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2023 ReportANNUAL REPORT 2019 ABN 14 118 619 042 Contents Chairman’s Letter Directors’ 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 25 26 30 31 32 33 34 35 60 61 64 Competent Person Statement The information in this presentation that relates to Exploration Results is based on information compiled by geologists employed by Boya SAU (a wholly owned subsidiary of Chesser Resources) and reviewed by Mr Michael Brown, who is a member of the Australian Institute of Geoscientists (MAIG). Mr Brown is the Managing Director of Chesser Resources Limited. Mr Brown is considered to have sufficient experience deemed relevant to the style of mineralisation and type of deposit under consideration, and to the activity that he is undertaking to qualify as a Competent person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (the 2012 JORC Code). Mr Brown consents to the inclusion in this report of the matters based on this information in the form and context in which it appears. Mr Brown directly holds 1,125,000 fully paid ordinary shares in the Company and has a direct ownership in 3,000,000 unlisted options to acquire ordinary shares in the Company. References to prior ASX Announcements This report contains information extracted from previous ASX market announcements reported in accordance with the JORC Code (2012) and available for viewing at www.chesserresources.com.au. Chesser Resources confirms that in respect of these announcements it is not aware of any new information or data that materially affects the information included in any original ASX market announcement. The announcements are as follows: Diamba Sud Project: Announcements dated: 3rd April 2017, 22nd February 2018, 28th May 2018, 27th August 2018, 25th March 2019, 10th April 2019, 6th May 2019, 14th May 2019, 26th August 2019 and 3rd September 2019. Chairman’s Letter CHAIRMAN’S LETTER Chairman’s Letter to Shareholders Dear Fellow Shareholders, It gives me great pleasure to present Chesser Resources Limited’s (the “Company” or “Chesser”) 2019 Annual Report. Drilling completed in the year to June 2019 led to your Company announcing a high grade gold discovery at Area A within the Northern Arc Target at our Diamba Sud Project. This project lies to the immediate west of the important Senegal-Mali-Shear- Zone that is associated with the prolific Birimian greenstone belt hosting over 45 million ounces of gold. Whilst it is early days, we are in a very exciting stage as we focus on defining and expanding the discovery. Your Company conducted a highly successful exploration program during the year. This commenced with positive results from deeper auger drilling that confirmed and delineated a large gold geochemical anomaly on the Diamba Sud project. In January we commenced a Phase 1 drilling program on very wide spaced lines on the Northern Arc Target and three other anomalous zones. Results from this Phase 1 program were extremely encouraging, with widespread high-grade gold mineralization in fresh rock encountered. A second phase of exploration drilling followed, starting in early June and finishing in early July. Post year end your Company received the assays from this Phase 2 program, with spectacular intersections encountered, confirming the discovery, as well as a potentially significant mineralised fault at Area D. While neighbouring properties hint at the potential, there is still a lot of work to define and understand the geology of the mineralization your Company has discovered to date and explore the rest of the property. Further exploration is required to properly appreciate the scale, structure, grade and potential economics of gold mineralization at Diamba Sud. Clearly, a Phase 3 program is required. In that regard, your Company has an in-country team with deep geological expertise within the Kedougou-Kenieba inlier that is our focus. We are indeed fortunate to have such expertise helping with the planning and supervision of exploration, as well as the analysis of both existing and future exploration results. Your Board was confident in the Senegal tenement package acquired in July 2017. This confidence was underpinned by the view that the Kedougou-Kenieba inlier is a uniquely prospective region for gold exploration, hosting more than 45 million ounces in operating mines, and the discovery made at Diamba Sud has now vindicated this view. The exploration success achieved this year has been substantial and did not happen by accident. I would like to take this opportunity to thank my fellow Directors, your Company’s Managing Director, Mike Brown, and his technical and in-country personnel for their tireless and professional contributions during the past year. I look forward to continued success as we further prove up the potential of Diamba Sud. Yours sincerely, Simon O’Loughlin Chairman Chesser Resources Limited Annual Report 2019 | 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 Michael Brown, Managing Director (appointed 5 November 2018) • 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 2019 Chesser Resources Limited DIRECTORS’ REPORT Mr Michael Brown, BSc (Geology), BA, MBA Mr Brown has over 25 years’ experience in exploration, mining, energy, finance and capital markets. He has held senior executive roles with Kinross Gold and Pacific Hydro and has local and international experience as an exploration and mine geologist. Mr Brown was most recently a member of the executive team at ASX listed Austral Gold (ASX: AGD), a junior producer with mines in Chile and Argentina. Prior to that, he was CEO of Argentex Mining, a TSX Listed precious metals explorer acquired by AGD. Mr Brown has a MBA from Melbourne Business School, and a double BSc (Honours-Geology), BA from The University of Melbourne. He is a member of Australian Institute of GeoScientists and is fluent in Spanish. He has considerable experience in negotiating with local authorities, government agencies and communities and worked in West Africa in his time with Kinross Gold. Former directorships in last 3 years Nil 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: Number of Ordinary Shares # Number of Options over Ordinary Shares # Mr Simon O’Loughlin Mr Simon Taylor Mr Michael Brown Mr Stephen Kelly 2,833,334 3,500,001 1,125,00 895,000 1,950,000 2,600,000 3,000,000 1,950,000 # 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) Number of meetings eligible to attend Number of meetings attended Mr Simon O’Loughlin Mr Simon Taylor Mr Michael Brown Mr Stephen Kelly 7 7 5 7 7 7 5 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 2019 | 3 Principal Activities The principal activities undertaken by the Company during the year are summarised as follows: Permit Renewals The Company received official notification of the granting of extension of the Diamba Sud and Diamba Nord exploration permits during the year. These permits, 53.3km2 and 241.9km2 respectively, are valid for three years and can be extended for an additional three-year period. A 25% reduction of the original permit areas was required. This provides certainty over the Company’s flagship project, Diamba Sud. During the year the Youboubou tenement was dropped based on low exploration potential, and the Woye and Garaboureya joint venture agreements were not renewed based on the lack of encouraging results from auger drilling on these, and the expiry of the underlying tenements. Exploration Activities The Company’s exploration activities during the year were focussed on the Senegal projects, and the Company’s flagship project Diamba Sud in particular. DIAMBA SUD Diamba Sud comprises two rectangular blocks joined by a corridor to create a contiguous tenement (Figure 1). The northern segment of Diamba Sud (termed DS-1) has an open pit gold mine (Kharakane) operated by Afrigold along its western margin and has had previous programs of soil geochemistry, rock chip sampling and drilling. 200000 M T Z Sabodala 5.4Moz DIALE-DALÉM A SERIES Barrick Massawa 3.0Moz DIAMBA SUD 250000 S E N E G A L M A L I S H E A R Z O N E 50 Kilometres Barrick Loulo 12.5Moz Algom Resources Tabakoto 3.8Moz Barrick Gounkoto 5.5Moz 0 0 0 0 0 5 1 0 0 0 0 0 4 1 IAMGOLD Boto Project 2.6Moz Faleme Group B2 Gold Fekola Project 7.6Moz SENEGAL PROJECT LOCATIONS Koft Series Gold Mine Cover Sequences Advanced Project Chesser Tenements SMSZ Country Border Neoproterozoic Taudeni Basin Calc-alkaline lavas volcanic rocks Mauritanides (Hercynian mobile belt) Volcaniclastic sediments & Carbonate rocks Birimian Lithologies Kofi Series Metasedimentary rocks Peraluminous Granite Metaluminous calc-alkaline rocks Theleiitic basalts Kakadian Batholith Figure 1: Schematic regional geology of eastern Senegal, showing the Diamba Sud Project and its proximity to both the SMSZ, and the major gold operations and projects on or adjacent to splays off the SMSZ. 4 | Annual Report 2019 Chesser Resources Limited DIRECTORS’ REPORT Early in the year, excellent assay results were received from a 72-hole saprolite auger drilling program. 