 21 – COMMITMENTS Planned Exploration Expenditure Exploration expenditure commitments represent tenement rentals and expenditure requirements that may be required to be met under the relevant legislation should the Group wish to retain tenure on all current tenements in which the Group has an interest. As at 30 June 2019 there are 13 granted tenements and 1 granted mining lease. In addition, there are 3 applications not yet granted and 9 granted miscellaneous licences which do not have an annual minimum expenditure commitment but do have an annual rent payment applicable. Planned Exploration Expenditure - Within one year Aggregate exploration commitments contracted at reporting date but not recognised as liabilities 2019 $ 2018 $ 1,197,363 1,050,208 1,197,363 1,050,208 Annual exploration expenditure after one year will be a similar commitment to that within one year, however this amount is increased if new exploration tenements are added to the Group’s portfolio or reduced, if exploration tenements are removed from the Group’s portfolio. 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 has entered into a lease arrangement on a printer from 22 May 2017, and a phone system from 9 July 2017, both with lease terms 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 at reporting date but not recognised as liabilities 2019 $ 2018 $ 160,752 379,485 540,237 149,651 529,348 678,999 NOTE 22 – CONTINGENT ASSETS AND LIABILITIES There were no contingent liabilities at 30 June 2019 (2018: Nil). As 30 June 2019 Capricorn Metals Ltd has bank guarantees totalling $138,364 (2018: $138,364). Refer Note 7. NOTE 23 – EVENTS SUBSEQUENT TO REPORTING DATE There were no material events arising subsequent to 30 June 2019, to the date of this report which may significantly affect the operations of the Group, the results of those operations and the state of affairs of the Group in the future, other than: • On 3 July 2019 a placement to raise up to $18.26m by the issue of 280,922,429 new shares at a price of $0.065 per share was announced. The placement was completed in two tranches with 108,707,208 new shares raising $7.07m completed on 5 July 2019 and 172,215,221 new shares to raise $11.19m completed on 30 August 2019. • On 8 July 2019 Mr Mark Clark was appointed to the Board as Executive Chairman and Mr Mark Okeby appointed as a Non- Executive Director. • On 13 August 2019 a placement to raise up to $65.00m by the issue of 406,250,000 new shares at an issue price of $0.16 per share was announced. The placement is to be completed in two tranches with tranche one completed on 20 August 2019 by the issue of 125,426,127 new shares to raise $20.07m. A shareholder meeting held on 24 September 2019 has approved the completion of tranche two of the placement which will see the issue of a further 280,823,873 new shares to raise a further $44.93m. Tranche two settled on 27 September 2019, with shares quoted from Monday 30 September 2019. • On 14 August 2019 Capricorn announced the completion of 200,000 ounces of gold hedging with a 31 December 2019 maturity and a price of A$2,249 per ounce. The hedge has a maturity of 31 December 2019, by which time it is expected that a project debt facility will have been finalised and the gold hedging will be rolled into a delivery programme matching debt quantum and amortisation and life of mine production plans. CAPRICORN METALS LTD ABN 84 121 700 105 46 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 23 – EVENTS SUBSEQUENT TO REPORTING DATE (Cont’d) Hedging of 200,000 ounces represents coverage of approximately 2 years of anticipated gold production out of a current mine life of 8.5 years on the current Ore Reserve of 892,000 ounces of gold (Ore Reserve estimated using an A$1,600/oz gold price). • On 30 August 2019 50,000,000 unquoted options, exercisable at $0.12 per share, with an expiry date of 30 August 2022 were issued to Directors, Mr Mark Clark (40,000,000 options) and Mr Mark Okeby (10,000,000 options) subsequent to shareholder approval received on 27 August 2019. • On 13 September 2019 a number of Board and management changes occurred, which include: o Appointment of Mr Myles Ertzen as a Non-Executive Director. o Resignations of Mr Timothy Kestell, Mr Douglas Jendry and Mr Stuart Pether as Non-Executive Directors of the Company. o Appointment of Mr Kim Massey as Chief Executive Officer. o Appointment of Mr Paul Thomas as Chief Operating Officer, commencing 1 October 2019. o Appointment of Mr Stephen Evans as General Manager of Operations. NOTE 24 – FINANCIAL INSTRUMENTS In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments. The Company’s key financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payables. