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2023 ReportANNUAL REPORT 2018 ABN 14 118 619 042 Contents Chairman’s Letter Director’s Report Auditor’s Independence Declaration Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Shareholder Information Corporate Directory 1 2 19 20 24 25 26 27 28 29 54 55 56 Chairman’s Letter CHAIRMAN’S LETTER Chairman’s Letter Dear Fellow Shareholders, It gives me great pleasure to present Chesser Resources Limited’s (Chesser or the Company, ASX: CHZ) 2018 Annual Report. Since the acquisition of our Senegal assets completed in July 2017, Chesser has become well established in Senegal. The in-country technical team acquired with the projects is well settled and is already demonstrating deep geological expertise within the Kedougou-Kenieba inlier that is our focus. We are indeed fortunate to have such local expertise helping with the planning and supervision of exploration, as well as the analysis of exploration results. Chesser is also becoming a force in Senegal, with management recently meeting with H.E. Dr. Aissatou Gladima, Minister for Mines and Geology, Republic of Senegal. Your Company’s systematic exploration of its tenement holdings during the year represents a level of activity that stands in stark contrast to activity levels on the tenements prior to our acquisition. Anecdotely, Chesser appeared to be the most active exploration company in Senegal during the fiscal year. With nearly 7,500 drill holes undertaken for a total of approximately 54,000m of drilling, and with a further 800 or so soil samples also taken, Chesser has certainly come out of the blocks sprinting. With nearly 7,500 drill holes undertaken for a total of approximately 54,000m of drilling, and with a further 800 or so soil samples also taken, Chesser has certainly come out of the blocks sprinting. Your Board is of the view that the Kedougou-Kenieba inlier is a uniquely prospective region for gold exploration. Given that view, we had an expectation that the systematic exploration of Chesser’s large landholding in Senegal would deliver results. The definition of a significant gold anomaly at Diamba Sud, backed by an emerging geological understanding of its presence, vindicates your Company’s confidence. In less than a year, Chessser has integrated a technical team, planned and instigated a systematic program of reconnaissance exploration and identified a very significant auger gold anomaly at Diamba Sud. All this within a single field season. It is a level of activity, and a result, of which all involved should be justifiably proud. With the current wet season expected to draw to a close shortly, we look forward to the imminent deeper follow up drilling at Diamba Sud. Yours sincerely, Simon O’Loughlin Chairman Chesser Resources Limited Annual Report 2018 | 1 Director’s Report DIRECTORS’ REPORT Directors’ Report The directors of Chesser Resources Limited (the “Company” or “Chesser”) submit herewith the year financial report of the Company and the entities it controlled for the year ended 30 June 2018 (collectively “Group”). In order to comply with the provisions of the Corporations Act 2001, the directors report as follows. Directors The following persons were directors of Chesser Resources Limited during the whole of the year under review and up to the date of this report, unless otherwise stated: • Mr Simon O’Loughlin, Non-Executive Chairman • Mr Simon Taylor, Non-Executive Director • Mr Stephen Kelly, Executive Director Company Secretary Mr Stephen Kelly was the Company Secretary during the whole of the year under review and up to the date of this report. Mr Simon O’Loughlin, BA(Acc) (Non-Executive Chairman) Mr O’Loughlin is the founding member of O’Loughlins Lawyers, an Adelaide based medium sized specialist commercial law firm. For many years he has practiced both in Sydney and Adelaide, in the corporate and commercial fields with, in more recent times, a particular focus on the resources sector. He also holds accounting qualifications. He is a Non-Executive Director of Bod Australia Limited and Petratherm Limited. Mr O’Loughlin has extensive experience and involvement with companies in the small industrial and resources sectors. He has also been involved in the listing and back-door listing of numerous companies on the ASX and National Stock Exchanges. He is a former Chairman of the Taxation Institute of Australia (SA Division) and Save the Children Fund (SA Division). Former directorships in last 3 years In the last 3 years , he has been a director of Kibaran Resources Ltd, Odin Mining Ltd, ARC Exploration Limited, Piedmont Lithium Limited and Oklo Resources Limited. Mr Simon Taylor, BSc(Geology), MAIG, GCertAppFin (Finsia) (Non-Executive Director) Mr Taylor is a geologist with 20 years’ experience throughout Australia and overseas having held senior geologist and exploration manager positions for numerous ASX listed resource companies. He has gained considerable experience in exploration, project assessment and joint venture negotiations. His experience includes providing consulting services to resource companies and financial corporations as a resource analyst. Mr Taylor’s corporate experience includes project appraisal, advice on placements and fundraising. He is a member of the Australian Institute of Geoscientists and is the Managing Director of Oklo Resources Limited and Non-Executive Director of ARC Exploration Limited and Bod Australia Limited. Former directorships in last 3 years TW Holdings Limited, King Solomon Mines Limited and Aguia Resources Limited 2 | Annual Report 2018 Chesser Resources Limited DIRECTORS’ REPORT Mr Stephen Kelly, B.Bus, ACA (Executive Director, Company Secretary and Chief Financial Officer) Mr Kelly was appointed as the Company Secretary and Chief Financial Officer of the Company on 15 November 2012. A qualified Australian Chartered Accountant, Mr Kelly was previously Chief Financial Officer at Allied Gold Mining PLC. He has more than 25 years’ international experience in the areas of external and internal audit, risk management and compliance, treasury and corporate finance across a range of industry sectors including mining, infrastructure, property development and banking and finance. Former directorships in last 3 years Nil Interests in the shares and options of the Company As at the date of this report, the interests of the directors in the shares and options of Chesser Resources Ltd were: Mr Simon O’Loughlin Mr Simon Taylor Mr Stephen Kelly Number of Ordinary Shares # Number of Options over Ordinary Shares # 1,833,334 2,500,001 500,000 1,200,000 1,600,000 1,200,000 # Includes shares in which the Director has an indirect interest through associated entities. Meetings of Directors The number of meetings of the Company’s board of directors and each board committee held during the year ended 30 June 2018, and the numbers of meetings attended by each director were as follows: Number of meetings held Board Meetings 7 Mr Simon O’Loughlin Mr Simon Taylor Mr Stephen Kelly Number of meetings eligible to attend Number of meetings attended 7 7 7 7 7 7 The full Board fulfilled the roles of the Audit, Risk and Compliance Committee and the Remuneration and Nominations Committee during the financial year. Chesser Resources Limited Annual Report 2018 | 3 Principal activities The principal activities undertaken by the Company during the year are summarised as follows: Acquisition of the Senegal Projects On 12 July 2017 the Company acquired 100% of the issued capital of each Boya Gold Pty Ltd (“Boya”) and Erin Mineral Resources Pty Ltd (“Erin”), who together own five exploration projects in Senegal. As consideration for the acquisition, Chesser issued the following CHZ securities to the vendors and third-party facilitators or their nominees: • 27,071,419 fully paid ordinary shares in Chesser. 26,767,848 shares were issued on 12 July 2017 and 303,571 shares were issued on 11 September 2017; • The following unlisted options: i. 1,000,000unlisted options with an exercise price of $0.06 and an expiry date of 31 December 2019 ii. 1,000,000 unlisted options with an exercise price of $0.10 and an expiry date of 31 December 2020. • The following performance shares: i. 23,809,524 Class A performance shares which will convert into fully paid ordinary shares upon certification by an independent Competent Person of a JORC Mineral Resource of 0.5Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects; and ii. 23,809,524 Class B performance shares which will convert into fully paid ordinary shares upon certification by an independent Competent Person of a total JORC Mineral Resource of 1.0Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects. The Senegal projects are located within the Birimian-age greenstone belts of the Kédougou- Kéniaba Inlier, from which more than 45 million ounces of gold has been discovered to date. The projects are located along or nearby the Senegal- Mali Shear Zone, a major structure that hosts numerous major gold projects. The projects are located close to significant operating gold mines: Yatela (3Moz), Sadiola (15Moz), Sabodala (10Moz), Loulo (12.7Moz) and Gounkoto (5.5Moz) (refer Figure 1). Figure 1: Chesser tenements and nearby gold mines, eastern Senegal. 4 | Annual Report 2018 Chesser Resources Limited DIRECTORS’ REPORT Exploration Activities The Company’s exploration activities during the year were focussed on the Senegal projects that were acquired by the Company in July 2017. Limited exploration work undertaken by previous owners of those projects had identified gold anomalism through initial soil and rock chip sampling and limited drilling. In November 2017, Chesser initiated a planned 4,000-hole, 40,000 metre shallow geochemical auger drilling program to be conducted across the Diamba Sud, Garaboureya and Woye projects. This program was subsequently expanded to include the Diamba Nord Project and a follow-up infill auger drilling program at the Diamba Sud Project. The program was concluded in the June 2018 quarter following the onset of the wet season, with approximately 53,942 metres of auger drilling in 7,443 holes being completed. The 2017-2018 multi-licence auger program has provided geochemical access to prospective zones that were blind to soil sampling and in areas of hard laterite cover and has systematically defined the gold mineralisation potential of the Company’s Senegal projects. DIAMBA SUD Diamba Sud comprises two rectangular blocks joined by a corridor to create a contiguous tenement (Figure 2). The northern segment of Diamba Sud (termed DS-1) has an open pit gold mine (Kharakhane) operated by Afrigold along its western margin and has had previous programs of soil geochemistry, rock chip sampling and drilling. Figure 2: Location of Diamba Sud project Chesser Resources Limited Annual Report 2018 | 5 DIRECTORS’ REPORT Auger Sampling Semi-regional first-pass auger drilling was undertaken over all of Diamba Sud. At the end of the first-pass program, 1,651 auger holes had been completed on the licence for a total of 14,308 metres at an average hole depth of 8.7m. First-pass assay results indicated a coherent anomalous zone in the northern part of Diamba Sud block (DS-1) with numerous results over 0.3g/t gold and a maximum assay of 4.9g/t gold1. Within the anomalous gold zone (>500ppb gold), drilling identified ten mineralised envelopes each up to 1.4km long and up to 400m wide. An infill auger program comprising a further 12,646 metres from 1,466 holes at a nominal 200m by 50m spacing was completed during the June quarter. First-pass holes with an assay of over 500ppb (0.5 g/t gold) had additional infill holes drilled 25m either side. The objective of the infill program was to define gold anomalism within the existing wide-spaced sampling in DS-1. Assay results from 2,960 samples were announced to ASX on May 28 20182 with 50 samples reporting over 500ppb (0.5g/t) gold and 26 samples reporting over 1,000ppb (1.0g/t) gold, forming a coherent mineralised trend that extends 5km in length and up to 2km in width (Figure 3). The infill geochemical auger drilling program confirmed a large, significant gold anomalous trend extending over 5km in length and up to 2km in width. Assays from 26 auger holes, all ending in mineralisation, returned greater than 1g/t gold, including: 3 metres at 8.11 g/t gold 2 metres at 6.82 g/t gold 2 metres at 6.12 g/t gold 3 metres at 5.37 g/t gold 3 metres at 5.13 g/t gold There are several high tenor gold zones within the mineralised trend which are obvious priority targets for deeper drill testing (Figure 4). During the program, auger holes were routinely stopped three metres into the saprolite, so mineralisation is effectively open and untested at depth. Rock Channel Sampling Rock channel samples were collected from an area of artisanal workings along a proposed drill traverse (1426200N) which proved inaccessible to the auger rigs. The rock channel samples, as proxies for auger holes in those locations, were collected as continuous channel samples down the walls of abandoned workings and assayed as composites. Significant high-grade gold assays obtained from rock channel samples within the trend including: 4 metres at 10.80 g/t gold 1 metre at 7.28 g/t gold 1 metre at 4.95 g/t gold 1 Refer ASX Announcement dated 22 February 2018. The Company is not aware of any new information or data that materially affects the information contained in that announcement. 