59 samples returned assays greater than 1g/t gold, with the highest result being 1m at 21.1 g/t gold. Significant intercepts included: 16m at 2.57 g/t gold (from 3m in hole DSA2861T) including 8m at 4.83 g/t gold 9m at 2.87 g/t gold (from 8m in hole DSA2798W) including 2m at 4.93 g/t gold 10m at 2.75 g/t gold (from 11m in hole DSA2798T) including 3m at 4.03 g/t gold 9m at 2.31g/t gold (from 9m in hole DSA2796S) including 5m at 3.95 g/t gold 6m at 2.11 g/t gold (from 12m in hole DSA2798N) including 3m at 3.74 g/t gold These results confirmed the continuity and extended the depth of the previously identified significant anomalous auger gold trend with many of the intersections ending in mineralisation. The deepest hole was 28m with an average hole depth of 14m. The auger exploration program was highly successful, identifying a significant gold anomalous trend extending over 5km in length and up to 2km in width at the Diamba Sud prospect. Figure 2: Diamba Sud Project, showing Area A discovery within the large gold geochemical anomaly that comprises the Northern Arc area, the Area D high priority exploration target, location of all drilling to date and the numerous auger anomalies that remain untested. Chesser Resources Limited Annual Report 2019 | 5 DIRECTORS’ REPORT The success of the auger exploration program led to an initial RC drilling campaign (Phase 1). The Phase 1 reverse circulation (RC) drilling program was focussed on locating the source of the high grade saprolite- hosted gold anomalies in the northern part of a broad ring structure (Figure 2), and understanding the style, nature and potential host of the mineralisation. The northern block of Diamba Sud (DS1) hosts a broad 4.5km by 4km ring-like geochemical anomaly comprised of a number of apparently distinct trends and responses. This anomaly is thought to be related to the contact of an intrusive body, visible in a Government sponsored aeromagnetic survey. A total of 70 RC holes were drilled for 4,671m (avg depth ~67m). Phase 1 drilling started in late January 2019 with drilling completed in late March 2019. The program encountered widespread gold mineralisation in both oxide and bedrock, with encouraging fresh rock intercepts, and was therefore followed by a Phase 2 drilling program. The Phase 1 program successfully delineated three large gold targets for follow-up drill testing: Northern Arc, Western Flank and Southern Zone. Two of these targets were further tested during Phase 2 drilling (26 RC holes for 863m), started during the reporting year and finished subsequent to year end, with a discovery confirmed at the Northern Arc target post year end. Northern Arc Target A discovery was announced at Northern Arc at Area A following high-grade intersections in drilling in Phase 1 and discovery of continuous high-grade mineralised zones in Phase 2. A second significant target area is Area D, where drilling has indicated the presence of a potentially significant mineralised fault. Area A Area A (Line A) was initially tested with 8 45-75m RC holes in Phase 1 drilling, drilling to the northwest and southeast. Best intersections included: 12m at 3.65g/t gold from 42m, including 8m at 4.47 g/t gold from 46m with the hole ending in mineralisation, 3m at 6.19g/t gold from 80m, including 1m at 16.1g/t gold from 81m, 11m at 3.54g/t gold from 38m and 2m at 2.58g/t gold from 58m with the hole ending in mineralisation, 5m at 3.18g/t gold from 70m, 2m at 5.52g/t gold from 51m, The follow-up Phase 2 drill program testing tested the high priority Northern Arc and Western Flank targets commenced in early June and was completed post year end (mid-July), with 26 RC holes drilled (for 2,873m). Assay results received post year end confirmed a discovery at Diamba Sud. Based on the alignment of intersections Phase 2 drilling was undertaken on a western azimuth for potential northerly trending structures. A total of 6 RC holes were drilled, ranging from 81 to 129m depth. 6 | Annual Report 2019 Chesser Resources Limited DIRECTORS’ REPORT Drilling results received in August confirmed a high-grade gold discovery at Area A within the Northern Arc Target. Multiple zones of significant gold mineralisation were intersected, including: 21m at 6.62g/t gold from 53m, including 1m at 30.60g/t gold from 69m and 4m at 3.44g/t gold from 76m in hole DSR093 14m at 9.53g/t gold from 75m, including 2m at 21.85g/t gold from 78m and 2m at 13.15g/t gold from 83m in hole DSR092 6m at 7.27g/t gold from 60m; and - 11m at 2.15g/t gold from 70m; and - 6m at 3.17g/t gold from 107m in hole DSR088 This discovery appears to be consistent with pressure-shadow style of mineralisation associated with the northern contact of an intrusive granodioritic body. This body is indicated in the regional geological map and identifiable in the regional aeromagnetic survey. The large ring-like gold geochemical anomaly at Diamba Sud has been interpreted to be associated with this contact area and drilling at Area A appears to support this theory. Barrick’s Massawa project, 50km to the west of Diamba Sud is an example of this type of deposit. A technical report released in July 2019 indicates a measured and indicated resource of 3 million ounces at 4g/t gold1. Granny Smith mine, West Australia, is another Paleoproterozoic analogue to this type of deposit. Its current reported resource (MII) is approximately 7.8 million ounces at 5.27g/t gold2. Figure 3: Area A discovery drilling and selected significant intercepts. 1 Technical Report on the Feasibility Study of the Massawa Gold Project, Senegal, Report for 43-101, July 23, 2019 2 Mineral Resources and Mineral Reserves Supplement, 2018. Gold Fields Ltd, p 71 Chesser Resources Limited Annual Report 2019 | 7 DIRECTORS’ REPORT232233,400233,50233,300mE1,429,500 mN233,233,21,429,700 mN33,200mEDIAMBA SUD PROJECTArea A Plan View>1.0>0.5<0.1>0.1>5.0Au Intersection (g/t)RC Drill HoleXPreviously released g/t AuDSR091DSR090DSR088DSR089DSR030DSR031DSR032DSR092DSR093DSR033DSR035DSR037DSR036DSR0346m @ 3.17g/t gold2m @ 7.09g/t gold12m @ 3.65g/t gold14m @ 2.83g/t gold6m @ 2.91g/t gold6m @ 3.08g/t gold11m @ 3.54g/t gold14m @ 9.53g/t gold21m @ 6.62g/t gold5m @ 3.18g/t gold6m @ 7.27g/t gold3m @ 2.48g/t goldN50metres0 The mineralised zones appear to dip 35-40 degrees to the east, with a northerly strike. The mineralised zones (>0.5g/t gold) typically lie within broader low-grade mineralised zones of >0.1g/t gold. To date mineralisation has all been encountered in fresh rock, with pyrite and potassic alteration. Further drilling, and in particular diamond drilling, is required to confirm the nature and orientation of this potentially significant new gold discovery at Area A. Figure 4: Northern Arc Target: Section 1429610N looking north, showing significant drill intersections. Area D (Line D) Phase 1 drilling at Area D commenced in late January, with a total of 11 holes completed, drilling on a northwest and southeast azimuth. Best intersections included 18m at 5.61g/t gold in hole DSR022 and 8m at 3.48g/t gold in hole DSR018, (Figure 3). A number of holes failed to reach target depth, with excess water and clay in the saprolite material causing them to be terminated. This was interpreted to indicate the presence of deeper weathering along a structure. Significant Intersections included: 18m at 5.61g/t gold from 6m, including 8m at 11.84 g/t gold from 14m, 10m at 2.72 g/t gold from 19m, including 1m at 16.30g/t gold from 23m, 8m at 3.48 g/t gold from 34m, 11m at 1.16g/t gold from 19m. 8 | Annual Report 2019 Chesser Resources Limited DIRECTORS’ REPORTBASE OF SAPROLITEFRESH ROCKDSR091DSR090123m129m75m105m81mDSR092DSR093DSR035233,300mE233,350mE233,400mE180mRL160mRL233,200mE233,250mE60mRL80mRL100mRL40mRL20mRL-20mRL0mRL140mRL180mRL160mRL60mRL80mRL100mRL120mRL40mRL20mRL-20mRL0mRL140mRL233,150mEWE50m0mDIAMBA SUD PROJECTArea A - Northern Arc TargetSection 1429610NRC Drill Hole>0.1g/t Au Mineralised HaloAu Intersection (g/t)XPreviously released g/t Au>1.0>0.5<0.1>0.1 >5.0?6m @ 1.62g/t gold6m @ 2.91g/t gold21m @ 6.62g/t gold14m @ 9.53g/t gold2m @ 1.79g/t gold6m @ 3.08g/t gold4m @ 3.44g/t gold14m @ 2.83g/t gold2m @ 1.93g/t goldFAULT Phase 2 drilling was undertaken on a westerly azimuth to test for potential north and northwest trending host structures extending from the previously reported significant intercepts from the Phase 1 program. A total of 6 holes were drilled on 50m step-outs to the north and south of hole DSR018. Preliminary results from a GAIP survey completed were used in planning these holes, following a conductivity high interpreted as a weathered structure (Figure 6). Hole DSR103 intersected 53m at 2.61g/t gold from 57m, with a higher-grade zone, of 17m at 4.97g/t gold from 59m (Figure 5, Table 1). This higher-grade zone is associated with an oxidised fault zone between 55m and 66m, and continues as a mineralised zone, in fresh rock, from 70m down to 110m. Figure 5: Northern Arc Target Area D, Section 1429500N looking north, showing significant drill intersections reported in this release (dashed line shows estimated saprolite-fresh-rock interface) Hole DSR097, drilled 50m to the south of DSR103, intersected 4m at 2.23g/t gold from 93m and 4m at 2.75/t gold from 99m along the interpreted host structure (Figure 6). These lie within a low-grade halo (>0.1g/t gold) 28m at 0.97g/t gold from 75m. Hole DRS098, drilled 50m south of DRS097 and adjacent to DSR018, failed to reach the target depth due to excessive water and clay and was abandoned at 22m. The southernmost hole (DSR099) was also abandoned short of its target depth at 77m, however it did intersect 2m at 1.73g/t gold. Two holes drilled to the north of DSR103, targeting the IP anomaly and inferred host structure failed to intersect any mineralisation. Follow-up drilling testing for potential northerly extensions to the significant mineralisation encountered in hole DSR103 is planned. 