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Annual Report 2017
Our stOry
Clean TeQ has two divisions to its business:
Clean TeQ Metals and Clean TeQ Water.
Clean TeQ Metals includes Clean TeQ’s Syerston
cobalt-nickel-scandium Project. The resource-rich
central west of New South Wales, Australia, is home
to this world-class Project.
Syerston will be the world’s first operation to
exclusively produce high-purity nickel sulphate
and cobalt sulphate; critical new materials essential
for today’s energy storage industry.
Positioned to become a leading supplier to the
fast-growing lithium-ion battery market, Clean TeQ
is committed to being a reliable and valued producer
to the global electric vehicle market.
Scandium will also be produced at Syerston for the
next generation of lightweight aluminium alloys.
Founded in 1990, Clean TeQ has a track record
of innovation in clean technologies spanning
over 25 years. These technologies are being
commercialised and applied across several projects
within Clean TeQ Metals and Clean TeQ Water.
Contents
Our technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Messages from the Co-Chairmen . . . . . . . . . . . . . . . . . . 3
Message from the Managing Director . . . . . . . . . . . . . . 4
The way we work . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Clean TeQ Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Clean TeQ Metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . 95
1
Clean TeQ Holdings Limited Annual Report 2017Our cOmpanyThrough the application of our ion-exchange technologies, we aspire to be a world leader in the supply of metals which lower the environmental burden.We focus on metals that are highly geared to disruptive changes in technologies and markets, particularly in global energy and transport.Innovation is at the core of our philosophy, focused on simplicity in technical solutions to deliver quality, affordable products to our customers. Clean TeQ is powering innovation. Our technology
Clean TeQ’s Clean-iX® continuous ion exchange technology
provides the basis for highly efficient extraction and purification
processes for a range of valuable strategic metals from ores,
tailings, slurries and solutions. In many instances, conventional
processing routes can be economically marginal or pose an
environmental burden that is not sustainable.
One of Clean TeQ’s competitive advantages at its Syerston
Project is gained through the use of its proprietary Clean-iX®
process. Clean-iX® produces metal salts in the primary
extraction phase of processing, thereby saving significant
re-handling and reprocessing costs. It does this by selectively
extracting nickel and cobalt onto a polymer-based ion
exchange resin, and then stripping the metals from the
resin in the form of a sulphate.
Clean TeQ’s continuous ionic filtration technology, CIF®,
uses similar principles to extract pollutants from wastewaters,
making water reuse solutions available to a variety of
industries including power, mining, oil, gas and municipal.
Clean TeQ’s CIF® and NEX™ (Natural Evaporation and
Crystallisation) water treatment systems can be applied
across a range of different applications such as acid
mine drainage, municipal wastewater and industrial
water treatment. China is a highly suitable market for
our technologies, especially in the northern regions, where
water scarcity and water pollution are significant challenges.
2
Messages from the Co-Chairmen
Co-Chairman Mr Jiang Zhaobai
Co-Chairman Mr Robert Friedland
It was with great pride and pleasure that I accepted
the invitation to become Co-Chairman of our company
alongside my good friend Mr Robert Friedland.
The February strategic investment received from Pengxin
Mining this year was an important milestone in advancing
Clean TeQ’s rapid development.
Energy storage represents one of the fastest growing markets
in the world, and this is particularly the case in China. It is
vital that new and reliable sources of raw materials for electric
vehicle batteries and utility-scale energy storage systems are
developed as quickly as possible. It is important that we are
all involved and play a part in facilitating solutions to improve
the lives of millions of people, especially to see millions even
hundreds of millions drive clean green cars in Asia.
The Syerston Project is a strategically important source
of the materials – cobalt and nickel sulphate – that are key
components of energy storage systems which are critical
to achieving such a change in our society. Clean TeQ
is positioned to become a globally significant supplier
to the rapidly expanding lithium-ion battery industry.
I look forward to working with Clean TeQ to support the
rapid development of the Syerston Project and the business
more generally. The coming year will be one of great
progress and prosperity for our business. I commend the
work of my Co-Chairman, our fellow Board members and
our team, and look forward to continuing to help guide an
organisation with such a bright and promising future.
Mr Jiang Zhaobai
Co-Chairman
姜照柏主席致辞：
能获邀与我的好友罗伯特·弗里德兰先生一起成为
Clean TeQ公司的联席主席，我感到十分荣幸。
储能市场是当今世界上增长最快的领域之一，尤其在
中国行业发展突发猛进。伴随着动力电池和大型能源
储存设备的需求快速拉升，如何尽快扩大可靠的原料
供给是全产业的当务之急。重要的是，我们能够帮助
亚洲成千上亿人用上清洁能源汽车，从而为改善人类
生活做出贡献，这是我们此项事业的重大意义所在。
Syerston项目的最终产品为硫酸钴和硫酸镍，这两种材
料皆为储能电池核心材料，具备重要的战略意义，对
改变我们的生活便利性起着举足轻重的作用。Clean
TeQ将紧跟锂电行业发展趋势，致力于改善人类出行便
利性，成为全球重要的锂电原料供应商。
我期待与Clean TeQ的管理层携手，为Syerston项目的迅
速开发提供关键支持，同时共同开拓新能源领域更为
广阔的商业机会。未来一年将是我们取得重大突破的
一年。截至目前，公司的董事会和经营团队呈现了十
分出色的工作表现。我期待能和我们优秀的团队成员
一起，引导这样一家具有无限光明前景的企业走向辉
煌和成功。
姜照柏
The Shanghai-based Pengxin Group is a highly respected
and successful group of diversified businesses operating
across China and around the world. Mr Jiang Zhaobai,
Chairman of Pengxin Group, has become a good
friend and, as Co-Chairman of Clean TeQ, is personally
participating in the achievement of our mutual goals.
Great progress is being made in fast-tracking our Syerston
Project that is set to play a critical role in the electrification
revolution spreading through the world’s transportation and
energy sectors.
Syerston, in the Australian state of New South Wales,
will become the world’s largest, non-Congolese source
of battery-grade cobalt sulphate and nickel sulphate
that are essential for the cathodes of lithium-ion batteries.
With the leadership of Managing Director Sam Riggall,
and the deep experience and resourcefulness of our
implementation team, Clean TeQ will become the world’s
leading supplier of ultra-high-purity raw materials for a new
generation of lithium-ion car and truck batteries.
Clean TeQ’s production will help to reduce the unacceptable
burden of environmental and health impacts from the world’s
reliance on fossil fuels during the past 100 years.
The progress being made by Clean TeQ in our strategy to
significantly disrupt the supply chain of lithium-ion-battery-grade
nickel and cobalt sulphates already is attracting growing
attention in financial markets.
Syerston’s resources also will support a revolution
in high-strength, lightweight, scandium-aluminium alloys.
The project will establish, for the first time, a world-scale,
low-cost and reliable supply of scandium oxide that will
enable the development and adoption of a wide range
of applications for the alloys.
Clean TeQ’s principal assets – Syerston and the company’s
proprietary CIF® and NEX™ water-treatment systems – will
help to bring about positive changes in the way we live,
work and travel.
Our extremely dedicated management and employees
are intently focused on seizing the extraordinary business
opportunities that we see before us.
Mr Robert Friedland
Co-Chairman
Clean TeQ Holdings Limited Annual Report 2017
3
Message from the Managing Director
The year in review has been one of complete transformation
for Clean TeQ. Our Board has been considerably
strengthened with the appointment of Mr Jiang Zhaobai
as Co-Chairman together with Mr Robert Friedland.
Our team has also grown in skills and size, commensurate
with our objectives and goals.
This technical work formed the foundations to securing
our strategic partnership with Shanghai Pengxin Group.
This agreement represented a breakthrough in the development
of Syerston. It provided us with the initial funding required
to fast track the development of Syerston and a strong
partner to assist with our future growth and development.
Within Clean TeQ Metals, our Syerston Project has
been our sole focus during the year in review. Syerston
is a laterite (iron-hosted) mineral resource, rich in cobalt,
nickel and scandium, located 350km west of Sydney,
NSW. Development ready, Syerston will be the first mine
in the world to exclusively produce high-purity cobalt and
nickel sulphate for lithium-ion battery cathodes.
Over the last year, we have progressed the Syerston Project
through feasibility studies and entered into several key strategic
partnerships to enable the rapid development of the Project.
We also made considerable progress in testing and refining
our proprietary processes, which will allow us to produce
high-purity cobalt and nickel sulphate to meet our future
customers’ specifications.
In the latter half of 2016 we released a nickel and cobalt
mineral resource update, which was an important trigger
for the Syerston Project. This new emphasis on the nickel
and cobalt potential of the project was in direct response
to several drivers. These include the opportunity of the
global shift towards electric vehicles and energy storage,
Clean TeQ’s proprietary mineral processing technology
and Syerston’s unique mineralogy.
Completion of the Syerston nickel-cobalt Pre-Feasibility
Study was the next important step, which demonstrated
the robust economic potential of Syerston.
Syerston is an outstanding cobalt-nickel-scandium resource.
Combining this world-class asset with Clean TeQ’s
proprietary processing technology is a clear point of
difference that will allow us to deliver high-purity cobalt
and nickel sulphate end-products at lowest quartile cost.
We have made strong progress towards completion of
the Definitive Feasibility Study. Importantly, we have also
successfully processed 20 tonnes of Syerston ore through
our pilot plant, located in Perth, with positive feedback
from prospective customers about the samples.
Fast-tracking Syerston is an immediate priority. To this end,
considerable work is being done to build out the project
construction and operations team in parallel with completion
of the Definitive Feasibility Study. I look forward to sharing
updates about Syerston’s progress in the coming quarters.
In Clean TeQ Water, the last year has seen some exciting
developments. We have entered into important partnerships
and secured key contracts – all of which highlights the strong
potential for the application of our ion exchange processes
in the field of water treatment.
During the year we formed a Chinese incorporated joint
venture with Jinzhong Hoyo Municipal Urban Investment
& Construction Co., Ltd (Hoyo) to pursue water treatment
opportunities in China’s Shanxi Province using our water
purification technology.
Two autoclaves have been purchased for Clean TeQ’s Syerston Project.
4
This company has been awarded an initial contract to
build, own and operate a Clean TeQ CIF® water treatment
plant. The plant will treat up to 13,000 tonnes of effluent
per day for a 20-year period at a waste water treatment
plant owned by Hoyo.
In May 2017, our wholly owned subsidiary Clean TeQ
Water Pty Ltd won a significant contract with Multotec
Process Equipment Pty Ltd (Multotec) in Oman. The contract
includes the design, procurement and commissioning
of a Clean TeQ proprietary CIF® wastewater treatment
solution at a minerals processing plant currently under
construction. We have also entered into an exclusive
Technology Distribution Agreement with Multotec for
the African continent.
Securing contracts to perform feasibility and engineering
for several ion exchange water treatment systems at mining
or processing operations in Australia and Africa highlights
the strong connection and synergies between our two
business divisions. We are committed to lowering the global
environmental burden and our technology is the enabler.
To this end, I am pleased to report that over the next year
or so we expect to deliver several commercial plants that will
be great demonstration sites for the versatility of Clean TeQ’s
CIF® and NEX™ water treatment systems across a range
of different applications. These include mine drainage,
acid mine drainage, municipal wastewater and industrial
water treatment. China is a primary focus for these technologies,
where water scarcity and water pollution are two of the
greatest socio-economic threats facing the country.
As we grow and are increasingly out in the field, we are
working on implementing the right fit-for-purpose health,
safety and environment (HSE) systems. As we go through
this important process we are thinking holistically about the
concept of HSE, which is embodied in our value of “care”.
I am a firm believer in the importance of culture in enabling
these systems and will be encouraging everyone across
our business to achieve this.
As this report goes to print, Clean TeQ has been included
in the S&P/ASX300 Index – positive recognition that our
outstanding work over the last year is resonating with the
investment market. While the accolade shows we are growing,
it’s the quality of the growth that pleases me most. We are
building a solid foundation for the future, with a highly
capable team in place to deliver on our commitments.
I would like to take this opportunity to thank our retiring
Board member, Roger Harley, for his significant contribution
to our business. Roger has been on the Board for seven
years and has tirelessly shared his experience and deep
insight to help shape our business of today. His hallmark
passion for innovation has been instrumental in the evolution
of Clean TeQ and his contribution will be missed.
I am looking forward to delivering on our key targets
during the coming year, and thank shareholders for their
ongoing support.
Sam Riggall
Managing Director
APWorks, a subsidiary of Airbus Group, has developed the Light Rider (pictured below), a 3D printed
Scalmalloy® (aluminium-magnesium-scandium alloy) electric motorbike which, weighing in at just
35kg, is about 30 per cent lighter than most conventional e-motorcycles. The Light Rider is capable
of going from 0 to 80km per hour in seconds and can travel close to 60km between charges.
Clean TeQ Holdings Limited Annual Report 2017
5
The way we work
Clean TeQ’s vision is to create a
sustainable, value-creating business
through positive innovation and
disruptive change.
Our five values underpin everything we do:
Respect – We are genuine in what we do and say,
taking accountability for our actions, keeping our
promises and instilling confidence in those we work with.
Care – Care for our colleagues, communities, partners,
and the environment ensures a safe place to work,
live and thrive, and underpins our licence to operate.
Togetherness – We achieve success in the way we
work by being connected and collaborative, and our
relationships are built from a position of trust.
Simplicity – We focus our effort on what matters most,
driving actions and decisions to achieve our business
objectives and share value (customer, financial, social
and environment).
Ambition – We are driven to establish new industry
norms through innovation to address global needs
of the future.
Reflecting our commitment to sustainability, we will:
• Ensure the commitments defined in our Sustainability
Policy are applied in all business planning and
decision-making processes.
• Build a strong and positive safety culture based on visible
leadership, ongoing training and access to the right tools
and equipment. We aspire to create a workplace that
ensures everyone goes home safe and well, every day.
The contribution of all members of our organisation is
essential to building this culture.
•
Implement robust management systems across our
businesses, with a commitment to continual improvement.
• Focus on hazard identification and management of risks
to our people, the environment and communities in which
we operate.
• Design, construct and operate our projects to mitigate
or remove environmental impacts, minimise our use
of energy and natural resources, and remediate any
environmental impact of our activities. We respect
the conservation of biodiversity.
• Meet or exceed the regulatory requirements in the
areas in which we work.
• Deliver the highest possible quality products and services.
• Build relationships and work in a spirit of togetherness
with the people and organisations in the areas in
which we operate. These relationships are based
on mutual respect, open and transparent dealings
and lasting commitment.
• Share our values, foster value creation and help
our host communities thrive beyond us.
• Provide equal opportunity and create a diverse
work environment in which everyone is treated
fairly, with respect and can reach their potential.
6
Clean TeQ Water
Clean TeQ Water is providing innovative
wastewater treatment solutions for removing
hardness, desalination, nutrient removal and
zero liquid discharge .
Clean TeQ Water continues to promote and demonstrate
our Continuous Ion Exchange (CIF®) and Natural Evaporation
and Crystallisation (NEX™) technologies with an emphasis
on the Chinese water market, the largest and most rapidly
growing water treatment market in the world.
The sectors of focus include municipal wastewater,
surface water, industrial wastewater and
running wastewater .
CIF® and NEX™ makes a water treatment solution
available to many Chinese industries including power,
mining, oil and gas and municipal.
Contractual highlights of the year in review include:
• CHINA: Via our newly created Joint Venture
with Jinzhong Hoyo Municipal Urban Investment
& Construction Co., Ltd – to build, own and operate
a Clean TeQ CIF® water treatment plant to treat
up to 13,000 tonnes of effluent a day for a 20-year
period at a waste water treatment plant.
• OMAN: Design, procure and commission a
Clean TeQ proprietary CIF® wastewater treatment
solution at a minerals processing plant currently
under construction.
• AUSTRALIA: Install CIF® wastewater treatment
solution to treat tailings water to a standard to
allow discharge at a gold mining operation.
The technology removes toxic pollutants such
as sulphate, antimony and arsenic from
wastewater streams.
• AFRICA: Feasibility and engineering for a Clean-iX®
uranium recovery plant to remove low concentrations
of uranium from process liquor at a copper/cobalt
processing operation.
We anticipate that these opportunities will progress
to commercial supply contracts to deliver a Clean TeQ
water treatment solution.
7
Clean TeQ Holdings Limited Annual Report 2017 Clean TeQ Metals
Clean TeQ specifically targets metals that are
highly geared to disruptive changes in technologies
and markets, particularly in global energy
and transport .
Our Clean-iX® continuous ion exchange process
provides highly efficient extraction and purification
for a range of valuable strategic metals from slurries
and solutions .
We are focused on applying our proprietary ion
exchange processes to the recovery of strategic
metals from ores and tailings where the conventional
routes are economically marginal or pose an
environmental burden that is not sustainable .
Clean TeQ seeks to own, joint venture or develop
assets where the application of our technical
approach unlocks significant value .
AbOUT TH e SyeRSTON P ROjeCT
Clean TeQ’s Syerston Project is a laterite (iron-hosted)
mineral resource, rich in cobalt, nickel and scandium,
located 350km west of Sydney and 100 per cent owned
by Clean TeQ. It is uniquely positioned as one of the
largest and highest-grade sources of cobalt outside Africa.
Once developed, it will be the first operation in the world
to produce high-purity nickel and cobalt sulphate – critical
raw material inputs into the lithium-ion battery cathode market.
Clean TeQ acquired the Syerston Project in 2014. The Project,
located near the township of Fifield in Central West NSW,
is based in one of Australia’s most established mining
jurisdictions. It is well serviced by infrastructure, with road,
rail and power services readily available. The Fifield district
is noted for its intense magnetic anomalism and significant
occurrences of minerals containing cobalt, nickel, scandium
and platinum.
The Syerston Project comprises an exploration licence
and several mining lease applications granted under
the NSW Mining Act, which overlay the project area.
In addition, Clean TeQ owns the freehold land where
the mine and processing facility will be located.
All key approvals for the Project have been secured including
approval of the company’s Environmental Impact Statement,
a secured water allocation and an approved Development
Consent. Syerston is development ready and will be the first
mine developed to exclusively produce high-purity cobalt
and nickel sulphate to supply the lithium-ion battery market.
8
In August 2017 the company signed a binding offtake
agreement with Beijing Easpring Material Technology Co Ltd,
one of the world’s largest producers of high quality cathode
material for the lithium-ion battery industry. The five-year
offtake agreement is for 20 per cent of cobalt and nickel
sulphate production from Clean TeQ’s Syerston Project.
The Syerston resource also hosts a globally significant
resource of scandium. This rare metal is widely regarded
as the most effective alloying element that exists for
aluminium, improving strength, corrosion-resistance and
weldability. However, due to its scarcity, scandium has
rarely been adopted for large-scale industrial applications.
