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ANNUAL
FINANCIAL REPORT
30 JUNE 2017
CHALICE GOLD MINES LIMITED
ABN 47 116 648 956
Front image: Diamond drilling
operations at Warrego North Project,
Northern Territory, Western Australia
Corporate Directory
Directors
Anthony Kiernan
Non-executive Chairman
Share Registry
Australia
Timothy (Tim) Goyder Managing Director
Computershare Investor Services Pty Limited
Stephen Quin
Non-executive Director
Level 11, 172 St Georges Terrace
Morgan Ball
Non-executive Director
PERTH WESTERN AUSTRALIA 6000
Tel: 1300 787 272
Canada
Computershare Investor Services
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
ASX
Share Code: CHN
TSX
Share Code: CXN
Joint Company Secretaries
Richard Hacker and Catherine Huynh
Principal Place of Business
& Registered Office
Level 2, 1292 Hay Street
WEST PERTH WA 6005
Tel:
(+61) (8) 9322 3960
Fax:
(+61) (8) 9322 5800
Web: www.chalicegold.com
Email: info@chalicegold.com
Auditors
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH WESTERN AUSTRALIA 6000
Home Exchange
Australian Securities Exchange Limited
Level 40, Central Park
152-158 St Georges Terrace
PERTH WESTERN AUSTRALIA 6000
Toronto Stock Exchange
300 – 100 Adelaide Street West
Toronto, Ontario M5H 1S3
1
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
Contents
Chairman’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mineral Resource Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Tenement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Corporate Governance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ASX Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
2
CHALICE GOLD MINES LIMITED Chairman’s Letter
Dear shareholder,
The 2017 year has been successful and productive for Chalice
at a number of levels.
encouraging results generated from copper and gold rock chip
sampling.
While much of our effort in recent years has been directed
towards the potential acquisition of an advanced mineral asset,
we have also invested considerable time and resources in
systematically reviewing exploration opportunities worldwide.
Our current portfolio now spans prospective and well-endowed
gold and base metal belts in Canada and Australia, including
some of the world’s most active “hot-spots” for gold exploration
globally such as the prolific Abitibi district in Canada and the
Pilbara region of Western Australia.
In Canada, our portfolio now includes:
▪ The East Cadillac Projects: located 35km east of Val-d’Or
in Quebec and covering 16km of strike at the eastern part
of the Larder Lake – Cadillac Fault, a district that has a gold
endowment of +100 million ounces; and
▪ The Kinebik Gold Project: covering 30km strike on the
Casa Berardi Fault in Quebec, a structure that hosts multiple
gold deposits.
In Australia, through a combination of strategic joint ventures,
option agreements and selective ground acquisitions, our
portfolio now includes:
▪ The West Pilbara Gold and Base Metals Project: located
160km south-west of Karratha in the Pilbara region of WA,
with a contiguous coverage of 90km of strike of prospective
geology along the contact between the Ashburton and
Hamersley Basins. Subsequent to year-end, Chalice applied
for a further 10 Exploration Licences covering an area of
881.3km2;
▪ The Warrego North Project: Iron Oxide Copper-Gold
targets located in the Northern Territory where we enjoyed
some initial success during the year with the Parakeet copper-
gold discovery; and
▪ The Latitude Hill Nickel Project: Potential for Nova-Bollinger
and Voisey’s Bay style nickel-copper discoveries in an under-
explored region of Western Australia.
Given our strong balance sheet and accomplished in-house
technical team, Chalice is in the enviable position of being able
to pursue a mid-tier scale exploration effort across this high-quality
portfolio without diluting our shareholders at either the company
or project level.
To this end, the Board approved exploration budgets for the
2017-18 financial year of A$7.5 million including 22,000m
of drilling to test multiple targets at East Cadillac including
extensions of our existing high-grade gold resource at Nordeau
West and other prospective targets.
At the date of this report, diamond drilling was underway at East
Cadillac and up to 6,500 m of RC and Aircore drilling was
about to commence at our West Pilbara Project in WA following
Chalice is also assessing the Company’s Pilbara tenements to
establish the presence of the basal conglomerate unit of the
Fortescue Group which contains the conglomerate-hosted gold
discoveries reported elsewhere in the region by companies such
as Novo Resources Corporation, Artemis Resources and De
Grey Mining.
With exploration activities ramping up on a number of fronts
in the second half of 2017 – all of which have the potential to
generate company-changing returns for Chalice shareholders –
we are extremely optimistic about the Company’s prospects over
the coming 12 months, particularly as investor interest continues
to return to the junior resource sector.
On the corporate front, the Company has maintained its strong
balance sheet with A$47 million in cash at the 30 June balance
date and liquid assets of approximately A$6 million. During
the year the Company realised significant value as a result of
the sale of the Cameron Gold Project in 2016 by selling 25.3
million shares in First Mining Finance for proceeds of A$21.5
million. We continue to hold approximately 6.9 million shares in
First Mining Finance.
As part of a capital management strategy, the Company
acquired 21.5 million of its own shares as part of an on market
discretionary share buy-back at a cost of A$3.8 million. Whilst
the share buy-back ceased in July 2017, the Board remains
vigilant on managing its capital.
Under the leadership of our Managing Director, Tim Goyder,
the Company has demonstrated a disciplined and focused
approach to the management of our finances and key projects,
while demonstrating a preparedness to undertake aggressive
exploration and to move quickly to take advantage of corporate
or investment opportunities when they present themselves.
As always, a results-driven approach is being taken to exploration
and evaluation.
In conclusion, I would like to take this opportunity to thank our
shareholders, my fellow directors and all employees both in
Australia and Canada for their continued and valued support
during the past year. We are all looking forward to an even
busier and more successful year ahead.
Yours faithfully
Anthony Kiernan
Chairman
3
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
Operating and Financial Review
Business strategy and outlook
Chalice’s vision is to grow a multi-asset resource company by
exploring and developing high quality mineral resource assets.
To deliver this vision the Company is pursuing the following
business strategy:
▪ Securing a strategic exploration footprint across prolific
gold and base metal mineral belts, preferably in lower risk
jurisdictions.
▪ Drive shareholder value by executing a mid-tier scale global
exploration effort without the need to dilute shareholders at
the company or project level.
▪ Target acquisition of more advanced mineral resource
project opportunities, or where Chalice’s strong financial
position may provide a funding solution to the development
of the asset(s).
Figure 1. Location of Chalice’s exploration assets
Chalice’s exploration strategy has focused on acquiring exposure
to projects, either through direct ownership or joint venture,
hosted in terranes with outstanding metal endowment that also
have the key geological features to host Tier 1 deposits. During
2016 and 2017, Chalice entered into a number of option, earn-
in and joint venture agreements including the East Cadillac Gold
Project in the prolific Abitibi gold district in Quebec, Canada; the
Warrego North Iron Oxide Copper Gold project in the Tennant
4
Creek gold ± copper mineral field of the Northern Territory, the
Latitude Hill nickel project and the gold and base metals districts
of the West Pilbara in Western Australia (Figure 1).
CHALICE GOLD MINES LIMITED
Operating and Financial review
Looking forward, the Board has approved a substantial A$7.5
million budget, including >22,000m drilling, planned on five
high-potential gold and base metals projects across five projects
in Canada and Australia for the financial year 2018. Chalice
will continue to review opportunities to secure prospective land
holdings in favourable geological settings.
Future exploration results, movements in commodity prices, foreign
exchange rates, equity prices and interest rates may adversely
impact the achievement of these objectives. In particular, the
Company has an exposure to equity prices through its holding
of approximately 7 million First Mining Finance Corp common
shares and a potentially material exposure to the movements in the
Australian Dollar against the US dollar and Canadian dollars, as
the Company holds approximately $27.5 million denominated
in foreign currencies. The financial impact of movements in the
First Mining Finance Corp share price and foreign exchanges
rates is discussed at note 19.
East Cadillac Gold Project, Quebec, Canada
The East Cadillac Gold Project (“ECG Project”) covers an area
of 107km2 and is located 35km east of the 20 million oz Val-
d’Or gold camp (Figure 2). With land holdings encompassing a
strike length of 16km of the Larder Lake-Cadillac Fault, the most
prolifically gold endowment trend in southern Abitibi, the project
is situated amongst some of the region’s most significant mines
and is adjacent to the historical Chimo gold mine (owned by
Cartier Resources (TSX: ECR)) (Figure 3).
No modern surface geochemistry, geological mapping or
structural analysis has been completed in the district. The
Company has analysed historical exploration information and
merged this data with results from recent exploration activities
undertaken by Chalice. This compilation provides the basis for an
integrated approach to exploration targeting over the Company’s
consolidated land position.
Figure 2. East Cadillac and Kinebik Gold Project Locations
Figure 3. East Cadillac Property and Geology Map
Exploration Activities
During the year, an detailed airborne aeromagnetic survey, a
soil Mobile Metal Ion (“MMI”) and rock-chip sampling/spectral
sampling program (on a 400m x 400m and 200m x 200m grid)
and a LIDAR (Light Detection and Ranging) survey was completed
over the entire ECG project to assist in understanding the broad
controls on gold mineralisation and identifying favourable
lithological and/or structural targets.
In addition, as a result of limited historical IP survey data, a
substantial Dipole-Dipole
(“IP”) has
commenced across the 16km strike length of the Larder Lake-
Cadillac fault to further assist in defining drill targets for the
upcoming 2017–2018 drilling campaign.
Induced Polarisation
The Company also completed a four hole diamond drill hole
program for 1,005m at the Nordeau West target to test for a
continuation of the mineralised structures hosting the Nordeau
West gold deposit and the historical Chimo gold deposit. High-
grade gold was intersected within broad zones of low-grade
gold in the key 5N and 5M structures showing that these two
trends have a pronounced gold endowment.
Future Exploration Program
The Company has a 7,800m diamond drill program in H2
2017 to test multiple targets, including extensions of the existing
high-grade gold mineral resource at Nordeau West and along
the prospective Larder-Lake Cadillac Fault corridor controlled by
Chalice.
Nordeau West Mineral Resource
The ECG Project includes an initial indicated mineral resources
of 225,000t @ 4.17g/t gold for 30,200oz gold and an inferred
mineral resource of 1,112,000t @ 4.09g/t gold for 146,300oz
gold at the Nordeau gold deposit, which the Company considers
to have substantial growth potential.
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ANNUAL FINANCIAL REPORT | 30 JUNE 2017
Operating and Financial review
Warrego North, Northern Territory, Australia (right
to earn a 70% interest)
The Warrego North Project is located approximately 20km
north-west of the historical high-grade Warrego copper-gold
mine in the western part of the Tennant Creek Mineral Field in the
Northern Territory, Australia (Figure 4). Warrego was the largest
deposit mined in the area with historical production of 1.3
million oz of gold and 90,000 tonnes of copper from 5 million
tonnes of ore at 8g/t gold and 2% copper in a classic iron oxide
copper gold (“IOCG”) geological setting. Chalice can earn up
to a 70% interest in the project from Meteoric Resources NL by
sole funding $800,000.
Exploration Activities
The Company’s first of two diamond drill holes drilled during the
year at Warrego North, WND17-001, targeted a coincidental
magnetic-gravity and IP chargeability anomaly (Figure 5) and
intersected chalcopyrite in magnetite ironstones grading 8m @
1.74% copper and 0.42g/t gold between 249-257m down-hole
depth. Pervasive chlorite-sericite alteration indicates the potential
for an extensive hydrothermal system, which is a characteristic of
IOCG deposits.
Future Exploration Program
The Company is encouraged by the results of its maiden drilling
program, and has completed a detailed 3D IP survey subsequent
to year end. The results from this survey were used to assist in
planning immediate follow-up drilling for extensions to the
mineralisation discovered in hole WND17-001 and a second,
stronger, chargeability anomaly located about 300m north of
WND17-001. Drilling commenced subsequent to year end and
assay results are currently awaited.
to be spent to earn the remaining 19% interest.
Figure 4. Warrego North Project Location,
Northern Territory, Australia
Mineral resources are not mineral reserves and do not have
resource
demonstrated economic viability. These mineral
estimates include inferred mineral resources that are considered
too speculative geologically to have economic considerations
applied to them that would enable them to be categorised as
mineral reserves. There is also no certainty that these Inferred
mineral resources will be converted to the measured and
indicated categories through further drilling, or into mineral
reserves, once economic considerations are applied.
The independent Mineral Resource estimates for the Nordeau
West deposit was prepared by MRB & Associates, (“MRB”) of
Val d’Or, Quebec and is reported and classified in accordance
with the guidelines of the 2012 Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves (the
JORC Code 2012) and in accordance with Canadian National
Instrument 43-101.
The mineral resources were estimated using the Canadian
Institute of Mining, Metallurgy and Petroleum, CIM Standards on
Mineral Resources and Reserves, Definitions and Guidelines and
adopted by the CIM Council.
Acquisition Terms
The ECG Project consists of two option and earn in arrangements
and 100% Chalice owned claims. Chalice can earn a 70%
interest in the Chimo Property by making total option payments
of C$200,000 to Richmont Mines and funding exploration
expenditures of C$3.1 million over a period of four years. Upon
meeting these requirements and exercising the option, Chalice
shall then grant a 1% net smelter return royalty to Richmont on
claims with no pre-existing royalties. Chalice has the right to
withdraw without earning an interest in the Project at any time.
Chalice may acquire a 100% interest (except certain claims
where Globex has a 60% interest) in the Nordeau Property by
making annual option payments totalling C$590,000 over four
years to Globex and undertaking exploration expenditures of
C$2.5 million, also over a four-year period. Upon exercising the
option Chalice, will grant a 3% gross metal royalty to Globex
(there are currently no existing royalties in relation to the property
and no government royalties). Chalice has the right to withdraw
without earning an interest at any time.
Kinebik Gold Project, Quebec, Canada
The 100%-owned Kinebik Gold Project covers an area of
187km2, including a 30km strike of the Casa Berardi fault, which
hosts Hecla Mining Company’s (NYSE:HL) Casa Beradi multi-
million ounce gold mine and numerous other gold occurrences.
MMI soil sampling has identified three geochemical anomalies
with moderate to strong Au-Ag-W responses situated close to the
Casa Berardi fault. These anomalies which will be prioritised
with a dipole-dipole 3D ‘Orevision’ IP survey and diamond
drilling of priority targets.
6
CHALICE GOLD MINES LIMITED Operating and Financial review
of the survey areas and has validated targets for follow-up drill
testing. Preparations are well underway for a 4,500m RC drill
program, which has recently commenced.
Figure 5. Parakeet aeromagnetic image with superimposed
gravity, IP and drill collars
Acquisition Terms
Chalice has the right to earn up to a 70% interest in the Warrego
North Project by sole funding $800,000 in exploration
expenditure. Chalice may earn an initial 51% by funding the
first A$400,000 in exploration expenditure and there is an
obligation to drill at least one diamond drill hole, of at least
300m, in 12 months before Chalice can withdraw (obligation
now met), with the balance of A$400,000 (at the Company’s
election) to be spent to earn the remaining 19% interest.
Latitude Hill Project, Western Australia
The 990km2 Latitude Hill Project (Figure 6) was acquired to
provide Chalice with a counter-cyclical investment opportunity in
an under-explored region that is highly prospective for massive
and disseminated nickel-copper-platinum group metals sulphide
deposits similar to the Nova-Bollinger nickel-copper sulphide
deposit in the Albany-Fraser Orogen. The project is subject to a
farm-in and joint venture whereby Chalice can earn up to a 51%
interest with Traka Resources Limited (ASX: TKL) (and up 70% if
Traka elects not to contribute thereafter).
A high quality ‘Spectrem’ Airborne Electromagnetic (EM) survey
completed in 2012 by Anglo American, when they were in
joint venture in the area with Traka, identified seven priority
conductors that were not subsequently followed up (Figure 7).
None of these priority conductors have been subject to ground-
based exploration.
During the year, all five tenements were progressed to grant.
A program of moving-loop EM (“MLEM”) commenced in late June
to survey six of the seven Spectrem airborne EM conductors. The
MLEM survey identified interpreted bedrock conductors at each
Figure 6. Location map showing Latitude Hill relative to other
nickel discoveries in the region
nickel discoveries in the region
Figure 7. Aeromagnetic image showing the property boundary
and location of high priority targets
Acquisition Terms
Chalice must incur A$1 million on exploration expenditure within
the first 12 months from the grant of the tenements. Chalice has
the right, after meeting the minimum commitment, to earn a 51%
interest by expenditure of A$5 million (including the minimum
commitment) within 3 years of commencement. If Chalice earns
a 51% interest, the Company must advise Traka whether it
wishes to increase its interest to 70%. Traka then has 14 days
to notify Chalice if it wishes to maintain its interest at 49% by
proportionally contributing to all future expenditures. If Traka
does not wish to maintain the 49% interest Chalice has the right,
but not the obligation, to expend a further A$5 million in an
additional three years to increase its interest to 70%. If Chalice
earns a 70% interest (or retains the initial 51% interest if Traka
7
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
Operating and Financial review
executes its right to maintain its 49% interest) both parties will
contribute proportionally to all expenditures going forward.
West Pilbara Gold Project, Western Australia (right
to earn a 70% interest)
The 1,390km² West Pilbara Project (Figure 8) is located
approximately 160km south-southwest of Karratha and has
contiguous coverage of 90km of strike of prospective geology
along the contact between the Ashburton and Hamersley Basins,
referred to as the Paraburdoo Hinge Zone and is defined by
regional fault/shear zones.
The region is under-explored for both gold and base metals and
the south-west boundary of the property is approximately 8km
from Northern Star Resources’ (ASX: NST) multi-million-ounce
Paulsens gold mine. The project is subject to a farm-in and joint
venture whereby Chalice can earn up to a 51% interest in the
non-iron rights from Red Hill Iron Limited (ASX: RHI) (and up to
70% if Red Hill elects not to contribute at this stage).
Figure 9: Hydrothermal Breccia with malachite and chalcocite
mineralisation at Wyloo West Prospect
Exploration Activities
During the year, a program of field reconnaissance and rock-
chip sampling was undertaken across all high priority gold and
base metal targets including Wyloo West, Dereks Bore, Kens
Bore, G1 and Red Hill Copper prospects. A total of 130 rock-
chip samples were collected from nine prospects with maximum
values recorded of up to 12.3g/t Au and 29% Cu.
