A N N U A L R E P O R T 2 0 2 0
FULLY FUNDED FOR HIGH IMPACT
EXPLORATION PROGRAMS
C O R P O R A T E D I R E C T O R Y
DIRECTORS
Fletcher Quinn (Non-Executive Chairman)
Kris Knauer (Managing Director)
Scott Funston (Executive Director)
COMPANY SECRETARY
Scott Funston
REGISTERED OFFICE
Level 1
1205 Hay Street
WEST PERTH WA 6005
Telephone: (08) 6380 9235
AUDITOR
HLB Mann Judd (WA Partnership)
Level 4, 130 Stirling Street
PERTH WA 6000
SHARE REGISTRY
Automic Pty Ltd
Level 2
267 St Georges Terrace
PERTH WA 6000
Telephone: 1300 288 664 (within Australia)
Telephone: +61 (0) 2 9698 5414 (International)
SECURITIES EXCHANGE LISTING
Australian Securities Exchange
ASX Code: CEL
WEBSITE
www.challengerex.com
2
C O N T E N T S
Chairmans’ Address
Sustainability Report
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 Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholders’ Information
2
4
6
48
50
51
52
53
54
77
78
82
Challenger Exploration:
Argentina and Ecuador Gold/Copper Projects
2
11
C H A I R M A N S ’ A D D R E S S
Dear Shareholder,
The past year has been a significant year for your company. Since re-listing on 4 July 2019, we have seen the company’s
share price grow from $0.03 to a high of $0.28 on 1 June 2020.
A total of $26.5m was raised through a series of well-supported equity issues.
Our land position increased significantly in Ecuador and the initial 25% was earnt in the Hualilan Gold Project in Argentina.
On behalf of shareholders, I am grateful for the considerable efforts made by our management, employees and
consultants in response to the challenges that were overcome during the year.
They have built a quality and cohesive team and in turn are laying robust foundations in rapidly progressing the projects.
The COVID-19 pandemic created significant challenges. The health and safety of our employees, consultants and the
communities in which we operate is always our first priority. As a result, we implemented measures to protect our people
and maximise our ability to continue operating in line with all government recommendations. This has resulted in no
reported cases of COVID-19 up to the date of this report.
At our Argentinian Hualilan Gold Project we achieved many significant outcomes;
•
•
•
•
•
•
Discovery of a large scale intrusion-hosted gold system underlying the historical high-grade mineralisation;
Extensions of mineralisation, with a strike length now exceeding 2 km;
Extension of the historical high-grade mineralisation by 100 meters to 400 meters at Cerro Norte;
Numerous significant high-grade gold intersections from drilling;
A committed 45,000 metre drilling program; and
Advancement towards an initial JORC Resource.
With the many positive elements identified from the recent exploration initiatives, the Company has embarked on
redefining the scope of the Hualilan Gold Project to better understand the best options for development.
The Company remains excited at the potential scale of the Hualilan Gold Project and notes the discovery of two distinct
styles of mineralisation which both remain open in all directions.
Further, in Ecuador the use of the historical exploration has significantly reduced the lead time for a discovery at the El
Guayabo Gold Copper Project .
Advances at El Guayabo include;
•
•
•
•
•
An increase in tenement position by 830% in January 2020;
Further increases in tenement position to 3,545 hectares (35.5 square kilometres) in the first quarter of 2020;
Identification of broad zones and intrusive breccia hosted mineralisation;
56 holes ( > 21,000 metres) of historical drilling identified for re-assay and re-logging, resulting in a confirmed bulk
gold discovery (the company completed 4380 metres for re-assay, with excellent results); and
Detailed surface mapping, rock chip and regional soil sampling.
As we continue into our next twelve months, I believe Challenger Exploration is extremely well positioned for further
expansion and significant growth of our resource base during a period of a strong gold price.
I take this opportunity to thank all of our stakeholders for your support over the past year and I look forward to updating
you as we continue towards our goal of continued growth.
Yours Sincerely
Fletcher Quinn
Chairman
2
59 holes totalling 6,487 metres
completed with samples from 42 holes
submitted for assay during 2020
Five rigs drilling on site now
2
3
3
S U S T A I N A B I L I T Y R E P O R T
SUSTAINABILITY
Challenger is committed to ensuring long term sustainability to the host countries, states and local communities in which
it operates and firmly believes that the health and safety of those communities and its Company employees are of the
highest priority.
Employ local contractors and employees
Food Kits to 94 Families in COVID-19 affected areas
Initiation of health and wellbeing programs at all projects
Zero Reported COVID-19 for employees and contractors
Donation of medical supplies and protection equipment to local community
Challenger continues to drive and provide meaningful employment opportunities for the local communities in which
we operate. Wherever possible, depending on experience and skill requirements, people are employed from the local
towns. Examples have included;
•
•
•
•
•
•
Local drilling contractors;
Employment of local people, full-time and casual;
Cleaning and laundry service from the Community Women’s Association;
Training the Community Women’s Association to provide food service to the project;
Co-ordinating environmental training for students; and
Co-ordinating with medical dispensary for community health issues training.
The initiation of the Health Training at the Hualilan Project is provided in collaboration of the Ministry of Mining Development
in San Juan Argentina. Sustainable Mining and Health for all guarantees a health system with health strategies focused
on prevention.
4
Challenger provides a sanitary truck available to the San Juan province to bring health to all corners of San Juan. The
truck guarantees and brings health care to the entire province, providing 3-day weekly care according to the needs of
each location visited. The Ministry of Mining has the responsibility for the maintenance, insurance and logistics of the
truck provided by Challenger.
The Sanitary Truck is equipped with:
-
-
-
-
A rear Sector, with provision of water and energy, suitable for the installation of a laboratory;
A central Sector, with equipment for the use of health personnel;
A front sector, with a large storage place for the deposit of supplies and a complete sound equipment for
conferences; and
A sector tent for 70 people, with the necessary elements on board the truck for its assembly and disassembly.
In addition, the trailer is equipped with a tank with a capacity for 400 litres of water, a roof suitable for solar panels, two
air conditioning units and its own generator set. The 19 municipalities will be responsible for lodging and feeding the
medical and technical team in attendance.
During the COVID-19 pandemic, Challenger has donated 300 surgical masks, 100 long-sleeved robes, 40 biosecurity
suits, 40 disposable glove boxes, 10 nylon saturates and 10 gallons of quaternary ammonium.
4
5
D I R E C T O R S ’ R E P O R T
The Directors submit the financial report of the Group, consisting of Challenger Exploration Limited (“the Company”) and
the entities it controlled during the period, for the financial year ended 30 June 2020.
DIRECTORS
The names and details of the Company’s Directors who held office during the year and until the date of this report are as
follows. Directors were in office for the entire year unless otherwise stated.
Names, qualifications, experience and special responsibilities
Fletcher Quinn
Non-Executive Chairman. Appointed 4 July 2019.
Mr Quinn has over 35 years’ experience in venture capital, corporate finance and investment banking. This includes
extensive experience with both listed and unlisted companies, including public company development, management and
governance. Mr Quinn was the founding Chairman for ASX entities Citadel Resource Group Limited and Sirocco Resources.
Kris Knauer BSc Appl Geol (Hons)
Managing Director. Appointed 4 July 2019.
Mr Knauer started his career as an exploration geologist before moving into investment banking, initially as a mining analyst.
He is an experienced listed company CEO. He led the listing of a package of copper/gold assets in Saudi Arabia to create
Citadel Resource Group Limited, becoming the Managing Director for the first 18 months. Citadel completed a DFS on the
Jabal Sayid copper project in Saudi Arabia before being taken over for $1 billion. In the past 5 years, Mr Knauer was also a
Director of Medibio Limited (ASX: MEB), resigning as a Director on 13 October 2017.
Scott Funston B.Bus CA ACIS
Executive Director and Company Secretary. Appointed 4 July 2019.
Mr Funston is a qualified Chartered Accountant and Company Secretary with nearly 20 years’ experience in the mining
industry and accounting profession. His expertise is financial management, regulatory compliance and corporate advice.
Mr Funston possesses a strong knowledge of the Australian Securities Exchange requirements. Scott has assisted several
resources companies operating throughout Australia, South America, Asia, USA and Canada with financial accounting, stock
exchange compliance and regulatory activities. Mr Funston has performed roles as an executive director, non-executive
director, chief financial officer and company secretary for numerous ASX listed companies.
Michael Fry, B.Com, F.FINSIA
Non-Executive Chairman. Resigned 4 July 2019.
Mr Michael Fry holds a Bachelor of Commerce degree from the University of Western Australia, is a Fellow of Financial
Services Institute of Australasia and is a past member of the Australian Securities Exchange (“ASX”). Michael has extensive
experience in capital markets and corporate treasury management specialising in the identification of commodity, currency
and interest rate risk and the implementation of risk management strategies.
Robert Willes, BA (Hons)
Executive Director. Resigned 4 July 2019.
Mr Robert Willes has an honours degree in Geography from Durham University in the UK. He has completed executive
education programs at Harvard Business School in the USA and Cambridge University in the UK. Robert has held several
senior roles in BP including General Manager of the North West Shelf LNG Project, overall accountability for BP’s interests in
the Browse LNG and Greater Gorgon LNG Projects, and business development activities in the Asia Pacific. More recently,
Robert was Chief Executive Officer of Eureka Energy Limited. He is a graduate of the Australian Institute of Company
Directors, a member of the Association of International Petroleum Negotiators, and was formerly a director of the Australian
Petroleum Production and Exploration Association (APPEA). Robert is a Non-Executive Director of Buru Energy Limited.
Clinton Carey, B.Com (Fin., Econ.)
Non-Executive Director. Resigned 4 July 2019.
Mr Carey has over 25 years of management and Director level experience in listed companies specializing in mining, oil and
gas and technology. Mr Carey was a director of Roper River Resources Limited when it completed a reverse take over of
Webjet Limited. He has worked for mining companies in Russia, Brazil, Canada, Australia and England.
6
Directorships of other listed companies in the last 3 years are as follows:
Name
Fletcher Quinn
Kris Knauer
Scott Funston
Michael Fry
Robert Willes
Clinton Carey
Company
None
Medibio Limited
None
Brookside Energy Limited
Norwest Energy NL
Technology Metals Australia Limited
Buru Energy Limited
Period of Directorship
N/A
2 July 2014 to 13 October 2017
N/A
20 April 2004 to date
8 June 2009 to date
20 May 2016 to date
2 July 2014 to date
Red Sky Energy Limited
12 January 2015 to date
FORMER COMPANY SECRETARY
Robert Lees, B.Bus (UTS), Grad. Dip. DP (UTS), CA, AGIA. Appointed 27 September 2018, resigned 4 July 2019.
Mr Lees has over 35 years of experience in the accounting profession and 17 years of experience as a Company Secretary
for ASX listed companies.
MEETINGS OF DIRECTORS
The Directors held 5 meetings during the financial year, and all meetings were attended by Mr Quinn, Mr Knauer and Mr
Funston. Mr Fry, Mr Willes and Mr Carey were not eligible to attend any meetings during the financial year.
CORPORATE INFORMATION
Challenger Exploration Limited is a public company listed on the ASX (Code: CEL) and is incorporated and domiciled
in Australia. Challenger Exploration Limited and the entities it controlled during the period are collectively referred to as
Challenger Exploration, Challenger, or the Group, as the context requires.
NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
Challenger Exploration is a gold and copper exploration company. There have been no other significant changes in the
nature of those activities during the year.
6
7
D I R E C T O R S ’ R E P O R T
Corporate Highlights
•
Successful Reinstatement to Official Quotation on ASX with the completion
of the transaction with AEP Corporation Pty Ltd on 4 July 2019
• Completion of $5M Capital Raising at 3 cents per share on 4 July 2019,
completion of $6.5M Capital Raising at 10 cents per share on 17 January
2020, completion of $20M Capital Raising at 20 cents per share on 16
July 2020, all funds were used or will be used to progress exploration
of the Hualilan Gold Project, Argentina and the El Guaybo Copper-Gold
Project, Ecuador
•
Appointment of experienced exploration and mining executives Fletcher
Quinn, Kris Knauer and Scott Funston
•
•
•
Fully Funded for High Impact Exploration Programs over the next 2 years
Strong financial position with cash at bank of $21.7 million (28 July 2020)
Proceeds from the equity raising will be used to:
•
•
expedite a 45,000-metre drilling program, scoping study, expand the
tenement position, and additional studies (mining and geophysics) at
its flagship Hualilan gold project in San Juan, Argentina; and
deliver a 5,000-metre drilling program at Colorado V designed to
allow the reporting of a JORC compliant resource.
•
Key Management take up to 100% of their remuneration for the rest of
2020 in shares at the capital raising price of $0.20
8
EL GUAYABO/COLORADO V
GOLD-COPPER PROJECT -
EQUADOR
World class bulk gold target
5km along strike from a
~17-million-ounce orebody2
HUALILAN GOLD PROJECT –
ARGENTINA
Historical resource 627,000
oz Au at 13.7 g/t1. High-grade
skarn overlying a large, and
previously unrecognised,
intrusive-hosted gold system
1 to ensure compliance with LR 5.12 please refer to the Company’s ASX Release dated 25 February 2019. These
estimates are foreign estimates and not reported in accordance with the JORC Code. A competent person has
not done sufficient work to clarify the foreign estimates as a mineral resource in accordance with the JORC Code.
It is uncertain that following evaluation and/or further exploration work that the foreign estimate will be able to be
reported as a mineral resource. The company is not in possession of any new information or data relating to the
foreign estimates that materially impact on the reliability of the estimates that materially impacts on the reliability of the
estimates or CEL’s ability to verify the foreign estimates estimate as minimal resources in accordance with Appendix
5A (JORC Code). The company confirms that the supporting information provided in the initial market announcement
on February 25 2019 continues to apply and is not materially changed. Refer to Slide 22 for Foreign Resource Estimate
2 Source Lumina Gold NI 43-101 Technical Report Cangrejos Project July 2020
8
99
D I R E C T O R S ’ R E P O R T
COMPANY PROJECTS
CEL is a South American focussed gold company with two key projects.
The Hualilan Gold Project – Argentina
CEL has the rights to earn up to 75% of the Project which comprises 15 mining licences and an exploration licence
application covering the surrounding 26kms2 in San Juan Provence, Argentina. The project is a high-grade gold and
silver prospect associated with a multi-phase porphyry intrusive. It has extensive historical drilling with over 150 drill-
holes dating back to the 1970s. There has been limited historical production reported despite having in excess of 6km
of underground workings. The property was last explored in 2006 by La Mancha Resources, a Toronto Stock Exchange
listed company. La Mancha’s work resulted in a NI43-101 (non-JORC) resource estimate of 627,000 Oz @ 13.7 g/t gold1
that remain open in most directions.
In the 15 years prior to being acquired by CEL the project was locked up in a dispute so it had seen no modern exploration.
The Company’s maiden 1500m drilling program, in late 2019, intersected high grade gold over 1.7 km of strike and
extended the known mineralisation along strike and at depth in multiple locations. Results included 6.1m @ 34.6 g/t gold,
21.9 g/t silver, 2.9% zinc, 6.7m @ 14.3 g/t gold, 140 g/t silver, 7.3% zinc and 10.3m @ 10.4 g/t gold, 28 g/t silver, 4.6% zinc.
A follow up 7,500 metres drill program this year further extended the high-grade skarn mineralisation and discovered
a significant underlying intrusion-hosted gold system with intercepts including 116m at 1.0 g/t gold. The Company has
started a 5-rig 45,000 metre drill program to expand the high-grade resource and test the underlying intrusion-hosted
gold system. The current program will also include metallurgical test work of key ore types, an initial JORC Compliant
Resource and scoping study.
El Guayabo Project - Ecuador
The Company’s El Guayabo project in southern Ecuador covers 35 km2 and comprises three contiguous tenements, the
El Guaybo, El Guaybo 2, and Colorado V tenements.
The El Guayabo Copper-Gold Tenement - El Oro, Ecuador was last drilled by Newmont Mining in 1995 and 1997 targeting
gold in hydrothermal breccias. Historical drilling has returned a number of ore grade intersections including 156m @ 2.6
g/t gold, 9.7 g/t silver, 0.2% copper and 112m @ 0.7 g/t gold, 14.7 g/t silver, 0.6% copper which have never been followed
up. The Company completed a 3D MT survey covering 20 km2 which outlined a number of potential porphyry and
intrusive breccia systems all within 400 metres of surface. The Project has multiple targets including breccia hosted
mineralization, an extensive flat-lying late-stage vein system and an underlying porphyry system target none of which
have been validly drill tested. CEL owns 100% of the project.
The Colorado V Copper-Gold Tenement - El Oro, Ecuador adjoins and has the same geology as the El Guayabo Gold
and Copper Project. It comprises a metamorphic basement intruded by intermediate alkaline intrusives which range in
age from 40 – 10 Ma (million years age). The intrusions are commonly overprinted by late porphyry dykes and intrusion
breccia suggesting deeper, evolving magmatic systems are feeding shallower systems.
The concession contains a 500-metre long zone of underground workings where narrow veins are currently being
exploited on a small scale. The current owner of the Colorado V concession had previously drilled several diamond
core holes immediately along strike and down dip targeting extensions to this mineralisation. These drill holes were
not systematically logged or assayed for bulk tonnage gold or base metal mineralisation. Sampling and assaying by the
Company has confirmed a bulk gold system surrounding these narrow veins with results including 146 metres at 1.5 g/t
gold, 1.8 g/t silver. Surface mapping and sampling designed to test south-east along strike from this 500-metre long
zone defined by narrow underground workings has defined a further 2-kilometre strike extension of this zone which is
undrilled. The Company is earning 50% of the Colorado V concession.
The El Guayabo 2 Tenement - El Oro, Ecuador has the same and continuous geology as CEL’s adjoining El Guayabo
and Colorado V tenements which are believed to contain a “Low Sulphide” porphyry gold copper system.” Limited
historical exploration has been undertaken on the tenement, with the work that has been done undertaken by local
Ecuadorian groups that targeted high-grade gold. Historical exploration reports record gold mineralisation in intrusive
rocks in outcrop.
1010
Project Highlights - 2020 Exploration Program
Hualilan Gold Project - San Juan, Argentina
•
•
•
59 holes totalling 6,487 metres completed with samples from 42 holes submitted for assay during 2020
including 23 diamond core and 18 reverse circulation holes totalling 4,043 metres completed during the
second quarter 2020.
Intrusion-Hosted gold discovery with drill holes GNDD-025 and GNDD-032 intersecting 88 metres at 0.9
g/t gold, 2.2 g/t silver and 0.1 % zinc and 116 metres at 1.1 g/t gold, 4.0 g/t silver and 0.2 % zinc in altered
dacite porphyry one kilometre apart (refer Table 2).