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of those risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The Group’s risk management policies and objectives are designed to minimise the potential impacts of these risks on the Group where such impacts may be material. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. (a) Capital risk management The Board controls the capital of the Group in order to ensure that the Group can fund its operations and continue as a going concern. As at 30 June 2019, under the Company’s ASX listing Rule 7.1 Capacity, the Company could issue up to 15% of it is previously approved issued capital as new shares, therefore Capricorn could issue up to 140,480,001 new shares without requiring shareholder approval. There are no externally imposed capital requirements. The Board 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 the Board 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. As disclosed in Note 23 Subsequent Events, on 14 August 2019 Capricorn announced the completion of 200,000 ounces of gold hedging with a 31 December 2019 maturity and a price of A$2,249 per ounce. The hedge has a maturity of 31 December 2019, by which time it is expected that a project debt facility will have been finalised and the gold hedging will be rolled into a delivery programme matching debt quantum and amortisation and life of mine production plans. The Group does not speculate in the trading of derivative instruments. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous year. (c) Foreign currency risk The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Group’s functional and presentation currency. CAPRICORN METALS LTD ABN 84 121 700 105 47 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 24 – FINANCIAL INSTRUMENTS (Cont’d) As a result of subsidiary companies being registered in Madagascar, the Group's statement of financial position can be affected by movements in the AUD$/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. (d) Financial risk management The Group’s management, co-ordinates access to banking facilities, and monitors and manages the financial risks relating to the operations, comprising mainly access to cash, and the level of trade and other payables in accordance with the decisions of the directors. In the reporting period, the Group was not exposed to material financial risks of changes in foreign currency exchange rates. Accordingly, the Group did not employ derivative financial instruments to hedge currency risk exposures. 2019 Cash Receivables Payables Statement of Financial Position exposure 2018 Cash Receivables Payables Statement of Financial Position exposure (e) Interest rate risk Net Financial Assets/(liabilities) in AUD AUD 9,032,042 145,736 (2,004,031) 7,173,747 MGA EURO Total AUD 7,609 124,526 (24,121) 108,014 116 - - 116 9,039,767 270,262 (2,028,152) 7,281,877 Net Financial Assets/(liabilities) in AUD AUD 5,569,226 160,170 (906,484) 4,822,912 MGA EURO Total AUD 17,005 75,824 3,658 96,487 206 - - 206 5,586,437 235,994 (902,826) 4,919,605 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 2019 $ 2018 $ 9,039,767 5,586,437 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 2018. 2019 2018 100 bp Increase $ 90,398 100 bp Decrease $ (90,398) 100 bp Increase $ 55,864 100 bp Decrease $ (55,864) Variable rate instruments (f) Liquidity risk 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. (g) Credit risk 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. CAPRICORN METALS LTD ABN 84 121 700 105 48 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 24 – FINANCIAL INSTRUMENTS (Cont’d) 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. (h) 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). - 30 June 2019 Financial assets - listed investments (BlackEarth Minerals NL shares) 30 June 2018 Financial assets - listed investments (BlackEarth Minerals NL shares) Level 1 $ Level 2 $ Level 3 $ Total $ 128,000 128,000 190,000 190,000 - - - - - - - - 128,000 128,000 190,000 190,000 Included within Level 1 of the hierarchy are the BlackEarth Minerals NL shares listed on the Australian Securities Exchange. The fair value of this financial asset has been based on the closing quoted bid prices at the end of the reporting period, excluding transaction costs. 