Future Exploration Program
Based on the results of these field programs three prospects (Wyloo
West, Dereks Bore and Red Hill) have recently been surveyed
by gradient array IP geophysics to cover identified targets which
include either elevated Au and Cu rock chip sampling, anomalous
soil geochemistry or historic Au drill intersections. Any new drill
targets defined from the IP surveying will be included with the
planned drilling programs at Ken’s Bore, G1, and Wyloo East
with drilling scheduled to commence in H2 2017.
Figure 8: Geology and property map of the West Pilbara project
Acquisition Terms
8
Chalice can earn up to 70% interest in the West Pilbara Project
by $3 million of exploration expenditures, with a minimum
commitment of A$500,000 within the first 12 months. Chalice
may spend A$1 million within two years (including the minimum
commitment) to earn 51% at which point Red Hill have a one-off
right to contribute to its 49% pro rata interest. If Red Hill elects not
to contribute, Chalice has the right but not the obligation to then
spend another A$2 million to earn a further 19% within no set
time period, or withdraw and retain no interest.
Figure 9: Hydrothermal Breccia with malachite and
chalcocite mineralisation at Wyloo West Prospect
CHALICE GOLD MINES LIMITED
Operating and Financial review
Yilgarn Gold Projects, Western Australia
(100% owned)
Chalice has compiled historical exploration results for its 100%
owned tenements in the Southern Cross, Eastern Goldfields and
Sandstone regions and is currently reviewing field programs to
commence testing of priority targets in the first half of 2018.
Nyanzaga Project, Tanzania (Entitlement to
payment upon Commercial Mining)
Following Chalice’s merger with Sub-Sahara Resources NL in
2009, the Company became entitled to a payment of A$5
million upon commercial production at the Nyanzaga Project
(“Nyanzaga”) in Tanzania. OreCorp Limited (ASX: ORR), which
is currently earning a 51% interest in Nyanzaga, have recently
completed a positive Scoping Study.
GeoCrystal Limited – Webb Diamond Project,
Australia (22.95% equity interest)
Chalice has a 22.95% interest in unlisted diamond explorer,
GeoCrystal Ltd (“GeoCrystal”). GeoCrystal has a 78% interest
in the Webb Diamond Project via a joint venture with ASX-listed
explorer Meteoric Resources Ltd.
Strategic Interest in Ausgold Resources Limited
During the year Chalice subscribed to a share placement of
40 million shares in ASX listed Ausgold Limited (ASX: AUC)
(“Ausgold”) at an issue price of 2.5 cents per share for a total of
$1.0 million (“the Placement”). The funds will predominantly be
used to advance Ausgold’s flagship Katanning Gold Project in
Western Australia.
In addition to the Placement, Chalice agreed to sell its Dumbleyung
Project, which is located adjacent to the Katanning Gold Project,
to Ausgold for 15 million shares (subject to a 12-month escrow)
and 10 million unlisted share options that are exercisable at
3.5 cents per share within a 2-year period. The issue of the
consideration shares and options to Chalice was subject to
Ausgold shareholder approval, which occurred in August 2017
and the consideration shares and options were issued to Chalice
on 14 September 2017. Chalice will also retain a 2 percent
Net Smelter Royalty (“NSR”) over the Dumbleyung Project.
Chalice holds a 13% interest in Ausgold (increasing to a ~16%
interest in the event that the consideration options are exercised)
on a fully diluted basis.
Ausgold’s Katanning Gold Project is located 275km southeast
of Perth, Western Australia where Ausgold holds a dominant
ground position of approximately 4,031km2 in a relatively
under-explored greenstone belt that is prospective for Archaean
gold deposits.
Corporate
Share buyback
In July 2016, the Company commenced a discretionary on-market
share buy-back of up to 28,271,080 ordinary shares as part of
a capital management plan over the next 12 months. As at the
date of this report the Company has acquired and cancelled
21,500,508 ordinary shares under the on-market buy-back for a
total cost of $3,786,723.
TSX listing
Following the sale of the Cameron Gold Project, the Toronto Stock
Exchange (“TSX”) commenced a review on the ordinary shares
of the Company in respect to its continued listing requirements
of the TSX. In December 2016, the TSX advised that it had
completed its review and determined that the Company meets
the applicable requirements for its continued listing.
Investment in Oklo Resources Limited
During the year, Chalice acquired a 9.7% interest in Oklo
Resources Limited (ASX: OKU) (“Oklo”), which was sold in May
2017. Total proceeds received from the sale of the Company’s
interest in Oklo was $5.6 million.
Financial performance
The Group reported a net loss after income tax of $2.3 million
for the year compared to a net gain of $7.4 million for the
year ended 30 June 2016. This decrease is largely related
to the net profit from discontinued operations of $11.7 million,
which predominately related to the sale of the Cameron Project
in the prior financial year. In addition, the loss for the year from
continuing operations was reduced in the current year from $4.3
million at 30 June 2016 to $2.3 million for the current year. The
reduction in net loss is due to the net gain on sale of financial
assets ($1.8 million), which relates to the sale of First Mining
Finance Corp. shares, and the Company’s holding in Oklo
Resources Limited, and a net gain on sale of exploration assets
of $0.7 million.
The $0.9 million net foreign exchange loss (2016: net gain of
$0.9 million) for the year has mainly resulted from the impact of
movements in the Australian Dollar against the US Dollar and
Canadian Dollar on the Company’s US and Canadian Dollar
cash balances.
Corporate administrative expenses of $1.7 million (2016: $1.2
million) increased due to higher personnel associated costs in the
current year.
9
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Statement of cash flows
Financial position
Operating and Financial review
At balance date the Group had net assets of $55 million and an
excess of current assets over current liabilities of $51.4 million.
Current assets decreased by 14.5% to $53 million (2016: $62
million) mainly due to the sale of 25,300,000 common shares
in First Mining. Cash and cash equivalents increased by 31%
to $46.8 million (2016: $35.7 million). Refer to the statement
of cash flows discussion above for further details regarding the
movements in the 2016 cash balance.
Non-current assets increased by 153% to $4.3 million (2016:
$1.7 million), as a result of an increase in exploration and
evaluation assets of $2.9 million.
Current liabilities increased by 129% to $1.6 million (2016:
$0.7 million) mainly due to capital gains tax payable on the sale
of First Mining Finance Corp. shares to 30 June 2017. Non-
current liabilities decreased due to the reduction in the deferred
tax liability in the current year.
Cash and cash equivalents at 30 June 2017 were $46.8 million
(30 June 2016: $35.7 million). The increase in cash of $11.1
million is predominately due to proceeds from sale of financial
assets of $27 million (i.e. proceeds from the sale of 25,300,000
shares in First Mining Finance Corp. and 23,434,977 shares in
Oklo Resources Limited) which was offset by the following:
▪ The acquisition of shares in Oklo Resources Limited ($4.8
million) and Ausgold Limited ($1 million); and
▪ $3.8 million being spent on the share buy-back facility;
In comparison to the 2016 financial year, net cash flows used in
operating activities increased by 22% from $0.9 million in 2016
to $1.1 million.
Net cash flows from investing activities increased significantly
during the year from a net outflow of $4.2 million in 2016 to
a net inflow of $16.4 million in 2017. This was primarily due
to proceeds received from the sale of financial assets as noted
above.
Net cash used in financing activities in the current year represents
the on-market share buy-back that was conducted during the year.
The effect of exchange rates on cash and cash equivalents at
30 June 2017 was a loss of $0.4 million (2016: gain of $0.9
million). The Company held approximately US$10 million in US$
denominated bank accounts at 30 June 2017 (30 June 2016:
US$18 million) and held C$14.5 million in C$ denominated
bank accounts at 30 June 2017 (30 June 2016: C$0.1 million).
10
CHALICE GOLD MINES LIMITED Mineral Resource Statement
The Company reviews and reports it mineral resources at least
annually. The date of reporting is 30 June each year, to coincide
with the Company’s end of financial year balance date. If there
are any material changes to its mineral resources over the course
of the year, the Company is required to report these changes.
On 7 March 2017, the Company issued an updated mineral
resource statement for the Nordeau West deposit in Canada.
The report was prepared in accordance with Canadian National
Instrument 43-101 and JORC Code (2012 Edition).
In completing the annual review for the year ended 30 June
2017, the historical resource factors were reviewed and found
to be relevant and current, therefore, there were no changes to
the mineral resources as stated on 7 March 2017.
The Mineral Resource estimate is summarised below:
Table 1. Nordeau West Mineral Resource estimates
JOrc category
Cut-Off
(g/t au)
Indicated
Inferred
Total Indicated & Inferred
2.75
2.75
2.75
tonnes
(t)
225,000
1,112,000
1,337,000
grade
(g/t au)
contained au
(oz au)
4.17
4.09
4.10
30,200
146,300
176,500
1. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. These Mineral Resource estimates
include Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied
to them that would enable them to be categorised as mineral reserves. There is also no certainty that these Inferred Mineral
Resources will be converted to the Measured and Indicated categories through further drilling, or into mineral reserves, once
economic considerations are applied. All figures are rounded to reflect the relative accuracy of the estimate and therefore
numbers may not appear to add precisely.
2.
The independent Mineral Resource estimates for the Nordeau West deposit was prepared by MRB & Associates, (“MRB”) of Val
d’Or, Quebec and is reported and classified in accordance with the guidelines of the 2012 Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (the JORC Code 2012) and the Canadian National Instruments 43-101.
Governance Arrangements and Internal Controls
The Company has ensured that the mineral resources quoted are
subject to good governance arrangements and internal controls.
The mineral resources reported have been based on information
compiled by Mr John Langton, P.Geo., Principal, MRB &
Associates. Mr John Langton is a consultant to the company and
has sufficient experience in the field of activity being reported to
qualify as a Competent Person as defined in the 2012 edition
of the Australasian Code for Reporting of Exploration Results,
Mineral Resource and Ore Reserves and is a Qualified Person
under National Instrument 43-101 – ‘Standards of Disclosure for
Mineral Projects’. The consultant has also undertaken reviews
of the quality and suitability of the underlying information used
to generate the resource estimation. In addition, Chalice’s
management carries out regular reviews and audits of internal
processes and external consultants that have been engaged by
the Company.
11
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Mineral resOurce s tateMent
resources and, if successful at any of the Company’s exploration
projects, the potential viability of any mineral resource so
defined; planned expenditures and budgets and the execution
thereof; the timing and availability of drill results; potential sites
for additional drilling, the future share price performance of First
Mining Finance Corp and Ausgold Limited, that general business
and economic conditions will not change in a materially adverse
manner; the timing and amount of estimated future production,
costs of production, capital expenditures, success of mining
reclamation
operations, environmental
expenses, title disputes or claims and limitations on insurance
coverage.
risks, unanticipated
In certain cases, forward-looking statements can be identified
by the use of words such as plans, planning, expects or does
not expect, is expected, will, may, would, potential, budget,
scheduled, estimates, forecasts, intends, anticipates or does
not anticipate, or believes, occur, or be achieved, or variations
of such words and phrases or statements that certain actions,
events or results may, could, would, might or will be taken, occur
or be achieved or the negative of these terms or comparable
terminology. By their very nature forward-looking statements
involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied
by the forward-looking statements. Such factors may include,
among others, risks related to actual results of current exploration
activities; changes in exploration programs based upon results of
exploration; future prices of mineral resources; possible variations
in mineral resources or ore reserves, grade or recovery rates;
accidents, labour disputes and other risks of the mining industry;
delays in obtaining governmental approvals or financing or in
the completion of development or construction activities; as well
as those factors detailed from time to time in the Company’s
interim and annual financial statements, all of which are filed
and available for review on SEDAR at sedar.com. Although the
Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
Competent Person and
Qualifying Person Statements
The information in this report that relates to Exploration Results in
relation to the West Pilbara, East Cadillac Gold Project, Kinebik
Gold Project is based on information complied by Dr Kevin Frost
BSc (Hons), PhD, who is a Member of the Australian Institute of
Geoscientists. Dr Frost is a full-time employee of the Company
and has sufficient experience in the field of activity being reported
to qualify as a Competent Person as defined in the 2012 edition
of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves, and is a Qualified Person
under National Instrument 43-101-‘Standards of Disclosure for
Mineral Projects’. Dr Frost, the Qualified Person has verified the
information disclosed in this release and consents to the release
of information in the form and context in which it appears here.
The information in this report that relates to the East Cadillac
Gold Project, Quebec mineral resource estimate is extracted from
the announcement entitled “Maiden JORC Resource for Nordeau
West deposit provides foundation for expanded exploration
program at East Cadillac Gold Project, Quebec” dated 7 March
2017.
The information in this report that relates to the Warrego North,
NT is extracted from the announcement entitled “Chalice
discovers copper-gold mineralisation at Warrego North Project,
NT” dated 16 June 2017.
The above announcements are available to view on the
Company’s website at www.chalicegold.com. The Company
confirms that it is not aware of any new information or data
that materially affects the information included in the original
market announcement and that all material assumptions in the
market announcement continue to apply and have not materially
changed. The Company confirms that the form and context in
which the Competent Person’s and Qualifying Persons findings
are presented have not been materially modified from the original
market announcements.
Forward Looking Statements
This document may contain forward-looking information within
the meaning of Canadian securities legislation and forward-
looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995 (collectively, forward-
looking statements). These forward-looking statements are made
as of the date of this document and Chalice Gold Mines Limited
(the Company) does not intend, and does not assume any
obligation, to update these forward-looking statements.
Forward-looking statements relate to future events or future
performance and reflect Company management’s expectations
or beliefs regarding future events and include, but are not limited
to, the estimation of mineral reserve and mineral resources at
the East Cadillac Gold Project, the realisation of mineral reserve
estimates; the likelihood of exploration success including results
of future geophysical surveys, drilling at the East Cadillac Gold
Project, the Latitude Hill Project, the Warrego North Project and
the West Pilbara Project and other exploration activities; the
timing and costs of future exploration activities on the Company’s
exploration projects; the potential to define future mineral
12
CHALICE GOLD MINES LIMITED Tenement Schedules
Tenement Schedules as at 18 September 2017:
AUSTRALIA
location
project
tenement no./
claim no.
registered Holder
nature of interest
Music Well
E37/1250
CGM (WA) Pty Ltd
100%
Jericho
Yundamindra
Bulga Downs
E39/1914
E39/1976
E57/1050
Woodanilling
E70/4863*
a
i
l
a
r
t
s
u
A
n
r
e
t
s
e
W
Katanning
Williams
Williams
Roe
Nulla South
Nulla South
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Chain Bore
Jericho
Jericho
E70/4864*
E70/4865*
E70/4866*
E70/4869
E77/2353
E77/2354
P37/8702
P37/8703
P37/8704
P37/8705
P37/8706
P37/8707
P37/8708
P37/8709
P37/8710
P37/8711
P39/5600
P39/5601
West Pilbara
E08/1227
Red Hill Iron Limited - 40%
API Management Pty Ltd- 60%
0% - farm-in agreement, right to earn
up to 51% or 70% as applicable (in
all minerals other than iron ore)
E08/1283
E08/1289
13
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
WEST PILBARA
location
project
tenement no./
claim no.
registered Holder
nature of interest
West Pilbara
E08/1293
Red Hill Iron Limited - 40%
API Management Pty Ltd- 60%
0% - farm-in agreement, right to earn
up to 51% or 70% as applicable (in
all minerals other than iron ore)
teneMent sc Hedules
E08/1294
E08/1295
E08/1430
E08/1473
E08/1516
E08/1537
E08/1141
E08/1693
a
i
l
a
r
t
s
u
A
n
r
e
t
s
e
W
Latitude Hill
ELA69/2817
Traka Resources Limited
0% - farm-in agreement, right
to earn up to 51% or 70% as
applicable
ELA69/2610
ELA69/2592
ELA69/3421
ELA69/3399
Northern Territory Warrego North
EL23764
Meteoric Resources NL
0% - farm-in agreement, right to
earn up to 51% interest or 70% as
applicable
* Dumbleyung tenements sold to Ausgold Limited as disclosed in ASX Announcement dated 14 September 2017. Transfer is pending.
14
CHALICE GOLD MINES LIMITED
teneMent sc Hedules
CANADA
location
project
claim numbers
registered Holder
nature of interest
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
Kinebik
2448108 to 2448207
Chalice Gold Mines (Quebec) Inc.
100%
2448409 to 2448497
2449277 to 2449375
2454112 to 2454113
2454308 to 2454320
2454863 to 2454867
2466152 to 2466176
2468010 to 2468013
2470442 to 2470460
2499665 to 2499668
East Cadillac
2461488 to 2461495
Chalice Gold Mines (Quebec) Inc.
100%
East Cadillac
2468029 to 2468043
East Cadillac
2481223 to 2481300
East Cadillac
2491126
East Cadillac
2491239 to 2491250
c
e
b
e
u
Q
East Cadillac
2385084
Richmont Mines Inc.
East Cadillac
2438140 to 2438211
East Cadillac
2437912 to 2437915
Globex Mining Enterprises Inc.
0%- earn-in option
agreement into a 70%
interest
0%- earn-in option
agreement into a 100%
interest
East Cadillac
2437862 to 2437873
East Cadillac
2438798 to 2438811
East Cadillac
2438935 to 2438937
Compagnie minière Baie Bateman
inc. (40%)
Globex Mining Enterprises Inc.
(60%)
0%- earn-in option
agreement into a 100%
interest
East Cadillac
2437791 to 2437811
Globex Mining Enterprises Inc.
0%- earn-in option
agreement into a 100%
interest
15
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 direct Ors’ repOrt
Directors’ Report
The Directors present their report together with the financial report of Chalice Gold Mines Limited (“Chalice” or “the Company”) and its
subsidiaries (together “the Group”) for the financial year ended 30 June 2017 and the independent auditor’s report thereon. The names
and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were
in office for the entire period unless otherwise stated.
1.
DIRECTORS
Anthony (Tony) W
Kiernan
LLB
Non-executive Chairman
Tony, previously a practising lawyer, is a corporate advisor with extensive experience in the
administration and operation of listed public companies. He is the Chairman of Pilbara Minerals
Limited (since 2017) and Venturex Resources Limited (since 2010) both listed on ASX. During the
past three years, Tony was previously a director of ASX listed BC Iron Limited (2006 to 2016) and
Danakali Limited (2013 to 2017). Tony was appointed Chairman on 10 October 2014, and has
been a director since 2007 (10 years).
