Cazaly Resources Limited
ABN: 23 101 049 334
and
Controlled Entities
Annual Report
For the Year Ended
30 June 2019
CONTENTS
Cazaly Resources Limited Annual Report 2019
Corporate Directory
Directors’ 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 Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
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CORPORATE DIRECTORY
Cazaly Resources Limited Annual Report 2019
JOINT MANAGING DIRECTORS
Nathan McMahon
Clive Jones
NON-EXECUTIVE DIRECTOR
Terry Gardiner
COMPANY SECRETARY
Mike Robbins
PRINCIPAL & REGISTERED OFFICE
Level 2, 38 Richardson Street
WEST PERTH WA 6005
AUDITORS
Bentleys Audit & Corporate (WA) Pty Ltd
Level 3, London Hose, 216 St Georges Tce
Perth WA 6000
SHARE REGISTRAR
Advanced Share Registry Services
110 Stirling Highway
Nedlands WA 6009
PERTH WA 6000
STOCK EXCHANGE LISTING
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
Code: CAZ
BANKERS
National Australia Bank
100 St Georges Terrace
PERTH WA 6000
1
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
Your directors present their report, together with the financial statements of Cazaly Resources
Limited (the Company or Cazaly) and its controlled entities (the Group) for the financial year
ended 30 June 2019.
1.
DIRECTORS AND COMPANY SECRETARY
Directors
The following directors have been in office since the start of the financial year to the date of
this report unless otherwise stated:
Nathan McMahon
Clive Jones
Terry Gardiner
Company Secretary
Mike Robbins
2.
PRINCIPAL ACTIVITIES
The principal activity of the Group during the financial year was mineral exploration and
evaluation activities as well as seeking out further exploration, acquisition and joint venture
opportunities.
There were no significant changes in the nature of the Group’s principal activities during the
financial period.
3.
OPERATING RESULTS & FINANCIAL POSITION
The Group’s loss after tax for the year was $1,804,071 (2018: $1,472,564). The Group’s net assets
at the end of the year are $21,448,009 (2018: $21,398,306).
Cash and cash equivalents as at year end were $836,709 (2018: $1,474,219).
Exploration expenditure for the year was $1,110,937 (2018: $1,503,714). This expenditure was on
Mt Venn, the Kaoko Kobalt Project in Namibia and Parker Range. Exploration expenditure
written off for the year was $520,505 compared to $641,517 in the 2018 financial year. The main
write offs related to non-essential Parker Range and Coolgardie areas, Teutonic Bore, cobalt
projects in NSW and Queensland as well as previously capitalised expenditures relating to the
various tenements and/or applications that were relinquished during the financial year.
Net administration expenses and employee benefits for the year totalled $613,602 (2018:
$584,555).
During the next financial year the Group intends to continue to further develop its current core
projects whilst also exploring new key commodity opportunities both in Australia and overseas.
These opportunities are being explored by the Board and corporate consultants who operate
on a success fee basis only.
4.
RISKS
There are specific risks associated with the activities of the Group and general risks which are
largely beyond the control of the Group and the Directors. The risks identified below, or other
risk factors, may have a material impact on the future financial performance of the Group and
the market price of the Company’s shares.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
All mining ventures are exposed to risks and the Group continues to monitor risks associated
with current projects whilst also analysing the risks associated with any new mining
opportunities. These risks may cover such areas as:
•
Title Risk
This may specifically cover mining tenure whereby country specific mining laws and legislation
apply.
Any opportunity in Australia and overseas will be subject to particular risks associated with
operating in Australia or the respective foreign country. These risks may include economic,
social or political instability or change, hyperinflation, currency non-convertibility or instability
and changes of law affecting foreign ownership, exchange control, exploration licensing,
export duties, investment into a foreign country and repatriation of income or return of capital,
environmental protection, land access and environmental regulation, mine safety, labour
relations as well as government control over mineral properties or government regulations that
require the employment of local staff or contractors or require other benefits be provided to
local residents.
•
Exploration Risk
The Directors of the Company realise that mineral exploration and development are high risk
undertakings due to the high level of inherent uncertainty. There can be no assurance that
exploration of the Group’s tenements, or of any other tenements that may be acquired by the
Group in the future, will result in the discovery of economic mineralisation. Even if economic
mineralisation is discovered there is no guarantee that it can be commercially exploited.
Any future exploration activities of the Group may be affected by a range of factors including
geological conditions, limitations on activities due to seasonal weather patterns, unanticipated
operational and technical difficulties, industrial and environmental accidents, native title
process, changing government regulations and many other factors beyond the control of the
Group.
•
Resource Estimates
The Group’s projects may contain JORC Code compliant resources. There is no guarantee that
a JORC Code compliant resource will be discovered on any of the Group’s other tenements.
Resource estimates are expressions of judgement based on knowledge, experience and
industry practice. Estimates which were valid when originally calculated may alter significantly
when new information or techniques become available. In addition, by their very nature,
resource estimates are imprecise and depend to some extent on interpretations which may
prove to be inaccurate. As further information becomes available through additional fieldwork
and analysis the estimates are likely to change. This may result in alterations to development
and mining plans which may, in turn, adversely affect the Group’s operations and the value of
the Company’s listed shares.
•
Access Risks – Cultural Heritage and Native Title
The Group must comply with various country specific cultural heritage and native title
legislation including access agreements which require various commitments, such as base
studies and compliant survey work, to be undertaken ahead of the commencement of mining
operations.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
It is possible that some areas of those tenements may not be available for exploration due to
cultural heritage and native title legislation or invalid access agreements. The Group may need
to obtain the consent of the holders of such interests before commencing activities on affected
areas of the tenements. These consents may be delayed or may be given on conditions which
are not satisfactory to the Group.
•
JV and Contractual Risk
The Group has and may have additional options where it can increase its holding in the
selective assets by achieving or undertaking selected milestones. The Group’s ability to achieve
its objectives and earn or maintain an interest in these projects is dependent upon it and the
registered holders of those tenements complying with their respective contractual obligations
under joint venture agreements in respect of those tenements, and the registered holders
complying with the terms and conditions of the tenements and any other relevant legislation.
•
Economic
General economic conditions, introduction of tax reform, new legislation, the general level of
activity within the resources industry, movements in interest and inflation rates and currency
exchange rates may have an adverse effect on the Group’s exploration, development and
possible production activities, as well as on its ability to fund those activities.
•
Market conditions
Share market conditions may affect the value of the Company’s quoted securities regardless
of the Group’s operating performance. Share market conditions are affected by many factors
such as:
introduction of tax reform or other new legislation;
interest rates and inflation rates;
- general economic outlook;
-
-
- changes in investor sentiment toward particular market sectors;
-
-
the demand for, and supply of, capital; and
terrorism or other hostilities.
The market price of securities can fall as well as rise and may be subject to varied and
unpredictable influences on the market for equities in general and resource exploration stocks
in particular. Neither the Group nor the Directors warrant the future performance of the Group
or any return on an investment in the Company.
•
Volatility in Global Credit and Investment Markets
Global credit, commodity and investment markets have recently experienced a high degree
of uncertainty and volatility. The factors which have led to this situation have been outside the
control of the Group and may continue for some time resulting in continued volatility and
uncertainty in world stock markets (including the ASX). This may impact the price at which any
Listed Options and Shares trade regardless of operating performance and affect the
Company’s ability to raise additional equity and/or debt to achieve its objectives, if required.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
•
Commodity Price Volatility and Exchange Rates Risks
If the Group achieves success leading to mineral production, the revenue it will derive through
the sale of gold, iron ore, lithium or any other minerals it may discover exposes the potential
income of the Group to commodity price and exchange rate risks. Commodity prices fluctuate
and are affected by many factors beyond the control of the Group. Such factors include
supply and demand fluctuations for commodities and metals, technological advancements,
forward selling activities and other macro-economic factors such as inflation expectations,
interest rates and general global economic conditions.
Furthermore, international prices of various commodities are denominated in United States
dollars whereas the income and expenditure of the Group are and will be taken into account
in Australian currency. This exposes the Group to the fluctuations and volatility of the rate of
exchange between the United States dollar and the Australian dollar as determined in
international markets.
If the price of commodities declines this could have an adverse effect on the Group’s
exploration, development and possible production activities, and its ability to fund these
activities, which may no longer be profitable.
•
Environmental Risks
The operations and proposed activities of the Group are subject to each project’s jurisdiction,
laws and regulations concerning the environment. As with most exploration projects and
mining operations, the Group’s activities are expected to have an impact on the environment,
particularly if advanced exploration or mine development proceeds. Future legislation and
regulations governing exploration, development and possible production may impose
significant environmental obligations on the Group.
The cost and complexity of complying with the applicable environmental laws and regulations
may prevent the Group from being able to develop potential economically viable mineral
deposits. The Group may require approval from the relevant authorities before it can undertake
activities that are likely to impact the environment. Failure to obtain such approvals or to obtain
them on terms acceptable to the Group may prevent the Group from undertaking its desired
activities. The Group is unable to predict the effect of additional environmental laws and
regulations, which may be adopted in the future, including whether any such laws or
regulations would materially increase the Group’s cost of doing business or affect its operations
in any area.
There can be no assurances that new environmental laws, regulations or stricter enforcement
policies, once implemented, will not oblige the Group to incur significant expenses and
undertake significant investments in such respect which could have a material adverse effect
on the Group’s business, financial condition and results of operations.
•
Sovereign and Political Risk
The Company has an 80% interest in two uranium applications in the Czech Republic and a
51% interest in the Kaoko Kobalt Project in Namibia.
The Company’s interests in the Czech Republic and Namibia are subject to the risks associated
with operating in a foreign country. These risks may include economic, social or political
instability or change, hyperinflation, currency non-convertibility or instability and changes of
law affecting foreign ownership, exchange control, exploration licensing, export duties,
investment into a foreign country and repatriation of income or return of capital, environmental
protection, land access and environmental regulation, mine safety, labour relations as well as
government control over petroleum properties or government regulations that require the
employment of local staff or contractors or require other benefits be provided to local
residents.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
The Company may also be hindered or preventing from enforcing its rights with respect to
government instrumentalities because of the doctrine of sovereign immunity.
Any future material adverse changes in government policies or legislation in the Czech
Republic or Namibia that affect ownership, development or mining activities, may affect the
viability and profitability of the Company.
The legal systems operating in the Czech Republic and Namibia are different to that in Australia
and this may result in risks such as:
• Different forms of legal redress in the courts whether in respect of a breach of law or
regulation, or in ownership dispute.
• A higher degree of discretion on the part of governmental agencies.
• Differences in political and administrative guidance on implementing applicable rules
and regulations including, in particular, as regards local taxation and property rights.
• Different attitudes of the judiciary and court.
• Difficult in enforcing judgments.
The commitment by local business people, government officials and agencies and the judicial
system to abide by legal requirements and negotiated agreements may be more uncertain,
creating particular concerns with respect to licences and agreements for business. These may
be susceptible to revision or cancellation and legal redress may be uncertain or delayed. There
can be no assurance that joint ventures, licences, licence applications or other legal
arrangements will not be adversely affected by the actions of government authorities or others
and the effectiveness and enforcement of such arrangements cannot be assured. Further,
there is no guarantee that any applications for tenements will be granted or granted on
conditions satisfactory to the Company.
The Company’s future operations in the Czech Republic and Namibia may be affected by
changing political conditions and changes to laws and petroleum and/or mining policies. The
effects of these factors cannot be accurately predicted and developments may impede the
operation or development of a project or even render it uneconomic.
The above risks are not exhaustive but are the minimum exposure areas observed by the
Group.
5.
DIVIDENDS PAID OR RECOMMENDED
The Directors do not recommend the payment of a dividend and no amount has been paid
or declared by way of a dividend to the date of this report.
6.
REVIEW OF OPERATIONS
Projects
Parker Range Iron Ore Project
On 11 June 2019, Cazaly had agreed commercial terms for the sale of its 100% owned
subsidiary, Cazaly Iron Pty Ltd (Cazaly Iron) to Gold Valley. Cazaly Iron holds the tenements
that comprise Parker Range. The agreement with Gold Valley allowed for an initial three-month
due diligence exclusivity period, however Cazaly reserved the right to terminate the exclusivity
period should it receive another proposal or offer from a third party which is more favourable
to Cazaly and its shareholders.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
As announced on 21 August 2019, the Company, following the receipt of an unsolicited
superior proposal from Mineral Resources Limited (Mineral Resources) to purchase the Parker
Range Iron Ore Project (Parker Range), terminated the exclusivity period with Gold Valley Iron
Pty Ltd (Gold Valley) under its conditional agreement with Gold Valley originally announced
on 11 June 2019.
Following such termination, Cazaly agreed to commercial terms with Mineral Resources for the
sale of the assets comprising Parker Range via a binding Heads of Agreement (HOA). The
agreement with Gold Valley remained in place whilst Cazaly evaluated the Mineral Resources
proposal and its next steps for the sale of Parker Range.
Agreement Terms
The key terms of the HOA with Mineral Resources were as follows:
(a) a payment of AUD$20,000,000 (ex GST) cash upon completion of the sale;
and
(b) a royalty of A$0.50 for every dry metric tonne of iron ore extracted and removed
from the area of the Project after the first 10,000,000 dry metric tonnes.
The HOA was conditional upon:
a) Mineral Resources being satisfied with its due diligence investigations in respect of
Parker Range within 21 days of execution of the agreement;
b) Approval of both parties Boards within 21 days of execution of the agreement;
c) The parties receiving all necessary consents and approvals from the minister under
the Mining Act 1978 (WA) to the transfer of the tenements comprising Parker Range
within 21 days of execution of the agreement; and
d) Cazaly obtaining approval from its shareholders, if required, for the sale of Parker
Range.
The Company received confirmation from ASX that ASX Listing Rules 11.1.3 and 11.2 do not
apply to the proposed transaction pursuant to the Agreement.
On 30 August 2019, both parties announced that they had completed or waived their
Conditions Precedent responsibilities as noted in their ASX announcements dated 21 August
2019. Cazaly also received the cash consideration of $20 million (ex GST).
A break fee of $250,000 was paid to Gold Valley on 3 September 2019 as per the terms of the
Gold Valley agreement.
Mount Caudan JORC 2012 Resource Upgrade
The Company engaged RPM Advisory Services Limited (“RPM”) to update the Mineral
Resource estimate for the Mount Caudan Iron Ore (Fe) deposit to JORC (2012) reporting
standards. This involved re-reporting the Mineral Resource at a revised cut-off grade and within
a new optimised pit shell based upon current costs and commodity prices. The deposit forms
part of the Parker Range Project and is located 15km southeast of Marvel Loch, Western
Australia and approximately 60km by road south of the Perth–Kalgoorlie railway.