Results include (refer Table 3 for details):
• 8.3 metres at 17.7 g/t gold, 257 g/t silver and 0.3% zinc (GNDD-020)
-
(including 5.5m at 26.0 g/t gold, 355 g/t silver and 0.4% zinc from 74 metres)
• 3.8 metres at 7.1 g/t gold, 78 g/t silver, 3.6% zinc (GNDD-018)
-
(including 2.6m at 10.3 g/t gold, 114 g/t silver and 4.9% zinc from 64 metres)
• 69.0m at 3.4 g/t gold, 8.1 g/t silver, 2.8% zinc (GNRC-068)
-
(including 27.0m at 7.9 g/t gold, 16.0 g/t silver, 7.0% zinc from 9 metres)
Colorado V Gold/Copper Projects - El Oro, Ecuador
•
Initial assay results confirm the discovery of large-scale gold system in the Colorado V Project with
intersections of (refer Table 4 for full details):
•
-
•
-
151 metres at 0.9 g/t gold and 3.8 g/t silver from 225 metres
(including 134 metres at 1.0 g/t gold and 4.1 g/t silver from 227 metres)
146 metres at 1.5 g/t gold and 1.8 g/t silver, from 211 metres
(including 87 metres at 2.1 g/t gold and 1.9 g/t silver from 253 metres)
•
•
The mineralisation is located on a 500-metre long trend defined by small scale underground mine workings
Assay results received from drill holes located on the margins of a series of 1 kilometre long gold-copper
soil anomalies which are believed to represent porphyry Au-Cu targets
- All drill holes which penetrated the edges of these anomalies returned ore grade intersections which
significantly upgrade these large targets.
-
Interpretation suggests the mineralisation has similar geology, grades, and surface footprint as the Tier
1 Cangrejos Gold Project located five kms to the northeast.
- To assist shareholders, appreciate the scale of the opportunity CEL presents an Exploration Target
reporting according to the JORC Code (2012).
10
10
11
11
11
HUALILAN GOLD PROJECT - ARGENTINA
Metallurgical test work
During the second quarter of 2020 the Company’s Phase 1 metallurgical testing program commenced with the delivery
of a 150kg bulk sample to SGS in Lakefield, Ontario. The test work is designed to confirm, and improve upon, the
historical metallurgy which was completed in 1999. This historical metallurgical testing confirmed base case recoveries
of approximately 80% for gold and silver by rougher flotation, which is a simple and robust process route involving the
production of a high-grade gold-silver and a separate zinc concentrate.
The Phase 1 testing program will involve grind testing, gravity recovery tests and a suite of rougher flotation tests examining
variables, including primary grind size, reagent scheme, and pulp density. The Phase 2 program will be conducted after
evaluation of the Phase 1 results. Phase 2 will include, Bond ball mill grindability and Bond abrasions tests as well as a
suite of cleaner flotation and cleaner variability tests. This testing will provide a clear and early view on recovery and
composition of separate gold and zinc concentrates and also any improvements that may not have been available
twenty years ago.
The testing is designed to allow the company to research processing options and have initial discussions with
concentrate off-takers and better target additional metallurgical testing that will be required as part of a Pre-Feasibility
Study.
The bulk sample was collected by the drilling of four dedicated metallurgical holes. These were designed to provide a
bulk sample containing grades and mineralogy representative of the project. Accordingly, the metallurgical holes were
not drilled targeting the wider and higher-grade portions of the orebody. The four holes were located at Main Manto,
Cerro Norte (GNDD-039 and GNDD-043), Sentazon (GNDD-0040), and the Magnata Vein (GNDD-041). Assays for the
metallurgical holes have been received with results including (refer table 1):
5.1 metres at 13.1 g/t AuEq2
2.0 metres at 21.7 g/t AuEq2
7.9 g/t gold, 83 g/t silver, 7.9%zinc (GMDD-041) and
-
- 20.0 g/t gold, 29 g/t silver, 1.2% zinc,
8.7 metres at 6.8 g/t AuEq2
2.9 metres at 14.2 g/t AuEq2
- 5.5 g/t gold, 12 g/t silver, 2.2% zinc (GNDD-040), including
- 11.8 g/t gold, 24 g/t silver, 4.2% zinc
Drill hole GMDD-040 was drilled to take a sample primarily of the M2 Magnata zone. The hole successfully sampled the
M2 intersecting 5.1 metres at 7.9 g/t gold, 83 g/t silver, 7.9% zinc. The hole also successfully intersected a zone of high
grade mineralisation in the M1 (upper Magnata Fault) that was not evident in the drill core returning 2.9 metres at 11.8 g/t
gold, 24 g/t silver, 4.2% zinc..
CEL has implemented a policy of 100% assaying given recent high-grade results such as 8.3 metres at 17.7 g/t gold and
257 g/t silver, in drill hole GNDD-020 and the recent gold in the intrusives which were not evident visually. Hole GMDD-
043 deviated significantly during drilling which resulted in the bottom hole location being off the interpreted down
plunge extension of the Main Manto in that location. Given sufficient samples were already acquired, it was not deemed
necessary to re-drill this hole.
12
Drill hole
(#)
from
GMDD-039
(Main Manto) and
GMDD-040
(Sentazon)
GMDD-041
(Magnata)
from
inc
from
and
and
GMDD-043
(Main Manto)
from
inc
From
(m)
18.0
67.6
116.7
122.5
31.0
41.7
63.5
18.0
70.5
To
(m)
26.0
68.6
125.4
125.4
47.0
43.7
68.6
28.0
70.8
Total
(m)
Gold
(g/t)
Ag
(g/t)
8.0
1.0
8.7
2.9
16.0
2.0
5.1
10.0
0.3
0.2
24.5
5.5
11.8
2.6
20.0
7.9
0.1
25.9
1.9
58
12
24
4.9
29
83
1.7
81
Zn
(%)
0.60
3.9
2.2
4.2
0.3
1.2
7.9
0.5
9.4
Pb
(%)
0.1
1.8
0.0
0.0
0.3
1.7
0.21
0.1
3.1
Au Eq (1)
(g/t)
0.5 g/t AuEq (2)
28.1 g/t AuEq
6.8 g/t AuEq
14.2 g/t AuEq
2.9 g/t AuEq (2)
21.7 g/t AuEq
13.1 g/t AuEq
0.4 g/t AuEq (2)
33.0 g/t AuEq
Table 1: Significant Intercepts from dedicated metallurgical holes
1
2
test work performed by Lakefield Research Chile S.A., reported to INGEOMA S.A. (1999).
intercepts calculated using a cut-off of 0.2 g/t AuEq cut-off. Other intercepts calculated using a
1.0 g/t AuEq cut-off
3 Gold Equivalent (AuEq) values - Requirements under the JORC Code
• Commodity prices for the calculation of AuEq is Au US$1450 Oz, Ag US$16 Oz, and Zn US$2,200 /t
• Metallurgical recoveries for Au, Ag and Zn are assumed to be the same (see JORC Table 1 Section3 )
• AuEq (g/t) = Au (g/t) + Ag (g/t)x (16/1450) + Zn (%) x 2.12
CEL confirms that it is the company’s opinion that all the elements included in the metal equivalents calculation have a reasonable potential to be
recovered and sold.
New Discovery of Intrusion Hosted Gold
Subsequent to the end of the financial year, the Company announced the discovery of a new style of intrusion-hosted
gold mineralisation contiguous to the historical high-grade gold hosted in limestone units or faults. Drill hole GNDD-025
intersected 88 metres at 0.9 g/t gold, 2.2 g/t silver and 0.1 % zinc including 50 metres at 1.4 g/t gold, 3.4 g/t silver,
0.15 % lead and 0.17 % zinc from 53 metres, under cover in dacite porphyry containing weak iron oxide, silica, and pyrite
alteration. This was followed by Drill hole GNDD-032 which intersected 116 metres at 1.1 g/t gold, 4.0 g/t silver, 0.2
% zinc (1.2 g/t AuEq) from 49 metres, in dacite porphyry containing weak iron oxide, silica, pyrite and skarn alteration.
The Company defined a near surface conceptual intrusion-hosted target covering 1 kilometre of strike and up to 100
metres wide following the GNDD-025 discovery hole (Figure 1). This is defined by the limited historical drilling, mapping
of the surface exposure of the altered dacite porphyry and recent CEL drill holes. The current northern end of this target
is defined by CEL drill hole GNDD-025, with the current southern end of the target defined by CEL drill holes GNDD-032
and GNDD-031.
The Company also notes the recent discovery of extensive surface veining and alteration in porphyry dacite in outcrop
to the north of drill hole GNDD-032 which will be tested by drilling. GNDD-047 returned 38.5 m at 1.3 g/t gold, 1.2 g/t
silver, including 6.0m at 6.3 g/t gold, 3.5 g/t silver) a further 300 metres south along strike from GNDD-025. It now
appears that the intrusives contain both significant high-grade endoskarn mineralisation, generally in the prognosed
position of the skarn associated manto mineralisation, and bulk gold mineralisation over at least 1.5 kilometres of strike.
The Company will complete a number of holes to test the intrusion-hosted gold target during the second half of 2020
as part of its expanded 45,000 metre drilling program following the successful completion of the $20 million (before
costs) capital raising in July this year. As Figure 2 shows there are expected to be major synergies from an exploration
and mine development perspective as the porphyry hosted gold is contiguous to and underlies, the existing high-grade
mineralisation.
12
13
D I R E C T O R S ’ R E P O R T
i
F
g
u
r
e
1
i
-
S
h
o
w
n
g
d
i
s
t
r
i
b
u
t
i
o
n
o
f
d
a
c
i
t
e
i
n
t
r
u
s
i
v
e
s
b
e
y
o
n
d
t
h
e
c
o
n
c
e
p
t
u
a
l
i
n
t
r
u
s
i
o
n
-
h
o
s
t
e
d
g
o
d
t
a
r
g
e
t
l
i
n
t
h
e
G
a
p
Z
o
n
e
.
14
Figure 2 Showing distribution of the high-grade skarn mineralisation and adjacent porphyry at Cerro Norte.
Note the “high-grade skarn” is red and the “porphyry” is pink.
It is believed that the high-grade skarn mineralisation at the Hualilan Gold Project lies above, and wraps around, this
intrusion-hosted gold mineralisation although this will be confirmed with additional drilling
The limit of dacite porphyry at depth is governed by a lack of drill data
The higher-grade zones of mineralisation in drill hole GNDD-032 contains a component of skarn alteration similar to that
seen in the high-grade mineralisation in the Magnata Vein and the Manto’s (limestone). The location of the higher grade
zones in GNDD-032; specifically 6 metres at 9.6 g/t gold, 18.7 g/t silver 0.15% zinc and 4 metres at 9.8 g/t gold, 18.5
g/t silver, 1.5% zinc; is believed to coincide with the projected location of the M1 Upper Magnata Fault at this location.
The high-grade east-west striking Magnata Vein is controlled by the M1 and M2 faults which are regional, steeply dipping,
strike-slip faults with up to 200 metres of apparent lateral movement. The east-west faults were conduits for mineralising
fluids with high-grade veins (Magnata and Sanchez Veins) forming along these faults. Typical results from the Company’s
historical drilling of the Magnata Vein are shown on Figure 3 and include 6.70 metres at 14.3 g/t Au, 140 g/t Ag, 7.3 % Zn
(GNDD-007) 3 metres at 17.7 g/t Au, 143 g/t Ag, 2.5 % Zn (GNDD-010).
The extension of this high-grade skarn mineralisation into the intrusives significantly expands the scope of the Project
to contain additional high-grade gold beyond the historical mineralisation. The historical interpretation was that the
porphyry dacite intrusives overprinted the high-grade skarn mineralisation thus sterilising the possibility of high-grade
mineralisation, and accordingly, the intrusives were generally not assayed in the historical drilling. This now appears not
to be the case.
14
15
D I R E C T O R S ’ R E P O R T
Figure 3 - Plan view showing CEL drilling Magnata Vein
Hole_id
DNDD-025
from
GNDD-031
from
GNDD-032
GNDD-047
from
including
and
including
and
from
inc
and
and
and
From
(m)
53.0
32.0
49.0
77.0
101.0
101.0
136.0
61.00
62.50
74.10
83.55
98.50
Interval
(m)
88.0*
28.0
116.0
3.0
10.0
6.0
4.0
38.50
6.00
1.50
0.45
1.00
Au
(g/t)
0.94
0.43
1.05
0.93
6.1
9.6
9.8
1.3
6.3
1.0
7.3
1.2
Ag
(g/t)
2.3
5.7
4.0
33.7
18.1
18.7
18.5
1.2
3.5
1.9
12
0.82
Zn
(%)
0.1
0.15
0.20
2.10
0.11
0.15
1.5
0.0
0.2
0.0
0.0
0.0
AuEq
(g/t)
1.0
0.6
1.2
2.3
6.4
9.9
10.7
1.3
6.4
1.0
7.4
1.2
Note
0.2 g/t AuEq cut
0.2 g/t AuEq cut
0.2 g/t AuEq cut
1.0 g/t AuEq cut
1.0 g/t AuEq cut
10.0 g/t AuEq cut
1.0 g/t AuEq cut
0.2 g/t AuEq cut
1.0 g/t AuEq
1.0 g/t AuEq
1.0 g/t AuEq
1.0 g/t AuEq
Table 2 - Significant assay results for the Intrusion-hosted gold discovery, Hualilan Project
(1)
(2)
Intercepts calculated using a using a 0.2 g/t AuEq cut-off, 1.0 g/t and 10 g/t AuEq cut-off as indicated
See 3 under Table 1 for information regarding AuEq’s reported under the JORC Code
16
Hualilan 7,500 metre Drill Program
During the final quarter of 2020, the focus at Hualilan was the 7,500 metre drilling program designed to extend the
existing mineralisation and support a maiden JORC Resource. The Company had completed 41 holes (23 diamond core
and 18 reverse circulation) totalling 4,043 metres by June 30 2020 with the full 7500 metre program being completed
during August. This program transitioned seamlessly into the current 5-rig 45,000 metre program. Assay results were
reported for the first 55 holes of the 70 hole 7500 metre program.
Sentazon
GNDD-011, GNDD-013 and GNDD-014 and GNDD-016 were the initial four holes designed to test the Sentazon Zone
following the success of hole GNDD-009 in CEL’s first drilling program. GNDD-009 returned 10.3 metres at 10.4 g/t
gold, 28 g/t silver, 4.6% zinc - 12.9 g/t AuEq. The hole was an exploration focussed hole drilled 500 metres further
south than any of CEL’s existing drill holes to test the lightly explored Sentazon Manto. The Sentazon mineralisation
is the southernmost zone included in the historical foreign non-JORC resource and comprises a small part of this
historical foreign resource estimate. Previous drilling at Sentazon by La Mancha, was predominantly clustered around
and under the Sentazon shaft. Following GNDD-011, GNDD-013 and GNDD-014 and GNDD-016, all of which intersected
mineralisation, CEL plans to drill a number of additional holes at Sentazon as the mineralisation remains open in all
directions.
Figure 4 - Cross Section showing GNDD-009 and GNDD-011 and proposed holes
16
17
D I R E C T O R S ’ R E P O R T
Drill Hole GNDD-011
Drill hole GNDD-011 was designed to extend the mineralisation encountered in GNDD-009 approximately 40 metres
down dip. The hole encountered 12 metres of manto mineralisation from 139 metres downhole which was visually similar
to the mineralisation encountered in GNDD-009. While the mineralisation encountered in GNDD-011 is of ore grade it is
lower in grade than GNDD-009. This lower grade is believed to result from the higher-grade shoots of mineralisation at
Sentazon appearing to be controlled by a plunge component which will be tested in future holes.
Drill hole GNDD-013
Drill hole GNDD-013 intersected 6.9 metres at 1.3 g/t gold, 12 g/t silver, 2.7% zinc - 2.7 g/t AuEq including 0.83 metres
at 9.9 g/t AuEq. The hole is the southernmost hole drilled by CEL and extends the mineralisation encountered in drill hole
GNDD-009 a further 25 metres south along strike and confirms that mineralisation remains open to the south. Follow up
holes are planned down-dip and up-dip from GNDD-013 as well as further south along strike.
Figure 5 - Cross Section Showing GNDD-016, GNDD-046 and proposed drilling
Drill hole GNDD-014
GNDD-014 was drilled as a twin hole to La Mancha hole 05-HD-05, which returned 5.6m at 2.8 g/t gold, 19.9 g/t silver,
1.2% zinc, for JORC purposes. GNDD-014 returned 7.55 metres at 2.4 g/t gold, 15 g/t silver, 3.6 % zinc - 4.4 g/t AuEq.
The intercept encountered in GNDD-014 was some 35% wider and 16% higher in grade (on a gold equivalent basis) than
that encountered in the historical result. This confirms that the initial La Mancha historical drill holes have understated
grade and width. A number of holes are planned to test up-dip and along strike (down plunge) and down-dip of GNDD-
014. The hole had a secondary objective to test a deeper intercept of 1.9 m at 4.51 g/t gold, 15 g/t silver, 0.7% zinc
encountered in historical drill hole 04-HD-17 however the hole was terminated due to drilling conditions. This potential
deeper repeat of the Sentazon Manto will be tested in follow up drilling.
18
Drill hole GNDD-016
GNDD-016 intersected almost 10 metres of mineralisation in the Sentazon manto comprising 4.5 metres at 6.0 g/t gold,
83 g/t silver, 3.9% zinc -8.9 g/t AuEq and 5.0 metres at 1.8 g/t gold, 27 g/t silver, 8.3% zinc -6.2 g/t AuEq separated by 2
metres of barren limestone. GNDD-016 successfully extended the Sentazon mineralisation 40 metres north along strike
from CEL hole the GNDD-009, the discovery hole, and confirmed that the Sentazon Manto remains open and strong to
the north along strike. GNDD-045 (assays pending) has been drilled to test 40 metres down dip from GNDD-016 and a
series of holes are planned to extend the mineralisation intersected in GNDD-016 up-dip.
Drill Hole GNDD-046
Drill hole GNDD-046 was designed to extend the mineralisation encountered in GNDD-016 approximately 50 metres
down dip. The hole returned substantially higher grades than GNDD-016 returning 2.9 m at 29.5 g/t gold, 522.0 g/t
silver, 10.8% zinc (40.3 g/t AuEq) which is the best intersection to date at Sentazon. It demonstrates that the Sentazon
Manto remains open at depth and strong at this location.
CEL is encouraged by the substantially higher-grades encountered in GNDD-046, compared to drill hole GNDD-016 up
dip. This higher grade at depth is believed to result from GNDD-046 successfully intersecting one of the higher-grade
plunging shoots of mineralisation. Higher grades at Sentazon appear to be controlled by a plunge component which
will be further tested in future holes.