Global scandium oxide production is limited to approximately
15 tonnes per annum. The absence of reliable and secure
long-term production, combined with a high and volatile price,
has constrained the use of scandium to niche applications.
The Syerston Project has the potential to produce up to
170 tonnes per annum scandium oxide as by-product from
cobalt and nickel production, for very low incremental
capital and operating cost. This represents strong potential
for significant economic upside in the Project.
Global lithium-ion
battery production
capacity will
increase by 521%
between 2016
and 2020
CAPACITy IN
CAPACITy IN
2016
2020
NeW CAPACITy
China’s Lib capacity
increasing 6x by 2020
Tesla
28
GWh
174
GWh
Over US$25b committed
globally to new battery
production
“China’s government is forcing the electrification of its own auto industry, and quite
literally so, as the bulk of China’s auto manufacturers are state-owned, in one way
or the other. Message from Beijing: make electric cars, or die.”
Bertel Schmitt, Forbes, 25 November 2016
9
Clean TeQ Holdings Limited Annual Report 2017 Clean TeQ Metals continued
THe eNeRGy Rev OLUTION
As the global automotive and energy storage industries stand
on the edge of a technology and energy revolution, supplies
of cobalt and nickel are becoming increasingly critical as
raw materials in the production of cathodes for the lithium-ion
battery market.
These metals can make up approximately 70 to 80 per cent
of the cost of producing the battery cathode. The global
battery industry already consumes approximately 50 per cent
of global cobalt supply, with demand expected to soar
as the world switches from internal combustion engines
to electric drivetrains. Two-thirds of mined global cobalt
supply comes from the Democratic Republic of Congo.
Importantly, the battery industry cannot directly use cobalt
or nickel in metal form to manufacture battery cathode.
The products must be supplied in the form of metal salts,
usually hydrated metal sulphates such as cobalt sulphate
(CoSO4.7H2O) and nickel sulphate (NiSO4.6H2O).
Clean TeQ’s competitive advantage at Syerston is our
proprietary Clean-iX® process that produces these metal salts
in the primary extraction phase of processing, thereby saving
significant re-handling and reprocessing costs. It does this
by selectively loading nickel and cobalt onto a polymer
ion exchange resin, and then stripping the metals in the
form of a sulphate.
The demand for lithium-ion batteries is anticipated to grow
strongly over the next decade as production of electric
vehicles increases and batteries become an important
component in utility-scale energy storage systems.
The combination of Syerston’s unique mineral resource
and Clean TeQ’s proprietary technology uniquely positions
the company to benefit from the strong forecast growth
in demand for lithium batteries.
A HIGHLy ATTRACTIve INveSTMeNT
CATHODe MARKeT
LITHIUM-ION bATTeRIeS
High-purity nickel and cobalt sulphate are
key raw material inputs for the rapidly
expanding lithium-ion battery industry
RAW MATeRIAL CHALLeNGeS
evolving supply constraints for high-purity
nickel and cobalt sulphate, particularly
with an auditable supply chain
SyeRSTON PROjeCT
A sTRATeGiC sOuRCe OF RAW MATeRiAls FOR THe liTHiuM-iOn bATTeR y inDusTRy
CObALT PLA y
A rare, large and
high-grade cobalt
project outside
Africa
STRATeGIC
jURISDICTION
Customers require
supply options
outside Africa
ATTRACTIve
eCONOMICS
First quartile
cost position with
39-year mine life
DeveLOPMeNT
ReADy
All key approvals
and infrastructure
in place
10
vALUe CHAIN
bATTeRIeS ReqUIRe Key MeTAL PRODUCTS
uPstrEAM
RAW
MATeRIALS
lithium
Cobalt
Graphite
nickel
DOWNstrEAM
COMPONeNTS
bATTeR y
PACKS
APPLICATIONS
Precursor
Cathode
Anode
electrolyte
Cells:
Cylindrical
Prismatic
Pouch
small (4–7kWh)
Mid (10–100kWh)
large (>500kWh)
smartphones
eVs
Residential
Commercial
HIGHLIGHTS OF THe ye AR IN Rev IeW
Excellent progress was made in advancing the development
of the Syerston Project during the year in review.
Key milestones include:
• October 2016 – Completed the Pre-Feasibility Study for
the Syerston cobalt-nickel-scandium Project. The findings
were exceptionally positive. The Study was based on
a throughput capacity of 2.5Mtpa of autoclave ore feed
from Syerston’s near-surface resource for life of mine,
focusing on an initial 20-year period.
• November 2016 – A Definitive Feasibility Study (‘DFS’)
was commenced in late 2016 and targets completion
in Q4 2017. The DFS will be used to assess the definitive
economics of the Project for financing as well as
providing the plan for the implementation of the Project.
As part of the DFS, Clean TeQ’s Resin-in-Pulp (RiP®) pilot
plant at ALS Metallurgy in Perth was recommissioned.
The plant processed 20 tonnes of Syerston ore to provide
test work data to feed into the DFS and produce
cobalt and nickel sulphate samples for customer testing
and validation.
• February 2017 – Strategic partnership with and
A$81m placement to Pengxin Mining.
• March 2017 – ASX All Ordinaries index inclusion.
11
Clean TeQ Holdings Limited Annual Report 2017
Contents
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
lndependent Auditor’s Report
Shareholder Information
13
38
39
41
42
43
44
86
87
92
The company’s 2017 Corporate Governance Statement was released to the ASX on 25th August 2017 and is available
at www .cleanteq.com
12
Directors’ Report
For the year ended 30 June 2017
The directors present their report, together with the financial
statements, for the consolidated entity consisting of Clean TeQ
Holdings Limited (referred to hereafter as the ‘Parent Entity’,
‘the Company’ or ‘Clean TeQ’) and the entities it controlled
(referred to hereafter as the ‘Consolidated Entity’), for the
financial year ended 30 June 2017, and the auditor’s
report thereon.
Directors
The following persons were directors of the Company
during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Robert Friedland
(Co-Chairman and Non-Executive Director
– appointed 8 September 2016)
Jiang Zhaobai
(Co-Chairman and Non-Executive Director
– appointed 24 April 2017)
Sam Riggall
(Managing Director)
Li Binghan
(Non-Executive Director – appointed 24 April 2017)
Eric Finlayson
(Independent Non-Executive Director)
Roger Harley
(Independent Non-Executive Director)
Ian Knight
(Independent Non-Executive Director)
Stefanie Loader
(Independent Non-Executive Director
– appointed 28 June 2017, effective 1 July 2017)
Michael Spreadborough
(Independent Non-Executive Director
– appointed 8 December 2016)
Peter Voigt
(Executive Director
– resigned as a Director effective 30 June 2017)
Principal activities
During the financial year the principal continuing activities of
the Consolidated Entity consisted of:
• The ongoing development and commercialisation of the
Company’s proprietary Continuous Ionic Filtration (‘CIF®’)
and Macroporous Polymer Adsorption (‘MPA®’) resin
technologies for application in the purification and
recycling of industrial and mining waste waters
(‘Water Division’); and,
• The ongoing development and use of the Clean-iX® resin
technology for application in the extraction and purification
of a range of resources in the mining industry including
base metals, precious metals and rare earth elements
and through the development of the Consolidated Entity’s
Syerston Nickel-Cobalt-Scandium Project in New South
Wales (‘Metals Division’).
There have been no other significant changes in the nature
of the Consolidated Entity’s activities during the financial year.
Dividends
There were no dividends paid, recommended or declared
during the current or previous financial year.
Review of Operations
The loss for the Consolidated Entity after providing for income
tax amounted to $12,184,000 (2016: loss after tax of
$6,423,000).
During the financial year ended 30 June 2017, the
Consolidated Entity’s revenue from continuing operations
increased to $1,612,000 (2016: $1,454,000) primarily
due to an increase in contract income and interest income
received in the current period.
The continuing development of the Syerston Project resulted
in $13,619,000 of expenditure being capitalised as an
exploration and evaluation asset during the financial year.
This expenditure, along with the net cash outflows from
operating activities of $1,504,000, was financed largely
by capital raisings totalling $97,661,000 after issue costs.
Revenues from continuing operations were low during the
financial year due to the fact that the Consolidated Entity’s
technologies remain at the early stages of commercialisation
and as a result of the Syerston Project being at the pre-
production development phase.
As a result of the above, the Consolidated Entity’s net assets
increased during the financial year by $90,659,000 to
$113,384,000 (2016: $22,725,000). Working Capital,
being current assets less current liabilities, amounts to a surplus
of $85,671,000 (2016: $9,361,000), with cash reserves
increasing from $7,226,000 to $88,863,000 during the
financial year.
Metals Division
The key focus for the Metals Division was advancing the
development of the Consolidated Entity’s Syerston Project
in New South Wales, the background of which is discussed
further below.
A Feasibility Study for a small scale Scandium Project at
Syerston was completed in August 2016. The proposed
scandium project involved mining and processing ore from
a number of small pods with exceptionally high grades of
scandium on the periphery of the larger nickel/cobalt resource.
That Feasibility Study confirmed the robust economics of an
operation to produce approximately 50 tonnes per annum
of scandium oxide. For full details see the ASX announcement
dated 30 August 2016.
13
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
In addition, the Company completed a Pre-Feasibility Study
(‘PFS’) to assess the economics of a large scale operation
at Syerston to produce nickel sulphate and cobalt sulphate
products specifically targeted at the fast-growing lithium
ion battery (‘LiB’) market.
The PFS assessed the economics of a mine with a designed
throughput capacity of 2.5Mtpa of autoclave ore feed from
Syerston’s near-surface resource for life of mine, focusing
on an initial 20-year period.
Table 1 below provides a summary of the key parameters
and outcomes of the PFS Base Case, for full details see
the ASX announcement dated 5 October 2016.
Table 1 – Syerston Nickel Cobalt Project PFS Base Case Overview
Parameter
Autoclave Throughput1
Life of Mine
Initial operating period
Autoclave Feed Grade2 (Year 3-20 average)
Production (Years 3-20 average)
Production (Years 3-20 average)
Recovery (Years 3-20 average)
Nickel price assumption3
Cobalt price assumption3
Exchange Rate
Total Capital Cost4
C1 Cash Cost (Year 3-20 average) 5
Net Present Value (NPV8) – post tax6
Internal Rate of Return (IRR) – post tax
Notes:
Nickel
Cobalt
Nickel sulphate
Cobalt sulphate
Contained nickel
Contained cobalt
Nickel
Cobalt
before Co credits
after Co credits
Assumption / Output
2.5Mtpa
39 years
20 years
0.80%
0.14%
85,135tpa
15,343tpa
18,730tpa
3,222tpa
94.2%
93.0%
US$7.50/lb
US$12.00/lb
AUD/USD 0.75
US$680M (A$906M)
US$2.96/lb Ni
US$0.89/lb Ni
US$891M (A$1,188M)
25%
1. Designed processing throughput rate following a 24-month commissioning and ramp up period.
2. Includes pit selection, dilution and mining factors
3. Based on bank/broker long-term consensus market pricing for metal content only.
Does not include premiums that are typically paid in the market for battery-grade nickel and cobalt sulphate
4. Includes a US$62M (A$83M) contingency on capital costs
5. C1 cash cost excludes potential by-product revenue from scandium oxide sales and royalties
6. Post tax, 8% discount, 100% equity, real terms
Following an initial commissioning and ramp up period,
the Nickel & Cobalt Project was estimated to generate free
cashflow of approximately US$300 million (A$400 million)
per annum over years 3-10 at bank/broker long term
consensus forecast nickel and cobalt prices and a
AUD/USD 0.75 exchange rate.
The large scale nickel & cobalt resource assessed through
the PFS also hosts significant quantities of scandium, however,
given the scandium market is still developing, the PFS Base
Case assumed no scandium revenue. In order to demonstrate
the significant upside potential that exists from producing
scandium oxide as a by-product of nickel and cobalt
production, the Company prepared an Upside Case which
includes the capital and operating cost and revenue impact
of scandium production. The Upside Case analysis, which
includes the impact of sales of 50 tonnes per annum of
scandium oxide, is presented in Table 2 below.
14
Table 2 – Syerston Nickel Cobalt Project Upside Case Overview
Parameter
Autoclave Feed Grade1 (Years 3-20 average)
Recovery (Years 3-20 average)
Production (Years 3-20 average)
Scandium oxide price assumption
Additional Capital Cost for Scandium Plant
Upside Case Total Capital Cost
C1 Cash Cost (Year 3-20 average) 2
Net Present Value (NPV8) – post tax
Internal Rate of Return (IRR) – post tax3
Notes:
1. Includes pit selection, dilution and mining factors applied
2. C1 cash cost does not include royalties
3. Post tax, 8% discount, 100% equity, real terms
Table 2 above highlights the potential for scandium to provide
an important source of additional revenue for the Nickel /
Cobalt Project. The incremental capital and operating cost
of generating that additional scandium revenue is much
lower than could be achieved by construction of a
small-scale, stand-alone plant, focused only on extraction
from the highest-grade scandium zones surrounding the
nickel / cobalt resource. As scandium recovery would form
part of the primary processing route, it allows for a reliable
supply of significant quantities of scandium oxide to customers
for the life of the mine. At 2.5Mtpa of ore throughput, the
plant has the potential, on average, to produce circa 170tpa
of scandium oxide over the first twenty years of operation.
The mine plan presented in the Upside Case does not rely
on the vast majority of the very high grade scandium resource
which sits adjacent to the nickel/cobalt deposit (for full details
of the scandium only resource see the ASX announcement of
17 March 2016). This provides the Company with the ability
to readily and significantly increase scandium production in
future years for virtually no additional capital cost by adjusting
feed to the plant. It also sends a very strong signal to
potentially high-volume customers of scandium that long-term,
low cost and reliable supply will be delivered to the market.
Given the favourable Project economics demonstrated by
the PFS and the strong offtake demand that is currently
being indicated by potential customers in the LiB sector, the
Company has commenced a Definitive Feasibility Study (‘DFS’)
for the Project. The DFS will be used to assess the definitive
economics of the Project for financing as well as providing
the plan for the implementation of the Project.
As part of the DFS activities the Company re-commissioned
its Resin-in-Pulp (RiP ®) pilot plant at ALS Metallurgy in Perth.
The purpose of the pilot campaign was to generate samples
of nickel and cobalt sulphate eluate solution for further testing
to confirm the flow sheet design for the refinery section of the
Scandium
Scandium
Scandium oxide
before Co & Sc credits
after Co & Sc credits
Assumption / Output
53ppm
85%
50tpa Sc2O3
US$1,500/kg
US$15M (A$20M)
US$695M (A$927M)
US$3.12/lb Ni
-US$0.76/lb Ni
US$1,233M
30%
processing plant and to provide samples of nickel sulphate
and cobalt sulphate for potential offtake customers.
The pilot campaign successfully processed a bulk sample
of approximately 20 tonnes of Syerston ore to produce
samples of high purity nickel and cobalt sulphate. Nickel
and cobalt sulphate (salts) are the final high value product
which will be sold to manufacturers of lithium ion battery
cathode precursor material.
In June and July 2017, the production of samples of high
purity nickel sulphate (NiSO4.6H2O) and cobalt sulphate
(CoSO4.6H2O) was finalised from the processing of
Syerston ore at the Company’s nickel and cobalt recovery
and purification demonstration plant at ALS Metallurgy in
Perth. The samples were dispatched to a number of potential
customers in the lithium ion battery supply chain for testing
and analysis.
For nickel and cobalt sulphate offtake, Clean TeQ’s objective
is to agree binding long term nickel and cobalt sulphate sales
contracts with a small number of high calibre counterparties
during 2017 while the DFS is being completed. Clean TeQ
has met with numerous companies in the LiB cathode supply
chain from traders and cathode makers through to electric
vehicle manufacturers.
The Company has received strong expressions of interest
for offtake of the Syerston nickel and cobalt sulphate materials
from a number of these parties. A number of potential offtake
counterparties visited the pilot plant in Perth and the site in
NSW during late 2016 and early 2017. Discussions are
ongoing. The Company also continues to progress a range
of activities which are aimed at facilitating and promoting the
use of scandium aluminium alloys for high strength light weight
applications with the ultimate aim of securing offtake contracts
for scandium oxide, given the highly value accretive impact
of producing scandium as a by-product to nickel and cobalt
sulphate production.
15
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Water Division
The Clean TeQ Water Division continues to promote and
demonstrate our Continuous Ion Exchange Technology (CIF®)
with a particular emphasis on the Chinese water market, the
largest and most rapidly growing water treatment market in
the world. CIF® makes available a water treatment solution
to many Chinese industries including power, mining, oil and
gas and municipal.
Clean TeQ has formed a Chinese incorporated joint venture
(JV Company) with Jinzhong Hoyo Municipal Urban Investment
& Construction Co., Ltd (Hoyo) to pursue water treatment
opportunities in China’s Shanxi Province utilising Clean TeQ’s
water purification technology. As previously announced, the
JV Company has been awarded an initial contract to build,
own and operate a Clean TeQ CIF ® water treatment plant
to treat up to 13,000 tonnes of effluent per day for a 20 year
period at a waste water treatment plant owned by Hoyo.
The proposed project contract provides for the JV Company
to be paid a service fee of 1RMB per tonne of water treated,
subject to a minimum payment for 9,000 tonnes per day.
Clean TeQ has actively pursued a build, own and operate
business model, targeting generation of long term sustainable
cashflows and favourable economic returns. Design and
engineering of the plant has been completed and the plans
have been submitted to the Shanxi Urban & Rural Planning
Design Institute for approval. The Design Institute has
provided an initial indication that approval of the plans
will be forthcoming, allowing for an environmental impact
assessment to be commenced. Final formal approval of the
plans and approval of the environmental impact assessment
is anticipated to be received shortly with construction
anticipated to commence in late 2017.
In May 2017, the Company announced that its wholly
owned subsidiary Clean TeQ Water Pty Ltd had been
awarded a significant contract by Multotec Process
Equipment Pty Ltd (Multotec) to design, procure and
commission a Clean TeQ proprietary Continuous Ionic
Filtration (CIF ®) wastewater treatment solution at a minerals
processing plant currently being constructed in Oman.
The Company has also executed an exclusive Technology
Distribution Agreement with Multotec for the African continent.
Multotec is a leading provider of high-quality mineral
processing equipment and solutions to the mining, mineral
processing, petrochemical and power generation industries.
Multotec has branches throughout Africa, Australia, Asia,
South America and North America. Over four decades
of developing, manufacturing, installing and maintaining
processing equipment has made Multotec a global leader
in custom, application specific mineral processing technology.
16
The Company has also been contracted on commercial terms
to perform feasibility and engineering for a number of other
ion exchange water treatment systems including:
• A CIF ® wastewater treatment solution to treat tailings
water to a standard to allow discharge at a gold
mining operation in Australia. The technology removes
toxic pollutants sulphate, antimony and arsenic from
a waste water stream; and
• A Clean-iX® uranium recovery plant to remove low
concentrations of uranium from process liquors at a
copper/cobalt processing operation in Africa.