2 Refer ASX Announcement dated 28 May 2018 for a full listing of all significant intercepts. The Company is not aware of any new information or data that materially affects the information contained in that announcement. 6 | Annual Report 2018 Chesser Resources Limited DIRECTORS’ REPORT Rock Chip Sampling Rock chip samples were acquired from an area of artisanal workings adjacent to the auger traverse line 1,426,600N. Fifty-eight rock chip samples were collected from a 200m x 150m area of which twenty-three samples assayed over 1g/t gold with the highest assay of 12.5g/t gold. Proposed Future Activity The Company is, as a priority, collating and interpreting all current and previous exploration results. The aim is to define a drilling program that will best define both the shallow (saprolite) and deeper (hard rock) gold mineralisation within DS-1. Figure 3: Anomalous gold-in-soil auger assay results DS-1 block Chesser Resources Limited Annual Report 2018 | 7 DIRECTORS’ REPORT Figure 4: Cross-section of auger assays and intersected intervals along traverse N1429600 DIAMBA NORD The planned semi-regional soil sampling work in Diamba Nord licence (in three parts called DN-1, DN-2, DN-3) was replaced by a semi-regional auger program. The thick transported soil cover was not amenable to soil sampling and proved impenetrable by hand augers. The auger program commenced on April 14 and continued until June 28 when the onset of rains made the area inaccessible. All of DN-1 & DN-2 and 25% of DN-3 was completed by auger drilling totalling 13,459 metres from 1,682 holes with an average hole dept of 8m. During the June quarter all three of the DN blocks were mapped north of the Faleme River (running through the lower third of DN-3 block), including a sampling program of rock chips and termite mounds. As at 30 June 2018, the Company was awaiting complete assays for the auger, rock chip and termite mound samples. These will be interpreted as a high priority. GARABOUREYA First pass auger drilling was undertaken at Garaboureya with 656 holes drilled for a cumulative 6,210m at an average hole depth of 9.5 metres. Assay results were pending as at 30 June 2018. WOYE First pass auger drilling was undertaken at Woye with 1,045 holes drilled for a cumulative 6,928m at an average hole depth of 6.6 metres. Assay results were pending as at 30 June 2018. Rough and inaccessible terrain precluded the complete auger sampling program as planned and those locations missed by auger are planned to be tested with deep soil sampling and hand augers in the September quarter. YOUBOUBOU The soil sampling program over Youboubou comprised 1,600 soil samples collected in a semi-regional grid. This project has a lower priority and results were pending as at 30 June 2018. 8 | Annual Report 2018 Chesser Resources Limited DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report FARM IN AGREEMENT FOR THE KURNALPI NICKEL PROJECT On 14 June 2018, Chesser announced that it had formally notified Mithril Resources Limited of Chesser’s intention to withdraw from the Kurnalpi Farm-In Agreement. The effective date for the termination of the Farm-In Agreement was 11 July 2018. Corporate activities During the year the Company: • Completed a 1 for 3 rights issue announced on 22 June 2017 raising $1.59 million (before costs). The rights issue was fully underwritten by Taylor Collison Limited. It closed on 13 July 2017 and the shortfall was placed by the Underwriter on 21 July 2017. • Completed a private placement on 12 September 2017 to raise $500,000 (before costs) through the issue of 12,500,000 fully paid ordinary shares at an issue price of $0.04 per share. Operating result The Company reported a loss after tax for the year of $957,352 (2017: loss of $693,976). The significant items affecting the loss after tax were: a) Options issued to Directors and third-party consultants were recognised in accordance with the requirements of AASB 2 Share Based Payments, totaling $76,000 (2017: $Nil). b) Professional fees, administrative and operating expenses reflecting the increase in the nature and scope of the Company’s activities following the acquisition of the Senegal exploration tenements and the related equity raising. c) An increase in director and key management personnel remuneration expense to $380,180 (2017: $ 211,768) as a consequence of the appointment of Dr Simon McDonald as the Company’s Chief Executive Officer and an increase in other remuneration consistent with the increase in the Company’s activities following the acquisition of the Senegal projects. Significant changes in the reporting year The financial position and performance of the group was particularly affected by the following events and transactions during the year-ended 30 June 2018: • Acquisition on 12 July 2017 of 100% of the issued capital of each of Boya Gold Pty Ltd (“Boya”) and Erin Mineral Resources Pty Ltd (“Erin”), who together own five exploration projects in Senegal. As consideration for the acquisition issued various equity instruments as set out on page 13 of this report. • On 12 July 2017, Chesser issued 39,778,164 fully paid ordinary shares to raise $1,591,126 before transaction costs pursuant to a 1 for 3 entitlement issue announced on 21 June 2017 • • The following unlisted options were issued on 12 July 2017 to Directors: - 2,300,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 - 2,300,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 Issue of 12,500,000 fully paid ordinary shares on 12 September 2017 at $0.04 per share to raise $500,000 before costs. The issue was undertaken as a private placement in accordance with shareholder approval. Chesser Resources Limited Annual Report 2018 | 9 10 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report • Issue of unlisted options to Dr Simon McDonald, the Company’s Chief Executive Officer on the following terms: - - 1,000,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 1,000,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 Dividends No dividends were paid or declared during the year and no recommendation is made as to payment of dividends. Events occurring after balance sheet date No matter or circumstance has arisen since the end of the year that has significantly affected, or may significantly affect the Group’s operations, the result of those operations or the Group’s state of affairs. Likely developments and expected results of operations Following the completion of the Group’s acquisition of the Senegal Projects it is anticipated that the short-term focus of the Group will continue to be the exploration of these projects. Environmental Regulation The Company was not subject to any significant environmental regulation under a law of the Commonwealth of a State or Territory of Australia. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is attached to this report. Shares under Option Unissued ordinary shares of the Company under option at the date of this report are as follows: Grant Date Vest Date Expiry Date Exercise price of options Number under options 12/07/2017 12/07/2017 11/09/2017 11/09/2017 12/07/2017 12/07/2017 11/09/2017 11/09/2017 31/12/2019 31/12/2020 31/12/2019 31/12/2020 $0.06 $0.10 $0.06 $0.10 3,300,000 3,300,000 1,000,000 1,000,000 8,600,000 No option holder has any right under the options to participate in any other share issue of the company or any other entity. Shares issued as a result of the exercise of options No shares were issued during the financial year as a result of the exercise of options. 10 | Annual Report 2018 Chesser Resources Limited 11 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Remuneration Report a) Policy for determining the nature and amount of key management personnel remuneration The Board of Chesser Resources Limited is responsible for determining and reviewing compensation arrangements for the Non- Executive Directors and the Executive Director. The Board's remuneration policy is to ensure that the remuneration package properly reflects the person's duties and responsibilities, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high -quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the Group. In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. I. Non-Executive Director Remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure Remuneration of non-executive directors is determined by the Board, within the maximum amount approved by the shareholders from time to time (currently set at an aggregate of $400,000 per annum). The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each non-executive director receives a fee for being a director of the Group. Non-Executive Directors receive an annual fee of $40,000. Non-Executive Directors who are called upon to perform extra services beyond the director’s ordinary duties may be paid additional fees for those services. No fees were paid to Non- Executive Directors for additional services during the year ended 30 June 2018 (2017: additional fees totaling $54,000 were paid to Mr Simon Taylor for services provided in relation to management of the Company’s participation in the Kurnalpi Joint Venture, services provided in relation to the assessment of investment opportunities in the resources sector including the Senegal exploration properties that were acquired in July 2017). Executive Director and Key Management Personnel Remuneration Objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group so as to: • • • • Reward executives for Group and individual performance against agreed targets; Align the interest of executives with those of shareholders; Link reward with the strategic goals and performance of the Group; and Ensure total remuneration is competitive by market standards. Chesser Resources Limited Annual Report 2018 | 11 12 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Structure In determining the level and make-up of executive remuneration, the Board has had regard to market levels of remuneration for comparable executive roles. It is the Board's policy that employment contracts are entered into with all senior executives. Variable Remuneration - Short and Long-Term Incentives Objective The objectives of the incentives plan are to: • Recognise the ability and efforts of the employees of the Group who have contributed to the success of the Group and to provide them with rewards where deemed appropriate; Provide an incentive to the employees to achieve the long-term objectives of the Group and improve the performance of the Group; and Attract persons of experience and ability to employment with the Group and foster and promote loyalty between the Group and its employees. • • Structure Long term incentives granted to senior executives are delivered in the form of options in accordance with an Employee Share Option Plan. As part of the Group's annual strategic planning process, the Board and management agree upon a set of financial and non-financial objectives for the Group. The objectives form the basis of the assessment of management performance and vary but are targeted directly to the Group's business and financial performance and thus to shareholder value. b) Remuneration, Group performance and shareholder wealth The development of remuneration policies and structures is considered in relation to the effect on Group performance and shareholder wealth. They are designed by the Board to align Director and Executive behaviour with improving Group performance and ultimately shareholder wealth. The Board considers at this stage in the Group’s development, that share price growth itself is an adequate measure of total shareholder return. Executives are currently remunerated by a combination of cash base remuneration and options. The options granted are considered by the Board to provide an alignment between the employees and shareholders interests. The table below shows for the current financial year and previous four financial years the total remuneration cost of the key management personnel, earnings per ordinary share (EPS), dividends paid or declared, and the closing price of ordinary shares on ASX at year end. Financial Year 2018 2017 2016 2015 2014 Total Remuneration $ 417,200 215,700 202,546 1,282,075 1,182,962 EPS (Cents) (0.49) (0.58) (0.31) 8.59 (3.27) Dividends (Cents) Share Price (Cents) - - - - - 6.0 4.5 3.2 3.4 12 # The share price at December 2014 does not include the effect of a 15 cent per share return of capital made by the Company in November 2017. 