The Mineral Resource estimate complies with recommendations in the Australasian Code for
Reporting of Mineral Resources and Ore Reserves (2012) by the Joint Ore Reserves Committee
(JORC).
The RPM 2019 Mineral Resource estimate was reported above a cut-off grade of 50.0% Fe and
within a 1.2 times revenue factor optimised pit shell. A full list of parameters is contained at the
end of this report.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
Table 1. Mount Caudan June 2019 Mineral Resource Estimate Summary (50% Fe Cut-Off Grade)
Class
Tonnes
(Mt)
Fe (%)
Al2O3
(%)
P
(%)
SiO2 (%)
LOI
(%)
Mn
(%)
S (%)
Measured
25.7
55.7
2.7
0.019
6.4
8.9
1.3
0.07
Indicated
7.7
56.3
3.1
0.023
6.3
9.0
0.5
0.09
Inferred
2.8
53.8
3.7
0.017
9.0
8.8
0.4
0.14
Total
36.2
55.7
2.9
0.020
6.6
8.9
1.1
0.08
Note:
1. Totals may differ due to rounding, Mineral Resources reported on a dry in-situ basis at a 50.0% Fe cut-off grade.
2. The Statement of Estimates of Mineral Resources has been compiled by Mr. David Allmark who is a full-time employee
of RPM and a Member of the AIG. Mr. Allmark has sufficient experience that is relevant to the style of mineralisation
and type of deposit under consideration and to the activity that he has undertaken to qualify as a Competent Person
as defined in the JORC Code (2012).
3. All Mineral Resources figures reported in the table above represent estimates at 27th June 2019. Mineral Resource
estimates are not precise calculations, being dependent on the interpretation of limited information on the location,
shape and continuity of the occurrence and on the available sampling results. The totals contained in the above table
have been rounded to reflect the relative uncertainty of the estimate. Rounding may cause some computational
discrepancies.
4. Mineral Resources are reported in accordance with the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (The Joint Ore Reserves Committee Code – JORC 2012 Edition).
5. Reporting cut-off grade was selected by RPM based on parameters defined by a Definitive Feasibility Studies
conducted by Cazaly in 2010, 2011 and refreshed in 2019.
6. To satisfy the criteria of reasonable prospects for eventual economic extraction, the Mineral Resources have been
reported within an optimised pit shell defined by the key input parameters of an overall metal price of AUD75.54/t,
recovery between 96% and 100%, a processing and handling cost of AUD40.50/ dry tonne of product and variable
mining costs.
Mount Venn Project (100%)
On 23 May 2019, the Company entered into a Heads of Agreement with Woomera Mining Ltd
(Woomera) for the sale of an 80% interest in the Mt Venn Project in the north eastern Goldfields
of Western Australia.
The Heads of Agreement provided the framework for a detailed Share Acquisition Agreement
and Joint Venture Agreement, which the parties aim to negotiate and execute on or before
20 August 2019. Importantly, the Heads of Agreement specifies key terms which have been
agreed and must be incorporated into the final agreements. The Mt Venn project comprises
two granted exploration licences E38/3111 and E38/3150 and ground covered by four expired
prospecting licences over the historic Chapman’s Reward mine (P38/4149, 4150, 4151 and
into E38/3111. The tenements cover
4195) which were subsequently amalgamated
approximately 390km2 occur over some 50 kms of strike of the Mt Venn Greenstone Belt giving
the dominant land position (>90%) over the Belt. The project lies within the Cosmo Newberry
Aboriginal reserve and is subject to a Native Title claim by the Yilka people. A Cazaly subsidiary,
Yamarna West Pty Ltd, signed a Native Title Agreement with the Yilka People and the Cosmo
Newberry Aboriginal Corporation (CNAC) on 28th July 2016. The tenements are highly
prospective for gold, nickel and nickel-copper-cobalt deposits. Volcanogenic massive
sulphide deposits may also be a possibility based on anomalous zinc, copper, lead, gold and
silver in felsic volcanics.
A Share Purchase Agreement (SPA) was executed on 8 August 2019 which was subject to
customary conditions for a share acquisition and the good standing of the tenements and will
also be subject to Woomera successfully undertaking a fund raising in order to fund the
acquisition and to provide capital for exploration. The closing date for completion under the
SPA was 20 September 2019.
On 20 September 2019, both parties announced that they had completed or waived their
Conditions Precedent responsibilities as noted in the SPA.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
Heads of Agreement Terms
The Company holds the project through its 100% owned subsidiary Yamarna West Pty Ltd.
Woomera has agreed to acquire 100% of the shares in Yamarna subject to the key terms and
conditions of the Heads of Agreement.
Prior to the completion date, Yamarna will transfer to Cazaly a 20% undivided interest in the
project tenements whilst also entering into an agreement with Yamarna which establishes an
unincorporated joint venture (Joint Venture) under which the JV parties will hold the following
interests:
Yamarna 80%
Cazaly 20%
The consideration comprises:
(a) a cash payment of AUD$900,000 comprising a deposit of $20,000 and a balance of
$880,000 payable at completion;
(b) a deferred cash payment of AUD$100,000 upon the ground covered by the expired
prospecting licences being amalgamated into E38/3111; and
(c) the issue of seven million (7,000,000) fully paid ordinary shares in Woomera at
completion (to be subject to a voluntary escrow of 12 months from the date of issue
of the shares).
Key aspects of the Joint Venture are:
1. Stage 1 Exploration - Woomera to sole fund a total amount of $1,200,000 in exploration
on the project tenements during the first 3 years of the Joint Venture.
2. Further Exploration - Woomera will free carry Cazaly to the completion of a Pre-
Feasibility Study.
3. Woomera to ensure that exploration expenditure shall be sufficient to keep the project
tenements in good standing. Upon Woomera completing a Pre-Feasibility Study,
Cazaly can elect to:
(a) contribute to ongoing JV expenditure in accordance with its 20% JV interest
and otherwise dilute in accordance with the provisions of the intended
unincorporated joint venture agreement, if such expenditure commitment is
not met; or
(b) convert its JV interest to an ongoing net smelter royalty of 2.0%.
Woomera will be appointed the Manager of the JV and will remain Manager whilst it has a
majority interest.
It should be noted that Sulphide Resources Ltd had previously entered into an agreement for
the purchase of Mount Venn but their option to purchase expired in January 2019.
Kaoko Kobalt Project (76%)
The project, in which Cazaly has the right to earn a 95% interest, is primarily prospective for base
metal mineralisation over a large area in northern Namibia. The Kaoko Project lies in northern
Namibia approximately 800km by road from the capital of Windhoek and approximately
750km from port of Walvis Bay. The region has excellent infrastructure and comprises
exploration licence EPL6667 (granted in February 2018) and two further applications (EPL 7096
& EPL 7097) which, combined, cover ~1,410km2 of tenure.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
McKenzie Springs Project (100% - FIN earning 51%)
The project is located immediately south & along strike of the Savannah Nickel Mine
(Panoramic Resources Ltd), Kimberley, WA. Prospective ultramafic basal contact extends for
~15km. Work by Cazaly has identified high grade gossan samples returned 12.8% Cu, 1.92% Ni,
0.17% Co. The project is also within 10km of the Hexagon Resources McIntosh Graphite
Resource. Reprocessing and imaging of historic VTEM data was completed by Cazaly with
several conductor targets potentially representing graphitic units ready for follow up.
Below is an extract from the Fin Resources Limited ASX release dated 25 July 2019 (ASX:FIN):
A review of the potential of the McKenzie Springs Project was completed by an external
consultant during the June Quarter. The review focused on the work completed by Fin and
previous explorers to validate and refine the company’s target so as to drill the best targets at
McKenzie Springs.
The review confirmed that one of the priority targets (MK25) coincides with an isolated gravity
anomaly and has the appropriate geological setting to host Ni-Co-Cu occurrences. The target
is greatly enhanced by the considerable thickening of magma to other targeted areas within
the licence and has reported a similar electromagnetic response to the Savanna Ni-Cu-Co
Mine that is located along strike to the NE of the project.
The external consultant review highlighted the much larger Spring Creek intrusion complex
(located in the northern section of the license) which hosts a minor airborne EM anomaly that
remains untested, with little modern exploration work done over this area (one drill hole for PGE
and a rock chip traverse). It was recommended to extend the geochemistry coverage of the
intrusion as well as other areas not previously covered. The Company now considers
completing new geochemical survey over the Spring Creek intrusion as essential before
prioritising targets for drilling.
Corporate
Placements
As announced on 18 March 2019, the Company raised a total of $750,000 via a placement to
professional and sophisticated investors of 30m shares at an issue price of $0.025 per share. 15m
unquoted free options (exercisable at $0.05 on or before 31 March 2021) were also issued on a
one for two shares subscribed for basis.
On 10 June 2019, the Company issued 10 million fully paid ordinary shares, at an issue price of
$0.03, to Gold Valley as agreed under their agreement for the sale of the Parker Range Iron
Ore Project.
Note Deed
As announced on 13 December 2018, the Company provided an update in relation to the
unsecured 2017 convertible note deed (2017 Deed), which expired on that date.
The Company and Oracle Capital Group Pty Ltd (Oracle) agreed that the Company would
repay the original notes and all accrued interest.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
Oracle, a Perth based portfolio management and corporate advisory firm, provided the
Company with a new unsecured note facility of $748,000 (Deed) via the issue of 748,000
unsecured notes (face value of one dollar ($1.00))(Notes). The Company and Oracle agreed
and acknowledged that by entering into the Deed, any and all liabilities, amounts and
obligations which are outstanding or owing by the Company in favour of Oracle and/or its
nominees or any other any other person under the 2017 Deed are deemed to have been
repaid, satisfied and extinguished in full and the Company is released and discharged from all
of its liabilities, amounts and obligations under the 2017 Deed. The terms of the notes are
detailed in the announcement dated 13 December 2018.
On 10 June 2019, a total of 15,043,110 fully paid ordinary shares were issued on the conversion
of notes and accrued interest by note holders. Total face value of notes outstanding at 30 June
2019 is $485,100.
On 23 August 2019, a total of 28,331,099 fully paid ordinary shares were issued on the conversion
of the remaining notes and all accrued interest by note holders.
7.
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
The Group will continue its mineral exploration activity at and around its exploration projects
with the object of identifying commercial resources. The Group has continued to reduce its
tenement holdings but is also focussed on sourcing key commodity projects.
8.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
9.
AFTER BALANCE DATE EVENTS
On 21 August 2019, the Company announced that, following the receipt of an unsolicited
superior proposal from Mineral Resources to purchase Parker Range, it had terminated the
exclusivity period with Gold Valley under its conditional agreement with Gold Valley originally
announced on 11 June 2019.
On 23 August 2019, a total of 28,331,099 fully paid ordinary shares were issued on the conversion
of the remaining notes and all accrued interest by note holders.
As announced on 30 August 2019, the sale of Parker Range to Mineral Resources was
completed and the Company received the cash consideration of $20 million (ex GST). The
Company also paid the break fee of $250,000 due to Gold Valley under the terms of their
agreement.
On 10 September 2019, 27,720,000 unquoted options (exercisable at $0.02745 on or before 31
December 2021) were converted to shares in the Company and proceeds of $760,914 were
received.
On 17 September 2019, a further 2,200,000 unquoted Options (exercisable at $0.02745 on or
before 31 December 2021) were converted to shares in the Company and proceeds of $60,390
were received.
On 20 September 2019, the Company completed the sale of the Mt Venn project to Woomera
Mining Limited.
Apart from the above, the Directors are not aware of any matters or circumstances at the date
of the report, other than those referred to in this report or the financial statements or notes
thereto, that has significantly affected or may significantly affect the operations, the results of
operations or the state of affairs of the Group in subsequent financial years.
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DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
10.
ENVIRONMENTAL ISSUES
The Company has a policy of complying with or exceeding its environmental performance
obligations. The Board believes that the Company has adequate systems in place for the
management of its environmental requirements. The Company aims to ensure the appropriate
standard of environmental care is achieved, and in doing so, that it is aware of and is in
compliance with all environmental legislation. The Directors are not aware of any breach of
environmental legislation for the financial year under review.
11.
INFORMATION ON DIRECTORS
Nathan McMahon
Managing Director (Corporate and Administration)
Qualifications
B.Com
Experience
Mr McMahon has provided corporate and tenement management
advice to the mining industry for nearly 30 years to in excess of
twenty public listed mining companies. Nathan has specialised in
native title negotiations, joint venture negotiations and project
acquisition due diligence.
Equity Holdings
29,366,142 fully paid ordinary shares
2,500,000 options exercisable at $0.06 expiring 26 November 2020
Other Directorships
Galan Lithium Limited (since February 2011)
Clive Jones
Managing Director (Technical)
Qualifications
B.App.Sc(Geol), M.AusIMM.
Experience
Mr Jones has been involved in mineral exploration for over 25 years
and has worked on the exploration for a range of commodities
including gold, base metals, mineral sands, uranium and iron ore. Mr
Jones is also a director of other ASX listed mining companies.
Equity Holdings
16,329,904 fully paid ordinary shares
2,500,000 options exercisable at $0.06 expiring 26 November 2020
Other Directorships
Corazon Mining Ltd (since February 2005)
Bannerman Resources Ltd (since January 2007)
Terry Gardiner
Non-Executive Director
Qualifications
B.Bus.
Experience
Mr Gardiner has been involved in capital markets, corporate
advising, stockbroking & derivatives trading for over 20 years. For the
past twelve years Mr Gardiner has been an Executive Director of
boutique broker Barclay Wells Ltd. Mr Gardiner is also a director of
numerous public unlisted companies.
Equity Holdings
5,071,500 fully paid ordinary shares
1,500,000 options exercisable at $0.06 expiring 26 November 2020
500,000 options exercisable at $0.05 expiring 31 March 2021
Other Directorships
Galan Lithium Limited (from December 2013)
Roto-Gro International Limited (from July 2019)
12
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
Mike Robbins
Company Secretary
Mr Robbins has over 25 years resource industry experience gathered at both operational and
corporate levels, both within Australia and overseas. During that time, he has held numerous
project and head office roles and is also Company Secretary for Galan Lithium Limited.
12. REMUNERATION REPORT - AUDITED
This report details the nature and amount of remuneration for each director of the Company.