1 Technical Report on the Feasibility Study of the Massawa Gold Project, Senegal, Report for 43-101, July 23, 2019 2 Mineral Resources and Mineral Reserves Supplement, 2018. Gold Fields Ltd, p 71 Chesser Resources Limited Annual Report 2019 | 9 DIRECTORS’ REPORT??OXIDISED MINERALISED FAULT/SHEAR 17m @ 4.97g/t53m @ 2.61g/t 14m @ 1.74g/tBASE OF SAPROLITEFRESH ROCK111m99m123mDSR103DSR012DSR011DSR096DSR013140mRL120mRL60mRL40mRL-20mRL0mRL20mRL232,550mE232,600mE232,650mE80mRL100mRL232,700mE60mRL232,450mE232,500mE140mRL120mRL100mRL0mRL-20mRL232,400mE232,350mE80mRL20mRL40mRL50m0mDIAMBA SUD PROJECTNorthern Arc Target - Area D Section 1429500RC Drill HoleAu Intersection (g/t)>1.0>0.5<0.1>0.1 >5.0WEXPreviously released g/t Au The second area tested was to the immediate north and south of the high-grade oxide intersection previously reported from hole DSR022 (18m at 5.61g/t gold from 6m). A total of 6 holes were drilled in 50m step-outs along the interpreted north-northwest strike of the host structure. Drilling intersected oxide mineralisation, including 14m at 1.74g/t gold from 8m in hole DRC096, 2m at 1.47g/t gold in oxide from 18m in hole DRS095 and 2m at 4.99g/t gold from 22m in hole DSR100. It would appear that the very limited drilling did not intersect a fresh rock source and closer spaced drilling on fences with wider east- west coverage will need to be drilled to properly test this zone. The oxide intersects do suggest a possible horizontal zone of elevated oxide mineralisation near surface, although not of the size or grade of that encountered in DSR022. More drilling will be needed to better define both the extents and grade of this supergene zone. Significant Intersections included: 53m at 2.61g/t gold from 57m, including 17m at 4.97g/t gold from 59m 4m at 2.23g/t gold from 93m, and 4m at 2.75g/t gold from 99m 14m at 1.74g/t gold from 8m 2m at 4.99g/t gold from 22m Figure 6: GAIP Chargeability and Conductivity induced polarization surveys undertaken in June, with linear weathered structure in the Conductivity visible and selected significant intersect 10 | Annual Report 2019 Chesser Resources Limited DIRECTORS’ REPORT1 - 5Gold (g/t)< 0.10.1 - 0.50.5 - 1DSR020DSR097DSR098DSR019DSR104DSR105DSR103DSR099DSR101DSR102DSR016DSR018DSR015DSR017DSR014DSR013DSR012DSR100DSR095DSR094DSR011DSR022DSR021DSR096>1.0>0.5<0.1>0.1>5.0Au Intersection (g/t)RC Drill HoleXPreviously released g/t AuN100metres0DIAMBA SUD PROJECTPhase 1&2 RC drilling programGold (g/t) plan view(Background: IP Resistivity)18m @ 5.61g/t gold8m @ 3.48g/t gold2m @ 1.73g/t gold14m at 1.74g/t gold2m @ 4.99g/t gold4m @ 2.23g/t gold53m @2.61g/t goldinc 17m @ 4.97g/t gold4m @2.75g/t goldDSR020DSR097DSR098DSR019DSR104DSR105DSR103DSR099DSR101DSR102DSR016DSR018DSR015DSR017DSR014DSR013DSR012DSR100DSR095DSR094DSR011DSR022DSR021DSR096>1.0>0.5<0.1>0.1>5.0Au Intersection (g/t)RC Drill HoleXPreviously released g/t AuN100metres0DIAMBA SUD PROJECTPhase 1&2 RC drilling programGold (g/t) plan view(Background: IP Conductivity)18m @ 5.61g/t gold8m @ 3.48g/t gold2m @ 1.73g/t gold14m at 1.74g/t gold2m @ 4.99g/t gold4m @ 2.23g/t gold53m @2.61g/t goldinc 17m @ 4.97g/t gold4m @2.75g/t gold Area F Area F was drilled during Phase 1, covering the south western area within the Northern Arc anomaly. Holes were drilled on a southeast azimuth. Drilling returned two holes with notable gold mineralisation (Figure 3). Hole DSR051 intersected 6m at 4.70g/t gold in saprolite followed by 19m at 1.49g/t gold in fresh rock. Hole DSR073 returned a comparable saprolite intersection of 4m at 6.51g/t gold, with lower grade mineralisation in fresh rock. Five follow-up holes were drilled in Phase 2, on a westerly azimuth to test for possible northerly trending structures. Whilst results were encouraging further drilling is needed to properly understand the nature and orientation of mineralisation intersected to date. Significant Intersections: 6m at 4.70g/t gold from 26m and 19m at 1.49g/t gold from 39m, 4m at 6.51g/t gold from 26m including 2m at 12.00g/t gold, 2m at 4.91g/t gold from 26m; and 2m at 5.35g/t gold from 34m, 12m at 1.14g/t gold from 30m. Figure 7: Section of Area F RC holes on Northern Arc Target looking northeast showing significant gold intercepts. Solid/dashed line shows saprolite-fresh rock boundary. Chesser Resources Limited Annual Report 2019 | 11 DIRECTORS’ REPORTNWSE63mDSR073DSR07463mDSR07260m60mDSR051232,400mE232,425mE232,450mE1,428,975mN1,428,950mN1,429,000mN1,429,025mN160mRL140mRL120mRL100mRL80mRL160mRL140mRL120mRL100mRL80mRL232,375mE232,350mERC Drill HoleIntersection of >1.0g/t AuIntersection of >0.5g/t AuIntersection of <0.1g/t AuIntersection of >0.1g/t AuIntersection of >5g/t AuGold (g/t)20m0mDIAMBA SUD PROJECTArea FXPreviously released g/t Au6m @ 4.70g/t gold4m @ 6.51g/t goldinc 2m @12.00 g/t gold19m @ 1.49g/t BASE OF SAPROLITEFRESH ROCK Western Flank target: a potential trend of up to 10km in length, as defined by artisanal workings, an aeromagnetic feature (potential splay off the SMSZ). Phase 1 drilling consisted of 4 RC holes, drilled on an east and west azimuth. The mineralised zone was interpreted to represent a structure trending SSE extending to the 2016 RC drilling conducted by the previous owner. The best intercept was 6m at 7.79g/t gold from 39m. Phase 2 drilling consisted of 3 holes to test under and 50m to the north and south of the significant intersection. Although the drilling intersected the targeted structure, with brecciation and pyrite, no significant mineralisation was detected. Review of the preliminary GAIP data shows that the main structure (“the Western Splay”) is actually 2km to the west of where the Western Flank drilling was, suggesting the original drilling intersected a sub parallel structure. The potential of the Western Splay is significant, based on splays off the SMSZ hosting all the main deposits on the Mali side of the SMSZ. This structure will be tested in future exploration drilling and has an apparent length of nearly 6km. Significant Intersections: 6m at 7.79g/t gold from 39m, 16m at 1.05/t gold from 4m, including 4m at 2.98/t gold from 4m W 160mRL , 2 3 0 9 8 0 m E , 2 3 1 0 0 0 m E , 2 3 1 0 2 0 m E , 2 3 1 0 4 0 m E , 2 3 1 0 6 0 m E , 2 3 1 0 8 0 m E , 2 3 1 1 0 0 m E , 2 3 1 1 2 0 m E , 2 3 1 1 4 0 m E E 160mRL 16m @ 1.05g/t gold inc 4m at 2.98 g/t gold D S R 056 D S R 057 D S R 052 D S R 053 D S R 054 R055 S D 8 5 0 R S D 140mRL 120mRL 100mRL 6m @ 7.79g/t gold 60m 60m 60m 60m 60m 60m 60m 80mRL 60mRL 0m 20m DIAMBA SUD PROJECT LINE 2780 RC Drill Hole X Previously released g/t Au Gold (g/t) Intersection of >5g/t Au Intersection of >1.0g/t Au Intersection of >0.5g/t Au Intersection of >0.1g/t Au Intersection of <0.1g/t Au Figure 8: Section of Traverse 2780 RC holes on Western Flank looking north showing significant gold intercepts. Solid/dashed line shows saprolite-fresh rock boundary. Southern Zone target: numerous widespread drill intersections located 200m to the northwest of significant previous drill results (including 14m at 2.85 g/t gold, including 4m at 4.43g/t gold, Figure 3). The Southern Zone was tested in Phase 1, with encouraging results. The area is marked as a cluster of 12 | Annual Report 2019 Chesser Resources Limited 140mRL 120mRL 100mRL 80mRL 60mRL DIRECTORS’ REPORTBASE OF SAPROLITEFRESH ROCK medium to high gold in auger geochemical anomalies at the southern arc of the large circular geochemical anomaly at DS1. This cluster covers an area of 1km by 1km. The area is planned to be tested with future follow- up drilling. Significant Intersections: 4m at 6.85g/t gold from 20m, 4m at 1.12g/t gold from 2m. The Southern Zone target has not yet had follow-up drilling post the Phase 1 RC drilling program. 2 3 2 , 3 5 0 m E 2 3 2 , 4 0 0 m E D S R 060 D S R 059 17m @ 1.33g/t gold 2 3 2 , 4 5 0 m E D S R 061 160mRL W 140mRL 120mRL 100mRL 2 3 2 , 5 0 0 m E 160mRL E 140mRL 120mRL D S R 062 6m @ 1.19g/t gold 100mRL 3m @ 3.30g/t gold 80mRL 60mRL 40mRL 7m @ 1.14g/t gold 80mRL 63m 60m 63m 2m @ 3.40g/t gold 2m @ 5.84g/t gold 75m 4m @ 3.37g/t gold 60mRL 40mRL 30m 0m DIAMBA SUD PROJECT LINE 2640 RC Drill Hole X Previously released g/t Au Gold (g/t) Intersection of >5g/t Au Intersection of >1.0g/t Au Intersection of >0.5g/t Au Intersection of >0.1g/t Au Intersection of <0.1g/t Au Figure 9: Section of Traverse 2640 RC holes on Southern Zone, looking north showing significant gold intercepts. Solid/dashed line shows saprolite-fresh rock boundary. The Area A discovery and Area D intersections within the Northern Arc exhibit the key characteristics of other large gold systems in the region, including the nearby world-class Gounkoto/Loulo (5.5/12Moz) and Fekola (7.6Moz) deposits: • Spatially related to splays off the Senegal Mali Shear Zone (SMSZ) • Northerly trend of mineralisation • Association of potassic alteration with mineralisation and pyrite with high gold grades Proposed Future Activity A full review of all exploration results is underway with drilling activities (diamond drilling) expected to commence in late October, following the wet season in Senegal and subject to access. Chesser Resources Limited Annual Report 2019 | 13 DIRECTORS’ REPORTBASE OF SAPROLITEFRESH ROCK Table 1: Significant fold intersections from Diamba Sud Phase 1 RC drilling Hole ID From DSR018 DSR022 including including DSR027 including including DSR030 including DSR033 DSR036 DSR037 DSR048 DSR051 DSR052 DSR056 including DSR059 DSR060 DSR061 DSR073 including 12 34 6 14 16 61 71 75 80 81 42 46 38 51 54 58 51 70 20 26 33 39 39 4 4 44 49 15 31 20 53 56 26 26 55 To 14 42 24 22 18 63 78 78 83 82 54 54 49 52 55 60 53 75 24 32 34 58 45 20 8 45 51 18 32 37 54 60 30 28 57 Interval (m) 2 8 18 8 2 2 7 3 3 1 12 8 11 1 1 2 2 5 4 6 1 19 6 16 4 1 2 3 1 17 1 4 4 2 2 Gold (g/t) 1.8 3.48* 5.61 11.84 22.1 1.76 2.42 3.87 6.19 16.1 3.65* 4.47* 3.54 1.24 1.19 2.58* 5.52 3.18* 6.85 4.70 1.09 1.49 7.79 1.05 2.98 1.11 5.84 3.30 1.20 1.33 1.48 3.37 6.51 12.00 1.05 Intervals are reporting using a threshold of 1 g/t or greater average over the interval and selects all material greater than 0.5 g/t. No interpretation can be made regarding true widths of the interval. *hole ended in mineralisation. **Hole DSR103 is reported using a threshold of 1g/t Au or greater average over the interval and selects all material greater than 0.3g/t Au with a maximum of 2m of internal dilution. 