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. Financial liability and financial asset maturity analysis Within 1 year 1 to 5 years Total 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ Financial liabilities – Due for payment Trade & Other Payables Total expected outflows 2,028,152 2,028,152 902.826 902.826 300,713 300,713 333.989 333.989 2,328,865 2,328,865 1,236,815 1,236,815 CAPRICORN METALS LTD ABN 84 121 700 105 49 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 25 – 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 and Madagascar. 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. 2019 Revenue Revenue Other income Total segment revenue Result Segment Result Profit/(Loss) before Income tax Assets/ Liabilities Segment Assets Segment Liabilities Other Acquisition of non-current assets Depreciation expense 2018 Revenue Revenue Other income Total segment revenue Result Segment Result Profit/(Loss) before Income tax Assets/ Liabilities Segment Assets Segment Liabilities Other Acquisition of non-current assets Depreciation expense Australia $ Madagascar $ Elimination $ Group $ - 47,213 47,213 159,794 151 159,945 - - - 159,794 47,364 207,158 (19,167,985) (19,167,985) (181,474) (180,413) (4,467,819) (4,467,819) (23,817,278) (23,816,217) 24,961,879 (2,439,177) 295,768 (4,066) 1,026,312 (23,308) 26,283,959 (2,466,623) 1,527,699 38,411 - 16,562 Australia $ Madagascar $ Elimination $ - 55,442 55,442 186,222 106 186,328 - - - - - 1,527,699 54,973 Group $ 186,222 55,548 241,770 (2,930,075) (2,930,075) (473,081) (471,663) 284,727 284,727 (3,118,429) (3,117,011) 31,592,384 (1,405,435) 1,783,600 (10,194) 4,012,401 11,015 37,388,385 (1,404,614) 1,528,874 39,993 - 28,376 - - 28,874 68,369 CAPRICORN METALS LTD ABN 84 121 700 105 50 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 26 – RELATED PARTY DISCLOSURES (a) Key Management Personnel during the year ended 30 June 2019 Name Position Movements during the year to 30 June 2019 Mr T Kestell Non-Executive Director Appointed 5 March 2019. Mr D Jendry Non-Executive Director Appointed 5 March 2019. Mr S Pether Non-Executive Director Mr P Thompson Chief Operating Officer Ms D Bakker Non-Executive Director Non-Executive Chair Transitioned to Non-Executive Chair on 8 November 2018, ceased 5 March 2019. Mr G Rogers Non-Executive Director Appointed 8 November 2018, ceased 5 March 2019. Mr P Benjamin Non-Executive Director Appointed 8 November 2018, ceased 5 March 2019. Mr P Langworthy Non-Executive Director Resigned 8 November 2018. Mr W Hallam Managing Director Appointed 19 February 2019, resigned 5 March 2019. Mr H Hellewell Executive Chairman Resigned 8 November 2018. Mr J Shellabear Chief Financial Officer Joint Company Secretary Mrs N Santi Joint Company Secretary Key Management Personnel Remuneration Resigned 5 March 2019. 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 2019 $ 1,192,242 52,500 77,006 126,599 63,625 1,511,972 2018 $ 1,267,437 7,200 89,768 371,586 106,033 1,842,024 (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 on 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 Personnel P Langworthy (1) Transaction Exploration programme management 2019 $ 27,005 27,005 2018 $ 314,364 314,364 Note (1) 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. P Langworthy ceased to be a key management person and related party on 8 November 2018. CAPRICORN METALS LTD ABN 84 121 700 105 51 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 26 – RELATED PARTY DISCLOSURES (Cont’d) 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 (c) Controlled Entities 2019 $ 2018 $ - - 35,646 35,646 The consolidated financial statements include the financial statements of the Parent and the subsidiaries set out in the following table. Subsidiaries Mazoto Minerals SARL Energex SARL Mining Services SARL St Denis Holdings SARL MGY Mauritius Ltd Malagasy Graphite Holdings