Remuneration Policy
The remuneration policy of Cazaly has been designed to align Director and executive
objectives with shareholder and business objectives by providing a fixed remuneration
component which is assessed on an annual basis in line with market rates. The further tailoring
of goals between shareholders and the Directors and executives is achieved through the issue
of equity to the directors and executives to encourage the alignment of personal and
shareholder interest.
The Board of the Company believes the remuneration policy to be appropriate and effective
in its ability to attract and retain the best personnel to run and manage the Company, as well
as create goal congruence between Directors, executives and shareholders.
The remuneration policy, setting the terms and conditions for the Directors and executives was
developed by the Managing Directors and approved by the Board after seeking professional
advice from independent external consultants.
In determining competitive remuneration rates, the Board seeks independent advice on local
and international trends among comparative companies and industry generally. It examines
terms and conditions for employee incentive schemes benefit plans and other incentive plans.
Independent advice is obtained to confirm that executive remuneration is in line with market
practice and is reasonable in the context of Australian executive reward practices.
The Group is exploration and development focussed, and therefore speculative in terms of
performance. Consistent with attracting and retaining talented people, the Directors and
executives are paid market rates associated with individuals in similar positions, within the same
industry.
Options and performance incentives will be issued in the event that the entity moves from an
exploration entity to a producing entity, and key performance indicators such as profits and
growth can be used as measurements for assessing Board and executive performance.
All remuneration paid to Directors and executives is valued at the cost to the Company and
expensed or carried forward on the balance sheet for time that is attributable to exploration
and evaluation. Options are valued using the Black-Scholes methodology.
The Board policy is to remunerate non-executive directors at market rates for comparable
companies for time, commitment and responsibilities. The Managing Directors, in consultation
with independent advisors as necessary, determine payments to the non-executive Directors
and review their remuneration annually, based on market practice, duties and accountability.
The maximum aggregate amount of fees that can be paid to non-executive directors is subject
to approval by shareholders at the Annual General Meeting. Fees for non-executive Directors
are not linked to the performance of the Company. However, to align Directors’ interests with
shareholder interests, all Directors are encouraged to hold shares in the company.
13
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
12.
REMUNERATION REPORT – AUDITED (Cont’d)
Employment Contracts of Directors and Senior Executives
The employment conditions of the Managing Directors are each formalised in contracts of
employment. These contracts commenced on 1 July 2010 and have 3 year rolling terms which
include an annual salary review incorporating a minimum increase in fees based upon the
prevailing CPI in June and December each year. The contracts provided Messrs. McMahon
and Jones with a commencement annual salary of $180,000 each since 1 July 2010. The
contracts have standard termination clauses. In the event of termination, the fixed proportion
of remuneration is payable up until the date of the termination. After the completion of the
sale of Parker Range, the annual salaries of Messrs McMahon and Jones were increased to
$210,806 per annum applicable from 1 July 2019 based entirely upon the contractual CPI
review clauses contained in their agreements.
An employment contract has been in place for the Non-Executive Director, Terry Gardiner. Mr
Gardiner’s annual fee has been $30,000 per annum but was reviewed to $50,000 (plus
superannuation) from 1 July 2019.
The employment contracts stipulate a range of one to three-month resignation periods. The
Company may terminate an employment contract without cause by providing one to three
months written notice or making payment in lieu of notice, based on the individual’s annual
salary component. Termination payments are not payable on resignation or under the
circumstances of unsatisfactory performance.
Details of Remuneration for Years Ended 30 June 2019 & 30 June 2018
The remuneration for key management personnel of the company during the year was as
follows:
Short-term Benefits
Post
Employment
Benefits
Other
Long-term
Benefits
Share based
Payment
Total
Performance
Related
Cash, salary
Cash
Non-cash
Other
Super
Other
Equity
Options
&
commissions
profit
share
Benefit
$
$
$
$
$
$
$
$
$
%
Nathan McMahon – Managing Director (i)
2019
2018
180,000
180,000
-
-
Clive Jones – Managing Director (ii)
2019
2018
180,000
180,000
-
-
-
-
-
-
Terry Gardiner – Non Executive Director
2019
2018
30,000
30,000
Total Remuneration
2019
2018
390,000
390,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,710
193,710
-
180,000
13,710
193,710
-
180,000
8,225
38,225
-
30,000
35,645
425,645
-
390,000
7%
-%
7%
-%
22%
-%
8%
-%
i) An aggregate amount of $180,000 (2018:$ 180,000) was paid, or was due and payable to Kingsreef Pty Ltd, a
company controlled by Mr Nathan McMahon, for the provision of corporate and tenement management services
to the Company.
ii) An aggregate amount of $180,000 (2018:$ 180,000) was paid, or was due and payable to Widerange Corporation
Pty Ltd, a company controlled by Mr Clive Jones, for the provision of corporate and technical services to the
Company.
14
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
12.
REMUNERATION REPORT – AUDITED (Cont’d)
Related Party Information
The Company received a total of $126,720 (incl GST) under an Office Services Agreement with
Galan Lithium Limited and is considered by the Company to be a related party, as the joint
Managing Director of the Company, Mr Nathan McMahon, is also a director of Galan Lithium
Limited.
Barclay Wells Ltd was paid a total of $42,900 (incl GST) in capital raising and advisory fees for
the 2019 financial year. Barclay Wells Ltd is considered by the Company to be a related Party,
as the Non-Executive Director of the Company, Mr Terry Gardiner, is also a director of Barclay
Wells Ltd.
Key Management Personnel (KMP) Share and Option Holdings
Shares
30 June 2019
N. McMahon
C. Jones
T. Gardiner
30 June 2018
N. McMahon
C. Jones
T. Gardiner
Balance
01-07-18
Granted as
Remuneration
Options
Exercised
Net Change
Other
Balance
30-06-19
28,772,022
15,329,904
1,375,000
45,476,926
Balance
01-07-17
Granted as
Remuneration
27,236,299
14,579,904
1,225,000
43,041,203
-
-
-
-
-
-
-
-
-
-
-
-
594,120
1,000,000
3,696,500
5,290,620
29,366,142
16,329,904
5,071,500
50,767,546
Options
Exercised
Net Change
Other
Balance
30-06-18
-
750,000
150,000
900,000
1,535,723
-
-
1,535,723
28,772,022
15,329,904
1,375,000
45,476,926
Unquoted Options
30 June 2019
N. McMahon
C. Jones
T. Gardiner
30 June 2018
N. McMahon
C. Jones
T. Gardiner
Balance
01-07-18
Issued
Acquired
Exercised
Lapsed
Balance
30-06-19
Vested
during
the year
Vested
and
exercisable
2,500,000
2,500,000
2,500,000
2,500,000
-
2,000,000 (i)
5,000,000
7,000,000
-
-
-
-
(2,500,000)
2,500,000
(2,500,000)
2,500,000
-
2,000,000
(5,000,000)
7,000,000
-
-
-
-
2,500,000
2,500,000
2,000,000
7,000,000
Balance
01-07-17
Issued
Acquired
Exercised
Lapsed
Balance
30-06-18
Vested
during the
year
Vested
and
exercisable
4,166,667
4,166,667
-
-
-
(1,666,667)
2,500,000
(750,000)
(916,667)
2,500,000
-
150,000
(150,000)
-
-
8,333,334
150,000
(900,000)
(2,583,334)
5,000,000
-
-
-
-
2,500,000
2,500,000
-
5,000,000
(i)
1,500,000 options exercisable @ $0.06 on or before 26 November 2020 and 500,000 options exercisable
at $0.05 on or before 31 March 2021.
15
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
12. REMUNERATION REPORT – AUDITED (Cont’d)
Quoted Options
30 June 2019
N. McMahon
C. Jones
T. Gardiner
30 June 2018
N. McMahon
C. Jones
T. Gardiner
Balance
01-07-18
-
-
59,923
59,923
Balance
01-07-17
Issued
Exercised
Lapsed
Balance
30-06-19
Vested
during
the year
Vested
and
exercisable
-
-
-
-
-
-
-
-
-
-
(59,923)
(59,923)
-
-
-
-
-
-
-
-
-
-
-
-
Issued
Exercised
Lapsed
Balance
30-06-18
Vested
during the
year
Vested
and
exercisable
-
-
-
-
-
-
59,923
59,923
-
-
-
-
-
-
-
-
-
-
59,923
59,923
-
-
-
-
-
-
59,923
59,923
Voting and comments made at the Company’s 2018 Annual General Meeting
The adoption of the Remuneration Report for the financial year ended 30 June 2018 was put
to the shareholders of the Company at the Annual General Meeting held 23 November 2018.
The Company received 100% of the vote, of those shareholders who exercised their right to
vote, in favour of the remuneration report for the 2018 financial year. The resolution was passed
without amendment on a show of hands. The Company did not receive any specific feedback
at the AGM or throughout the year on its remuneration practices.
End of Remuneration Report (Audited).
13. MEETINGS OF DIRECTORS
The number of directors' meetings held and conducted during the financial year, each director
held office during the financial year and the number of meetings attended by each director
is:
Director
N McMahon
C Jones
T Gardiner
Directors Meetings
Number Eligible
Number Participated
5
5
5
4
5
5
The Company does not have a formally constituted audit and risk committee or remuneration
and nomination committee as the Board considers that the Company’s size and type of
operation do not warrant the formation of such committees.
16
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
14.
INDEMNIFYING OFFICERS OR DIRECTORS
In accordance with the constitution, except as may be prohibited by the Corporations Act 2001
every Officer, or agent of the Company shall be indemnified out of the property of the
Company against any liability incurred by him in his capacity as Officer or agent of the
Company or any related corporation in respect of any act or omission whatsoever and
howsoever occurring or in defending any proceedings, whether civil or criminal. No
indemnification has been paid with respect to the Company’s auditor.
The Company has insurance policies in place for Directors and Officers insurance.
15. OPTIONS
Options forfeited or cancelled
During, or since the end of the financial year, no options were forfeited or cancelled.
Options Expired or Lapsed
On 30 November 2018, 5,000,000 unquoted options exercisable at $0.20 expired and on 22
August 2019, 1,450,000 unquoted options exercisable at $0.18 expired along with 2,500,000
unquoted options exercisable at $0.144.
Unquoted options on Issue
At the date of this report the Company had the following options on issue:
Expiry Date
31/12/2019
22/8/2020
26/11/2020
31/3/2021
Exercise Price Number Under Option
$0.06000
$0.21600
$0.06000
$0.05000
7,300,000
2,500,000
8,750,000
15,000,000
Option holders do not have any rights to participate in any issue of shares or other interests in
the Company or any other entity.
16.
PROCEEDINGS ON BEHALF OF GROUP
No person has applied for leave of Court to bring proceedings on behalf of the Group or
intervene in any proceedings to which the Group is a party for the purpose of taking
responsibility on behalf of the Group for all or any part of those proceedings. The Group was
not a party to any such proceedings during the year.
17. AUDITORS INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended 30 June 2019 has been
received and can be found on page 20.
18. NON-AUDIT SERVICES
The Board of Directors is satisfied that the provision of non-audit services performed during the
year by the Group’s auditors is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. No other fees were paid or payable to the
auditors for non-audit services performed during the year ended 30 June 2019.
17
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
This report of the Directors, incorporating the Remuneration Report, is signed in accordance
with a resolution of the Board of Directors.
Nathan McMahon
Managing Director
Competent Persons Statement
24 September 2019
The information in this Report that relates to Mineral Resources is based on information compiled by Mr D
Horn, Mr A Green and Mr R Williams and reviewed by Mr D. Allmark. Mr D Horn is Exploration Manager of
CAZ and a Member of the Australasian Institute of Mining and Metallurgy. Mr Horn has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and
to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition
of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. Mr Allmark is a full time
employee of RPM and a Member of the Australian Institute of Geoscientists. Mr Allmark has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and
to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition
of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. The Mineral Resource
estimate complies with recommendations in the Australian Code for Reporting of Mineral Resources and
Ore Reserves (2012) by the Joint Ore Reserves Committee (JORC). Therefore, it is suitable for public
reporting.
The team of people involved in the preparation of this report are listed as follows:
• Mr A Green (Formerly Runge – Operations Manager WA) responsible for site visit;
• Mr R Williams (Formerly Runge – Senior Consultant Geologist) responsible for site visit and previous
Mineral Resource model;
• Mr D Horn (CAZ – Exploration Manager) responsible for providing project data and geological
interpretation. Competent Person sign-off for JORC Table 1 Sections 1 and 2, and
• Mr D. Allmark (RPM – Senior Resource Geologist) responsible for review of all data including data
validation, QAQC review, geological model, statistical analysis, Mineral Resource estimation,
classification and Competent Person sign-off for the Mineral Resource and JORC Table 1 Section 3.
18
DIRECTORS’ REPORT
Cazaly Resources Limited Annual Report 2019
The resource estimate contained in the Directors’ Report was completed using the following parameters:
•
•
•
•
•
•
•
•
•
The Mt Caudan estimate covers the 4,550m lateral extent from 6,495,650mN to 6,500,200mN and the
vertical extent of the resource is 175m from surface at approximately 455mRL to 280mRL.
Drill holes used in the resource estimate included 201 RC and 17 DD core holes, totalling 7,238m,
within the resource wireframes. All holes were drilled by CAZ from 2007. The full database contained
records for 318 drill holes for 24,754m of drilling.
A site visit was conducted in August 2009 by Aaron Green and Robert Williams of RPM (formerly
known as Runge) to review the project and deposit geology, drilling and site procedures. No material
changes have taken place to the underlying Mineral Resource dataset since the site visit.
The bulk of the resource has been tested by holes drilled at section spacings of approximately 60m.
Where infill drilling has not been completed the section spacing is 120m, while sparse drilling at the
Rainmaker prospect has been completed on section spacings of between 300m to 500m.
RC holes were sampled at 1 metre intervals. The sampling method involved collecting a calico
bagged sample from a rig mounted splitter, while the bulk reject was collected to enable further test
work to be conducted. Mineralised intervals of the DD holes were sampled at predominantly 1m
sample length, with only 13 of a total 611 samples not sampled at 1m length.
All holes were down hole surveyed at the collar and at 50m intervals with either a single shot camera
or a gyro survey tool. Only minor records were noted where magnetic interference had been
experienced.
Collar surveys and topographic surveys were completed using a RTK GPS instrument. All surveys were
recorded in the MGA94-50 datum.
All logging and sampling methods for the drilling completed by CAZ have been reviewed by RPM
and are considered to be of a high standard.