Magnata Fault
Drill holes GNDD-015, GNDD-018 and GNDD-020 were designed to test the western ends of the Magnata vein. The
Magnata vein is believed to be controlled by an east-west orientated strike slip fault which dips from 60 degrees to
the north to near vertical. The Magnata Fault is believed to be one of the key structures controlling mineralisation at
Hualilan with mineralising fluids migrating up the fault forming the east-west Magnata Vein and, where this fault intersects
permeable limestone beds, replacing these limestone beds with north-south orientated massive sulphide Manto bodies.
Drill hole GNDD-015
Drill hole GNDD-015 was designed to test the 100 metres of undrilled strike between CEL holes GNDD-005 (5.0m at 10.9
g/t gold, 101 g/t silver, 1.5% zinc) and GNDD-006 (3.8m at 6.8 g/t gold, 34.0 g/t silver, 0.4% zinc). The hole successfully
intersected the Magnata Fault with the fault evident in the drill core and an intersection of 1.9 metres at 3.0 g/t AuEq. It
Is believed that the steepening of the Magnata Fault in the immediate vicinity of where it was intersected by GNDD-015
may have reduced the open space available for mineralisation to form in this location. Accordingly, the plan is to test
up-dip and along strike (down plunge) and down-dip of GNDD-015.
Drill hole GNDD-020
Drill hole GNDD-020 was drilled as an up-dip test of GNDD-015 where it was believed open space allowing mineralisation
was impacted by the M1 Magnata Fault steepening in the immediate vicinity of GNDD-015. The hole strongly supported
this model with GNDD-020 returning 8.3 metres at 17.7 g/t gold, 257 g/t silver, 0.3% zinc - 21.1 g/t AuEq including
5.5 metres at 26.0 g/t gold, 355 g/t silver, 0.4% zinc. GNDD-020 successfully extended the high-grade Magnata Vein
mineralisation 40 metres to the north-east along strike towards drill hole GNDD-006. Importantly, this hole unlocks the
potential of structurally controlled high-grade shoots of mineralisation extending along strike and down-plunge which
have yet to be tested.
18
19
D I R E C T O R S ’ R E P O R T
Figure 6 - Cross Section Showing GNDD-015 and GNDD-020 and proposed drilling
Drill hole GNDD-018
GNDD-018 was designed to extend the Magnata mineralisation south-west along strike from hole GNDD-005 which
returned 5.0 metres at 10.9 g/t gold, 101 g/t silver, 1.5 % zinc at the extreme western end of the Magnata Vein. GNDD-018
returned 3.8 metres at 7.1 g/t gold, 78 g/t silver, 3.6% zinc -11.6 g/t AuEq including a higher-grade section of 2.6 metres
at 10.3 g/t gold, 114 g/t silver, 4.9% zinc - 16.7 g/t AuEq. The hole successfully extended the Magnata Vein a further 20
metres along strike and confirmed the high-grades and continuity of the Magnata Vein mineralisation.
Muchilera Manto
Drill hole GNDD-012 was the first hole drilled at Muchilera. Underground inspection and channel sampling by previous
explorers and followed up by CEL in 2019 (CEL announcement 16 July 2019) map a 2-3m thick, bedding-parallel
mineralised zone. GNDD-012 was collared immediately outside the entrance to the main Muchilera adit. The drill hole
intersected skarn alteration in the limestone but bid not return a significant intersection. The hole did intersect 1.0 metre
at 6.3 g/t gold and 290 g/t silver, 0.18% Cu, 1.2% Pb and 0.12% Zn - 10.3 g/t AuEq in shale further up hole suggesting
there may be a second target. Results are pending for additional drill holes targeting mineralisation in the limestone at
Muchilera.
20
Figure 7 - Cross Section Showing GNDD-018 and GNDD-024 (pending) and proposed drilling
Cerro Norte
Drillhole GNDD-035
Drill hole GNDD-035 intersected 5.75 metres at 9.5 g/t gold, 29 g/t silver, 3.5 % zinc (11.5 g/t AuEq) from 88.75 metres
including a higher grade zone of 3.15 metres at 17.1 g/t gold, 29 g/t silver 5.6 % zinc (20.1 g/t AuEq). The mineralisation
is typical of the historical high-grade skarn mineralisation and is believed to be a southerly extension of the high-grade
Main Manto mineralisation at Cerro Norte.
The hole is located 100 metres south of CEL drill hole GNDD-003, the previous southern-most intersection of high
grade mineralisation at Cerro Norte, which returned 6.1m at 34.6 g/t Gold, 21.9 g/t Silver, 2.9% Zinc. GNDD-035 was
drilled 70 metres south of a fence of historical drill holes, that had marked the southern limit of the historical resource at
Cerro Norte. These historical holes (05-HD-36, DDH-44, HUA-16) failed to encounter high grade zones of mineralisation
leading to the historical interpretation that the Main Manto mineralisation may weaken to the south.
Thus GNDD-035 is one of CEL’s more significant holes at the Hualilan Gold project. It has extended the strike extent
of Cerro Norte, which accounts for approximately half of the foreign historical 627,000 ounce resource1, by twenty
five percent. It also intersected high-grade mineralisation at Cerro Norte south of the previous southern-most drill
holes which returned lower grade results. Demonstrating that the high-grade Main Manto mineralisation at Cerro Norte
remains strong and open to the south into the largely unexplored 1.2 kilometre Gap one between Cerro Sur and Cerro
Norte. Mineralisation at Cerro Norte remains open to the north and south along strike and at depth.
20
21
D I R E C T O R S ’ R E P O R T
Figure 8 - Plan view showing Interpreted geology and Drilling Cerro Norte
The Company will complete a number of holes, in addition to those currently programmed (Figure 8), to further extend
the high-grade Main Manto mineralisation to the south into the Gap Zone as well as up and down dip of GNDD-035. This
will form part of its expanded 45,000 metre drilling program following the completion of the $20 million (before costs)
capital raising.
22
Sanchez Zone
Subsequent to the year end the Company received the results for drill hole GNRC-068 which was the first drill hole
designed to test the Sanchez Zone. GNRC-068 intersected a far wider zone of mineralisation than expected returning
69.0m at 3.4 g/t gold, 8.1 g/t silver, 2.8% zinc (4.8 g/t AuEq) including a broad high grade zone of 27.0m at 7.9 g/t gold,
16.0 g/t silver, 7.0% zinc (11.4 g/t AuEq) containing a bonanza grade zone of 4.0m at 41.7 g/t gold, 54.2 g/t silver, 12.0%
zinc (48 g/t AuEq), all from near surface.
The Sanchez Zone is believed to be controlled by an east-west orientated fault which dips steeply to the south. The
Sanchez Fault, similar to the Magnata Fault Zone at Cerro Sur, is believed to be one of the key structures controlling
mineralisation at Hualilan. The mineralising fluids migrating within the fault forming east-west oriented mineralisation
and, where this fault intersects permeable limestone beds, replacing these limestone beds with north-south orientated
massive sulphide Manto bodies.
The Sanchez Fault has been mapped in outcrop over 500 metres of strike across the main Cerro Norte hill. As illustrated
in Figure 9 the steep terrain along the Sanchez Zone made drill pad location difficult. As such the Sanchez Fault has
historically only been drilled to 50 metres sub-surface over less than 100 metres of strike. It remains open at depth and
under cover in both directions along strike.
The Sanchez Zone was a high priority target as the Company’s experience with its drilling of the Magnata Fault Zone is
that the mineralisation is generally:
high-grade;
laterally and vertically continuous;
extensive at depth, with the Magnata Vein open below 160 metres; and
likely to extend under cover along strike beyond the limits of the main outcrop.
Nearby historical drill hole DDH-61 recorded a bonanza grade intercept of 5 metres at 94 g/t gold, 57 g/t silver from 5
metres which was believed to be an isolated pod of extremely high-grade material. This correlates with the bonanza zone
section in GNRC-068, which is now interpreted as a potential near vertical high-grade core at the centre of the Sanchez
Fault. This interpretation is further supported by historical drill hole 05-HD-40, which recorded 2 metres of no recovery,
likely to be an old stope, 40 metres below GNRC-068. Additionally, DDH-61 reported a 4-metre zone of no recovery
above 4.7 metres of 1.8 g/t gold, 9.1 g/t Ag at the end of the hole. (Figure 9).
Neither of DDH-61 or 05-HD-40 are believed to be valid test of the Sanchez Fault structure as both holes reported wide
zones of extremely poor core recovery, as low as 30%, across the interpreted downdip extension below GNRC-068. The
Company has previously twinned historical holes which reported low grade mineralisation corresponding with zones of
poor core recovery and returned high-grade mineralisation. Significantly the 5 metres at 94 g/t gold in DDH-61 occurs
in a zone of good core recovery. The Company has immediately programmed an RC hole which will twin 05-HD-40. A
series of holes are also programmed to test the Sanchez Fault along strike to the west under cover and below GNRC-068.
22
23
GNDD-035 (88 to 93m) - 5.75m at 9.5 g/t Au, 29 g/t Ag, 3.5 % Zn from 88.8m
D I R E C T O R S ’ R E P O R T
Figure 9 – Cross Section showing Interpreted Geology Sanchez Zone, Cerro Norte
Drill hole
(#)
GNDD-011
From
(m)
81.0
139.8
147.2
151.4
To
(m)
82.0
144.6
147.9
151.9
from
and
and
and
GNDD-012
from
40.7
41.7
GNDD-013
from
inc
116.4
122.5
123.3
123.3
GNDD-014
from
118.5
126.1
GNDD-015
GNDD-016
GNDD-018
GNDD-020
from
and
from
and
and
from
and
and
from
inc
and
54.0
156.0
64.0
109.5
116.6
37.8
63.2
64.4
71.3
74.0
83.3
55.0
157.9
65.0
114.5
121.0
38.6
67.0
67.0
79.5
79.5
84.0
Total
(m)
1.00
4.80
0.70
0.50
1.00
6.93
0.83
7.55
1.00
1.90
1.00
5.00
4.45
0.85
3.75
2.55
8.25
5.50
0.65
Ag
(g/t)
43
5.7
13
5.5
290
12
61
15
8.6
31
27
27
83
3.6
78
114
257
355
2.7
Zn
(%)
0.1
2.6
6.6
0.2
0.1
2.7
10.1
3.6
0.4
2.8
0.0
8.3
3.9
0.1
3.6
4.9
0.3
0.4
0.0
Pb
(%)
0.1
1.2
.2
1.2
.2
0.2
0.8
0.0
0.0
0.1
3.6
5.2
0.7
0.2
10.7
Au Eq (1)
(g/t)
2.5 g/t AuEq
2.7 g/t AuEq
12.7 g/t AuEq
1.4 g/t AuEq
10.0 g/t AuEq
2.7 g/t AuEq
9.9 g/t AuEq
4.4 g/t AuEq
1.1 g/t AuEq
3.0 g/t AuEq
1.2 g/t AuEq
6.2 g/t AuEq
8.9 g/t AuEq
1.2 g/t AuEq
11.6 g/t AuEq
16.7g/t AuEq
21.1 g/t AuEq
30.3 g/t AuEq
5.1 g/t AuEq
Gold
(g/t)
1.9
1.4
9.4
1.2
6.3
1.3
4.0
2.4
0.7
1.0
0.80
1.8
6.0
1.1
7.1
10.3
17.7
26.0
0.03
24
11.5
20.1
GNDD-035
From
incl
88.75
88.75
GNDD-046
GNRC-068
82.90
124.15
9.9
9.9
14.0
24.0
51.0
59.0
66.0
72.0
from
inc
inc
inc
and
and
and
and
94.5
91.0
0.45
2.85
69.0
27.0
4.0
6.0
1.0
1.0
2.0
4.0
5.75
3.15
4.1
29.5
3.4
7.9
41.7
5.2
1.0
1.3
1.6
1.9
9.5
17.1
4.1
29.5
3.4
7.9
41.7
5.2
1.0
1.3
1.6
1.9
29.0
29.0
27
522
8
16
54.2
21.0
40
5
1
3
3.5
5.6
0.06
10.8
2.8
7.0
12.0
10.7
0.9
0.1
0.0
0.1
11.5 g/t AuEq
20.1 g/t AuEq
4.5 g/t AuEq
40.3 g/t AuEq
4.8 g/t AuEq
11.4 g/t AuEq
48.0 g/t AuEq
10.5 g/t AuEq
1.9 g/t AuEq
1.4 g/t AuEq
1.7 g/t AuEq
1.9 g/t AuEq
Table 3: Significant Intercepts from 2020 7500 metre Drill Programme
Completion of Earn-in of the first 25% of Hualilan Project
During the final quarter of 2020 the Company earned an initial 25% interest in the Hualilan Gold Project, under the Earn-
in Agreements for Cerro Sur (including the 26km2 surrounding the EL) and Cerro Norte. The Company earned an initial
25% of the project by spending a minimum of A$1 million, previously issuing 3.334 million ordinary full paid CEL shares in
2019, and a further 5 million ordinary fully paid CEL shares (“Shares”) to the owners of the Cerro Norte and 6.67 million
Shares to the owners of the Cerro Sur Project. Challenger Exploration is committed to completing the remaining Earn-in
Agreement Milestone, which will see the Company’s ownership increase from 25% to 75%, following the completion of
a Definitive Feasibility Study within 5 years from the commencement date, and the issue of a further 50 million ordinary
full paid CEL shares to the owners of the Cerro Norte and Cerro Sur Projects.
IP Geophysics
Collection of data from a trial Induced Polarisation (IP) geophysical survey covering 77 hectares at Cerro Norte was
completed by San Juan-based Geofisica Argentina S.A. The survey consists of 8 lines, each 1 km in length over Cerro
Norte spaced at 100 metre intervals with a 50-metre dipole spacing. The survey has been designed to model the
geology, including under cover so as to define extensions to the sulphide dominant mineralisation and assist with drill
targeting. More specifically the survey is expected to provide high resolution coverage down to a vertical depth of
approximately 300 metres. The current foreign historical resource at Hualilan is located within 125 metres of surface.
During the quarter, some interpretation of the data was completed involving raw data reprocessing and inversion. The
preliminary review of the survey data is encouraging and shows co-incident resistivity conductors with low IP response that
is continuous between the sections and able to provide a 3D model. Possible downdip extensions of the mineralisation
are interpreted and will be followed up with drill testing. A further announcement will be made once the re-processing
of the IP and recently acquired ground magnetic data has been finalised and interpretation completed.
24
25
D I R E C T O R S ’ R E P O R T
Figure 10 - Plan view showing drilling Magnata Vein
EL GUAYABO GOLD COLORADO V GOLD/COPPER PROJECT - ECUADOR
Discovery of large-scale Gold System - Colorado V
During the final quarter of 2020, results from the first drill hole submitted for assay from the recently acquired Colorado
V concession in Ecuador confirmed the discovery of large-scale gold system in the Colorado V Project in Ecuador.
This was followed, subsequent to the end of the financial year, by results for an additional 3 drill holes, all of which
encountered over 100 metres of mineralisation, reinforcing the discovery of a large-scale gold system. Results are given
in Table 4.
The drill holes are from a series of 60 historical holes drilled by CEL’s farm-in partner targeting extensions to narrow high-
grade vein hosted gold mineralisation they are currently exploiting. These historical drill holes were not systematically
logged or assayed for bulk tonnage gold or base metal mineralisation. The majority of the holes, including the first four
holes assayed by the Company, were drilled on a 500 metre northwest-southeast trend defined by under-ground mine
workings.
26
Drill hole
(#)
ZK0-1
ZK1-3
ZK1-5
ZK0-2
From
(m)
9.4
66.5
105.7
167.5
46.0
56.0
127.0
290.5
302.5
211.4
253.0
13.3
75.7
172.7
224.6
227.1
227.4
To
(m)
37.5
89.5
129.7
214.0
103.7
85.7
163.0
421.0
380.5
355.0
340.0
108.2
108.2
193.1
376.0
361.1
290.5
Total
(m)
28.1m
23.0m
24.0m
46.5m
57.7m
29.7m
36.0m
130.5m
78.0m
145.6m
87.0
94.9m
32.5m
20.4m
151.4m
134.0m
63.1m
from
and
and
and
from
(incl)
from
and
(incl)
from
(incl)
from
(incl)
and
and
(incl)
(incl)
Gold
(g/t)
Silver
(g/t)
0.4
0.9
0.3
0.4
0.5
0.8
0.5
0.5
0.7
1.5
2.1
0.3
0.4
0.3
0.9
1.0
1.6
1.0
4.7
1.0
7.1
1.9
3.1
3.5
3.1
3.5
1.7
1.9
1.7
2.6
2.1
3.8
4.1
5.1
Table 4: Assay results from Colorado V re-logging and re-sampling program
Drill hole ZK0-2 encountered over 250 metres of gold mineralisation in three zones. Highlights include 151 metres at 0.9
g/t gold and 3.8 g/t silver from 225 metres containing a higher-grade core of 134 metres at 1.0 g/t gold + 4.1 g/t silver,
including 63 metres at 1.6 g/t gold and 5.1 g/t silver. ZK-02 is located on the northern end of a 500-metre northwest-
southeast trend defined by small scale underground mine workings. Figure 11 is a cross section showing drill holes ZK0-2
and ZK0-1. ZK0-1 was drilled largely above the main diorite unit which contains the mineralisation however the hole still
intersected over 100 metres of mineralisation including 23 metres at 0.9 g/t gold, 4.7 g/t silver and 46 metres at 0.4 g/t
gold, 7.1 g/t silver.
26
27
ZK1-5 Box 50 (From273.40m-278.60m)
D I R E C T O R S ’ R E P O R T
Figure 11 - Cross Section showing ZK0-2 and ZK0-1
28
Drill Hole ZK1-5 returned 146 metres at 1.5 g/t gold, 1.8 g/t silver, that contains a higher-grade core of 87 metres at 2.1
g/t gold, 1.9 g/t silver. Drill hole ZK1-5 is located 80 metres along strike from, and correlates with, the ZK0-2 discovery
hole which returned 151 metres at 0.9 g/t gold and 3.8 g/t silver and also contained a higher-grade core of 63 metres
at 1.6 g/t gold and 5.1 g/t silver. ZK1-5 was drilled across the mineralisation and the intercept is believed to represent
near true width.
Drill Hole ZK1-3 intersected 225 metres of mineralisation comprising 58 metres at 0.5 g/t gold, 1.9 g/t silver from near
surface (including 30 metres at 0.8 g/t gold, 3.1 g/t silver), plus a zone of 131 metres at 0.5 g/t gold, 3.1 g/t silver
(including 78 metres at 0.7 g/t gold, 3.5 g/t silver). ZK1-3 Is located on the same section as ZK1-5 and is believed to have
been drilled nearer the margins of the mineralised domain.