Upon delivery of the feasibility and engineering, the Company
is confident that at least one of these opportunities will result
in a commercial supply contract to deliver a Clean TeQ
water treatment solution.
In February 2017, the Company agreed a partnership with
Ionic Industries Ltd for the development and commercialisation
of graphene-oxide based water filtration technologies. Ionic
is a commercialisation partner of Monash University and
has secured a licence from Monash for intellectual property
relating to a range of graphene oxide based technologies.
Graphene oxide (‘GO’) is regarded as a highly versatile
industrial material with its ability to form super-strong ultra-thin
2-D matrices.
Researchers at Monash University have developed a method
of producing GO which is suitable for the production of
water and wastewater filtration products. The method has
the potential to be readily and economically scaled to meet
commercial needs. The partnership will see Clean TeQ funding
a $200,000 programme of works for product development
and testing with the Monash research team and at Clean
TeQ’s facilities.
Subject to Clean TeQ successfully completing this product
development and testing phase prior to 30 September 2018,
Clean TeQ may, at its election, form a joint venture with
Ionic (75/25 Clean TeQ/Ionic) for the purpose of bringing
the products to market in the field of water purification.
The joint venture will be funded by the parties according
to their pro-rata equity share.
Significant changes in the state of affairs
On 8 September 2016, the Company announced the
appointment of Mr Robert Friedland, as Co – Chairman
and non-executive director.
During the past 20 years of his career, Mr. Friedland has
founded and led two prominent, international mining entities
under the Ivanhoe Mines banner. He is Executive Chairman
and a director of the present Africa-focused Ivanhoe Mines
Ltd., which is building two major new mines in South Africa
and the Democratic Republic of Congo. It formerly operated
under the Ivanplats name after its founding in 1998 and
later assumed the Ivanhoe name in 2013.
The original Ivanhoe Mines, founded in 1994, had extensive
mining and exploration interests in the Asia Pacific Region.
Mr. Friedland was Executive Chairman and Chief Executive
Officer of the initial Ivanhoe Mines until 2012, and also was
President from 2003 to 2008. He directed Ivanhoe Mines’
assembly of a portfolio of interests in several countries over
16 years and led the company’s discoveries and initial
development of the Oyu Tolgoi copper-gold-silver deposits
in southern Mongolia. Rio Tinto acquired a controlling
interest in the company in 2012; the company was required
to relinquish the Ivanhoe name and became Turquoise Hill
Resources, which is continuing its development of Oyu Tolgoi.
Mr. Friedland also is Chairman and President of Ivanhoe
Capital Corporation, his family’s private, Singapore-based
company founded in 1987 that specializes in providing
venture capital, project financing and related services for
international business enterprises, predominantly in the
minerals, energy and communications technologies sectors.
He was inducted into the Canadian Mining Hall of
Fame in 2016.
On 3 November 2016, the Company announced its
agreement to a placement of 38,461,538 new shares
at an issue price of $0.39 per share to raise proceeds
of $15,000,000. Of this placement, 33,333,333 shares
were issued to AustralianSuper, a large Australian institutional
investor. The balance of 5,128,205 shares was issued
to a number of institutional investors who are existing
shareholders and clients of BW Equities.
On 8 December 2016, the Company announced
the appointment of Mr Michael Spreadborough
as a non-executive director.
Mr Spreadborough is a mining engineer with extensive
experience in the development and operation of mineral
resources projects spanning a range of commodities including
copper, gold, uranium, lead, zinc and iron ore. Over the past
20 years Mr Spreadborough has held senior executive roles
with a number of mining companies including Chief Operating
Officer of Sandfire Resources and Inova Resources Ltd (formerly
Ivanhoe Australia), General Manager – Coastal Operations
for Rio Tinto and General Manager – Mining for WMC and
later Vice President – Mining for BHP Billiton at the world-class
Olympic Dam mine in South Australia.
On 27 February 2017, the company announced the
appointment of Mr Scott Magee as Project Director for
the Syerston Nickel/Cobalt/Scandium Project. Mr Magee
is a project management executive with 28 years’
experience in project development, project delivery
and project governance. Prior to joining Clean TeQ,
Mr Magee worked for BHP Billiton as the Vice President
Projects where he was responsible for project governance
and establishing best practice processes across a $15 billion
annual capital projects portfolio. Prior to BHP Billiton,
Mr Magee held engineering and project management
roles with Hatch and operational roles with Alcoa.
On 28 March 2017, the company announced the issue
of shares to Pengxin International Mining Co. Ltd. (‘Pengxin
Mining’), part of the Shanghai Pengxin Group Co. Ltd
(‘Shanghai Pengxin Group’), Pengxin Mining agreed to
make an initial private placement investment of approximately
$81,000,000 in Clean TeQ, to be used primarily for the
development of Syerston, by purchasing 92,518,888 new
Clean TeQ shares at an issue price of A$0.88 per share.
On 24 April 2017, the Company announced the
appointment of Mr Jiang Zhaobai as Co-Chairman
and non-executive director.
Mr Jiang is an engineer with an EMBA from China Europe
International Business School. He is currently the Chairman
of Shanghai Pengxin Group Co Ltd. He is also the Executive
Chairman of Shanghai Entrepreneurs Association, the Vice
President of China Non-governmental Enterprise Directors
Association and Economic Advisor to China Development
Bank. Since graduating from university in the 1980s, Mr Jiang
has participated in numerous engineering and construction
projects. In 1988, he founded his own real estate development
company. In 1997, Mr Jiang founded the Shanghai Pengxin
Group Co Ltd, with Mr Jiang as the founding Chairman,
a role he continues in as at this date.
Under Mr Jiang’s leadership, Shanghai Pengxin Group has
successfully developed a number of significant property
projects, amounting to a total of six million square meters.
Starting from real estate development including both
residential and commercial as well as hotel industry,
the group has diversified into a range of other sectors
including modern agriculture, mining, environmental science
& technology and financial investment. The group is now
a diversified conglomerate with controlling interests in four
listed companies in China.
On 24 April 2017, the Company announced the appointment
of Mr Li Binghan as a non-executive director.
Mr Li is Director of the Risk Control & Legal Department
of Pengxin Mining. Mr Li commenced his career with
Henan Province Judicial Bureau in 1996. After five years
in the Judicial Bureau, Mr Li began his legal career with
Shanghai Pudong Law firm in 2003, focusing on foreign
direct investment and mergers and acquisitions. In 2012
Mr Li joined Shanghai Co-effort Law Firm, working in the
field of intellectual property law. Mr Li joined Pengxin Mining
in 2015. Mr Li has a Masters in International Law, Law School,
Fudan University, a Masters in Intellectual Property Law, from
the Law School, of the Queen Mary University of London,
and a Qualification Certificate for Attorney at Law and
a Qualification Certificate for Patent Attorney.
17
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
On 23 May 2017, the Company announced that the NSW
Government Department of Planning and Environment had
approved Clean TeQ’s application to modify the Development
Consent for the Syerston Nickel/Cobalt Scandium Project in
NSW. The Development Consent confirms the approval for
the Company to carry out mining operations at the mine for
21 years from the day upon which mining operations start in
order to produce and transport up to 180 tonnes of scandium
oxide and up to 40,000 tonnes of nickel and cobalt metal
equivalents (as either sulphide or sulphate precipitate products)
from the mine.
On 28 June 2017, the Company announced the appointment
of Ms Stefanie Loader as a non-executive director, effective
1 July 2017.
Ms Stefanie (Stef) Loader is a mining industry executive with
broad international experience having worked in exploration,
project evaluation and development, mining and corporate
roles across seven countries and four continents. Residing
in Central West NSW, Stef was most recently Managing
Director of Northparkes Copper and Gold Mine for CMOC
International. She successfully transformed the business to be
one of the lowest cost copper producers globally while also
managing the sale and transition of ownership from Rio Tinto
to CMOC in 2013-14. Ms Loader has a Bachelor of Science
with Honours in Geology from the University of Western
Australia and a Graduate Certificate in Applied Statistics
from Murdoch University.
Mr Peter Voigt resigned as a Director effective 30 June
2017. Mr Voigt will remain in his executive role as Chief
of Technology. Mr Voigt founded the Company in the early
1990s and led the company through its initial public offering
in 2007. Mr Voigt has been instrumental in the identification,
acquisition and development of the Company’s suite of ion
exchange technologies.
There were no other significant changes in the state of
affairs of the Consolidated Entity during the financial year.
Matters subsequent to the end
of the financial year
No matter or circumstance has arisen since 30 June 2017
that has significantly affected, or may significantly affect
the Consolidated Entity’s operations, the results of those
operations, or the Consolidated Entity’s state of affairs
in future financial years.
Likely developments and expected results
of operations
The Consolidated Entity will continue to pursue its objectives
of advancing the development of the Syerston Project as well
as its suite of technology applications for the treatment of
water for use by the water, municipal, industrial and resources
sectors. This will include further commercial development of the
applications that are both currently in use and in development
and advancing the market penetration strategies to enable the
Consolidated Entity to fully exploit the potential of its products
in the Metals and Water Divisions.
The Consolidated Entity intends to fund its development
through capital raisings as well as operational revenues from
contracts entered into, and through securing additional
contracts throughout the year. The Consolidated Entity will
consider both debt and equity funding should the need arise.
Further information on likely developments in the operations of
the Consolidated Entity and the expected results of operations
have not been included in this report because the directors
believe it would be likely to result in unreasonable prejudice
to the Consolidated Entity.
Environmental regulation
The Consolidated Entity has an interest in the exploration
licence disclosed in note 17. The authorities responsible for
the granting of these licences require the tenement holder to
comply with the terms and conditions of the licence and all
directions given to it by those authorities.
The terms and conditions of any exploration licence typically
include certain environmental conditions, covering such matters
as Aboriginal cultural heritage, threatened species, habitat,
heritage items, trees and vegetation, roads and tracks,
groundwater, streams and watercourses, erosion and sediment
controls, preventing and monitoring pollution, refuse, chemicals,
fuels and waste materials, transmission lines and pipelines,
drilling, rehabilitation of the land, environmental reporting,
and site security. There have been no known breaches
of the Consolidated Entity’s licence conditions or any other
environmental regulation during the financial year or up
until the date of this report.
18
Information on directors
Name:
Title:
Mr Robert Friedland
Co-Chairman and Non-Executive Director
Qualifications:
Bachelor of Arts in Political Science from Reed College, Oregon, USA
Experience and Expertise:
Mr. Friedland was appointed Co-Chairman of Clean TeQ on 8 September 2016. During the
past 20 years of his career, Mr. Friedland has founded and led two prominent, international
mining entities under the Ivanhoe Mines banner. He is Executive Chairman and a director of
the present Africa-focused Ivanhoe Mines Ltd., which is building two major new mines in South
Africa and the Democratic Republic of Congo. It formerly operated under the Ivanplats name
after its founding in 1998 and later assumed the Ivanhoe name in 2013. The original Ivanhoe
Mines, founded in 1994, had extensive mining and exploration interests in the Asia Pacific
Region. Mr. Friedland was Executive Chairman and Chief Executive Officer of the initial Ivanhoe
Mines until 2012, and also was President from 2003 to 2008. He directed Ivanhoe Mines’
assembly of a portfolio of interests in several countries over 16 years and led the company’s
discoveries and initial development of the Oyu Tolgoi copper-gold-silver deposits in southern
Mongolia. Rio Tinto acquired a controlling interest in the company in 2012; the company
was required to relinquish the Ivanhoe name and became Turquoise Hill Resources, which
is continuing its development of Oyu Tolgoi. Mr. Friedland also is Chairman and President
of Ivanhoe Capital Corporation, his family’s private, Singapore-based company founded in
1987 that specializes in providing venture capital, project financing and related services for
international business enterprises, predominantly in the minerals, energy and communications
technologies sectors. He was inducted into the Canadian Mining Hall of Fame in 2016.
Other current directorships:
Executive Chairman, Ivanhoe Mines Ltd.
Chairman & President, Ivanhoe Capital Corporation
Chairman & Co-Founder, I-Pulse Inc.
Chairman & Chief Executive Officer, High Power Exploration Inc.
Chairman, Pu Neng Energy
Co-Chairman, SK Global Entertainment
Chairman, Ivanhoe Pictures
Ivanhoe Industries & Kietta
Former directorships
(last 3 years):
Special responsibilities:
Nil
Nil
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
94,518,888 fully paid ordinary shares
Nil
Nil
Mr Jiang Zhaobai
Co-Chairman and Non-Executive Director
Qualifications:
EMBA, China International Business School
Experience and Expertise:
Mr Jiang took part in numerous engineering and construction projects following graduation from
university in the 1980’s. He later founded his own real estate development company in 1988.
In 1997, Shanghai Pengxin Group Co., Ltd. was established with Mr Jiang as founding
Chairman and he remains in that role to this date. Under Mr Jiang’s leadership, Shanghai
Pengxin Group has successfully developed a number of significant property projects, amounting
to a total of six million square meters. Starting from real estate development including both
residential and commercial as well as hotel industry, the group has diversified into a range of
other sectors including modern agriculture, mining, environmental science and technology and
financial investment. The group is now a diversified conglomerate with controlling interests in
four listed companies in China. He was appointed a Director of Clean TeQ on 24 April 2017.
19
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Other current directorships:
Chairman of Shanghai Pengxin Group; Executive Chairman of Shanghai Entrepreneurs
Association; Vice President of China Non-governmental Enterprise Directors Association;
Economic Adviser to China Development Bank
Former directorships
(last 3 years):
Special responsibilities:
Nil
Nil
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
92,518,888 fully paid ordinary shares
Nil
Nil
Mr Sam Riggall
Managing Director & Chief Executive Officer
Qualifications:
LLB (Hons), B.Com., MBA
Experience and Expertise:
Mr Riggall is a graduate in law and commerce from Melbourne University and has an
MBA from Melbourne Business School. He was previously Executive Vice President of Business
Development and Strategic Planning at Ivanhoe Mines Ltd. Prior to that Mr Riggall worked
in a variety of roles in Rio Tinto for over a decade covering project generation and evaluation,
business development and capital market transactions. Mr Riggall was appointed to
the Clean TeQ Board and to the position of Chairman on 4 June 2013. Mr Riggall was
appointed Chairman and Chief Executive Officer effective 1 July 2015. Mr Riggall resigned
as Co-Chairman and assumed the role of Managing Director effective 24 April 2017.
Other current directorships:
Syrah Resources Limited
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Nil
Nil
6,917,944 fully paid ordinary shares
8,000,000 unlisted options exercisable at $0.1574 (15.74 cents) per option and 8,000,000
unlisted options exercisable at $0.2305 (23.05 cents) per option and 8,000,000 unlisted
options exercisable at $0.31 (31 cents) per option
Interests in rights:
1,311,025
Name:
Title:
Qualifications:
Experience and Expertise:
Other current directorships:
Former directorships
(last 3 years):
Special responsibilities:
Mr Roger Harley
Independent Non-Executive Director
Mr Harley has a science degree from the University of Melbourne and is a Fellow of the
Australian Institute of Company Directors.
Mr Harley is a founder and principal of independent corporate advisory firm, Fawkner Capital.
Previously he worked for 11 years for Deutsche Bank, and held positions including Director
of Corporate Finance and Director of Equity Capital Markets. His current roles also include
Director of People and Parks Foundation and Trustee of the Alfred Deakin Lecture Trust. Mr
Harley has had various appointments by the Commonwealth Government that related to the
oversight of innovation and venture capital programs and policies. These include membership
of the Pooled Development Funds Registration Board, the Industry Research and Development
Board and Innovation Australia. His previous board positions include Director of Medibank
Private. He was appointed a Director of Clean TeQ on 1 June 2010.
Nil
Nil
Mr Harley is a member of the Audit Committee and Chair of the Nomination
and Remuneration Committee.
Interests in shares:
1,830,812 fully paid ordinary shares (including 455,406 owned by spouse)
20
Interests in options:
750,000 unlisted options exercisable at $0.2712 (27.12 cents) per option; 375,000
unlisted options exercisable at $0.3100 (31.00 cents) per option
Interests in rights:
Nil
Name:
Title:
Mr Ian Knight
Independent Non-Executive Director
Qualifications:
FCA, CPA
Experience and Expertise:
Mr Knight is a graduate in Business Studies and is also a fellow of the Institute of Chartered
Accountants, a member of the Australian Society of Certified Practicing Accountants, an
Associate Fellow of the Australian Institute of Management and a member of the Institute of
Company Directors. His experience includes presenting and working with boards of public,
private and private equity ownership, State and Federal Governments and extensive experience
in strategising and implementing mergers, acquisitions, divestments and capital raising initiatives.
Mr Knight was also formerly a Partner of KPMG where he held the position of Head of
Mergers and Acquisitions and Head of Private Equity for KPMG Corporate Finance. Currently
he is Managing Director of Axsia Group and a partner of nem Australasia Pty Ltd He was
appointed a director of Clean TeQ on 8 July 2013.
Other current directorships:
Graziers’ Investment Company Limited (public unlisted company)
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Nil
Mr Knight is a member of the Nomination and Remuneration Committee and Chair of the
Audit Committee.
1,025,557 fully paid ordinary shares
750,000 unlisted options exercisable at $0.2712 (27.12 cents) per option; 375,000
unlisted options exercisable at $0.3100 (31.00 cents) per option
Interests in rights:
Nil
Name:
Title:
Mr Eric Finlayson
Independent Non-Executive Director
Qualifications:
BSc (Honours) in Applied Geology
Experience and Expertise:
Mr Finlayson is a geologist with over thirty years’ experience in Australia and overseas.
Over 24 years with Rio Tinto Mr Finlayson held a number of key executive roles including
regional exploration manager for Canada, Director of Exploration for the Australasian region
and 5 years as Global Head of Exploration based in London. Mr Finlayson also served as
CEO of Rio Tinto Coal Mozambique following Rio Tinto’s takeover of Riversdale Mining in 2011.
Mr Finlayson is currently President of High Power Exploration. He was appointed a director
of Clean TeQ on 16 September 2015.
Other current directorships:
Cordoba Minerals Corp. and Kaizen Discovery Inc.