Sample preparation and assaying was carried out by Kalgoorlie Assay Laboratories in Perth.
Comprehensive assaying of Fe, Al2O3, SiO2, Mn, P and S was carried out routinely using the X-Ray
Fluorescence (“XRF”) method.
• Quality control data for the recent drilling has been reviewed by RPM, and has confirmed that the
assay data used in the estimate is accurate and unbiased.
• Material-type wireframes were constructed using geological sectional interpretations provided by
CAZ. Mineralisation wireframes were constructed using cross sectional interpretations based on a
nominal 50% Fe cut-off grade. Samples within the wireframes were composited to even 1.0m
intervals.
Based on a review of the deposit statistics, a high grade cut of 20% was used for Mn in the resource.
No other high grade cuts were used.
A Surpac block model was used for the estimate with a block size of 30m NS by 12.5m EW by 5m
vertical with sub-cells of 7.5m by 3.125m by 1.25m.
•
•
• OK grade interpolation used an oriented ‘ellipsoid’ search for elements. Three passes were used to
•
•
•
•
fill the model with 97% of the model being filled in the first pass.
Bulk density values ranging from 2.31t/m3 for footwall supergene to 3.25t/m3 for high grade SIF were
assigned in the resource. Waste bulk densities of 1.81t/m3 were applied to the hanging wall mafics
and the footwall sediments in the oxide domain. A bulk density of 2.8t/m3 was applied to the
hanging wall mafics and the footwall sediments in the fresh domain, while 3.77t/m3 was applied to
SIF in the fresh domain.
The Mineral Resource was classified as Measured, Indicated and Inferred Mineral Resource. The
Measured portion of the resource is confined to the SIF unit where the 60m by 25m drill spacing
coupled with surface geological mapping has sufficiently demonstrated both geological and
mineralisation continuity. The Indicated portion of the resource was defined where the drill spacing
was less than 200m by 40m and lode continuity was good. The Inferred Resource included areas of
the resource where sampling was greater than 200m by 40m and isolated, discontinuous zones of
mineralisation.
In order to satisfy the requirements for reasonable prospects for eventual economic extraction RPM
reported the deposit at a cut-off grade of 50.0% Fe and inside a 1.2 times revenue factor optimised
pit shell. The mine planning process concluded that 51.5% Fe was an appropriate cut-off grade for
plant feed and was used to estimate the Ore Reserves taking into account blending from stockpiles.
To account for blending of various grade materials, RPM has selected a cut-off grade of 50.0% Fe
(which is lower than the Ore Reserves cut-off) to achieve an average ore product grade of 55% to
56% Fe.
RPM has selected a 1.2 times revenue factor pit shell within which to report the Mineral Resources to
account for a reasonable increase in the iron ore prices. The Project is relatively insensitive to
changes in the iron ore price with a change in price of 20% resulting in an increase of around 5% ore
tonnes
19
To The Board of Directors
Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
As lead audit Partner for the audit of the financial statements of Cazaly Resources
Limited for the financial year ended 30 June 2019, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
−
−
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
any applicable code of professional conduct in relation to the audit.
Yours faithfully
BENTLEYS
Chartered Accountants
DOUG BELL CA
Partner
Dated at Perth this 24th day of September 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For Year Ended 30 June 2019
Note
2019
$
2018
$
Revenue from continuing operations
Other Income
Employee benefits
Finance Costs
Depreciation
Administrative expenses
Compliance and regulatory expenses
Occupancy expenses
Written-off exploration expenditure
Gain/(Loss) on sale of financial assets
Revaluation /(Impairment) of financial assets
Loss before income tax
Income tax (expense)/ benefit
Loss for the year
Other comprehensive income
Total comprehensive income for the year
2
2
3
3
6
Loss for the year attributable to:
Members of the parent entity
Non-controlling interest
Total comprehensive income attributable to:
Members of the parent entity
Non-controlling interest
217,833
77,720
120,000
41,145
(386,296)
(507,912)
(8,741)
(227,306)
(209,075)
(183,512)
(520,505)
-
(98,557)
(312,892)
(111,382)
(6,171)
(271,662)
(181,929)
(65,948)
(641,517)
5,471
(5,399)
(1,804,071)
-
(1,804,071)
-
(1,804,071)
(1,472,564)
-
(1,472,564)
-
(1,472,564)
(1,803,888)
(183)
(1,804,071)
(1,472,389)
(175)
(1,472,564)
(1,803,888)
(183)
(1,804,071)
(1,472,389)
(175)
(1,472,564)
Earnings/(loss) per share from continuing
and discontinued operations
Basic weighted average loss per share
Diluted weighted average loss per share
20
20
Cents
(0.75)
(0.75)
Cents
(0.75)
(0.75)
The accompanying notes form part of these financial statements.
21
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2019
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
Note
2019
$
2018
$
7
8
836,709
71,030
-
907,739
1,474,219
221,711
102,160
1,798,090
Non current assets held for sale
9
16,875,456
727,328
TOTAL CURRENT ASSETS
17,783,195
2,525,418
NON CURRENT ASSETS
Trade and other receivables
Financial assets
Property, plant and equipment
Exploration and evaluation assets
8
10
11
12
26,929
155,058
25,419
4,128,235
26,306
245,456
18,337
19,685,931
TOTAL NON CURRENT ASSETS
4,335,641
19,976,030
TOTAL ASSETS
22,118,836
22,501,448
CURRENT LIABILITIES
Trade and other payables
Provisions
Convertible Notes
13
14
15
165,021
143,564
362,241
329,248
103,606
670,288
TOTAL CURRENT LIABILITIES
670,826
1,103,142
TOTAL LIABILITIES
670,826
1,103,142
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Controlling entity interest
Non-controlling interest
21,4448,010
21,398,306
16
17
18
31,288,827
777,627
(10,603,110)
21,463,344
(15,334)
29,963,658
305,198
(8,855,399)
21,413,457
(15,151)
TOTAL EQUITY
21,448,010
21,398,306
The accompanying notes form part of these financial statements.
22
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2019
Issued Capital
(Accumulated
Losses)
Option
Reserve
$
$
$
Non-
Controlling
Interest
$
Total
$
Balance at 1 July 2017
27,712,676
(7,383,010)
218,304
(14,976)
20,532,994
Loss for the year
Other comprehensive
income for the year
Total comprehensive income
for the year
Transactions with owners, in
their capacity as owners, and
other transfers:
Shares issued during the
year
Equity based payments
Option reserve
Transaction costs
Tax effect of equity raising
cost
-
-
-
(1,472,389)
-
(1,472,389)
2,335,802
-
-
(84,820)
-
-
-
-
-
-
-
-
-
-
-
86,894
-
-
(175)
(1,472,564)
-
-
(175)
(1,472,564)
-
-
-
-
-
2,335,802
-
86,894
(84,820)
-
Balance at 30 June 2018
29,963,658
(8,855,399)
305,198
(15,151)
21,398,306
Loss for the year
Other comprehensive
income for the year
Total comprehensive
income/(loss) for the year
Transactions with owners, in
their capacity as owners, and
other transfers:
Shares issued during the
year
Equity based payments
Option reserve
Transaction costs
Tax effect of equity raising
cost
-
-
(1,803,888)
(1,803,888)
1,370,169
-
-
-
-
-
-
(45,000)
-
-
56,177
-
-
528,606
(56,177)
-
-
(183)
(1,804,071)
(183)
(1,804,071)
-
-
-
-
-
1,370,169
528,606
-
(45,000)
-
Balance at 30 June 2019
31,288,827
(10,603,110)
777,627
(15,334)
21,448,010
The accompanying notes form part of these financial statements.
23
CONSOLIDATED CASH FLOW
STATEMENT
For the year ended 30 June 2019
Note
2019
$
2018
$
Cash Flows from Operating Activities
Payments to suppliers and employees
Interest received
Proceeds from other income
Payments for exploration and evaluation
(763,119)
2,706
-
(929,115)
(615,933)
3,842
10,065
(1,167,380)
Net cash used in operating activities
21
(1,689,528)
(1,769,406)
Cash Flows From Investing Activities
Purchase of Property, Plant & Equipment
Purchase of Equity Investments
Proceeds from sale of exploration assets
Proceeds from sale of investments
(15,823)
(8,159)
120,000
-
(1,963)
(8,000)
20,000
6,360
Net cash provided by investing activities
96,018
16,397
Cash Flows from Financing Activities
Proceeds from issue of securities
Payment for costs of issue of securities
Proceeds from convertible notes
1,050,000
(39,000)
(55,000)
1,858,786
(84,820)
730,000
Net cash provided by financing activities
956,000
2,503,966
Net increase/(decrease) in cash held
(637,510)
750,957
Cash and cash equivalents at beginning
of the financial year
1,474,219
723,262
Cash and cash equivalents at end of the
financial year
7
836,709
1,474,219
The accompanying notes form part of these financial statements.
24
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements and notes represent those of Cazaly Resources Limited
(the Company or Cazaly) and its controlled entities (the Group). Cazaly Resources Limited is a
listed public company, incorporated and domiciled in Australia.
The financial statements were authorised for issue on 24 September 2019 by the Directors of the
Company.
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance
with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
The Group is a for-profit entity for financial reporting purposes under Australian Accounting
Standards.
Australian Accounting Standards set out in accounting policies that the AASB has concluded
would result in financial statements containing relevant and reliable information about
transactions, events and conditions. Compliance with Australian Accounting Standards ensures
that the financial statements and notes also comply with International Financial Reporting
Standards as issued by the IASB. Material accounting policies adopted in the preparation of these
financial statements are presented below and have been consistently applied unless otherwise
stated.
These financial statements have been prepared on an accruals basis and are based on historical
costs, modified, where applicable, by the measurement at fair value of selected non-current
assets, financial assets and financial liabilities.
Going Concern
The financial report has been prepared on a going concern basis, which contemplates the
continuity of normal business activity and the realisation of assets and the settlement of liabilities
in the ordinary course of business.
As disclosed in note 25, on 30 August 2019, the sale of Parker Range to Mineral Resources was
completed and the Company received the cash consideration of $20 million (ex GST).
(a)
Principles of Consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities
controlled by the Company at the end of the reporting period. A controlled entity is any entity
over which the Company has the power to govern the financial and operating policies so as to
obtain benefits from the entity’s activities. Control will generally exist when the parent owns,
directly or indirectly through subsidiaries, more than half of the voting power of an entity. In
assessing the power to govern, the existence and effect of holdings of actual and potential voting
rights are also considered.
Where controlled entities have entered or left the Group during the year, the financial
performance of those entities are included only for the period of the year that they were
controlled. A list of controlled entities, as at 30 June 2019 is contained in Note 23 to the financial
statements.
In preparing the consolidated financial statements, all inter-group balances and transactions
between entities in the Group have been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with those adopted by
the Company.
25
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to
a parent, are shown separately within the Equity section of the consolidated Statement of
Financial Position and Statement of Profit or Loss and other Comprehensive Income. The non-
controlling interest in the net assets comprises their interests at the date of the original business
combination and their share of changes in equity since that date.
(b)
Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. The
carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in
excess of the recoverable amount from these assets. The recoverable amount is assessed on the
basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been discounted to their present values
in determining recoverable amounts.
(c)
Depreciation
Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line
basis so as to write off the net cost or other revalued amount of each asset over its expected
useful life to its estimated residual value.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and equipment
Office furniture and equipment
Motor vehicle
Depreciation Rate
40.0%
18.0%
22.5%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end
of each 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. When revalued assets are sold, amounts included in the revaluation reserve relating to
that asset are transferred to retained earnings.
(d)
Exploration, Evaluation and Development Expenditure
Costs incurred during exploration and evaluations relating to an area of interest are accumulated.
Costs are carried forward to the extent they are expected to be recouped through successful
development, or by sale, or where exploration and evaluation activities have not yet reached a
stage to allow a reasonable assessment regarding the existence of economically recoverable
reserves. In these instances the entity must have rights of tenure to the area of interest and must
be continuing to undertake exploration operations in the area.
Accumulated costs carried forward in respect of an area of interest that is abandoned 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 will be 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 capitalise costs in relation to that area of interest.
26
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Costs of site restoration are provided over the life of the project from when exploration
commences and are included in the costs of that stage. Site restoration costs include the
dismantling and removal of mining plant, equipment and building structures, waste removal, and
rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been
estimated of future costs, current legal requirements and technology on an undiscounted basis.
(e)
Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of
the asset, but not the legal ownership, are transferred to entities in the consolidated group are
classified as finance leases. Finance leases are capitalised by recording an asset and a liability
equal to the present value of the minimum lease payments, including any guaranteed residual
values. Leased assets are depreciated on a straight-line basis over the shorter of their estimated
useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are charged as expenses in the periods in which they are incurred.
(f)
Financial Instruments
Financial Assets
Initial Recognition and Measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost,
fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them. With
the exception of trade receivables that do not contain a significant financing component or for
which the Group has applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs.
In order for a financial asset to be classified and measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’
on the principal amount outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial
assets in order to generate cash flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulation or convention in the market place (regular way trades) are recognised on the trade
date, i.e., the date that the Group commits to purchase or sell the asset.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial
assets designated upon initial recognition at fair value through profit or loss, or financial assets
mandatorily required to be measured at fair value. Financial assets are classified as held for
trading if they are acquired for the purpose of selling or repurchasing in the near term.
Financial assets at fair value through profit or loss are carried in the statement of financial position
at fair value with net changes in fair value recognised in the statement of profit or loss.
27
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
This category includes listed equity investments which the Group had not irrevocably elected to
classify at fair value through OCI. Dividends on listed equity investments are also recognised as
other income in the statement of profit or loss when the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement
of financial position) when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under
a ‘pass-through’ arrangement; and
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b)
the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when
internal or external information indicates that the Group is unlikely to receive outstanding
contractual amounts in full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable expectation of recovering the
contractual cash flows
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through
profit or loss, loans and borrowings, payables as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings
and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payable and convertible notes.
The accounting policy on convertible notes are at 1(v).
(g)
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, and bank overdrafts.
Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of
financial position.
(h)
Trade and Other Receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at original
invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts
is made when there is objective evidence that the entity will not be able to collect the debts. Bad
debts are written off when identified.