Tony is a member of the Audit and Risk Committee and Chairman of the Remuneration Committee.
Timothy (Tim) R B Goyder
Managing Director
Tim has considerable experience in the resource industry as an executive and investor. He has been
involved in the formation and management of a number of publicly-listed and private companies and
is currently Chairman of Uranium Equities Limited (since 2002) and Liontown Resources Limited (since
2006) and a director of Strike Energy Limited (since 2017), all listed on ASX.
Tim has been a director since 2005 (12 years) and was appointed Managing Director on 10
October 2014. Tim previously held the position of Executive Chairman.
Stephen is a geologist with over 36 years’ experience in the mining and exploration industry.
Stephen is based in Vancouver, Canada, and has been the President & CEO of Midas Gold Corp.
and its predecessor since January 2011. Stephen was previously President and COO of TSX listed
copper producer Capstone Mining Corp. and, up until its merger with Capstone, President and CEO
of TSX listed copper producer Sherwood Copper Corp. Prior to joining Sherwood, Stephen spent
18 years as Vice President and subsequently Executive Vice President of TSX listed Miramar Mining
Corporation, a Canadian focused gold producer and developer. Stephen has extensive experience
in the resources sector, and in the financing, development and operation of production companies.
Stephen P Quin
PGeo, FGAC, FSEG,
MIOM3
Independent Non-executive
Director
Stephen is a member of the Audit and Risk Committee and Remuneration Committee and has been
an independent non-executive director since 2010 (7 years).
Morgan S Ball
B.Com, CA, FFin
Independent Non-executive
Director
Morgan is a Chartered Accountant with more than 25 years of Australian and international
experience in the resources, logistics and finance industries. Morgan is currently Chief Financial
Officer of ASX Listed Saracen Mineral Holdings Limited. During the past three years, Morgan was
Managing Director from 2013 to 2016, and prior to that Finance Director (2011 to 2013) of ASX
listed BC Iron Limited.
Morgan is Chairman of the Audit and Risk Committee and a member of the Remuneration Committee
and was appointed to the Board as an independent non-executive director on 24 June 2016 (1
year).
16
CHALICE GOLD MINES LIMITED
direct Ors’ repOrt
2.
CHIEF FINANCIAL OFFICER AND JOINT COMPANY SECRETARY
Richard K Hacker
B.Com, CA, ACIS
Chief Financial Officer and Joint
Company Secretary
Richard is a Chartered Accountant and Chartered Secretary with over 20 years of
professional and corporate experience in the energy and resources sector in Australia and the
United Kingdom. Richard has previously worked in senior finance roles with global energy
companies including Woodside Petroleum Limited and Centrica Plc. Prior to this, Richard
was in private practice with major accounting practices. Richard is a director of ASX listed
Uranium Equities Limited. Richard was appointed Joint Company Secretary on
18 September 2017.
Catherine Huynh
B.Com, CA, ACIS
Joint Company Secretary
Catherine is a Chartered Accountant and Chartered Secretary who has 8 years
of professional experience and was appointed Joint Company Secretary on
18 September 2017.
Leanne Stevens
B.Com, CA, ACIS
Company Secretary
(resigned 18 September 2017)
Leanne is a Chartered Accountant and Chartered Secretary who has 14 years of accounting
and governance experience within the mining and energy industries. Leanne is also
Company Secretary of ASX listed Liontown Resources Limited. Leanne resigned from the
position of Company Secretary effective 18 September 2017.
3.
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings
attended by each director were as follows:
directors’ Meetings
audit
remuneration
nomination
Number of meetings held:
Number of meetings
attended:
A W Kiernan
T R B Goyder
S P Quin
M S Ball
7
7
7
7
7
2
2
-
2
2
1
1
-
1
1
-
-
-
-
-
The Company has an audit and risk committee and a separate remuneration committee. The nomination committee comprises the full
membership of the board of directors and any matters to be dealt with by the nomination committee are included in board meetings.
Members acting on the committees during the year were:
audit and risk
remuneration
M S Ball (Chairman)
A W Kiernan (Chairman)
nomination
Full Board
A W Kiernan
S P Quin
S P Quin
M S Ball
17
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 4.
PRINCIPAL ACTIVITIES
6.3. PRINCIPLES OF COMPENSATION
direct Ors’ repOrt
The principal activities of the Group during the year were mineral
exploration and evaluation. There has been no significant
changes in the nature of these activities during the year.
5.
SIGNIFICANT CHANGES IN STATE OF
AFFAIRS
Other than the progress documented above, the state of affairs of
the Company was not affected by any other significant changes
during the year.
6.
REMUNERATION REPORT – AUDITED
This report for the year ended 30 June 2017 outlines remuneration
arrangements in place for directors and executives of Chalice
Gold Mines Limited in accordance with the requirements of the
Corporations Act 2001 (the “Act”) and its regulations. This
information has been audited as required by section 308 (3C)
of the Act.
6.1 MESSAGE FROM THE BOARD
The Company’s remuneration policy is structured to ensure it is
aligned to the business strategy, shareholder interests and to
ensure effective executive remuneration and retention. These
objectives are designed to be achieved through the Company’s
short term and long term incentive plans which link the
achievement of these objectives to the variable compensation
of the Managing Director and staff. Further details are provided
in this report.
6.2
INTRODUCTION
The remuneration report details the remuneration arrangements
for Key Management Personnel (“KMP”) who are defined as
those individuals who have the authority and responsibility for
planning, directing and controlling the activities of the Company
and the Group directly or indirectly. The following were the KMP
for the Group at any time during the year:
Non-executive Directors
Anthony Kiernan Chairman
Stephen Quin
Morgan Ball
Non-executive Director
Non-executive Director
Executive Directors
Tim Goyder
Managing Director
Executives
Richard Hacker Chief Financial Officer and Joint Company
Kevin Frost
Patrick Lengyel
Secretary
General Manager – Exploration
Exploration Manager - Canada
There were no changes in KMP after the reporting date and
before the financial report was authorised for issue.
6.3.1. REMUNERATION GOVERNANCE
Remuneration committee
The Board is responsible for ensuring Chalice’s remuneration
strategy is aligned with Company performance and shareholder
interests and is equitable for participants. To assist with this, the
Board has established a Remuneration Committee consisting of
the following directors:
▪ Anthony Kiernan (Chairman)
▪ Stephen Quin
▪ Morgan Ball
The Remuneration Committee has delegated decision-
making authority for some matters related to the remuneration
arrangements for KMP, and is required to make recommendations
to the Board on other matters.
Specifically, the Board approves the remuneration arrangements
of the Managing Director and other executives including awards
made under the Short Term Incentive Plan (“STIP”) and Employee
Long Term Incentive Plan (“ELTIP”), following recommendations
from the Remuneration Committee. The Board also sets the
aggregate fee pool for Non-executive Directors (“NED”) (which
is subject to shareholder approval) and NED fee levels.
The Remuneration Committee meets through the year when
appropriate. The Managing Director may attend certain
invitation, where
Remuneration Committee meetings by
management input is required. The Managing Director is not
present during any discussions related to his own remuneration
arrangements.
Further information on the Remuneration Committee’s role,
responsibilities and membership can be seen at www.
chalicegold.com.
Use of remuneration consultants
To ensure the Remuneration Committee is fully informed when
making remuneration decisions, the Remuneration Committee
may seek external advice, as it requires, on remuneration
policies and practices. Remuneration consultants are able to be
engaged by, and report directly to, the Committee. In selecting
remuneration consultants, the Committee would consider potential
conflicts of interest and independence from the Group’s KMP and
other executives. During the financial year, the Remuneration
Committee did not seek specific advice or recommendations
from external consultants.
Remuneration report approval at 2016 Annual
General Meeting
The Remuneration Report for the financial year ended 30 June
2016 received positive shareholder support at the 2016 Annual
General Meeting (“AGM”) with a vote of 99.6% in favour.
18
CHALICE GOLD MINES LIMITED
direct Ors’ repOrt
6.3.2 REMUNERATION PRINCIPLES AND
COMPONENTS OF REMUNERATION
The Company has adopted the following principles in its
remuneration framework:
1. Seeking aggregate remuneration at a level which provides
the Company with the ability to attract and retain directors
and executives of high calibre at a cost which is acceptable
to shareholders; and
rewards to attract and retain appropriate employees;
▪ ensuring that total remuneration is competitive with its peers
by market standards;
▪
incorporating in the remuneration framework both short
and long term incentives linked to the strategic goals and
performance of the individuals and the Company and
shareholder returns;
▪ demonstrating a clear
relationship between
individual
2. KMP interest being aligned with shareholder value and
performance and remuneration; and
Company performance by:
▪ motivating employees to pursue and achieve the long term
▪ providing fair, consistent and competitive compensation and
growth and success of the Company.
The following table is an overview of the components of remuneration:
Fixed remuneration
element
Base salary
Base fee
Committee fees
Superannuation
Consultancy fees
Other benefits
Variable remuneration
Short term incentives (STI)
Share options
Performance rights
(1) Only applies to Australian non-executives.
(2) Some directors are paid consultancy fees on an arm’s length basis (refer below).
(3) Other benefits relates to directors and officers insurance.
non-executive directors
executives
×
×
×
×
(1)
(2)
(3)
(4)
×
×
(4) Non-executive directors are eligible to participate in the share option plan at the discretion of the Board subject to shareholder approval where required (refer below for further details).
6.3.3 NON-EXECUTIVE DIRECTOR
REMUNERATION
The Company’s Constitution and the ASX Listing Rules specify that
the maximum aggregate fees to be paid to non-executive directors
for their roles as directors are to be approved by shareholders
at a general meeting. The latest determination was at the 2011
AGM, whereby Shareholders approved a maximum aggregate
amount of $450,000 per year (including superannuation). The
Board does not propose to seek any increase for the non-executive
director pool at the upcoming 2017 Annual General Meeting.
The fee structure for non-executive directors is reviewed annually
and the Remuneration Committee and the Board may consider
advice from external consultants, and undertake comparative
analyses of the fees paid to non-executive directors of comparable
companies in the resources sector with similar market capitalisations.
Generally, the Company will position itself within the 50th and
75th percentile band of the comparative market data.
For the 2017 financial year, a non-executive director (excluding
the Chairman) receives a fee of $60,000 (inclusive of
superannuation, where applicable) and the Chairman receives a
fee of $80,000 (inclusive of superannuation). Members of the
Audit Committee and Remuneration Committee also receive an
additional $5,000 (inclusive of superannuation) for their roles on
each of those Committees. The additional payments recognise
the additional time commitment by non-executive directors who
serve on committees.
The non-executive directors are not entitled to receive retirement
benefits. Non-executive directors, at the discretion of the Board,
may participate in the Employee Share Option Plan (“ESOP”),
subject to approvals required by shareholders. The Board is
conscious of the issue of share options to non-executive directors
and will continue to balance the cost benefit of issuing share
options to attract and retain quality directors against paying
higher fixed directors’ fees.
Non-executive directors are not eligible to participate in the
Company’s Long Term Incentive Plan (“LTIP”).
Apart from their duties as directors, non-executive directors may
undertake additional work for the Company on a consultancy
basis on market terms. The use of consultancy by non-executive
directors in addition to their duties as directors enables the
Company to better utilise the skills offered by the Board particularly
in light of the Company’s current small management team.
19
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
Under the terms of these consultancy agreements, non-executive
directors typically receive a daily rate or monthly retainer for the
work performed at a rate comparable to market rates that they
would otherwise receive for their consultancy services.
The remuneration of non-executive directors for the years ended
30 June 2017 and 30 June 2016 is detailed further in this
Remuneration Report. The amounts listed under ‘Salary & Fees’
include both director fees and consultancy fees received by non-
executive directors.
6.3.4 EXECUTIVE REMUNERATION
Executive remuneration consists of fixed remuneration and may
also comprise variable remuneration in the form of performance
based cash bonuses (Short Term Incentive Plan (“STIP”)), share
options and performance rights (issued under the terms of the
ESOP and Long Term Incentive Plan (“LTIP”) respectively). The LTIP
was last approved by the Company’s shareholders at the 2014
AGM. The structure of the plan is detailed below.
(a)
Fixed remuneration
The level of fixed remuneration is set to provide a base level
of remuneration which is both appropriate for the position and
competitive in the market. The Company aims to pay within
the 50th and 75th percentile band of benchmark data, but the
Board has the discretion to pay above this to attract and retain
key employees in achieving the Company’s strategic goals.
Fixed remuneration is reviewed at appropriate times (and no
less than on an annual basis) by the Remuneration Committee
and approved by the Board having regard to the Company
and individual performance, relevant comparable remuneration
for similarly capitalised companies in the mining industry and
independently compiled market data. Executives receive their
fixed remuneration in the form of cash.
The fixed remuneration for executives is detailed further in this
Report.
direct Ors’ repOrt
(b)
Variable remuneration - STIP
The Board has implemented a formal STIP which includes cash
bonuses to executives upon achievement of predefined targets.
The maximum bonus percentage (“MBP”) ranges between 10%
and 50% of an executive’s fixed annual salary depending on
the position held and responsibilities to be undertaken. The STIP
is based on achieving “Expected” and “Stretch” targets for the
year. Achieving the expected target attracts 20% of the relevant
MBP and achieving the stretch target or better attracts up to
100% of the relevant MBP.
The Board has suspended the STIP and moved 100% of
eligible KMP’s incentive entitlements exclusively to the LTIP.
The justification for this is that at this stage of the Company’s
development, all the key business objectives of KMP have longer
dated time frames than the STIP’s 12 month time frame. Therefore,
during the financial year, no formal cash bonuses were paid to
executives pursuant to the STIP. The Board reserves the right to
pay discretionary cash bonuses to employees and executives to
reward individual efforts and/or outstanding performance.
(c)
Variable remuneration – employee long
term incentive plan (LTIP)
Under the LTIP, the Board has the discretion to make annual
awards of performance rights (which is a right to convert into
ordinary shares after achievement of applicable criteria and
targets) to executives and employees. The level of the award
of performance rights is dependent on an employee’s position
within the Company. Subject to the performance criteria set out
in the terms of the LTIP, performance rights held by an employee
may convert into ordinary fully paid shares in the Company. In the
event performance criteria are not achieved by the measurement
date, the employee’s performance rights lapse with no shares
being issued.
20
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
A summary of the LTIP is set out below:
Key design Feature
design
Eligibility
Award quantum
Performance conditions
All full-time employees and permanent part-time employees (including executive directors and the
managing director) of the Company are eligible participants. Shareholder approval is required
before any director or related party of the Company can participate in the LTIP.
The award quantum will be determined in consideration of total remuneration of the individual,
market relativities and business affordability. The LTIP does not set out a maximum number of
shares that may be issuable to any one person, other than the 5% limit of the total number of
issued shares.
The performance conditions that must be satisfied in order for the performance rights to vest
are determined by the Board. The performance conditions may include one or more of the
following:
▪ Employment of a minimum period of time;
▪ Achievement of specific objectives by the participant and/or the Company. This may include
the achievement of share price targets, total shareholder return and other major long term
milestone targets; or
▪ Such other performance objectives as the Board may determine.
Vesting
Vesting will occur at the end of a defined period, usually three years, and upon the achievement
of the performance conditions.
Term and lapse
The term of the performance rights is determined by the Board in its discretion, but will ordinarily
have a three year term up to a maximum of five years. Performance Rights are subject to
lapsing if performance conditions are not met by the relevant measurement date or expiry
dates (if no other measurement date is specified) or if employment is terminated for cause or in
circumstances as described below.
Price Payable by Participant
No consideration.
Cessation of Employment
If an employee leaves the Company prior to the expiration of the relevant vesting period for a
particular award of performance rights, such performance rights would, as a general rule lapse,
except in certain limited defined situations such as disability, redundancy or death.
Annual grant of performance rights – 2017/2018
The table below outlines the performance rights granted to KMP in July 2017:
annual award
KMp
number of rights
Measurement date
vesting date
2017/2018
Tim Goyder*
1,217,989
Richard Hacker
764,921
Kevin Frost
815,607
Patrick Lengyel
415,365
*Those to Mr Goyder are subject to shareholder approval at the Company’s 2017 AGM.
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
The performance rights shown above will not vest (and the underlying shares will not be issued) unless the performance conditions set
by the Board have been satisfied at the measurement date. For the 2017/2018 annual grant of performance rights, the Remuneration
Committee recommended to the Board that 100% of KMP’s incentive entitlements are offered via the LTIP and that 50% of the LTIP is
to be based on meeting Total Shareholder Return (“TSR”) and the remaining 50% is to be based on achieving key business objectives.
21
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 direct Ors’ repOrt
The following table outlines key business objectives and the weightings of the performance condition:
Overall
performance
condition
Strategic objectives
Specific Performance Conditions
percentage of granted
performance rights that
will vest if performance
conditions are met
Undertake a significant acquisition or corporate transaction: acquire
one or more assets or undertake a corporate transaction with potential
to generate an IRR of at least 20% using consensus commodity prices
and board approved cost assumptions.
50%
AND/OR
Value generation through:
▪ Making a significant new discovery which shows the potential to
be economic based on consensus commodity prices and board
approved cost assumptions; or
▪ Substantially increasing the Company’s resource base; or
▪ Conducting economic/feasibility studies which show the potential to
generate an IRR of at least 20% using consensus commodity prices
and board approved cost assumptions; or
▪ The sale of an asset(s) at a significant profit.
NB: The determination as to whether the above objectives have been
met will be done by the Board of the Company in a timely manner,
acting reasonably and in good faith.
The performance conditions for performance rights issued will be measured
by comparing the Company’s TSR with that of an appropriate comparator
group of companies as determined by the Remuneration Committee over
the period from the grant of the performance rights, to the end of the
financial year that is 3 years after that date (vesting date). The performance
rights will vest depending on the Company’s percentile ranking within the
comparator group on the relevant vesting date as follows:
Below 50th Percentile
Between 50th and 75th percentile
TSR objectives
0%
Pro rata between 16.5% and
50%
At or above 75th percentile
50%
The test date for the performance rights are set at 30 June 2020, being approximately 3 years from the date of grant.