Ltd Greenmount Resources Pty Ltd % Ownership Country Madagascar Madagascar Madagascar Madagascar Mauritius Australia Australia Principal activity Exploration Dormant Exploration Services Commercial Property Investment Holding Investment Holding Exploration 2018 100% 100% 100% 100% 100% 100% 100% 2017 100% 100% 100% 100% 100% 100% 100% The subsidiaries noted above are all controlled entities and are dependent on the parent entity for financial support. During the year $119,668 loans were capitalised as investment (2018: Nil). Additional loans were made as follows: - Madagascan operations: $18,234 (2018: $78,099) - Australian operations: $5,312,249 (2018: $6,094,618) At the year end, total net loans from the parent company to these subsidiaries amount to $30,813,634 (2018: $25,621,053). Loans to subsidiaries total $38,000,456 (2018: $32,789,639) with a provision for impairment of $7,186,822 (2018: $7,168,586). NOTE 27 – DISPOSAL OF SUBSIDARY On 18 January 2018, the Group disposed of Madagascar Graphite Ltd and its wholly owned subsidiary Mada-Aust SARL which held a number of exploration licences in Madagascar. Consideration received Consideration received in cash and cash equivalents (1) Consideration received in fully paid ordinary shares Note 2019 $ 2018 $ 75,000 400,000 475,000 - - - (1) BlackEarth Minerals NL also paid a non-refundable deposit on the signing of the Sale & Purchase Agreement in February 2017. (Loss)/gain on disposal Total consideration received Net assets disposed of Net cash inflow on disposal Consideration received in cash and cash equivalents Less: cash and cash equivalent balances disposed of CAPRICORN METALS LTD ABN 84 121 700 105 2019 $ 2019 $ - - - - - - 2018 $ 475,000 (510,290) (35,290) 2018 $ 75,000 (804) 74,196 52 Notes to the Consolidated Financial Statements (Cont’d) For the year ended 30 June 2019 NOTE 28 – 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 Statement of Comprehensive Income Net loss attributable to members of the parent entity 2019 $ 2018 $ 9,171,650 36,689,364 45,861,014 5,577,459 31,297,213 37,038,797 279,224 300,713 579,937 441,011 333,989 775,000 62,633,017 1,184,893 (18,536,833) 45,281,077 50,878,673 1,056,070 (15,670,946) 36,263,797 (2,655,887) (2,713,104) Total comprehensive loss for the year attributable to members of the parent entity (2,655,887) (2,713,104) 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 2019, the Group has the following financial guarantees: - - $40,000 is held as security for the credit card facility and bears 2.35% interest $98,364 is held as security for the office lease and bears 2.35% interest. NOTE 29 – AUDITORS REMUNERATION Amount payable to William Buck Audit (WA) Pty Ltd - Auditing or reviewing the financial report 2019 $ 2018 $ 28,541 27,991 Amounts payable to other audit firms for the audit and review of the financial reports of subsidiary companies was $4,970 (2018: $4,882) CAPRICORN METALS LTD ABN 84 121 700 105 53 Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 24 to 53 are in accordance with the Corporations Act 2001 and: (a) (b) comply with Australian Accounting Standards and the Corporations Regulations 2001; and give a true and fair view of the financial position as at 30 June 2019 and of the performance for the year ended on that date of the Group. 2. the Chief Executive Officer and Chief Financial Officer have each declared that: (a) (b) (c) (d) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; the financial statements and notes for the financial year comply with the Accounting Standards; and the financial report also complies with International Financial Reporting Standards as disclosed in Note 1; and 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 M Clark Executive Chairman Perth, Western Australia 30 September 2019 CAPRICORN METALS LTD ABN 84 121 700 105 54 Capricorn Metals Ltd Independent auditor’s report to members Report on the Audit of the Financial Report Opinion We have audited the financial report of Capricorn Metals Ltd (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Independent auditor’s report to members (continued) CARRYING VALUE OF EXPLORATION COSTS Area of focus Refer also to notes 1 (e) and 11 How our audit addressed it Our audit procedures included: — Reviewing the directors’ assessment of