12 | Annual Report 2018 Chesser Resources Limited 13 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Given the stage of the Company’s development and the fact that it does not currently have any revenue producing operations, the Board does not consider EPS or dividends paid or declared to be meaningful measures for assessing executive performance. Key management personnel The following persons were key management personnel of the Group during the financial year (unless noted otherwise the persons listed were key management personnel for the whole of the financial year): Name Simon O’Loughlin Simon Taylor Stephen Kelly Simon McDonald Position Held Non-Executive Director Non-Executive Director Executive Director, CFO and Company Secretary Chief Executive Officer The Company has entered into a Consultancy Agreement with KCG Advisors Pty Ltd pursuant to which Mr Kelly was engaged to provide Chief Financial Officer and Company Secretarial services to the Company effective from 11 May 2015. The key terms of the Agreement are: • KCG Advisors Pty Ltd to receive $225 per hour, exclusive of GST, for services provided by Mr Kelly. • Unless otherwise agreed between the parties, a monthly cap of $10,000 (2017: monthly cap of $6,500), • exclusive of GST, will apply to payments to KCG Advisors Pty Ltd; and The Agreement may be terminated by either party at any time on the giving of not less than one month’s notice in writing. The Company has entered into a Consultancy Agreement with Kurranulla Pty Ltd pursuant to which Dr McDonald was engaged to provide Chief Executive Officer services to the Company effective from 1 October 2017. The key terms of the Agreement are: • Kurranulla Pty Ltd to receive $16,000, exclusive of GST, for services provided by Dr McDonald. • Dr McDonald to be issued 2,000,000 options in the Company on the following terms: - - 1,000,000 options exerciseable at $0.06 expiring on 31 December 2019 with 600,000 of those options vesting immediately and 400,000 of those options vesting on the first anniversary of completion of the acquisition of the Senegal Properties; and 1,000,000 options exerciseable at $0.10 expiring on 31 December 2020 vesting on the second anniversary of completion of the acquisition of the Senegal Properties. • The Agreement may be terminated by either party at any time on the giving of not less than one month’s notice in writing. c) Details of remuneration Compensation paid, payable or provided by the Group or on behalf of the Group, to key management personnel is set out below. Key management personnel include all Directors of the Group and certain executives who, in the opinion of the Board and Managing Director, have authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly. Chesser Resources Limited Annual Report 2018 | 13 14 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report 2018 Cash and salary fees Super- annuation Options^ Total remuneration $ $ $ $ Proportion of remuneration that is performance based % Non-Executive Directors Mr Simon O’Loughlin Mr Simon Taylor Total Non-Executive Directors 40,000 40,000 80,000 3,800 1,900 10,800 14,400 25,200 5,700 54,600 56,300 110,900 - - - Executive Directors Mr Stephen Kelly* Total Executive Directors Key Management Personnel Mr Simon McDonald Total Key Management Personnel Total Director and KMP Compensation 139,500 139,500 - 10,800 - 10,800 150,300 150,300 192,000 - 35,000 227,000 192,000 - 35,000 227,000 - - - - 411,500 5,700 71,000 488,200 - ^ Equity-settled share-based payments as per Corporations Regulation 2M.3.03(1) Item 11. * During the 2018 financial year Mr Kelly received additional fees totalling $19,500 for services provided in relation to the management of the Company’s acquisition of the Senegal exploration projects and related equity raising activities.. 2017 Cash and salary fees Super -annuation Options Total remuneration $ $ $ Proportion of remuneration that is performance based % Non-Executive Directors Mr Simon O’Loughlin Mr Simon Taylor# Total Non-Executive Directors 40,000 94,000 134,000 3,700 - 3,700 Executive Directors Mr Stephen Kelly Total Executive Directors 78,000 78,000 - - - - - - - 43,700 94,000 137,700 - - - 78,000 78,000 - - Total Director and KMP Compensation # During the 2017 financial year Mr Simon Taylor received additional fees totalling $54,000 for services provided in relation to the management of the Company’s participation in the Kurnalpi Joint Venture, services provided in relation to the assessment of investment opportunities in the resources sector and services in relation to the acquisition of the Senegal exploration projects that was completed in July 2017. 212,000 215,700 3,700 - 14 | Annual Report 2018 Chesser Resources Limited 15 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Share-based compensation d) The following unlisted options were issued on 12 July 2017 to Directors: • 2,300,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 • 2,300,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 The following unlisted options were issued on 12 September 2017 to Dr Simon McDonald, the Company’s Chief Executive Officer: • 1,000,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 • 1,000,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date 12/07/2017 12/07/2017 11/09/2017 11/09/2017 Vesting and exercise date 12/07/2017 12/07/2017 11/09/2017 11/09/2017 Expiry date Exercise price 31/12/2019 31/12/2020 31/12/2019 31/12/2020 $0.06 $0.10 $0.06 $0.10 Value per option at grant date $0.010 $0.008 $0.016 $0.019 Vested 100% 100% 100% 100% The number of options over ordinary shares in the company provided as remuneration to directors and key management personnel is shown in section (e) below. When exercisable, each option is convertible into one ordinary share of Chesser Resources Limited. Options are granted to attract, retain and incentivise key management personnel. The board has rules that contain restrictions on removing the ‘at risk’ aspect of the options granted to executives. Executives may not enter into any transactions designed to remove the ‘at risk’ aspect of an instrument before it vests. There are no performance hurdles attaching to the options granted other than service vesting conditions. In the event of termination (specified circumstances) only vested options are entitled to be exercised. Unvested options are forfeited. The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Shares provided on exercise of remuneration options No shares were issued as a result of the exercise of options during the year. Chesser Resources Limited Annual Report 2018 | 15 16 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report e) Unlisted option holdings The numbers of options over ordinary shares in the Company held during the financial year by each director and each key management person of the Group, including their personally related parties, are set out below: 2018 Name Balance at start of year Granted as compensati on Directors of Chesser Resources Limited S Taylor S O’Loughlin S Kelly S McDonald Total 1,800,000 1,200,000 1,200,000 2,000,000 6,200,000 - - - - - 2017 Name Balance at start of year Granted as compensati on Directors of Chesser Resources Limited S Taylor S O’Loughlin S Kelly - - 600,000 600,000 - - - - Exercised Lapsed Balance at end of year Vested and exercisable Unvested - - - - - - - - - - 1,800,000 1,200,000 1,200,000 2,000,000 6,200,000 1,800,000 1,200,000 1,200,000 400,000 4,600,000 - - - 1,600,000 1,600,000 Exercised Lapsed Balance at end of year Vested and exercisable Unvested - - - - - - (600,000) (600,000) - - - - - - - - - - - - f) Share holdings The number of shares in the Company held during the financial year by each director of Chesser Resources Ltd and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation (2017: nil). 2018 Balance at start of year Directors of Chesser Resources Limited Ordinary shares S Taylor S O’Loughlin S Kelly S McDonald 1,500,000 812,500 - - 2,312,500 Shares held on appointment as key management personnel Purchases / (disposals) during the year Shares held on ceasing to be key management personnel Balance at the end of the year - - - - - 1,000,001 1,020,834 500,000 - 2,520,835 - - - - - 2,500,001 1,833,334 500,000 - 4,833,335 16 | Annual Report 2018 Chesser Resources Limited 17 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Balance at start of year 2017 Directors of Chesser Resources Limited Ordinary shares S Taylor S O’Loughlin S Kelly 1,500,000 812,500 - 2,312,500 Shares held on appointment as key management personnel Purchases / (disposals) during the year Shares held on ceasing to be key management personnel Balance at the end of the year - - - - - - - - - - - - 1,500,000 812,500 - 2,312,500 No shares were received by key management personnel on the exercise of options during the year. Loans to key management personnel g) There were no loans to key management personnel at any time during the financial year. h) Other transactions with key management personnel During the year ended 30 June 2018, O’Loughlins Lawyers, a legal firm in which the Company’s Chairman Mr Simon O’Loughlin is a partner, provided legal services to the Company. As at 30 June 2018 the total amount payable to O’Loughlins Lawyers was $nil (2017: $22,703). The total fees paid to O’Loughlins Lawyers during the year was $34,668 (2017: $31,692). Voting and comments made at the Company’s 2017 Annual General Meeting i) The Company received more than 98% of “yes” votes on its remuneration report for the financial year ended 30 June 2017. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. End of Remuneration Report Insurance of officers To the extent permitted by law, the Company has indemnified (fully insured) each director and the secretary of the Company. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings (that may be brought) against the officers in their capacity as officers of the Company or a related body, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities Proceedings on behalf of the Group The Group is not aware that any person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings in which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the court under section 237 of the Corporations Act 2001. Chesser Resources Limited Annual Report 2018 | 17 18 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2018 Directors’ report Non-audit Services The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group and/or the Group are important. No non-audit assignments were engaged with the auditor during the year (2017: none) Details of the amounts paid or payable to the auditor, Pitcher Partners for audit services provided during the year are set out in note 17 to the financial report. Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is attached to this report. Auditor Pitcher Partners continues in office in accordance with section 327 of the Corporations Act 2001. Rounding of amounts in accordance with ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191 The amounts in the Directors’ report and in the financial report have been rounded to the nearest dollar. This report is made in accordance with a resolution of directors. Stephen Kelly Executive Director Brisbane, 28 September 2018 18 | Annual Report 2018 Chesser Resources Limited 19 | P a g e DIRECTORS’ REPORT The Directors Chesser Resources Limited Suite 3, Level 7 100 Edward Street Brisbane QLD 4000 Auditor’s Independence Declaration In relation to the independent audit for the year ended 30 June 2018, to the best of my knowledge and belief there have been: (i) (ii) No contraventions of the auditor independence requirements of the Corporations Act 2001; and No contraventions of APES 110 Code of Ethics for Professional Accountants. This declaration is in respect of Chesser Resources Limited and the entities it controlled during the year. PITCHER PARTNERS NIGEL BATTERS Partner Brisbane, Queensland 28 September 2018 Auditor’s Independence Declaration Chesser Resources Limited Annual Report 2018 | 19 AUDITOR’S INDEPENDENCE DECLARATION Independent Auditor’s Report Independent Auditor’s Report to the Members of Chesser Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Chesser Resources Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes to the financial statements including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 20 | Annual Report 2018 Chesser Resources Limited INDEPENDENT AUDITOR’S REPORT Key audit matter How our audit addressed the matter Exploration and evaluation expenditure - Impairment Refer to Note 5: Critical accounting estimates and judgements The group have capitalised exploration and evaluation expenditure in relation to the Senegalese exploration projects acquired during the year. The risk is that the carrying value of this asset is overstated. Our testing included: understanding the control environment through which exploration and evaluation expenditure is incurred and recorded; assessing whether the relevant expenditure meets the asset recognition requirements of AASB6 Exploration for and Evaluation of Mineral Resources; and reviewing the group’s forecasts and expectations of successful development and exploitation of the projects. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the [Group] or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. Chesser Resources Limited Annual Report 2018 | 21 INDEPENDENT AUDITOR’S REPORT As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included on pages 11 to 17 of the directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Chesser Resources Limited for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. 22 | Annual Report 2018 Chesser Resources Limited INDEPENDENT AUDITOR’S REPORT Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. PITCHER PARTNERS NIGEL BATTERS Partner Brisbane, Queensland 28 September 2018 Chesser Resources Limited Annual Report 2018 | 23 INDEPENDENT AUDITOR’S REPORT Consolidated Income Stat Chesser Resources Limited Consolidated Income Statement For the year ended 30 June 2018 Notes 2018 $ 2017 $ 7 12 13 Revenue and other income Auditors’ remuneration Director and key management personnel remuneration Depreciation expense Finance charges General and administrative expenses Impairment of capitalised exploration expenditure Other expenses Professional fees Travel expenses Business development costs Share based payments expense Share registry and exchange listing fees Foreign exchange (losses) / gains Loss before income tax expense from continuing operations 3,803 (40,000) (380,180) (22,151) (6,008) (115,339) (7,591) (51,038) (72,497) (94,297) (32,302) (76,000) (50,975) (12,696) (957,352) 3,662 (22,000) (211,768) - - (131,264) (77,040) (73,166) (54,373) - (72,822) - (55,583) 378 (693,976) Taxation 10 - - Loss for the year from continuing operations (957,352) (693,976) Loss attributable to Owners of Chesser Resources Limited (957,352) (693,976) Basic and diluted loss per share (cents per share) 17 (0.49) (0.58) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 24 | Annual Report 2018 Chesser Resources Limited 25 | P a g e CONSOLIDATED INCOME STATEMENTFor the year ended 30 June Consolidated Statement of Comprehensive Income Chesser Resources Limited Consolidated statement of Comprehensive Income For the year ended 30 June 2018 Loss for the year from continuing operations (957,352) (693,976) 2018 $ 2017 $ Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Income tax relating to these items Other comprehensive income for the year, net of tax 93 - - (83) - (83) Total comprehensive loss for the year (957,259) (694,059) Comprehensive loss attributable to the owners of Chesser Resources Limited (957,259) (694,059) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 26 | P a g e Chesser Resources Limited Annual Report 2018 | 25 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 30 June Consolidated Statement of Financial Position Chesser Resources Limited Consolidated Statement of Financial Position As at 30 June 2018 Current assets Cash and cash equivalents Trade and other receivables Prepayments Total current assets Non-current assets Property, plant and equipment Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Notes 2018 $ 2017 $ 21(a) 11 2,385,360 17,565 45,194 3,312,011 21,623 13,620 2,448,119 3,347,254 12 13 164,879 3,193,146 3,358,025 - - - 5,806,144 3,347,254 14 457,542 137,487 457,542 457,542 137,487 137,487 5,348,602 3,209,767 15 16 8,840,512 2,007,869 (5,499,779) 5,838,418 1,913,776 (4,542,427) 5,348,602 3,209,767 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 26 | Annual Report 2018 Chesser Resources Limited 27 | P a g e CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June Consolidated Statement of Changes in Equity Chesser Resources Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2018 2018 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Balance as at 1 July 2017 5,838,418 1,913,776 (4,542,427) 3,209,767 Loss for the year Other comprehensive income Total comprehensive loss for the year Transactions with owners in their capacity as owners: - - - - 93 93 (957,352) - (957,352) (957,352) 93 (957,259) Issue of equity securities Costs of issuing equity securities Share based payments Total transactions with owners in their capacity as owners 3,173,983 (171,889) - 3,002,094 - - 94,000 94,000 - - - - 3,173,983 (171,889) 94,000 3,096,094 Balance as at 30 June 2018 8,840,512 2,007,869 (5,499,779) 5,348,602 2017 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Balance as at 1 July 2016 5,838,418 1,913,859 (3,848,451) 3,903,826 Loss for the year Other comprehensive income Total comprehensive loss for the year Transactions with owners in their capacity as owners - - - - - (83) (83) - (693,976) - (693,976) (693,976) (83) (694,059) - - Balance as at 30 June 2017 5,838,418 1,913,776 (4,542,427) 3,209,767 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 28 | P a g e Chesser Resources Limited Annual Report 2018 | 27 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 30 June Consolidated Statement of Cash Flows Chesser Resources Limited Consolidated Statement of Cash Flows For the year ended 30 June 2018 21(b) Cash flow from operating activities Interest received Interest paid Payments to suppliers and employees Net cash flows used in operating activities Cash flow from investing activities Payments for property, plant and equipment Payments for exploration and evaluation expenditure Net cash used in investing activities Cash flow from financing activities Proceeds from share issue Costs of issuing equity securities Net cash provided by financing activities Reconciliation of cash and cash equivalents Cash and cash equivalents at the beginning of the year Net decrease in cash and cash equivalents Foreign exchange difference on cash and cash equivalents 2018 $ 2017 $ 3,803 (6,088) (929,583) (931,868) (187,030) (1,728,452) (1,915,482) 2,091,126 (171,888) 1,919,238 3,312,011 (928,112) 1,461 3,662 - (604,696) (601,034) - (38,220) (38,220) - (13,620) (13,620) 3,964,589 (652,874) 296 Cash and cash equivalents at 30 June 21(a) 2,385,360 3,312,011 Non-cash financing and investing activities 21(c) The accompanying accounting policies and explanatory notes form an integral part of the financial statements 28 | Annual Report 2018 Chesser Resources Limited 29 | P a g e CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 30 June Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 1. General information Chesser Resources Limited (the Company) is a listed public company incorporated in Australia. The address of its registered office and principal place of business is Suite 3, Level 7, 100 Edward Street, Brisbane City OLD 4000. The entity's principal activity during the financial year was the acquisition of a number of greenfield gold exploration projects in Senegal and undertaking exploration an auger geochemical drilling campaign across those projects. 2. Application of new and revised Accounting Standards Adoption of New and Revised Standards The Company was required to change some of its accounting policies as the result of new or revised accounting standards which became effective for the annual reporting period commencing on 1 January 2017. The affected policies and standards are: • 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 2017-2 Amendments to Australian Accounting Standards - Further Annual Improvements 2014-2016 Cycle The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. Early adopted standards (i) AASB 9 Financial Instruments (effective from 1 January 2018) The Group has elected to apply AASB 9 Financial Instruments as issued in December 2014, from 1 July 2017. In accordance with the transitional provisions in AASB 9 (7.2.15), comparative figures have not been restated. The adoption of AASB 9 did not result in a change to the recognition or measurement of financial instruments for the Group as presented in the financial report. The Group will continue to recognise and measure financial instruments at amortised cost. As a result of adopting AASB 9, no changes have been made to the Group’s accounting policies. New accounting standards not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. (i) AASB 15 Revenue from contracts with customers (effective from 1 January 2018) AASB 15 Revenue from contracts with customers will replace AASB 118 Revenue and introduces a new framework for revenue recognition. The new framework is based on a five-step process where revenue is recognised for each distinct performance obligation, at the point control of the good or service passes to the customer. This replaces the previously applied risks and rewards approach under AASB 15. 