Figure 12 shows the location of ZK1-3 and ZK1-5, and the other ZK series of drill holes which are yet to be logged
and assayed. It shows antimony in soil which does appear to image the mineralisation due to the strong correlation
of antimony with the intrusion related gold in the four holes assayed to date. As Figure 12 which shows combined
Au-Cu-Mo in soil geochemistry, the current 500-metre-long zone of mineralisation shows relatively little geochemical
expression, possibly masked by the larger gold-copper in soil anomalies believed to relate to gold-copper porphyry
mineralisation.
Figure 12 - Antimony in soil, and coincident gold, anomalies and new targets along strike
28
29
D I R E C T O R S ’ R E P O R T
The mineralisation encountered in ZK1-5, ZK1-3 and ZK0-1 is consistent with that encountered in the ZK0-2 discovery
hole. The mineralisation is primarily contained within a diorite and metamorphosed diorite unit. The mineralisation is
defined by a 500-metre northwest-southeast belt of under-ground mine workings which is parallel to a main structural
trend in the region. The diorite unit that hosts the mineralisation is some 200 metres wide and appears to dip to the
northeast at 50-70 degrees. There is also a second zone of mineralisation, as yet not well defined, located in an overlying
intrusive breccia unit.
In addition to the 500 meter strike extent defined by the underground workings and historical drilling there are two
larger antimony in soil anomalies, with coincident gold in soil anomalies, along strike to the southeast which were
not recognised prior to the Company’s farm-in. Mapping and sampling of the creek exposures in these anomalies has
defined a 2-kilometre strike extent of high-grade gold and silver mineralisation at surface with assays ranging from 14.35
to 0.1 g/t gold, 498 to 0.3 g/t silver. The mineralisation, alteration, and structural controls to mineralisation appear to be
directly spatially related to the large soil anomalies. This extends the potential strike of the recently announced bulk gold
discovery at Colorado V by 500 percent to 2.5 kilometres. The much broader zone of anomalous soil geochemistry to
the south-east of CV1 and CV2 will also be the subject of follow-up.
Figure 13 shows composite gold-copper-molybdenum in soils. This map highlights a number of large coincident gold-
copper-molybdenum soil anomalies which were the Company’s main targets prior to the ZK0-2 intrusion related gold
discovery hole. Each anomaly covers approximately 1 km2 and the limited historical drilling only tested the margins of
these anomalies. While the focus has switched to prioritising the assay of drill holes on the current discovery trend the
Company remains excited by, and committed to, assaying the holes which were drilled on the flanks of soil anomalies
A, B and C. Each of these anomalies has the scale to support a significant discovery and are located less than 5km along
strike from Lumina Gold’s 17 million-ounce Cangrejos gold discovery(1) which is currently going through permitting.
Figure 13 - Colorado V gold/copper/molybdenum soil geochemistry and historical drill holes
30
Figure 14 - Cross Section showing ZK1-3 and ZK1-5
30
31
D I R E C T O R S ’ R E P O R T
Discovery of large-scale Gold-Copper Porphyry Targets - Colorado V
Assay results have been received from drill holes located on the margins of a series of gold-copper soil anomalies, 1
kilometre long, believed to represent porphyry Au-Cu targets.
The drill holes are from the series of 60 historical holes drilled by CEL’s farm-in partner targeting extensions to narrow
high-grade vein hosted gold mineralisation they are currently exploiting. These historical drill holes were not systematically
logged or assayed for bulk tonnage gold or base metal mineralisation. As the focus of the current owner of Colorado V
was supplying high grade feed to their existing processing plant these soil anomalies were not a priority and consequently
poorly explored.
All drill holes which penetrated the edges of these anomalies returned ore grade intersections which significantly upgrade
these large targets.
Interpretation suggests the mineralisation has similar geology, grades, and surface footprint as the Tier1 Cangrejos Gold
Project1 located five kms to the northeast.
To assist shareholders, appreciate the scale of the opportunity CEL presents an Exploration Target reporting according to
the JORC Code (2012). Highlights include (refer Table 5):
Anomaly A
Drill hole ZK0-5, drilled across the extreme south-eastern margin of the anomaly returned 51 m at 0.7
g/t gold, 1.4 g/t silver within a broader zone of 84 metres at 0.5 g/t gold, 1.2 g/t silver
This anomaly is one kilometre long and only tested by ZK0-5, ZK10-1 (pending) and panel sampling in
the main adit, which averaged 1.5 g/t gold and 0.15% copper.
Anomaly B:
SAZK2-1 returned 63m at 0.6 g/t gold, 2.1 g/t silver and 0.1% copper to the edge of the anomaly and
SAK0-2 (located so the bottom 50 metres of the hole penetrated Anomaly B) returned 55m at 0.7 g/t
gold, 1.5 g/t silver and 0.1% copper with grade increasing at depth
The anomaly is almost one kilometre in length and tested by only three drill holes, all located near its
edge, all of which encountered significant mineralisation
None of these holes were valid tests of the anomalies with most being drilled off the anomalies, or at best, into the edge
of the anomalies (see Figure 15). However, those holes which did intersect the edges of Soil Anomaly A and B returned
significant results.
The results demonstrate that these anomalies are compelling targets of significant scale. The grades in the few holes
which did penetrate the margins of the anomalies are in line with those in the Tier 1 Cangrejos Project (2) located
approximately 5 kilometres along strike.
The only other assay data within this Anomaly is the limited panel sampling in the main Humedos Mine Adit completed by
the Company. This panel sampling covered 40 metres of the adit with the panel samples averaging 1.5 g/t gold, 3.5 g/t
silver and 0.15% copper. These higher grades are now interpreted as being consistent with the location of these samples
nearer to the centre of Anomaly A. The company has mapped 300 metres of porphyry style mineralisation in this adit
and intends to rock saw channel sample this entire adit.
The geology and surface extent of the anomalies is similar to Cangrejos and of sufficient size to host a major gold
discovery.
32
Figure 15 - Showing location of drilling and Anomaly A and B (>100ppb gold in soil)
Potential Size of the Exploration Targets
Anomaly A and Anomaly B, combined, define an Exploration Target ranging between 442 to 468 million tonnes grading
from 0.5 to 1.0 g/t gold, 1.5 to 2.5 g/t silver, plus copper credits.
It should be noted that the potential quantity and grade of the Exploration Target is conceptual in nature. There has been
insufficient exploration to determine a mineral resource, and there is no certainty that further exploration work will result
in the determination of mineral resources.
A detailed explanation of the basis for the statement, including specific description of the level of exploration activity
already completed is available below.
-
-
-
-
-
Surface area defined by a 100 ppb gold soil anomaly which coincides with a 0.1 g/t gold cut-off in drill hole assays
and the panel sampling in the adit
Depth extent of 400 metres assumed based on a reasonable depth extent for surface mining operation of a large
steeply plunging low grade Au-Ag-Cu deposit. Current intersections in holes assayed by the Company which
demonstrate mineralisation persist with depth, and is open below 400 metres sub-surface
Density estimates of 2,600 – 2,750 kg/m3 are based on typical expected values for diorite, schist and diorite-schist
breccia intersected in the drilling, in the adit, and observed on surface. The assumed density is not supported by
sample density measurements.
Gold, Silver and Copper grade estimates are based on drill intersections that coincide with the volume defined by
the gold in soil anomaly to a depth of 400m below surface. A grade range of 0.5 to 1.0 g/t gold and 1.5 to 2.5 g/t
silver has been used in the Exploration Target estimate.
The proportion above cut-off (0.2 g/t gold) is an estimate based on the variability of grade from drilling and adit
panel sampling. A range of 70-90% has been used.
32
33
D I R E C T O R S ’ R E P O R T
Exploration Target Anomaly A
High estimate
Low estimate
Tonnage (Mt)
Gold Grade (g/t)
Silver Grade (g/t)
% tonnage above cut-off
275
1.0
2.5
90%
260
0.5
1.5
70%
Exploration Target Anomaly B
High estimate
Low estimate
Tonnage (Mt)
Gold Grade (g/t)
Silver Grade (g/t)
% tonnage above cut-off
Totals
Tonnage (Mt)
Gold Grade (g/t)
Silver Grade (g/t)
Table 5 - Exploration Target
193
1.0
2.5
90%
182
0.5
1.5
70%
High estimate
Low estimate
468
1.0
2.5
442
0.5
1.5
Figure 16 - 3D Image showing Anomaly A (sub-surface projection) and drilling
Anomaly A (Figure 16) represents a significant target with the surface area defined by the 100ppb gold contour covering
250,000 square metres. Projecting this shape down to 400 metres sub surface defines a shape containing 260-275
million tonnes. Drilling and underground panel sampling has demonstrated this target has grades above 1 g/t gold near
its centre and 0.5 g/t gold near its margins and has not been validly drill tested.
34
Figure 17 - 3D Image showing Anomaly B (sub-surface projection) and drilling
Anomaly B (Figure 17) represents a significant target with the surface area defined by the 100ppb gold contour covering
175,000 square metres. Projecting this shape down to 400 metres subsurface defines a shape containing 182-193 million
tonnes. This target has been tested by only three drill holes, all located near its edge, all of which encountered significant
widths of better than 0.5 g/t gold mineralisation with significant silver and copper credits.
34
35
Figure 18 - Cross Section showing drill hole SAZK2-1
D I R E C T O R S ’ R E P O R T
Forward Exploration Program to test the Exploration Targets
The Company has contracted MPX geophysics to undertake a 50 square kilometre helicopter magnetic survey in October
- November 2020. The survey will be flown on east-west lines with a line spacing of 50-metres. The results of this survey
will be used to better define structural controls and map the intrusions and alteration in 3D to better define the potential
porphyry targets. It is anticipated this data will be received and processed in December 2020.
The Company has commenced an infill and extension soil sampling program to verify the historical Colorado V soil
data, integrate the data with the Company’s soil data over the El Guayabo concession, and tighten up the Colorado
V soil anomalies. The Company will continue with its program of assaying all of the historical drill holes including the
remaining holes drilled in the vicinity of soil Anomalies A, B and C.
These activities are expected to be completed in this year. Once this data has been integrated with the existing geological
model, the Company will make a decision on exploration drilling in Ecuador to test these new Exploration Targets and
drill infill/twin holes on the ZK0-2 discovery trend. The Company notes drilling contract rates in Ecuador are at historical
lows due to a marked downturn in exploration as a result of COVID-19.
Re-assaying Program El Guayabo Concession
The historical drill core at El Guayabo was subjected to a limited assay program when the holes were drilled 25 years
ago. The first five holes were assayed for gold only with subsequent holes only assayed for gold, silver, copper, zinc,
lead, molybdenum, and arsenic. CEL undertook a program of re-assaying the historical El Guayabo core prior to starting
work on the Colorado V historical core. This program involved re-assaying approximately 1,000 metres of the total 7,600
metres of historical drill core.
The aims of the program were to provide multi element assay data to better vector on the porphyry targets and to
validate the historical assay data. Due to the desire to keep at least quarter core for future reference, the sections re-
assayed were constrained to subsections within the larger historical intercepts. The results included intercepts of (refer
Table 5 for full details:
62 metres at 5.2 g/t gold, 21.3g/t silver and 0.25% copper from 40 metres, and
57 metres at 1.2 g/t gold and 3.4 g/t silver and 0.18% copper from 114 metres
available samples from drill hole GGY-02 within a broader historical intercept of
156 metres at 2.6 g/t gold, 9.7 g/t silver and 0.16% copper from 76 metres
42.7 metres at 2.1 g/t gold, 2.8 g/t silver and 0.05% copper from 112 metres
available samples from drill hole GGY-02 within a broader historical intercept of
65 metres at 1.4 g/t gold, 2.8 g/t silver and 0.06% copper from 89 metres
The results validated the historical assays with the re-assays being within 3% of the historical results for gold and 7% for
silver. The re-assays returned copper results averaging 22% lower across the 1,000 metres. Inspection of the discrepancies
indicates that most are likely related to missing sections of core. The higher-grade copper zones, unlike the higher-grade
gold zones, are visual and as such, the material with the higher copper grades may have been taken and processed over
the past 25 years by artisanal miners.
Of note are the re-assays for 2 sections of drill hole GY-02 and drill hole JDH-013. Drill hole GY-02 reported a historical
intercept of 156 metres at 2.6 g/t gold, 9.7 g/t silver and 0.16% copper from 76 metres. The section from 40-102 metres
re-assayed by CEL returned 62 metres at 5.2 g/t gold, 21.3 g/t silver and 0.25% copper compared to historical assays of
4.8 g/t gold, 20.0 g/t silver and 0.23% copper over the same interval. Re-assays for JDH-013 returned 42.7 metres at 2.1
g/t gold, 2.8 g/t silver and 0.05% copper from 112 metres compared to the historical result of 2.0 g/t gold, 3.7 g/t silver
and 0.08% copper over the same interval.
Interestingly the high-grade gold zone encountered in drill holes GY-02 and JDH-13 shows a similar association with
arsenic and antimony as seen in the gold zone in the recently assayed ZK0-2 drill hole from the Colorado V concession.
Drill holes GGY-02 and JDH-13 are located approximately 4 kilometres south-east of ZK0-2 directly in line with the
structure believed to control the mineralisation encountered in ZK0-2. This spatial association on trend will be investigated
with detailed mapping once the program of logging and assaying of Colorado V drill core is complete.
36
The re-assays also confirm that the copper dominant mineralisation at El Guayabo in drill holes such as JDH-009
(historical intercept 112 metres at 0.7 g/t gold, 14.6 g/t silver and 0.6% copper, importantly appears to represent a
distinct second, and separate target.
Karoo Basin - South Africa
The Company continues to pursue its application for shale gas exploration rights in South Africa. As previously reported,
the Department of Mineral Resources is progressing a new petroleum resources development bill, and the Minister
reportedly indicated during his address in the debate on the Presidential State of the Nation Address in June that the bill
will soon undergo public participation, as part of the cabinet and parliamentary approval processes.
COVID-19
Following a brief suspension of all activities in Argentina and Ecuador, due to COVID-19 restrictions, CEL has
recommenced all exploration programs with strict COVID-19 protocols in place. The Company continues to work with
all levels of government and local communities in relation to COVID-19. To date no employee or contractor has tested
positive to COVID-19.
The Company’s priority remains the health and wellbeing of all its staff and contractors and their families. A copy of the
Company’s COVID-19 protocols is available on our website.
Foreign Resource Estimate Hualilan Project
La Mancha Resources 2003 foreign resource estimate for the Hualilan Project
Category
Measured
Indicated
Total of Measured & Indicated
Inferred
Tonnes
(kt)
Gold Grade
(g/t)
Contained Gold
(koz)
218
226
445
977
14.2
14.6
14.4
13.4
13.7
100
106
206
421
627
Total of Measured, Indicated & Inferred
1,421
Source: La Mancha Resources Toronto Stock Exchange Release dated 14 May 2003 -Independent Report on Gold Resource Estimate. Rounding
errors may be present. Troy ounces (oz) tabled here
For details of the foreign non-JORC compliant resource and to ensure compliance with LR 5.12 please refer to
the Company’s ASX Release dated 25 February 2019. These estimates are foreign estimates and not reported in
accordance with the JORC Code. A competent person has not done sufficient work to clarify the foreign estimates
as a mineral resource in accordance with the JORC Code. It is uncertain that following evaluation and/or further
exploration work that the foreign estimate will be able to be reported as a mineral resource. The company is not in
possession of any new information or data relating to the foreign estimates that materially impacts on the reliability
of the estimates or CEL’s ability to verify the foreign estimates estimate as minimal resources in accordance with
Appendix 5A (JORC Code). The company confirms that the supporting information provided in the initial market
announcement on February 25 2019 continues to apply and is not materially changed.
36
37
D I R E C T O R S ’ R E P O R T
Competent Person Statement – Exploration Results and Exploration Target
The information that relates to sampling techniques and data, exploration results and geological interpretation and
Exploration Targets has been compiled Dr Stuart Munroe , BSc (Hons), PhD (Structural Geology), Gdip (AppFin&Inv)
who is a full-time employee of the Company. Dr Munroe is a Member of the AusIMM. Dr Munroe has over 20 years’
experience in the mining and metals industry and qualifies as a Competent Person as defined in the JORC Code (2012).
Dr Munroe has sufficient experience of relevance to the styles of mineralisation and the types of deposits under
consideration, and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the
Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results. Dr Munroe consents
to the inclusion in this report of the matters based on information in the form and context in which it appears. The
Australian Securities Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this
release.
Competent Person Statement – Foreign Resource Estimate
The information in this release provided under ASX Listing Rules 5.12.2 to 5.12.7 is an accurate representation of the
available data and studies for the material mining project. The information that relates to Mineral Resources has been
compiled by Dr Stuart Munroe , BSc (Hons), PhD (Structural Geology), Gdip (AppFin&Inv) who is a full-time employee
of the Company. Dr Munroe is a Member of the AusIMM. Dr Munroe has over 20 years’ experience in the mining and
metals industry and qualifies as a Competent Person as defined in the JORC Code (2012).
Dr Munroe and has sufficient experience which is relevant to the style of ineralization and type of deposits under
consideration to qualify as Competent Person as defined in the 2012 Edition of the JORC Code for Reporting of, Mineral
Resources and Ore Reserves. Dr Munroe consents to the inclusion in this report of the matters based on information
in the form and context in which it appears. The Australian Securities Exchange has not reviewed and does not accept
responsibility for the accuracy or adequacy of this release.
EVENTS SUBSEQUENT TO BALANCE DATE
On the 23 July 2020, the Company issued 100,000,000 shares at 20 cents per share, raising $20M before costs of $1.3M.
The impact of the Coronavirus (COVID-19) pandemic is ongoing, and while there has been no material impact financially
for the Group up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the
reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government
and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic
stimulus that may be provided.
RESULTS OF OPERATIONS
The net loss after tax for the financial year ended 30 June 2020 for the Group was $1,735,299 (2019: $5,834,974).
DIVIDENDS
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.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Group during the financial year and up to the date of
this report, other than as set out in this report.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Likely developments in the operations of the Group are set out in the above review of operations in this annual financial
report. Any future prospects are dependent upon the results of future exploration and evaluation.
ENVIRONMENTAL REGULATIONS
The Group carries or carried out operations that are subject to environmental regulations under legislation in Ecuador
and Argentina. The Group has formal procedures in place to ensure regulations are adhered to. The Group is not aware
of any breaches in relation to environmental matters.