14 | Annual Report 2019 Chesser Resources Limited Hole ID From To Interval (m) Gold (g/t) DSR088 DSR089 including DSR090 DSR091 DSR092 including Including DSR093 including DSR084 DSR085 DSR086 DSR087 DSR095 DSR096 DSR097 DSR099 DSR100 DSR101 DSR103** including Line A 66 81 87 96 100 113 117 84 83 95 101 107 94 110 116 119 126 24 101 121 89 80 85 102 14 74 70 80 Line F 28 36 42 22 24 34 20 22 40 88 97 103 50 65 24 113 110 76 60 70 86 92 97 107 116 82 82 93 100 104 93 104 113 118 120 20 87 119 75 78 83 100 8 53 69 76 26 34 30 18 20 30 18 8 38 87 93 99 48 63 22 112 57 59 6 11 1 4 3 6 1 2 1 2 1 3 1 6 3 1 6 4 14 2 14 2 2 2 6 21 1 4 2 2 12 4 4 4 2 14 2 1 4 4 2 2 2 1 53 17 7.27 2.15 1.7 2.37 1.41 3.17 3.23 7.09 13.4 3.19 1.18 2.48 2.21 2.91 1.23 2.13 3.08 2.46 2.83 1.93 9.53 21.85 13.15 1.79 1.62 6.62 30.6 3.44 4.91 5.35 1.14 2.25 1.66 2.05 1.47 1.74 1.50 1.34 2.23 2.75 1.73 1.03 4.99 1.03 2.61 4.97 DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report Corporate activities During the year the Company: • Appointed Mr Michael Brown Managing Director on 5th November 2018. In December 2018, the Company appointed highly experienced geologist Gareth O’Donovan (ex-SRK Exploration) as Exploration Manager. • Completed a placement to sophisticated and institutional investors in January 2019, pursuant to which 20.8 million shares were issued at an issue price of A$0.038 per share to raise $789,640 before costs. In addition, the Company entered into agreements to issue 2.92 million shares to Directors at the Placement price of $0.038 per share to raise funds totaling $110,960. The Director subscription agreements completed in March 2019 after the requisite shareholder approvals were obtained. • Completed a private placement to sophisticated and institutional investors on 23 May 2019 to raise $975,000 (before costs) through the issue of 24,375,000 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 $2,018,453 (2018: loss of $957,352). The significant items affecting the loss after tax were: • Impairment of capitalised exploration and evaluation expenditure totaling $732,955 (2018: $7,591) in relation to the Woye, Youboubou and Garaboureya tenements which the Company determined to relinquish or surrender as the results of exploration activities undertaken on those tenements did not justify further exploration activity being undertaken. • A general increase in operating expenditure in year ended 30 June 2019 reflecting the first full year of operations following the acquisition of the Senegal subsidiaries (2018: approximately 9 months of operations). • An increase in key management personnel and employee remuneration expense to $467,368 (2018: $ 380,180) as a consequence of the appointment of Mr Michael Brown as the Company’s Managing Director including a transition period during which the services of both Mr Brown and Dr Simon McDonald, the previous Chief Executive Officer of the Company, were retained. 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 2019: • On 4 January 2019, Chesser issued 20,780,000 fully paid ordinary shares at an issue price of $0.038 to raise $789,640 before transaction costs. • • On 4 January 2019 and 19 January 2019, the Company issued 2,000,000 unlisted options with an exercise price of $0.05 and an expiry date of 30 November 2021 and 1,246,8000 fully paid ordinary shares to Taylor Collison as consideration for corporate advisory and lead manager services provided in relation to the 4 January 2019 capital raising. On 15 March 2019 the Company issued the following equity securities: i. 2,920,000 fully paid ordinary shares to Directors at an issue price of $0.038 to raise $110,960 before transaction costs. ii. 600,000 loan funded shares to Mr Michael Brown at an issue price of $0.05 per share. The non-recourse loan is repayable by Mr Brown from proceeds received by Mr Brown on any sale of the shares. iii. 5,500,000 unlisted options with an exercise price of $0.05 and an expiry date of 30 November 2021 issued to Directors. Chesser Resources Limited Annual Report 2019 | 15 21 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report iv. 1,500,000 unlisted options with an exercise price of $0.05 and an expiry date of 1 December 2022 issued to Mr Gareth O’Donovan, the Company’s Exploration Manager. v. 175,200 fully paid ordinary shares were issued to Taylor Collison in payment of the lead manager fee payable on the 2,920,000 fully paid ordinary shares issued to Directors. • On 23 May 2019 the Company issued 24,375,000 fully paid ordinary shares at an issue price of $0.04 to raise $975,000 before costs. 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 Except as noted below, 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: • On 19 September 2019, the Company issued 31,507,295 fully paid ordinary shares at an issue price of $0.06 to raise $1,890,437 before costs. Likely developments and expected results of operations Following the highly encouraging exploration results to date which have confirmed a new high-grade gold discovery at the Diamba Sud Project it is anticipated that the short-term focus of the Group will continue to be the exploration of the Diamba Sud Project with additional exploration activity being undertaken at the Diamba Nord Project. 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 Expiry Date Exercise price of options Number under options 12/07/2017 12/07/2017 11/09/2017 11/09/2017 04/01/2019 15/03/2019 15/03/2019 15/03/2019 15/03/2019 31/12/2019 31/12/2020 31/12/2019 31/12/2020 31/12/2021 31/12/2021 31/12/2021 31/12/2022 31/12/2022 $0.06 $0.10 $0.06 $0.10 $0.05 $0.05 $0.05 $0.05 $0.05 3,300,000 3,300,000 1,000,000 1,000,000 2,000,000 500,000 5,000,000 500,000 1,000,000 17,600,000 16 | Annual Report 2019 Chesser Resources Limited 22 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report 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, and up to the date of this report, as a result of the exercise of options. Remuneration Report (Audited) 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 2019(2018: $Nil). Non-executive directors may also be granted options from time to time. The options granted are considered by the Board to be an effective means of appropriately compensating Directors whilst preserving the Company’s cash reserves and providing an alignment between Director and shareholder interests. 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 2019 | 17 23 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 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 2019 2018 2017 2016 2015 Total Remuneration $ 533,391 417,200 215,700 202,546 1,282,075 EPS (Cents) (0.95) (0.49) (0.58) (0.31) 8.59 Dividends (Cents) Share Price (Cents) - - - - - 4.4 6.0 4.5 3.2 3.4 18 | Annual Report 2019 Chesser Resources Limited 24 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 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 Michael Brown Stephen Kelly Simon McDonald Position Held Non-Executive Director Non-Executive Director Managing Director (appointed 5 November 2018) Executive Director, CFO and Company Secretary Chief Executive Officer (resigned 31 January 2019) The Company has entered into a Consultancy Agreement with MEMM Capital Pty Ltd pursuant to which Mr Michael Brown was engaged to provide Managing Director services to the Company effective from 5 November 2018. The key terms of the Agreement are: • Mr Brown will be paid $280,000 per annum, inclusive of superannuation. • Subject to shareholder approval Mr Brown (or his nominee) will be granted the following incentive options: - 500,000 incentive options exercisable at A$0.05 each on or before 30 November 2021, vesting immediately 500,000 incentive options exercisable at A$0.05 each on or before 30 November 2021, vesting on 5 November 2019 1,000,000 incentive options exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.075 prior to 31 May 2020 1,000,000 incentive options exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.10 prior to 31 May 2021 - - - • • • Subject to shareholder approval, the Company shall provide an interest free, non-recourse loan in the amount of $30,000 to be used for the sole purpose of acquiring loan funded shares. The Company has agreed to reimburse up to $25,000 in moving expenses incurred in relocating to Australia. The Agreement may be terminated by either Mr Brown or the Company by providing three months’ notice. 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 (2018: 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. 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 2019 | 19 25 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report 2019 Cash and salary fees Super- annuation Share Based Payments^ Total remuneration $ $ $ $ Proportion of remuneration that is performance based % 40,000 40,000 80,000 3,800 3,800 7,600 2,583 3,444 6,027 46,383 47,244 93,627 6% 7% 6% 183,556 120,000 303,556 - - - 21,625 2,583 24,208 205,181 122,583 327,764 112,000 - Other Key Management Personnel Mr Simon McDonaldb Total Key Management Personnel Total Director and KMP Compensation a Appointed 5 November 2018 b Resigned 31 January 2019 ^ Equity-settled share-based payments as per Corporations Regulation 2M.3.03(1) Item 11. 495,556 112,000 7,600 - - 112,000 - 112,000 30,235 533,391 6% Cash and salary fees Super- annuation Share based payments Total remuneration $ $ $ $ Proportion of remuneration that is performance based % 40,000 3,800 10,800 54,600 20% 40,000 80,000 1,900 14,400 25,200 5,700 56,300 110,900 26% - Non-Executive Directors Mr Simon O’Loughlin Mr Simon Taylor Total Non-Executive Directors Executive Directors Mr Michael Browna Mr Stephen Kelly Total Executive Directors 2018 Non-Executive Directors Mr Simon O’Loughlin Mr Simon Taylor Total Non-Executive Directors Executive Directors Mr Stephen Kelly* Total Executive Directors 139,500 139,500 10,800 - - 10,800 150,300 150,300 192,000 Other Key Management Personnel Mr Simon McDonald Total Key Management Personnel Total Director and KMP Compensation * During the 2018 financial year KCG Advisors Pty Ltd, the Company through which Mr Kelly’s services are engaged by the Company 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. - 227,000 35,000 411,500 227,000 192,000 488,200 35,000 71,000 5,700 - 20 | Annual Report 2019 Chesser Resources Limited 26 | P a g e 11% 2% 11% - - 7% - 15% - 15% DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report d) Share-based compensation The following unlisted options were granted to Directors on 26 February 2019: • 5,500,000 options with an exercise price of $0.05 and an expiry date of 30 November 2021 The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Date of grant 26/02/2019 26/02/2019 26/02/2019 Expiry date 30/11/2021 30/11/2021 $0.0105 $0.0105 916,667 916,667 Number granted Exercise price $0.05 $0.05 100% 0% Vested Value per option at grant date Vesting and exercise date 26/02/2019 05/11/2019 Subject to achieving 10-day VWAP of $0.075 Subject to achieving 10-day VWAP of $0.10 26/02/2019 30/11/2021 $0.05 $0.0101 1,833,333 30/11/2021 $0.05 $0.0085 1,833,333 0% 0% 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. Except as noted above, 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 trinomial 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. 