the criteria for the capitalisation of exploration expenditure and evaluation of whether there are any indicators of impairment to capitalised costs; — Assessing the viability of the new tenements and whether there were any indicators of impairment to those costs capitalised in the current period; and — We assessed the adequacy of the Group’s disclosures in respect of the transactions. The Group have incurred exploration costs for the Karlawinda project since December 2015. There is a risk that accounting criteria associated with the capitalisation of exploration and evaluation expenditure may no longer be appropriate and that capitalised costs exceed the value in use. An impairment review is only required if an impairment trigger is identified. Due to the nature of the mining industry, indicators of impairment applying the value in use model include: — Significant decrease seen in global mineral prices — Changes to exploration plans — Loss of rights to tenements — Changes to reserve estimates — Costs of extraction and production Other Information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2019 but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. Independent auditor’s report to members (continued) If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our independent auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 16 to 21 of the directors’ report for the year ended 30 June 2019. Independent auditor’s report to members (continued) In our opinion, the Remuneration Report of Capricorn Metals Ltd, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. William Buck Audit (WA) Pty Ltd ABN: 67 125 012 124 Robin Judd Director Dated this 30th day of September 2019 ASX Additional Information 1. Quoted Securities - Fully Paid Ordinary Shares The shareholder information set out below was applicable as at 17 September 2019. a) Distribution of Share Holdings Size of Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Shareholders No. of Shareholders 63 153 261 1,005 671 2,153 No. of Shares 8,863 565,100 2,109,051 44,112,696 1,296,086,190 1,342,881,900 There are 80 Shareholders with less than a marketable parcel at a price of $0.235, totalling 41,698 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 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED SAMOZ PTY LTD CENTREPEAK RESOURCES GROUP PTY LTD NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NEDLANDS NOMINEES PTY LTD LIBERTY MANAGEMENT PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PORTBARB PTY LTD NEON CAPITAL LTD ROLLASON PTY LTD TOPAZ HOLDINGS PTY LTD NERO RESOURCE FUND PTY LTD MUTUAL INVESTMENTS PTY LTD NEON CAPITAL LTD MR KIM ANDREW MASSEY NERO RESOURCE FUND PTY LTD THIRD REEF PTY LTD RUNNING WATER LIMITED Top Twenty Shareholders Total Issued Capital No. of Shares 289,936,045 77,652,271 69,230,770 39,327,115 34,602,056 33,350,826 31,600,417 23,076,924 23,032,616 21,538,461 18,939,999 15,384,615 14,307,692 13,461,539 13,036,141 12,521,936 10,769,231 10,667,936 10,222,956 10,100,000 772,759,546 1,342,881,900 % 21.59 5.78 5.16 2.93 2.58 2.48 2.35 1.72 1.72 1.60 1.41 1.15 1.07 1.00 0.97 0.93 0.80 0.79 0.76 0.75 57.54 100.00 d) Substantial Shareholders The names of the substantial shareholders listed in the Company’s share register as at 17 September 2019 were: Shareholder Hawke’s Point Holdings I Limited Paradice Investment Management Pty Ltd Samoz Pty Ltd Total e) On Market Buy-Back There is currently no on-market buy-back in place. No. of Shares 245,749,840 93,119,950 69,230,770 408,100,560 % 18.30 6.93 5.16 30.39 CAPRICORN METALS LTD ABN 84 121 700 105 59 ASX Additional Information (Cont’d) f) Top Up Right – Held by Hawke’s Point Holdings L. P Pursuant to a Subscription Agreement made in February 2017 and subject to a waiver of ASX listing Rule 6.18 granted by the ASX on 7 March 2017, Hawke’s Point Holdings L.P are permitted to maintain, by way of a right to participate in any issue of shares or to subscribe for shares, its percentage relevant interest in the issued share capital of the Company (the “Top Up Right”) in respect of a diluting event which occurs on the following conditions: ‐ 1. The Top Up Right lapses on the earlier of: 1.1 the date on which the Subscriber ceases to hold in aggregate at least a 10% relevant interest in the Company (other than Up Right applies and in respect of which the Subscriber is still ‐ as a result of shares (or equity securities) to which the Top Up Right); entitled to exercise, or has exercised, the Top 1.2 the Subscriber’s relevant interest in the Company exceeds 25%; or ‐ ‐ 1.3 the strategic relationship between the Company and the Subscriber ceasing or changing in such a way that it effectively ceases. 