30 | P a g e Chesser Resources Limited Annual Report 2018 | 29 Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 Chesser Resources Limited is an exploration entity and does not currently produce any saleable product. The entity has assessed that the initial application of this standard will have no impact on the Company. (ii) AASB 16 Leases (effective from 1 January 2019) (effective 1 January 2019) AASB 16 Leases will replace AASB 117 Leases and removes the distinction between operating and financing leases and introduces a single framework which results in the lessee being required to recognise all leases with a term longer than 12 months on the balance sheet. This is presented in the balance sheet as a right to use asset being the leased item, and financial liability being the lease payments over the term of the lease. For operating leases, the cost of these leases will then be presented as amortisation of the leased asset and interest expense as the discount rate on the liabilities unwind, rather than operating cash costs as the current approach under AASB 117. As at 30 June 2018 the Group has the entered into lease arrangements for office premises in Australia and Senegal that meet the definition of a lease under the new standard. Currently the Group accounts for these lease arrangements as operating leases and records rental payments under the lease as an expense when incurred; no lease asset or lease liability is recognised by the Group. Under the new standard the leases will be accounted for as finance leases. In the Statement of Financial Position, the Company will recognise a right-of-use asset and a lease liability (calculated as the present value of the future rentals, discounted using an applicable rate). As at 30 June 2018, the Group estimates that a lease asset of approximately $94,569 and a lease liability of approximately $80,745 would have been recognised had the new standard been early adopted by the Group. Subsequent to initial measurement, the Company will depreciate the right-of-use asset in accordance with the depreciation requirements in AASB 116 whilst the lease liability will be increased to reflect the interest on the liability and reduced by the fixed lease payments. AASB 16’s scope states that leases to explore for or use minerals, oil, natural gas and similar non- regenerative resources are excluded from the standard. The Group’s mineral exploration licences are therefore outside of the scope of the standard and will continue to be accounted for under AASB 6 Exploration for and Evaluation of Mineral Resources. (iii) AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share- based Payment Transactions (effective 1 January 2018) The amendments made to AASB 2 clarify the measurement basis for cash-settled share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. They also introduce an exception to the classification principles in AASB 2. Where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority, the whole award will be treated as if it was equity-settled provided it would have been equity-settled without the net settlement feature. The Group has various share-based payment arrangements. All arrangements are recognised and accounted for as equity-settled share-based payment transactions. The Group does not have any cash- settled shared-based payments nor does it have equity-settled awards that include net settlement features relating to tax obligations. The amendments to AASB 2 therefore are not expected to impact the Group. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 30 | Annual Report 2018 Chesser Resources Limited 31 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 3. a) Significant accounting policies Statement of compliance The financial statements comprise the consolidated financial statements of the Group consisting of Chesser Resources Limited and its subsidiaries. The Company is a for-profit entity for the purpose of preparing the financial statements. These financial statements are general purpose financial statements that have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with the other requirements of the law. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards ('IFRS'). The financial standards were authorized for issue by the Directors on 28 September 2018. b) Basis of preparation The consolidated general purpose financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB2 and measurements that have some similarities to fair value but are not fair value such as value in use in AASB 136. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurement are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that that the entity can access at the measurement date. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below. c) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Chesser Resources Limited ("Company" or "parent entity") as at 30 June 2017 and the results of all subsidiaries for the year then ended. Chesser Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. 32 | P a g e Chesser Resources Limited Annual Report 2018 | 31 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de- consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 3(g). lntercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively. d) Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operated ("the functional currency"). The consolidated financial statements are presented in Australian dollars, which is Chesser Resources Limited's functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs. All other foreign exchange gains and losses are presented in the income statement on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non- monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income. Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet Income and expenses for each statement of comprehensive income are translated at average exchange rates • 32 | Annual Report 2018 Chesser Resources Limited 33 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 (unless this is not a recognizable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transactions), and • All resulting exchange differences are recognized in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange difference is reclassed to profit or loss, as part of the gain or loss on sale where applicable. Financial risk management 4. The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payables. The Group does not currently have any projects in production and as such the main purpose of these financial instruments is to provide liquidity to finance the Group’s development and exploration activities. It is, and has been throughout the financial year, the Group’s policy that no trading in speculative financial instruments shall be undertaken. The main risks arising from the Group’s use of financial instruments are liquidity risk, counterparty or credit risk, interest rate risk and foreign currency risk. During the year the Group has had some transactional currency exposures, principally to the US dollar and the Euro. The Group has not entered into forward currency contracts to hedge these exposures due to the short time frame associated with the currency exposure and the relatively modest overall exposure at any one point in time. Primary responsibility for identification and control of financial risk rests with the board of directors. However, the day-to-day management of these risks is under the control of the Executive Director. The Board agrees the strategy for managing future cash flow requirements and projections. The Group holds the following financial instruments all of which are carried at amortised cost. Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables 2018 $ 2017 $ 2,385,360 17,565 2,402,925 400,752 400,752 3,312,011 21,623 3,333,634 137,487 137,487 Foreign exchange risk a) Market risk (i) The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The Group’s policy is to convert its local currency to the foreign currency at the time of the transaction. Foreign exchange risk arises from future commercial transactions and recognised financial liabilities denominated in a currency that is not the Group’s functional currency (which is the Australian dollar). The Group manages foreign exchange risk on an as-needs basis. The risk is measured using sensitivity analysis and cash-flow forecasting. The Group’s exposure to foreign currency risk, expressed in Australian dollars at the reporting date, was as follows: 34 | P a g e Chesser Resources Limited Annual Report 2018 | 33 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 30 June 2018 Cash and cash equivalents Trade and other receivables 2,230,729 17,565 Trade and other payables 81,581 Total assets 2,248,294 AUD Denominated Balances USD Denominated Balances CFA Denominated Balances TOTAL 30 June 2018 3,882 150,749 2,385,360 - 3,882 229,369 - 17,565 150,749 2,402,925 89,802 60,947 400,752 2,002,173 Net exposure 2,166,714 (225,487) AUD Denominated Balances USD Denominated Balances CFA Denominated Balances TOTAL 30 June 2017 30 June 2017 Cash and cash equivalents Trade and other receivables 3,308,271 21,623 Trade and other payables 122,487 Total assets 3,329,894 Net exposure 3,207,407 3,740 - 3,740 - 3,740 - - - 3,312,011 21,623 3,333,634 122,487 3,211,147 The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. A negative number in the table represents a decrease in the operating profit before tax and reduction in equity where the Australian dollar strengthens against the relevant currency. For a 10% strengthening of the Australian dollar against the relevant currency, there would be a comparable impact on the loss or equity, and the balances below would be positive. Profit / (loss) before tax and equity – 10% increase Profit / (loss) before tax and equity – 10% decrease 2018 $ 16,454 (16,454) 2017 $ 374 (374) Interest rate risk (ii) The Group’s exposure to interest rate risk arises predominantly from cash and cash equivalents bearing variable interest rates, as the Group intends to hold any fixed rate financial assets to maturity. At the end of the reporting period the Group maintained the following variable rate accounts: 30 June 2018 30 June 2017 Weighted average interest rate % 0.5% Balance $ 2,385,360 Weighted average interest rate % 0.5% Balance $ 3,312,011 Cash and cash equivalents At the end of the reporting period, if the interest rates had changed, as illustrated in the table below, with all other variables remaining constant, after-tax profit and equity would have been affected as follows: 34 | Annual Report 2018 Chesser Resources Limited 35 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 +1% (100bp) -1% (100bp) After-tax loss higher / (lower) 2018 $ 23,854 (23,854) 2017 $ 33,120 (33,120) Equity higher / (lower) 2018 $ 2017 $ 23,854 (23,854) 33,120 (33,120) Credit risk b) Credit risk primarily arises from cash and cash equivalents and term deposits deposited with banks and receivables. Cash and cash equivalents and term deposits are primarily placed with National Australia Bank Limited and AMP Bank Limited, which has an independently rated credit rating of A1+. The Company has no past due or impaired financial assets in the period covered by these financial statements. Due to their short-term nature, the carrying value of financial assets represents the maximum exposure to credit risk. Liquidity risk c) Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents in order to meet the Group’s forecast requirements. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in bank deposits. At reporting date, the Group did not have access to any undrawn borrowing facilities. Maturity of financial liabilities The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. 30 June 2018 Less than 3 months $ Total contractual cash flows $ Carrying amount $ Trade and other payables 400,752 400,752 400,752 30 June 2017 Less than 3 months $ Total contractual cash flows $ Carrying amount $ Trade and other payables 122,487 122,487 122,487 Fair value estimation d) Financial assets at fair value through profit or loss are carried at their fair value as determined by reference to quoted bid prices in an active, liquid market (Level 1). The carrying amount of other financial assets (net of any provision for impairment) and financial liabilities as disclosed above is assumed to approximate their fair values primarily due to their short maturities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. 5. Critical accounting estimates and judgements When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated Chesser Resources Limited Annual Report 2018 | 35 36 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 results. Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expense is provided below. Exploration and evaluation expenditure As at 30 June 2018 the Group had capitalised exploration and evaluation expenditure of $3,193,146 in relation to the Senegal Projects. The ultimate recoupment of capitalised exploration and development expenditure is dependent on the successful development and commercial exploitation, or alternatively sale, of the respective areas of interest. The Company’s continued development of its mineral property interests is dependent upon the determination of economically recoverable reserves, the ability of the Company to obtain the financing necessary to maintain operations, successfully complete its exploration and development programs and the attainment of future profitable production. The recognition of this expenditure as an asset requires management to make certain estimates and assumptions as to future events and circumstances. These estimates and assumptions may change as new information becomes available. If after having capitalised expenditure under the accounting policy a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be expensed in the statement of comprehensive income. Share based payments The Group measures the cost of equity settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Fair value is calculated using the Black Scholes valuation model, taking into account the terms and conditions upon which the options were granted. The assumptions used in these valuation models is set out in note 16. Acquisition of the Senegal Projects On 12 July 2017 Chesser completed the acquisition of 100% of the issued capital from each of Boya Gold Pty Ltd and Erin Mineral Resources Pty Ltd to acquire interests in five gold exploration projects in Senegal. As part consideration the Group issued settlement options which were recognized using the Black Scholes valuation model, taking into account the terms and conditions upon which the options were granted. The assumptions used in this valuation model is set out in note 16. The directors have determined that at the time of the acquisition, the Senegal Projects owned by Boya Gold Pty Ltd and Erin Mineral Resources Pty Ltd lacked the necessary inputs and processes required to generate outputs that have the ability to provide a return on investment to the owner. Consequently, the Senegal Projects did not meet the criteria of a business and were outside the scope of AASB3: Business Combinations. The acquisition of the shares in Boya Gold Pty Ltd and Erin Mineral Resources Pty Ltd have been determined by the directors to be assets acquired by an equity-settled share-based payment under AASB 2: Share Based Payments. As a fair value of neither the shares in Boya Gold Pty Ltd and Erin Mineral Resources Pty Ltd nor the Senegal Projects could be estimated reliably, the fair value recognised for the acquisition has been measured largely by reference to the fair value of the equity instruments issued by Chesser Resources Limited as the major part of the consideration provided for the acquisition. Deferred tax assets No members of the Group have generated taxable income in the financial year and as such the Group continues to carry forward tax losses that give rise to deferred tax assets. Given that the Group’s projects remain in early exploration stages, it is unlikely that the Group will generate taxable income in the foreseeable future in the absence of asset sales. Taking account of the above, the deferred tax assets have not been recognised in the financial statements as management does not believe that the members of the Group satisfy the criteria set out in paragraph 35 of AASB 112 that. 36 | Annual Report 2018 Chesser Resources Limited 37 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 6. Segment information The Group has identified its operating segments based on the internal reports that were reviewed and used by the Chief Executive Officer (chief operating decision maker) in assessing performance and determining the allocation of resources during the year. The Group is managed primarily on a geographic basis, that is, the location of the respective areas of interest. Operating segments are therefore determined on the same basis. Accounting policy The Chief Executive Officer assesses the performance of the operating segments based on a measure of gross expenditure that includes both expenditure that is capitalised in these financial statements and expenditure that is expensed in the income statement in these financial statements. The measurement of gross expenditure does not include the impairment of exploration expenditure or non-cash items such as depreciation expense and share based payments expense. Interest revenue is allocated to the Corporate segment. Other items of revenue are not allocated to segments. All operating segments are in the exploration and development phase and did not generate any revenue in the current or prior year. Assets, liabilities and cash flows are not allocated to segments in the internal reports that are prepared for the Chief Executive Officer. Activity by segment Kurnalpi Project The Kurnalpi Project is situated at Kurnalpi approximately 60 kilometres north east of Kalgoorlie. On 15 October 2016, the Company entered into an earn in joint venture agreement with Mithril Resources Limited to earn up to an 80% interest in the tenements comprising the project. No work was undertaken on the Mithril Project during the year as Chesser was focussed on the Senegal exploration projects. Effective 11 July 2018, formal notification was given to Mithril to withdraw from the Farm-In-Agreement. Expenditure incurred during the year related to tenement rentals. All associated costs were impaired at year-end. Senegal Projects The Group has acquired a number of new operating segment in July 2017. The Senegal Projects, which consist of five exploration projects, are located adjacent and to the west of the Senegal Mali Shear Zone in the Kédougou Inlier with a total area of 624kms2. The projects are: Diamba Sud, Diamba Nord, Woye, Youboubou and Garaboureya. Corporate Expenditure incurred that is not directly allocated to other segments is reported as corporate costs in the internal reports prepared for the chief operating decision maker. The following tables present revenue and profit information for the Group’s operating segments for the year ended 30 June 2018 and 2017, respectively. Chesser Resources Limited Annual Report 2018 | 37 38 | P a g e NOTES TO THE FINANCIAL STATEMENTS 3 0 8 3 , $ , ) 4 8 5 2 4 9 2 ( , , ) 1 8 7 8 3 9 2 ( , 3 0 8 3 , , ) 2 1 4 5 5 8 ( , ) 9 0 6 1 5 8 ( $ - $ - $ , ) 9 6 0 8 4 1 ( , ) 9 6 0 8 4 1 ( ) 5 0 1 3 3 ( , ) 5 0 1 3 3 ( , - , ) 6 0 2 5 2 2 ( , ) 6 0 2 5 2 2 ( $ l a t o T e t a r o p r o C u o b a r a G a y e r u o b u o b u o Y e y o W - , ) 5 7 0 7 4 5 ( , ) 5 7 0 7 4 5 ( $ a b m a D i d r o N - $ d u S a b m a D i , ) 6 2 1 6 2 1 1 ( , , ) 6 2 1 6 2 1 1 ( , - ) 1 9 5 7 ( , ) 1 9 5 7 ( , l e k c i N j t c e o r P $ i l p a n r u K e c n a m r o f r e p t n e m g e S ) i ( 8 1 0 2 e n u J 0 3 r a e Y e u n e v e r t n e m g e s l a t o T e r u t i d n e p x e t n e m g e S t l u s e r t n e m g e S x a t e r o f e b s s o l p u o r G o t t l u s e r t n e m g e s f o n o i t a i l i c n o c e R s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 8 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o F d e t i i m L s e c r u o s e R r e s s e h C , 1 7 1 7 8 0 2 , e r u t i d n e p x e d e s i l a t i p a C - ) 1 9 5 7 ( , ) 1 5 1 2 2 ( , ) 0 0 0 6 7 ( , , ) 2 5 3 7 5 9 ( l a t o T e t a r o p r o C u o b a r a G a y a r u o b u o b u o Y e y o W 2 6 6 3 . ) 8 1 8 8 5 6 ( , , ) 6 5 1 5 5 6 ( $ 0 2 2 8 3 , ) 0 4 0 7 7 ( , , ) 6 7 9 3 9 6 ( e g a P | 9 3 2 6 6 3 , ) 8 9 5 0 2 6 ( , ) 6 3 9 6 1 6 ( , $ $ $ $ a b m a D i d r o N $ d u S a b m a D i $ - ) 0 2 2 8 3 ( , ) 0 2 2 8 3 ( , l e k c i N j t c e o r P $ i l p a n r u K x a t e r o f e b s s o l t e N 7 1 0 2 e n u J 0 3 r a e Y e u n e v e r t n e m g e s l a t o T e r u t i d n e p x e t n e m g e S t l u s e r t n e m g e S x a t e r o f e b s s o l p u o r G o t t l u s e r t n e m g e s f o n o i t a i l i c n o c e R l d n a n o i t a r o p x e f o t n e m r i a p m I e r u t i d n e p x e d e s i l a t i p a C • • e r u t i d n e p x e n o i t a u a v e l x a t e r o f e b s s o l t e N l d n a n o i t a r o p x e f o t n e m r i a p m I e s n e p x e s t n e m y a p d e s a b e r a h S e m o c n i r e h t O e r u t i d n e p x e n o i t a u a v e l e s n e p x e n o i t a i c e r p e D • • • • • 38 | Annual Report 2018 Chesser Resources Limited NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 (ii) Segment assets The following table present assets information for the Group’s operating segments for the year ended 30 June 2018 and 2017, respectively. The following table shows assets by geographical segment. 30 June 2018 Segment assets 30 June 2017 Segment assets 7. Revenue and other income Interest income Senegal $ Australia $ Total $ 3,508,773 2,297,371 5,806,144 - 3,347,254 3,347,254 2018 $ 2017 $ 3,803 3,803 3,662 3,662 Accounting policy Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. 8. Expenses The group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance of the group. Operating lease rentals Superannuation contributions Business development costs Share based payment expense 36,152 3,850 32,302 76,000 - 3,700 72,822 - Business development costs includes costs for preliminary assessment of potential mineral resources, including an internal cost allocation for management’s fees. Refer Note 16 for details of share-based payment transactions. 40 | P a g e Chesser Resources Limited Annual Report 2018 | 39 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 9. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity and its related practices: 2018 $ 2017 $ Pitcher Partners Brisbane (i) Audit and assurance services Audit and review of financial reports Total auditors’ remuneration 10. Income tax (a) Income tax benefit Current and deferred tax (b) Deferred income tax/(revenue) Deferred income tax/(revenue) included in tax expense comprises: (Increase)/decrease in deferred tax assets Increase/(decrease) in deferred tax liabilities (c) Reconciliation of income tax expense to prima facie income tax Loss before income tax from continuing operations Tax at the Australian tax rate of 27.5% (2017: 30%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Effect of change in tax rates Different tax rates in other jurisdictions Non deductible expenses Deductible capital raising costs Deferred tax assets not recognised / (recognised) Income tax benefit (d) Deferred tax assets / liabilities comprise Accruals Provisions S 40-880 capital raising expenses and legal fees Prepayments Tax losses available for offset against future taxable income Net deferred tax assets Deferred tax assets not recognised 40 | Annual Report 2018 Chesser Resources Limited 40,000 40,000 22,000 22,000 - - 113,995 (113,995) - (957,352) (263,271) 258,806 2,490 130,616 (43,319) 85,322 (85,322) - 7,288 13,746 - (12,428) 2,983,075 2,991,681 (2,991,681) - - - (219,307) 219,307 - (693,976) (208,192) - - - (42,533) (250,725) 250,725 - 7,500 - 36,944 (4,086) 3,065,318 3,105,676 (3,105,676) - 41 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 (e) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: 2018 $ 2017 $ Temporary differences and tax losses at 27.5% (2017: 30%) 2,991,681 3,105,676 Tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits from the deferred tax assets. The benefit of the tax losses will only be available if the Company, or a tax consolidated group of which it is a member, derives future assessable income of a nature and of an amount sufficient to enable the benefit from the tax losses to be realised, has complied and continues to comply with conditions for deductibility imposed by current tax legislation and there are no adverse changes to such legislation. The conditions for deductibility of the carried forward tax losses (continuity of ownership test and continuity of business test) will need to be considered in light of any changes that may occur in both the ownership of the Company and the nature of the Company’s business activities. Accounting policy The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate 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 substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income, Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amounts and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 42 | P a g e Chesser Resources Limited Annual Report 2018 | 41 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 11. Trade and other receivables Current Other receivables 2018 $ 2017 $ 17,565 21,623 Other receivables represent the Company’s GST receivable. Accounting Policy Trade and other receivables are recognised initially at fair value and subsequently at the amount considered recoverable. Trade and other receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. 