Former directorships
(last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Apollo Minerals Limited (resigned 7 July 2016)
Mr Finlayson is a member of the Nomination and Remuneration Committee and Audit
Committee
Nil
750,000 unlisted options exercisable at $0.2712 (27.12 cents) per option; 375,000
unlisted options exercisable at $0.3100 (31.00 cents) per option
Interests in rights:
Nil
21
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Name:
Title:
Mr Michael Spreadborough
Independent Non-Executive Director
Qualifications:
BEng (Mining Engineering); MBA, AICD
Experience and Expertise:
Mr Spreadborough is a mining engineer with extensive experience in the development and
operation of mineral resources projects spanning a range of commodities including copper,
gold, uranium, lead, zinc and iron ore. Over the past 20 years Mr Spreadborough has
held senior executive roles with a number of mining companies including Chief Operating
Officer of Sandfire Resources and Inova Resources Ltd (formerly Ivanhoe Australia), General
Manager – Coastal Operations for Rio Tinto and General Manager – Mining for WMC
and later Vice President – Mining for BHP Billiton at the world-class Olympic Dam mine
in South Australia. He was appointed a director of Clean TeQ on 8 December 2016.
Other current directorships:
Nusantara Resources Limited
Former directorships
(last 3 years):
Nil
Special responsibilities:
Chair of the Sustainability and Risk Committee
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and Expertise:
Nil
Nil
Nil
Mr Li Binghan
Non-Executive Director
Masters in International Law, Law School, Fudan University, Masters in Intellectual Property Law,
Law School, Queen Mary University of London and a Qualification Certificate for Attorney at
Law and Qualification Certificate for Patent Attorney
Mr Li is a lawyer with more than 20 years’ experience. He is currently the Director of the
Risk Control and Legal Department of Pengxin Mining. He commenced his career with Henan
Province Judicial Bureau in 1996. After five years in the Judicial Bureau, Mr Li began his legal
career with Shanghai Pudong Law firm in 2003, focusing on foreign direct investment and
mergers and acquisitions. In 2012 Mr Li joined Shanghai Co-effort Law Firm, working in the
field of intellectual property law. Mr Li joined Pengxin Mining in 2015. He was appointed
a Director of Clean TeQ on 24 April 2017.
Other current directorships:
Former directorships
(last 3 years):
Nil
Nil
Special responsibilities:
Member of the Sustainability and Risk Committee
Nil
Nil
Nil
Ms Stefanie Loader
Independent Non-Executive Director
Bachelor of Science with Honours (Geology), University of Western Australia, Graduate
Certificate in Applied Statistics, Murdoch University; Member AIG (post nominal MAIG);
Graduate Member AICD (post nominal GAICD)
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
22
Experience and Expertise:
Ms Stefanie (Stef) Loader is a mining industry executive with broad international experience
having worked in exploration, project evaluation and development, mining and corporate roles
across seven countries and four continents. Residing in Central West NSW, Ms Loader was
most recently Managing Director of Northparkes Copper and Gold Mine for CMOC
International. A geologist and statistician by training, Ms Loader began her career as an
exploration geologist in Western Australia and was then part of the discovery team for the
Khanong copper deposit at Sepon in Laos in the late 1990s. After exploration and evaluation
roles in the Americas, Ms Loader was assigned to the office of Rio Tinto Chief Executive in
London where she then worked on global exploration strategy and prioritisation as Exploration
Executive. Ms Loader also led the development of the Bunder diamond project in India for four
years, including the signing of a landmark development agreement with the State of Madhya
Pradesh in support of the project. Ms Loader was appointed a Director of Clean TeQ on
28 June 2017, with effect from 1 July 2017.
Other current directorships:
Former directorships
(last 3 years):
Nil
Nil
Special responsibilities:
Member of the Sustainability and Risk Committee
Interests in shares:
Interests in options:
Interests in rights:
Nil
Nil
Nil
Other current directorships’ quoted above are current
directorships for listed entities only and excludes directorships
in all other types of entities, unless otherwise stated.
‘Former directorships’ quoted above are directorships
held in the last 3 years for listed entities only and
excludes directorships in all other types of entities,
unless otherwise stated.
Company Secretary
Ms Melanie Leydin was appointed to the position of
Company Secretary on 7 July 2011. Ms Leydin is a
Chartered Accountant and principal of Leydin Freyer, a
chartered accounting firm specializing in accounting and
company secretarial services. Ms Leydin has over 20 years’
experience in the accounting profession and is company
secretary for a number of junior mining, bioscience,
biotechnology and IT entities listed on ASX.
Meetings of Directors
The number of meetings of the Company’s Board of Directors
(‘the Board’) and of each Board committee held during the
financial year ended 30 June 2017, and the number of
meetings attended by each director were:
Robert Friedland
Jiang Zhaobai
Sam Riggall
Peter Voigt
Roger Harley
Ian Knight
Eric Finlayson
Mike Spreadborough
Li Binghan
Full Board Meeting
Audit Committee
Nomination and
Remuneration Committee
Attended
Held
Attended
Held
Attended
Held
3
–
5
5
5
5
5
3
1
3
1
5
5
5
5
5
3
1
–
–
–
–
2
2
2
–
–
–
–
–
–
2
2
2
–
–
–
–
–
–
3
3
3
–
–
–
–
–
–
3
3
3
–
–
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
No meetings of the board were held during the period that Stefanie Loader was appointed as a director and the end of the
financial year.
23
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Remuneration report (audited)
The remuneration report, which has been audited, outlines
the director and executive remuneration arrangements for
the Consolidated Entity and the Company, in accordance
with the requirements of the Corporations Act 2001 and
its Regulations. Remuneration is referred to as compensation
throughout the Remuneration Report.
The Remuneration Report is set out under the following
main headings:
A. Principles used to determine the nature
and amount of remuneration
B. Details of remuneration
C. Service agreements
D. Share-based compensation
E. Additional information
F. Additional disclosures relating
to key management personnel.
A. Principles used to determine the nature and
amount of remuneration (audited)
The Board of Directors is responsible for approving the
compensation arrangements for the Directors and senior
executives following recommendations received from the
Remuneration and Nomination Committee. The Board, in
conjunction with the Remuneration and Nomination Committee,
assesses the appropriateness of the nature and amount of
emoluments of such officers on a periodic basis by reference
to relevant employment market conditions, with the overall
objective of ensuring maximum stakeholder benefit from the
retention of a high quality Board and executive team.
Key management personnel have authority and responsibility
for planning, directing and controlling the activities of the
Consolidated Entity.
Key management personnel as identified for the purposes
of this report by the criteria set out above are as follows:
• Robert Friedland – Co-Chairman and Non-Executive
Director (appointed 8 September 2016)
• Jiang Zhaobai – Co-Chairman and Non-Executive
Director (appointed 24 April 2017)
• Sam Riggall – Managing Director
and Chief Executive Officer
• Peter Voigt – Executive Director
• Li Binghan – Non-Executive Director
(appointed 24 April 2017)
• Eric Finlayson – Independent Non-Executive Director
• Roger Harley – Independent Non-Executive Director
• Ian Knight – Independent Non-Executive Director
• Stefanie Loader – Independent Non-Executive Director
(appointed 28 June 2017, with effect from 1 July 2017)
24
• Mike Spreadborough – Independent Non-Executive
Director (appointed 8 December 2016)
• Ben Stockdale – Chief Financial Officer
• Scott Magee – Syerston Project Director
(appointed 27 February 2017)
There were no other employees in the Consolidated Entity that
met the definition of executive or key management personnel
in accordance with the Corporations Act 2001 or Australian
Accounting Standards.
Compensation levels for key management personnel and
the Company Secretary are competitively set to attract and
retain appropriately qualified and experienced directors
and executives. As and when required the Nomination and
Remuneration Committee has access to independent advice
on the appropriateness of compensation packages given
trends in comparative companies and the objectives of the
compensation strategy. Independent advice was sought during
the 2017 financial year. The Nomination and Remuneration
Subcommittee of the Board has undertaken to implement
these recommendations during financial year 2018. See the
ASX Announcement dated 15 June 2017 for more details.
The compensation structures explained below are designed
to attract and retain suitably qualified candidates, reward
the achievement of strategic objectives, and create the
broader outcome of creating value for shareholders.
The compensation structures take into account:
• the capability and experience of the key management
personnel;
• the key management personnel’s ability to control
the relevant segment’s performance;
• the Consolidated Entity’s performance including:
(i)
the Consolidated Entity’s earnings;
(ii)
the growth in share price and delivering constant
returns on shareholder wealth; and
(iii) the amount of incentives within each key management
person’s compensation.
The directors’ and executives’ remuneration and incentive
policies and practices are performance based and aligned
to the Consolidated Entity’s vision, values and overall business
objectives. They are designed to motivate key management
personnel to pursue the Consolidated Entity’s long term growth
and success. Compensation packages include a mix of fixed
and variable compensation and short and long-term
performance-based incentives.
In addition to their salaries, the Consolidated Entity
also provides non-cash benefits to its directors and
key management personnel, and contributes to post-
employment superannuation plans on their behalf.
Fixed remuneration
Long Term Incentive
Fixed compensation consists of base compensation (which
is calculated on a total cost basis and includes any fringe
benefits tax charges related to employee benefits including
motor vehicles), as well as leave entitlements and employer
contributions to superannuation funds.
Compensation levels are reviewed annually by the
Nomination and Remuneration Committee through a
process that considers individual, segment and overall
performance of the Consolidated Entity. An executive’s
compensation is also reviewed upon promotion.
Performance-linked remuneration
Performance-linked compensation, including both short-term
and long-term incentives, is designed to reward employees
for meeting or exceeding their financial and personal
objectives. The short-term incentive (‘STI’) is an “at risk”
bonus provided in the form of cash, while the long-term
incentive (’LTI’) is provided as options and performance
rights over ordinary shares of the Company under the rules
of the Employee Incentive Plan. The plans provide for
Board discretion on the provision of bonuses and options.
During the 2017 financial year the Board exercised its
discretion and authorised the issue of options and
performance rights to a number of employees. In addition,
STI bonuses relating to performance against FY16 KPI’s
of $50,000 were paid to staff during the 2017 financial
year, but no key management personnel were paid a bonus.
Refer to section E of this remuneration report for an analysis
of the Consolidated Entity’s recent performance and link
to overall remuneration.
Short Term Incentive
Each year the Nomination and Remuneration Committee sets
the key performance indicators (’KPI’s’) for all employees. The
KPI’s generally include measures relating to the Consolidated
Entity, the relevant segment and the individual, and include
financial, staff management, safety, customer and strategy
and risk measures. The measures are chosen as they directly
align the individual’s reward to the KPI’s of the Consolidated
Entity and to its strategy and performance.
The financial performance objectives include performance
compared to budgeted amounts. The non-financial objectives
vary with position and responsibility and include measures
such as achieving strategic outcomes, safety and environmental
performance, customer satisfaction and staff development.
At the end of the financial year, the Nomination and
Remuneration Committee assesses the actual performance
of the Consolidated Entity, the relevant segment and
individual against the KPI’s set at the beginning of the
financial year. A percentage of the pre-determined
maximum bonus amount is awarded at the Board’s
discretion and depending on results. No bonus is
awarded where performance falls below the minimum.
The LTI consists of a grant of options to directors and key
executives, administered under the Company’s shareholder
approved Employee Incentive Plan (‘EIP’). The EIP provides for
directors and key executives to receive, for no consideration,
options over ordinary shares of the Company at specified
exercise prices as determined by the Board. The grant of
options is intended to align the interests of directors and key
executives with other owners of the Company. The ability
to exercise the options is conditional upon each director
and key executive’s ongoing employment by the Company
and other applicable performance hurdles determined by
the Board from time to time.
The LTI also consists of a grant of performance rights to
employees, administered under the terms of the EIP. The
grant of performance rights is intended to align the interests
of employees with other owners of the Company. Performance
rights are granted at the discretion of the Board to employees
by way of issue at nil cost both at the time of grant and
vesting. Performance rights are granted on an annual basis,
with the at-risk value of the annual grant over the vesting
period, typically three years, representing a percentage
of the employee’s total fixed remuneration, priced at the time
of grant. Vesting is contingent on the Consolidated Entity
meeting or exceeding a performance hurdle over the
performance period. The performance hurdle involves
an assessment of the Company’s total shareholder returns
relative to a comparator group of companies. Vesting is
also subject to the continued employment of the employee.
The EIP, which was adopted on 19 July 2017, states that
the total number of options issued pursuant to the EIP must
not exceed 5% of the total number of issued shares in the
Company, which excludes options and performance rights
issued pursuant to shareholder approval or to non-employees.
The Nomination and Remuneration Committee, in conjunction
with the Board, determines the number of options performance
rights and the terms and conditions associated with those
options and performance rights that may be issued to
employees each year. The criteria used to assess the
number of options and performance rights issued include
the Consolidated Entity’s performance, individual performance
and an industry analysis of best practice. The method
of assessment was chosen as it provides the Nomination
and Remuneration Committee with an objective means
of measuring performance against expected performance.
25
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Short Term and Long Term Incentive Structure
Other benefits
Key management personnel can receive non-cash benefits as
part of their base compensation as part of the terms and
conditions of their appointment. Non-cash benefits typically
include motor vehicles and toll road payments. The Company
pays fringe benefits tax on these benefits.
Voting and comments made at the Company’s
22 November 2016 Annual General Meeting
(‘AGM’)
The Company received 97.2% of ‘for’ votes in relation to
its remuneration report for the year ended 30 June 2016.
The Company did not receive any specific feedback
at the AGM regarding its remuneration practices.
The Nomination and Remuneration Committee considers
that the above performance-linked compensation structure
will generate the desired outcome in respect of attracting
and retaining high calibre employees.
In the current year the Consolidated Entity has achieved
many of its operational targets, however, financial
results remained loss-making due to the fact that the
Consolidated Entity’s technologies remain at the early
stages of commercialisation and as a result of the
Syerston Project being at the pre-production development
phase. The Nomination and Remuneration Committee will
conduct a formal assessment of employees’ key performance
indicators and the Consolidated Entity’s performance as a
whole during the 2018 financial year to determine if any STI
bonus is to be awarded in respect of the 2017 financial year.
Non-Executive Directors
The Company Constitution provides for Non-Executive
Directors to be paid or provided remuneration for their
services the total amount or value of which must not exceed
an aggregate maximum of $1,000,000 per annum or such
other maximum amount determined from time to time by the
Company in a general meeting.
The aggregate maximum sum will be apportioned among
them in such manner as the Directors in their absolute discretion
determine. Non-Executive Directors fees are set based on
advice from external advisors with reference to fees paid
to other Non-Executive Directors of comparable companies.
Non-Executive Directors do not receive performance related
remuneration. Directors’ fees cover all main Board and
Committee activities.
Non-Executive Directors are entitled to be paid travelling
and other expenses properly incurred by them in attending
Directors’ or general meetings of the Company or otherwise
in connection with the business of the Consolidated Entity.
No retirement benefits are to be paid to Non-Executive
Directors. The Company determines the maximum amount
for remuneration, including thresholds for share-based
remuneration, for Directors by resolution.
26
B. Details of remuneration (audited)
Details of the nature and amount of each major element of remuneration of the key management personnel of the
Consolidated Entity are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share based
payments
2017
Cash salary
and fees
$
Bonus
$
Non-
-monetary
$
Super
-annuation
$
Long
service
leave
$
Equity
-settled
$
Total
$
Non-Executive Directors:
Robert Friedland*
37,500
Jiang
Zhaobai****
Li Binghan****
Eric Finlayson
Roger Harley
Ian Knight
Mike
Spreadborough**
Executive Directors:
Sam Riggall
Peter Voigt
Other KMP:
8,333
8,333
45,872
45,872
50,000
25,649
300,000
250,000
Scott Magee***
92,952
Ben Stockdale
253,750
1,118,261
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
413
–
–
413
–
–
–
4,358
4,358
–
2,437
28,500
23,750
6,230
24,106
93,739
–
–
–
–
–
–
–
–
–
–
137,738
137,738
137,738
37,500
8,333
8,333
187,968
187,968
187,738
–
28,086
6,974
3,004,288
3,339,762
16,719
418,331
709,213
1,593
4,329
346,640
30,433
447,415
312,618
29,615
4,212,906
5,454,934
* Robert Friedland was appointed as Co-Chairman and Non-Executive Director on 8 September 2016.
** Mike Spreadborough was appointed as a Non-Executive Director on 8 December 2016.
*** Scott Magee was appointed Syerston Project Director on 27 February 2017.
**** Jiang Zhaobai was appointed as Co-Chairman and Non-Executive Director on 24 April 2017. Li Binghan was appointed
as a Non-Executive Director on 24 April 2017.
Stefanie Loader was appointed as a Non-Executive Director on 28 June 2017. Her appointment has effect from 1 July 2017.
For the year ending 30 June 2017, she received no remuneration for her duties as Non-Executive Director.
27
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share based
payments
2016
Cash salary
and fees
$
Bonus
$
Non-
-monetary
$
Super
-annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
Non-Executive Directors:
Roger Harley
Ian Knight
Eric Finlayson**
Executive Directors:
Sam Riggall*
Peter Voigt
Other KMP:
Ben Stockdale
45,872
50,000
36,315
185,841
200,001
250,001
768,030
–
–
–
–
–
–
–
–
–
–
152
152
4,358
–
3,450
14,460
19,000
23,750
65,018
–
–
–
62,325
62,325
62,325
112,555
112,325
102,090
3,053
3,352
688,149
210,724
891,503
433,229
4,190
191,142
469,083
10,595
1,276,990
2,120,785
* Sam Riggall was appointed to the position of CEO on 1 July 2015.
** Eric Finlayson was appointed as a Non-Executive Director on 16 September 2015.
C. Service agreements (audited)
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Mr Sam Riggall
Managing Director
Agreement commenced:
1 July 2015
Term of agreement:
No fixed term
Experience and Expertise:
Remuneration is set at a salary of $300,000 per annum, plus superannuation of $28,500
based on duties as Managing Director. The Company may terminate the agreement upon
three months’ notice or payment in lieu of notice. Mr Riggall can terminate the agreement
upon three months’ notice. The Company may terminate the agreement immediately where
the executive commits any act of serious misconduct, persistent breach or non-observance
of a term of this agreement.
Name:
Title:
Mr Peter Voigt
Executive Director
Agreement commenced:
1 March 2015
Term of agreement:
No fixed term
Experience and Expertise:
Remuneration is set at a base salary of $250,000 per annum plus superannuation of $23,750
based on duties as executive director. The Company may terminate the agreement upon
three months’ notice or payment in lieu of notice. Mr Voigt can terminate the agreement
upon three months’ notice. The Company may terminate the agreement immediately where
the executive commits any act of serious misconduct, persistent breach or non-observance
of a term of this agreement.
28
Name:
Title:
Mr Ben Stockdale
Chief Financial Officer
Agreement commenced:
15 January 2015
Term of agreement:
No fixed term
Experience and Expertise:
Remuneration set at base salary of $253,750 per annum plus superannuation of $24,106
based on duties as Chief Financial Officer. The Company may terminate the agreement
upon six months’ notice or payment in lieu of notice. Mr Stockdale can terminate the agreement
upon three months’ notice. The Company may terminate the agreement immediately where the
executive commits any act of serious misconduct, persistent breach or non-observance of a term
of this agreement.