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: Chesser Resources Limited Annual Report 2019 | 21 27 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report 2019 Name Balance at start of year Granted as compensati on Exercised Key Management Personnel of Chesser Resources Limited - S Taylor - S O’Loughlin - M Brown - S Kelly - S McDonald - Total 1,000,000 750,000 3,000,000 750,000 - 5,500,000 1,600,000 1,200,000 - 1,200,000 2,000,000 6,000,000 Held at time of ceasing to be KMP - - - - (2,000,000) (2,000,000) Balance at end of year Vested and exercisable Unvested 2,600,000 1,950,000 3,000,000 1,950,000 - 9,500,000 1,766,667 1,325,000 500,000 1,325,000 - 4,916,667 833,333 625,000 2,500,000 625,000 - 4,583,333 2018 Name Balance at start of year Granted as compensati on Exercised Lapsed Balance at end of year Vested and exercisable Unvested Key Management Personnel of Chesser Resources Limited - - S Taylor - - S O’Loughlin - - S Kelly - - S McDonald - - Total 1,600,000 1,200,000 1,200,000 2,000,000 6,000,000 f) Share holdings - - - - - 1,600,000 1,200,000 1,200,000 2,000,000 6,000,000 1,600,000 1,200,000 1,200,000 400,000 4,400,000 - - - 1,600,000 1,600,000 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 (2018: nil), however the Company provided Mr Brown a non-recourse loan of $30,000 in relation to his acquisition of 600,000 shares during the financial year. Shares held on appointment as key management personnel 2019 Balance at start of year Key Management Personnel of Chesser Resources Limited Ordinary shares S Taylor S O’Loughlin M Brown S Kelly S McDonald 2,500,001 1,833,334 - 500,000 - 4,833,335 - - - - - - Acquisitions during the year Shares held on ceasing to be key management personnel Balance at the end of the year 1,000,0001 1,000,0001 1,125,0002 395,0001 - 3,520,000 - - - - - - 3,500,001 2,833,334 1,125,000 895,000 - 8,353,335 1 Represents shares subscribed for by the Key Management Personnel pursuant to an issuance of shares by the Company at an issue price of $0.038 per Share. 2 Comprised 525,000 shares subscribed for by the Key Management Personnel pursuant to an issuance of shares by the Company at an issue price of $0.038 per Share and 600,000 shares issued to Mr Brown as Loan Funded Shares. 22 | Annual Report 2019 Chesser Resources Limited 28 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 Directors’ report 2018 Balance at start of year 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 Directors of Chesser Resources Limited Ordinary shares S Taylor S O’Loughlin S Kelly S McDonald 1,500,000 812,500 - - 2,312,500 - - - - - 1,000,001 1,020,834 500,000 - 2,520,835 - - - - - 2,500,001 1,833,334 500,000 - 4,833,335 No shares were received by key management personnel on the exercise of options during the year. Loans to key management personnel g) Except as noted below, there were no loans to key management personnel at any time during the financial year: • The Company provided an interest free, non-recourse loan in the amount of $30,000 to be used for the sole purpose of acquiring loan funded shares. The loan and the issue of the loan funded shares were approved by the Company’s shareholders on 26 February 2019. 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 2019 the total amount payable to O’Loughlins Lawyers was $nil (2018: $Nil). The total fees paid to O’Loughlins Lawyers during the year was $Nil (2018: $34,668). Voting and comments made at the Company’s 2018 Annual General Meeting i) The Company received more than 98% of “yes” votes on its remuneration report for the financial year ended 30 June 2018. 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 2019 | 23 29 | P a g e DIRECTORS’ REPORT Chesser Resources Limited Financial Report for the year ended 30 June 2019 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 (2018: 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, 30 September 2019 24 | Annual Report 2019 Chesser Resources Limited 30 | P a g e DIRECTORS’ REPORT The Directors Chesser Resources Limited Level 14 167 Edward Street Brisbane QLD 4000 Auditor’s Independence Declaration In relation to the independent audit for the year ended 30 June 2019, 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 30 September 2019 31 | P a g e Chesser Resources Limited Annual Report 2019 | 25 AUDITOR’S INDEPENDENCE DECLARATION 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 2019, 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 2019 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. Material Uncertainty Related to Going Concern We draw attention to Note 3(b) in the financial report which states that the Group’s ability to continue as a going concern is dependent on the Group’s ability to raise further funding and the successful exploration and subsequent exploitation of the Group’s tenements. The matters set forth in Note 3(b) indicate the existence of a material uncertainty that may cast doubt about the Group’s ability to continue as a going concern and, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. 26 | Annual Report 2019 Chesser Resources Limited INDEPENDENT AUDITOR’S REPORT Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the matter Exploration and evaluation expenditure - Impairment Refer to Note 5: Critical accounting estimates and judgements and Note 13: Exploration and Evaluation Expenditure The Group is involved in exploration and evaluation activities with a focus on gold deposits in Senegal. Exploration and evaluation expenditure totalling $3,979,825 as disclosed in Note 13 represents a significant balance recorded in the consolidated Statement of Financial Position. AASB6 Exploration for and Evaluation of Mineral Resources requires the exploration and evaluation assets to be assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. As described in Note 5 to the financial statements, management performed an impairment assessment at 30 June 2019 in accordance with the accounting policy described in Note 13 which required management to make certain estimates and assumptions as to future events and circumstances surrounding the development and commercial exploitation of their Senegal Projects. Our procedures included: • Understanding the control environment through which exploration and evaluation expenditure is incurred, recorded and assessed for impairment; • Obtaining an understanding of the status of ongoing exploration programs and future intentions for the areas of interest, including future budget spend and related work programs; • Enquiring of management and reviewed ASX announcements and minutes of directors meetings to ensure the group had not decided to discontinue exploration and evaluation at its areas of interest; • Reviewing the director’s estimates and assumptions included in their assessment of potential indicators of impairment; • Assessing whether the relevant expenditure meets the asset recognition requirements of AASB6 Exploration for and Evaluation of Mineral Resources; • Verifying that each exploration licence remains valid; and • Assessing the adequacy of the related disclosures made in Note 5 and Note 13 of the financial statements. 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 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Chesser Resources Limited Annual Report 2019 | 27 INDEPENDENT AUDITOR’S REPORT 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. 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. Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. 28 | Annual Report 2019 Chesser Resources Limited INDEPENDENT AUDITOR’S REPORT 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 17 to 23 of the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Chesser Resources Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. PITCHER PARTNERS NIGEL BATTERS Partner Brisbane, Queensland 30 September 2019 Pitcher Partners is an association of independent firms. An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Chesser Resources Limited Annual Report 2019 | 29 INDEPENDENT AUDITOR’S REPORT Chesser Resources Limited Consolidated Income Statement For the year ended 30 June 2019 Notes 2019 $ 2018 $ Revenue and other income Auditors’ remuneration Key management personnel and employee remuneration Depreciation expense Finance charges General and administrative expenses Impairment of capitalised exploration expenditure Other expenses 7 12 13 Professional fees Travel expenses Business development costs Share based payments expense Share registry and exchange listing fees Foreign exchange (losses) / gains 1,396 (37,500) (467,398) (53,379) (3,994) (146,706) (732,955) (214,757) (20,973) (177,878) (32,599) (45,710) (86,839) 839 3,803 (40,000) (380,180) (22,151) (6,088) (115,339) (7,591) (51,038) (72,497) (94,297) (32,302) (76,000) (50,976) (12,696) Loss before income tax expense from continuing operations (2,018,453) (957,352) Taxation Loss for the year after tax 10 - - (2,018,453) (957,352) Loss attributable to Owners of Chesser Resources Limited (2,018,453) (957,352) Basic and diluted loss per share (cents per share) 17 (0.95) (0.49) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 30 | Annual Report 2019 Chesser Resources Limited 36 | P a g e CONSOLIDATED INCOME STATEMENT Chesser Resources Limited Consolidated statement of Comprehensive Income For the year ended 30 June 2019 Loss for the year after tax 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 2019 $ 2018 $ (2,018,453) (957,352) 402 - 402 93 - 93 Total comprehensive loss for the year (2,018,051) (957,259) Comprehensive loss attributable to the owners of Chesser Resources Limited (2,018,051) (957,259) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 17 | P a g e Chesser Resources Limited Annual Report 2019 | 31 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Chesser Resources Limited Consolidated Statement of Financial Position As at 30 June 2019 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 Notes 2019 $ 2018 $ 21(a) 11 1,243,371 58,819 28,099 2,385,360 17,565 45,194 1,330,289 2,448,119 12 13 177,040 3,979,825 164,879 3,193,146 Total non-current assets 4,156,865 3,358,025 Total assets Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 5,487,154 5,806,144 14 315,100 457,542 315,100 315,100 457,542 457,542 5,172,054 5,348,602 15 16 10,636,305 2,053,981 (7,518,232) 5,172,054 8,840,512 2,007,869 (5,499,779) 5,348,602 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 32 | Annual Report 2019 Chesser Resources Limited 18 | P a g e CONSOLIDATED STATEMENT OF FINANCIAL