38
REMUNERATION REPORT (Audited)
REMUNERATION POLICY
The remuneration policy of the Group has been designed to align Director objectives with shareholder and business
objectives by providing a fixed remuneration component that is assessed on an annual basis in line with market rates. The
Board of Challenger Exploration believes the remuneration policy to be appropriate and effective in its ability to attract
and retain the best directors to run and manage the Company, as well as create goal congruence between directors and
shareholders. The remuneration policy, setting the terms and conditions for executive and non-executive directors and
other senior staff members, was developed and approved by the Board.
The Board’s policy for determining the nature and amount of remuneration for board members is as follows:
In determining competitive remuneration rates, the Board considers local and international trends among comparative
companies and the industry generally so that executive remuneration is in line with market practice and is reasonable in
the context of Australian executive reward practices. All executives receive a base salary (which is based on factors such
as length of service and experience), superannuation, and may be issued options or performance shares from time to
time.
The Group is currently an exploration entity, and therefore speculative in terms of performance. Consistent with
attracting and retaining talented executives, Executive Directors and Senior Executives are paid market rates associated
with individuals in similar positions within the same industry. Options and other performance incentives may be issued
particularly if the Group moves from exploration towards a producing entity and key performance indicators such
as market capitalisation and production and reserves growth can be used as measurements for assessing executive
performance.
All remuneration paid to Executive Directors and Senior Executives is valued at the cost to the Company and expensed.
Options and other performance rights are valued using the Black-Scholes methodology, which takes account of factors
such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity
of the option. Although a value is ascribed and included in total remuneration, it should be noted that the Executive
Directors and Senior Executives have not received this amount and the option may have no actual financial value unless
the options achieve their exercise price.
The Board policy is to remunerate non-executive Directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non-executive Directors and reviews 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, and they do not receive performance shares
or options, however, to align non-executive Directors’ interests with shareholder interests, the Directors are encouraged
to hold shares in the Company.
The Company may engage remuneration consultants from time to time. The Company will ensure any recommendation
from a remuneration consultant will be made free from undue influence from any members of Key Management
Personnel. The Company did not engage remuneration consultants for the year ended 30 June 2020.
KEY MANAGEMENT PERSONNEL
(a)
Details of Key Management Personnel
Fletcher Quinn – Non-Executive Chairman(a)
Kris Knauer – Managing Director(a)
Scott Funston – Executive Director(a)
Michael Fry – Non-Executive Chairman(b)
Robert Willes – Managing Director(b)
Clinton Carey – Non-Executive Director(b)
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b) Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
38
39
D I R E C T O R S ’ R E P O R T
Directors’ remuneration and other terms of employment are reviewed annually by the non-executive Directors having
regard to performance against goals set at the start of the year, and relative comparative information.
Except as detailed in Notes (b) – (d) below, no Director has received or become entitled to receive, during or since the
financial year, a benefit because of a contract made by the Company or a related body corporate with a director, a firm
of which a director is a member or an entity in which a director has a substantial financial interest.
(b)
Compensation of Key Management Personnel
Remuneration Policy
The Board of Directors is responsible for determining and reviewing compensation arrangements for the executive team.
The Board will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis
by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of a high-quality Board and executive team. Remuneration of Key Management Personnel is
set out below.
The value of remuneration received or receivable by Key Management Personnel for the financial year ended 30 June
2020 is as follows:
Primary
Equity
Compensation
Post-employment
Performance
Related
%
Base Salary
and Fees
$
Bonus and
Non Monetary
Benefits
$
Value of
Performance
Rights / Shares
$
Directors
Fletcher Quinn(a)
Kris Knauer(a)
Scott Funston(a)
Michael Fry(b)
Robert Willes(b)(c)
43,000
268,296
211,250
-
-
-
-
-
-
37,500(d)
154,815(e)
-
-
-
-
Total 2020
522,546
37,500
154,815
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b) Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
Superannuation Termination
Contributions
Benefits
TOTAL
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
43,000
268,296
403,565
-
-
-
-
38.36
-
-
714,861
21.65
(c) Mr Willes remains a consultant to the Company, however, is no longer a member of Key Management Personnel
(d)
Mr Funston received shareholder approval on 28 November 2019 to receive 937,500 ordinary shares in lieu of cash consideration for services
on the reverse acquisition that closed on 4 July 2019.
(e)
Performance rights have been valued on a company share price on date of issue and value is bought to account over the vesting period.
40
2019
Primary
Equity
Compensation
Post-employment
Performance
Related
%
Base Salary
and Fees
$
Bonus and
Non Monetary
Benefits
$
Value of
Performance
Rights / Shares
$
Directors
Fletcher Quinn(a)
Kris Knauer(a)
Scott Funston(a)(c)
Michael Fry(b)
Robert Willes(b)
Total 2019
-
-
25,000
-
18,265
43,265
(c)
Compensation Options
-
-
-
-
-
-
-
-
-
-
-
-
Superannuation Termination
Contributions
Benefits
TOTAL
$
-
-
-
-
1,735
1,735
$
-
-
-
-
-
-
$
-
-
25,000
-
20,000
45,000
-
-
-
-
-
-
No options were granted to Key Management Personnel of the Group during the year.
There have been no alterations to the terms and conditions of options granted as remuneration since their grant date.
(d)
Share, Option and Performance Rights holdings
Options and Performance Rights may be issued to Key Management Personnel as part of their remuneration. The
Options and Performance Rights are issued to increase goal congruence between Executives, Executive Directors and
Shareholders. Options and Performance Rights are not issued to Non-Executive Directors.
During the financial year Mr Funston received 5,000,000 Class A Performance Rights and 5,000,000 Class B Performance
Rights following shareholder approval on 28 November 2019.
Class A Performance Rights have the following vesting conditions:
A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
i.
ii.
iii.
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 1.0 grams per tonne Gold Equivalent.
Class B Performance Rights will vest on the completion and announcement by Challenger (subject to the provision of
information allowable at the time of completion) of a positive Scoping Study (as defined in the JORC Code) on either the
Hualilan Project or the El Guayabo Project by an independent third-party expert which evidences an internal rate of return
of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions, including deliverable spot commodity /
mineral prices, which are independently verifiable) provided that the total cumulative EBITDA over the project life is over
US$50m.
(e)
Employment Contracts of Key Management Personnel
The Managing Director Mr Kris Knauer entered into an agreement on 4 July 2019 pursuant to which Mr Knauer was
appointed as Managing Director of the Company. The material terms and conditions of the agreement are set out
below:
(a)
(b)
(Commencement Date): The date of the Company’s re-admission to the Official List.
(Term): Two (2) years from the Commencement Date or until validly terminated.
40
41
D I R E C T O R S ’ R E P O R T
(c)
(d)
(e)
(f)
(g)
(Remuneration): Mr Knauer receives a base salary of $295,000 per annum (including superannuation).
(Incentives): Mr Knauer is eligible to receive Securities under the Company’s Incentive Option Plan and
Performance Rights Plan.
(Accrued Entitlements): All entitlements that have accrued to Mr Knauer prior to the date of this agreement
will be honoured by the Company.
(Termination): The Company may terminate the agreement by providing six (6) months’ written notice.
(Expenses): Mr Knauer is entitled to reimbursement for all reasonable travelling expenses, accommodation
and general expenses incurred in the performance of his duties under the agreement.
Effective January 2020, the salary component of remuneration for Mr Knauer in his capacity as Managing Director was
increased to $295,000.
The Finance Director, CFO and Company Secretary, Mr Scott Funston entered into an agreement on 4 July 2019,
pursuant to which Mr Funston was appointed as Company Secretary, Chief Financial Officer and Finance Director of the
Company. The material terms and conditions of the agreement are set out below:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(Position): Company Secretary, Chief Financial Officer and Finance Director
(Commencement Date): One (1) day after the Company’s re-admission to the Official List.
(Term): Two (2) years from the Commencement Date or until validly terminated.
(Remuneration): Mr Funston receives a base salary of $245,000 per annum (including superannuation).
(Incentives): Mr Funston is eligible to receive Securities under the Company’s Incentive Option Plan and
Performance Rights Plan.
(Accrued Entitlements): All entitlements that have accrued to Mr Funston prior to the date of this agreement
will be honoured by the Company.
(Termination): The agreement may be terminated by either party by providing three (3) months written
notice.
(Expenses): Mr Funston is entitled to reimbursement for all reasonable travelling expenses, accommodation
and general expenses incurred in the performance of his duties under the agreement.
Effective January 2020, the salary component of remuneration for Mr Funston in his capacity as Finance Director, CFO
and Company Secretary was increased to $245,000, with his employment increased to a full-time basis.
Pursuant to an agreement executed on 20 August 2008, Mr Michael Fry provided services to the Group as a Non-Executive
Chairman. The broad terms of this agreement include remuneration payable of $60,000 per annum. The agreement
may be terminated by either party by providing 3 months written notice and upon payment of any outstanding fees for
services rendered.
Effective 21 June 2018, Mr Fry agreed to forego all fees yet to be paid for his capacity as non-executive chairman of the
Company up to and including the date of his resignation on 4 July 2019.
On 3 April 2013, the Group entered into an executive services agreement with Mr Robert Willes under which Mr Willes
received a salary package of $375,000 per annum inclusive of superannuation for Mr Willes’ services as Managing Director
of the Group. The agreement could have been terminated by either party by providing 3 months written notice and,
in the case of termination by the Company without reason, upon payment of three months’ salary. Further provisions
applied in respect of any unissued Retention Shares and/or unvested Incentive Shares.
As part of his remuneration package, and as approved by shareholders at the EGM held 22 August 2013, Mr Willes
would have been issued 4,000,000 fully paid ordinary shares (“Retention Shares”) in the Company in equal 6 monthly
instalments of 666,667 Retention Shares for a period of 36 months. The issue of Retention Shares was conditional on
Mr Willes remaining an employee of the Company as at the date the respective Retention Shares were to be issued. The
final two instalments of shares required to be issued for 1,333,334 shares in total are yet to be issued at the date of this
report and will not be issued.
42
Effective 21 June 2018, components of remuneration for Mr Willes in his capacity as Managing Director were altered.
These changes included:
•
•
foregoing $518,750 of fees yet to be paid for his capacity as Managing Director up to and including 31 May 2018;
receiving $200,000 of fees yet to be paid for his capacity as Managing Director in cash at the time the Company
completes a further capital raising of at least $1,000,000;
• waive any entitlement to receive fees (as Managing Director) on and from 1 June 2018 until such time as the Company
completes the pro-rata non-renounceable entitlement offer as announced on 13 June 2018 (Rights Issue); and
• on and from completion of the Rights Issue, receive remuneration of $10,000 per month for a three-month term,
such amount to be revisited at the end of this three-month period.
Mr Willes agreed to forgo all remuneration that may be payable to him under his agreement up to the date of his
resignation on 4 July 2019.
Under an established Performance Rights Plan, Mr Willes had been issued 16,000,000 Performance Rights in the following
tranches and subject to the following vesting conditions:
• Tranche 1 – 4,000,000 Performance Rights (fair value of $69,593 – refer to Note 11 for further details) vest on
completion of 12 months continuous employment with the Company and the Company having or achieving a
market capitalisation of $100m or greater by no later than 7 April 2016. These Performance Rights have expired.
• Tranche 2 – 4,000,000 Performance Rights (fair value of $1,707) vest on completion of 24 months continuous
employment with the Company and the Company having or achieving a market capitalisation of $200m or greater
by no later than 7 April 2018. These Performance Rights have expired.
• Tranche 3 – 4,000,000 Performance Rights (fair value of $308,000) vest on completion of 36 months continuous
employment with the Company and the Company having or achieving a 3P resource in excess of 1TCF by no later
than 7 April 2018. These Performance Rights have expired.
• Tranche 4 – 4,000,000 Performance Rights (fair value of $308,000) vest on completion of 36 months continuous
employment with the Company and either the Company by no later than 7 April 2020:
•
•
•
announcing that its interests in the Karoo Basin, South Africa can be commercially developed; or
receiving an independent reserves certification containing proved reserves; or
having or achieving a market capitalization of $500m or greater.
It is not currently considered probable the Tranche 4 Performance Rights will vest.
At the completion of the consolidation of the issued capital on a 1 for 5 basis, Mr Willes held 800,000 performance rights
at 30 June 2019 under the Tranche 4 Performance Rights. These performance rights expired during the financial year.
(f)
Shares held by Key Management Personnel
Balance
at 1.7.19
Shares
Purchased
Net Change
Other
Balance
at 30.06.20
Directors
Fletcher Quinn(a)(c)
Kris Knauer(a)
Scott Funston(a)
Michael Fry(b)
Robert Willes(b)
Clinton Carey(b)
10,328,637
42,195,332
3,666,667
366,593
533,333
50,000
13,000,000
-
1,137,500
-
-
-
-
-
-
(366,593)
(533,333)
(50,000)
23,328,637
42,195,332
4,804,167
-
-
-
57,140,562
14,137,500
(949,926)
70,328,136
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b) Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
(c) Subsequent to the financial year and up to the date of this report, Mr Quinn purchased an additional 500,000 ordinary shares.
No shares were issued by the Company during or since the financial year ended 30 June 2020 as a result of the
exercise of an option or performance right.
42
43
D I R E C T O R S ’ R E P O R T
(g) Options held by Key Management Personnel
Balance
at 1.7.19
Options
Expired
Options
Issued
Balance
at 30.06.20
Total
Vested
Total
Exercisable
Directors
Fletcher Quinn(a)
Kris Knauer(a)
Scott Funston(a)
Michael Fry(b)
Robert Willes(b)
Clinton Carey(b)
500,000
9,734,167
2,000,000
-
-
-
(500,000)
(880,000)
-
-
-
-
12,234,167
(1,380,000)
-
-
-
-
-
-
-
-
8,854,167
2,000,000
-
-
-
-
8,854,167(e)
2,000,000(e)
-
-
-
10,854,167
10,854,167
-
-
-
-
-
-
-
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b) Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
(c) Mr Knauer and Mr Funston were issued options in Challenger pursuant to the Additional Offers in Section 6 of the Prospectus dated 15 May
2019
(d) Shareholders approved a consolidation of capital on a 1 for 5 basis at a General Meeting held on 29 April 2019
(e) Unexercisable options are subject to escrow under ASX Listing Rules up to 4 July 2021
(h)
Performance Shares held by Key Management Personnel
Balance
at 1.7.19
Received
as Remuneration
Performance
Shares
Expired
Net Change
Other
Balance
at 30.06.20
Total
Vested
Total
Exercisable
Directors
Fletcher Quinn(a)
Kris Knauer(a)(c)
Scott Funston(a)
Michael Fry(b)
Robert Willes(b)
Clinton Carey(b)
-
37,000,000
-
-
800,000
-
37,800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(800,000)
-
-
37,000,000
-
-
-
-
(800,000)
37,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b)Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
(c) Mr Knauer was issued performance shares in Challenger. They consist of 18,500,000 Performance A Shares and 18,500,000 Performance B
Shares. Details of Performance Shares are disclosed in Note 14 of the financial report.
(i)
Performance Rights held by Key Management Personnel
Balance
at 1.7.19
Received
as Remuneration
Performance
Shares
Expired
Net Change
Other
Balance
at 30.06.20
Total
Vested
Total
Exercisable
Directors
Fletcher Quinn(a)
Kris Knauer(a)(c)
Scott Funston(a)
Michael Fry(b)
Robert Willes(b)
Clinton Carey(b)
-
-
-
-
- 10,000,000
-
-
-
-
-
-
- 10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000
-
-
-
10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b)Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
Please refer to (b) Remuneration of Key Management Personnel, above for the value of performance rights issued to MR
Funston during the financial year.
44
(j)
Other Transactions with Key Management Personnel
Mr Quinn is a director of Seco Resources Pty Ltd. Seco has provided his services as Chairman to a value of $43,000
(2019: Nil) to Challenger during the year on normal commercial terms. This amount is included the Remuneration Report
section of the Directors Report. $20,000 (2019: Nil) was outstanding at year end.
Mr Knauer is a director of Greenfield Securities Pty Ltd. Greenfield has provided his services as Managing Director and
CEO to a value of $268,296 (2019: Nil) to Challenger during the year on normal commercial terms. This amount is
included the Remuneration Report section of the Directors Report. $98,333 (2019: Nil) was outstanding at year end.
Mr Funston is a director of Resourceful International Consulting Pty Ltd. Resourceful has provided his services as
Director, Company Secretary and CFO to a value of $211,250 (2019: $25,000) to Challenger during the year on normal
commercial terms. This amount is included the Remuneration Report section of the Directors Report. $36,250 (2019:
Nil) was outstanding at year end.
(k)
Amounts owing to Key Management Personnel
A total of $154,583 was outstanding to Key Management Personnel as at 30 June 2020 (2019: Nil).
END OF REMUNERATION REPORT
OPTIONS
At the date of this report, 86,644,444 unlisted options over new ordinary shares in the Company were on issue:
Type
Unlisted
Date of Expiry
Exercise Price
Number under Option
30 June 2022
$0.04
86,644,444
1,000,000 ordinary shares were issued upon the exercise of options during the financial year ended 30 June 2020 and
6,950,000 unlisted options exercisable at 25 cents on or before 30 June 2020 expired, unexercised.
PERFORMANCE SHARES
At the date of this report, 120,000,000 Performance Shares over new ordinary shares in the Company were on issue:
Type
Performance A
Performance B
Number
60,000,000
60,000,000
Performance A Rights have the following vesting conditions:
A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
i.
ii.
iii.
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 1.0 grams per tonne Gold Equivalent.
Performance B Rights will vest on the completion and announcement by Challenger (subject to the provision of
information allowable at the time of completion) of a positive Scoping Study (as defined in the JORC Code) on either the
Hualilan Project or the El Guayabo Project by an independent third-party expert which evidences an internal rate of return
of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions, including deliverable spot commodity/
mineral prices, which are independently verifiable) provided that the total cumulative EBITDA over the project life is over
US$50m.
44
45
D I R E C T O R S ’ R E P O R T
PERFORMANCE RIGHTS
At the date of this report, 16,000,000 Performance Rights over new ordinary shares in the Company were on issue:
Type
Class A
Class B
Number
8,000,000
8,000,000
Class A Performance Rights have the following vesting conditions:
A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
i.
ii.
iii.
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 1.0 grams per tonne Gold Equivalent.
Class B Performance Rights will vest on the completion and announcement by Challenger (subject to the provision of
information allowable at the time of completion) of a positive Scoping Study (as defined in the JORC Code) on either the
Hualilan Project or the El Guayabo Project by an independent third-party expert which evidences an internal rate of return
of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions, including deliverable spot commodity /
mineral prices, which are independently verifiable) provided that the total cumulative EBITDA over the project life is over
US$50m.