28
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(i)
Revenue and Other Income
Revenue from the sale of goods is recognised upon the delivery of goods to customers. Interest
revenue is recognised on a proportional basis taking into account the interest rates applicable to
the financial assets. Revenue from the rendering of a service is recognised upon the delivery of
the service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
(j)
Impairment of Assets
At the end of each reporting period, the Group assesses whether there is any indication that an
asset may be impaired. The assessment will include the consideration of external and internal
sources of information including dividends received from subsidiaries, associates or jointly
controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an
impairment test is carried out on the asset by comparing the recoverable amount of the asset,
being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying
value. Any excess of the asset’s carrying value over its recoverable amount is recognised
immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with
another standard (eg in accordance with the revaluation model in AASB 116). Any impairment
loss of a revalued asset is treated as a revaluation decrease in accordance with that other
standard.
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.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
(k)
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 (“ATO”). 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. The net amount of GST recoverable from, or payable to, the ATO is included as
a current asset or liability in the statement of financial position.
Cash flows are included in the cash flow statement on a gross basis. The GST components of cash
flows arising from investing and financing activities which are recoverable from, or payable to, the
ATO are classified as operating cash flows.
(l)
Taxation
The income tax expense (revenue) for the year comprises current income tax expense (income)
and deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income
calculated using applicable income tax rates enacted, or substantially enacted, as at reporting
date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid
to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability
balances during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity
instead of the profit or loss when the tax relates to items that are credited or charged directly to
equity.
29
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Deferred tax assets and liabilities are ascertained based on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets also result where amounts have been fully expensed but future
tax deductions are available. No deferred income tax will be recognised from the initial
recognition of an asset or liability, excluding a business combination, where there is no effect on
accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled, based on tax rates enacted or
substantively enacted at reporting date. Their measurement also reflects the manner in which
management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only
to the extent that it is probable that future taxable profit will be available against which the
benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates,
and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the
reversal of the temporary difference can be controlled and it is not probable that the reversal will
occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it
is intended that net settlement or simultaneous realisation and settlement of the respective asset
and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable
right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or different taxable entities where it is
intended that net settlement or simultaneous realisation and settlement of the respective asset
and liability will occur in future periods in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
Tax Consolidation
Cazaly and its wholly-owned Australian subsidiaries have formed an income tax consolidated
group under tax consolidation legislation. Each entity in the group recognises its own current and
deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’
approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused
tax losses and tax credits in the subsidiaries are immediately transferred to the head entity.
(m)
Trade and Other Payables
Trade payables and other payables are carried at amortised costs and represent liabilities for
goods and services provided to the company prior to the end of the financial year that are unpaid
and arise when the company becomes obliged to make future payments in respect of the
purchase of these goods and services.
(n)
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.
The amount recognised as a provision is the best estimate of the consideration required to settle
the present obligation at reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows.
30
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
(o)
Share Based Payments
The Group operates equity-settled share-based payment employee share and option schemes.
The fair value of the equity to which employees become entitled is measured at grant date and
recognised as an expense over the vesting period, with a corresponding increase to an equity
account. Share-based payments to non-employees are measured at the fair value of goods or
services received or the fair value of the equity instruments issued, if it is determined the fair value
of the good or services cannot be reliably measured, and are recorded at the date the goods or
services are received. The corresponding amount is shown in the option reserve.
The fair value of shares is ascertained as the market bid price. The fair value of options is
ascertained using a Black–Scholes pricing model which incorporates all market vesting conditions.
The number of shares and options expected to vest is reviewed and adjusted at the end of each
reporting period such that the amount recognised for services received as consideration for the
equity instruments granted shall be based on the number of equity instruments that eventually
vest.
(p)
Issued Capital
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.
(q)
Earnings Per Share
Basic earnings per share is calculated as net earnings attributable to members, adjusted to
exclude costs of servicing equity (other than dividends) and preference share dividends, divided
by the weighted average number of ordinary shares, adjusted for an bonus element.
Diluted earnings per share is calculated as net earnings attributable to members, adjusted for
costs of servicing equity (other than dividends) and preference share dividends; the after tax
effect of dividends and interest associated with dilutive potential ordinary shares that would have
been recognised as expenses; and other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of potential ordinary shares; divided by the
weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for
any bonus element.
(r)
Employee Benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by
employees to the end of the reporting period. Employee benefits that are expected to be settled
within one year have been measured at the amounts expected to be paid when the liability is
settled.
(s)
Interest in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
31
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
When a Group entity undertakes its activities under joint operations, the Group as a joint operator
recognises in relation to its interest in a joint operation:
•
•
•
•
•
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint
operation in accordance with the AASBs applicable to the particular assets, liabilities, revenues
and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator
(such as a sale or contribution of assets), the Group is considered to be conducting the transaction
with the other parties to the joint operation, and gains and losses resulting from the transactions
are recognised in the Group's consolidated financial statements only to the extent of other parties'
interests in the joint operation.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator
(such as a purchase of assets), the Group does not recognise its share of the gains and losses until
it resells those assets to a third party.
(t)
Critical Accounting Estimates and Judgements
The preparation of financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised and in any future periods affected.
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 Judgements –Exploration and evaluation expenditure
Exploration and evaluation costs are carried forward where right of tenure of the area of interest
is current. These costs are carried forward in respect of an area that has not at balance sheet
date reached a stage that permits reasonable assessment of the existence of economically
recoverable reserves, refer to the accounting policy stated in note 1(d).
Key Judgements - Share based payment transactions
The Company 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 is
determined by an internal valuation using a Black-Scholes option pricing model.
Key Judgments – Environmental issues
Balances disclosed in the financial statements and notes thereto are not adjusted for any pending
or enacted environmental legislation, and the directors understanding thereof. At the current
stage of the company’s development and its current environmental impact the directors believe
such treatment is reasonable and appropriate.
32
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Key Estimate – Taxation
Balances disclosed in the financial statements and the notes thereto, related to taxation, are
based on the best estimates of directors. These estimates take into account both the financial
performance and position of the company as they pertain to current income taxation legislation,
and the directors understanding thereof. No adjustment has been made for pending or future
taxation legislation. The current income tax position represents that directors’ best estimate,
pending an assessment by the Australian Taxation Office.
(u)
Fair value measurements
The Group measures and recognises the asset, ‘Financial assets held for trading’ at fair value on
a recurring basis after initial recognition.
The Group does not subsequently measure any liabilities at fair value on a non-recurring basis.
(i) Fair Value Hierarchy
AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of
the fair value hierarchy, which categorises fair value measurements into one of three possible
levels based on the lowest level that an input that is significant to the measurement can be
categorised into as follows:
Level 1
Level 2
Level 3
Measurements based on
quoted prices (unadjusted)
in active markets for
identical assets or liabilities
that the entity can access at
the measurement date.
Measurements based on
inputs other than quoted
prices included in Level 1 that
are observable for the asset or
liability, either directly or
indirectly.
Measurements based on
unobservable inputs for the
asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using
one or more valuation techniques. These valuation techniques maximise, to the extent possible,
the use of observable market data. If all significant inputs required to measure fair value are
observable, the asset or liability is included in Level 2. If one or more significant inputs are not
based on observable market data, the asset or liability is included in Level 3.
(ii) Valuation techniques
The Company selects a valuation technique that is appropriate in the circumstances and for
which sufficient data is available to measure fair value. The availability of sufficient and relevant
data primarily depends on the specific characteristics of the asset or liability being measured.
The valuation technique selected by the Company is the Market approach whereby valuation
techniques use prices and other relevant information generated by market transactions for
identical or similar assets or liabilities.
When selecting a valuation technique, the Company gives priority to those techniques that
maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that
are developed using market data (such as publicly available information on actual transactions)
and reflect the assumptions that buyers and sellers would generally use when pricing the asset
or liability are considered observable, whereas inputs for which market data is not available and
therefore are developed using the best information available about such assumptions are
considered unobservable.
The following table provides the fair values of the Company’s assets and liabilities measured and
recognised on a recurring basis after initial recognition and their categorisation within the fair
value hierarchy:
33
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
30 June 2019
Note
Level 1
$
Level 2
$
Level 3
$
Total
$
Recurring fair value measurements
Financial assets at fair value through
profit or loss:
- Australian listed shares
- unlisted Australian shares (i)
Recurring fair value measurements
Financial assets at fair value through
profit or loss:
- Australian listed shares
- unlisted Australian shares (i)
113,818
-
113,818
-
-
-
-
41,240
41,240
113,818
41,240
155,058
30 June 2018
Note
Level 1
$
Level 2
$
Level 3
$
Total
$
204,216
-
204,216
-
-
-
-
41,240
41,240
204,216
41,240
245,456
(i) Directors have valued the shares on the last active trading price prior to delisting from the ASX.
(v) Convertible Notes
Convertible notes issued by the Group include embedded derivatives (option to convert to
variable number of shares in the Group). These convertible notes are recognized as financial
liabilities at fair value through profit or loss. On initial recognition, the fair value of the convertible
note will equate to the proceeds received less costs to issue and subsequently the liability is
measured at fair value at each reporting period until settlement. The fair value movements are
recognized on the profit and loss as finance costs.
(w) Non current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use. This
condition is regarded as met only when the asset (or disposal group) is available for immediate
sale in its present condition subject only to terms that are usual and customary for sales for such
asset (or disposal group) and its sale is highly probable. Management must be committed to the
sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classification.
When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the
assets and liabilities of that subsidiary are classified as held for sale when the criteria described
above are met, regardless of whether the Group will retain a non-controlling interest in its former
subsidiary after the sale.
34
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
When the Group is committed to a sale plan involving disposal of an investment, or a portion of
an investment, in an associate or joint venture, the investment or the portion of the investment
that will be disposed of is classified as held for sale when the criteria described above are met,
and the Group discontinues the use of the equity method in relation to the portion that is classified
a held for sale. Any retained portion of an investment in an associate or a joint venture that has
not been classified as held for sale continues to be accounted for using the equity method. The
Group discontinues the use of the equity method at the time of disposal when the disposal results
in the Group losing significant influence over the associate or joint venture.
After the disposal takes place, the Group accounts for any retained interest in the associate or
joint venture in accordance with AASB 139 unless the retained interest continues to be an
associate or a joint venture, in which case the Group uses the equity method (see the accounting
policy regarding investments in associates or joint ventures above).
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of
their previous carrying amount and fair value less costs to sell.
(x) New, revised or amending accounting standards and interpretations adopted
The Company has adopted all of the new, revised or amended Accounting Standards that are
mandatory for the current accounting period. The adoption of these Accounting Standards and
Interpretations are described below:
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) for
annual periods beginning on or after 1 January 2018, bringing together all three aspects of the
accounting for financial instruments: classification and measurement; impairment; and hedge
accounting. The Group has applied AASB 9 retrospectively, with the initial application date of 1
July 2018. The Group has elected to restate comparative information.
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities
and some contracts to buy or sell non-financial items. The changes in accounting policies resulting
from the adoption of AASB 9 did not have a material impact on the Group’s financial statements.
As of 30 June 2019 and 30 June 2018, the Group’s financial instruments consist of cash and cash
equivalents, trade and other receivables, trade and other payables, and borrowings.
Class of financial instrument
presented in the statement
of financial position
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Original measurement category
under AASB 139
New measurement category
under AASB 9
Loans and receivables
Loans and receivables
Financial liability at amortised cost
Financial assets at amortised cost
Financial assets at amortised cost
Financial liability at amortised cost
The change in classification has not resulted in any re-measurement adjustments at 1 July 2018.
Refer to the relevant accounting policy disclosures for further details.
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit
loss model to be applied as opposed to an incurred credit loss model under AASB 139. The
expected credit loss model requires the Group to account for expected credit losses and changes
in those expected credit losses at each reporting date to reflect changes in credit risk since initial
recognition of the financial asset. In particular, AASB 9 requires the Group to measure the loss
allowance at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the
instrument has increased significantly since initial recognition. On the other hand, if the credit risk
on the financial instrument has not increased significantly since initial recognition, the Group is
required to measure the loss allowance for that financial instrument at an amount equal to the
ECL within the next 12 months. There is no impact on the cash flows of the Group from the
application of AASB 9.
35
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Initial application of AASB 15: Revenue from Contracts with Customers
The Group has adopted AASB 15 with a date of initial application of 1 July 2018. Based on the
Directors’ assessment there was no impact on the Group’s existing revenue recognition policy
arising from the adoption.
Any new, revised or amending Accounting Standards or Interpretations that are not yet
mandatory have not been early adopted. The following table summarises the expected impact
of new Accounting Standards that are not yet mandatory and have not been early adopted:
Application
Date
Annual
reporting
periods
beginning
on or after
1 January
2019.
Impact on Initial Application
Management has assessed the impact
of AASB 16 on the Groups existing
operations. The Standard is not expected
impact on the
to have a material
transactions and balances recognised in
the financial statements when it is first
adopted for the year ending 30 June
2020, given the Group does not have any
leases (refer Note 22).
for
Nature of Change
AASB 16 eliminates the operating and finance
lease classifications
lessees currently
accounted for under AASB 117 Leases. It instead
requires an entity to bring most leases into its
statement of financial position 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
statement of financial position 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.
36
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
2.
2.
REVENUE & OTHER INCOME
Revenue
-
-
- other revenue
interest received
recoupment of office costs on-charged
Other Income
- proceeds from tenement sale agreement
- proceeds on sale of royalty
3.
PROFIT (LOSS) FOR THE YEAR
2019
$
2018
$
3,329
212,994
1,510
217,833
120,000
-
120,000
4,404
26,681
46,635
77,720
31,080
10,065
41,145
Profit (loss) before income tax from continuing operations includes the following specific
expenses:
Expenses
Administrative expenses
Consulting
Advertising, printing and stationery
Travel and accommodation
Insurance
Other
Compliance and regulatory expenses
ASX, ASIC, registry and secretarial
Legal
Employee Benefits
Superannuation
4.
KEY MANAGEMENT PERSONNEL
Interests of Key Management Personnel
67,502
13,749
22,511
31,296
92,248
227,306
157,000
52,075
209,075
76,106
17,843
16,100
19,463
142,150
271,662
157,856
24,073
181,929
27,457
24,843
Refer to the remuneration report contained in the directors’ report for details of the remuneration
paid or payable to each member of the Company’s key management personnel for the year
ended 30 June 2019.
The totals of remuneration paid to key management personnel of the Company during the year
are as follows:
37
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
4.
KEY MANAGEMENT PERSONNEL (Cont’d)
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share based payments
2019
$
390,000
-
-
35,645
425,645
2018
$
390,000
-
-
-
390,000
No compensation was paid in respect to KMP in termination benefits
Related Party Information
The Company received a total of $126,720 (incl GST) under an Office Services Agreement with
Galan Lithium Limited and is considered by the Company to be a related party, as the joint
Managing Director of the Company, Mr Nathan McMahon, is also a director of Galan Lithium
Limited.