POSITION Chesser Resources Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2019 2019 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Balance as at 1 July 2018 8,840,512 2,007,869 (5,499,779) 5,348,602 Loss for the year Other comprehensive income Total comprehensive loss for the year Transactions with owners in their capacity as owners: - - - - 402 402 (2,018,453) - (2,018,453) (2,018,453) 402 (2,018,051) Issue of equity securities Costs of issuing equity securities Share based payments Total transactions with owners in their capacity as owners 1,929,636 (133,843) - 1,795,793 - - 45,710 45,710 - - - - 1,929,636 (133,843) 45,710 1,841,503 Balance as at 30 June 2019 10,636,305 2,053,981 (7,518,232) 5,172,054 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 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 19 | P a g e Chesser Resources Limited Annual Report 2019 | 33 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Chesser Resources Limited Consolidated Statement of Cash Flows For the year ended 30 June 2019 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 2019 $ 2018 $ 1,396 (3,994) (1,191,716) 21(b) (1,194,314) 3,803 (6,088) (929,583) (931,868) (65,540) (1,678,329) (1,743,869) (187,030) (1,728,452) (1,915,482) 1,875,600 (79,807) 1,795,793 2,385,360 (1,142,390) 401 2,091,126 (171,888) 1,919,238 3,312,011 (928,112) 1,461 Cash and cash equivalents at 30 June 21(a) 1,243,371 2,385,360 Non-cash financing and investing activities 21(c) The accompanying accounting policies and explanatory notes form an integral part of the financial statements 34 | Annual Report 2019 Chesser Resources Limited 20 | P a g e CONSOLIDATED STATEMENT OF CASH FLOWS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 Level 14, 167 Eagle Street, Brisbane City QLD 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 has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are effective for accounting periods commencing on or after 1 July 2018. • AASB 15 Revenue from Contracts with Customers and related amending Standards 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. New accounting standards not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 reporting periods and have not been early adopted by the Group. Standards/amendment AASB 16 Leases AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycle AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material (i) AASB 16 Leases (effective from 1 January 2019) Effective for annual reporting periods beginning on or after 1 January 2019 Expected to be initially applied in the financial year ending 30 June 2020 1 January 2019 30 June 2020 1 January 2020 30 June 2020 1 January 2020 30 June 2021 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 2019 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. Chesser Resources Limited Annual Report 2019 | 35 21 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 2019, 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. 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. 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 30 September 2019. b) Going concern As at 30 June 2019 the Group had cash reserves of $1,243,371, net working capital of $1,015,189 and net assets of $5,172,054. The Group incurred a loss for the year ended 30 June 2019 of $2,018,453 (2018 loss: $957,352), net cash outflows from operating activities of $1,194,314 (2018: $931,868 outflows) and net outflows from investing activities of $1,743,869 (2018: $1,915,482 outflows). The ability of the Group to continue as a going concern is principally dependent upon the ability of the Company to raise additional funding in the future and the successful exploration and subsequent exploitation of the Group’s tenements. These conditions give rise to material uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern. Based on the success of previous capital raisings, including the capital raising completed on 19 September 2019 to raise $1,890,437, combined with the potential to attract farm-in partners for projects and the potential sale of the current portfolio of exploration assets held, the Directors have prepared the financial statements on a going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. 36 | Annual Report 2019 Chesser Resources Limited 22 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 The Directors are confident of securing funds as and when necessary to meet the Group’s obligations as and when they fall due. Should the Group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements. This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Group be unable to continue as a going concern. c) 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. d) 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 2019 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. 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. Chesser Resources Limited Annual Report 2019 | 37 23 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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. e) 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 (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. 38 | Annual Report 2019 Chesser Resources Limited 24 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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, the Western African Franc 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 Chief Financial Officer. 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 a) Market risk 30 June 2019 Cash and cash equivalents Trade and other receivables 2019 $ 2018 $ 1,243,371 58,819 1,302,190 309,959 309,959 2,385,360 17,565 2,402,925 400,752 400,752 AUD Denominated Balances USD Denominated Balances CFA Denominated Balances TOTAL 30 June 2019 1,092,946 23,108 4,093 28,477 32,570 120,079 (87,509) 146,332 1,243,371 7,234 58,819 153,566 1,302,190 84,745 68,821 309,959 992,231 Trade and other payables 105,135 Total assets 1,116,054 Net exposure 1,010,919 30 June 2018 Cash and cash equivalents Trade and other receivables AUD Denominated Balances USD Denominated Balances CFA Denominated Balances TOTAL 30 June 2018 2,230,729 17,565 3,882 150,749 2,385,360 - - 17,565 Total assets 2,248,294 3,882 150,749 2,402,925 Trade and other payables 81,581 Net exposure 2,166,714 229,369 (225,487) 89,802 60,947 400,752 2,002,173 Chesser Resources Limited Annual Report 2019 | 39 25 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 2019 $ (1,869) 1,869 2018 $ 16,454 (16,454) Interest rate risk (i) 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 2019 30 June 2018 Weighted average interest rate % 0.5% Balance $ 1,243,371 Weighted average interest rate % 0.5% Balance $ 2,385,360 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: +1% (100bp) -1% (100bp) After-tax loss higher / (lower) 2019 $ 12,434 (12,434) 2018 $ 23,854 (23,854) Equity higher / (lower) 2019 $ 2018 $ 12,434 (12,434) 23,854 (23,854) 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. 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. 40 | Annual Report 2019 Chesser Resources Limited 26 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 2019 Less than 3 months $ Total contractual cash flows $ Carrying amount $ Trade and other payables 309,959 309,959 309,959 30 June 2018 Less than 3 months $ Total contractual cash flows $ Carrying amount $ Trade and other payables 400,752 400,752 400,752 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 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 2019 the Group had capitalised exploration and evaluation expenditure of $3,979,825 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 a trinomial 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. Chesser Resources Limited Annual Report 2019 | 41 27 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 AASB 112. 6. Segment information The Group has identified its operating segments based on the internal reports that were reviewed and used by the Managing Director or 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 Operating Decision Maker 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 Operating Decision Maker. Activity by segment Kurnalpi Project The Kurnalpi Project is situated at Kurnalpi approximately 60 kilometres north east of Kalgoorlie. 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 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. During the 2019 financial year, the Company relinquished its interests in the Woye, Youboubou and Garaboureya projects and impaired all capitalised exploration and evaluation expenditure relating to those projects. 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 2019 and 2018, respectively. 42 | Annual Report 2019 Chesser Resources Limited 28 | P a g e NOTES TO THE FINANCIAL STATEMENTS 6 9 3 , 1 $ ) 8 7 2 , 8 0 7 , 2 ( ) 2 8 8 , 6 0 7 , 2 ( 6 9 3 , 1 - ) 4 4 6 , 8 8 1 , 1 ( ) 8 4 2 , 7 8 1 , 1 ( ) 2 6 0 , 5 ( ) 2 6 0 , 5 ( $ $ - ) 4 5 2 , 4 ( ) 4 5 2 , 4 ( $ - ) 7 2 9 , 0 4 ( ) 7 2 9 , 0 4 ( $ 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 - ) 0 7 4 , 4 9 1 ( ) 0 7 4 , 4 9 1 ( $ a b m a D i d r o N d u S a b m a D i - $ ) 1 2 9 , 4 7 2 , 1 ( ) 1 2 9 , 4 7 2 , 1 ( - - - i l p a n r u K j t c e o r P $ e c n a m r o f r e p t n e m g e S ) i ( 9 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 9 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 9 3 8 4 3 6 , 9 1 5 , 1 ) 5 5 9 , 2 3 7 ( ) 9 7 3 , 3 5 ( ) 0 1 7 , 5 4 ( ) 3 5 4 , 8 1 0 , 2 ( l a t o T $ 3 0 8 , 3 ) 4 8 5 , 2 4 9 , 2 ( ) 1 8 7 , 8 3 9 , 2 ( 1 7 1 , 7 8 0 , 2 ) 1 9 5 , 7 ( ) 1 5 1 , 2 2 ( ) 0 0 0 , 6 7 ( ) 2 5 3 , 7 5 9 ( e g a P | 9 2 3 0 8 , 3 ) 2 1 4 , 5 5 8 ( ) 9 0 6 , 1 5 8 ( $ e t a r o p r o C u o b a r a G a y e r $ - - ) 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 ( $ u o b u o b u o Y e y o W a b m a D i d r o N $ - ) 5 7 0 , 7 4 5 ( ) 5 7 0 , 7 4 5 ( d u S a b m a D i - $ - i l p a n r u K j t c e o r P $ ) 6 2 1 , 6 2 1 , 1 ( ) 6 2 1 , 6 2 1 , 1 ( ) 1 9 5 , 7 ( ) 1 9 5 , 7 ( x a t e r o f e b s s o l t e N 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 l e r u t i d n e p x e n o i t a u a v e d n a n o i t a r o p x e f o t n e m l 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 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 s n e p x e n o i t a i c e r p e D e m o c n i r e h t O • • • • • l e r u t i d n e p x e n o i t a u a v e d n a n o i t a r o p x e f o t n e m l 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 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 s n e p x e n o i t a i c e r p e D • • • • x a t e r o f e b s s o l t e N Chesser Resources Limited Annual Report 2019 | 43 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 (ii) Segment assets The following table shows assets by geographical segment. 