INCENTIVE PERFORMANCE RIGHTS
At the date of this report, 5,250,000 Incentive Performance Rights over new ordinary shares in the Company were on
issue:
Type
Incentive Performance Rights
Number
5,250,000
Incentive Performance Rights have the following vesting condition:
The holder must remain employed or engaged by the Company for a minimum period of twelve months from 28
November 2019.
No ordinary shares were issued upon the vesting of performance rights or performance shares during or since the
financial year ended 30 June 2020.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
In accordance with the constitution, except as may be prohibited by the Corporations Act 2001, every officer, auditor
or agent of the Group shall be indemnified out of the property of the Group against any liability incurred by them in
their capacity as an officer, auditor or agent of the Group or any related corporation in respect of any act or omission
whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal. The Company paid
insurance premiums in respect of Directors’ and Officers’ Liability Insurance contracts for current officers of the Company,
including officers of the Company’s controlled entities. The liabilities insured are damages and legal costs that may be
incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers
of entities in the Group. The total amount of insurance premiums paid has not been disclosed due to confidentiality
reasons.
46
PROCEEDINGS ON BEHALF OF THE COMPANY
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.
AUDITOR’S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the
Company with an independence declaration in relation to the audit of the financial report.
The lead auditor’s independence declaration is set out on page 40 and forms part of the Directors’ Report for the year
ended 30 June 2020.
NON-AUDIT SERVICES
HLB Barnett Chown (South Africa), an overseas affiliated HLB firm, provided statutory compliance non-audit services of
$Nil during the year ended 30 June 2020 (2019: $2,636).
HLB Mann Judd (WA Partnership) did not provide any non-audit services during the financial year but did provide services
for the Independent Limited Assurance Report included in the Prospectus dated 15 May 2019 of $12,000.
This report is made in accordance with a resolution of the Directors.
Kris Knauer
Managing Director
11 September 2020
46
47
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Challenger Exploration Limited
for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
b)
any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
11 September 2020
B G McVeigh
Partner
40
48
48
49
Photo showing old workings in the Magnata Manto
C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S
A N D O T H E R C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Other income
2
348,258
300,028
Consolidated
Consolidated
Note
2020
$
2019
$
Accounting and audit fees
Consultants’ and directors’ fees
Legal and compliance
Investor relations, conferences, and corporate advice
Employee expenses
Travel expenses
Administration expenses
Share based payments
Depreciation
Foreign exchange losses
Listing premium on acquisition
Other
Loss before income tax
Income tax expense
Net loss for the year
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Income tax on other comprehensive income/(loss)
Other comprehensive loss for the year
Total comprehensive loss for the year
(63,506)
(666,948)
(141,721)
(270,804)
(24,421)
(228,827)
(230,777)
(511,695)
(4,785)
14,923
-
(2,021)
(80,132)
(85,523)
(98,239)
(5,822,719)
(1,364)
-
-
-
-
-
-
-
(1,782,324)
(5,787,949
47,025
(47,025
(1,735,299)
(5,834,974)
23
3
(326,109)
-
(326,109)
-
-
-
(2,061,408)
(5,834,974)
Basic and diluted loss per share
16
(0.35)
(6.50)
The accompanying notes form part of these financial statements.
50
C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N
A S A T 3 0 J U N E 2 0 2 0
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other Receivables
Deferred exploration and evaluation expenditure
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Borrowings
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred Tax Liability
TOTAL NON-CURRENT LIABIITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Consolidated
Consolidated
Note
2020
$
2019
$
4
5
6
5
7
8
9
10
11
3
12
13
3,801,292
115,536
43,515
3,960,343
316,276
11,653,007
46,337
12,015,620
15,975,963
1,157,129
24,990
-
5,043,935
87,941
827
5,132,703
-
3,277,843
-
3,277,843
8,410,546
729,027
-
467,780
1,182,119
1,196,807
-
-
47,025
47,025
1,182,119
1,243,832
14,793,844
7,166,714
22,177,747
186,370
(7,570,273)
13,000,904
784
(5,834,974)
14,793,844
7,166,714
The accompanying notes form part of these financial statements.
50
51
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Consolidated
2020
Issued
Capital
Accumulated Share Based
Foreign
Payment Reserve Exchange
Reserves
Losses
Option
Reserves
Total
$
$
$
$
Balance at 1 July 2019
Loss for the year
Other comprehensive loss
13,000,904 (5,834,974)
(1,735,299)
-
-
Total comprehensive loss for the year
-
(1,735,299)
Issue of share capital
Issue of deferred consideration shares
Share based payments
Shares issued on conversion of options
Share issue costs
6,639,500
2,826,667
-
40,000
(329,324)
-
-
-
-
-
-
-
-
-
-
-
511,695
-
-
-
784
7,166,714
(326,109)
-
-
(1,735,299)
(326,109)
(326,109)
-
(2,061,408)
-
-
-
-
- 6,639,500
- 2,826,667
-
-
-
511,695
40,000
(329,324)
Balance at 30 June 2020
22,177,747
(7,570,273)
511,695
(326,109)
784 14,793,844
Balance at 1 July 2018
Loss for the year
Other comprehensive loss
-
-
-
-
(5,834,974)
-
Total comprehensive loss for the year
- (5,834,974)
Issue of share capital under prospectus
Issued and paid up capital of AEP
Shares issued on reverse acquisition
at fair value of the Company
Shares issued on conversion of loans
Issue of options
Share issue costs
5,180,000
2,258,740
5,113,048
1,050,000
-
(600,884)
-
-
-
-
-
-
Balance at 30 June 2019
13,000,904 (5,834,974)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,834,974)
-
-
(5,834,974)
- 5,180,000
- 2,258,740
-
-
5,113,048
1,050,000
784
784
-
(600,884)
784
7,166,714
-
-
-
-
-
-
-
-
-
The accompanying notes form part of these financial statements.
52
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Consolidated
Consolidated
Note
2020
$
2019
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Other income
Interest received
(1,343,043)
342,799
3,249
(657,124)
-
28
NET CASH USED IN OPERATING ACTIVITIES
4
(996,995)
(657,096)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditure on exploration
Expenditure on property, plant, and equipment
Investment in subsidiary net of cash acquired
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Loans received
Repayment of loans
Proceeds from share issue
Share issue costs
NET CASH PROVIDED BY FINANCING ACTIVITIES
27
11
(5,543,857)
(47,558)
-
(2,521,846)
-
1,002
(5,591,415)
(2,520,844)
-
(467,780)
6,540,500
(741,876)
5,330,844
1,217,780
-
7,004,095
-
8,221,875
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
(1,257,566)
5,043,935
Cash and cash equivalents at beginning of the year
Effect of movements in exchange rates on cash held
5,043,935
14,923
-
-
CASH AND CASH EQUIVALENTS AT END OF YEAR
4
3,801,292
5,043,935
The accompanying notes form part of these financial statements.
52
53
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
1.
(a)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
Challenger Exploration Limited is a for-profit listed public company limited by shares that is incorporated and
domiciled in Australia. The Group has operations in Ecuador and Argentina and its principal activities are exploration
for gold and copper.
The financial report is a general purpose financial report, which has been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the
law.
The financial information has been prepared on the accruals basis and is based on historical costs and does not
take into account changing money values. Cost is based on the fair values of the consideration given in exchange
for assets.
The financial report is presented in Australian dollars.
The financial report was authorised for issue on the date of the signing of the Directors’ Declaration.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report,
comprising the financial statements and notes thereto, complies with International Financial Reporting Standards
(IFRS).
The following is a summary of the accounting policies adopted by the Group in the preparation of the financial
report. The accounting policies have been consistently applied unless otherwise stated.
(b)
Adoption of new and revised standards
Standards and Interpretations applicable to 30 June 2020
In the year ended 30 June 2020, the Directors have adopted all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to the Group and effective for the current annual reporting period. As a result
of this review the Group has applied AASB 16 from 1 July 2020.
Standards and Interpretations in issue not yet adopted
The Directors have also reviewed all Standards and Interpretations in issue not yet adopted for the year ended 30
June 2020. As a result of this review the Directors have determined that there is no material impact of the new
and revised Standards and Interpretations on the Group and, therefore, no change is necessary to the Group’s
accounting policies.
AASB 16
AASB 16 replaces AASB 117 Leases and sets out the principles for the recognition, measurement, presentation and
disclosure of leases.
AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for
all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required
to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability
representing its obligations to make lease payments. A lessee measures right-of-use assets similarly to other non-
financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities.
As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and
also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents
them in the statement of cash flows applying AASB 107 Statement of Cash Flows. AASB 16 substantially carries
forward the lessor accounting requirements in AASB 117 Leases. Accordingly, a lessor continues to classify its
leases as operating leases or finance leases, and to account for those two types of leases differently.
AASB 16 is effective from annual reporting periods beginning on or after 1 January 2019. A lessee can choose to
apply the Standard using a full retrospective or modified retrospective approach.
There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or
comparative periods as the short term lease exemption in AASB 16 was utilised.
54
(c)
Basis of Consolidation
The consolidated financial statements comprise of the separate financial statements of Challenger Exploration
Limited (“Company” or “Parent”) and its subsidiaries as at 30 June each year (the “Group”). Control is achieved
where the Company has the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
On 27 June 2019 Challenger Exploration Limited announced that all conditions precedent for the completion
and acquisition of AEP Corporation Pty Ltd through an off-market takeover bid for all of the ordinary shares in AEP
Corporation Pty Ltd on the basis of 1 Challenger Exploration Limited share for every 1 AEP Corporation Share.
As such the consolidation of these two companies was on the basis of the continuation of AEP Corporation with
no fair value adjustments, whereby AEP Corporation was deemed to be the accounting parent and Challenger the
legal parent.
The financial statements of the subsidiaries are prepared for the same reporting period as the Parent, using
consistent accounting policies.
All intercompany balances and transactions, income and expenses, and profits and losses from intra-group
transactions are eliminated in full on consolidation.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of the Group. Control exists where the Company
has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing when the Group controls another entity.
Business combinations have been accounted for using the acquisition method of accounting. Investments in
subsidiaries are accounted for at cost in the separate financial statements of the parent entity less any impairment
charges. Dividends received from subsidiaries are recorded as a component of other revenues in the separate
statement of profit or loss and other comprehensive income of the parent entity, and do not impact the cost
of the investment. Upon receipt of dividend payments from subsidiaries, the parent will assess whether any
indicators of impairment of the carrying value of the investment in the subsidiary exist. Where such indicators
exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss
is recognised.
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group
and are presented separately in the consolidated statement of profit or loss and other comprehensive income
and within equity in the consolidated statement of financial position. Losses are attributed to the non-controlling
interest even if it results in a deficit balance.
(d)
Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted, or substantively enacted, as at the end of the reporting period.
Deferred income tax is provided on all temporary differences as at the end of the reporting period between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax
liabilities are recognised for all taxable temporary differences except:
•
•
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests
in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
54
55
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be
utilised, except:
•
•
when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance
date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred
tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted, or
substantively enacted, as at the end of the reporting period.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
(e)
Exploration and Evaluation Expenditure
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an
exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:
(a) the rights to tenure of the area of interest are current; and
(b) at least one of the following conditions is also met:
(i)
the exploration and evaluation expenditures are expected to be recouped through successful
development and exploitation of the area of interest, or alternatively, by its sale; or
(ii) exploration and evaluation activities in the area of interest have not at the balance date reached
a stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable reserves, and active and significant operations in, or in relation to, the area of interest
are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore,
studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation
and amortised of asset used in exploration and evaluation activities. General and administrative costs are only
included in the measurement of exploration and evaluation costs where they are related directly to operational
activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable
amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated
being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if
any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the asset in
previous years.
56
Where a decision has been made to proceed with development in respect of a particular area of interest,
the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to
development.
(f)
Trade and Other Payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes
obliged to make future payments in respect of the purchase of these goods and services. Amounts are unsecured
and are usually paid within 30 to 45 days of recognition.
(g)
Cash and Cash Equivalents
Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
For the purpose of the statement of cash flows, cash consists of cash and cash equivalents as defined above, net
of bank overdrafts.
(h)
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 statement of cash flows on a gross basis. The GST components of cash flows
arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
ATO.
(i)
Foreign Currency Translation
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the end of the reporting period.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of
differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity.
These are taken directly to equity until the disposal of the net investment, at which time they are recognised in
profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
The functional currencies of the Group are United States Dollars (USD), South African Rand (ZAR) and Australian
Dollars (AUD). The presentation currency is Australian Dollars (AUD).
As at reporting date the assets and liabilities of the subsidiaries are translated into the presentation currency of
Challenger Exploration at the rate of exchange ruling at the end of the reporting period and income and expenses
are translated at the weighted average exchange rate for the year.
The exchange differences arising on the translation are taken directly to a separate component of equity, being
recognised in the foreign currency translation reserve.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular
foreign operation is recognised in profit or loss.
56
57
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
(j)
Earnings Per Share (“EPS”)
Basic earnings per share is calculated as net profit or loss attributable to members of the parent, 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 any bonus element.
·
·
·
Diluted EPS is calculated as net profit or loss attributable to members of the parent, 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 shares and dilutive potential shares, adjusted for any bonus element.
(k)
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors.
(l)
Trade and Other Receivables
Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised
cost using the effective interest rate method, less provision for impairment. Trade receivables are generally due
for settlement within periods ranging from 15 days to 30 days.
A provision for impairment is established based on 12-month expected credit losses unless there has been a
significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision
is recognised in profit or loss.
(m)
Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds
received.
(n)
Revenue
The following specific recognition criteria must also be met before revenue is recognised:
Interest
Interest revenue is recognised when control of the right to receive the interest payment.
Capital Gain on Foreign Exchange Conversion
Blue chip swaps are bought in USD and sold in Argentinian Peso’s on the same day. The income is recognised on
the day of the sale.
(o)
Property, Plant & Equipment
Property, plant & equipment is measured at cost less accumulated depreciation and any accumulated impairment
losses. Depreciation is provided on a straight line basis on all property, plant and equipment over 3 years. The
assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
financial year end.
(i) Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with
recoverable amount being estimated when events or changes in circumstances indicate that the carrying
value may be impaired.
58
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined
for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to
be close to its approximate fair value.
An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated
recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.
For plant and equipment, impairment losses are recognised in the statement of profit or loss and other
comprehensive income in the cost of sales line item.
(ii) Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in profit or loss in the year the asset is derecognised.
(p)
Share-based Payment Transactions
Equity settled transactions:
The Group provides benefits to employees (including senior executives) of the Group in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled
transactions).
The cost of equity-settled transactions with employees is measured 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 external valuer using the Black
& Scholes option-pricing model. In valuing equity-settled transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the shares of Challenger Exploration Limited.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date
reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number
of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant
date. The statement of profit or loss and other comprehensive income charge or credit for a period represents
the movement in cumulative expense recognised as at the beginning and end of that period. No expense is
recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a
market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any modification that increases the total fair value of
the share-based payment arrangement, or is otherwise beneficial to the employee, measured at the modification
date.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new
award are treated as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share.
58
59
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
(q) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for
future operating losses.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the statement of profit or loss and other comprehensive income
net of any reimbursement.
Provisions are measured at the present value or management’s best estimate of the expenditure required to settle
the present obligation at the end of the reporting period. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
(r) Employee leave benefits
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within
12 months of the balance date are recognised in other payables in respect of employees’ services up to the
balance date. They are measured at the amounts expected to be paid when the liabilities are settled.
(s)
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The application of accounting policies requires the Group’s management to make estimates and assumptions
that affect the carrying values of assets and liabilities that are not readily apparent from other sources. The
determination of estimates requires the exercise of judgment based on various assumptions and other factors
such as historical experience, current and expected economic conditions and expectations of future events that
are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Estimates and underlying assumptions are evaluated on an ongoing basis.
Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial year are discussed below.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had,
or may have, on the consolidated entity based on known information. This consideration extends to customers,
supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed
in specific notes, there does not currently appear to be either any significant impact upon the financial statements
or any significant uncertainties with respect to events or conditions which may impact the consolidated entity
unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.
Share-based Payments
The Group measures the cost of equity-settled transactions with employees and consultants, where the fair value
of the services provided cannot be reliably measured by reference to the fair value at grant date using the Black
& Scholes formula, taking into account the terms and conditions upon which the instruments were granted. The
assumptions used are detailed in Note 17.
Exploration and evaluation expenditure
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment
in determining whether it is likely that future economic benefits are likely either from future exploitation or sale or
where activities have not reached a stage which permits a reasonable assessment of the existence of reserves.
The determination of a Joint Ore Reserves Committee (JORC) resource is itself an estimation process that
requires varying degrees of uncertainty depending on sub-classification and these estimates directly impact the
60
point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make
certain estimates and assumptions about future events or circumstances, in particular whether an economically
viable extraction operation can be established. Estimates and assumptions made may change if new information
becomes available.
(t)
Going Concern
The financial statements have been prepared on the going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of
business. In determining the appropriateness of the basis of preparation, the Directors have considered the impact
of the COVID19 pandemic on the position of the Group at 30 June 2020 and its operations in future periods.
(u)
Parent Entity Disclosures
The financial information for the parent entity, which is the legal parent Challenger Exploration Limited, disclosed
in note 26 has been prepared on the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the parent entity’s financial statements.
(v)
Reverse Asset Acquisition
On 25 February 2019 Challenger Exploration Limited (formerly Challenger Energy Limited) announced a binding
Heads of Agreement to acquire 100% of the issued capital in AEP Corporation Pty Ltd. For accounting purposes,
the acquisition of AEP by Challenger has the features of a reverse acquisition under Australian Accounting
Standard AASB 3 “Business Combination” notwithstanding that the Company is the legal parent of the Group.
Consequently, the historical financial information presented in this Report for the year ended 30 June 2019 is the
historical information of AEP Corporation Pty Ltd.
The legal structure of the Group subsequent to the acquisition of Challenger Exploration Limited is that Challenger
is the legal entity. However, the principles of reverse acquisition accounting are applicable where the owner of the
acquired entity (in this case, the Challenger) obtain control of the acquiring entity (in this case, AEP) as a result of
the business’ combination.
Under reverse acquisition accounting, the consolidated statements are issued under the name of the legal parent
(Challenger) but are a continuation of the financial statements of the legal subsidiary (AEP), with assets and
liabilities of the legal subsidiary being recognizes and measured at their pre-combination carrying amounts rather
than their fair values.
60
61
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
2.
REVENUE
Capital gain from loan forgiveness
Government cash flow boost
Capital gain on foreign exchange conversion
Interest received
3.