Annual grant of performance rights - 2016/2017
The table below outlines the performance rights granted to KMP for the 2016/2017 financial year and have not yet vested:
annual award KMp
number
of rights
Measurement date
vesting date
2016/2017
Tim Goyder
1,200,738
30 June 2019
Richard Hacker 754,087
30 June 2019
Kevin Frost
804,058
30 June 2019
Patrick Lengyel 389,594
30 June 2019
30 June 2019
30 June 2019
30 June 2019
30 June 2019
The performance rights shown above will not vest (and the underlying shares will not be issued) unless the performance conditions set by
the Board have been satisfied. For the 2016/2017 annual grant of performance rights, the Remuneration Committee recommended
to the Board that 100% of KMP’s incentive entitlements are offered via the LTIP and that 50% of the LTIP is to be based on meeting Total
Shareholder Return (“TSR”) and the remaining 50% is to be based on achieving key business objectives.
22
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
The following table outlines key business objectives and the weightings of the performance condition:
Overall
performance
condition
Strategic objectives
Specific Performance Conditions
percentage of granted
performance rights that
will vest if performance
conditions are met
Undertake a significant acquisition or corporate transaction: acquire
one or more assets or undertake a corporate transaction with potential
to generate an IRR of at least 20% using consensus commodity prices
and board approved cost assumptions.
50%
AND/OR
Value generation through:
▪ Making a significant new discovery which shows the potential to
be economic based on consensus commodity prices and board
approved cost assumptions; or
▪ Substantially increasing the Company’s resource base; or
▪ Conducting economic/feasibility studies which show the potential to
generate an IRR of at least 20% using consensus commodity prices
and board approved cost assumptions; or
▪ The sale of an asset(s) at a significant profit.
NB: The determination as to whether the above objectives have been
met will be done by the Board of the Company in a timely manner,
acting reasonably and in good faith.
The performance conditions for performance rights issued will be measured
by comparing the Company’s TSR with that of an appropriate comparator
group of companies as determined by the Remuneration Committee over
the period from the grant of the performance rights, to the end of the
financial year that is 3 years after that date (vesting date). The performance
rights will vest depending on the Company’s percentile ranking within the
comparator group on the relevant vesting date as follows:
Below 50th Percentile
Between 50th and 75th percentile
TSR objectives
0%
Pro rata between 16.5% and
50%
At or above 75th percentile
50%
The test date for the performance rights are set at 30 June 2019, being 3 years from the date of grant.
Annual grant of performance rights - 2015/2016
The table below outlines the performance rights that were granted for the 2015/16 financial year and have not yet vested.
annual award KMp
number
of rights
Measurement date
number of rights
meeting performance
hurdles at
Measurement date
vesting date
2015/2016
Tim Goyder
1,664,707
30 June 2017
1,147,444
30 June 2018
Richard
Hacker
1,306,837
30 June 2017
900,772
Patrick Lengyel 648,809
30 June 2017
447,209
30 June 2018
30 June 2018
In July 2017, the Remuneration Committee determined that, at the measurement date of 30 June 2017, performance hurdles relating
to strategic objectives and share price hurdles during the measurement period of 1 July 2015 until 30 June 2017 have been partially
met. Therefore, 68.9% of performance shares will vest and convert to fully-paid ordinary shares subject to eligible KMP’s and employees
completing an additional 12 months service period ending on 30 June 2018.
23
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 direct Ors’ repOrt
6.3.5 LINK BETWEEN PERFORMANCE AND
EXECUTIVE REMUNERATION
The focus of executive remuneration over the financial year was
fixed remuneration and performance rights under the LTIP (i.e.
growing the value of the Company as reflected through share
price) which seeks to ensure that executive remuneration is
appropriately aligned with the business strategy and shareholder
interests.
The share price performance over the last 5 years, is as follows:
30
June
2013
30
June
2014
30
June
2015
30
June
2016
30
June
2017
$0.16
$0.15
$0.11
$0.18
$0.15
(d)
Variable remuneration – share option plan
Equity grants to executives have previously been delivered in the
form of employee share options under the Company’s Employee
Share Option Plan which was last approved by shareholders in
2016. Options are issued at an exercise price determined by the
Board at the time of issue.
Generally, no performance hurdles were set on options issued
to executives. The Company considered that as options were
issued at a price in excess of the Company’s current share price
(at the date of issue of those options), there was an inherent
performance hurdle as the share price of the Company’s shares
had to increase before any reward could accrue to the executive.
The vesting period for share options is at the discretion of the
Board and the expiry date of share options is usually between
3 and 5 years.
Share
price
Upon cessation of employment, participants have 3 months
from the date of cessation to exercise the share options.
This requirement may be waived at the Board’s discretion.
It is currently the Board’s preference to issue performance rights
under the LTIP to KMP rather than share options.
24
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
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T
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
direct Ors’ repOrt
6.5 EQUITY INSTRUMENTS
6.5.1 EMPLOYEE SHARE OPTIONS
During the reporting period 1,500,000 options were granted to non-executive directors as per the below table. No further options over
ordinary shares in the Group were granted or vested as compensation to KMP.
number
of options
granted
during
2017
grant date
Fair value
of options
at grant
date
$
Fair
value per
option
$
exercise
price
$
expiry date
number
of options
vested
during
2017
Directors
A W Kiernan
500,000 22 November 2016 0.25
16,811
S P Quin
M S Ball
500,000 22 November 2016 0.25
16,811
500,000 22 November 2016 0.25
14,664
0.03
0.03
0.03
30 November 2019 500,000
30 November 2019 500,000
30 June 2019
500,000
During the reporting period, no shares were issued on the exercise of share options granted as compensation and no options granted
as compensation in the current and/or prior year were forfeited/lapsed.
6.5.2 EMPLOYEE LONG TERM INCENTIVE PLAN - PERFORMANCE RIGHTS
During the reporting period the following performance rights were granted as compensation to KMP and details of performance rights
that vested during the reporting period are as follows:
number
of rights
granted
during 2017
grant date
Fair value
of rights at
grant date
(a)
$
Fair value
per right
$
number of
rights vested
during 2017
expiry date
Directors
T R B Goyder
1,200,738 22 November 2016 157,057
R K Hacker
754,087 15 July 2016
126,340
K M Frost
P Lengyel
804,058 15 July 2016
134,712
389,594 15 July 2016
65,273
0.13
0.17
0.17
0.17
30 June 2020
30 June 2020
30 June 2020
30 June 2020
-
-
-
-
(A) The value of performance rights granted in the year is the fair value of performance rights calculated at grant date using a binomial
option-pricing model. The total value of the performance rights granted is included in the table above. This amount is allocated
to remuneration over the vesting period.
The above performance rights were issued at no cost and expire on the earlier of their date or termination of the KMP’s employment.
During the reporting period, no shares were issued on the exercise of performance rights granted as compensation. Refer below.
26
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
Details of the vesting profile of performance rights granted as remuneration to each KMP of the Group are outlined below.
number
of rights
grant date
% vested in
year
% forfeited
in year
vesting date
Directors
T R B Goyder
1,664,707 25 November 2015 -
1,200,738 22 November 2016 -
Executive
R K Hacker
K M Frost
P Lengyel
1,306,837 25 June 2015
754,087 15 July 2016
804,058 15 July 2016
648,809 25 June 2015
389,594 15 July 2016
-
-
-
-
-
-
-
-
-
-
-
-
30 June 2018
30 June 2019
30 June 2018
30 June 2019
30 June 2019
30 June 2018
30 June 2019
During the reporting period, the following performance rights over ordinary shares held by KMP were forfeited/lapsed:
number of rights forfeited/lapsed
$
Financial year granted
$
Executives
R K Hacker
1,326,693
30 June 2015
6.5.3 EQUITY HOLDINGS OF KEY MANAGEMENT PERSONNEL
Option holdings and performance rights of key management personnel
The movement during the reporting period in the number of options and performance rights over ordinary shares in the Group held,
directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
Held at
1 July 2016
granted as
compensation
exercised/
Forfeited
Held at
30 June
2017
vested
during the
year
vested and
exercisable
at 30 June
2017
Director
T Goyder
A W Kiernan
S P Quin
M S Ball
Executive
K M Frost
P Lengyel
1,664,707
1,200,738
-
-
-
-
500,000
500,000
500,000
804,058
648,809
389,594
-
-
-
-
-
-
804,058
1,038,403
R K Hacker
2,633,530
754,087
(1,326,693)
2,060,924
2,865,445
-
-
500,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
-
-
-
-
-
-
27
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 direct Ors’ repOrt
Shareholdings of key management personnel
The movement during the reporting period in the number of ordinary shares in the Group held, directly, indirectly or beneficially, by
each KMP, including their related parties, is as follows:
Held at
1 July 2016
additions
received on
exercise of
Options/
performance
rights
Held at
30 June
2017
sales
Held at 30
June 2017
Director
T R B Goyder
43,827,765
1,000,000
A W Kiernan(1)
1,602,040
300,000
S P Quin
M B Ball
Executive
K M Frost
P Lengyel
26,321
-
-
-
R K Hacker
132,000
-
-
-
-
-
-
-
-
-
-
-
-
44,827,765
1,902,040
26,321
-
-
-
132,000
-
-
-
-
-
-
-
44,827,765
1,902,040
26,321
-
-
-
132,000
(1)The shareholding of Mr Kiernan has been adjusted to remove the shareholding of Mr Kiernan’s children as they are no longer deemed dependents of Mr Kiernan.
6.5.4 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
AND THEIR RELATED PARTIES
A number of KMP, or their related parties, hold positions in other entities that result in them having control or significant influence over
the financial or operating policies of those entities.
A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with KMP or
their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar
transactions to non-director related entities on an arm’s length basis.
The aggregate expense/(income) recognised during the year relating to KMP or their related parties was as follows:
KMp
transaction
note
A W Kiernan
Consulting services
Other related parties
Liontown Resources Limited
Corporate services
Uranium Equities Limited
Corporate services
PhosEnergy Limited
Corporate services
(i)
(ii)
(ii)
(ii)
2017
$
2016
$
46,200
40,500
(66,000)
(96,814)
(21,600)
(66,000)
(66,000)
(24,436)
The Group used the consulting services of Mr Kiernan during the course of the financial year. Amounts were billed based on
normal market rates for such services and were due and payable under normal payment terms.
The Group supplied corporate services such as accounting and company secretarial services under a Corporate Services
Agreement to Liontown Resources Limited (“LTR”), Uranium Equities Limited (“UEL”) and PhosEnergy Limited (“PEL”) and geological
services of KMP. Mr Goyder is a director of LTR, UEL and PEL and Mr Kiernan is Chairman of PEL. Amounts were billed on a
proportionate share of the cost to the Group of providing the services and are due and payable under normal payment terms.
(i)
(ii)
28
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
Amounts outstanding (to)/from the above related parties at reporting date arising from these transactions were as follows:
Assets and liabilities arising from the above transactions
Current payables
Trade debtors
2017
$
2016
$
-
21,048
21,048
(15,000)
12,800
(2,200)
6.6 EXECUTIVE CONTRACTS
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are provided below.
Managing Director
The Managing Director (“MD”), Mr Tim Goyder, is employed under an ongoing contract which can be terminated with notice by either
the Group or the MD.
▪ Under the terms of the present contract, as disclosed to the ASX in October 2014:
▪ The MD receives fixed remuneration of $390,000 per annum (inclusive of superannuation).
▪ The MD may participate in incentive plans that may be in place from time to time subject to the Board’s discretion and any
shareholder approvals required.
The MD’s termination provisions are as follows:
Resignation
Termination for cause
3 months
None
Termination in cases of death, disablement, redundancy or notice without cause
3 months
Diminution of responsibility
12 months
3 months
None
3 months
N/A
notice period
payment in lieu
of notice
Executives
Other Executives are employed on individual ongoing contracts that set out the terms of their employment. The following table outlines
the termination provisions contained within those employment agreements held by other KMP:
Resignation
Termination for cause
3 months
None
Termination in cases of death, disablement, redundancy or notice without cause
3 months
Diminution of responsibility
6 months*
3 months
None
3 months
N/A
notice period
payment in lieu
of notice
* Mr Hacker only
7.
DIVIDENDS
No dividends were declared or paid during the year and the directors recommend that no dividend be paid.
29
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
direct Ors’ repOrt
8.
LIKELY DEVELOPMENTS
There are no likely developments that will impact on the Company other than as disclosed elsewhere in this report.
9.
SIGNIFICANT EVENTS AFTER BALANCE DATE
On 27 July 2017 the Board resolved to issue a total of 4,929,291 performance rights to directors (subject to shareholder approval),
executives and employees under the terms and conditions of the Company’s long term incentive plan. Please refer to section 7.3.4 (c)
of the Remuneration Report for further details in relation to the performance rights issued subsequent to balance date.
10. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares, rights or options over such instruments issued by Chalice and other related bodies
corporate, as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this
report is as follows:
T R B Goyder
S P Quin
M B Ball
A W Kiernan
Ordinary
shares
Options over
ordinary shares
performance
rights
44,827,765
-
2,865,445
26,321
-
1,902,040
500,000
500,000
500,000
-
-
-
11.
SHARE OPTIONS AND PERFORMANCE RIGHTS
Unissued shares under option
At the date of this report 2,250,000 unissued ordinary shares (2,250,000 at reporting date) of the Company are under option on the
following terms and conditions:
expiry date
31 October 2017
30 November 2019
30 June 2019
30 June 2020
exercise price
($)
number of
options
0.25
0.25
0.25
0.25
500,000
1,000,000
500,000
250,000
Unless exercised, these options do not entitle the holder to participate in any share issue of Chalice or any other body corporate.
Performance rights
At the date of this report 12,253,046 performance rights (8,541,744 at reporting date) have been issued on the following terms and
conditions:
exercise price ($)
number of rights
Nil
Nil
Nil
Nil
4,069,554
3,472,190
1,000,000
3,711,302
expiry date
30 June 2019
30 June 2020
15 June 2018
30 June 2021
In addition to the above, the Board has resolved, subject to shareholder approval at the Company’s 2017 AGM to grant Mr Goyder
1,217,989 performance rights, in accordance with the terms and conditions of the Company’s LTIP, and with the same performance
conditions as those granted to KMP (refer to the above section 7.3.4).
30
CHALICE GOLD MINES LIMITED direct Ors’ repOrt
Shares issued on exercise of options or
performance rights
No shares were issued during or since the end of the year as a
result of the exercise of options or performance rights.
15. NON-AUDIT SERVICES
During the year HLB Mann Judd, the Company’s auditors did not
provide services in addition to their statutory duties.
12.
ENVIRONMENTAL LEGISLATION
16. AUDITOR’S INDEPENDENCE
DECLARATION
The Group is subject to environmental legislation and obligations
within the jurisdictions in which it operates, which during the
period has been primarily Canada.
The auditor’s independence declaration is set out on page 30
and forms part of the Directors’ Report for the year ended 30
June 2017.
This Report is made in accordance with a resolution of the
Directors:
Tim Goyder
Managing Director
Dated at Perth the 18th day of September 2017
13. PROCEEDINGS ON BEHALF
OF THE COMPANY
No person has applied for leave of court to bring proceedings on
behalf of the Company or intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or any part of those proceedings.
14.
INDEMNIFICATION AND INSURANCE
OF DIRECTORS AND OFFICERS
Chalice has agreed to indemnify all the directors and officers who
have held office during the year, against all liabilities to another
person (other than Chalice or a related body corporate) that
may arise from their position as directors and officers of Chalice,
except where the liability arises out of conduct involving a lack of
good faith. The agreement stipulates that Chalice will meet the
full amount of any such liabilities, including costs and expenses.
During the year the Group paid insurance premiums of $10,688,
in respect of directors and officers indemnity insurance contracts,
for current and former directors and officers. The insurance
premiums relate to:
▪ costs and expenses incurred by the relevant officers in
defending proceedings, whether civil or criminal and
whatever their outcome; and
▪ other liabilities that may arise from their position, with the
exception of conduct involving a wilful breach of duty or
improper use of information or position to gain a personal
advantage.
The amount of insurance paid is included in KMP remuneration in
section 7.4 of the Remuneration Report.
31
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Corporate Governance Statement
Chalice Gold Mines Limited ACN 116 648 956 (Company) has
established a corporate governance framework, the key features
of which are set out in its Corporate Governance statement which
can be found on the Company’s website at www.chalicegold.com,
under the section marked “Governance”.
In establishing its corporate governance framework, the Company
has referred to the recommendations set out in the ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations 3rd edition (Principles & Recommendations).
The Company has followed each recommendation where the
Board has considered the recommendation to be an appropriate
benchmark for its corporate governance practices. Where
the Company’s corporate governance practices follow a
recommendation, the Board has made appropriate statements
reporting on the adoption of the recommendation. In compliance
with the “if not, why not” reporting regime, where, after due
consideration, the Company’s corporate governance practices
do not follow a recommendation, the Board has explained it
reasons for not following the recommendation and disclosed
what, if any, alternative practices the Company has adopted
instead of those in the recommendation.