Barclay Wells Ltd was paid a total of $42,900 (incl GST) in capital raising and advisory fees for the
2019 financial year. Barclay Wells Ltd is considered by the Company to be a related Party, as the
Non-Executive Director of the Company, Mr Terry Gardiner, is also a director of Barclay Wells Ltd.
5.
AUDITORS REMUNERATION
Remuneration of the auditor for:
- Auditing or reviewing the financial report
6.
INCOME TAX EXPENSE
The components of the tax expense/(income) comprise:
Current tax
Deferred tax
(a)
The prima facie tax on profits/(losses) from ordinary
activities before income tax is reconciled to the
income tax as follows:
32,988
32,988
22,500
22,500
-
-
-
-
-
-
Profit from continuing operations
(1,804,071)
(1,472,564)
Prima facie tax benefit on loss from ordinary activities
before income tax at 27.5% (2018: 27.5%)
(496,120)
(404,955)
Add/(subtract):
Tax effect of:
Current year capital losses not recognised
Effect of tax losses derecognised
Other non-allowable items
Tax benefit of deductible equity raising costs
Movement in unrecognised temporary differences
Income tax expense (benefit) attributable to entity
-
327,621
143,959
(8,267)
32,807
-
109,949
344,883
65,945
(6,452)
(109,370)
-
38
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
6.
INCOME TAX EXPENSE (Cont’d)
(b)
Recognised deferred tax assets at 27.5% (2018:
27.5%) comprise the following
2019
$
2018
$
Carry forward revenue losses
Capital raising and future black hole
deductions
Provisions and accruals
Other
Less: Set off of deferred tax liabilities
Recognised deferred tax liabilities at 27.5% (2018:
27.5%) comprise the following
Exploration expenditure
Other
Less: Set off of deferred tax asset
(c)
Deferred tax recognised directly in equity:
Relating to equity raising costs
(d)
Unrecognised deferred tax assets at 27.5% (2018:
27.5%) comprise the following:
Deferred tax assets have not been recognized in
respect to the following as they are not considered
to have met the recognition criteria:
5,360,491
5,280,354
-
47,654
67,375
5,475,521
(5,475,521)
-
5,475,521
-
5,475,521
(5,475,521)
-
-
48,028
67,375
5,395,757
(5,395,757)
-
5,395,757
-
5,395,757
(5,395,757)
-
-
-
-
-
Deductible temporary differences
Tax revenue losses
Tax capital losses
242,490
2,058,161
325,916
2,626,567
205,575
1,720,470
325,916
2,251,961
7.
CASH AND CASH EQUIVALENTS
Cash at bank
Petty cash
8.
TRADE AND OTHER RECEIVABLES
Current
Other receivables (i)
836,509
200
836,709
1,474,019
200
1,474,219
71,030
71,030
221,711
221,711
(i) Other receivables normally have 30 to 60 day terms. At 30 June 2019, $13,757 (2018: $59,816) is
receivable from companies related to one of the Directors.
39
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
8.
TRADE AND OTHER RECEIVABLES (Cont’d)
Non-Current
Bonds (ii)
(ii) Bonds are term deposits, held by way of bank guarantee.
9.
NON-CURRENT ASSETS HELD FOR SALE
Non-current asset held for sale – Mt Venn (i)
Non-current asset held for sale – Parker Range (ii)
Movements
Balance brought forward
Transfer from exploration and evaluation assets
2019
$
2018
$
26,929
26,929
26,306
26,306
868,076
16,007,380
16,875,456
727,328
-
727,328
727,328
16,148,128
16,875,456
-
727,328
727,328
(i)
(ii)
The Company entered into a Share Sale Agreement with Woomera Mining Ltd (WML). As
disclosed in note 26, on 20 September 2019, the Company completed the sale and received
gross proceeds of $1 million and 7 million WML shares.
As announced on 21 August 2019, the Company received an unsolicited offer from Mineral
Resources Ltd in respect of the sale of the Parker Range Iron Ore Project. As announced on
30 August 2019, both parties completed or waived the conditions precedent and the
transaction was completed. The Company subsequently received gross proceeds of $20m
(ex GST).
10.
FINANCIAL ASSETS
Current
Financial assets, at fair value through profit or loss:
Australian listed shares
Unlisted Australian public company shares
113,818
41,240
204,216
41,240
155,058
245,456
40
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
11.
PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost
Accumulated depreciation
Office Furniture and Equipment
At cost
Accumulated depreciation
Motor Vehicle
At cost
Accumulated depreciation
2019
$
2018
$
326,331
(310,889)
15,442
311,615
(305,189)
6,426
41,491
(38,995)
2,496
65,878
(58,397)
7,481
25,419
40,384
(37,938)
2,446
65,878
(56,413)
9,465
18,337
Movement in the carrying amounts for each class of property, plant and equipment between the
beginning and end of the current financial year.
Balance at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
Balance at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
Plant and
Equipment
$
6,426
14,716
-
(5,700)
15,442
Plant and
Equipment
$
7,000
1,963
-
(2,537)
6,426
2019
Office
Furniture
$
2,446
1,107
-
(1,057)
2,496
2018
Office
Furniture
$
3,545
-
-
(1,099)
2,446
Motor
Vehicles
$
9,465
-
-
(1,984)
7,481
Motor
Vehicles
$
12,000
-
-
(2,535)
9,465
Total
$
18,337
15,823
-
(8,741)
25,419
Total
$
22,545
1,963
-
(6,171)
18,337
41
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
12.
EXPLORATION AND EVALUATION ASSETS
Non-Current
Costs carried forward in respect of areas of interest in:
2019
$
2018
$
Exploration and evaluation phases at cost
4,187,203
19,685,931
Movement – exploration and evaluation
Brought forward
Exploration expenditure capitalised during the year
Acquisitions
Exploration expenditure capitalised on tenements sold
during the year
Exploration expenditure written off
Transfer to Non current assets classified as held for sale
(refer note 9)
19,685,931
1,110,937
-
19,679,982
1,123,714
380,000
-
(520,505)
(128,920)
(641,517)
(16,148,128)
(727,328)
4,128,235
19,685,931
Exploration expenditure for the year was $1,110,937 (2018: $1,503,714). This expenditure was on Mt
Venn, the Kaoko Kobalt Project in Namibia and Parker Range. Exploration expenditure written off
for the year was $520,505 compared to $641,517 in the 2018 financial year. The main write offs
related to non-essential Parker Range and Coolgardie areas, Teutonic Bore, cobalt projects in
NSW and Queensland as well as previously capitalised expenditures relating to the various
tenements and/or applications that were relinquished during the financial year.
The value of the Group’s interest in exploration expenditure is dependent upon:
-
-
-
the continuance of the Group’s rights to tenure of the areas of interest;
the results of future exploration; and
the recoupment of costs through successful development and exploitation of the areas of
interest, or alternatively, by their sale.
13.
TRADE AND OTHER PAYABLES
Current
Trade creditors
Other creditors and accrued expenses
Creditors are non-interest bearing and settled on 30 to 45 day terms.
14.
PROVISIONS
Current
Provision for annual leave
Provision for long service leave
77,924
87,097
165,021
251,248
78,000
329,248
94,090
49,474
143,564
86,268
17,338
103,606
42
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
15.
CONVERTIBLE NOTES
Face value
Opening Balance
Issue costs
Interest expense
- 7,300,000 options issued
- Consultancy costs settled in shares
-
- Cost of unwound during the period
- Repayment of 2017 interest and notes
- 2018 notes issued
-
Interest expense
- Cost of unwound during the period
- Convertible note converted
Balance
Deed
2019
$
2018
$
-
670,288
(480,590)
(44,880)
73,000
59,712
(803,000)
748,000
18,603
396,397
(275,289)
362,241
730,000
-
(86,894)
(44,400)
-
71,582
-
-
-
-
-
670,288
As announced on 13 December 2018, the Company provided an update in relation to the
unsecured 2017 convertible note deed (2017 Deed), which expired on that date.
The Company and Oracle Capital Group Pty Ltd (Oracle) agreed that the Company would repay
the original notes and all accrued interest.
Oracle, a Perth based portfolio management and corporate advisory firm, provided the
Company with a new unsecured note facility of $748,000 (Deed) via the issue of 748,000
unsecured notes (face value of one dollar ($1.00))(Notes). The Company and Oracle agreed and
acknowledged that by entering into the Deed, any and all liabilities, amounts and obligations
which are outstanding or owing by the Company in favour of Oracle and/or its nominees or any
other any other person under the 2017 Deed are deemed to have been repaid, satisfied and
extinguished in full and the Company is released and discharged from all of its liabilities, amounts
and obligations under the 2017 Deed.
Under the terms of the Deed, Oracle and/or its nominees, will also be entitled to 29,920,000
unquoted Company options exercisable at a price that is equal to 150% of the Share price
calculated on the basis of 85% of the VWAP of the Shares on the ASX calculated over the 5
consecutive trading days which immediately precede the date of the Deed.
The 29,920,000 unquoted options were valued at $480,590 based on the following assumptions:
Number of
Options
Fair Value at
Grant Date per
Option
Estimated
Volatility
Life of Option
(years)
Exercise Price
Share Price at
Grant Date
Risk Free
Interest Rate
29,920,000
$0.01606
100%
3.04
$0.02745
$0.021
2.0%
43
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
15.
CONVERTIBLE NOTES (Cont’d)
The final terms of the Notes are set out below:
(a) Maturity Date - 12 months from the date of issue (Repayment Date)
(b) Interest - 10% per annum. Paid on conversion and/or redemption date (as applicable).
(c) Conversion Price – the lower of:
•
•
•
85% of the VWAP of the Shares on the ASX calculated over the 5 consecutive trading
days which immediately precede the date of the Deed; and
85% of the VWAP of the Shares on the ASX calculated over the 5 consecutive trading
days which immediately precede the date of the relevant conversion notice; and
the price of any capital raising completed by the Company from the date of execution
of the Deed up to and including the date of the relevant conversion notice,
(d) Conversion Approval – Notes can only be converted upon receipt of Conversion Approval on
the basis set out above.
(e) Redemption - the Company may redeem all or part of the principal sum of each Note at any
time and at any frequency on or before the Repayment Date by giving to Oracle a redemption
notice. A redemption notice must not be given in respect of a Note the subject of a conversion
notice. A redemption notice must specify not less than 374,000 Notes for redemption (when
aggregated with all redemption notices issued on the same day as that redemption notice).
(f) Conversion prior to Repayment Date – subject to Conversion Approval, the Oracle may convert
all or any of the Notes into Ordinary Shares at any time and at any frequency as at a date prior to
the Repayment Date by giving a conversion notice to the Company.
(g) Conversion on Repayment Date - All outstanding Notes (excluding any Notes in respect of
which a redemption notice has been issued or a conversion notice has been issued) will
automatically convert into Shares on the Repayment Date and the Company will be deemed to
have issued a conversion notice converting all outstanding Notes held by Oracle at the
Repayment Date.
(h) Security - the Notes are unsecured.
(i) Transferability and other restrictions: the Notes will only be transferrable with the Company’s
prior written consent.
On 10 June 2019, a total of 15,043,110 fully paid ordinary shares were issued on the conversion of
notes and accrued interest by note holders. Total face value of notes outstanding at 30 June 2019
is $485,100.
On 23 August 2019, a total of 28,331,099 fully paid ordinary shares were issued on the conversion
of the remaining notes and all accrued interest by note holders.
2017 Deed
On 14 December 2017, the Company announced the completion of a capital raising through the
issue of unsecured convertible notes via a Perth based portfolio management and corporate
advisory firm, Oracle Capital Group Pty Ltd (Oracle) to raise up to $750,000, through the issue of
up to 750,000 convertible notes, each with a face value of one dollar ($1.00). Oracle would also
be entitled to up to 10 options for each convertible note issued, exercisable at $0.06 on or before
31 December 2019. A total of 730,000 convertible notes were issued and 7,300,000 unquoted
options were issued on 8 January 2018.
The 7,300,000 unquoted options were valued at $86,864 based on the following assumptions:
Number of
Options
Fair Value at
Grant Date per
Option
Estimated
Volatility
Life of Option
(years)
Exercise Price
Share Price at
Grant Date
Risk Free
Interest Rate
7,300,000
$0.0119
67.5%
2
$0.06
$0.043
1.86%
44
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
16.
ISSUED CAPITAL
287,862,168 fully paid ordinary shares (2018:
230,366,599) with no par value
Movements in Ordinary Shares
2019
$
2018
$
31,288,827
29,963,658
30 June
2019
Number
30 June
2019
$
30 June
2018
Number
30 June
2018
$
Balance at the beginning of the
year
Issue of shares at $0.0403 each
Issue of shares at $0.0391 each
Issue of shares at $0.04098 each
Issue of shares at $0.05621 each
Issue of shares at $0.04 each
Issue of shares at $.06 each
Issue of shares at $0.054 each
Issue of shares at $0.0183 each
Issue of shares at $0.025 each
Issue of shares at $0.025 each
Issue of shares at $0.0183 each
Issue of shares at $0.03 each
Less: transaction costs
(i)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
230,366,599
29,963,658 186,191,608
27,712,676
-
-
-
-
-
-
-
2,452,459
29,000,000
1,000,000
15,043,110
10,000,000
-
-
-
-
-
-
-
-
44,880
725,000
25,000
275,289
300,000
(45,000)
535,980
1,304,757
1,083,455
3,166,035
3,649,167
6,000,000
28,435,597
-
-
-
-
-
-
21,600
51,016
44,400
177,297
145,967
360,000
1,535,522
-
-
-
-
-
(84,820)
Balance at the end of the year
287,862,168
31,288,827 230,366,599
29,963,658
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Shares issued to a contractor, on 20 July 2017 and 3 November 2017 respectively, in lieu of
services provided.
Shares issued to consultants on 8 January 2018 in lieu of services provided.
Placement shares issued to Acuity Capital on 8 January 2018 under Controlled Placement
Deed.
Shares issued on the conversion of unquoted options on 8 January 2018.
Shares issued to the vendors and JV partner on 19 April 2018 as initial consideration for the
interest in the Kaoko Kobalt project.
Placement shares issued on 2 May 2018.
Shares issued to consultants on 18 December 2018 in lieu of fees due on 2018 note deed.
Placement shares issued on 21 March 2019.