Name:
Title:
Mr Scott Magee
Syerston Project Director
Agreement commenced:
1 March 2017
Term of agreement:
No fixed term
Experience and Expertise:
Remuneration set at base salary of $300,000 per annum plus superannuation of $28,500
based on duties as Project Director. The Company may terminate the agreement upon three
months’ notice or payment in lieu of notice. Mr Magee can terminate the agreement upon
three months’ notice. The Company may terminate the agreement immediately where the
executive commits any act of serious misconduct, persistent breach or non-observance of
a term of this agreement.
The service contracts outline the components of compensation paid to the key management personnel. The service contracts
of the key management personnel prescribe how compensation levels are modified year to year. Compensation levels are
reviewed each year to take into account cost-of-living changes, any change in the scope of the role performed by the
senior executive and any changes required to meet the principles of the compensation policy.
D. Share-based compensation (audited)
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year ended
30 June 2017.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
29
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Grantee /
Number of Options /
Grant Date
Sam Riggall
8,000,000 options
25 February 2015
Sam Riggall
4,000,000 options
20 November 2015
Sam Riggall
4,000,000 options
20 November 2015
Sam Riggall
8,000,000 options
6 September 2016
Peter Voigt
2,000,000 options
20 November 2015
Peter Voigt
1,000,000 options
6 September 2016
Roger Harley
750,000 options
20 November 2015
Roger Harley
375,000 options
6 September 2016
Ian Knight
750,000 options
20 November 2015
Ian Knight
375,000 options
6 September 2016
Eric Finlayson
750,000 options
20 November 2015
Eric Finlayson
375,000 options
6 September 2016
Ben Stockdale
2,000,000 options
1 March 2015
Ben Stockdale
1,000,000 options
16 May 2016
Scott Magee
1,500,000 options
22 February 2017
Scott Magee
1,500,000 options
22 February 2017
Vesting date &
exercisable date
Expiry Date
Exercise
Price
Fair value
per option
at grant date
30 June 2015
25 February 2018
$0.1574
$0.068
20 November 2015
30 June 2018
$0.2305
$0.085
31 December 2015
30 June 2018
$0.2305
$0.085
6 September 2016
16 May 2019
$0.3100
$0.367
20 November 2015
31 March 2018
$0.1450
$0.102
6 September 2016
16 May 2019
$0.2820
$0.378
20 November 2015
30 November 2018
$0.2712
$0.083
6 September 2016
16 May 2019
$0.3100
$0.367
20 November 2015
30 November 2018
$0.2712
$0.083
6 September 2016
16 May 2019
$0.3100
$0.367
20 November 2015
30 November 2018
$0.2712
$0.083
6 September 2016
16 May 2019
$0.3100
$0.367
1 March 2015
1 March 2018
$0.1495
$0.067
16 May 2016
16 May 2019
$0.2820
$0.177
22 February 2018
22 February 2020
$0.6549
$0.439
22 February 2019
22 February 2020
$0.6549
$0.439
Options granted carry no dividend or voting rights.
30
The number of options over ordinary shares granted to directors and other key management personnel as part of compensation
during the year ended 30 June 2017 is set out below:
Name
Sam Riggall
Peter Voigt
Roger Harley
Ian Knight
Eric Finlayson
Ben Stockdale
Scott Magee
Number
of options
granted
during
the year
Number
of options
granted during
the year
Number
of options
vested during the
year
Number
of options
vested during the
year
2017
2016
2017
2016
8,000,000
8,000,000
8,000,000
12,000,000
1,000,000
2,000,000
1,000,000
2,000,000
375,000
375,000
375,000
750,000
750,000
750,000
–
1,000,000
3,000,000
–
375,000
375,000
375,000
–
–
750,000
750,000
750,000
1,000,000
–
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part
of compensation during the year ended 30 June 2017 are set out below:
Name
Sam Riggall
Peter Voigt
Roger Harley
Ian Knight
Eric Finlayson
Ben Stockdale
Scott Magee
Value
of options
granted
during the year
Value
of options
exercised
during the year
Value
of options
lapsed
during the year
Remuneration
consisting
of options
for the year
$
2,938,400
378,400
137,738
137,738
137,738
–
346,640
$
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
%
88%
53%
73%
73%
73%
–%
77%
Options vested in prior years and expired in the current year are disclosed in note 42 to the financial statements.
31
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Performance Rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other
key management personnel in this financial year or future reporting years are as follows:
Grantee /
Number of Performance Rights /
Grant Date
Vesting date
Expiry Date
Exercise Price
Sam Riggall
480,000 rights
19 November 2015
Peter Voigt
400,000 rights
19 November 2015
Ben Stockdale
400,000 rights
8 July 2015
Ben Stockdale
468,606 rights
16 May 2016
Peter Voigt
461,681 rights
6 September 2016
Sam Riggall
831,025 rights
6 September 2016
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2019
1 July 2019
6 September 2019
6 September 2019
6 September 2019
6 September 2019
Nil
Nil
Nil
Nil
Nil
Nil
Fair value per
performance
right at grant
date
$0.065
$0.065
$0.086
$0.126
$0.195
$0.195
Performance rights granted carry no dividend or voting rights.
The number of performance rights over ordinary shares granted to each key management personnel as part of compensation
during the year ended 30 June 2017 is set out below:
Name
Sam Riggall
Peter Voigt
Ben Stockdale
Number of rights
granted during
the year
Number of rights
granted during
the year
Number of rights
vested during
the year
Number of rights
vested during
the year
2017
831,025
461,681
–
2016
480,000
400,000
868,606
2017
2016
–
–
–
–
–
–
Values of performance rights over ordinary shares granted, exercised and lapsed key management personnel as part of
compensation during the year ended 30 June 2017 are set out below:
$ Value of rights
granted during
the year
$ Value of rights
granted during
the year
$ Value of rights
vesting during
the year
$ Value of rights
vesting during
the year
2017
53,914
29,952
–
2016
31,330
26,109
93,491
2017
2016
–
–
–
–
–
–
Name
Sam Riggall
Peter Voigt
Ben Stockdale
32
E. Additional information (audited)
In considering the Consolidated Entity’s performance and benefits for shareholder wealth, the current Nomination and
Remuneration Committee have regard to the following profit or loss after tax in the current and previous four financial years,
along with the share price and movement in the share price.
The earnings of the Consolidated Entity for the five years to 30 June 2017 are summarised below:
Profit/(loss) after income tax
2013
$’000
(4,631)
2014
$’000
2015
$’000
2016
$’000
2017
$’000
(4,910)
(8,225)
(6,423)
(12,184)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end ($)
Movement in share price ($)
Dividends paid ($)
2013
0.10
(0.03)
–
2014
0.05
(0.05)
–
2015
0.23
0.18
–
2016
0.43
0.20
–
2017
0.67
0.24
–
Net profit after income tax is considered as one of the financial performance targets in setting the short-term incentives. Dividends
and changes in share price are included in the total shareholder return calculation, which is one of the performance criteria
assessed for the long-term incentives.
The other performance criteria assessed for the long term incentives is growth in earnings per share, which again takes into
account the Consolidated Entity’s net profit after income tax.
F. Key management personnel transactions (audited)
Movement in shares held
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the Consolidated Entity, including their personally related parties, is set out below:
Balance at the
start of the
year***
Received as part
of remuneration
Additions
Disposals
/ other
Balance
at end
of the year
Ordinary shares
Robert Friedland*
Jiang Zhaobai*
Sam Riggall
Peter Voigt
Li Binghan*
Eric Finlayson
Roger Harley
Ian Knight
Mike Spreadborough*
Scott Magee**
Ben Stockdale
87,518,888
92,518,888
6,878,634
27,725,794
–
–
1,830,812
1,025,557
–
–
75,000
217,573,573
–
–
–
–
–
–
–
–
–
–
–
–
7,000,000
–
39,310
–
–
–
–
–
–
–
–
–
–
–
94,518,888
92,518,888
6,917,944
(5,000,000)
22,725,794
–
–
–
–
–
–
–
–
–
1,830,812
1,025,557
–
–
75,000
7,039,310
(5,000,000)
219,612,883
* Appointed to the position of Non-Executive Director during the financial year.
** Appointed as Project Director – Syerston during the financial year.
*** The opening balance of Robert Friedland and Jiang Zhaobai’s shareholding is the balance on the date that they were appointed
as a director, rather than the balance as at 1 July 2016.
33
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Grant of anti-dilution right to Pengxin International Group Limited
On 27 March 2017, ASX Limited (‘ASX’) granted the Company a waiver from ASX listing rule 6.18. This waiver was given
to the extent necessary to permit Pengxin International Group Limited (‘Pengxin’), a company associated with Mr Jiang Zhaobai
and Mr Li Binghan, to maintain, its percentage interest in the issued share capital of the company.
This Anti-Dilution Right is activated if a dilution event occurs in the future. The Anti-Dilution Right lapses on the earlier of:
(i)
the date on which Pengxin and its related bodies corporate cease to hold in aggregate at least 10% voting power
in the Company;
(ii)
the date on which Pengxin and its related bodies corporate’s voting power in the Company exceeds 25%; or
(iii) the strategic relationship between the Company and Pengxin ceases or changes in such a way that it effectively ceases.
This Anti-Dilution Right can only be transferred to an entity in the wholly owned group of Pengxin.
Movement in options held
The number of options over ordinary shares in the Company held during the financial year by each director and other members
of key management personnel of the Consolidated Entity, including their personally related parties, is set out below:
Balance
at the start
of the year
Granted
as part of
remuneration
Exercised
Expired /
forfeited /
other
Balance at
end of
the year
Options over ordinary shares
Sam Riggall
Peter Voigt
Eric Finlayson
Roger Harley
Ian Knight
Ben Stockdale
Scott Magee*
16,000,000
8,000,000
2,000,000
1,000,000
750,000
750,000
750,000
3,000,000
375,000
375,000
375,000
–
–
3,000,000
23,250,000
13,125,000
* Appointed as Project Director – Syerston during the financial year.
Movement in performance rights held
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,000,000
3,000,000
1,125,000
1,125,000
1,125,000
3,000,000
3,000,000
36,375,000
The number of performance rights over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Consolidated Entity, including their personally related parties, is set out below:
Rights over ordinary shares
Sam Riggall
Peter Voigt
Ben Stockdale
Balance
at the start
of the year
Granted
as part of
remuneration
Exercised
Expired /
forfeited /
other
Balance at
end of
the year
480,000
400,000
868,606
831,025
461,681
–
1,748,606
1,292,706
–
–
–
–
–
–
–
–
1,311,025
861,681
868,606
3,041,312
34
Other transactions with key management personnel
Details of other transactions with key management personnel are set out in notes 31 and 35.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Clean TeQ Holdings Limited under option at the date of this report are as follows:
Grant Date
25 February 2015
1 March 2015
6 July 2015
20 November 2015
20 November 2015
20 November 2015
16 May 2016
6 September 2016
6 September 2016
15 December 2016
22 February 2017
20 June 2017
Expiry Date
25 February 2018
1 March 2018
30 June 2018
30 June 2018
31 March 2018
30 November 2018
16 May 2019
16 May 2019
16 May 2019
15 December 2019
22 February 2020
20 June 2020
Exercise
Price
Number under
Option
$0.1574
$0.1495
$0.3010
$0.2305
$0.1450
$0.2712
$0.2820
$0.2820
$0.3100
$0.5850
$0.6549
$0.9500
8,000,000
4,000,000
666,214
8,000,000
2,000,000
3,500,000
3,300,000
1,000,000
9,125,000
500,000
3,000,000
600,000
43,691,214
No person is entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
Company or of any other body corporate.
For details of options issued to directors and executives as remuneration refer to the remuneration report.
Shares subject to performance rights
Unissued ordinary shares of Clean TeQ Holdings Limited subject to performance rights as at 30 June 2017 are as follows:
Grant Date
8 July 2015
20 November 2015
16 May 2016
6 September 2016
Vest Date
1 July 2018
1 July 2018
1 July 2019
6 September 2019
Exercise
Price
Nil
Nil
Nil
Nil
Number
1,166,416
880,000
1,538,807
1,292,706
4,877,929
35
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Report
continued
Shares issued on the exercise of options or performance rights
During the year, the Company issued the following amount of shares, as a result of option holders exercising their options:
Number of Shares
200,000
2,000,000
2,000,000
333,787
2,000,000
1,700,000
Amount paid on
each share
$0.3960
$0.1155
$0.1455
$0.3010
$0.1450
$0.2820
Indemnity and insurance of officers
Non-audit services
The Company has indemnified the directors and executives of
the Company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable,
except where there is a lack of good faith.
During the financial year, the Company paid a premium in
respect of a contract to insure the directors and executives
of the Company against a liability to the extent permitted by
the Corporations Act 2001. The invoice from the Company’s
insurers did not specify the amount of the premium paid for
insurance against an officer’s liability for legal costs.
Indemnity and insurance of auditor
The Company has not, during or since the financial year,
indemnified or agreed to indemnify the auditor of the
Company or any related Entity against a liability incurred
by the auditor.
During the financial year, the Company has not paid a
premium in respect of a contract to insure the auditor
of the Company or any related Entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237
of the Corporations Act 2001 for leave to bring proceedings
on behalf of the Company, or to intervene in any proceedings
to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of
those proceedings.
Details of the amounts paid or payable to the auditor for
non-audit services provided during the financial year by
the auditor are outlined in note 32 to the financial statements.
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the
general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed
in note 32 to the financial statements do not compromise
the external auditor’s independence requirements of the
Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by
the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity
for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards.
Officers of the Company who are former audit
partners of KPMG
Ian Knight, appointed as a Non-Executive Director on
17 July 2013, was previously a Partner of KPMG and Head
of Private Equity for KPMG Corporate Finance, until June 2012.
36
Rounding of amounts
The Company is of a kind referred to in Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, the
nearest dollar.
Lead auditor’s independence declaration
A copy of the lead auditor’s independence declaration as
required under section 307C of the Corporations Act 2001
is set out on page 35 and forms part of the directors’ report
for the financial year ended 30 June 2017.
Auditor
KPMG continues in office in accordance with section
327 of the Corporations Act 2001.
This report is made in accordance with a resolution
of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the directors
Sam Riggall
Managing Director
25 August 2017
Melbourne
37
Clean TeQ Holdings Limited Annual Report 2017
Auditor’s Independence Declaration
For the year ended 30 June 2017
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Clean TeQ Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Clean TeQ Holdings
Limited for the financial year ended 30 June 2017 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
KPM_INI_01
Dana Bentley
Partner
Melbourne
25 August 2017
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
34
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
38
Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2017
Revenue
Share of profits of joint venture accounted for using the equity method
Expenses
Raw materials and other direct costs
Employee benefits expenses
Depreciation and amortisation expenses
Legal and professional expenses
Occupancy expenses
Marketing expenses
Impairment of loan receivable
Write off of bad debts
Other expenses
Finance costs
Loss before income tax benefit from continuing operations
Note
5
6
7
7
7
7
Consolidated
2017
$’000
1,612
1
(76)
(8,841)
(813)
(1,050)
(420)
(756)
–
(2)
(1,669)
(170)
(12,184)
2016
$’000
1,454
–
(61)
(4,291)
(704)
(543)
(361)
(544)
(326)
–
(773)
(274)
(6,423)
Income tax expense
8
–
–
Loss after income tax benefit for the year attributable
to the owners of Clean TeQ Holdings Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable
to the owners of Clean TeQ Holdings Limited
Total comprehensive income for the year is attributable to:
Continuing operations
Owners of the company
(12,184)
(6,423)
–
–
–
–
(12,184)
(6,423)
(12,184)
–
(12,184)
(6,423)
–
(6,423)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
39
Clean TeQ Holdings Limited Annual Report 2017 Statement of Profit or Loss and Other
Comprehensive Income
continued
Earnings per share for loss from continuing operations
attributable to the owners of Clean TeQ Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for loss attributable to the owners
of Clean TeQ Holdings Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2017
Cents
(2.49)
(2.49)
(2.49)
(2.49)
2016
Cents
(1.56)
(1.56)
(1.56)
(1.56)
Note
41
41
41
41
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
40
Statement of Financial Position
as at 30 June 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other financial assets
Total current assets
Non-current assets
Other financial assets
Investment in equity accounted investee
Property, plant and equipment
Intangibles
Exploration and evaluation assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Deferred revenue
Notes payable
Total current liabilities
Non-current liabilities
Deferred revenue
Notes payable
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
9
10
11
12
13
13
14
15
16
17
18
19
20
21
20
21
23
24
25
26
27
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Consolidated
2017
$’000
88,863
993
96
2,088
–
2016
$’000
7,226
302
96
2,395
377
92,040
10,396
80
804
2,662
10,406
14,379
28,331
120,371
3,172
300
47
2,850
6,369
495
–
68
55
618
6,987
113,384
137,517
8,484
(32,617)
113,384
–
–
2,329
11,103
3,201
16,633
27,029
715
274
46
–
1,035
544
2,684
41
–
3,269
4,304
22,725
39,856
3,302
(20,433)
22,725
41
Clean TeQ Holdings Limited Annual Report 2017 Statement of Changes in Equity
For the year ended 30 June 2017
Contributed
Equity
Accumulated
Losses
Reserves
Total Equity
Consolidated
Balance at 1 July 2015
Loss after income tax benefit for the financial year
Total comprehensive income for the financial year
Transactions with owners in their capacity as owners:
$’000
27,717
–
–
$’000
(14,010)
(6,423)
(6,423)
Equity contributions, net of transaction costs (note 25)
12,139
Share-based payments (note 42)
Lapse of options
Total contribution and distribution:
Change in ownership interests:
–
–
12,139
Total transactions with owners of the Company
12,139
–
–
–
–
–
Balance at 30 June 2016
Balance at 1 July 2016
Loss after income tax benefit for the financial year
Total comprehensive income for the financial year
Transactions with owners in their capacity as owners:
39,856
39,856
–
–
(20,433)
(20,433)
(12,184)
(12,184)
Equity contributions, net of transaction costs (note 25)
97,661
Share-based payments (note 42)
Lapse of options
Total contribution and distribution:
Change in ownership interests:
Total transactions with owners of the Company
Balance at 30 June 2017
–
–
97,661
97,661
137,517
–
–
–
–
–
(32,617)
$’000
1,063
–
–
–
2,239
–
2,239
$’000
14,770
(6,423)
(6,423)
12,139
2,239
–
14,378
2,239
14,378
3,302
3,302
–
–
–
5,182
–
5,182
5,182
8,484
22,725
22,725
(12,184)
(12,184)
97,661
5,182
–
102,843
102,843
113,384
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
42
Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Cash used in operating activities
Interest received
Interest and other finance costs paid
Research and development tax incentive received
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for acquisition of other intangibles
Payments for exploration and evaluation assets
Acquisition of non-controlling interest
Proceeds from disposal of plant & equipment
Net cash used in investing activities
Cash flows from financing activities
Note
40
15
16
17
5
Consolidated
2017
$’000
616
(5,112)
(4,496)
392
(4)
2,604
(1,504)
(336)
(70)
2016
$’000
681
(4,550)
(3,869)
110
(80)
1,506
(2,333)
(41)
–
(13,619)
(4,657)
(804)
12
–
–
(14,817)
(4,698)
Proceeds from issue of shares, net of issuance costs
97,661
12,139
Payment of hire purchases
Cash on deposit for security over bank guarantees
Repayment of borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
–
297
–
97,958
81,637
7,226
88,863
–
(24)
(1,171)
10,944
3,913
3,313
7,226
43
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
For the year ended 30 June 2017
Note 1. General information
The financial statements cover the Clean TeQ Holdings
Limited group as a Consolidated Entity consisting of Clean
TeQ Holdings Limited (‘the Company’) and its subsidiaries
(‘Consolidated Entity’). The financial statements are
presented in Australian dollars, which is the Consolidated
Entity’s functional and presentation currency.