32
CHALICE GOLD MINES LIMITED Auditor’s Independence Declaration
30
33
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
Continuing operations
Revenue
Net gain on sale of available for sale financial assets
Net gain on sale of exploration and evaluation assets
Foreign exchange gain/(loss)
Share of net profits/(losses) of associates
Impairment of investment in associate
Impairment of financial assets
Exploration and evaluation assets written off
Corporate administrative expenses
Business development and project acquisition costs
Share based payments
Depreciation and amortisation expense
Loss before tax from continuing operations
Income tax benefit
Loss for the year from continuing operations
Discontinued operations
Net profit for the year from discontinued operations
Overprovision for income tax expense
Income tax expense
Profit for the year from discontinued operations
Total (loss)/profit for the year
note
2017
$
2016
$
3(a)
3(b)
3(c)
8
8
3(g)
12
3(d)
3(f)
429,478
338,455
1,834,027
755,712
(974,148)
(55,156)
(429,010)
(530,136)
-
-
917,214
48,998
(790,050)
-
(339,226)
(2,201,005)
(1,676,740)
(1,230,656)
(1,279,290)
(1,413,600)
(329,119)
(50,227)
(47,312)
(64,197)
(2,643,835)
(4,442,153)
6
361,989
182,379
(2,281,846)
(4,259,774)
-
-
-
-
13,109,976
-
(1,417,703)
11,692,273
(2,281,846)
7,432,499
6
4
Total (loss)/profit for the year attributable to owners of the parent
(2,281,846)
7,432,499
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Net change in fair value of available for sale investments
Exchange differences on discontinued operations
Exchanges differences on translation of foreign operations
Other comprehensive loss for the year
96,803
(1,121,101)
-
(498,755)
(242,331)
(316,127)
(401,952)
(1,679,559)
Total comprehensive (loss)/income for the year
(2,683,798)
5,752,940
Total comprehensive (loss)/income for the year attributable to owners of the parent
(2,683,798)
5,752,940
Basic and diluted (loss)/earnings per share from continuing operations (cents)
Basic and diluted earnings per share from discontinued operations
Basic and diluted earnings per share from continuing and discontinued operations
(cents)
7
7
7
(0.9)
-
(0.9)
(1.5)
4.1
2.6
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
34
CHALICE GOLD MINES LIMITED Consolidated Statement of Financial Position
As at 30 June 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Assets held for sale
Total current assets
Non-current assets
Financial assets
Investment accounted for using the equity method
Exploration and evaluation expenditure
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Employee benefits
Total current liabilities
Non-current liabilities
Other
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Total equity
note
2017
$
2016
$
22
9
11
10
11
8
12
13
14
6
15
16
6
46,819,151
35,733,786
315,798
209,932
5,807,628
25,421,978
66,111
520,078
53,008,688
61,885,774
224,968
484,167
3,245,539
308,600
202,908
968,333
296,609
274,733
4,263,274
1,742,583
57,271,962
63,628,357
503,071
938,672
191,021
1,632,764
557,608
127,614
59,489
744,711
39,170
272,010
311,180
46,591
1,367,635
1,414,226
1,943,944
2,158,937
55,328,018
61,469,420
17
39,836,164
43,622,887
18(a)
18(b)
20,106,666
22,388,512
(4,614,812)
(4,541,979)
55,328,018
61,469,420
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
35
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
issued
capital
retained
earnings
share based
payments
reserve
investment
revaluation
reserve
Foreign
currency
translation
reserve
$
$
$
$
$
total
$
Balance at 30 June 2016
43,622,887
22,388,512
179,559
(1,003,499)
(3,718,039)
61,469,420
Other comprehensive
income/(loss) for the year
Net change in fair value of
available for sale financial
assets
Exchange differences
on translation of foreign
operations
Total comprehensive
income/(loss) for the year
-
-
-
-
(2,281,846)
-
-
(2,281,846)
Share buy-back
(3,786,723)
Share based payments
-
-
-
-
-
-
-
-
329,119
-
96,803
-
-
(2,281,846)
96,803
-
(498,755)
(498,755)
96,803
(498,755)
(2,683,798)
-
-
-
-
(3,786,723)
329,119
Balance at 30 June 2017
39,836,164
20,106,666
508,678
(906,696)
(4,216,794)
55,328,018
The above statement of changes in equity should be read in conjunction with the accompanying notes.
issued
capital
retained
earnings
share
based
payments
reserve
investment
revaluation
reserve
Foreign
currency
translation
reserve
$
$
$
$
$
total
$
Balance at 30 June 2015
43,622,887
14,890,400
197,860
117,602
(3,159,581)
55,669,168
Profit for the year
Net change in fair value of
available for sale investments
Exchange differences on
discontinued operations
Exchange differences
on translation of foreign
operations
Total comprehensive
income/(loss) for the year
Share based payments
Transfers between equity items
-
-
-
-
-
-
-
7,432,499
-
-
-
7,432,499
-
-
-
-
-
-
(1,121,101)
-
-
7,432,499
(1,121,101)
-
-
(242,331)
(242,331)
(316,127)
(316,127)
(1,121,101)
(558,458)
5,752,940
-
47,312
65,613
(65,613)
-
-
-
-
47,312
-
Balance at 30 June 2016
43,622,887
22,388,512
179,559
(1,003,499)
(3,718,039)
61,469,420
The above statement of changes in equity should be read in conjunction with the accompanying notes.
36
CHALICE GOLD MINES LIMITED Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Income tax paid
Exploration tax credits
Interest received
note
2017
$
2016
$
148,100
208,145
(1,640,074)
(1,188,498)
(52,856)
171,523
-
-
240,457
119,980
Net cash used in operating activities
22
(1,132,850)
(860,373)
Cash flows from investing activities
Payments for mining exploration and evaluation
Payments associated with the sale of the Cameron Gold Project
Payments for business development activities
Deferred consideration received
Acquisition of property, plant and equipment
Proceeds from sale of exploration and evaluation assets
Proceeds from sale of fixed assets
Proceeds from sale of financial assets
Payment for acquisition of financial assets
(3,159,522)
(5,155,365)
(175,509)
(543,503)
(1,367,019)
(1,350,974)
-
2,908,400
(85,151)
(47,796)
25,249
8,083
27,070,584
(5,835,169)
-
1,194
-
-
Net cash from/(used in) investing activities
16,481,546
(4,188,044)
Cash flows from financing activities
Share buy-back
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
(3,786,723)
(3,786,723)
-
-
11,561,973
(5,048,417)
35,733,786
39,864,989
(476,608)
917,214
Cash and cash equivalents at 30 June
22
46,819,151
35,733,786
The above statement of cash flows should be read in conjunction with the accompanying notes.
37
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
1.
SIGNIFICANT ACCOUNTING POLICIES
Chalice Gold Mines Limited is a dual listed Australian Securities Exchange (“ASX”) and Toronto Stock Exchange (“TSX”) listed public company
domiciled in Australia at Level 2, 1292 Hay Street, West Perth, Western Australia. The consolidated financial report comprises the financial
statements of Chalice Gold Mines Limited (“Company” or “Parent”) and its subsidiaries (“the Group”) for the year ended 30 June 2017.
(a)
Basis of preparation
Depreciation and Amortisation.
The financial report is a general purpose financial report which
has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and
other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report has also been prepared
on a historical cost basis, except for available-for-sale investments,
which have been measured at fair value. Cost is based on the
fair values of the consideration given in exchange for assets.
Chalice is domiciled in Australia and all amounts are presented
in Australian dollars, unless otherwise indicated.
The consolidated financial statements provide comparative
information in respect of the previous period. In addition, the
Group presents an additional statement of financial position at
the beginning of the earliest period presented when there is a
retrospective application of an accounting policy, a retrospective
restatement, or a reclassification of items in financial statements.
The financial report was authorised for issue by the directors on
18 September 2017.
(b)
Compliance with IFRS
The financial report also complies with International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
(c)
Adoption of new and revised standards
(i)
Standards and interpretations applicable
to 30 June 2017
For the year ended 30 June 2017, the Directors have
reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant to
the Group’s operations and that are effective for annual
reporting period. It has been determined that there
is no impact, material or otherwise, of the new and
revised Standards and Interpretations on the Group
and, therefore, no material change is necessary to
Group accounting policies. The Group has adopted
the following new and amended Standards and AASB
Interpretations as of 1 July 2016:
▪ AASB 14 Regulatory Deferral Accounts.
▪ AASB 2014-3 Amendments to Australian Accounting
Standards- Accounting for Acquisitions of Interests in
Joint Operations.
▪ AASB 2014-4 Amendments to Australian Accounting
Standards- Clarification of Acceptable Methods of
38
▪ AASB 2014-9 Amendments to Australian Accounting
Standards- Equity Method in Separate Financial
Statements.
▪ AASB 2014-10 Amendments
to Australian
Accounting Standards- Sale or Contribution of
Assets between and Investor and its Associate or
Joint Venture.
▪ AASB 2015-1 Amendments to Australian Accounting
to Australian
Standards- Annual
Accounting Standards 2012- 2014 Cycle.
Improvements
▪ AASB 2015-2 Amendments to Australian Accounting
Standards- Disclosure Initiative: Amendments to
AASB 101.
(ii)
Accounting Standards and Interpretations issued
but not yet effective
following new accounting
The
standards and
interpretations which are not yet effective and have not
been applied by the Company, have been assessed to
have no material impact on the Company:
▪ AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses.
▪ AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to
AASB 107.
▪ AASB 2016-3 Amendments to Australian Accounting
Standards – Clarifications to AASB 15.
▪ AASB 2016-5 Amendments to Australian Accounting
Standards- Classification and Measurement of
Share-based Payment Transactions.
▪ AASB 9 Financial Instruments (2014).
▪ AASB 15 Revenue from Contracts with Customers.
▪ AASB 2014-5 Amendments to Australian Accounting
Standards arising from AASB 15.
▪ AASB 2015-8 – Amendments
to Australian
Accounting Standards – Effective Date of AASB 15.
▪ AASB 2014-10 – Amendments to Australian
Accounting Standards- Sale or Contribution of
Assets between an Investor and its Associate of Joint
Venture.
▪ AASB 16 Leases.
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
(d)
Basis of consolidation
The consolidated financial statements comprise the financial
statements of Chalice Gold Mines Limited (“Company” or
“Parent”) and its subsidiaries as at 30 June each year (the
“Group”). Interests in associates are equity accounted and are
not part of the consolidated Group.
Subsidiaries are all those entities controlled by the Group. The
Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Special purpose entities are those entities over which the Group
has no ownership interest but in effect the substance of the
relationship is such that the Group controls the entity so as to
obtain the majority of benefits from its operation.
The financial statements of the subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. In preparing the consolidated financial
statements, all intercompany balances and transactions, income
and expenses and profit and losses resulting from intra-group
transactions have been eliminated in full.
Subsidiaries and special purpose entities are fully consolidated
from the date on which control is transferred to the Company
and cease to be consolidated from the date on which control is
transferred out of the Group.
Investments in subsidiaries held by Chalice Gold Mines Limited
are accounted for at cost in the financial statements of the parent
entity less any impairment charges.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method of
accounting involves recognising at acquisition date, separately
from goodwill, the identifiable assets acquired, the liabilities
assumed and any non-controlling interest in the acquired. The
identifiable assets acquired and the liabilities assumed are
measured at their acquisition date fair values.
The difference between the above items and the fair value
of consideration (including the fair value of any pre-existing
investment in the acquiree) is goodwill or a discount on
acquisition.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from
the acquisition date, allocated to each of the Group’s cash-
generating units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquire are
assigned to those units.
Where goodwill forms part of a cash-generating unit and part of
the operation within that unit disposal of, the goodwill associated
with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal
of the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
Non-controlling interests are allocated their share of net result
after tax in the consolidated statement of comprehensive income
and are presented in equity in the consolidated statement of
financial position, separately from the equity of the owners of
the Parent.
Total comprehensive income within a subsidiary is attributed to
the non-controlling interest even if that results in a deficit balance.
A change in ownership interest of a subsidiary, without a loss of
control, is accounted for as an equity transaction. If the Group
loses control over a subsidiary it:
▪ Derecognises the assets (including goodwill) and liabilities of
the subsidiary.
▪ Derecognises the carrying amount of any non-controlling
interest.
▪ Derecognises the cumulative translation differences recorded
in equity.
▪ Recognises the fair value of the consideration received.
▪ Recognises the fair value of any investment retained.
▪ Recognises any surplus or deficit in profit or loss.
▪ Reclassifies the Parent’s share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate.
If the Group loses control over a subsidiary, it derecognises the
related assets (including goodwill), liabilities, non-controlling
interest and other components of equity, while any resultant gain
or loss is recognised in profit or loss. Any investment retained is
recognised at fair value.
(e)
Significant accounting judgements,
estimates and assumptions
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to make
judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets, liabilities, income
and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
These accounting policies have been consistently applied by the
Group.
Uncertainty about these assumptions and estimates could result in
comes that require a material adjustment to the carrying amount
of assets or liabilities affected in future periods. The Group also
discloses its exposure to risks and uncertainties in Note 19. The
key estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting period are:
39
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 (i)
Recoverability of exploration and
evaluation expenditure
forward
The recoverability of the carrying amount of exploration
and evaluation expenditure carried
is
dependent on the future successful outcome from
exploration activity or alternatively the sale of the
respective areas of interest. Where exploration results
are unsuccessful, or no further work is to be undertaken,
the directors will then assess whether an impairment
write-down is required, which will be recognised in the
statement of comprehensive income.
nOtes tO tHe cOnsOlidated Financial s tateMents
subsidiaries are translated into the presentation currency of
Chalice Gold Mines Limited at the rate of exchange ruling at the
balance date and their statement of comprehensive income are
translated at the average exchange rate for the year.
The exchange differences arising on the translation are taken
directly to a separate component of recognised foreign currency
translation reserve in equity.
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.
(ii)
Share-based payment transactions
(g)
Segment reporting
The Group measures the cost of equity-settled share-
based payments at fair value at the grant date using
a Black-Scholes Option model taking into account
the terms and conditions upon which the instruments
were granted. The details and assumptions used in
determining the value of these transactions are detailed
in note 15.
(iii)
Impairment of available-for-sale financial assets
The Group follows the guidance of AASB 139
Financial Instruments: Recognition and Measurement to
determine when an available-for-sale asset is impaired.
This determination requires significant judgment. In
making this judgement the Group evaluates, among
other factors, the duration and extent to which the
fair value of an investment is less than its cost and the
financial health of a short-term business outlook for the
investee, including factors such as industry and sector
performance, changes in technology and operational
and financing cash flows.
(iv)
Non market vesting conditions
At each reporting period non-market vesting conditions
in relation to performance rights are assessed in order
to determine the probability of the likelihood that the
non-market vesting conditions are met.
(f)
Foreign currency translation
The functional currency of the Company is Australian dollars
and the functional currency of subsidiaries based in Canada is
Canadian Dollars (CAN$). The Group’s consolidated financial
statements are presented in Australian Dollars, which is also the
parent company’s functional currency. 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 functional currency spot rates of exchange
at the reporting date.
All exchange differences in the consolidated financial report
are taken to profit or loss as incurred. Non-monetary items that
are measured in terms of historical cost in a foreign currency
are translated at exchange rates as at the date of the initial
transaction.
As at the balance date the assets and liabilities of these
An operating segment is a component of an entity that engages
in business activities from which it may earn revenues and
incur expenses (including revenues and expenses relating to
transactions with other components of the same entity, whose
operating results are regularly reviewed by the entity’s chief
operating decision maker to make decisions about resources to
be allocated to the segment and assess its performance and for
which discrete financial information is available. This includes
start up operations which are yet to earn revenues. Management
will also consider other factors in determining operating segments
such as the existence of a line manager and the level of segment
information presented to the board of directors.
Operating segments have been identified based on the
information provided to the chief operating decision makers –
being the board of directors.
(h)
Fair Value
The Group measures financial instruments at fair value at each
balance sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value is
based on the presumption that the transaction to sell the asset or
transfer the liability takes place either:
▪
▪
In the principal market for the asset or liability; or
In the absence of a principal market, the most advantageous
market for the asset or liability.
The principal or the most advantageous market must be accessible
by the Group.
The Group uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available
to measure fair value, maximise the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
▪
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
▪
Level 2 - Valuation techniques for which the lowest level input
40
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
that is significant to the fair value measurement is directly or
indirectly observable.
on the basis of amounts expected to be paid to the tax
authorities.
▪
Level 3 - Valuation technique for which the lowest level input
that is significant to the fair value measurement is unobservable.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy, as explained above.
(i)
Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured regardless of when the payment is received.
Revenue is measured at the fair value of the consideration
received or receivable, net of returns, trade allowances, rebates
and amounts collected on behalf of third parties (such as taxes or
duty). The specific recognition criteria described below must also
be met before revenue is recognised:
(i)
Sale of goods
Revenue is recognised when the significant risks and
rewards of ownership of the goods have passed to the
buyer and the costs incurred or to be incurred in respect
of the transaction can be reliably measured. Risks and
rewards of ownership are considered passed to the
buyer at the time of delivery of the goods to the buyer.
(ii)
Services rendered
Revenue from services rendered is recognised in the
statement of comprehensive income in proportion to the
stage of completion of the transaction at balance date.
The stage of completion is assessed by reference to
surveys of work performed. No revenue is recognised
if there are significant uncertainties regarding recovery
of the consideration due and the costs incurred or to be
incurred cannot be measured reliably.
(iii)
Interest received
Interest income is recognised in the statement of
comprehensive income as it accrues, using the effective
interest method.
(j)
(i)
Taxes
Current income tax
The income tax expense or benefit for the period is the
tax payable on the current period’s taxable income
based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and
to unused tax losses.
The current income tax charge is calculated on the basis
of the tax laws enacted or substantially enacted at the
end of the reporting period in the country where the
company’s subsidiaries operate and generate taxable
income. Provisions are established where appropriate
Current tax liabilities for the current period and prior
periods are measured at the amount expected to be
recovered from or paid to taxation authorities. The tax
rates and tax laws used to compute the amount are
those that are enacted or substantially enacted by the
balance date.
(ii)
Deferred Tax
Deferred income tax is provided on all temporary
differences at reporting date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes. The amount of deferred
tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively
enacted at reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
▪ When the deferred tax liability arises from the initial
recognition of goodwill or 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.
▪
In respect of taxable temporary differences associated
with investments in subsidiaries, associates and
interests in joint arrangements, when the timing of
the reversal of the temporary differences can be
controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probably
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 tax asset relating to the deductible
temporary differences arises
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 tax able profit or loss.
from
the
▪
in
In respect of deductible temporary differences
associated with
subsidiaries,
investments
associates and interests in joint arrangements,
deferred tax assets are recognised only to the extent
that it is probable that the temporary differences
will reverse in the foreseeable future and taxable
profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
41
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets
are re-assessed at each reporting date and recognised
to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in 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 at the reporting date.
Income taxes relating to items recognised directly in
equity are recognised in equity and not profit or loss.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.
(iii)
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of
the amount of GST or other taxes, except:
▪ When the GST incurred on a sale or purchase of
assets or services is not payable to or recovered
from the taxation authority, in which case the GST
is recognised as part of the revenue or the expense
item or as part of the cost of acquisition of the asset,
as applicable.