INCOME TAX
The prima facie tax benefit on profit/(loss) before income tax
is reconciled to the income tax expense as follows:
Consolidated
Consolidated
2020
$
2019
$
-
21,202
323,807
3,249
348,258
300,000
-
-
28
300,028
Net loss before income tax
Prima facie tax benefit on result
(1,782,324)
(5,787,949)
before income tax at 30% (2019: 27.5%)
(534,697)
(1,591,686)
Add:
- Listing premium on acquisition
- Share based payments
- Movements in provisions, accruals and prepayments
- Non-deductible entertainment
- Other non-deductible expenses
- Change in tax rate
- Differences in tax rate of subsidiaries operating in different
jurisdictions
- Other deferred tax assets and tax liabilities not recognised
Less:
- Black hole expenditure deductions
- Non-assessable, non exempt income
- Benefit of tax losses and other temporary differences
not brought to account
Income tax expense
The following deferred tax balances have not been recognised:
Deferred tax assets / (liabilities) at 30% (2019: 27.5%):
Carry forward revenue losses
Capital raising costs
Accrued expenses
Foreign exchange
Capitalised exploration costs
62
-
1,601,248
153,509
-
1,812
427,003
153,316
(30,648)
(183,302)
(12,078)
24,431
654
-
3,298,644
36,233
12,296
(4,477)
49,500
6,862
-
-
-
-
(33,049)
-
14,150
47,025
917,983
33,049
(6,862)
-
(1,544,171)
(901,407)
1,798,525
42,763
The tax benefits of the above deferred tax assets will only be obtained if:
(a)
(b)
(c)
the Group derives future assessable income of a nature and of an amount sufficient to enable the
benefits to be utilised;
the Group continues to comply with the conditions for deductibility imposed by law; and
no changes in income tax legislation adversely affect the Group in utilising the benefits.
4. CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand and at bank
and investments in money market instruments, net of outstanding bank overdrafts. Cash at bank earns interest at
floating rates based on a daily bank deposit rate.
Consolidated
Consolidated
2020
$
2019
$
Cash at Bank
3,801,292
5,043,935
Reconciliation of net loss after tax to the net cash flows
from operations:
Net loss
Non cash items:
Deferred Tax Liability
Listing premium on acquisition
Depreciation
Foreign exchange gains
Creditors settled for equity
Share based payments
Changes in assets and liabilities
Decrease / (Increase) in receivables and prepayments
Increase / (Decrease) in payables and accruals
Net cash flows used in from operating activities
Changes in liabilities arising from financing activities:
Opening balance
Loans received
Loan repayments
Loans converted to equity
Net cash from financing activities
Closing balance
(1,735,299)
(5,834,974)
(47,025)
47,025
-
5,822,719
4,785
(14,923)
139,000
511,695
18,658
126,114
(996,995)
-
-
-
-
(88,762)
(603,104)
(657,096)
467,780
-
-
1,217,780
(467,780)
-
-
(750,000)
(467,780)
-
467,780
467,780
62
63
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0
5.
TRADE & OTHER RECEIVABLES
Current
GST receivable
Other receivables
Non-Current
VAT receivable
Consolidated
Consolidated
2020
$
2019
$
15,958
99,578
115,536
316,276
87,941
87,941
-
-
These amounts arise from the usual operating activities of the Group and are non-interest bearing. The debtors
do not contain any overdue or impaired receivables.
6.
PREPAYMENTS
Current
Other pre-payments
43,515
827
These amounts arise from the usual operating activities of the Group and are non-interest bearing.
7.
DEFERRED EXPLORATION AND EVALUATION EXPENDITURE
Non-current
Exploration and evaluation phase
Opening balance
Exploration and evaluation expenditure
Acquisition costs
Closing balance
11,653,007
3,277,843
3,277,843
5,063,274
3,311,890
-
3,086,608
191,235
11,653,007
3,277,843
The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is
dependent on the successful development and commercial exploitation or sale of the respective areas.
8.
PLANT AND EQUIPMENT
Plant and Equipment
Cost
Accumulated depreciation
Net carrying amount
Computer Equipment and Software
Cost
Accumulated depreciation
Net carrying amount
Furniture, Fixtures and Fittings
Cost
Accumulated depreciation
Net carrying amount
Total Plant and Equipment
64
29,6 91
(2,968)
26,723
12,834
(1,741)
11,093
8,569
(48)
8,521
46,337
-
-
-
-
-
-
-
-
-
-
Movements in Plant and Equipment
Plant and Equipment
At beginning of the period
Additions
Net exchange differences on translation
Depreciation charge for the year
Computer Equipment and Software
At beginning of the period
Additions
Net exchange differences on translation
Depreciation charge for the year
Furniture, Fixtures and Fittings
At beginning of the period
Additions
Net exchange differences on translation
Depreciation charge for the year
Consolidated
Consolidated
2020
$
2019
$
-
26,163
3,528
(2,968)
26,723
-
12,790
44
(1,741)
11,093
-
8,604
(35)
(48)
8,521
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9.
TRADE & OTHER PAYABLES
Current
Trade creditors and accruals
1,157,129
729,027
Terms and conditions: Trade creditors are non-interest bearing and are normally settled on 30-day terms.
10.
PROVISIONS
Current
Employee benefits
24,990
The provision for employee benefits represents accrued annual leave entitlements.
Movements in Provisions:
Employee benefits
At beginning of the period
Additions
11. BORROWINGS
Current
Unsecured loans
-
-
-
-
-
24,990
24,990
-
467,780
64
65
The Company previously entered into an unsecured loan facility on arm’s length terms from a non-related
party to Challenger for the amount of $467,780 to pay for incurred exploration expenditure between 31 March
2019 and 30 June 2029. The repayment of this amount came from the proceeds of the Public Offer from the
Prospectus dated 15 May 2019 and was repaid during the financial year.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
12.
ISSUED CAPITAL
(a) Issued Capital
Consolidated
Consolidated
2020
$
2019
$
22,177,747
13,000,904
Movement in ordinary shares on issue
Consolidated 2020
$
No
Consolidated 2019
$
No
At start of period
Existing shares of AEP post consolidation
Elimination of historical numbers of AEP shares
Existing shares of Challenger post-consolidation
Elimination of historical value of Challenger
Shares issued to acquire AEP
Shares issued for cash
Conversion of AEP loan facility
Conversion of loans from various lenders
Shares issued to lead manager
Shares issued as deferred consideration
for Hualilan Gold Project
Shares issued on exercise of options
Shares issued in lieu of cash
Transaction costs relating to issued shares
465,560,126
-
-
-
-
-
65,002,000
-
-
-
13,000,904
-
-
-
-
-
6,500,500
-
-
-
-
180,000,000
(180,000,000)
11,893,459
-
180,000,000
166,666,667
25,000,000
10,000,000
6,000,000
15,000,001
1,000,000
2,162,500
-
2,826,667
40,000
139,000
(329,324)
-
-
-
2,258,740
-
32,017,360
(32,017,360)
5,113,048
5,000,000
750,000
300,000
180,000
-
(600,884)
548,724,627
22,177,747
465,560,126
13,000,904
The Group does not have authorised capital nor par value in respect of its issued capital. Ordinary shares have
the right to receive dividends as declared and, in the event of a winding up of the Group, to participate in the
proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or proxy, at a meeting of the Group.
(b)
Options
At the date of this report, 86,644,444 unlisted options over new ordinary shares in the Group were on issue:
Type
Unlisted
Date of Expiry
Exercise Price
Number under Option
30 June 2022
$0.04
86,644,444
1,000,000 ordinary shares were issued upon the exercise of options during the financial year ended 30 June
2020 (2019: Nil). 6,950,000 options exercisable at $0.25 expired during the financial year (2019: Nil).
66
13. RESERVES
Option reserve
Share based payments reserve
Foreign currency translation reserve
(a) Movements in Reserves
Option reserve
Opening balance
Movement during the financial year
Options reserve is used to record the proceeds of issued share options.
Share based payments reserve
Opening balance
Share based payment expense
Consolidated
Consolidated
2020
$
2019
$
784
511,695
(326,109)
186,370
784
-
784
-
511,695
511,695
784
-
-
784
784
-
784
-
-
-
The share based payment reserve is used to record the value of equity benefits provided to directors, executives
and employees as part of their remuneration and non-employees for their services. Refer to note 17 for further
details of the share based payments during the financial year.
Foreign currency translation reserve
Opening balance
Foreign currency translation
-
(326,109)
(326,109)
-
-
-
The foreign exchange differences arising on translation of the foreign controlled entities are taken to the foreign
currency translation reserve, as described in note 1(i). The reserve is recognised in profit and loss when the net
investment is disposed of.
14. PERFORMANCE SHARES
At the date of this report, 120,000,000 Performance Shares over new ordinary shares in the Company were on
issue:
Type
Performance A
Performance B
Number
60,000,000
60,000,000
Performance A Shares have the following vesting conditions:
A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
i.
ii.
iii.
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 1.0 grams per tonne Gold Equivalent.
66
67
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
Performance B Shares will vest on the completion and announcement by Challenger (subject to the provision of
information allowable at the time of completion) of a positive Scoping Study (as defined in the JORC Code) on
either the Hualilan Project or the El Guayabo Project by an independent third-party expert which evidences an
internal rate of return of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions, including
deliverable spot commodity / mineral prices, which are independently verifiable) provided that the total cumulative
EBITDA over the project life is over US$50m,
The relevant interests held by each Director in shares, options and performance rights of the Company at the date
of this report are included in the Remuneration Report above.
No ordinary shares were issued upon the vesting of performance rights during or since the financial year ended
30 June 2019.
15.
PERFORMANCE RIGHTS
At the date of this report, 16,000,000 Performance Rights over new ordinary shares in the Company were on
issue:
Type
Class A
Class B
Number
8,000,000
8,000,000
Class A Performance Rights have the following vesting conditions:
A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
i.
ii.
iii.
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC
Code) at a minimum grade of 1.0 grams per tonne Gold Equivalent.
Class B Performance Rights will vest on the completion and announcement by Challenger (subject to the provision
of information allowable at the time of completion) of a positive Scoping Study (as defined in the JORC Code)
on either the Hualilan Project or the El Guayabo Project by an independent third-party expert which evidences an
internal rate of return of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions, including
deliverable spot commodity / mineral prices, which are independently verifiable) provided that the total cumulative
EBITDA over the project life is over US$50m.
The relevant interests held by each Director in shares, options, performance shares and performance rights of the
Company at the date of this report are included in the Remuneration Report above.
16.
INCENTIVE PERFORMANCE RIGHTS
At the date of this report, 5,250,000 Incentive Performance Rights over new ordinary shares in the Company were
on issue:
Type
Incentive Performance Rights
Number
5,250,000
Incentive Performance Rights have the following vesting condition:
The holder must remain employed or engaged by the Company for a minimum period of twelve months from
28 November 2019.
The relevant interests held by each Director in shares, options, performance shares and performance rights of the
Company at the date of this report are included in the Remuneration Report above.
No ordinary shares were issued upon the vesting of performance rights or performance shares during or since the
financial year ended 30 June 2020.
68
17.
SHARE BASED PAYMENTS
Recognised share-based payment transactions
Share based payment transactions recognised as operating expenses in the statement of profit or loss and other
comprehensive income during the period were as follows:
Operating expenses
Employee share based payment
Employee share based payment plan
Consolidated
Consolidated
2020
$
2019
$
511,695
-
The Group has established an Employee Share Option Plan and an Incentive Performance Rights Plan (‘Plans’).
The objective of the Plans are to assist in the recruitment, reward, retention and motivation of employees of
Challenger Exploration Limited. Under the Plans, the Directors may invite individuals acting in a manner similar
to employees to participate in the Plans and receive options and / or performance rights. An individual may
receive the options and / or performance rights or nominate a relative or associate to receive the options and /
or performance rights. The Plans are open to directors, executive officers, nominated consultants and employees
of Challenger Exploration Limited.
The fair value at grant date of performance rights granted during the reporting period was determined using
the Company’s share price on the grant date. The table below summaries options granted under Incentive
Performance Rights Plan:
Grant Date
Expiry date
Balance at
30 June 2019
Granted
Balance at
30 June 2020
Number
Number
Number
Vested and
exercisable at
30 June 2020
Number
3 December 2019
16 March 2020
4 July 2026
4 July 2026
-
-
16,000,000
5,250,000
16,000,000
5,250,000
-
-
There were no performance rights exercised, forfeited or cancelled during the period.
18.
KEY MANAGEMENT PERSONNEL EMOLUMENTS
(a) Details of Key Management Personnel
Fletcher Quinn – Non Executive Chairman(a)
Kris Knauer – Managing Director(a)
Scott Funston – Executive Director(a)
Michael Fry – Non-Executive Chairman(b)
Robert Willes – Managing Director(b)
Clinton Carey – Non-Executive Director(b)
(a) Mr Quinn, Mr Knauer and Mr Funston were appointed 4 July 2019
(b) Mr Fry, Mr Willes and Mr Carey resigned 4 July 2019
Directors’ remuneration and other terms of employment are reviewed annually by the non-executive Directors
having regard to performance against goals set at the start of the period, relative comparative information and
independent expert advice, as appropriate.
(b) Compensation of Key Management Personnel
The aggregate compensation paid to Directors and other members of key management personnel is out below:
68
69
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
Short-term employee benefits
Short-term employee benefits in lieu of cash consideration
Post-employment benefits
Share-based payments
Consolidated
Consolidated
2020
$
522,546
37,500
-
154,815
714,861
2019
$
43,265
-
1,735
-
45,000
Further details of key management personnel remuneration have been included in the Remuneration Report
section of the Directors’ Report.
(c) Other Transactions with Key Management Personnel
Mr Quinn is a director of Seco Resources Pty Ltd. Seco has provided his services as Chairman to a value of $43,000
(2019: Nil) to Challenger during the year on normal commercial terms. This amount is included the Remuneration
Report section of the Directors Report. $20,000 (2019: Nil) was outstanding at year end.
Mr Knauer is a director of Greenfield Securities Pty Ltd. Greenfield has provided his services as Managing Director
and CEO to a value of $268,296 (2019: Nil) to Challenger during the year on normal commercial terms. This
amount is included the Remuneration Report section of the Directors Report. $98,333 (2019: Nil) was outstanding
at year end.
Mr Funston is a director of Resourceful International Consulting Pty Ltd. Resourceful has provided his services as
Director, Company Secretary and CFO to a value of $211,250 (2019: $25,000) to Challenger during the year on
normal commercial terms. This amount is included the Remuneration Report section of the Directors Report.
$36,250 (2019: Nil) was outstanding at year end.
(d) Amounts owing to Key Management Personnel
A total of $154,583 was outstanding to Key Management Personnel as at 30 June 2020 (2019: Nil).
19.
SEGMENT INFORMATION
The Group is organised into one segment, being exploration operations. This operating segment is based on the
internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating
Decision Makers (“CODM”)) in assessing performance and in determining the allocation of resources.
30 June 2020
Interest income
Other income
Segment income
Australia
$
Ecuador
$
Argentina
$
Consolidated
$
3,249
21,202
24,451
-
-
-
-
323,807
3,249
345,009
323,807
348,258
Segment loss before income tax
(1,470,663)
(2,878)
(308,783)
(1,782,324)
Segment assets
Segment liabilities
3,777,636
5,655,760
6,542,567
15,975,963
400,817
199,309
581,993
1,182,119
70
30 June 2020
Included within segment assets
Cash at bank
Plant and equipment and
exploration expenditure
Australia
$
Ecuador
$
Argentina
$
Consolidated
$
3,735,765
14,219
51,308
3,801,292
-
5,540,075
6,112,932
11,653,007
Cash flow information
Net cashflow outflows from operating activities
Net cashflow outflows from investing activities
Net cashflow inflows from financing activities
(685,334)
-
5,330,844
(2,878)
(2,892,747)
-
(308,783)
(2,698,668)
-
(996,995)
(5,591,415)
5,330,844
30 June 2019
Interest Income
Loan Forgiveness
Segment income
28
300,000
300,028
-
-
28
300,000
300,028
-
-
Segment loss before income tax
(5,674,719)
(67,935)
(45,295)
(5,787,949)
Segment assets
Segment liabilities
Included within segment loss
Listing premium on acquisition
Included within segment assets
Cash at bank
5,132,703
3,101,229
176,614
8,410,546
1,052,597
191,235
5,822,719
5,043,935
-
-
-
-
-
1,243,832
5,822,719
5,043,935
Exploration expenditure
-
3,101,229
176,614
3,277,843
Cash flow information
Net cashflow outflows from operating activities
Net cashflow outflows from investing activities
Net cashflow inflows from financing activities
(598,037)
-
8,221,875
(13,764)
(2,344,230)
-
(45,295)
(176,614)
-
(657,096)
(2,520,844)
8,221,875
Consolidated
Consolidated
2020
$
2019
$
20.
EARNINGS / LOSS PER SHARE
The following reflects the loss and share data used in the calculation
of basic and diluted earnings / loss per share (EPS):
Loss used in calculation of basic and diluted EPS
(1,735,299)
(5,834,974)
Weighted average number of ordinary shares on issue used
in the calculation of basic and diluted EPS (i)
495,389,099
88,991,176
Number
Number
(i) There are no dilutive impacts on EPS.
70
71
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
21.
RELATED PARTY DISCLOSURE
Interest in subsidiaries
The consolidated financial statements include the financial statements of Challenger Exploration Limited and the
subsidiaries listed in the following table:
Name
Country of Percentage of equity interest held by the Group
AEP Corporation Pty Ltd
Bundu Oil & Gas Exploration (Pty) Ltd
Afro-Asian Resources Pty Ltd
Ecuador Mining Pty Ltd
Incorporation
Australia
South Africa
Australia
Australia
2020
100%
95%
100%
100%
2019
100%
95%
-
-
Bundu Oil & Gas Exploration does not have a material non-controlling interest in the Group.
22.
AUDITOR’S REMUNERATION
Amounts received or due and receivable by the auditor:
- HLB Mann Judd (WA Partnership) - audit or review of the
financial reports of the Company
Amounts received or due and receivable by overseas separate firms:
- HLB Mann Judd (WA Partnership) – Independent Limited
Assurance Report for Prospectus
- HLB Barnett Chown (South Africa) – statutory compliance services
23.
FINANCIAL INSTRUMENTS
(a) Financial risk management and risk policies
Consolidated
Consolidated
2020
$
2019
$
41,725
37,500
-
-
41,725
12,000
2,636
52,136
The Group’s principal financial instruments comprise of cash and short-term deposits. The main purpose of these
financial instruments is to hold funds for the entity’s operations. The entity has various other financial assets and
liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been
throughout the period under review, the entity’s policy that no trading in financial instruments shall be undertaken.