Clean TeQ Holdings Limited is a for-profit listed public
company limited by shares, incorporated and domiciled
in Australia. Its registered office and principal place
of business is:
Unit 12, 21 Howleys Road
Notting Hill
Victoria Australia 3168
A description of the nature of the Consolidated Entity’s
operations and its principal activities are included in the
directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance
with a resolution of directors, on 25 August 2017. The directors
have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
(a) Going concern
The financial report has been prepared on a going concern
basis, which assumes continuity of normal business activities
and the realisation of assets and the settlement of liabilities
in the ordinary course of business.
The Consolidated Entity reported a net loss after tax from
continuing operations for the financial year of $12,184,000
(30 June 2016: loss of $6,423,000). We note there were
no significant revenues from continuing operations during the
financial year. Operational revenues were more than offset
by exploration and evaluation, business development and
corporate overhead costs. Working capital, being current
assets less current liabilities, amounts to an $85,671,000
surplus (30 June 2016: $9,361,000 surplus), with cash
reserves increasing from $7,226,000 to $88,863,000
during the financial year. Net cash outflows from
operating activities were $1,504,000 for the financial
year (30 June 2016: $2,333,000 outflow).
During the financial year, the following events have taken
place to support the going concern basis of preparation
for the Consolidated Entity:
• The Consolidated Entity increased its available cash
on hand as at 30 June 2017 to $88,863,000;
• During the financial year, the Consolidated Entity raised
$97,661,000 in equity capital after issue costs, indicating
strong support from investors to invest in the Consolidated
Entity and its technologies;
• The Consolidated Entity received a $2,604,000 cash
rebate from the Australian Tax Office for eligible research
and development expenditure relating to the 2016 financial
year. The Consolidated Entity anticipates that a proportion
of the 2017 financial years’ development expenditure,
including a large proportion of Syerston piloting and
testwork, will also be eligible for the refundable tax
offset; and
• The forecast cash flows for the Consolidated Entity indicate
a positive cash position for at least the period of 12 months
to August 2018.
The Consolidated Entity expects that relationships with its
major investors will also assist in widening the Consolidated
Entity’s opportunities for profitable commercialisation of its
technologies in addition to assisting in securing further
funding required.
As set out in the financial report, during the financial year
the Consolidated Entity made good progress in respect of
the commercialisation of its water and metals technologies.
A number of significant project opportunities have been
identified in a number of key markets with a focus on treatment
of waste water from mining operations. The Consolidated
Entity also made good progress in respect of the ongoing
development of the Syerston Project. The Consolidated Entity
will continue working towards securing commercial contracts
in the near future, and anticipates both the Water and Metals
Divisions to produce substantial revenues in the future.
The directors are confident that the Consolidated Entity can
continue to access debt and equity funding to meet medium
term working capital requirements, and has a history of
securing such funding as required in the past to support
their confidence.
On the basis of cash and cash equivalents available as
at 30 June 2017, cashflow forecasts to 31 December 2018,
and that sufficient funding is expected to be raised to meet
the Consolidated Entity’s medium to long term expenditure
forecasts, the directors consider that the Consolidated Entity
remains a going concern and these financial statements
have been prepared on this basis.
44
(b) Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards (“AASBs”) and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit
oriented entities. These financial statements also comply
with International Financial Reporting Standards (“IFRSs”)
as issued by the International Accounting Standards
Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the
historical cost convention unless otherwise described
in the accounting policies.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the Consolidated Entity’s accounting policies.
The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed in note 3.
(c) Parent Entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the Consolidated Entity only.
Supplementary information about the Parent Entity is disclosed
in note 36.
(d) Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Clean TeQ Holdings Limited
as at 30 June 2017 and the results of all subsidiaries for
the year then ended. Clean TeQ Holdings Limited and
its subsidiaries together are referred to in these financial
statements as the ‘Consolidated Entity’.
Subsidiaries are all those entities over which the Consolidated
Entity has control. The Consolidated Entity controls an entity
when the Consolidated Entity 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
Consolidated Entity. They are de-consolidated from
the date that control ceases.
Business combinations
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date
fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling
interest in the acquiree is measured at either fair value or at
the proportionate share of the acquiree’s identifiable net assets.
Transaction costs are expensed as incurred, except if related
to the issue of debt or equity securities.
On the acquisition of a business, the Consolidated Entity
assesses the financial assets acquired and liabilities assumed
for appropriate classification and designation in accordance
with the contractual terms, economic conditions, the
Consolidated Entity’s operating or accounting policies and
other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the
Consolidated Entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and
the difference between the fair value and the previous carrying
amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of contingent consideration classified
as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets
acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred
and the fair value of any pre-existing investment in the acquiree
is recognised as goodwill. If the consideration transferred
and the pre-existing fair value is less than the fair value of
the identifiable net assets acquired, being a bargain purchase
to the acquirer, the difference is recognised as a gain directly
in profit or loss by the acquirer on the acquisition-date, but only
after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest in the
acquiree, if any, the consideration transferred and the
acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises
additional assets or liabilities during the measurement
period, based on new information obtained about the
facts and circumstances that existed at the acquisition date.
The measurement period ends on either the earlier of
(i) 12 months from the date of the acquisition or
(ii) when the acquirer receives all the information
possible to determine fair value.
45
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Transactions eliminated on consolidation
Intercompany transactions, balances and any unrealised
gains and losses on transactions between entities in the
Consolidated Entity are eliminated. Unrealised gains
arising from transactions with equity-accounted investees
are eliminated against the investment to the extent of the
Consolidated Entity’s interest in the investee. 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 Consolidated Entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share
of the non-controlling interest acquired is recognised
directly in equity attributable to the Parent.
Loss of control
Where the Consolidated Entity loses control over a subsidiary,
it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any
cumulative translation differences recognised in equity.
The Consolidated Entity recognises the fair value of the
consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Associates
Associates are entities over which the Consolidated Entity
has significant influence but not control or joint control.
Investments in associates are accounted for using the equity
method. Under the equity method, the share of the profits
or losses of the associate is recognised in profit or loss and
the share of the movements in equity is recognised in other
comprehensive income. Investments in associates are carried
in the statement of financial position at cost plus post-
acquisition changes in the Consolidated Entity’s share
of net assets of the associate. Goodwill relating to the
associate is included in the carrying amount of the
investment and is neither amortised nor individually
tested for impairment. Dividends received or receivable
from associates reduce the carrying amount of the investment.
The Consolidated financial statements include the
Consolidated Entity’s share of profit or loss and other
comprehensive income of equity accounted interests,
after adjustments to align the accounting policies with
those of the Consolidated Entity, from the date that
significant influence or joint control commences until
the date that significant influence or joint control ceases.
When the Consolidated Entity’s share of losses exceeds
its interest in an equity accounted investee, the carrying
amount of that interest, including any long-term interests
that form part thereof, is reduced to zero, and the
recognition of further losses is discontinued except
to the extent that the Consolidated Entity has an obligation
or has made payments on behalf of the investee.
46
Joint ventures
A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the
net assets of the arrangement. Investments in joint ventures
are accounted for using the equity method. Under the equity
method, the share of the profits or losses of the joint venture
is recognised in profit or loss and the share of the movements
in equity is recognised in other comprehensive income.
Investments in joint ventures are carried in the statement
of financial position at cost plus post-acquisition changes
in the Consolidated Entity’s share of net assets of the joint
venture. Goodwill relating to the joint venture is included in
the carrying amount of the investment and is neither amortised
nor individually tested for impairment. Income earned from joint
venture entities reduces the carrying amount of the investment.
(e) Operating segments
Operating segments are presented using the ‘management
approach’, where the information presented is on the same
basis as the internal reports provided to the Chief Operating
Decision Makers (‘CODM’). The CODM is responsible for
the allocation of resources to operating segments and
assessing their performance.
(f) Revenue recognition
Revenue is recognised when it is probable that the economic
benefit will flow to the Consolidated Entity and the revenue
can be reliably measured. Revenue is measured at the fair
value of the consideration received or receivable.
Sale of goods and services
Revenue from the sale of goods is measured at the fair
value of the consideration received or receivable, net of
returns, trade discounts and volume rebates. Revenue is
recognised when the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods
and the amount of revenue can be measured reliably.
If it is probable that discounts will be granted and the
amount can be reliably measured, then the discount
is recognised as a reduction of revenue as the sales
are recognised.
Transfers of risks and rewards vary depending on the individual
terms of the contract of sale. For sales of units developed
and built, transfer usually occurs when the product is received
at the customer’s site and or is commissioned ready for use.
Rendering of services
Revenue from contracted services rendered is recognised
in profit or loss in proportion to the stage of completion of
the transaction at the reporting date. The stage of completion
is assessed by reference to the completion of key milestones
in the contracts.
Contract revenue includes the initial amount agreed in the
contract plus any variations in contract work, claims and
incentive payments to the extent that it is probable that they
will result in revenue and can be measured reliably. When
the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised only to the extent
of contract costs incurred that are likely to be recoverable.
Contract expenses are recognised as they are incurred
unless they create an asset related to future contract activity.
An expected loss on a contract is recognised immediately
in profit or loss.
Technology licensing income
Technology licensing income is recognised based on
the substance of the contractual arrangements entered
into. Upfront non-refundable fees for the right to utilise the
technology, where the economic Entity has no ongoing
contractual and performance obligations, are recognised
fully in profit or loss at the time the contractual commitment
is entered into. Technology licensing fees where the licensee
has the right to use the technology over a specified period
of time or on a refundable basis is recognised in profit or loss
on a straight line basis over the agreed term of the licence.
Sales of non-current assets
Gains or losses on sale of non-current assets are included
as income or expenses at the date control of the asset
passes to the buyer, usually when an unconditional
contract of sale is signed.
Gains or losses on disposal are calculated as the difference
between the carrying amount of the asset at the time of
disposal and the net proceeds on disposal.
Government grants
Government grants are recognised initially as deferred income
at fair value and when there is reasonable assurance that they
will be received and that the Consolidated Entity will comply
with the conditions associated with the grant, they are then
recognised in profit or loss as other income on a systematic
basis over the useful life of the asset. Grants that compensate
the Consolidated Entity for expenses incurred are recognised
in profit or loss or other income on a systematic basis in the
same periods in which the expenses are recognised. Grants
that compensate the Consolidated Entity for expenditure
capitalised are recognised as a reduction in the carrying
value of the asset and grants that compensate the
Consolidated Entity for expenditure recognised in profit
or loss is recognised as government grant income.
(g) Income tax
Tax expense comprises current and deferred tax. Current
tax and deferred tax is recognised in the profit or loss
except to the extent that it relates to business combinations,
or items recognised directly in equity or in other
comprehensive income.
Current tax comprises the expected tax payable or receivable
on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets
or liabilities in a transaction that is not a business
combination and that affects neither accounting
nor taxable profit or loss;
• temporary differences related to investments in subsidiaries,
associates and joint arrangements to the extent that the
Consolidated Entity is able to control the timing of the
reversal of the temporary differences and it is probable
that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial
recognition of goodwill.
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. The Consolidated Entity
makes this assessment at each reporting date. Deferred tax
is measured at the tax rates that are expected to be applied
to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
The carrying amount of recognised and unrecognised deferred
tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer
probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised
deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to
recover the asset.
Deferred tax assets and liabilities are offset only where there
is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred
tax liabilities; and they relate to the same taxable authority on
either the same taxable Entity or different taxable entities which
intend to settle simultaneously.
Clean TeQ Holdings Limited (the ‘head Entity’) and its
wholly-owned Australian subsidiaries have formed an income
tax Consolidated group under the tax consolidation regime.
The head Entity and each subsidiary in the tax Consolidated
group continue to account for their own current and deferred
tax amounts. The tax Consolidated group has applied the
‘separate taxpayer within group’ approach in determining
the appropriate amount of taxes to allocate to members
of the tax Consolidated group.
47
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
In addition to its own current and deferred tax amounts, the
head Entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from each subsidiary in the tax
Consolidated group. Assets or liabilities arising under tax
funding agreements with the tax Consolidated entities are
recognised as amounts receivable from or payable to other
entities in the tax Consolidated group. The tax funding
arrangement ensures that the intercompany charge equals
the current tax liability or benefit of each tax Consolidated
group member, resulting in neither a contribution by the head
Entity to the subsidiaries nor a distribution by the subsidiaries
to the head Entity.
(h) Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is current when: it is expected to be realised or
intended to be sold or consumed in the normal operating
cycle; it is held primarily for the purpose of trading; it is
expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are
classified as non-current.
A liability is current when: it is expected to be settled in the
normal operating cycle; it is held primarily for the purpose
of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer
the settlement of the liability for at least 12 months after
the reporting period. All other liabilities are classified
as non-current.
Deferred tax assets and liabilities are always classified
as non-current.
(i) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
(j) Trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade
receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly.
A provision for impairment of trade receivables is raised when
there is objective evidence that the Consolidated Entity will
not be able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties
of the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation and default or delinquency in
payments (more than 60 days overdue) are considered
indicators that the trade receivable may be impaired. The
amount of the impairment allowance is the difference between
the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest
rate. Cash flows relating to short-term receivables are
not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any
provision for impairment.
(k) Inventories
Raw materials, work in progress and finished goods are stated
at the lower of cost and net realisable value on a ‘first-in
first-out’ basis. Cost comprises direct materials and delivery
costs, direct labour, import duties and other taxes, an
appropriate proportion of variable and fixed overhead
expenditure based on normal operating capacity, and, where
applicable, transfers from cash flow hedging reserves in equity.
Costs of purchased inventory are determined after deducting
rebates and discounts received or receivable.
Work in progress is measured, for each project in progress,
as the excess of revenue recognised for the project, based
on the project’s percentage of completion, over the revenue
invoiced to date for that project. For projects where the
revenue recognised for a project is less than the revenue
invoiced to date for that project, the excess of revenue
invoiced over revenue recognised is recorded as a current
liability, presented as deferred revenue.
Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make
the sale.
(l) Property, plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Subsequent
expenditure is capitalised only when it is probable that the
future economic benefits associated with the expenditure
will flow to the Consolidated Entity. Ongoing repairs
and maintenance are expensed as incurred. Land
is not depreciated.
48
Items of property, plant and equipment are depreciated from
the date that they are installed and are ready for use, or in
respect of internally constructed assets, from the date that
the asset is completed and ready for use. Depreciation is
calculated to write off the net cost of each item of plant and
equipment (excluding land) over their expected useful lives.
Depreciation is generally recognised in profit or loss, unless
the amount is included in the carrying amount of another asset.
Leased assets are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably certain that
the Consolidated Entity will obtain ownership by the end of
the lease term. The estimated useful lives of property, plant
and equipment are as follows for the current and preceding
financial year:
Plant and factory
equipment
Office furniture
and equipment
2.5 to 20 years (straight line
and diminishing value)
2.5 to 20 years (straight line
and diminishing value)
Leasehold improvements
3 – 7 years (diminishing value)
Motor vehicles
5 – 6 years (diminishing value)
Land
Indefinite
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal
or when there is no future economic benefit to the
Consolidated Entity. Gains and losses between the carrying
amount and the disposal proceeds are taken to profit or loss.
Any revaluation surplus reserve relating to the item disposed
of is transferred directly to retained profits.
(m) Other financial assets
Cash on deposit used as security for bank guarantees
maturing within twelve months of each reporting period is
disclosed as a current other financial asset. Those deposits
that mature in excess of twelve months are disclosed as
non-current other financial assets.
(n) Intangibles
Intangible assets acquired as part of a business combination,
other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired
separately are initially recognised at cost. Indefinite life
intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible
assets are subsequently measured at cost less amortisation
and any impairment. The gains or losses recognised in profit
or loss arising from the de-recognition of intangible assets are
measured as the difference between net disposal proceeds
and the carrying amount of the intangible asset. The method
of determining useful lives of finite life intangible assets are
reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively
by changing the amortisation method or period.
Research and development
Research costs are expensed in the period in which they
are incurred. Development costs are capitalised when
it is probable that the project will be an economic success
considering its commercial and technical feasibility; the
Consolidated Entity is able to use or sell the asset; the
Consolidated Entity has sufficient resources; and intent to
complete the development and its costs can be measured
reliably. Otherwise they are recognised in the profit or loss
as incurred. Capitalised development costs are amortised
on a straight-line basis over the period of their expected
economic benefit, being between 4 and 20 years
dependent on the project.
Mineral Licence Rights
Licence rights relating to mining tenements are amortised in
the consolidated statement of profit or loss and comprehensive
income over the life of the relevant area of interest from the
commencement of commercial production. The mineral
license rights intangible asset is subject to impairment testing
in accordance with the Consolidated Entity’s accounting policy
for impairment of non-financial assets as set out in note 2(o).
Patents and trademarks
Significant costs associated with patents and trademarks are
deferred and amortised on a straight-line basis over the period
of their expected benefit, being between 4 and 20 years.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates. All other expenditure, including expenditure
on internally generated goodwill and brands, is recognised
in profit or loss as incurred.
(o) Impairment of non-financial assets
At each reporting date, the Consolidated Entity reviews
the carrying amounts of its non-financial assets (other than
inventories and deferred tax assets) to determine whether
there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated.
Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows
of other assets or CGUs. Goodwill arising from a business
combination is allocated to CGUs or groups of CGUs that
are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of
its value in use and its fair value less costs to sell. Value in use
is based on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU.
49
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
An impairment loss is recognised if the carrying amount
of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
(p) Leases
Determining whether an arrangement contains a lease
At inception of an arrangement, the Consolidated Entity
determines whether such an arrangement is or contains a lease.