2. The Top Up Right may only be transferred to an entity which is a wholly owned subsidiary of the Subscriber. 3. Any securities issued under the Top ‐ Up Right are offered to the Subscriber for cash consideration that is: 3.1 no more favourable than cash consideration paid by third parties (in the case of issues of securities to third parties for cash cash consideration offered by third parties (in the case of issues of securities to third parties for consideration); or 3.2 equivalent in value to non cash consideration). non ‐ ‐ ‐ 4. The number of securities that may be issued to the Subscriber under the Top Up Right in the case of any diluting event must not be greater than the number required in order for the Subscriber to maintain its percentage holding in the issued share capital of the Company immediately before that diluting event. ‐ 2. a) Unquoted Securities – Options Distribution of Option Holdings Size of Holding 100,001 and over Total Optionholders b) Voting Rights No. of Optionholders 10 10 No. of Options 91,390,028 91,390,028 Unquoted options do not entitle the holder to any voting rights. c) Holder of More Than 20% of Unquoted Options As at 17 September 2019 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 Peter Robert Thompson Hawke’s Point Holdings I Limited S J & F M Pether Samoz Pty Ltd Liberty Management Pty Ltd Holders individually less than 20% Total Exercisable at $0.10 Expiring 31/05/2020 Exercisable at $0.20 Expiring 31/05/2020 Exercisable at $0.15 Expiring 05/05/2021 Exercisable at $0.097 Expiring 23/11/2021 Exercisable at $0.12 Expiring 30/08/2022 6,000,000 - - - - - 6,000,000 2,500,000 - - - - - 2,500,000 - 28,490,028 - - - 3,400,000 31,890,028 - - 1,000,000 - - - 1,000,000 - - - 40,000,000 10,000,000 - 50,000,000 CAPRICORN METALS LTD ABN 84 121 700 105 60 ASX Additional Information (Cont’d) d) Details of options on issue The following Unquoted Options are on issue: No. of Options 2,000,000 2,000,000 2,000,000 833,333 833,333 833,334 18,284,101 10,205,927 1,133,333 1,133,333 1,133,334 333,333 333,333 333,334 50,000,000 91,390,028 Exercise Price $0.10 $0.10 $0.10 $0.20 $0.20 $0.20 $0.15 $0.15 $0.15 $0.15 $0.15 $0.097 $0.097 $0.097 $0.12 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 23/11/2018 23/11/2019 23/11/2020 30/08/2019 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 23/11/2021 23/11/2021 23/11/2021 30/08/2022 3. Corporate Governance The Company’s corporate governance statement can be found at the following URL: http://capmetals.com.au/wp-content/uploads/2019/09/CMM-Corporate-Governance-Statement-2019-FINAL.pdf 4. Mineral Resources & Reserves Bibra Ore Reserve As at 30 June 2019, and the date of this report, the Company had a JORC 2012 compliant Ore Reserve estimate of 28 million tonnes @ 1.0g/t Au for 892,000 ounces for the Bibra deposit (including the Southern Corridor pit) at the Karlawinda Gold Project, which is based on the Mineral Resource estimate of 45 million tonnes @ 1.0g/t Au for 1.4 million ounces. Both the current Ore Reserve and the current Mineral Resource estimate were released in an ASX announcement dated 29 May 2018. There has been no change to the Ore Reserve estimate from that reported at 30 June 2018. JORC-2012 compliant Ore Reserve as at 30 June 2018 and 30 June 2019: BIBRA GOLD DEPOSIT JORC OPEN PIT ORE RESERVE STATEMENT (A$1600/ounce assumption) PROVED RESERVES PROBABLE RESERVES TOTAL RESERVES Date Bibra pit Sth Corridor pit Total Tonnes (Mt) 9.6 0.079 9.6 Grade (g/t Au) 1.1 0.6 1.1 Ounces (Moz) 0.3 0.002 0.3 Tonnes (Mt) Grade (g/t Au) 17 1.0 18 1.0 0.8 1.0 Ounces (Moz) 0.5 0.026 0.5 Tonnes (Mt) Grade (g/t Au) 27 1.0 28 1.0 0.8 1.0 Ounces (Moz) 0.86 0.03 0.89 Notes on the May 2018 Ore Reserve estimate: 1. Ore Reserves are a subset of Mineral Resources. 2. Ore Reserves reported in conformance with the JORC 2012 Code definitions. 3. Ore Reserves are calculated using a gold price of A$1600/ounce. 