Placement shares issued to a Director on 10 June 2019 (as approved by shareholders at a
general meeting on 6 June 2019).
Shares issued on the part conversion of notes and accrued interest under the 2018 note deed.
(x)
(xi) Gold Valley placement shares issued on 10 June 2019.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in
proportion to the number of shares held and in proportion to the amount paid up on the shares
held.
45
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
16.
ISSUED CAPITAL (Cont’d)
At shareholders meetings each ordinary share is entitled to one vote in proportion to the paid up
amount of the share when a poll is called, otherwise each shareholder has one vote on a show
of hands.
Movements in Options over Ordinary Shares
Exercise Period
Exercise
Price
Number on
issue at 30
June 2018
Issued
during the
year
Exercised/
Expired/
Cancelled
Number on
issue at 30
June 2019
Quoted
On or before 21 August 2018
Unquoted
On or before 22 August 2018
On or before 30 November
2018
On or before 22 August 2019
On or before 22 August 2019
On or before 22 August 2020
On or before 31 December
2019 (i)
On or before 26 November
2020 (ii)
On or before 26 November
2020 (iii)
On or before 31 March 2021
(iv)
On or before 31 March 2021 (v)
On or before 31 December
2021 (vi)
$0.11
18,913,847
-
(18,913,847)
$0.150
$0.200
175,000
5,000,000
(175,000)
(5,000,000)
1,450,000
2,500,000
2,500,000
7,300,000
-
-
-
-
-
-
-
-
6,500,000
2,250,000
- 14,500,000
500,000
-
- 29,920,000
$0.180
$0.144
$0.216
$0.060
$0.060
$0.060
$0.050
$0.050
$0.02745
-
-
-
-
-
-
-
-
-
-
-
-
1,450,000
2,500,000
2,500,000
7,300,000
6,500,000
2,250,000
14,500,000
500,000
29,920,000
Total unquoted options
18,925,000 53,670,000
(5,175,000)
67,420,000
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Issued on 8 January 2018 as part of the issue of the 2017 note deed announced on 14 December
2017 (approved by shareholders on 13 March 2018).
Issued on 27 November 2018 to Directors (approved by shareholders on 23 November 2018).
Issued on 21 January 2019 to employees of the Company
Issued on 21 March 2019 under the terms of a placement announced 18 March 2019.
Issued on 10 June 2019 to a Director under the terms of a placement announced 18 March 2019
(approved by shareholders on 6 June 2019).
Issued on 18 December 2018 as part of the issue of the 2018 note deed announced on 13
December 2018 (approved by shareholders on 6 March 2019).
Unquoted options are issued to directors, employees and consultants. The unquoted options may
be subject to performance criteria, and are issued to directors, employees and consultants to
increase goal congruence between executives, directors and shareholders. Unquoted options
carry no dividend or voting rights.
46
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
16.
ISSUED CAPITAL (Cont’d)
Capital risk management
The Board controls the capital of the Group in order to provide the shareholders with adequate
returns and ensure that the Group can fund its operations and continue as a going concern. The
Group’s capital includes ordinary share capital. There are no externally imposed capital
requirements.
The working capital position of the Group at 30 June 2019 and 30 June 2018 are as follows:
Par
Cash and cash equivalents
Trade and other receivables
Financial assets
Current liabilities
Working capital position
17. OPTION RESERVE
Opening balance
Equity based payments
Transfers to accumulated losses
Closing balance
2019
$
836,709
71,028
155,058
(670,826)
391,969
2018
$
1,474,219
221,711
245,456
(1,103,142)
838,244
305,198
528,606
(56,177)
777,627
218,304
86,894
-
305,198
This reserve is used to record the value of equity benefits provided to employees and directors
as part of their remuneration and for the value of equity benefits provided to vendors in respect
of asset purchases.
18. ACCUMULATED LOSSES
Opening balance
Net loss attributable to members
Transfers from option reserve
Closing balance
19.
FINANCIAL RISK MANAGEMENT
(8,855,399)
(1,803,888)
56,177
(10,603,110)
(7,383,010)
(1,472,389)
-
(8,855,399)
The Group’s principal financial instruments comprise receivables, payables, held-for-trading
investments, cash and short-term deposits.
The Board of Directors has overall responsibility for the oversight and management of the Group’s
exposure to a variety of financial risks (including fair value interest rate risk, credit risk, liquidity risk
and cash flow interest rate risk).
The Group’s overall risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the financial performance of the Group.
Interest rate risks
The Group’s exposure to market interest rates relates to cash deposits held at variable rates. The
Board constantly analyses its interest rate exposure. Within this analysis consideration is given to
potential renewals of existing positions.
47
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
19.
FINANCIAL RISK MANAGEMENT (Cont’d)
Credit risk
The maximum exposure to credit risk at balance date is the carrying amount (net of provision of
doubtful debts) of those assets as disclosed in the Statement of Financial Position and notes to the
financial statements. The Consolidated group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value of transactions concluded
is spread amongst approved counterparties.
Credit risk related to balances with banks and other financial institutions is managed by the
board. The board’s policy requires that surplus funds are only invested with counterparties with
a Standard & Poor’s rating of at least A+. All of the Group’s surplus funds are invested with AA
and A+ Rated financial institutions, the amount is $836,709 (2018: $1,424,219).
Liquidity risk
The responsibility for liquidity risk management rests with the Board of Directors. The Consolidated
group manages liquidity risk by maintaining sufficient cash or credit facilities to meet the
operating requirements of the business and investing excess funds in highly liquid short term
investments.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the Group’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
Maturity profile of financial instruments
The following tables detail the Group’s exposure to interest rate risk as at 30 June 2019 and 30 June
2018:
30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets – held for trading
Floating
Interest
Rate
$
836,509
-
-
836,509
Fixed
Interest
maturing
in 1 year
or less
$
-
26,929
-
26,929
Non-
interest
bearing
2019
Total
$
$
200
71,028
155,058
226,286
836,709
97,957
155,058
1,089,724
Weighted average effective interest rate
0.77%
Financial Liabilities
Trade and other payables
-
-
-
-
165,019
165,019
165.019
165,019
48
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
19.
FINANCIAL RISK MANAGEMENT (Cont’d)
30 June 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets – held for trading
Floating
Interest
Rate
$
1,474,019
-
-
1,474,019
Fixed
Interest
maturing
in 1 year
or less
$
-
26,306
-
26,306
Non-
interest
bearing
2018
Total
$
$
200
221,711
245,456
467,367
1,474,219
248,017
245,456
1,967,692
Weighted average effective interest rate
0.69%
Financial Liabilities
Trade and other payables
Net Fair Values
-
-
-
-
329,249
329,249
329,249
329,249
The carrying value and net fair values of financial assets and liabilities at balance date are:
Financial assets
Cash and deposits
Receivables
Investment held for trading
Financial liabilities
Convertible notes
Payables
2019
2018
Carrying
Amount
$
836,709
97,957
155,058
1,089,724
362,241
165,019
527,260
Net fair
Value
$
836,709
97,957
155,058
1,089,724
362,241
165,019
527,260
Carrying
Amount
$
1,474,219
248,017
245,456
1,967,692
670,288
329,249
999,537
Net fair
Value
$
1,474,219
248,017
245,456
1,967,692
670,288
329,249
999,537
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. All financial instruments measured at fair value are
level one, meaning fair value is determined from quoted prices in active markets for identical
assets.
Sensitivity Analysis
Interest Rate Risk
The Company has performed sensitivity analysis relating to its exposure to interest rate risk at
balance date. This sensitivity analysis demonstrates the effect on the current year results and
equity which could result from a change in these risks.
Change in loss
Increase in interest rate by 100 basis points
•
• Decrease in interest rate by 100 basis points
Change in equity
Increase in interest rate by 100 basis points
•
• Decrease in interest rate by 100 basis points
2019
$
8,364
(8,364)
8,364
(8,364)
2018
$
14,740
(14,740)
14,740
(14,740)
49
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
220.
EARNINGS PER SHARE
a)
Reconciliation of earnings to profit or loss:
Loss for the year
Loss used to calculate basic and diluted EPS
(1,804,071)
(1,804,071)
(1,472,564)
(1,472,564)
b)
Basic and diluted weighted average number of
ordinary shares outstanding during the year used
in calculating dilutive EPS
21.
CASH FLOW INFORMATION
Reconciliation of cash flows from operating
activities with profit/(loss) after income tax
Profit/(Loss) after income tax
Non-operating cash flows in loss for the year:
Depreciation
Net (Gain)/ Loss on sale of shares
Shares acquired on sale of tenement
Finance costs on convertible note
Net Profit on sale of exploration assets
Employee & Consultant equity settled
transactions
Fair value adjustment to investments
Exploration write-off
Changes in assets and liabilities:
Decrease/(increase) in trade receivables and
prepayments
Increase/(decrease) in trade payables, accruals
and employee entitlements
Decrease/(increase) in exploration
2019
No. of Shares
2018
No. of Shares
241,943,079
197,076,315
2019
$
2018
$
(1,804,071)
(1,472,564)
8,741
-
-
547,712
-
48,016
98,557
520,505
6,171
(5,471)
(100,000)
71,582
(20,000)
-
5,399
641,517
252,820
(104,811)
(130,871)
(1,110,937)
150,949
(942,178)
Cash outflow from operations
(1,689,528)
(1,769,406)
Financing Activity Information
30
June 2018
Cashflows
Options
issued
Conversion
Finance
cost
accrued
30
June 2019
Convertible Notes
(670,288)
55,000
525,470
275,289
(547,712)
(362,241)
50
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
22. COMMITMENTS
In order to maintain rights of tenure to mining tenements, the Group would have the following
discretionary exploration expenditure requirements up until expiry of leases. These obligations,
which are subject to renegotiation upon expiry of the leases, are not provided for in the financial
statements and are payable:
No longer than one year
Longer than one year, but not longer than five years
Longer than five years
2019
$
303,066
252,168
-
555,234
2018
$
662,003
1,446,684
715,568
2,824,255
The Group currently has commitments in excess of cash, however the Board believes it will be able
to raise the additional funds to satisfy the commitments for the future.
If the Group decides to relinquish certain leases and/or does not meet these obligations, assets
recognised in the statement of financial position may require review to determine the
appropriateness of carrying values. The sale, transfer or farm-out of exploration rights to third
parties will reduce or extinguish these obligations.
23. CONTROLLED ENTITIES
Parent Entity
Cazaly Resources Limited
Controlled Entities
Cazaly Iron Pty Ltd
Sammy Resources Pty Ltd
Cazroy Pty Ltd
Baker Fe Pty Ltd
Baldock Fe Pty Ltd
Lockett Fe Pty Ltd
Hase Fe Pty Ltd
Caz Yilgarn Pty Ltd
Discovery Minerals Pty Ltd
Yamarna West Pty Ltd
Kunene North Pty Ltd
24. OPERATING SEGMENTS
Country of Incorporation Percentage Owned
2018
2019
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
The Group has identified its operating segments based on the internal reports that are reviewed
and used by the Board of Directors in assessing performance and determining the allocation of
resources.
The Group is managed primarily on the basis of its exploration and corporate activities. Operating
segments are therefore determined on the same basis.
Exploration
Segment assets, including acquisition cost of exploration licenses, all expenses related to the
tenements and profit on sale of tenements are reported on in this segment.
Segment assets
Where an asset is used across multiple segments, the asset is allocated to the segment that
receives the majority of economic value from the asset. In the majority of instances, segment
assets are clearly identifiable on the basis of their nature and physical location.
51
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
24.
OPERATING SEGMENTS (Cont’d)
Unless indicated otherwise in the segment assets note, deferred tax assets and intangible assets
have not been allocated to operating segments.
Segment liabilities
Liabilities are allocated to segments where there is direct nexus between the incurrence of the
liability and the operations of the segment. Borrowings and tax liabilities are generally considered
to relate to the Group as a whole and are not allocated. Segment liabilities include trade and
other payables.
Unallocated items
Non-recurring items of revenue or expenses are not allocated to operating segments as they are
not considered part of the core operations of any segment.
2019
Exploration
$
Unallocated
$
Total
$
Revenue
Interest received
Other
Total segment revenue
Segment net operating profit
(loss) before tax
Depreciation
Impairment of exploration
assets
Share based payments
Segment assets
Exploration expenditure
Non current assets held for sale
Property, plant & equipment
Segment liabilities
-
120,000
120,000
3,329
212,504
217,833
3,329
334,504
337,833
(400,505)
-
(1,403,566)
8,741
(1,804,071)
8,741
520,505
-
21,003,691
4,128,235
16,875,456
-
47,195
-
48,016
1,115,144
-
-
25,419
623,629
520,505
48,016
22,118,835
4,128,235
16,875,456
25,419
670,826
2018
Exploration
$
Unallocated
$
Total
$
Revenue
Interest received
Other
Total segment revenue
Segment net operating profit
(loss) before tax
Depreciation
Impairment of exploration
assets
Share based payments
Segment assets
Exploration expenditure
Non current assets held for sale
Property, plant and equipment
Segment liabilities
-
51,080
51,080
4,404
63,381
67,785
4,404
114,461
118,865
(590,436)
-
(882,128)
6,171
(1,472,564)
6,171
641,517
-
20,413,259
19,685,931
727,328
-
26,272
-
-
2,087,189
-
-
18,337
1,076,870
641,517
-
22,500,448
19,685,931
727,328
18,337
1,103,142
52
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
25.
PARENT ENTITY DISCLOSURES
(a) Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves:
Equity settled employee benefits
Retained profits
Total Equity
(b) Statement of Profit or Loss and Other Comprehensive
Income
Total profit/ (loss)
Total comprehensive income
Loans to Controlled Entities
2019
$
2018
$
905,823
2,666,335
1,794,040
2,709,585
3,572,158
4,503,625
670,802
1,103,118
-
670,802
1,103,118
31,288,826
29,963,657
777,627
(29,165,097)
305,198
(26,868,348)
2,901,356
3,400,507
(2,296,749)
(2,530,595)
(2,296,749)
(2,530,585)
Loans are provided by Cazaly (‘the Parent’) to its controlled entities for their respective operating
activities. Amounts receivable from controlled entities are non-interest bearing with no fixed term
of repayment. The eventual recovery of the loan will be dependent upon the successful
commercial application of these projects or the sale to third parties.
26.
EVENTS SUBSEQUENT TO REPORTING DATE
On 21 August 2019, the Company announced that, following the receipt of an unsolicited superior
proposal from Mineral Resources to purchase Parker Range, it had terminated the exclusivity
period with Gold Valley under its conditional agreement with Gold Valley originally announced
on 11 June 2019.