At inception or on reassessment of an arrangement that
contains a lease, the Consolidated Entity separates payments
and other consideration required by the arrangement into
those for the lease and those for other elements on the basis
of their relative fair values. If the Consolidated Entity concludes
for a finance lease that it is impracticable to separate the
payments reliably, then an asset and a liability are recognised
at an amount equal to the fair value of the underlying asset;
subsequently, the liability is reduced as payments are made
and an imputed finance cost on the liability is recognised
using the Consolidated Entity’s incremental borrowing rate.
Leased assets
Assets held by the Consolidated Entity under leases that
transfer to the Consolidated Entity substantially all the risks
and rewards of ownership are classified as finance leases.
The leased asset is measured initially at an amount equal
to the lower of their fair value and the present value of the
minimum lease payments. Subsequent to initial recognition,
the assets are accounted for in accordance with the
accounting policy applicable to that asset.
Assets held under other leases are classified as operating
leases and are not recognised in the Consolidated Entity’s
statement of financial position.
Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part
of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated
to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance
of the liability. The Consolidated Entity derecognises the
liabilities when its contractual obligations are discharged,
cancelled or expired.
(q) Trade and other payables
These amounts represent liabilities for goods and services
provided to the Consolidated Entity prior to the end of the
financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost. The amounts are
unsecured and are usually paid within 30 days of recognition.
The Consolidated entity derecognises the liability when its
contractual obligations are discharged, cancelled or expired.
(r) Borrowings
Loans and borrowings, including promissory notes, are initially
recognised at the fair value of the consideration received,
net of transaction costs. They are subsequently measured
at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement
of the liability for at least 12 months after the reporting date,
the loans or borrowings are classified as non-current.
Interest related to the financial liability component is recognised
in profit or loss. On conversion, the equity component of the
financial liability is reclassified to equity and no gain or loss
is recognised.
(s) Finance income and costs
The Consolidated Entity’s finance income and finance
costs include, as applicable:
• interest income;
• interest expense;
• dividend income;
• the net gain or loss on the disposal of available-for-sale
financial assets;
• the net gain or loss on financial assets at fair value
through profit or loss;
• the foreign currency gain or loss on financial assets
and financial liabilities;
• the fair value loss on contingent consideration classified
as a financial liability;
• impairment losses recognised on financial assets
(other than trade receivables);
• the net gain or loss on hedging instruments
that are recognised in profit or loss; and
• the reclassification of net gains previously
recognised in other comprehensive income.
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.
50
Dividend income is recognised in profit or loss on the date
that the Group’s right to receive payment is established.
The cost of equity-settled transactions are measured at fair
value on grant date.
Interest expense is recognised using the effective interest
method. Finance costs attributable to qualifying assets are
capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred, including:
• interest on short-term and long-term borrowings; and
• interest on hire purchases.
(t) Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected
to be settled within 12 months of the reporting date are
recognised in current liabilities in respect of employees’
services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be settled within 12 months of the reporting
date are recognised in non-current liabilities, provided there
is an unconditional right to defer settlement of the liability.
The liability is measured as the present value of expected
future payments to be made in respect of services provided
by employees up to the reporting date using the projected
unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures
and periods of service. Expected future payments are
discounted using market yields at the reporting date on
Australian Corporate bonds with terms to maturity and
currency that match, as closely as possible, the estimated
future cash outflows.
Termination benefits
Termination benefits are expensed at the earlier of when the
Group can no longer withdraw the offer of those benefits and
when the Group recognises costs for a restructuring. If benefits
are not expected to be settled wholly within 12 months of the
end of the reporting period, then they are discounted.
Defined contribution superannuation expense
Contributions to defined contribution superannuation
plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation
benefits are provided to employees. There were no cash
settled share-based payments during the financial year.
Equity-settled transactions are awards of shares, or options
and performance rights over shares that are provided to
employees in exchange for the rendering of services.
Cash-settled transactions are awards of cash for the
exchange of services, where the amount of cash is
determined by reference to the share price.
Fair value is independently determined using either the
Binomial or Black-Scholes option pricing model that takes
into account the exercise price, the term of the option, the
strike price 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, together with non-vesting conditions that are not
dependant on whether the Consolidated Entity receives the
services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as
an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely to
vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date
less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each
reporting date until vested, determined by applying either
the Binomial or Black-Scholes option pricing model, taking
into consideration the terms and conditions on which the
award was granted. The cumulative charge to profit
or loss until settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting
date is the fair value of the award at that date multiplied
by the expired portion of the vesting period; and
• from the end of the vesting period until settlement of the
award, the liability is the full fair value of the liability
at the reporting date.
All changes in the liability are recognised in profit or loss.
The ultimate cost of cash-settled transactions is the cash
paid to settle the liability.
Market conditions are taken into consideration in determining
grant date fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether
or not that market condition has been met provided all
other conditions are satisfied.
If equity-settled awards are modified, as a minimum an
expense is recognised as if the modification has not been
made. An additional expense is recognised, over the
remaining vesting period, for any modification that increases
the total fair value of the share-based compensation benefit
as at the date of modification.
If the non-vesting condition is within the control of the
Consolidated Entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is
not within the control of the Consolidated Entity or employee
and is not satisfied during the vesting period, any remaining
expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
51
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and
the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive
potential ordinary shares.
(x) Goods and Services Tax (‘GST’)
and other similar taxes
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised
as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is
included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or
financing activities which are recoverable from, or payable
to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the tax authority.
(y) Rounding of amounts
The Company is of a kind referred to in Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, the
nearest dollar.
(z) Exploration and evaluation assets
Exploration, evaluation and feasibility expenditure
Exploration and evaluation expenditure is capitalised and
carried forward in the financial statements, in respect of areas
of interest for which the rights of tenure are current and where
such costs are expected to be recouped through successful
development and exploitation of the area of interest, or
alternatively, by its sale. Capitalised costs are deferred
until commercial production commences from the relevant
area of interest, at which time they are amortised on a
unit of production basis.
Exploration and evaluation expenditure consists of an
accumulation of acquisition costs and direct exploration
and evaluation costs incurred.
If equity-settled awards are cancelled, it is treated as if it
has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement
award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
(u) Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes,
the fair value is based on 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; and assumes that the transaction will take place either:
in the principle market; or in the absence of a principal market,
in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, are used,
maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified,
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed each reporting date and transfers
between levels are determined based on a reassessment
of the lowest level input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise
is either not available or when the valuation is deemed
to be significant. External valuers are selected based
on market knowledge and reputation. Where there is a
significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which
includes a verification of the major inputs applied in the
latest valuation and a comparison, where applicable,
with external sources of data.
(v) Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
(w) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to the ordinary shareholders of Clean TeQ
Holdings Limited by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year.
52
Exploration and evaluation assets are assessed for impairment
if (i) sufficient data exists to determine technical feasibility and
commercial viability, and (ii) facts and circumstances suggest
that the carrying amount exceeds the recoverable amount
(see impairment policy, Note 2(o)). For the purpose of
impairment testing, exploration and evaluation assets are
allocated to cash-generating units to which the exploration
activity relates.
When an area of interest is abandoned, or the Directors
determine it is not commercially viable to pursue, accumulated
costs in respect of that area are written off in the period the
decision is made.
(aa) New standards and interpretations
not yet adopted
A number of new standards and amendments to standards
are effective for annual period beginning after 1 July 2016,
however, the Group has not applied the following new or
amended standards in preparing these consolidated
financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance,
including IAS 18 Revenue, IAS 11 Construction Contracts
and IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for annual reporting periods beginning
on or after 1 January 2018, with early adoption permitted.
IFRS 9 Financial Instruments
IFRS 9, published in July 2014, replaces the existing guidance
in IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 includes revised guidance on the classification and
measurement of financial instruments, including a new
expected credit loss model for calculating impairment on
financial assets, and the new general hedge accounting
requirements. It also carries forward the guidance on
recognition and de-recognition of financial instruments
from IAS 39.
IFRS 9 is effective for annual reporting periods beginning
on or after 1 January 2018, with early adoption permitted.
IFRS 16 Leases
IFRS 16 requires companies to bring most leases on-balance
sheet from 2019. Companies with leases will appear to be
more asset-rich, but also more heavily indebted. IFRS 16 is
effective for annual reporting periods beginning on or after
1 January 2019, with early adoption permitted.
The adoption of these standards may have an impact on the
Consolidated Entity’s financial assets, and is not expected to
have a significant impact on the Consolidated Entity’s financial
liabilities, however the impact is not expected to be material
to net equity.
Note 3. Critical accounting judgements,
estimates and assumptions
The preparation of the financial statements requires
management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements.
Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities,
revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on
other various factors, including expectations of future events,
management believes to be reasonable under the
circumstances.
The resulting accounting judgements and estimates will seldom
equal the related actual results. The judgements, estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year
are discussed below.
Share-based payment transactions
The Consolidated Entity measures the cost of equity-settled
transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted.
The fair value is determined by using either the Binomial
or Black-Scholes model taking into account the terms and
conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled
share-based payments would have no impact on the carrying
amounts of assets and liabilities within the next annual
reporting period but may impact profit or loss and equity.
Estimation of useful lives of assets
The Consolidated Entity determines the estimated useful
lives and related depreciation and amortisation charges
for its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a result
of technical innovations or some other event. The depreciation
and amortisation charge will increase where the useful lives
are less than previously estimated lives, or technically obsolete
or non-strategic assets that have been abandoned or sold
will be written off or written down.
Exploration & Evaluation Assets
As set out in Note 2(z) exploration and evaluation expenditure
is capitalised for an area of interest for which it is considered
likely to be recoverable from future exploitation or sale.
The accounting policy requires management to make
certain estimates and assumptions as to future events
and circumstances, in particular whether an economically
viable extraction operation can be established. These
estimates and assumptions may change as new information
becomes available.
53
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
If, after having capitalised the expenditure under the
accounting policy, a judgement is made that recovery
of the expenditure is unlikely, the relevant capitalised
amount will be written off to the profit or loss.
The CODM reviews gross profit for each operating division.
The accounting policies adopted for internal reporting
to the CODM are consistent with those adopted in
the financial statements.
Intangible assets
The recoverable value of patents and trademarks acquired
is based on the cost of registering the patents and
trademarks, less any diminution in value through
amortisation and impairment.
The recoverable value of development intangible assets
is based on discounted cash flows expected to be
derived from the use or eventual sale of the assets.
At each reporting date the directors and management
undertake an impairment review to determine their value
in use as derived from discounted cash flow modelling.
Based on the impairment review at 30 June 2017, the
directors determined that no impairment of the intangible
assets be recognised (2016: Nil). Details of the review, and
the assumptions and estimates used, are contained in note 16.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences only if the Consolidated Entity considers it is
probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Other non-derivative financial liabilities
Other non-derivative financial liabilities are measured at
fair value, at initial recognition and for disclosure purposes,
at each financial reporting date. Fair value is calculated
based on the present value of the future principal and interest
cash flows, discounted at the market rate of interest at the
measurement date. In respect of the liability component of
convertible notes, the market rate of interest is determined
with reference to similar liabilities that do not have a
conversion option. For finance leases the market rate of
interest is determined by reference to similar lease agreements.
Note 4. Operating segments
Identification of reportable operating segments
The Consolidated Entity is organised into 2 operating
segments: Water and Metals. These operating segments
offer different products and services, and are managed
separately because they require different technology and
marketing strategies. For each segment internal reports are
produced for review and use by the Managing Director
who is the Consolidated Entity’s chief operating decision
maker (‘CODM’), in assessing performance and in
determining the allocation of resources. There is no
aggregation of operating segments.
The information reported to the CODM is on at least
a monthly basis.
Types of products and services
The principal products and services of each of these
operating segments are as follows:
Water
Metals
The Company’s suite of water technologies
filter, separate and purify polluted waters
for drinking, agriculture, recreation or
industrial use.
The Clean-iX® technology is at the core
of this segment and aims to provide cost
effective extraction techniques for a range
of resources, including base metals, precious
metals and radioactive elements (such
as uranium). The Metals segment is also
progressing the development of the
Syerston Project in New South Wales.
Information regarding the results of each reportable segment
is included below. Performance is measured based on the
net result before interest, depreciation, amortisation and tax,
as included in the internal management reports that are
reviewed by the Consolidated Entity’s Managing Director.
Each segment’s net result before interest, depreciation,
amortisation and tax is used to measure performance
as management believes that such information is the most
relevant in evaluating the results of certain segments relative
to other entities that operate within these industries.
Inter-segment pricing is determined on an arm’s length basis.
The information relating to the performance of the identified
segments includes revenues and directly attributable costs
and materials. The assets attributed to each division relates
to revenue generating assets. All other assets and liabilities
are not allocated to specific segments.
Geographical segments
Geographically, the Consolidated Entity operates
predominately in Australia.
Major customers
Major revenue for the year ending 30 June 2017 is
derived chiefly from interest income and government grants.
54
Operating segment information
Consolidated – 2017
Revenue
Sales to external customers
Rental income
Interest income
Other revenue
Total revenue
Share of profit from JV
Reportable segment (loss)/profit before interest,
depreciation and tax
Depreciation and amortisation
Impairment of assets
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Total assets includes:
Additions of non-current assets (including
those acquired in a business combination)
Liabilities
Segment liabilities
Total liabilities
Metals
$’000
Water
$’000
Intersegment
eliminations/
unallocated**
$’000
–
72
–
500
572
–
(1,541)
(388)
–
–
(1,929)
–
392
–
–
181
573
1
(1,754)
(378)
–
–
(2,132)
–
–
–
453
14
467
–
(47)
–
(170)
(8,123)
–
24,668
5,754
89,949
Total
$’000
392
72
453
695
1,612
1
(813)
–
(170)
(12,184)
–
(12,184)
120,371
120,371
(7,906)
(11,201)
13,689
2,850
804
542
336
14,829
3,595
6,987
6,987
* The magnitude of the unallocated portion of the segment results is a result of the Consolidated Entity incurring a significant amount
of expenses that cannot be directly attributable on a reasonable basis to any one segment.
55
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Consolidated – 2016
Revenue
Sales to external customers
Rental income
Interest income
Other revenue
Total revenue
Reportable segment (loss)/profit before interest,
depreciation and tax
Depreciation and amortisation
Impairment of assets
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Total assets includes:
Additions of non-current assets (including those
acquired in a business combination)
Liabilities
Segment liabilities
Total liabilities
Metals
$’000
Water
$’000
Intersegment
eliminations/
unallocated**
$’000
44
80
–
430
554
(1,332)
(18)
–
–
(1,350)
–
121
–
–
450
571
(2,212)
(663)
–
–
(2,875)
–
44
–
110
175
329
(1,901)
(23)
–
(274)
(2,198)
–
13,603
5,191
8,235
Total
$’000
209
80
110
1,055
1,454
(5,445)
(704)
–
(274)
(6,423)
–
(6,423)
27,029
27,029
2,955
2,684
–
–
–
2,955
1,620
4,304
4,304
* The magnitude of the unallocated portion of the segment results is a result of the Consolidated Entity incurring a significant amount
of expenses that cannot be directly attributable on a reasonable basis to any one segment.
56
Note 5. Revenue
Sales revenue
Contract revenue
Government grants
Rental income
Other revenue
Interest
Proceeds from Sale of Asset
Other revenue
Revenue
Note 6. Share of Profits of Joint Ventures Accounted for using the Equity Method
Share of Profit – Joint Venture
Consolidated
2017
$’000
2016
$’000
392
682
72
1,146
453
12
1
466
1,612
209
883
80
1,172
110
–
172
282
1,454
Consolidated
2017
$’000
1
2016
$’000
–
57
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 7. Expenses
Loss before income tax from continuing operations includes the following specific expenses:
Cost of sales
Cost of sales
Depreciation
Motor vehicles under lease
Plant and factory equipment
Office equipment and furniture
Total depreciation
Amortisation
Capitalised development costs
Other intangible assets
Total amortisation
Total depreciation and amortisation
Employee benefit expenses
Wages and salaries
Employee entitlements expense including movements
in provisions for employee entitlements
Superannuation
Equity settled share based payments
Other costs
Total employee benefit expenses
Rental expense relating to operating leases
Lease payments
Other expenses
Write off of bad debts
Impairment of loan
58
Consolidated
2017
$’000
2016
$’000
76
2
63
(20)
45
732
35
767
813
2,565
40
256
5,182
798
8,841
420
2
–
61
5
278
18
301
368
35
403
704
1,590
1
175
2,239
286
4,291
189
–
326
Note 8. Income tax benefit
Income tax benefit:
Current tax
Deferred tax – origination and reversal of temporary differences
Aggregate income tax benefit
Deferred tax included in income tax benefit comprises:
Decrease in deferred tax liabilities (note 22)
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit from continuing operations
Profit before income tax (expense)/benefit from discontinued operations
Tax at the statutory tax rate of 27.5% (2016: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
Share-based payments
Interest expense on promissory note treated as non-deductible
Change in recognised deductible temporary difference
Tax losses (reinstated) / not brought to account
Non-assessable government grant income
Non-deductible R&D expense
R&D tax credit
Non-deductible amortisation expense
Income tax benefit
Consolidated
2017
$’000
2016
$’000
–
–
–
–
(12,184)
–
(12,184)
(3,351)
4
1,425
46
–
2,764
(138)
1,637
(2,589)
202
–
–
–
–
–
(6,423)
–
(6,423)
(1,927)
2
672
58
6
1,344
(265)
454
(454)
110
–
Note that as at 1 July 2016, the company tax rate for companies with turnover of less than $10m has reduced from 30% to 27.5%.
Accordingly, deferred tax balances have been recalculated at the new rate of tax.
Tax losses not recognised:
Unused tax losses for which no deferred tax asset has been recognised,
including tax losses arising from a business combination
Potential tax benefit @ 27.5% (2016: 30%)
Plus: Unrecognised benefit of carry forward non-refundable R&D tax offset for
which no deferred tax asset has been recognised, arising from a business combination
Total potential tax benefit of carry forward tax losses and R&D tax offset for
which no deferred tax asset has been recognised
Temporary differences not brought to account
Consolidated
2017
$’000
2016
$’000
25,508
7,015
589
7,604
903
21,692
6,508
589
7,097
903
The above potential tax benefits for tax losses and R&D tax offset have not been recognised in the statement of financial position.
The tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test
is passed. The R&D tax offset can only be utilised in the future if sufficient tax liabilities can be generated against which the
carry forward R&D tax offset can be credited.
59
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 9. Current assets – cash and cash equivalents
Cash at bank
Cash on deposit
Cash on deposit used as security for bank guarantee and credit card facilities
– uncommitted
Consolidated
2017
$’000
88,863
–
–
2016
$’000
7,226
–
–
88,863
7,226
The effective interest rate on short-term bank deposits at 30 June 2017 was 2.03% (2016: 1.60%). These deposits have
a maximum maturity of 90 days of year end. Any balances with maturities exceeding this have been disclosed as other
financial assets.