30 June 2019 Segment assets 30 June 2018 Segment assets 7. Revenue and other income Interest income Accounting policy Senegal $ Australia $ Total $ 4,338,655 1,148,499 5,487,154 3,508,773 2,297,371 5,806,144 2019 $ 2018 $ 1,396 1,396 3,803 3,803 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 2019 $ 2018 $ 45,957 7,600 5,566 45,710 36,152 3,850 32,302 76,000 44 | Annual Report 2019 Chesser Resources Limited 30 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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: 2019 $ 2018 $ 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% (2018: 27.5%) 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 Prepayments Impairment of investments in and loans to subsidiaries Tax losses available for offset against future taxable income Net deferred tax assets Deferred tax assets not recognised 37,500 37,500 40,000 40,000 - - 161,713 (161,713) - (2,018,453) (555,075) - (2,791) 404,303 (13,843) (167,406) 167,406 - 7,563 16,811 (7,797) 89,468 3,060,802 3,166,847 (3,166,847) - - - 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) - 31 | P a g e Chesser Resources Limited Annual Report 2019 | 45 NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 (e) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: 2019 $ 2018 $ Temporary differences and tax losses at 27.5% (2018: 27.5%) 3,167,847 2,991,681 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. 46 | Annual Report 2019 Chesser Resources Limited 32 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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. 11. Trade and other receivables Current Other receivables Other receivables represent the Company’s GST receivable. 2019 $ 2018 $ 58,819 17,565 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 assessed for expected credit losses 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 Field Equipment Motor Vehicles Office Equipment TOTAL Carrying amount at 1 July 2017 Additions Disposals Depreciation 62,638 - (5,791) 121,330 - (16,089) Carrying amount at 30 June 2018 56,847 105,241 Additions Disposals Depreciation Carrying amount at 30 June 2019 - - (12,751) 44,096 39,467 - (32,159) 112,549 3,062 - (271) 2,791 26,073 - (8,469) 20,395 187,030 - (22,151) 164,879 65,540 - (53,379) 177,040 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: Chesser Resources Limited Annual Report 2019 | 47 33 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 Classification Field equipment Motor vehicles Office 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. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. 13. Exploration and evaluation expenditure 2019 $ 2018 $ At cost 3,979,825 3,193,146 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 3,193,146 - 1,519,634 (732,955) 3,979,825 - 1,113,565 2,087,172 (7,591) 3,193,146 In the financial year ended 30 June 2018, 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 equity securities to the vendors and third- party facilitators or their nominees: (i) 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; (ii) The following unlisted options: (a) (b) 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. (iii) The following performance shares: (a) (b) 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 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. 48 | Annual Report 2019 Chesser Resources Limited 34 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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. i. Impairment of exploration expenditure During the year ended 30 June 2019 the Group impaired $732,955 (2018: $7,591) of exploration and evaluation expenditure related to the Woye, Youboubou and Garaboureya projects as the exploration activity undertaken by Chesser subsequent to acquiring the projects has not indicated sufficient exploration potential to justify Chesser undertaking further exploration activity and as such Chesser has relinquished or surrendered its interest in those tenements. 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. Chesser Resources Limited Annual Report 2019 | 49 35 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 14. Trade and other payables Trade payables Accruals Total trade and other payables 2019 $ 2018 $ 249,728 65,372 315,100 143,574 313,968 457,542 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, non-interest bearing 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 2019 $ 2018 $ Ordinary shares – fully paid 10,636,305 8,840,512 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 2018 Share issue on 4 January 2019 (a) Share issue on 19 January 2019 (b) Shares issued on 15 March 2019(c) Shares issued on 23 May 2019(d) Share issue costs Closing Balance 30 June 2019 30 June 2019 No. $ 198,683,181 20,780,000 1,246,800 3,695,200 24,375,000 - 248,780,181 8,840,512 789,640 47,378 117,618 975,000 (133,843) 10,636,305 The following movements have occurred against Share Capital during the year: a) On 4 January 2019, Chesser issued 20,780,000 fully paid ordinary shares at $0.038 per share via a private placement; b) On 19 January 2019 Chesser issued 1,246,800 fully paid ordinary shares at $0.038 per share to Taylor Collison as payment of a capital raising fee; c) On 15 March 2019 Chesser issued 2,920,000 fully paid ordinary shares at $0.038 per share to Directors pursuant to a subscription, issued 600,000 ordinary shares funded via a loan to Michael Brown and issued 175,200 fully paid ordinary shares at $0.038 per share to Taylor Collison as payment of a capital raising fee; 50 | Annual Report 2019 Chesser Resources Limited 36 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 d) On 23 May 2019, Chesser issued 24,375,000 fully paid ordinary shares at $0.04 per share via a private placement. (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 2019, the following options for ordinary shares in the Company were on issue: Options with a $0.06 exercise price expiring 31 December 2019 Options with a $0.10 exercise price expiring 31 December 2020 Options with a $0.05 exercise price expiring 31 December 2021 Options with a $0.05 exercise price expiring 31 December 2022 Total options on issue 4,300,000 4,300,000 - - 8,600,000 - - 5,500,000 1,500,000 7,000,000 - 4,300,000 - 4,300,000 2,000,000 7,500,000 - 1,500,000 2,000,000 17,600,000 On issue at 1 July 2018 Options issued to Key Management Personnel and other employees Options issued as consideration for capital raising fees On issue at 30 June 2019 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 16 for further details regarding the accounting treatment of the options issued during the year. 16. Reserves Share based payments reserve Foreign currency translation reserve 2019 $ 2018 $ 2,053,981 - 2,053,981 2,008,271 (402) 2,007,869 Chesser Resources Limited Annual Report 2019 | 51 37 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 Movements: Foreign currency translation reserve Balance at 1 July 2018 Currency translation difference for the year Balance at 30 June 2019 Share based payments reserve Balance at 1 July 2018 Options issued Balance at 30 June 2019 Nature and purpose of reserves 2019 $ 2018 $ (402) 402 - 2,008,271 45,710 2,053,981 (495) 93 (402) 1,914,271 94,000 2,008,271 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: 52 | Annual Report 2019 Chesser Resources Limited 38 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 Options issued to directors (i) Options issued to third-party vendors (ii) Options issued to employees (iii) Loan funded shares issue to directors (iv) Share-based payments expense for the financial year 30 June 2019 $ 22,194 8,695 6,781 8,040 45,710 (i) On 26 February 2019 the shareholders approved the grant to Directors of 5,500,000 unlisted options over ordinary shares with an exercise price of $0.05 and an expiry date of 30 November 2021 subject to the following vesting conditions: • 916,667 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting immediately • 916,667 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on 5 November 2019. • 1,833,333 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.075 prior to 31 May 2020 • 1,833,333 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.10 prior to 31 May 2021 The fair value of the options at grant date has been estimated using a trinomial option valuation model, taking into account the terms and conditions upon which the options were granted. The following assumptions were used: Immediately vesting Exercise price Expected volatility Risk-free interest rate Expected life of share options (days) Grant date share price Fair value per option $0.05 50% 2.07% 1,008 $0.05 $0.0105 Vesting 5 November 2019 $0.05 50% 2.07% 1,008 $0.05 $0.0105 10 day VWAP of $0.075 prior to 31 May 2020 $0.05 50% 2.07% 1,008 $0.05 $0.0101 10 day VWAP of $0.10 prior to 31 May 2021 $0.05 50% 2.07% 1,008 $0.05 $0.0085 (ii) On 4 January 2019 the Group issued 2,000,000 unlisted options over ordinary shares with an exercise price of $0.05 and an expiry date of 30 November 2021 as partial consideration for corporate advisory and broking services provided to the Company and subject to the following vesting conditions: • 333,333 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting immediately • 333,333 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on 5 November 2019. Chesser Resources Limited Annual Report 2019 | 53 39 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 • 666,667 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.075 prior to 31 May 2020 • 666,667 of the incentive options to be issued shall be exercisable at A$0.05 each on or before 30 November 2021, vesting on the Company’s share price achieving a 10-day VWAP of $0.10 prior to 31 May 2021 The fair value