▪ When receivables and payables are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of the receivables or payables
in the statement of financial position. Other taxes payable in
foreign jurisdictions are included as a current payable in the
statement of financial position. Commitments and contingencies
are disclosed net of the amount of GST recoverable from, or
payable to, the taxation authority.
Cash flows are included in the statement of cash flows on a
gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or
payable to, the taxation authority is classified as part of operating
cash flows. Taxes paid in foreign jurisdictions are classified as
investing cash flows in the statement of cash flows.
(k)
Impairment of assets other than
financial assets
At each reporting date, the Group assesses whether there is any
indication that an asset may be impaired. Where an indicator of
impairment exists, or when annual impairment testing for an asset
is required, the Group makes a formal estimate of recoverable
amount. An asset’s recoverable amount is the higher of an asset’s
or CGU’s fair value less costs of disposal and its value in use.
The recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
nOtes tO tHe cOnsOlidated Financial s tateMents
independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
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. In determining fair value less costs
of disposal, recent market transactions are taken into account. If
no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies
or other available fair value indicators. For an asset that does
not generate largely independent cash flows, the recoverable
amount is determined for the cash generating unit to which the
asset belongs.
Impairment losses are recognised in the statement of profit and
loss in expense categories consistent with the function of the
impaired asset unless the asset has previously been revalued, in
which case the impairment loss is recognised as a reversal to the
extent of that previous revaluation with any excess recognised
through the statement of profit and loss. Receivables with a short
duration are not discounted.
For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have
decreased. If such indication exists, the Group estimates the
asset’s or CGU’s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change
in the estimates and assumptions used to determine the
asset’s recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in profit or loss
unless the asset is carried at revalued amount, in which case the
reversal is treated as a revaluation increase. After such a reversal
the depreciation charge is adjusted in future periods to allocate
the asset’s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
(l)
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position
comprise cash balances and call deposits with an original maturity
of six months or less, which are subject to an insignificant risk of
changes in value. Bank overdrafts that are repayable on demand
and form an integral part of the Group’s cash management are
included as a component of cash and short-term deposits for the
purpose of the statement of cash flows.
(m) Non-current assets held for sale and
discontinued operations
The Group classifies non-current assets and disposal groups as
held for distribution to equity holders of the parent if their carrying
amounts will be recovered principally through a distribution rather
than through continued use. Immediately before classification
42
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
as held-for-sale, the measurement of the assets (and all assets
and liabilities in a disposal group) is brought up to date in
accordance with applicable AIFRS. Such non-current assets and
disposal groups classified as held for distribution are measured
at the lower of their carrying amount and fair value less costs to
distribute.
The criteria for held for distribution classification is regarded as
met only when the distribution is highly probable and the asset
or disposal group is available for immediate distribution in its
present condition. Actions required to complete the distribution
should indicate that it is unlikely that significant changes to the
distribution will be made or that the decision to distribute will be
withdrawn. Management must be committed to the distribution
expected within one year from the date of the classification.
Property, plant and equipment and tangible assets once classified
as held for sale are not depreciated or amortised.
Discontinued operations are excluded from the results of continued
operations and are presented as a single amount as profit or
loss after tax from discontinued operations in the statement of
profit and loss. All other notes to the financial statements include
amounts for continuing operations, unless indicated otherwise.
(n)
Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses, if any.
Such cost includes the cost of replacing parts that are eligible
for capitalisation when the cost of replacing the parts is incurred.
When significant parts of plant and equipment are required to
be replaced at intervals, the Group depreciates them separately
based on their specific useful lives. Likewise, when a major
inspection is performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair and maintenance
costs are recognised in profit or loss as incurred. Plant and
equipment transferred from customers are initially measured at
fair value at the date on which control is obtained.
Depreciation is calculated on a diminishing value basis over the
estimated useful lives of each part of an item of property, plant
and equipment. Land is not depreciated. The depreciation rates
used in the current and comparative periods are as follows:
▪ plant and equipment
7%-40%
for impairment at each balance date in line with the Group’s
impairment policy (see accounting policy (k)).
(o)
Financial Assets
Initial recognition and measurement
Financial assets are classified at initial recognition, as financial
assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, AFS financial assets, or as derivatives
designated as hedging instruments in an effective hedge, as
appropriate. All financial assets are recognised initially at fair
value, plus, in the case of financial assets not recorded at fair
value through profit or loss, transaction costs that are attributable
to the acquisition of the financial asset.
Subsequent measurement
The Group determines the classification of its financial assets
at initial recognition and, when allowed and appropriate, re-
evaluates this designation at each financial year end.
(i)
Financial assets at fair value through
profit or loss
Financial assets at fair value through profit or loss include
financial assets held-for-trading and financial assets
designated upon initial recognition at fair value through
profit or loss. Financial assets are classified as held for
trading if they are acquired for the purpose of selling
in the near term. Derivatives, including embedded
derivatives are also classified as held-for-trading unless
they are designated as effective hedging instruments as
defined by IAS 139. Gains or losses on investments
held-for-trading are recognised in profit or loss.
(ii)
Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not
quoted in an active market. After initial measurement,
such financial assets are subsequently measured at
amortised cost using the effective interest rate method,
less impairment. Gains and losses are recognised
in profit or loss when the loans and receivables are
derecognised or impaired, as well as through the
amortisation process.
▪ fixtures and fittings
11%-22%
(iii)
Held-to-maturity investments
▪ motor vehicles
18.75%-25%
The assets’ residual values, useful lives and amortisation methods
are reviewed, and adjusted if appropriate, at each financial
year end.
An item of plant and equipment and any significant part initially
recognised 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 the statement of profit
or loss when the asset is derecognised.
The carrying values of plant and equipment are reviewed
If the Group has the positive intent and ability to hold
debt securities to maturity, then they are classified
as held-to-maturity. Held-to-maturity investments are
measured at amortised cost using the effective interest
method, less any impairment losses.
(iv)
Available-for-sale investments
Available-for-sale financial assets are those non-
derivative financial assets that are designated as
available-for-sale or are not classified as any of the three
preceding categories. After initial recognition available-
for-sale investments are measured at fair value with gains
or losses being recognised as a separate component of
43
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 equity until the investment in derecognised or until the
investment is determined to be impaired, at which time
the cumulative gain or loss previously reported in equity
is recognised in profit or loss.
The Group evaluates whether the ability and intention
to sell its available-for-sale financial asset in the near
term is still appropriate. The fair value of investments
that are actively traded in organised financial markets is
determined by reference to quoted market bid prices at
the close of business on the balance date. For investments
with no active market, fair value is determined using
valuation techniques. Such techniques include recent
arm’s length market transactions, reference to the current
market value of another instrument that is substantially
the same, discounted cash flow analysis and option
pricing models.
(p)
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s consolidated
statement of financial position) when:
▪
▪
the rights to receive cash flows from the asset have expired;
and/or
the Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under
a ‘pass-through’ arrangement; and either (a) the Group
has transferred substantially all the risk and rewards of the
asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a pass-through arrangement,
it evaluates if and to what extent it has retained the risk and
rewards of ownership. When it has neither transferred nor
retained substantially all of the risk and rewards of the asset,
nor transferred control of the asset, the asset is recognised to the
extent of the Group’s continuing involved in the asset. In that
case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a
basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over the
transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration
that the Group could be required to repay.
(q)
Impairment of financial assets
The Group assesses, at each reporting date, whether there
is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of a
financial assets is deemed to be impaired if, and only if, there
is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset
(an incurred “loss event”) and that loss event has an impact on
nOtes tO tHe cOnsOlidated Financial s tateMents
estimated future cash flows of the financial asset or the group
of financial assets that can be reliably estimated. Evidence of
impairment may include indications that debtors or a group of
debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability
that they will enter bankruptcy or other financial reorganisation
and when observable data indicate that there is a measurable
decrease in the estimated future cash flows, such as changes in
arrears or economic conditions that correlate with defaults.
(i)
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group
first assess whether objective evidence of impairment
exists individually for financial assets that are individually
significant, or collectively for financial assets that are
not individually significant. If the Group determines
that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively
assess them for impairment. Assets that are individually
assessed for impairment and for which an impairment
loss is or continues to be, recognised are not included
in a collective assessment of impairment.
If there are objective evidence that an impairment loss
has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount
and the present value of estimated future cash flows
(excluding future expected credit losses that have not
yet been incurred). The present value of the estimated
future cash flows is discounted at the financial asset’s
original effective interest rate.
(ii)
Financial assets carried at cost
If there is objective evidence that an impairment loss
has been incurred on an unquoted equity instrument that
is not carried at fair value (because its fair value cannot
be reliably measured), or on a derivative asset that is
linked to and must be settled by delivery of such an
unquoted equity instrument, the amount of the loss is
measured as the difference between the asset’s carrying
amount and the present value of estimated future cash
flows, discounted at the current market rate of return for
a similar financial asset. Such impairment loss shall not
be reversed in subsequent periods.
(iii)
Available-for-sale investments
If there is objective evidence that an investment or a
group of investments is impaired, an amount comprising
the difference between its cost (net of any principal
repayment and amortisation) and its current fair value,
less any impairment loss previously recognised in profit
or loss, is transferred from equity to the statement of
comprehensive income. Reversals of impairment losses
for equity instruments classified as available-for-sale are
not recognise in profit. Reversals of impairment losses for
debt instruments are reversed through profit or loss if the
increase in an instrument’s fair value can be objectively
4 4
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
related to an event occurring after the impairment loss
was recognised in profit or loss.
(r)
Exploration, evaluation and tenement
acquisition costs
Exploration, evaluation and tenement acquisition costs in relation
to separate areas of interest for which rights of tenure are current,
are capitalised in the period in which they are incurred and are
carried at cost less accumulated impairment losses. The cost of
acquisition of an area of interest and exploration expenditure
relating to that area of interest is carried forward as an asset
in the statement of financial position so long as the following
conditions are satisfied:
(1)
the rights to tenure of the area of interest are current; and
(2) at least one of the following conditions is also met:
(i)
the exploration and evaluation expenditures are
successful
recouped
expected
development and exploitation of the area of interest,
or alternatively, by its sale; or
through
to be
(ii) exploration and evaluation activities in the area of
interest have not at the reporting 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 expenditure is initially measured
at cost and include acquisition of rights to explore, studies,
exploratory drilling, trenching and sampling and associated
activities. General and administrative costs are only included
in the measurement of exploration and evaluation expenditures
where they are related directly to operational activities in a
particular area of interest.
Exploration and evaluation expenditure is assessed for impairment
when facts and circumstances suggest that their carrying amount
exceeds their recoverable amount and where this is the case
an impairment loss is recognised. Should a project or an area
of interest be abandoned, the expenditure will be written off in
the period in which the decision is made. Where a decision is
made to proceed with development, accumulated expenditure
will be tested for impairment, reclassified to development costs
and then amortised over the life of the reserves associated with
the area of interest once mining operations have commenced.
(s)
Trade and other payables
Trade and other payables are stated at amortised cost. Trade
and other payables are presented as current liabilities unless
payment is not due within 12 months.
(t)
Provisions
(i)
General
A provision is recognised when the Group has a present legal
or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate can be made of the
amount of the obligation. If the effect of the time value of money is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when appropriate,
the risks specific to the liability.
(ii)
Long service leave and annual leave
The Group does not expect its long service leave or annual leave
benefits to be settled wholly within 12 months of each reporting
date. The Group recognises a liability for long service leave
and annual leave measured as the present value of expected
future payments to be made in respect of services provided by
employees up to the reporting date plus related on-costs. This
benefit is discounted to determine its present value, and the fair
value of any related assets is deducted. The discount rate is the
yield at the reporting date on government bonds that have maturity
dates approximating the terms of the Group’s obligations. The
calculation is performed using the projected unit cost method.
(u)
Employee benefits
(i)
Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries, annual
leave and sick leave represent present obligations resulting from
employees’ services provided to reporting date, calculated at
undiscounted amounts based on remuneration wage and salary
rates that the Group expects to pay as at reporting date including
related on-costs, such as superannuation, workers’ compensation
insurance and payroll tax. These are recognised in the statement
of profit and loss as incurred.
(ii)
Superannuation
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the statement of profit
and loss as incurred.
(iii)
Share-based payment transactions
The Group currently provides benefits under an Employee Share
Option Plan. The cost of these equity-settled transactions with
employees and directors is measured by reference to the fair
value at the date at which they are granted using an appropriate
valuation model, further details of which are given in note 15.
The cost is recognised in employee benefits expense, together
with a corresponding increase in Share-based Payments Reserve
in equity, over the period in which the performance and/or
service conditions are fulfilled (the vesting period). The cumulative
expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate
of the number of equity instruments that will ultimately vest. The
expense or credit in the statement of profit or loss for a period
represents the movement in cumulative expense recognised as
at the beginning and end of that period and is recognised in
employee benefits expense.
Service and non-market performance conditions are not taken
into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is
assessed as part of the Group’s best estimate of the number of
45
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
The Group’s investment in associates is accounted for using
the equity method of accounting in the consolidated financial
statements. Under the equity method, investments in associates
is initially recognised at cost plus post acquisition changes in
the Group’s share of net assets of the associates. Goodwill
relating to an associate is included in the carrying amount of
the investment and is not tested for impairment separately. After
application of the equity method, the Group determines whether
it is necessary to recognise any impairment loss with respect
to the Group’s net investment in associates. At each reporting
date, the Group determines whether there is objective evidence
that the impairment in the associate is impaired. If there is such
evidence, the Group calculates the amount of the impairment as
the difference between the recoverable amount of the associate
and its carrying value, and then recognises the loss as ‘Share of
profit of an associate’ in the statement of profit or loss.
The Group’s share of its associates’ post acquisition profits or
losses is recognised in the statement of comprehensive income,
and its share of post-acquisition movements are adjusted against
the carrying amount of the investment. Dividends receivable from
the associates are recognised in the parent entity’s statement of
comprehensive income as a component of other income.
When the Group’s share of losses in an associate equals or
exceeds its interests in the associate, including any unsecured
long term receivables and loans, the Group does not recognise
further losses unless it has incurred obligations or made payments
on behalf of the associate.
Upon loss of significant influence over the associate, the Group
measures and recognised any retained investment at its fair
value. Any difference between the carrying amount of the
associate upon loss of significant influence and the fair value of
the retained investment and proceeds from disposal is recognised
in profit or loss.
(x)
Parent entity financial information
The financial information for the parent entity, Chalice Gold
Mines Limited, disclosed in note 20 has been prepared on the
same basis as the consolidated financial statements.
equity instruments that will ultimately vest. Market performance
conditions are reflected within the grant date fair value. Any
other conditions attached to an award, but without an associated
service requirement, are considered to be non-vesting conditions.
Non-vesting conditions are reflected in the fair value of an award
and lead to an immediate expensing of an award unless there
are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately
vest, except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market or non-
vesting condition is satisfied, provided that all other performance
and/or service conditions are satisfied, provided that all other
performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the
minimum expense recognised is the grant date fair value of the
unmodified award, provided the original terms of the award
are met. An additional expense, measured as at the date of
modification, is recognised for any modification that increases
the total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee.
Where an equity-settled award is cancelled by the entity or by
the counterparty, 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 through profit or loss. 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.
(v)
Share Capital
(i)
Ordinary share capital
Ordinary shares and partly paid shares are classified
as equity.
(ii)
Transaction costs
Transaction costs of an equity transaction are accounted
for as a deduction from equity, net of any related
income tax benefit.
(w)
Investments in associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is
not control or joint control over those policies. The considerations
made in determining significant influence or joint control are
similar to those necessary to determine control over subsidiaries.
46
CHALICE GOLD MINES LIMITED 4
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47
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
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CHALICE GOLD MINES LIMITED
nOtes tO tHe cOnsOlidated Financial s tateMents
3.
REVENUE AND EXPENSES
(a)
Revenue
Corporate and administration service fees
Net finance income
2017
$
2016
$
156,380
273,098
429,478
202,445
136,010
338,455
(b)
Net gain on sale of available for sale financial assets
Net gain on sale of available for sale financial assets
1,834,027
1,834,027
Net gain on sale at 30 June 2017 represents the net gain on sale of shares held in First Mining Finance Corp
($1,421,336), Oklo Resources Limited ($727,357) and the loss on sale of Doray Minerals Limited shares ($314,666).
In consideration for the sale of the Cameron Gold Project in Ontario, Canada (refer note 4), which completed in June
2016, the Company received 32,260,836 common shares (the “Consideration Shares”) in First Mining Finance Corp
(“First Mining”). By 30 June 2017, the Company had sold 25,300,000 shares at a weighted average price of C$0.85
per share for gross consideration of $21,454,720.
In March 2017, the Company acquired 23,434,977 fully paid ordinary shares in Oklo Resources Limited (“Oklo”) for a
weighted average price of $0.20 per share, for a total of $4,835,169. The Company then sold its total shareholding in
Oklo for $0.24 per share, for total proceeds of $5,562,526.
During the year, the Company received 400,000 fully paid ordinary shares in Doray Minerals Limited (“Doray”) in
consideration for the sale of the Company’s 12% interest in the Gnaweeda Project. These shares were subsequently sold
for net proceeds of $179,244.
(c)
Net gain on sale of exploration and evaluation assets
Net gain on sale of exploration and evaluation assets
2017
$
2016
$
755,712
755,712
-
-
-
-
Net gain on sale of exploration and evaluation assets represents the net gain from sale of the Company’s 12% interest in the
Gnaweeda Project, Western Australia and the sale of the Company’s 51% interest in the Ardeen Project, Ontario, Canada.
At 30 June 2016, these assets were disclosed as “assets held for sale” with both transactions completing in July 2016.