On 23 August 2019, a total of 28,331,099 fully paid ordinary shares were issued on the conversion
of the remaining notes and all accrued interest by note holders.
As announced on 30 August 2019, the sale of Parker Range to Mineral Resources was completed
and the Company received the cash consideration of $20 million (ex GST). The Company also
paid the break fee of $250,000 due to Gold Valley under the terms of their agreement.
On 10 September 2019, 27,720,000 unquoted options (exercisable at $0.02745 on or before 31
December 2021) were converted to shares in the Company and proceeds of $760,914 were
received.
On 17 September 2019, a further 2,200,000 unquoted Options (exercisable at $0.02745 on or before
31 December 2021) were converted to shares in the Company and proceeds of $60,390 were
received.
53
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
26.
EVENTS SUBSEQUENT TO REPORTING DATE (Cont’d)
On 20 September 2019, the Company completed the sale of the Mt Venn project to Woomera
Mining Limited.
Apart from the above, the Directors are not aware of any matters or circumstances at the date
of the report, other than those referred to in this report or the financial statements or notes thereto,
that has significantly affected or may significantly affect the operations, the results of operations
or the state of affairs of the Group in subsequent financial years.
27. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Contingent Liabilities
A break fee of $250,000 was potentially due to be paid, at 30 June 2019, to Gold Valley under the
terms of their agreement with the Company for the sale of Parker Range. It was subsequently paid
on 3 September 2019 due to the termination of the Gold Valley agreement.
As announced on 26 March 2018, the Company acquired an option to earn the rights to a 95%
interest in the Kaoko Kobalt Project (‘Kaoko Project’) in Namibia. The following contingent liabilities
remain at 30 June 2019:
Under the KDN JV:
Kunene North Pty Ltd can earn further equity in Philco and the Kaoko Project as follows:
i)
Spending N$2 million (~A$180,000) by 18 November 2020 to earn a further 19% in Philco (95%
total)
ii) KDN JV’s partner’s remaining 5% free carried to a definitive feasibility study and to be NEEEF
compliant (governmental draft “New Equitable Economic Empowerment Framework”)
Under the Kunene Purchase Agreement:
The Company acquired 100% of the issued capital of Kunene, and therefore its rights under the
KDN JV, and has the following commitments outstanding:
iv)
Issue 10.5 million CAZ fully paid shares upon the delineation of a JORC compliant mineral
resource containing at least 10,000t of contained cobalt (or other metal equivalent)
v) Pay A$1 million (or issuing fully paid CAZ shares to that amount) upon a formal Decision to
Mine
Contingent Asset
As announced on 30 August 2019, the sale of Parker Range to Mineral Resources was completed
and the Company received the cash consideration of $20 million (ex GST). A royalty is also due
at the rate of A$0.50 for every dry metric tonne of iron ore extracted and removed from the area
of the Project after the first 10,000,000 dry metric tonnes.
54
NOTES TO THE FINANCIAL STATEMENTS
Cazaly Resources Limited Annual Report 2019
28.
SHARE BASED PAYMENTS
The following table illustrates the number and weighted average exercise prices of and
movements in all options on issue during the year:
2019
2018
Number of
Options
Weighted
Ave Exercise
Price $
Number of
Options
Weighted
Ave Exercise
Price $
Balance at beginning of reporting
period
Expired during the year
Exercised during the year
Issued during the year
Balance at end of reporting period
Exercisable at end of reporting
period
37,838,847
0.124
36,513,015
0.123
(24,088,847)
-
53,670,000
67,420,000
67,420,000
0.129
-
0.039
0.055
(5,974,168)
-
7,300,000
37,838,847
37,838,847
0.040
-
0.060
0.124
The options outstanding at 30 June 2019 had a weighted average remaining life of 1.89 years (2018 – 0.68
years). The weighted average fair value of the options outstanding at 30 June 2019 was $0.011 (2018 -
$0.008).
Refer Note 15 for details of options issued during the year, which were in connection with the
convertible notes issued.
55
DIRECTORS’ DECLARATION
Cazaly Resources Limited Annual Report 2019
In accordance with a resolution of the directors of Cazaly Resources Limited, the directors of the
Company declare that:
1.
the financial statements and notes, as set out, are in accordance with the Corporations
Act 2001 and:
a.
b.
comply with Australian Accounting Standards, which, as stated in accounting
policy Note 1 to the financial statements, constitutes compliance with International
Financial Reporting Standards (IFRS); 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 consolidated group;
2.
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be
able to pay its debts as and when they become due and payable; and
the directors have been given the declarations required by s 295A of the Corporations Act
2001 from the Chief Executive Officer and Chief Financial Officer.
On behalf of the Directors
Nathan McMahon
Managing Director
Perth,
24 September 2019
56
Independent Auditor's Report
To the Members of Cazaly Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cazaly Resources Limited (“the Company”) and
its subsidiaries (“the Consolidated Entity”), 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 the directors’
declaration.
In our opinion:
a.
the accompanying financial report of the Consolidated Entity is in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Consolidated Entity’s financial position as
at 30 June 2019 and of its financial performance for the year then ended;
and
(ii)
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement. 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 Consolidated Entity 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.
Independent Auditor’s Report
To the Members of Cazaly Resources Limited (Continued)
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.
Key audit matter
How our audit addressed the key audit matter
Exploration and Evaluation Assets - $4,128,235
Our procedures included, amongst others:
(Refer to Note 12)
Exploration and evaluation is a key audit matter due
to:
− The significance of the balance to the
Consolidated Entity’s consolidated financial
position.
− The level of judgement required in evaluating
management’s application of the requirements of
AASB 6 Exploration for and Evaluation of
Mineral Resources. AASB 6 is an industry
specific accounting standard requiring the
application of significant judgements, estimates
and industry knowledge. This includes specific
requirements for expenditure to be capitalised as
an asset and subsequent requirements which
must be complied with for capitalised
expenditure to continue to be carried as an
asset.
The assessment of impairment of exploration and
evaluation expenditure being inherently difficult.
− Assessing management’s determination of its
areas of interest for consistency with the
definition in AASB 6. This involved analysing the
tenements in which the consolidated entity holds
an interest and the exploration programmes
planned for those tenements.
− For each area of interest, we assessed the
Consolidated Entity’s rights to tenure by
corroborating to government registries and
evaluating agreements in place with other parties
as applicable;
− We tested the additions to capitalised
expenditure for the year by evaluating a sample
of recorded expenditure for consistency to
underlying records, the capitalisation
requirements of the Consolidated Entity’s
accounting policy and the requirements of
AASB 6;
− We considered the activities in each area of
interest to date and assessed the planned future
activities for each area of interest by evaluating
budgets for each area of interest.
− We assessed each area of interest for one or
more of the following circumstances that may
indicate impairment of the capitalised
expenditure:
−
the licenses for the right to explore expiring in
the near future or are not expected to be
renewed;
− substantive expenditure for further
exploration in the specific area is neither
budgeted or planned
Independent Auditor’s Report
To the Members of Cazaly Resources Limited (Continued)
Key audit matter
How our audit addressed the key audit matter
− decision or intent by the Consolidated Entity
to discontinue activities in the specific area of
interest due to lack of commercially viable
quantities of resources; and
− data indicating that, although a development
in the specific area is likely to proceed, the
carrying amount of the exploration asset is
unlikely to be recovered in full from
successful development or sale.
− We assessed the appropriateness of the related
disclosures in note 12 to the financial
statements.
Non-current assets held for sale - $16,875,456
Our procedures included, amongst others:
(Refer to Note 9)
− Assessing the terms and conditions within the
During the year the Company entered into
agreements to sell its Parker Range and Mt Venn
projects.
As a result the exploration assets with respect to
these projects were classified as non-current assets
held for sale in accordance with the requirements of
sale agreements;
− Assessing whether the assets were measured at
the lower of the carrying amount and fair value
less costs to sell with reference to the terms of
the agreements;
− Verifying the receipt of consideration received
AASB 5 Non-current assets held for sale and
subsequent to year end; and
discontinued operations (“AASB 5”).
As disclosed in note 26 the sales were completed
subsequent to year end.
− Assessing the appropriateness of the disclosure
in notes 9 and 26 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Consolidated Entity’s annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Independent Auditor’s Report
To the Members of Cazaly Resources Limited (Continued)
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 Note 1, the
directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability 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 Consolidated Entity or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
−
−
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Consolidated Entity’s internal control.
−
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
−
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Consolidated Entity’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to
continue as a going concern.
Independent Auditor’s Report
To the Members of Cazaly Resources Limited (Continued)
−
−
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Consolidated Entity to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2019.
The directors of the Company are responsible for the preparation and presentation of the remuneration report
in accordance with s 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.
Auditor’s Opinion
In our opinion, the Remuneration Report of the Company, for the year ended 30 June 2019, complies with
section 300A of the Corporations Act 2001.
BENTLEYS
Chartered Accountants
DOUG BELL CA
Partner
Dated at Perth this 24th day of September 2019
ADDITIONAL SHAREHOLDER INFORMATION
Cazaly Resources Limited Annual Report 2019
Additional information required by Australian Securities Exchange Limited and not shown
elsewhere in this Annual Report is as follows. The information is provided as at 16 September
2019.
DETAILS OF HOLDERS OF EQUITY SECURITIES
ORDINARY SHAREHOLDERS
There are 343,913,267 fully paid ordinary shares on issue, held by 2,369 individual shareholders.
Each member entitled to vote may vote in person or by proxy or by attorney and on a show of
hands every person who is a member or a representative or a proxy of a member shall have one
vote and on a poll every member present in person or by proxy or attorney or other authorised
representative shall have one vote for each share held.
TWENTY LARGEST SHAREHOLDERS (AS AT 16 SEPTEMBER 2019)
Ordinary Shareholders
Kingsreef Pty Ltd (NB & DL Family A/c)
BT Portfolio Services Ltd (Warrell Holdings S/F A/C)
Gold Valley Iron Pty Ltd
Widerange Corporation Pty Ltd
Brispot Nominees Pty Ltd (House Head Nominee A/c)
CS Fourth Nominees Pty Ltd (HSBC Cust Nom AU Ltd 11 A/c)
Mr Anthony Robert Ramage
Mr Clive Bruce Jones
CMC Markets Stockbroking Nominees Pty Ltd (Accum A/c)
Acuity Capital Investment Management Pty Ltd
Kingsreef Pty Ltd
New Page Investments Limited
Mr Nathan McMahon
Mr Michael Nitsche
UBS Nominees Pty Ltd
Buckland Capital Pty Ltd (D Millar S/F A/c)
Mr C W Chalwell & Mrs J R Chalwell (Chalwell pension Fund A/c)
A22 Pty Ltd
CS Third Nominees Pty Ltd (HSBC Cust Nom AU Ltd 13 A/c)
Mrs Victoria Helen Gardiner
Fully Paid Ordinary
Number
Percentage
14,645,087
10,000,000
10,000,000
8,333,647
7,712,775
7,157,455
7,019,829
6,646,256
5,588,402
5,000,000
4,897,299
4,828,517
4,823,756
4,450,000
4,386,100
4,000,000
4,000,000
4,000,000
3,916,250
3,750,000
4.3%
2.9%
2.9%
2.4%
2.2%
2.1%
2.0%
1.9%
1.6%
1.5%
1.4%
1.4%
1.4%
1.3%
1.3%
1.2%
1.2%
1.2%
1.1%
1.1%
125,155,373
36.4%
VOTING RIGHTS
Subject to any rights or restrictions for the time being attached to any class or classes (at present
there are none) at general meetings of shareholders or classes of shareholders:
(a) each shareholder entitled to vote, may vote in person or by proxy, attorney or
representative;
(b) on a show of hands, every person present who is a shareholder or a proxy, attorney or
representative of a shareholder has one vote; and
62
ADDITIONAL SHAREHOLDER INFORMATION
Cazaly Resources Limited Annual Report 2019
(c) on a poll, every person present who is a shareholder or a proxy, attorney or representative
of a shareholder shall, in respect of each fully paid share held, or in respect of which he/she
has appointed a proxy, attorney or representative, have one vote for the share, but in
respect of partly paid shares shall have a fraction of a vote equivalent to the proportion
which the amount paid up bears to the total issue price for the share.
HOLDERS OF NON-MARKETABLE PARCELS
There are 1,260 shareholders who hold less than a marketable parcel of shares.
STOCK EXCHANGE INFORMATION
DISTRIBUTION OF SHARE HOLDERS (AS AT 16 SEPTEMBER 2019)
1 to
1,001 to
5,001 to
1,000
5,000
10,000
10,001 to 100,000
100,001 and over
SUBSTANTIAL SHAREHOLDERS
Ordinary
Shares
135,530
1,747,356
2,765,638
27,972,318
311,292,425
343,913,267
As at report date, the following shareholders are recorded as Substantial Shareholders:
Substantial Shareholder
Ordinary Shares held
% Held
Nathan McMahon & associated entities
29,366,142
8.54%
SHARE BUY-BACKS
There is no current on-market buy-back scheme.
OTHER INFORMATION
Cazaly Resources Limited, incorporated and domiciled in Australia, is a public listed Company
limited by Shares.
63
ADDITIONAL SHAREHOLDER INFORMATION
Cazaly Resources Limited Annual Report 2019
INTEREST IN MINING TENEMENTS AS AT 16 SEPTEMBER 2019
TID
PROJECT
ENTITY
% INT
TID
PROJECT
ENTITY
% INT
Not
Managed
E31/1019
E31/1020
M31/0427
M47/1450
M80/0247
E80/4808
CAROSUE
CAROSUE
CAROSUE
HAMERSLEY
MT ANGELO
MCKENZIE SPRINGS
CAZR
CAZR
CAZR
LOFE
CAZR
SAMR
10
10
10
30
20
100
Managed
E69/3692 *
E38/3111
E38/3150
E09/2346 *
E38/3425 *
E38/3426 *
Czech Rep *
Czech Rep *
Namibia
Namibia *
Namibia *
* – application
ZANTHUS
MOUNT VENN
MOUNT VENN
BURDIBUBBA
BROWN WELL
BROWN WELL
Horní Věžnice
Brzkov II
EPL 6667
EPL 7096
EPL 7097
HASE
YAMW
YAMW
SAMR
SAMR
SAMR
Discovery
Discovery
Kunene
Kunene
Kunene
100
100
100
100
100
100
80
80
76
100
100
64