of the options at grant date has been estimated using a trinomial option valuation model, taking into account the terms and conditions upon which the options were granted. The following assumptions were used: Immediately vesting Exercise price Expected volatility Risk-free interest rate Expected life of share options (days) Grant date share price Fair value per option $0.05 52% 1.72% 1,062 $0.04 $0.0115 Vesting 5 November 2019 $0.05 52% 1.72% 1,062 $0.04 $0.0115 10 day VWAP of $0.075 prior to 31 May 2020 $0.05 52% 1.72% 1,062 $0.04 $0.011 10 day VWAP of $0.10 prior to 31 May 2021 $0.05 52% 1.72% 1,062 $0.04 $0.0095 (iii) On 1 December 2018 the Group granted to employees 1,500,000 unlisted options over ordinary shares on the following conditions: i. 500,000 Options will have an exercise price of A$0.05, an expiry of 1 December 2022 and will vest on 1 December 2019. ii. 500,000 Options will have an exercise price of A$0.05, an expiry of 1 December 2022 and will vest on 1 December 2020. iii. 500,000 Options will have an exercise price of A$0.075, an expiry of 1 December 2022 and will vest on 1 December 2021. The fair value of the options at grant date has been estimated using a trinomial option 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 Fair value per option Vesting 1 December 2019 $0.05 50% 1.92% 1,461 $0.04 $0.0135 Vesting 1 December 2020 $0.05 50% 1.92% 1,461 $0.04 $0.0135 Vesting 1 December 2021 $0.075 50% 1.92% 1,461 $0.04 $0.009 (iv) On 15 March 2019 the Group issued 600,000 Loan Funded Shares to a Director. The Director was granted an interest free limited recourse loan to assist in the purchase of Shares, with the Shares acquired at their market value. The loan will be limited recourse so that at any time the Director may divest their Shares in full satisfaction of the loan balance. 54 | Annual Report 2019 Chesser Resources Limited 40 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 In accordance with the requirements of applicable AASB2, the loan funded shares are to be accounted for as an option granted to the employee with an exercise price equal to the market price of the Company’s shares at the grant date. Consequently, the loan funded shares have been valued using an option pricing model using the following inputs: Exercise price Expected volatility Risk-free interest rate Term Suboptimal exercise factor Grant date share price Fair value per option 17. Loss per share Loan funded shares $0.04 50% 2.07% 2.78 years 2.50 $0.04 $0.01 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 2019 $ (0.95) (0.95) 2018 $ (0.49) (0.49) (2,018,453) (957,352) Shares Shares 212,934,354 193,900,406 212,934,354 193,900,406 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. Chesser Resources Limited Annual Report 2019 | 55 41 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 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 2019 and 30 June 2018 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 2018 2019 $ $ Chesser Resources Limited (2,406,802) (2,406,802) 1,148,498 3,880,894 5,029,392 96,894 96,894 (874,009) (874,009) 2,297,472 3,281,904 5,579,377 81,581 81,581 4,932,498 5,497,797 10,636,305 2,053,981 (7,757,788) 4,932,498 8,840,512 2,008,271 (5,350,986) 5,497,797 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 56 | Annual Report 2019 Chesser Resources Limited 42 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 Contingent liabilities of the parent entity c) The parent entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018. Contractual commitments for capital expenditure d) The parent entity did not have any contractual commitments for capital expenditure as at 30 June 2019 (2018: $nil). Subsidiaries 19. 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 2019 % - - 2018 % 100 100 100 100 100 100 100 100 100 - Chesser Resources Holding Cooperatief U.A^^ Netherlands Membership Dharana B.V.^^ Netherlands Boya Gold Pty Ltd Australia Boya Minerals Pty Ltd Australia Boya Senegal SAU Senegal Erin Mineral Resources Pty Ltd Australia Erin Minerals Pty Ltd Australia Erin Senegal SAU Senegal Chesser Senegal SAU Senegal Bondou SAU@ Senegal @ Bondou SAU was incorporated during the financial year with Chesser Resources Limited as the founding and sole Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 shareholder. ^^The Company’s Netherlands subsidiaries were wound up during the financial period. 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 on arm’s length commercial terms. As at 30 June 2019 the total amount owing to O'Loughlins Lawyers was $nil (2018: $nil). The total fees paid to O'Loughlins Lawyers during the year was $Nil (2018: $34,668). 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 2019 $ 2018 $ 1,243,371 2,385,360 Chesser Resources Limited Annual Report 2019 | 57 43 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 b) Reconciliation of cashflows from operating activities 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 prepayments Increase/(decrease) in trade and other payables Net cash outflow from operating activities c) Non-cash investing and financing activities Acquisition of Senegal projects by means of share options Acquisition of Senegal projects by means of share issue Issue of shares in settlement of capital raising costs Issue of loan funded shares 2019 $ 2018 $ (2,018,453) (957,352) 53,379 732,955 (839) 45,710 (41,254) 17,096 17,092 (1,194,314) - - 54,036 30,000 22,151 7,591 12,696 76,000 (27,518) - (65,435) (931,867) 18,000 1,082,856 - - Accounting policy Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management. 58 | Annual Report 2019 Chesser Resources Limited 44 | P a g e NOTES TO THE FINANCIAL STATEMENTS Chesser Resources Limited Notes to the financial statements For the year ended 30 June 2019 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 2019 $ 25,211 66,635 91,846 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 one year but less than five years Later than five years (b) Contingent liabilities 2019 $ - 3,581,586 - 3,581,586 2018 $ 552,594 - 4,090,188 4,642,782 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 Except as noted below, 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: • On 19 September 2019, the Company issued 31,507,295 fully paid ordinary shares at an issue price of $0.06 to raise $1,890,437 before costs. Chesser Resources Limited Annual Report 2019 | 59 45 | P a g e NOTES TO THE FINANCIAL STATEMENTS 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 2019 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, 30 September 2019 60 | Annual Report 2019 Chesser Resources Limited 46 | P a g e DIRECTORS’ DECLARATION The shareholder information set out below was applicable as at 20 September 2019. SHAREHOLDER INFORMATION A. Distribution of securities Analysis of the number of equity securities by size of holding: Unlisted $0.06 options expiring 31 December 2019 - 1 10 11 9 31 4,300,000 Number of holders Unlisted $0.10 options expiring 31 December 2020 - 1 10 11 9 31 4,300,000 Unlisted $0.05 options expiring 30 November 2021 - - - - 5 5 7,500,000 Unlisted $0.05 options expiring 30 November 2022 - - - - 1 1 1,500,000 Listed Shares 88 132 96 260 260 836 280,287,476 Holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total holders Total securities There were 234 holders of less than a marketable parcel of listed shares. Holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total holders Total securities Tranche 1 Performance Shares expiring 12 July 2020 - - - 1 24 25 23,809,524 Tranche 1 Performance Shares expiring 12 July 2021 - - - 1 24 25 23,809,524 Chesser Resources Limited Annual Report 2019 | 61 47 | P a g e SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION B. Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of equity securities are listed below: Name Elliott Services Pty Ltd GP Securities Pty Ltd CPO Superannuation Fund Pty Ltd Calama Holdings Pty Ltd Darroch Family Pty Ltd Jarhamche Pty Ltd Mr Michael Andrew Whiting + Mrs Tracey Anne Whiting Souttar Superannuation Pty Ltd Octifil Pty Ltd AWJ Family Pty Ltd Mase Global Investments Limited Torres Investments Pty Ltd Corporate Property Services Pty Ltd Mr Nicholas Dermott Mc Donald Mr Angus William Johnson + Mrs Lindy Johnson Greenslade Holdings Pty Ltd Jimzbal Pty Ltd Fountain Oaks Pty Ltd Hoeksteen Investments Limited Mr Craig Peter Ball + Mrs Suzanne Katherine Ball Units 13,141,218 11,365,523 8,634,452 7,366,667 6,920,000 5,700,000 5,027,114 4,981,177 4,954,451 4,796,940 4,510,819 4,000,000 3,967,954 3,877,452 3,636,667 3,561,692 3,500,001 3,333,333 3,279,803 3,276,917 109,832,180 % of Units 4.69 4.05 3.08 2.63 2.47 2.03 1.79 1.78 1.77 1.71 1.61 1.43 1.42 1.38 1.30 1.27 1.25 1.19 1.17 1.17 39.19 Unquoted equity securities 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% 62 | Annual Report 2019 Chesser Resources Limited 48 | P a g e SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 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: Holder MGC Pharmaceuticals Ltd 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% Unlisted $0.05 options expiring 30 November 2021 Unlisted $0.05 options expiring 30 November 2022 Option holder Options % of total options on issue Gareth O’Donovan Taycol Nominees Pty Ltd Michael Brown - 2,000,000 3,000,000 5,000,000 - 26.67% 40.00% 66.67%% Options 1,500,000 - - 1,000,000 % of total options on issue 100% - - 100% 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 20 September 2019. 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 No voting rights. Chesser Resources Limited Annual Report 2019 | 63 49 | P a g e SHAREHOLDER INFORMATION CORPORATE DIRECTORY Non-Executive Chairman Non-Executive Director Managing Director Executive Director Board of Directors Mr Simon O’Loughlin Mr Simon Taylor Mr Michael Brown Mr Stephen Kelly Company Secretary Mr Stephen Kelly Registered Office and Principal Place of Business Level 14 167 Eagle 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 64 | Annual Report 2019 Chesser Resources Limited 50 | P a g e CORPORATE DIRECTORY Chesser Resources Limited Annual Report 2019 | 65 Level 14 167 Eagle Street Brisbane QLD 4000 chesserresources.com.au
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