(d)
Corporate administrative expenses
Consultants
Insurance
Legal fees
Travel
Head office costs
Regulatory and compliance
Personnel expenses (note 3(e))
Other
2017
$
2016
$
-
26,397
20,531
-
149,243
308,347
1,131,844
40,378
890
31,424
40,345
5,150
90,410
256,788
761,740
43,909
1,676,740
1,230,656
49
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 (e)
Personnel expenses
Wages and salaries
Directors’ fees
Other associated personnel expenses
Superannuation contributions
(Decrease)/increase in liability for annual leave
(Decrease)/increase in liability for long service leave
(f)
Business development costs
Personnel expenses
Head office costs
Consultants
Travel and conferences
Other
(g)
Impairment of financial assets
Impairment of available for sale financial assets
nOtes tO tHe cOnsOlidated Financial s tateMents
2017
$
2016
$
388,014
233,827
213,124
180,562
29,050
87,267
369,484
165,329
86,173
131,837
3,478
5,439
1,131,844
761,740
886,746
182,701
61,178
71,344
77,321
700,054
271,985
330,674
74,579
36,308
1,279,290
1,413,600
530,136
530,136
-
-
The Company has recorded an impairment in the fair value of share held in Kesselrun Resources Limited for the year ended
30 June 2017. The impairment has been included as part of continuing operations in the Statement of Comprehensive
Income due to the prolonged decline in market prices for this financial asset.
4.
(a)
DISCONTINUED OPERATIONS
Sale of the Cameron Gold Project, Ontario, Canada
On 10 June 2016, the Company completed the sale of the Cameron Gold Project in Ontario, Canada, through the sale
of its shares in the Company’s wholly owned subsidiary, Cameron Gold Operations Limited to First Mining Finance Corp
(“First Mining”), a mineral property holding company listed on the TSX (TSX: FF) for consideration of 32,260,836 common
shares in First Mining. In addition, the Company also acquired a 1% Net Smelter Return royalty over certain exploration
licences within the Cameron Gold Project which are not encumbered by pre-existing royalties.
Consideration received
First Mining shares received
Total consideration
Less:
Net assets disposed of
Transaction costs
Profit on disposal before income taxes
Income tax expense
Profit on disposal after tax
50
2017
$
2016
$
-
-
-
-
-
-
-
27,013,950
27,013,950
16,144,308
668,066
10,201,576
(1,367,635)
8,833,941
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
Net assets at date of sale
The carrying amount of assets and liabilities as at date of sale were:
Trade and other receivables
Property, plant and equipment (note 13)
Exploration and evaluation expenditure (note 12)
Total assets
Trade and other payables
Total liabilities
Net assets
2017
$
2016
$
-
-
-
-
-
-
-
2,790
167,716
15,973,802
16,144,308
2016
$
-
-
16,144,308
2017
$
(b)
Deferred consideration – Sale of the Zara Gold Project, Eritrea
In January 2016, the Company received deferred consideration of US$2 million from China SFECO Group, following first
gold pour at the Zara Gold Project in Eritrea. The US$2 million represents the final tranche for the sale of Chalice’s interest
in the Zara Gold Project which was completed in 2012.
Deferred consideration
Profit on disposal before income tax
Income tax expense
Overprovision for income tax
Profit on disposal after tax
(c)
Total profit after tax from discontinued operations:
Cameron Gold Project
Zara Gold Project
5. AUDITOR’S REMUNERATION
Audit services
HLB Mann Judd:
Audit and review of financial reports
Other services
2017
$
2016
$
2,908,400
2,908,400
(50,068)
-
2,858,332
8,833,941
2,858,332
11,692,273
-
-
-
-
-
-
-
-
2017
$
2016
$
45,000
-
45,000
35,000
1,000
36,000
51
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 6.
INCOME TAX
The major components of income tax expense are as follows:
Current income tax:
Current income tax expense
Under provision for income tax
Foreign exploration incentive tax credits
Deferred tax:
nOtes tO tHe cOnsOlidated Financial s tateMents
2017
$
2016
$
(159,439)
(50,068)
(8,264)
388,378
220,675
-
182,379
132,311
Temporary differences relating to available for sale investments
141,314
(1,367,635)
Total income tax benefit/(expense) reported in the statement of comprehensive income
361,989
(1,235,324)
The prima facie income tax expense on pre-tax accounting result on operations and discontinued operations reconciles to
the income tax expense in the financial statements as follows:
Accounting loss from continuing operations
Accounting profit from discontinued operations
2017
$
2016
$
(2,643,835)
(4,442,153)
-
13,109,976
(2,643,835)
8,667,823
Income tax calculated at the Australian corporate rate of 27.5% (2016: 30%)
(727,055)
2,600,347
Non-deductible expenses
Share based payments
Gain on sale of available for sale financial assets
Non-assessable foreign income
Deferred tax assets and liabilities not recognised
Foreign exploration incentive tax credits
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of change in tax rate
Under provision for income tax
229,148
90,507
38,941
815,799
14,194
-
(161,564)
(2,208,302)
162,395
(388,378)
(7,956)
393,709
8,264
483,216
(182,379)
(287,551)
-
-
Income tax benefit/(expense) reported in the statement of comprehensive income
361,989
(1,235,324)
The tax rate used in the above reconciliation is the corporate rate of 27.5% (2016: 30%) payable by Australian corporate
entities on taxable profits under Australian tax law.
Current tax liabilities comprise:
Income tax payable/(receivable) attributable to:
Parent Entity
Group’s subsidiaries
Deferred tax liabilities comprise:
Temporary differences relating to available for sale investments
2017
$
2016
$
259,951
678,721
938,672
259,951
(132,337)
127,614
2017
$
2016
$
272,010
272,010
1,367,635
1,367,635
52
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
Unrecognised deferred tax balances
The following deferred tax assets and liabilities have not been brought to account:
Deferred tax assets comprise:
Revenue losses available for offset against future taxable income
Other deferred tax assets
Deferred tax liabilities comprise:
Other deferred tax liabilities
2017
$
2016
$
4,140,787
3,785,240
1,050,937
1,209,714
5,191,724
4,994,954
(249,692)
(249,692)
(93,465)
(93,465)
Income tax benefit not recognised directly in equity during the year:
Share issue costs
1,560
-
Deferred tax liabilities have not been recognised in respect of these taxable temporary differences as the entity is able to
control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future.
7.
EARNINGS PER SHARE
Basic and diluted earnings per share
The calculation of basic earnings per share for the year ended 30 June 2017 was based on the loss attributable to
ordinary equity holders of the parent of $2,281,846 (2016: profit of $7,432,499) and a weighted average number of
ordinary shares outstanding during the year ended 30 June 2017 of 267,705,838 (2016: 282,710,802).
2017
$
2016
$
(Loss)/profit attributable to ordinary shareholders
Loss attributable to ordinary equity holders of the parent from continuing operations
(2,281,846)
(4,259,774)
Profit attributable to ordinary equity holders of the parent from discontinued
operations
-
11,692,273
Net (loss)/profit attributable to ordinary equity holders of the parent for basic
earnings
(2,281,846)
7,432,499
Net (loss)/profit attributable to ordinary equity holders of the parent adjusted for
the effect of dilution
(2,281,846)
7,432,499
Diluted earnings per share have not been disclosed as the impact from options and performance rights is anti-dilutive.
53
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
8.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
At 30 June 2017, the Company had a 22.95% interest in unlisted Australian based GeoCrystal Limited (“GeoCrystal”).
The principal activity of the company is exploring diamonds in Australia.
Reconciliation of movements in investments in associates
Balance at 1 July
Revaluation of unlisted options
Impairment of investment in associate(1)
Share of associate’s gain/(loss)
Balance at 30 June
Summary of financial information of associate:
Financial Position
Total assets
Total liabilities
Net assets
Share of associate’s net assets
Financial Performance
Total revenue
Total gain/(loss) for the year
Share of associate’s gain/(loss)
2017
$
2016
$
968,333
1,826,987
-
(429,010)
(55,156)
484,167
(117,602)
(790,050)
48,998
968,333
2017
$
2016
$
2,165,605
4,261,213
(55,945)
(41,897)
2,109,660
4,219,316
484,167
968,333
225
(240,376)
(55,156)
181,725
213,500
48,998
The associate had no contingent liabilities or assets at 30 June 2017 (30 June 2016: nil) and exploration commitments
payable within 1 year of $477,000 (2016: $400,000) and within 2 to 5 years of $395,000.
(1) At 30 June 2017, the directors reviewed the carrying value of the Company’s interest in unlisted GeoCrystal Limited and
having considered a number of factors, including market conditions and exploration results to date. The directors have now
impaired the carrying value of the Company’s investment to reflect its estimated market value having regard to recent arm’s
length market transactions.
9.
TRADE AND OTHER RECEIVABLES
Other trade receivables
Prepayments
10. ASSETS HELD FOR SALE
Exploration and evaluation expenditure – Gnaweeda Project
Exploration and evaluation expenditure – Ardeen Project
Exploration and evaluation expenditure – Dumbleyung Project
54
2017
$
2016
$
210,420
105,378
315,798
124,308
85,624
209,932
2017
$
2016
$
-
-
66,111
66,111
106,259
413,819
-
520,078
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
11. FINANCIAL ASSETS
Current
Available for sale investments(1)
Non-current
Bond in relation to office premises
Bank guarantee and security deposits
2017
$
2016
$
5,807,628
25,421,978
5,807,628
25,421,978
69,912
155,056
224,968
69,912
132,996
202,908
(1)Available for sale investments represents 6,960,836 shares in First Mining (2016: 32,260,836 shares), 2,040,000
shares held in Kesselrun Resources Limited received in consideration for the sale of the Company’s interest in the Ardeen
Project and 40,000,000 fully paid ordinary shares in Ausgold Limited. In June 2017, the Company subscribed to
40,000,000 fully paid ordinary shares in Ausgold Limited, at $0.025 per share for a total of $1 million.
During the year ended 30 June 2017, the Company sold 25,300,000 shares held in First Mining for net proceeds of
$21,454,720. The total net gain on sale of shares sold was $1,421,336 (refer note 3(b) for further details).
12. EXPLORATION AND EVALUATION EXPENDITURE
Costs carried forward in respect of:
Exploration and evaluation phase – at cost
Balance at beginning of year
Expenditure incurred
Sale of the Cameron Gold Project (see note 4(a))
Transferred to assets held for sale (see note 10)
Exploration and evaluation assets written off
Effects of movements in exchange rate
Total exploration expenditure
2017
$
2016
$
296,609
13,982,545
3,352,549
5,016,791
-
(15,973,802)
(66,111)
(520,078)
(339,226)
(2,201,005)
1,718
3,245,539
(7,842)
296,609
The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is
dependent on the successful development and commercial exploitation or sale of the respective areas.
13. PROPERTY, PLANT AND EQUIPMENT
Cost
Accumulated depreciation and impairment
Net carrying amount
Movements in property, plant and equipment:
At 1 July net of accumulated depreciation
Additions
Reclassified as discontinued operations (see note 4(a))
Disposals
Exchange differences
Depreciation charge for the year
At 30 June net of accumulated depreciation and impairment
2017
$
2016
$
1,108,731
1,015,593
(800,131)
(740,860)
308,600
274,733
274,733
132,298
554,154
48,797
-
(167,716)
(10,286)
(4,084)
(84,061)
308,600
(5,442)
(6,243)
(148,817)
274,733
55
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
2017
$
2016
$
1,580
71,690
429,801
503,071
7,138
58,739
491,731
557,608
2017
$
2016
$
97,869
93,152
191,021
53,604
5,885
59,489
14. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accrued expenses
15. EMPLOYEE BENEFITS
Annual leave accrued
Provision for long service leave
Share based payments
(a)
Employee share option plan
The Group has an Employee Share Option Plan (“ESOP”) in place. Under the terms of the ESOP, the Board may offer
options for no consideration to full-time or part-time employees (including persons engaged under a consultancy agreement),
executive and non-executive directors. In the case of the directors, the issue of options under the ESOP requires shareholder
approval.
Each option entitles the holder, on exercise, to one ordinary fully paid share in the Company. There is no issue price for the
options. The exercise price for the options is determined by the Board.
An option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise
satisfied. The Board may determine the vesting period, if any.
The number and weighted average exercise prices of share options is as follows:
30 June 2017
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Exercisable at the end of the year
Outstanding at the end of the year
weighted
average
exercise price
$
number
of options
2017
2017
0.25
-
0.25
0.25
0.25
500,000
-
1,750,000
2,250,000
2,250,000
56
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
30 June 2016
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Exercisable at the end of the year
Outstanding at the end of the year
weighted
average
exercise price
$
number
of options
2016
2016
0.28
0.30
1,550,000
(1,050,000)
-
-
0.25
0.25
-
-
500,000
500,000
The options outstanding at 30 June 2017 have a weighted average exercise price of $0.25 (2016: $0.25) and a
weighted average contractual life of 3 years (2016: 3 years).
The fair value of the options is estimated at the date of grant using a Black-Scholes option-pricing model. The following
table gives the assumptions made in determining the fair value of the options granted during the year.
Weighted average share price at grant date
Weighted exercise price
Expected volatility (expressed as weighted average volatility)
Option life (expressed as weighted average life)
Expected dividends
Risk-free interest rate
2017
2016
0.16
0.25
50.76%
3
-
1.85%
-
-
-
-
-
-
Share options are granted under service conditions. Non-market performance conditions are not taken into account in the
grant date fair value measurement of the services received.
(b)
Employee long term incentive plan
The Company has in place an Employee Long Term Incentive Plan (“LTIP”) and under the LTIP the Board may issue
performance rights to employees and directors. A performance right is a right to be issued an ordinary share upon the
satisfaction of certain performance conditions that are attached to the performance right, the conditions of which are
determined by the Board.
Performance rights are granted for no consideration and the term of the performance rights are determined by the Board
in its absolute discretion, but will ordinarily have a three year term up to a maximum of five years. Performance rights
are subject to lapsing if performance conditions are not met by the relevant measurement date or expiry date (if no other
measurement date is specified) or if employment is terminated. There is no ability to re-test performance under the LTIP after
the performance period.
The fair value of performance rights has been calculated at the grant date and allocated to each reporting period evenly
over the period from grant date to vesting date. The value disclosed is the portion of fair value of the rights allocated to this
reporting period.
The weighted average fair value of the performance rights outstanding at 30 June 2017 was 11.3 cents per performance
right (2016: 9.2 cents).
(c)
Other share based payments – performance rights
In June 2017, the Company issued 1,000,000 performance rights to corporate advisors of the Company as partial
consideration for services pursuant to contractual terms and conditions between the Company and the corporate advisors.
The performance rights will vest conditional upon the satisfaction of various performance based hurdles. The performance
rights were issued separately to the Company’s LTIP, however details of the issue are outlined below.
57
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
A summary of performance rights in the Group and the Company is as follows:
30 June 2017:
grant date
Opening
balance
granted
vested
1 October 2014
25 June 2015
1,747,682
2,404,847
25 November 2015
1,664,707
-
-
-
15 July 2016
22 November 2016
19 June 2017
-
-
-
5,817,236
2,756,434
1,200,738
1,000,000
4,957,172
30 June 2016:
-
-
-
-
-
-
-
lapsed/
Forfeited
closing
balance
(1,747,682)
-
-
-
2,404,847
1,664,707
(484,982)
2,271,452
-
-
1,200,738
1,000,000
(2,232,664)
8,541,744
share price
at date of
issue ($)
0.13
0.11
0.11
0.19
0.16
0.16
grant date
Opening
balance
granted
vested
lapsed/
Forfeited
closing
balance
share price
at date of
issue ($)
1 October 2014
3,388,357
17 November 2014
142,350
25 June 2015
3,783,673
-
-
-
25 November 2015
-
1,664,707
7,314,380
1,664,707
-
-
-
-
-
(1,640,675)
1,747,682
(142,350)
-
(1,378,826)
2,404,847
-
1,664,707
(3,161,851)
5,817,236
0.13
0.11
0.11
0.11
The fair value of performance rights granted during 2016 and 2017 were determined using a binomial option pricing model which
takes into account the impact of vesting conditions and the fact that the rights may never vest.
The following table gives the assumptions made in determining the fair value of the performance rights granted during the year.
Weighted share price at grant date
Exercise price
Expected volatility
Weighted average performance period (years)
Weighted average vesting period (years)
Expected dividends
Risk-free interest rate
2017
2016
$0.17
$0.11
Nil
50%
2.45
2.45
-
Nil
47%
3
3
-
1.70%
2.11%
58
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
Share based payment transactions
The expense recognised during the year is shown in the following table:
Share options granted in 2017 – equity settled
Performance rights granted in 2016
Performance rights granted in 2017
Total expenses recognised as share based payments
16. OTHER LIABILITIES
Non-current
Lease make good provision
17.
ISSUED CAPITAL
2017
$
2016
$
55,579
-
-
47,312
273,540
329,119
-
47,312
2017
$
2016
$
39,170
39,170
46,591
46,591
There were 261,210,294 shares on issue at 30 June 2017 (2016: 282,710,802).
(a)
Movements in ordinary shares on issue
Balance at beginning of
financial year
Share buy-back
2017
2016
no.
$
no.
$
282,710,802
43,622,887
282,710,802
43,622,887
(21,500,508)
(3,786,723)
-
-
Balance at end of financial year
261,210,294
39,836,164
282,710,802
43,622,887
In July 2016 the Company commenced a discretionary on-market share buy-back. During the year ended 30 June 2017,
the Company acquired 21,500,508 shares for $3,786,723 net of brokerage costs. The on-market share buy-back
subsequently completed on 4 July 2017.
Issuance of Ordinary Shares
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders’ meetings. In the event of winding up of the Company, the ordinary shareholders rank after all other
shareholders and creditors and are fully entitled to any proceeds on liquidation.
(b)
Share options
On issue at 1 July
Options exercised during the year
Options lapsed during the year
Options issued during the year
On issue at 30 June
2017
no.
2016
no.
500,000
1,550,000
-
-
1,750,000
2,250,000
-
(1,050,000)
-
500,000
59
ANNUAL FINANCIAL REPORT | 30 JUNE 2017
At 30 June 2017 the Company had 2,250,000 unlisted options on issue under the following terms and conditions:
nOtes tO tHe cOnsOlidated Financial s tateMents
number
500,000
1,000,000
500,000
250,000
expiry date
31 October 2017
30 November 2019
30 June 2019
30 June 2020
(c)
Performance rights
On issue at 1 July
exercise price
$
0.25
0.25
0.25
0.25
2017
no.
2016
no.