12. Property, plant and equipment Carrying amount at 1 July 2017 Additions Disposals Depreciation Carrying amount at 30 June 2017 Additions Disposals Depreciation Carrying amount at 30 June 2018 Field Equipment Motor Vehicles Office Equipment TOTAL - - - - 62,638 - (5,791) 56,847 121,330 - (16,089) 105,241 19,312 - (19,312) - 3,062 - (271) 2,791 19,312 - (19,312) - 187,030 - (22,151) 164,879 Accounting Policy Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation of assets is calculated on the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. The depreciation rates used for each class of depreciable asset are: Classification Field equipment Motor vehicles Computer equipment Useful lives 3 – 5 years 5 years 3 years Depreciation Basis Straight Line Straight Line Straight Line The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. 42 | Annual Report 2018 Chesser Resources Limited 43 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 3(h)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. 13. Exploration and evaluation expenditure 2018 $ 2017 $ At cost 3,136,356 38,820 Movements in exploration and evaluation expenditure during the year is summarized as follows: Carrying amount at beginning of period Acquisition cost (i) Exploration expenditure during the period Impairment of exploration and evaluation expenditure (ii) Carrying amount at end of period i. Acquisition of Senegal Projects - 1,113,565 2,030,380 (7,591) 3,136,356 - - 38,220 (77,040) - In the year the Company acquired 100% of the issued capital of each of Boya Gold (“Boya”) and Erin Mineral Resources (“Erin”), to acquire interests in five gold exploration projects in Senegal. • As consideration for the acquisition, Chesser issued the following CHZ securities to the vendors and third- party facilitators or their nominees: - - - 27,071,419 fully paid ordinary shares in Chesser. 26,767,848 shares were issued on 12 July 2017 and 303,571 shares were issued on 11 September 2017; The following unlisted options: i. 1,000,000 unlisted options with an exercise price of $0.06 and an expiry date of 31 December 2019 ii. 1,000,000 unlisted options with an exercise price of $0.10 and an expiry date of 31 December 2020. The following performance shares: iii. 23,809,524 Class A performance shares which will convert into fully paid ordinary shares upon certification by an independent Competent Person of a JORC Mineral Resource of 0.5Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects; and iv. 23,809,524 Class B performance shares which will convert into fully paid ordinary shares upon certification by an independent Competent Person of a total JORC Mineral Resource of 1.0Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects. The performance shares have been accounted for as contingent consideration (refer Note 22). The total acquisition cost has been measured at the fair value of the equity instruments granted as compensation for the acquisition, in accordance with AASB 2 Share-based payments (refer note 8 Share-based payments). v. Impairment of exploration expenditure 44 | P a g e Chesser Resources Limited Annual Report 2018 | 43 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 During the year ended 30 June 2018 the Group impaired $7,591 (June 2017: $77,040) of expenditure related to the Kurnalpi gold project in Western Australia. On 14 June 2018 the Board announced that the Company had provided formal notification to Mithril of Chesser’s intention to withdraw from the Farm-In-Agreement. The effective date for the termination is 11 July 2018. The ultimate recoupment of capitalised exploration and development expenditure is dependent on the successful development and commercial exploitation, or alternatively sale, of the respective areas of interest. The Company’s continued development of its mineral property interests is dependent upon the determination of economically recoverable reserves, the ability of the Company to obtain the financing necessary to maintain operations, successfully complete its exploration and development programs and the attainment of future profitable production. Accounting Policy Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the consolidated entity has obtained the legal rights to explore an area are recognised in profit or loss. Exploration and evaluation assets are only recognised if the rights to the area of interest are current and either: • • the expenditures are expected to be recouped through successful development and exploitation of the area of interest or by its sale; or 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 assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest. Once the technical feasibility and commercial viability of an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation expenditure to property and development assets within property, plant and equipment. Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration and evaluation phases that give rise to the need for restoration. Accordingly, these costs will be recognised gradually over the life of the project as the phases occur. 44 | Annual Report 2018 Chesser Resources Limited 45 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 14. Trade and other payables Trade payables Accruals Total trade and other payables 2018 $ 2017 $ 143,574 313,968 457,542 122,487 15,000 137,487 Trade payables and accruals are unsecured, non-interest bearing and due 30 days from the date of recognition. Accounting Policy Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measure at amortised cost using the effective interest method. 15. Issued capital 2018 $ 2017 $ Ordinary shares – fully paid 8,840,512 5,838,418 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (a) Movements in ordinary shares Opening Balance 30 June Share issue on 12 July 2017 (a) Share issue on 12 September 2017 (b) Shares issued on 12 July 2017 as partial consideration for acquisition of mineral tenements (c) Shares issued on 11 September 2017 as partial consideration for acquisition of mineral tenements (c) Share issue costs Closing Balance 30 June The following movements have occurred against Share Capital during the year: 30 June 2018 No. 119,333,598 39,778,164 12,500,000 $ 5,838,418 1,591,126 500,000 26,767,848 1,070,714 303,571 - 198,683,181 12,142 (171,888) 8,840,512 a) On 12 July 2017, Chesser issued 39,778,164 fully paid ordinary shares at $0.04 per share pursuant to a 1 for 3 entitlement issue; b) On 12 September 2017 Chesser issued 12,500,000 fully paid ordinary shares at $0.04 per share. The issue c) was undertaken as a private placement in accordance with shareholder approval; In accordance with the acquisition of Boya Gold and Erin, on 12 July 2017 Chesser issued 27,071,419 fully paid ordinary shares to the vendors. 46 | P a g e Chesser Resources Limited Annual Report 2018 | 45 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 (b) Capital management When managing capital, management’s objective is to ensure the entity continues as a going concern and to maintain a structure that ensures the lowest cost of capital available and to ensure adequate capital is available to meet the Group’s forecast expenditure commitments. In order to maintain or adjust the capital structure, the Group may seek to issue new shares. Total capital is calculated as ‘equity’ as shown in the statement of financial position. (c) Share options At 30 June 2018, the following options for ordinary shares in the Company were on issue: Options with a $0.06 exercise price expiring 31 December 2019 30 June 2018 Options with a $0.10 exercise price expiring 31 December 2020 30 June 2018 Number On issue at 1 July Options issued to Directors and key management personnel Options issues as partial consideration for acquisition of Senegal Projects On issue at 30 June - 3,300,000 1,000,000 4,300,000 - 3,300,000 - 6,600,000 1,000,000 4,300,000 2,000,000 8,600,000 The options do not provide the holder with any voting rights, any entitlement to dividends or any entitlement to the proceeds on liquidation in the event of a winding up. Refer note 14 for further details regarding the accounting treatment of the options issued during the year. 16. Reserves Share based payments reserve Foreign currency translation reserve Movements: Foreign currency translation reserve Balance at 1 July 2017 Currency translation difference for the year Balance at 30 June 2018 Share based payments reserve Balance at 1 July 2017 Options issued Balance at 30 June 2018 46 | Annual Report 2018 Chesser Resources Limited 2018 $ 2017 $ 2,008,271 (402) 2,007,869 (495) 93 (402) 1,914,271 94,000 2,008,271 1,914,271 (495) 1,913,776 (412) (83) (495) 1,914,271 - 1,914,271 47 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 Nature and purpose of reserves Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign controlled subsidiaries. Share based payments reserve The Share based payment reserve is used to record the fair value of share-based payments made by the Company. Accounting Policy Share-based compensation benefits are provided to directors and key management personnel. The fair value at grant date is determined using an option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions but excludes the impact of any service and non-market performance vesting conditions and the impact of any non-vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. The following share-based payment transactions were recognised during the year: Options issued to directors (i) Options issued to third-party vendors (ii) Options issued to key management personnel (iii) Total share-based payments for the year Share based payments capitalised to exploration and evaluation asset (refer note 12) Share-based payments expense 30 June 2018 $ 41,000 18,000 35,000 94,000 (18,000) 76,000 (i) On 12 July 2017 the Group issued to Directors the following unlisted options over ordinary shares: • 2,300,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 • 2,300,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 The fair value of the options at grant date has been estimated using the Black Scholes valuation model, taking into account the terms and conditions upon which the options were granted. The following assumptions were used: 48 | P a g e Chesser Resources Limited Annual Report 2018 | 47 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 Exercise price Expected volatility Risk-free interest rate Expected life of share options (days) Grant date share price Tranche 1 Expiring 31/12/2019 $0.06 61.44% 1.782% 902 $0.04 Tranche 2 Expiring 31/12/2020 $0.10 61.44% 1.961% 1,268 $0.04 Fair value per option $0.010 $0.008 (ii) As part consideration for the acquisition of Boya Gold and Erin, the Company issued the following settlement options on 12 July 2017: • 1,000,000 unlisted options with an exercise price of $0.06 and an expiry date of 31 December 2019 • 1,000,000 unlisted options with an exercise price of $0.10 and an expiry date of 31 December 2020. The options were issued on the same date and with the same terms as the options issued to directors (see above). The fair value of the options granted was therefore estimated using the same assumptions and fair value per option is $0.010 and $0.008. (iii) On 12 September 2017 the Company issued to key management personnel the following unlisted options over ordinary shares: • 1,000,000 options with an exercise price of $0.06 and an expiry date of 31 December 2019 • 1,000,000 options with an exercise price of $0.10 and an expiry date of 31 December 2020 The fair value of the options at grant date has been estimated using the Black Scholes valuation model, taking into account the terms and conditions upon which the options were granted. The following assumptions were used: Exercise price Expected volatility Risk-free interest rate Expected life of share options (days) Grant date share price Tranche 1 Expiring 31/12/2019 $0.06 61.44% 1.84% 840 $0.045 Tranche 2 Expiring 31/12/2020 $0.10 61.44% 1.98% 1,206 $0.045 Fair value per option $0.016 $0.019 48 | Annual Report 2018 Chesser Resources Limited 49 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 17. Loss per share The following reflects the operating loss after tax and number of shares used in the calculation of the basic and diluted earnings/(loss) per share. Loss per share (cents per share) Diluted loss per share (cents per share) Loss attributable to Owners of Chesser Resources Limited Weighted average number of ordinary shares used in the calculation of basic loss per share Weighted average number of ordinary shares used in the calculation of diluted loss per share 2018 $ (0.49) (0.49) 2017 $ (0.58) (0.58) (957,352) (693,976) Shares Shares 193,900,406 119,333,598 193,900,406 119,333,598 Options and other potential equity securities on issue at the end of the period have not been included in the determination of diluted earnings per share as the Group has incurred a loss for the period and they are therefore not dilutive in nature. Accounting policy Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), dividend by the weighted average number of ordinary shares, adjusted for any bonus element. The diluted earnings per share is calculated as net profit or loss attributable to members of the parent dividend by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. The weighted average number of shares was based on the consolidated weighted average number of shares in the reporting period. The net profit or loss attributable to members of the parent is adjusted for: • • Costs of servicing equity (other than dividends) and preference share dividends; The after-tax effect if dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • Other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares. 18. Parent entity disclosures The financial information for the parent entity Chesser Resources Limited has been prepared on the same basis as the consolidated financial statements except as set out below. Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of the Company. Dividends received from associates are recognized in the parent entity's profit or loss when its right to receive the dividend is established. Financial guarantees Where the Company has provided financial guarantees in relation to loans and payables of subsidiaries for no Chesser Resources Limited Annual Report 2018 | 49 50 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment. As at and throughout the financial year ending 30 June 2018 and 30 June 2017 the parent entity of the Group was Chesser Resources Limited. Summary financial information a) The individual financial statements for the parent entity show the following aggregations. Results Profit/(loss) for the year Total comprehensive income for the year Financial Position Current assets Non-current assets Current liabilities Net Assets Contributed equity Share-based payments reserve Accumulated losses 2017 2018 $ $ Chesser Resources Limited (874,009) (874,009) 2,297,472 3,281,904 5,579,377 81,581 81,581 (655,566) (655,566) 3,390,586 - 3,390,586 128,494 128,494 5,497,797 3,262,092 8,840,512 2,008,271 (5,350,987) 5,497,797 5,838,418 1,914,271 (4,476,977) 3,262,092 Guarantees entered into by the parent entity b) Chesser Resources Limited has not entered into any guarantees in the current or previous financial year, in relation to the debt of its subsidiaries Contingent liabilities of the parent entity c) The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017. Contractual commitments for capital expenditure d) The parent entity did not have any contractual commitments for capital expenditure as at 30 June 2018 (2017: $nil). 50 | Annual Report 2018 Chesser Resources Limited 51 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 19. Subsidiaries The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance with the accounting policy described in note 3(c). Name of entity Country of incorporation Class of shares Equity holding Chesser Resources Holding Cooperatief U.A Dharana B.V. Boya Gold Pty Ltd Boya Minerals Pty Ltd Boya Senegal SAU Erin Mineral Resources Pty Ltd Erin Minerals Pty Ltd Erin Senegal SAU Chesser Senegal SAU Netherlands Membership Netherlands Australia Australia Senegal Australia Australia Senegal Senegal Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 2018 % 100 100 100 100 100 100 100 100 100 2017 % 100 100 - - - - - - - Related parties 20. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. During the year ended 30 June 2018, O'Loughlins Lawyers, a legal firm in which the Company's Chairman Mr Simon O'Loughlin is a partner, provided legal services to the Company. As at 30 June 2018 the total amount owing to O'Loughlins Lawyers was $nil (2017: $22,703). The total fees paid to O'Loughlins Lawyers during the year was $34,668 (2017: $31,692). There were no other transactions between the Group and other related parties in the current or prior financial year. 21. Cash flow information a) Cash and cash equivalents Cash at bank and on hand 2018 $ 2017 $ 2,385,360 3,312,011 Chesser Resources Limited Annual Report 2018 | 51 52 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 b) Reconciliation of cashflows from operating activities Profit/(loss) before tax Depreciation and amortisation Impairment of capitalised exploration expenditure Foreign exchange (losses) / gains Share based payments expense Change in operating assets and liabilities (net of disposals): (Increase)/decrease in trade or other receivables Increase/(decrease) in trade and other payables 2018 $ 2017 $ (957,352) (693,976) 22,151 7,591 12,696 76,000 (27,518) (65,435) - 77,040 (379) - (9,317) 25,598 Net cash outflow from operating activities (931,867) (601,034) c) Non-cash investing and financing activities Acquisition of Senegal projects by means of share options (note 16(ii)) Acquisition of Senegal projects by means of share issue (note 15(c)) 18,000 1,082,856 22. Commitments and contingent liabilities (a) Commitments Operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years 2017 $ 2018 $ 23,962 71,222 95,184 - - - - - Tenement expenditure commitments Commitments for minimum exploration expenditure required to retain tenue on the Group’s exploration tenements are: Within one year Later than five years 52 | Annual Report 2018 Chesser Resources Limited 2018 $ 552,594 4,090,188 4,642,782 2017 $ 22,000 - 22,000 53 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2018 (b) Contingent liabilities Pursuant to the terms of the agreement for the acquisition of the Senegal exploration tenements, the Group issued the following performance shares: • 23,809,524 Class A performance shares, expiring 12 July 2020 • 23,809,524 Class B performance shares, expiring 12 July 2021 The performance shares will convert into fully paid ordinary shares on the following conditions: • Class A - Upon certification by an independent Competent Person of a JORC Mineral Resource of 0.5Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects; and • Class B - Upon certification by an independent Competent Person of a total JORC Mineral Resource of 1.0Moz Au with an average grade of at least 2.0g/t gold in relation to the Projects 23. Events occurring after the reporting period No matter or circumstance has arisen since the end of the reporting year that has significantly affected, or may significantly affect, the Group's operations, the results of those operations or the Group's state of affairs in subsequent periods. Chesser Resources Limited Annual Report 2018 | 53 54 | P a g e NOTES TO THE FINANCIAL STATEMENTS Directors’ Declaration CHESSER RESOURCES LTD DIRECTORS’ DECLARATION In the directors’ opinion: (a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance, as represented by the results of its operations and its cash flows, for the year ended on that date. (b) The financial report also complies with International Reporting Standards as disclosed in note 3(a); and (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of directors. Stephen Kelly Director Brisbane, 28 September 2018 54 | Annual Report 2018 Chesser Resources Limited 55 | P a g e DIRECTORS’ DECLARATION Shareholder Information The shareholder information set out below was applicable as at 19 October 2018. SHAREHOLDER INFORMATION A. Distribution of securities Analysis of the number of equity securities by size of holding: Holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Number of holders Unlisted $0.06 options expiring 31 December 2019 - 1 10 11 9 Unlisted $0.10 options expiring 31 December 2020 - 1 10 11 9 Listed Shares 84 136 101 245 205 771 31 31 There were 266 holders of less than a marketable parcel of listed shares. B. Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of equity securities are listed below: Name CPO Superannuation Fund Pty Ltd GP Securities Pty Ltd Calama Holdings Pty Ltd Darroch Family Pty Ltd Souttar Superannuation Pty Ltd AWJ Family Pty Ltd Mase Global Investments Limited Octifil Pty Ltd Hoeksteen Investments Limited Mr Nicholas Dermott Mc Donald Gulridje Pty Ltd Chieftain Securities Pty Ltd Mr Angus William Johnson + Mrs Lindy Johnson Greenslade Holdings Pty Ltd Corporate Property Services Pty Ltd Mr Nicholas Dermott Mc Donald Jetosea Pty Ltd Mrs Susan Maree Whiting Jimzbal Pty Ltd Australian Executor Trustees Limited Units 8,634,452 6,265,523 6,166,667 5,000,000 4,981,177 4,796,940 4,510,819 4,504,451 4,279,803 4,177,452 3,872,712 3,666,666 3,636,667 3,561,692 3,467,954 3,000,000 2,697,168 2,625,000 2,500,001 2 500,000 % of Units 4.35 3.15 3.10 2.52 2.51 2.41 2.27 2.27 2.15 2.10 1.95 1.85 1.83 1.79 1.75 1.51 1.36 1.32 1.26 1.26 84,845,144 42.70 Chesser Resources Limited Annual Report 2018 | 55 56 | P a g e SHAREHOLDER INFORMATION Corporate Directory Unquoted equity securities CORPORATE DIRECTORY Security Unlisted options with an exercise price of $0.06 expiring 31 December 2019 Unlisted options with an exercise price of $0.10 expiring 31 December 2020 Unlisted Class A Performance Shares Unlisted Class B Performance Shares Number on issue Number of holders 4,300,000 4,300,000 23,809,524 23,809,524 31 31 25 25 Unlisted options represent options to acquire ordinary shares. Each option entitles the holder to acquire one ordinary share. The names of the holders of more than 20% the unlisted options are: Unlisted $0.06 options expiring 31 December 2019 Unlisted $0.10 options expiring 31 December 2020 Option holder Options % of total options on issue Ismacate Pty Ltd 1,000,000 1,000,000 23.28% 23.28% Options 1,000,000 1,000,000 % of total options on issue 23.28% 23.28% Unlisted performance shares convert to the equivalent number of ordinary shares on the achievement specified milestones. The names of the holders of more than 20% the unlisted performance shares are: Class A Performance Shares Class B Performance Shares Number held 5,714,286 5,714,286 % of total Class A Performance Shares on issue 24.00% 24.00% Number held 5,714,286 5,714,286 % of total Class A Performance Shares on issue 24.00% 24.00% Holder MGC Pharmaceuticals Ltd C. Substantial shareholders The Company has not received any current notices from Substantial shareholders in the Company. D. Listed shares subject to voluntary escrow There are no restricted securities as at 22 October 2018. E. Voting rights The voting rights attaching to each class of equity securities are set out below: (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (b) Options and Performance Shares 56 | Annual Report 2018 Chesser Resources Limited No voting rights. 57 | P a g e CORPORATE DIRECTORY CORPORATE DIRECTORY Non-Executive Chairman Non-Executive Director Executive Director Board of Directors Mr Simon O’Loughlin Mr Simon Taylor Mr Stephen Kelly Company Secretary Mr Stephen Kelly Registered Office and Principal Place of Business Suite3, Level 7 100 Edward Street Brisbane QLD 4000 Postal address PO Box 5807 Brisbane QLD 4000 Website: www.chesserresources.com.au Share Registry Computershare Investor Services Pty Ltd Level 1 200 Mary Street Brisbane QLD 4000 Phone number: 1 300 552 270 Stock Exchange Australian Securities Exchange 20 Bridge Street Sydney, NSW 2000 ASX Code CHZ Auditors Pitcher Partners Chesser Resources Limited Annual Report 2018 | 57 58 | P a g e CORPORATE DIRECTORY Suite3, Level 7 100 Edward Street Brisbane QLD 4000 chesserresources.com.au
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