The main risks arising from the entity’s financial instruments are cash flow interest rate risk, liquidity risk, foreign
currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset and financial liability are disclosed in Note 1 to the financial statements.
(c) Interest rate risk
The Group is exposed to movements in market interest rates on short term deposits. The policy is to monitor the
interest rate yield curve out to 120 days to ensure a balance is maintained between the liquidity of cash assets and
the interest rate return. The Group does not have short or long term debt, and therefore this risk is minimal.
The table below reflects the undiscounted contractual settlement terms for financial instruments of a fixed period
of maturity, as well as management’s expectations of the settlement period for all other financial instruments. As
such, the amounts might not reconcile to the statement of financial position.
72
Consolidated
2020
Rate
Less than
1 month
$
1 to 3
months
$
3 months
to 1 year
$
1 to 5
years
$
Total
$
FINANCIAL ASSETS
Non-interest bearing
Variable interest rate instruments
0.01%
FINANCIAL LIABILITIES
Non-interest bearing
NET FINANCIAL ASSETS
2019
FINANCIAL ASSETS
Non-interest bearing
Variable interest rate instruments
0.01%
FINANCIAL LIABILITIES
Non-interest bearing
Variable interest rate instruments
NET FINANCIAL ASSETS
3,865,336
411,283
4,276,619
(1,182,119)
3,094,500
88,768
5,043,935
5,132,703
(729,027)
-
4,403,676
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(467,780)
-
(467,780)
-
-
-
-
-
-
-
-
-
-
-
3,865,336
411,283
4,276,619
(1,182,119)
3,094,500
88,768
5,043,935
5,132,703
(1,196,807)
-
3,935,896
Interest Rate Sensitivity Analysis
At reporting date, if interest rates had been 50 basis points higher or lower than the prevailing rates realised, with
all other variable held constant, there would have been an immaterial change in post-tax loss for the year. The
impact on equity would have been the same.
There was no exposure to interest rate risk in 2020 (2019: Nil).
(d) Net fair values of financial assets and liabilities
All financial assets and liabilities have been recognised at the balance date at their net fair values. The following
methods and assumptions are used to determine the net fair values of financial assets and liabilities:
Recognised Financial Instruments
Cash and cash equivalents: The carrying amount approximates fair value because of their short-term maturity.
Receivables, payables and borrowings: The carrying amount approximates fair value.
(e) Credit risk exposures
The Group’s maximum exposure to credit risk at each balance date in relation to each class of recognised
financial assets is the carrying amount, net of any allowance for doubtful debts, of those assets as indicated in the
statement of financial position. The maximum credit risk exposure on receivables of the Group at 30 June 2020
is $431,812 (2019: $87,941). There are no impaired receivables at 30 June 2020.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The 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
exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of
transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty
limits that are reviewed and approved annually. The Group measures credit risk on a fair value basis.
Concentration of Credit Risk
The Group is not exposed to any individual customer.
72
73
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
(f) Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities. The Group does not have any bank debt.
(g) Foreign exchange risk management
The Group is exposed to US Dollar (USD) and South African Rand (ZAR) currency fluctuations. At 30 June 2020,
there would have been an immaterial change in the post-tax operating loss for the year as a result of a 10% change
in the Australian Dollar (AUD) to the USD and ZAR. The impact to equity would be the same.
(h) Capital Risk Management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that
it may continue to provide returns for shareholders and benefits for other stakeholders.
Due to the nature of the Group’s activities, being gold exploration, it does not have ready access to credit facilities,
with the primary source of funding being equity raisings. Accordingly, the objective of the Group’s capital risk
management is to balance the current working capital position against the requirements of the Group to meet
exploration programmes and corporate overheads. This is achieved by maintaining appropriate liquidity to meet
anticipated operating requirements, with a view to initiating appropriate capital raisings as required.
24.
CONTINGENT ASSETS AND LIABILITIES
There are no known contingent liabilities or contingent assets.
25.
COMMITMENTS FOR EXPENDITURE
There are no commitments for expenditure as at 30 June 2020 (2019: $Nil).
26. PARENT ENTITY DISCLOSURES
Information relating to Challenger Exploration Limited, the legal Parent entity, is detailed below:
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
2020
$
2019
$
3,752,021
16,664,981
5,297,464
7,841,190
20,417,002
13,138,654
50,312
50,312
378,025
378,025
20,366,690
12,760,629
52,223,319
(34,912,180)
3,055,551
43,046,471
(32,829,698)
2,543,856
20,366,690
12,760,629
74
Financial performance
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income/(loss)
27. REVERSE ACQUISITION ACCOUNTING
Consolidated
Consolidated
2020
$
2019
$
(2,257,263)
174,738
2,862,018
-
(2,082,525)
2,862,018
On 27 June 2019 Challenger Exploration Limited announced that all conditions precedent for the completion
and acquisition of AEP Corporation Pty Ltd through an off-market takeover bid for all of the ordinary shares in
AEP Corporation Pty Ltd on the basis of 1 Challenger Exploration Limited share for every 1 AEP Corporation Share.
Additionally, 78,444,444 consideration options and 120,000,000 consideration performance shares were issued
on a post consolidation basis.
Under the Acquisition, Challenger Exploration Limited acquired all the shares in AEP Corporation Pty Ltd by
issuing 180,000,000 shares in Challenger Exploration to AEP Corporation shareholders, giving AEP Corporation
(accounting parent) a controlling interest in Challenger Exploration (accounting subsidiary) and equating to a
controlling interest in the combined entity. AEP Corporation was thus been deemed the acquirer for accounting
purposes as it owned 69.80% of the consolidated entity. The acquisition of AEP Corporation by Challenger
Exploration is not deemed to be a business combination, as Challenger Exploration is not considered to be a
business under AASB 3 Business Combinations.
As such the consolidation of these two companies was on the basis of the continuation of AEP Corporation
with no fair value adjustments, whereby AEP Corporation was deemed to be the accounting parent. Therefore
the most appropriate treatment for the transaction was to account for it under AASB 2 Share Based Payments,
whereby AEP Corporation is deemed to have issued shares to Challenger Exploration Shareholders in exchange
for the net assets held by Challenger Exploration.
In this instance, the value of the Challenger Exploration shares provided was been determined as the notional
number of equity instruments that the shareholders of AEP Corporation would have had to issue to Challenger
Exploration to give the owners of Challenger Exploration the same percentage ownership in the combined entity.
It has been deemed to be $5,113,048.
The pre-acquisition equity balances of Challenger Exploration are eliminated against this increase in Share
Capital of $5,113,048 on consolidation and the balance is deemed to be the amount paid for the listing status of
Challenger Exploration, being $5,822,719 (recognised as a share-based payment in the statement of profit or loss).
74
75
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 9
Details of the pre-combination carrying amounts of the assets and liabilities of the acquire are as follows:
Net Assets Acquired:
Cash and cash equivalents
Trade and other receivables
Exploration and evaluation assets
Creditors and Borrowings
Net Assets
Listing expense:
Acquisition consideration
Add: Net liabilities of Challenger Exploration Limited
Total
Reconciliation of cash and cash equivalents to net cash acquired:
Cash and cash equivalents at 27 June 2019 – Challenger
Proceeds from acquisition
Total
28.
SUBSEQUENT EVENTS
$
42,708
77,782
191,325
(1,021,486)
(709,671)
5,113,048
709,671
5,822,719
42,708
(41,706)
1,002
On the 23 July 2020, the Company issued 100,000,000 shares, raising $20,000,000 before costs of $1.3M.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while there has been an immaterial impact
financially for the consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures
imposed by the Australian Government and other countries, such as maintaining social distancing requirements,
quarantine, travel restrictions and any economic stimulus that may be provided.
76
D I R E C T O R S ’ D E C L A R A T I O N
1.
The Directors of the Company declare that:
a.
the financial statements, notes and the additional disclosures are in accordance with the Corporations
Act 2001 including:
i.
ii.
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
performance for the year then ended; and
complying with Australian Accounting Standards, the Corporations Regulations 2001, professional
reporting requirements and other mandatory requirements;
b.
c.
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 financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020.
This declaration is signed in accordance with a resolution of the Board of Directors.
Mr Kris Knauer
Managing Director
11 September 2020
76
77
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
INDEPENDENT AUDITOR’S REPORT
To the members of Challenger Exploration Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Challenger Exploration Limited (“the Company”) and its
controlled entities (“the Group”), which comprises the consolidated statement of financial position
as at 30 June 2020, the consolidated statement of profit and 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, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year then ended; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (“the Code”) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report of the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. We have determined the matters described below to
be the key audit matters to be communicated in our report.
68
78
Key Audit Matter
How our audit addressed the key audit
matter
Carrying value of Deferred Exploration and
Evaluation Expenditure
Note 7 of the financial report
In accordance with AASB 6 Exploration for and
Evaluation of Mineral Resources, the Group
capitalises acquisition costs of rights to explore
together with subsequent exploration and evaluation
expenditure and applies the cost model after
recognition.
Our audit focussed on the Group’s assessment of the
carrying amount of the deferred exploration and
evaluation expenditure, because this is one of the
most significant assets of the Group. There is a risk
that the capitalised expenditure no longer meets the
recognition criteria of the standard. In addition, we
considered it necessary to assess whether facts and
circumstances existed to suggest that the carrying
amount of deferred exploration and evaluation
expenditure may exceed its recoverable amount.
Our procedures included but were not
limited to the following:
- We obtained an understanding of the
key processes associated with
management’s review of the carrying
value of deferred exploration and
evaluation expenditure;
- We considered the Directors’
assessment of potential indicators of
impairment;
- We obtained evidence that the Group
has current rights to tenure of its areas
of interest;
- We examined the exploration budget
for 2021 and discussed with
management the nature of planned
ongoing activities;
- We enquired with management and
reviewed ASX announcements and
minutes of Directors’ meetings to
ensure that the Group had not decided
to discontinue exploration and
evaluation at its areas of interest; and
- We examined the disclosures made in
the financial report.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2020, 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.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
69
79
78
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with 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 Group’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 Group’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 Group to cease to continue as a going concern.
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.
-
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.
70
80
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included within the directors’ report for the year ended
30 June 2020.
In our opinion, the Remuneration Report of Challenger Exploration Limited for the year ended 30
June 2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
HLB Mann Judd
Chartered Accountants
Perth, Western Australia
11 September 2020
B G McVeigh
Partner
80
71
81
A D D I T I O N A L S H A R E H O L D E R S ’ I N F O R M A T I O N
ASX Additional Information
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current at 2 September 2020.
Substantial Shareholders
The names of the substantial shareholders who have notified the Company in accordance with Section 671B of the
Corporations Act 2001:
Shareholder
Kris Knauer
Distribution of Shareholders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 -100,000
100,001 and over
TOTAL
Top 20 Shareholders
Number
42,195,332
%
6.6
Ordinary Shares
Number of Holders
Number of Shares
% Issued Share Capital
119
383
225
814
644
2,185
38,868
1,210,822
1,866,678
35,478,272
610,129,987
648,724,627
0.01%
0.19%
0.29%
5.47%
94.05%
100.00%
The names of the twenty largest holders of each class of quoted equity security, the number of equity security each
holds and the percentage of capital each hold is as follows:
Rank
Holder Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
MONEYBUNG PTY LTD
EASTERN CAPITAL GROUP LLC
MONEYBUNG PTY LTD
LQ SUPER PTY LTD
CITICORP NOMINEES PTY LIMITED
STRANDLINE INVESTMENTS PTY LTD
JAWAF ENTERPRISES PTY LTD
CS THIRD NOMINEES PTY LIMITED
BROOKAVA PTY LTD
LEON SUPERANNUATION PTY LTD
SANPEREZ PTY LTD
BOLLENBACH INVESTMENTS LP
ELIAS SAHAD
BEGLEY SUPERANNUATION PTY LTD
MR PINCHAS ALTHAUS
MR JAMES HENDERSON ALLEN
DOMAEVO PTY LTD
LQ SUPER PTY LTD
E & E HALL PTY LTD
JACQUELINE KAY PTY LTD
Units
24,100,000
19,100,000
15,208,332
13,000,000
12,881,448
12,740,000
11,060,000
10,630,601
9,543,859
7,900,000
6,858,334
6,666,667
6,666,667
6,500,000
6,000,000
6,000,000
5,979,969
5,833,260
5,656,667
5,512,684
%
3.72%
2.94%
2.34%
2.00%
1.99%
1.96%
1.70%
1.64%
1.47%
1.22%
1.06%
1.03%
1.03%
1.00%
0.92%
0.92%
0.92%
0.90%
0.87%
0.85%
TOTAL
208,507,552
32.14%
82
Restricted Securities
The following securities are restricted securities:
Escrowed 24 months from listing date (4 July 2019)
On-Market Buy Back
There is no current on-market buy back.
Ordinary Shares
100,666,667
Voting Rights
All ordinary shares carry one vote per share without restriction.
Interests in Tenements Held
Project
Property Name
Tenure Title
Holder
Interest
%
El Guayabo El Guayabo
El Guayabo Colorado V
El Guayabo El Guaybo 2
Hualilan
Divisadero
Torata Mining Resources S.A
earning 100%
Goldking Mining Company S.A
earning 50%
Mr. Segundo Ángel Marín Gómez earning 80%
earning 75%
Golden Mining S.R.L.
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Hualilan
Flor de Hualilan
Pereyra y Aciar
Bicolor
Sentazon
Muchilera
Magnata
Pizarro
La Toro
La Puntilla
Pique de Ortega
Descrubidora
Pardo
Sanchez
Andacollo
Golden Mining S.R.L.
Golden Mining S.R.L.
Golden Mining S.R.L.
Golden Mining S.R.L.
Golden Mining S.R.L.
Golden Mining S.R.L.
Golden Mining S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
CIA GPL S.R.L.
North of “Pizarro” Mine Golden Mining S.R.L.
South of “La Toro” Mine CIA GPL S.R.L.
Josefina
Golden Mining S.R.L.
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
as above
Area
(ha)
281
2331
957
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
1.9
1.9
DNPM No
of Area
Status of
Tenure
COD225
COD3363.1
COD300964
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
5448-M-1960
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
5448-M-1960
G ranted
5448-M-1960
Granted
195-152-C-1981 Granted
195-152-C-1981 Granted
2570
30.591.654
Pending
ASX Waivers
The ASX granted the Company a waiver from ASX Listing Rule 7.3.2 to permit the notice of meeting (the “Notice”) seeking
shareholder approval for the issue of up to 245,000,001 fully paid ordinary shares in the Company (“Waiver Securities”)
upon the Company satisfying the milestones in relation to each of the Projects (“Milestones”) not to state that the Waiver
Securities will be issued within 3 months of the date of the shareholder meeting.
The Waiver Securities must be issued no later than 60 months after the date of reinstatement of the Company’s securities
to official quotation (4 July 2019).
3,333,334 Securities were issued on 17 September 2019.
11,666,667 Securities were issued on 30 June 2020.
The total Earn-In Shares will be issued progressively subject to the achievement of the following milestones:
82
83
A D D I T I O N A L S H A R E H O L D E R S ’ I N F O R M A T I O N
El Guayabo Project Milestones
Project Interest Cumulative Interest
Project Milestones
19.9%
15.1%
16%
49%
19.9%
35%
51%
100%
Hualilan Project Milestones
Existing interest in the project
Minimum expenditure on project of A$2m - ~1 Year after relisting
Minimum expenditure on project of A$3m - ~3 Years after relisting
180m CEL shares payable at the sole discretion of the Board of CEL. Shares to be
issued no later than 15 December 2022.
•
•
•
•
•
A payment of 1.667 million shares (being shares in CEL assuming the Transaction completes) to Cerro Sur owners for
assignment of Cerro Norte farmin due no later than one month after re-listing on the ASX.
A milestone payment of 1.667 million shares (being shares in CEL assuming the Transaction completes) due on 22 June
2019.
Minimum expenditure of A$1 million on the Hualilan Project.
The issue of a 11.667 million shares (being shares in CEL assuming the Transaction completes) no later than 1 July 2020
to acquire a 25% interest in the project.
Completion of a Definitive Feasibility Study within five years and the issue of 50 million shares (being shares in CEL
assuming the Transaction completes) to move from 25% to 75% of the project.
Performance Shares
The Company has 60,000,000 Class A Performance Shares and 60,000,000 Class B Performance Shares on Issue.
A summary of the terms and conditions of the Performance Shares are as follows:
The Performance Shares shall automatically convert into Shares, provided that if the number of Shares that would be issued
upon such conversion is greater than 10% of the Company’s Shares on issue as at the date of conversion, then that number of
Performance Shares that is equal to 10% of the Company’s Shares on issue as at the date of conversion under this paragraph
will automatically convert into an equivalent number of Company Shares. The conversion will be completed on a pro rata basis
across each class of Performance Shares then on issue as well as on a pro rata basis for each Holder. Performance Shares that
are not converted into Shares under this paragraph will continue to be held by the Holders on the same terms and conditions.
(No Conversion if Milestone not Achieved): If the relevant Milestone is not achieved by the required date (being seven years
from the date of the Proposed Acquisition or such other date as required by ASX), then all Performance Shares held by each
Holder shall lapse.
(After Conversion): The Shares issued on conversion of the Performance Shares will, as and from 5.00pm (WST) on the date
of issue, rank equally with and confer rights identical with all other Shares then on issue and application will be made by the
Company to ASX for official quotation of the Shares issued upon conversion (subject to complying with any restriction periods
required by the ASX).
(Milestones): The Performance Shares will, convert upon the satisfaction of the following milestones:
(Class A): A JORC Compliant Mineral Resource Estimate of at least Inferred category on either Project of the following:
a minimum 500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC Code) at a
minimum grade of 6 grams per tonne Gold Equivalent; or
a minimum 1,500,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC Code) at a
minimum grade of 2.0 grams per tonne Gold Equivalent; or
a minimum 3,000,000 ounces of gold (AU) or Gold Equivalent (in accordance with clause 50 of the JORC Code) at a
minimum grade of 1.0 grams per tonne Gold Equivalent;
(Class B): The Class B Performance Shares held by the holder will convert into an equal number of Shares upon the Company:
Completion and announcement by CEL (subject to the provision of information allowable at the time of completion)
of a positive Scoping Study (as defined in the JORC Code) on either Project by an independent third-party expert which
evidences an internal rate of return of US Ten Year Bond Rate plus 10% (using publicly available industry assumptions,
including deliverable spot commodity / mineral prices, which are independently verifiable) provided that the total
cumulative EBITDA over the project life is over US$50m.
No Performance Milestones have been met.
84
www.challengerex.com.au
84
C H A L L E N G E R E X P L O R AT I O N L I M I T E D
A C N 1 2 3 5 9 1 3 8 2
www.challengerex.com.au