5,817,236
7,314,380
Issue of performance rights under the Employee Long Term Incentive Plan
3,957,172
1,664,707
Issue of performance rights to consultants of the Company
Performance rights vested
Performance rights lapsed
On issue at 30 June
1,000,000
-
-
-
(2,232,664)
(3,161,851)
8,541,744
5,817,236
At 30 June 2017 the Company had 8,541,744 performance rights on issue under the following terms and conditions:
number
terms
expiry date
exercise
price
$
4,069,554
3,472,190
The number of performance rights that will vest will be solely
dependent on the Company meeting the strategy objective and
Company’s share price as at the measurement date of 30 June
2017 as compared to the Share price hurdles outlined in the
Remuneration Report.
The number of performance rights that will vest will be solely
dependent on the Company meeting the outlined strategy
objectives and by comparing the Company’s Total Shareholder
Return with that of a comparator group, as at the measurement
date of 30 June 2019, as outlined in the Remuneration Report.
30 June 2019
Nil
30 June 2020
Nil
1,000,000
The number of performance rights that will vest will be conditional
upon the satisfaction of various performance based hurdles on or
before 15 June 2018.
15 June 2018
Nil
18. RETAINED EARNINGS AND RESERVES
(a)
Movements in retained earnings attributable to owners of the parent:
Balance at beginning of financial year
2017
$
2016
$
22,388,512
14,890,400
(Loss)/profit for the year attributable to owners of the parent
(2,281,846)
7,432,499
Transfers between equity items
Balance at end of financial year
-
65,613
20,106,666
22,388,512
60
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
(b)
Nature and purpose of reserves
Other capital reserves
(i)
Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payment transactions
provided to employees, including key management personnel, as part of their remuneration. Refer to note 15 for further
details of these plans.
All other reserves as stated in the consolidated statement of changes in equity
(ii) Foreign currency translation reserve
The foreign currency reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries. It is also used to record the effect of exchange variances resulting from net investments in foreign
operations.
(iii)
Investment revaluation reserve
The investment revaluation reserve comprises the cumulative net change in the fair value of available-for-sale financial assets
and investments in associates until the investments are derecognised or impaired.
All movements in the above reserves are as stated in the consolidated statement of changes in equity.
19. FINANCIAL INSTRUMENTS
(a)
Capital risk management
The capital structure of the Group consists of equity attributable to equity holders, comprising issued capital, reserves and
retained earnings as disclosed in notes 17 and 18.
The Board reviews the capital structure on a regular basis and considers the cost of capital and the risks associated with
each class of capital. The Group will balance its overall capital structure through new share issues as well as the issue of
debt, if the need arises.
(b)
Market risk exposures
Market risk is the risk that changes in market prices such as foreign exchange rates, equity prices and interest rates will
have on the Group’s income or value of its holdings of financial instruments.
(i)
Foreign exchange rate risk
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. The Group does not hedge this exposure. The cash at bank held by the Company currently comprises
United States Dollar (“USD”), Australian dollar (“AUD”) and Canadian dollar (“CAD”) funds. The Group manages its
foreign exchange risk by constantly reviewing its exposure and ensuring that there are appropriate cash balances in order
to meet its likely future commitments in each currency. At 30 June 2017, Chalice had approximately US$10 million (A$13
million) cash on hand in US$ denominated bank accounts and C$14.5 million (A$14.5 million) cash on hand in C$
denominated bank accounts.
The following tables summarises the impact of increases/decreases in the relevant foreign exchange rates on the Group’s
post-tax result for the year and on the components of equity. The sensitivity analysis uses a variance of 10% movement in
the USD against AUD.
Impact on gain/(loss)
Impact on equity
AUD/USD +10%
AUD/USD -10%
AUD/USD +10%
AUD/USD -10%
2017
$
2016
$
(1,183,501)
(2,138,231)
1,301,851
2,352,054
(1,183,501)
(2,138,231)
1,301,851
2,352,054
61
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
In addition to the above foreign exchange exposure on the Group’s cash balance, the Group is also exposed to
movements in CAD against AUD in relation to its holding in First Mining Shares.
The following table summarises the impact of increases/decrease in the relevant foreign exchange rates on the Group’s
post-tax result for the year and on the components of equity. The sensitive analysis uses a variance of 10% movement in the
CAD against AUD.
AUD/CAD +10%
AUD/CAD -10%
AUD/CAD +10%
AUD/CAD -10%
2017
$
2016
$
(1,443,647)
(2,311,089)
1,588,013
2,542,197
(1,443,647)
(2,311,089)
1,588,013
2,542,197
Impact on gain/(loss)
Impact on equity
(ii) Equity prices
The Group has exposure to equity prices through its holding of First Mining Finance Corp common shares, Ausgold Limited
and Kesselrun Resources Limited. The following table outlines the impact of increases/decreases in the value of the
Company’s investment holding on the Group’s post-tax result for the year and on the components of equity. The sensitivity
analysis uses a variance of 10% movement upwards and down on the year end closing share prices.
Share price +10%
Share price -10%
Share price +10%
Share price -10%
2017
$
2016
$
580,763
2,542,198
(527,966)
(2,310,298)
580,763
2,542,198
(527,966)
(2,310,298)
Impact on gain/(loss)
Impact on equity
(iii) Interest rate risk
At reporting date the Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s short term
cash deposits. The Group is not exposed to cash flow volatility from interest rate changes on borrowings, as it does not
have any short or long term borrowings.
Chalice constantly analyses its exposures to interest rates, with consideration given to potential renewal of existing positions
and the period to which deposits may be fixed.
The Group considers preservation of capital as the primary objective as opposed to maximising interest rate yields by
investing in higher risk investments.
At reporting date, the following financial assets were exposed to fluctuations in interest rates:
Cash and cash equivalents
2017
$
2016
$
46,819,151
35,733,786
62
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
The following sensitivity analysis is based on the interest rate risk exposures in existence at reporting date. The sensitivity is
based on a change of 100 basis points in interest rates at reporting date.
In the year ended 30 June 2017, if interest rates had moved by 100 basis points, with all other variables held constant,
the post-tax result for the Group would have been affected as follows:
100 bp increase
100 bp decrease
100 bp increase
100 bp decrease
2017
$
2016
$
452,402
356,370
(452,402)
(356,370)
452,402
356,370
(452,402)
(356,370)
Impact on gain/(loss)
Impact on equity
(c)
Credit risk exposure
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets is the carrying amount, net of any allowance for doubtful debts, as disclosed in the notes to the financial
statements.
It is not the Company’s policy to securitise its trade and other receivables, however, receivable balances are monitored
on an ongoing basis. In addition, the Company currently diversifies its cash holdings across three of the main Australian
financial institutions.
(d)
Liquidity risk exposure
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board of
Directors actively monitors the Group’s ability to pay its debts as and when they fall due by regularly reviewing the current
and forecast cash position based on the expected future activities.
The Group has non-derivative financial liabilities which include trade and other payables of $503,071 (2016:
$557,608) all of which are due within 60 days.
In light of the Group’s current financial assets and low expenditures relative to those assets, the Group could continue to
operate as a going concern for a considerable period of time, subject to any changes to the Group structure or undertaking
a material transaction.
(e)
Fair value of financial instruments
The Directors consider the carrying value of the financial assets and financial liabilities are recognised in the consolidated
financial statements approximate their fair values. In particular, available for sale investments which represents 6,960,836
shares in TSX listed First Mining Finance Corp (2016: 32,260,836 shares), 40,000,000 shares in ASX listed Ausgold
Limited and 2,040,000 shares in Kesselrun Resources Limited (refer note 11) is measured at fair value using quoted market
prices at the reporting date (Level 1 fair value measurement).
The directors have assessed that the fair value of cash and short-term deposits, trade receivables, trade payables and other
current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
63
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 20. PARENT ENTITY
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
Financial performance
Loss for the year
Total comprehensive loss
Commitments and contingencies
(i) Contingencies
nOtes tO tHe cOnsOlidated Financial s tateMents
2017
$
2016
$
40,578,859
35,908,701
16,702,498
28,278,498
57,281,357
64,187,199
654,463
867,041
29,670,960
29,674,415
30,325,423
30,541,456
26,955,934
33,645,743
39,836,165
43,622,888
(13,388,907)
(10,156,702)
508,676
179,557
26,955,934
33,645,743
2017
$
2016
$
(3,187,441)
(965,227)
(3,187,441)
(965,227)
Other than as disclosed in note 21, the parent entity has no contingent assets or liabilities.
(ii) Operating lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
6 4
2017
$
2016
$
240,751
184,819
566,284
801,744
-
-
807,035
986,563
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
21. COMMITMENTS AND CONTINGENCIES
Exploration expenditure commitments
In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration
work to meet the minimum expenditure requirements as specified by various governments in order to maintain exploration
tenements in good standing. Therefore amounts stated are based on the minimum commitments known within the next 1
to 2 years. The Group may in certain situations apply for exemptions under relevant mining legislation or enter into joint
venture arrangements which significantly reduce working capital commitments. These obligations are not provided for in
the financial report and are payable:
Within 1 year
Within 2-5 years
Later than 5 years
Office lease commitments
Within 1 year
Within 2-5 years
Later than 5 years
Contingent asset
There are no contingent assets at 30 June 2017.
22. CASH AND CASH EQUIVALENTS
Bank balances
Term deposits
Petty cash
2017
$
2016
$
1,152,272
400,000
-
-
258,276
-
1,152,272
658,276
2017
$
2016
$
259,260
203,557
566,284
801,744
-
-
825,544
1,005,301
2017
$
2016
$
10,460,910
25,732,027
36,355,748
10,000,000
2,493
1,759
46,819,151
35,733,786
65
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Reconciliation of cash flows from operating activities
Loss after tax from continuing operations
Profit after tax from discontinuing operations
(Loss)/profit after tax
Adjustments for:
Depreciation and amortisation
Net gain on sale of fixed assets
Business development costs
Income tax benefit
Profit from discontinued operations
Net gain on sale of available for sale financial assets
Net gain on sale of exploration and evaluation assets
Foreign exchange gains/(loss)
Exploration and evaluation assets written off
Impairment of financial assets
Share of associate’s (net gain)/loss
Impairment of investment in associate
Equity-settled share-based payment expenses
nOtes tO tHe cOnsOlidated Financial s tateMents
2017
$
2016
$
(2,281,846)
(4,259,774)
-
11,692,273
(2,281,846)
7,432,499
50,227
(2,780)
64,197
-
1,279,290
1,413,600
(361,989)
(182,379)
-
(11,692,273)
(1,834,027)
(755,712)
-
-
974,148
(917,214)
339,226
2,201,005
530,136
-
55,156
(48,998)
429,010
790,050
329,119
47,312
Operating loss before changes in working capital and provisions
(1,250,042)
(892,201)
(Increase)/decrease in trade and other receivables
(Increase)/decrease in financial assets
(decrease)/Increase in trade creditors and other liabilities
(decrease)/increase in provisions
Net cash used in operating activities
Non-cash financing and investing activities
(48,872)
(1,173)
89,470
77,767
10,751
(5,140)
13,839
12,378
(1,132,850)
(860,373)
During the year the Company completed the sale of the Gnaweeda and Ardeen Project. In consideration for the
Company’s interest in the Gnaweeda Project, Chalice received 400,000 shares in Doray Minerals Limited and received
2,040,000 shares in Kesselrun Resources Limited in consideration for the sale of the Company’s interest in the Ardeen
Project. Refer to note 3(c) for further details.
66
CHALICE GOLD MINES LIMITED nOtes tO tHe cOnsOlidated Financial s tateMents
23. RELATED PARTIES
Key management personnel
The following were key management personnel (“KMP”) of the Group at any time during the reporting period and unless
otherwise indicated were KMP for the entire period:
Executive Directors
T R B Goyder (Managing Director)
Non-executive Directors
A W Kiernan (Chairman)
S P Quin
M S Ball
Executives
R K Hacker (Chief Financial Officer)
K M Frost (General Manager – Exploration)
P Lengyel (Exploration Manager – Canada)
The KMP compensation is as follows:
Short-term employee benefits
Post-employment benefits
Termination benefits
Long term benefits
Share-based payment
2017
$
2016
$
1,379,924
1,441,323
99,431
101,632
-
-
-
-
291,575
152,078
1,770,930
1,695,033
Individual director’s and executive’s compensation disclosures
The Group has transferred the detailed remuneration disclosures to the Directors’ Report in accordance with Corporations
Amendment Regulations 2006 (No. 4). These remuneration disclosures are provided in the Remuneration Report section of
the Directors’ Report under Key Management Personnel remuneration and are designated as audited.
Loans to key management personnel and their related parties
No loans were made to KMP or their related parties.
Other key management personnel transactions with the Group
A number of KMP, or their related parties, hold positions in other entities that result in them having control or significant
influence over the financial or operating policies of those entities.
A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions
with management persons or their related parties were no more favourable than those available, or which might reasonably
be expected to be available, on similar transactions to non-director related entities on an arm’s length basis.
67
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 nOtes tO tHe cOnsOlidated Financial s tateMents
The aggregate expense/(income) recognised during the year relating to KMP or their related parties was as follows:
KMp
transaction
note
A W Kiernan
Consulting services
Liontown Resources Limited
Corporate services
Uranium Equities Limited
Corporate services
PhosEnergy Limited
Corporate services
(i)
(ii)
(ii)
(ii)
2017
$
2016
$
46,200
(66,000)
(96,814)
(21,600)
40,500
(66,000)
(66,000)
(24,436)
(i)
(ii)
The Group used the consulting of Mr Kiernan during the course of the financial year. Amounts were billed based on
normal market rates for such services and were due and payable under normal payment terms.
The Group supplied corporate services including accounting and company secretarial services under a Corporate
Services Agreement to Liontown Resources Limited (“LTR”), Uranium Equities Limited (“UEL”) and PhosEnergy Limited
(“PEL”) and geological services of KMP. Mr Goyder is a director of LTR, UEQ and PEL. Mr Kiernan is a director of
PEL. Amounts were billed on a proportionate share of the cost to the Group of providing the services and are due and
payable under normal payment terms.
Amounts outstanding (to)/from the above related parties at reporting date arising from these transactions were as follows:
Assets and liabilities arising from the above transactions
Current payables
Trade debtors
2017
$
2016
$
-
21,048
21,048
(15,000)
12,800
(2,200)
68
CHALICE GOLD MINES LIMITED
nOtes tO tHe cOnsOlidated Financial s tateMents
24. RELATED PARTY DISCLOSURE
Significant investments in subsidiaries
The consolidated financial statements include the financial statements of Chalice Gold Mines Limited and its subsidiaries
listed in the following table:
name
country of
incorporation
% equity interest
2017
2016
Parent entity
Chalice Gold Mines Limited
Subsidiaries
Chalice Operations Pty Ltd (i)
Chalice Gold Mines (Eritrea) Pty Ltd
Western Rift Pty Ltd (ii)
CGM Minerals Pty Ltd
CGM (Lithium) Pty Ltd
(i) Subsidiaries of Chalice Operations Pty Ltd
Keren Mining Pty Ltd
Universal Gold Pty Ltd
Sub-Sahara Resources (Eritrea) Pty Ltd
(ii) Subsidiaries of Western Rift Pty Ltd
Chalice Gold Mines (Ontario) Inc.(iii)
Coventry Rainy Inc.
Coventry Ontario Inc.
(iii) Subsidiaries of Chalice Gold Mines (Ontario) Inc.
Chalice Gold Mines (Quebec) Inc.
Chalice Gold Mines (Exploration) Inc.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
25. EVENTS SUBSEQUENT TO REPORTING DATE
On 27 July 2017 the Board resolved to issue a total of 4,929,291 performance rights to directors (subject to
shareholder approval), executives and employees under the terms and conditions of the Company’s long term incentive
plan. Please refer to section 7.3.4 (c) of the Remuneration Report for further details in relation to the performance rights
issued subsequent to balance date.
69
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 Directors’ Declaration
1.
In the opinion of the directors of Chalice Gold Mines Limited (the ‘Company’):
a. the financial statements, notes and the additional disclosures in the directors’ report designated as audited, of the Group are
in accordance with the Corporations Act 2001 including:
i. giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year
ended on that date; and
ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001.
b. there are reasonable grounds to be that the Company will be able to pay its debts as and when they become due
and payable.
c. The 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 2017.
This declaration is signed in accordance with a resolution of the Board of Directors.
Dated at Perth the 18th day of September 2017
Signed in accordance with a resolution of the Directors:
Tim Goyder
Managing Director
70
CHALICE GOLD MINES LIMITED
Independent Auditor’s Report
71
71
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 independent audit Or’s repOrt
72
72
CHALICE GOLD MINES LIMITED independent audit Or’s repOrt
73
73
ANNUAL FINANCIAL REPORT | 30 JUNE 2017 independent audit Or’s repOrt
74
74
CHALICE GOLD MINES LIMITED ASX Additional Information
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is
set out below.
Shareholdings
Substantial shareholders
The number of shares held by substantial shareholders advised to the Company and their associated interests as at 15 September
2017 were:
shareholder
Timothy Rupert Barr Goyder
Franklin Resources Inc
Class of shares and voting rights
number of
ordinary
shares held
percentage
of
capital held
%
44,827,765
31,107,008
17.16
11.91
At 15 September 2017 there were 1,546 holders of the ordinary shares of the Company, 5 holders of unlisted share options and 12
holders of performance rights. The share options and performance rights have been granted under the Company’s Employee Share
Option Plan and Employee Long Term Incentive Plan.
The voting rights to the ordinary shares set out in the Company’s Constitution are:
“Subject to any rights or restrictions for the time being attached to any class or Classes of shares -
a) at meetings of members or classes of members each member entitled to vote in person or by proxy or attorney: and
b) on a show of hands every person who is a member has one vote and on a poll every person in person or by proxy or
attorney has one vote for each ordinary share held.”
Holders of options or performance rights do not have voting rights.
Distribution of equity security holders as at 15 September 2017:
category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
number of equity security holders
Ordinary
shares
unlisted
share
Options
performance
rights
107
209
390
667
173
1,546
-
-
-
-
5
5
-
-
-
-
12
12
The number of shareholders holding less than a marketable parcel at 15 September 2017 was 183.
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ANNUAL FINANCIAL REPORT | 30 JUNE 2017
asX additiOnal inFOrMatiOn
twenty largest Ordinary Fully paid shareholders
as at 15 september 2017
name
Timothy R B Goyder
HSBC Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Canadian Registry Control
Jetosea Pty Ltd
National Nominees Limited
Mr Mark Savage
BNP Paribas Nominees Pty Ltd
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