4. Ore Reserves are calculated using a cut-off grade between 0.27g/t and 0.35g/t Au. 5. Mining dilution and recovery, estimated by modelling to a Selective Mining Unit (SMU) with dimensions of 5m x 5m x 2.5m, are 5% and 94% respectively. 6. All figures are rounded to reflect appropriate levels of confidence which may result in apparent errors of summation. CAPRICORN METALS LTD ABN 84 121 700 105 61 ASX Additional Information (Cont’d) Bibra Mineral Resource As at 30 June 2019, and the date of this report the Bibra Mineral Resource estimate (inclusive of Ore Reserves) was 50.96 million tonnes @ 0.9 g/t Au for 1,525,000 ounces. This Mineral Resource for the Bibra deposit was estimated in May 2018 and saw 90% of the resource classified in the high confidence Measured and Indicated categories. There has been no change to the Minerals Resource estimate since the estimate reported at 30 June 2018. JORC-2012 compliant Mineral Resource Estimate as at 30 June 2018 and 30 June 2019: BIBRA GOLD DEPOSIT JORC OPEN PIT MINERAL RESOURCE ESTIMATE DATE May 2018 Tonnes (Mt) 10.64 MEASURED Grade (g/t Au) 1.1 Ounces (Moz) 365 INDICATED Grade (g/t Au) 0.9 Tonnes (Mt) 34.2 Ounces (Moz) 1,01 Tonnes (Mt) 6.16 INFERRED Grade (g/t Au) 0.7 Ounces (Moz) 150 TOTAL Grade (g/t Au) 0.9 Tonnes (Mt) 50.96 Ounces (Moz) 1.525 BIBRA GOLD DEPOSIT JORC OPEN PIT MINERAL RESOURCE ESTIMATE BY DOMAIN DOMAIN Laterite Oxide – Upper Saprolite Oxide – Lower Saprolite Transitional Fresh TOTAL Tonnes (Mt) 3.1 3.9 4.9 5.5 33 50.96 Grade (g/t Au) 0.9 0.8 0.8 0.8 1.0 0.9 Ounces (Moz) 0.09 0.10 0.13 0.14 1.06 1.525 Notes on the May 2018 Mineral Resource estimate: 1. Refer to JORC 2012 Table (1) in Appendix 1 of ASX Release on 29 April 2018 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 estimate has been reported using a cut-off grade of between 0.27g/t and 0.35g/t Au to reflect the cut-off grades determined through the May 2018 Ore Reserve estimation. 4. The Mineral Resource has been constrained by a A$2,050/ounce conceptual optimal pit shell. 5. Ordinary kriging was used for grade estimation utilising Vulcan software 6. Grade estimation was constrained to blocks within each of the mineralised wireframes. 7. See ASX announcement dated 29 April 2018 for Mineral 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 Ore Reserves for Bibra deposit is based on information compiled by Mr Daniel Donald. Mr Donald is an employee of Entech Pty Ltd and is a Member of the Australian Institute of Mining and Metallurgy (MAusIMM, #210032). Mr Donald 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. Donald 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 Mineral 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 62 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 E52/3571 E52/3656 E52/3671 E52/3677 E52/3729 Total Blocks Miscellaneous Licences L52/174 L52/177 L52/178 L52/179 L52/181 L52/183 L52/189 L52/192 L52/197 Mining Lease Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda Karlawinda 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 Greenmount Greenmount Greenmount Greenmount 33 16 15 8 11 36 44 16 128 109 7 8 10 94 26 31 51 643 22.17 ha 12.20 ha 21.41 ha 127.83 ha 1.00 ha 28.46 ha 1258 ha 220 ha 173ha Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Application Application Granted Granted Granted Granted Granted Granted Granted Granted Granted 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 06/11/2018 28/03/2018 28/03/2018 18/09/2018 24/08/2018 02/07/2019 07/12/2018 05/07/2019 18/04/2018 08/12/2017 08/12/2017 28/05/2018 18/04/2018 03/05/2018 10/04/2019 16/05/2018 10/04/2019 04/08/2019 20/07/2019 27/04/2020 14/06/2020 10/03/2021 12/01/2022 06/03/2022 12/01/2022 02/07/2022 05/11/2023 27/03/2023 27/03/2023 17/09/2023 - 01/072024 - - 17/04/2039 07/12/2038 07/12/2038 27/05/2039 17/04/2039 2/05/2039 10/04/2019- 28/09/2018- 10/04/2019- M52/1070 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 Permit Type Grant Date Expiry Date Term (Years) Project Name Total Carres (New - 0.391km2) Interest % Note 25095 PE 18-Jan-07 17-Jan-47 40 Ampanihy - Maniry Total Carres Note: 1. Leased to SQNY – Royalty and partial tenement fees payable. 48 608 100% 1 CAPRICORN METALS LTD ABN 84 121 700 105 63 

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