Note 10. Current assets – trade and other receivables
Trade receivables
Other receivables
Consolidated
2017
$’000
91
902
993
2016
$’000
49
253
302
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $nil as at 30 June 2017
($nil as at 30 June 2016).
The Consolidated Entity did not consider a credit risk on the aggregate balances after reviewing credit terms of customers
based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
31-60 days
60-90 days
90+days
Consolidated
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
Normal trading terms are 30 days from month end. Amounts outstanding beyond normal trading terms do not have a history
of default and thus management is of the view that no debtors are impaired at 30 June 2017 or 30 June 2016 and thus should
not be provided for.
60
Note 11. Current assets – inventories
Raw materials – at net realisable value
Finished goods – at cost
Consolidated
2017
$’000
10
86
96
2016
$’000
10
86
96
Raw materials includes grape skin extract which was initially recognised at a cost of $598,000 when first acquired pre-2007.
At 30 June 2017 the carrying value of grape skin extract is $10,000 (2016: $10,000). During the year ending 30 June 2017,
management did not choose to write down the value of finished goods (2016: $nil).
Note 12. Current assets – income tax receivable
Income tax receivable
Consolidated
2017
$’000
2,088
2016
$’000
2,395
Income tax receivable represents the refund due to the Consolidated Entity on expenditure during the current financial year eligible
for research and development tax concessions.
Note 13. Other financial assets
Current
Cash on deposit used as security for bank guarantees
Non-Current
Cash on deposit used as security for bank guarantees and facilities
Note 14. Non-current assets – Investment in equity accounted investee
Investment in joint venture
Consolidated
2017
$’000
2016
$’000
–
80
377
–
Consolidated
2017
$’000
804
2016
$’000
–
61
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 15. Non-current assets – property, plant and equipment
Office furniture and equipment – at cost
Less: Accumulated depreciation
Motor vehicles – at cost
Less: Accumulated depreciation
Factory equipment – at cost
Less: Accumulated depreciation
Leasehold improvements – at cost
Less: Accumulated depreciation
Land – at cost
Consolidated
2017
$’000
194
(100)
94
101
(40)
61
737
(737)
–
213
(63)
150
2,357
2,357
2,662
2016
$’000
156
(118)
38
86
(65)
21
737
(737)
–
41
–
41
2,229
2,229
2,329
Approximately $2,229,000 of the land was acquired from Ivanhoe Mines Ltd as part of the Consolidated Group’s acquisition
of the Syerston Project. The land was recorded at its deemed cost, being an approximate of its fair value as at that date
as determined by management, with reference to an independent valuation performed in May 2013.
The acquisition of the Syerston project has been recognised as an asset acquisition in accordance
with Australian Accounting Standards.
62
Reconciliations of carrying amount
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance as at 1 July 2015
Additions
Disposals
Write off of assets
Depreciation expense
Balance as at 30 June 2016
Additions
Disposals
Transfers In/Out
Write off of assets
Depreciation expense
Balance as at 30 June 2017
Factory
Equipment
$’000
278
–
–
–
(278)
–
–
–
–
–
–
–
Office
Furniture &
Equipment
Leasehold
Improve
-ments
$’000
$’000
56
–
–
–
(18)
38
94
(1)
(57)
–
20
94
–
41
–
–
–
41
115
–
57
–
(63)
150
Land
$’000
2,229
–
–
–
–
2,229
128
–
–
–
–
2,357
Motor
Vehicles
$’000
26
–
–
–
(5)
21
50
(8)
–
(2)
61
Total
$’000
2,589
41
–
–
(301)
2,329
387
(9)
–
–
(45)
2,662
Additions in leasehold improvements include a non-cash provision for make good of $51,000 that was provided for in this
financial year. This provision relates to the lease over the property that the Company holds at Unit 12, 21 Howleys Road.
63
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 16. Non-current assets – intangibles
Capitalised development costs – at cost
Less: Accumulated amortisation and impairments
Patents and trademarks – at cost
Less: Accumulated amortisation and impairments
Licence rights – at cost
Less: Accumulated amortisation and impairments
Consolidated
2017
$’000
18,424
(9,885)
8,539
713
(337)
376
4,542
(3,051)
1,491
10,406
2016
$’000
18,212
(8,941)
9,271
713
(302)
411
4,472
(3,051)
1,421
11,103
Reconciliation of carrying amount
Reconciliations of the carrying amounts at the beginning and end of the current and previous financial year are set out below:
Capitalised
Development
Costs
$’000
10,033
–
–
(394)
(368)
9,271
–
–
–
(732)
8,539
License
Right
$’000 s
1,421
–
–
–
–
1,421
70
–
–
–
1,491
Patents and
Trademarks
$’000
446
–
–
–
(35)
411
–
–
–
(35)
376
Total
$’000
11,900
–
–
(394)
(403)
11,103
70
–
–
(767)
10,406
Consolidated
Balance as at 1 July 2015
Additions
Impairment charge
Transfer to Exploration Asset
Amortisation expense
Balance as at 30 June 2016
Additions
Impairment charge
Transfer to Exploration Asset
Amortisation expense
Balance as at 30 June 2017
64
Carrying values of Cash Generating Units (CGUs)
Capitalised
Development
Costs
$’000
License
Rights
$’000
Patents and
Trademarks
$’000
As at 30 June 2016:
Water
Metals
As at 30 June 2017:
Water
Metals
4,836
4,435
9,271
4,472
4,067
8,539
121
1,300
1,421
141
1,350
1,491
205
206
411
188
188
376
Total
$’000
5,162
5,941
11,103
4,801
5,605
10,406
The carrying amount of each CGU inclusive of assets other
than intangible assets is $953,000 (2016: $30,000) for
Water and $19,063,000 (2016: $7,662,000) for Metals.
Amortisation
The amortisation of patents and trademarks, licence rights
and development costs are allocated to expenses within the
statement of profit or loss and other comprehensive income.
Recoverability of development costs
The carrying amount of the Consolidated Entity’s development
intangible assets that are yet to be commercialised is reviewed
at each reporting date for potential impairment. Impairment is
now assessed at a CGU level rather than based on individual
intangible assets capitalised due to the Consolidated Entity’s
technologies being platform technologies where cash flows
are inter-dependent. The review consists of a comparison of
the carrying value with the expected recoverable amount of
the development intangible assets based on the estimated
value in use, which is determined by discounted cash flow
models, as set out below.
Impairment test
As a result of the impairment assessment at 30 June 2017,
the directors and management of the Consolidated Entity
identified that no impairment charge be recognised
(30 June 2016: impairment of $nil).
Impairment testing of significant CGUs
The Consolidated Entity’s intangible assets are reviewed for
impairment at a CGU level using operating segments and
individually identifiable projects to develop appropriate
discounted cash flow models. The discounted cash flow
models take into account a range of factors including:
• the status of an individual project with regard to its stage
of project development;
• the extent of any incremental costs expected to be
incurred to commercialise the development assets;
• five to twenty year (Metals CGU) forecast revenues from
commercialisation of the development assets, including
assumptions with respect to sales growth dependent
upon either the quantum of projects forecast to commence;
• the risks attached to commercialising the asset,
including any industry specific or regulatory risk;
• anticipated levels of competition; and
• other general economic factors.
The discounted cash flows have been prepared using a
variety of sourced data such as sales data from Memoranda
of Understanding signed, anticipated sales resulting from
discussions with potential customers and other market data
to forecast future revenue. Forecast production and processing
results and capital and operating costs are estimated by
appropriately qualified and competent personnel engaged
by the Consolidated Entity for both the Water and Metals
CGUs. As there are no guarantees that new projects will be
awarded, given regulatory approval where such approval
is required, or be commercialized within planned timeframes,
there is an inherent risk attached to the discounted cash
flows that is factored into the key assumptions by way
of probability factor adjustments.
In generating the forecast cash flows, the Consolidated Entity
has used forecast prices of US$7.50/lb for nickel, US$12/lb
for cobalt, US$1500/Kg for Scandium oxide and AUD/USD
0.75 and a post-tax discount rate of 15% (2016: 15%) for all
future cash flows for a 20 year period for the Metals CGU.
The Water CGU forecast cashflows include income derived
from a mix of long term (20 years) and short to medium term
(5 years), tolling arrangement and plant revenue projects using
a discount rate of 15% post-tax. The discount rate was used in
conjunction with a range of probability factors for both CGUs
to reflect the current assessment of the likelihood of success
of the forecast cashflows.
65
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Management note that reasonably possible changes in key
assumptions include changes to probability factors applied to
forecast cash flows, changes in the timing of cash flows and
changes to assumed rates of market penetration. The most
significant potential changes and their impact, independent of
each other, on the carrying values to be tested for impairment
are as follows at 30 June 2017:
A reduction of 10% in the probability factors applied to forecast cash flows
A delay of six months in the commencement of forecast cash flows
A change of 2% in the weighted average cost of capital
An increase of 5% in operating expenditure
A reduction of 5% in commodity prices
A reduction of 5% in production yield
An increase of 5% in foreign currency exchange rates
An increase of 10% in capital expenditure
Consolidated
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Management’s conclusion is that these changes in key
assumptions, while reducing the recoverable amounts of the
Consolidated Entity’s technologies, would not, as at 30 June
2017, reduce the recoverable amounts to the extent that the
development intangible assets would be impaired. Therefore,
reasonably possible changes in key assumptions are unlikely
to result in an impairment at 30 June 2017 (30 June 2016: nil).
Note 17. Non-current assets – Exploration & evaluation assets
At the beginning of the financial year
Transfer from intangibles
Reversal of accrual
Additions
R&D incentive on exploration asset off-set
Disposals/Write offs
At end of the financial year
Exploration tenement summary
Consolidated
2017
$’000
3,201
–
(351)
13,619
(2,088)
(2)
14,379
2016
$’000
246
394
–
4,657
(2,096)
–
3,201
Licence Number
Project Name
EL4573
EL8561
Syerston
Syerston
Location
NSW
NSW
Equity Interest
2017
Equity Interest
2016
100%
100%
100%
-%
66
Note 18. Current liabilities – trade and other payables
Trade payables
Other payables
Note 19. Current liabilities – employee benefits
Annual leave
Long service leave
Note 20. Deferred revenue
Current
Government grant*
Non-Current
Government grant*
Consolidated
2017
$’000
2,520
652
3,172
Consolidated
2017
$’000
168
132
300
2016
$’000
412
303
715
2016
$’000
135
139
274
Consolidated
2017
$’000
2016
$’000
47
495
542
46
544
590
* This relates to the Commonwealth government grant money received associated with the Climate Ready project. This income is being
recognised over 17 years, being the estimated useful life of the related asset.
67
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 21. Notes payable
Current
Notes Payable
Non-Current
Notes Payable
Consolidated
2017
$’000
2,850
–
2,850
2016
$’000
–
2,684
2,684
As part of the acquisition of the Syerston Project from Ivanhoe Mines Ltd on 31 March 2015, a promissory note was issued
by the Consolidated Entity with a face value of $3,000,000 payable in three years’ time and carrying a zero coupon.
This promissory note is secured by first ranking mortgages against the real property of the Syerston Project. The promissory
note is recognised at its amortised cost of $2,850,000 (30 June 2016: amortised cost of $2,684,000).
Note 22. Non-current liabilities/assets – deferred tax
Consolidated
Balance as at 30 June 2017
Net balance
1 July 2016
$’000
Recognised
in profit
or loss
$’000
Recognised
directly in
equity
$’000
Deferred
tax assets
$’000
Deferred
tax liabilities
$’000
Deferred tax asset (liability) comprises temporary differences attributable to:
Amounts recognised in:
• Intangible assets
• Unearned interest
• Accrued expenses
• Employee benefits
• Transaction costs on share issues
• Legal and consulting fees
• Plant & equipment
• Unused tax losses
Tax liabilities (assets) before set-off
Set off deferred tax assets/liabilities
Net tax liabilities (assets)
Movements 2017
Opening balance
Charges to profit or loss (note 8)
Closing balance
–
–
–
(7)
–
–
–
–
17
123
101
252
17
11
1,684
2,206
(2,206)
(2,206)
–
–
–
–
–
–
(2,206)
2,206
(2,626)
–
188
95
259
11
2
421
17
(65)
6
–
6
9
2,071
(387)
–
–
–
–
–
–
In May 2017, the Australian Government enacted a change in the Australian corporate tax rate from 30% to 27.5% from 1 July
2016 for companies with turnover of less than $10m, and so the deferred tax balances have been recalculated at the new rate.
This recalculation of deferred tax balances as well as current year movement in the balances, are reflected in the movement in
temporary differences above.
68
Note 23. Non-current liabilities – employee benefits
Annual leave and long service leave
Note 24. Provisions
Provision for Make Good at end of lease
Consolidated
2017
$’000
68
2016
$’000
41
Consolidated
2017
$’000
55
2016
$’000
–
69
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 25. Equity – issued capital
Consolidated
2017
Shares
2016
Shares
2017
$’000
Ordinary shares – fully paid
576,266,310
437,052,097
137,517
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue Price
1 July 2016
437,052,097
Exercise of Options by Option Holder
Exercise of Options by Option Holder
4 July 2016
6 July 2016
Exercise of Options by Option Holder
18 August 2016
Exercise of Options by Option Holder
23 August 2016
200,000
2,000,000
500,000
33,000
Share placement
8 November 2016
38,461,538
Exercise of Options by Option Holder
14 February 2017
Exercise of Options by Option Holder
20 February 2017
Exercise of Options by Option Holder
Exercise of Options by Option Holder
2 March 2017
7 March 2017
53,155
500,000
44,577
33,223
Exercise of Options by Option Holder
10 March 2017
500,000
Exercise of Options by Option Holder
16 March 2017
Exercise of Options by Option Holder
21 March 2017
91,773
43,479
Share placement
24 March 2017
92,518,888
Exercise of Options by Option Holder
28 April 2017
Exercise of Options by Option Holder
Exercise of Options by Option Holder
Exercise of Options by Option Holder
Exercise of Options by Option Holder
Exercise of Options by Option Holder
5 May 2017
5 May 2017
5 June 2017
9 June 2017
9 June 2017
Exercise of Options by Option Holder
16 June 2017
100,000
100,000
500,000
288,745
1,211,255
2,000,000
34,580
$0.40
$0.15
$0.28
$0.30
$0.39
$0.30
$0.28
$0.30
$0.30
$0.28
$0.30
$0.30
$0.88
$0.28
$0.28
$0.12
$0.12
$0.12
$0.15
$0.30
2016
$’000
39,856
$’000
39,856
79
290
141
10
15,000
16
141
13
10
141
28
13
81,417
28
28
58
33
140
291
10
(226)
Capital raising costs
Balance
30 June 2017
576,266,310
137,517
Ordinary shares
Ordinary shares entitle the holder to participate in dividends
and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares
held. The fully paid ordinary shares have no par value and
the Company does not have a limited amount of authorised
capital. All ordinary shares rank equally with regard to the
Consolidated Entity’s residual assets.
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.
Share buy-back
There is no current on-market share buy-back.
70
Capital risk management
The Board’s policy is to maintain a strong capital base so
as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Board
of Directors monitors the return on capital, which the
Consolidated Entity defines as net operating income divided
by total shareholders’ equity. The Board of Directors also
monitors the level of dividends likely to be proposed and
paid to ordinary shareholders.
The Board ultimately seeks to maintain a balance between
the higher returns that might be possible with higher levels
of borrowings, new share issues and the issuing of convertible
notes and the advantages and security afforded by a sound
capital position. The Consolidated Entity may increase its debt
levels if and when required in order to achieve increased
returns for shareholders.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The capital risk
management policy remains unchanged from the 30 June 2015 Annual Report.
Note 26. Equity – reserves
Share based payments reserve
2017
$’000
8,484
8,484
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance as at 1 July 2015
Gain on sale transactions with equity holders
Lapsed options
Transfer to accumulated losses
Share based payments
Balance as at 30 June 2016
Gain on sale transactions with equity holders
Lapsed options
Transfer to accumulated losses
Share based payments
Balance as at 30 June 2017
Note 27. Equity – accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax expense for the year
Transfer from share based payments reserve
Foreign Currency
Reserve
$’000
–
–
–
–
–
–
–
–
–
–
–
Share Based
Payments
$’000
1,063
–
–
–
2,239
3,302
–
–
–
5,182
8,484
Consolidated
2016
$’000
3,302
3,302
Total
$’000
1,063
–
–
–
2,239
3,302
–
–
–
5,182
8,484
Consolidated
2017
$’000
(20,433)
(12,184)
–
2016
$’000
(14,010)
(6,423)
–
(32,617)
(20,433)
71
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 28. Equity – dividends
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Franking credits
Franking credits available for future years based on a tax rate of 30%
Consolidated
2017
$’000
–
2016
$’000
–
The above amounts represent the balance of the franking
account as at the end of the financial year, adjusted for:
The Consolidated Entity has exposure to the following
risks from their use of financial instruments:
• franking credits that will arise from the payment
of the amount of the provision for income tax
at the reporting date;
• franking debits that will arise from the payment of dividends
recognised as a liability at the reporting date; and
• franking credits that will arise from the receipt of dividends
recognised as receivables at the reporting date.
The ability to utilise the franking credits is dependent upon
there being sufficient available profits to declare dividends.
In accordance with the tax consolidation legislation, the
Company as the head Entity in the tax Consolidated Entity
has assumed the benefit of franking credits of $nil (2016: $nil).
Note 29. Financial instruments
Financial risk management objectives
The Consolidated Entity’s activities expose it to a variety
of financial risks: market risk (including foreign currency risk,
price risk and interest rate risk), credit risk and liquidity risk.
The Consolidated Entity’s overall risk management program
focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial
performance of the Consolidated Entity. The Consolidated
Entity uses different methods to measure different types of
risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and
other price risks, ageing analysis for credit risk and beta
analysis in respect of investment portfolios to determine
market risk.
Risk management is carried out by senior finance executives
under policies approved by the Board of Directors. These
policies include identification and analysis of the risk exposure
of the Consolidated Entity and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and
manages financial risks within the Consolidated Entity’s
operating units. The Company’s finance department
reports to the Board on a monthly basis.
• Market risk;
• Credit risk; and
• Liquidity risk.
This note presents information about the Consolidated Entity’s
exposure to each of the above risks, their objectives, policies
and processes for measuring and managing risk and the
management of capital. Further quantitative disclosures
are included throughout this financial report.
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. The Board is responsible for developing
and monitoring risk management policies.
Market risk
Market risk is the risk that changes in market prices – such
as foreign exchange rates and interest rates – will affect
the Consolidated Entity’s income or the value of its holdings
of financial instruments. The objective of market risk
management is to manage and control market risk exposures
within acceptable parameters, while optimising the return.
Foreign currency risk
The Consolidated Entity undertakes certain transactions
denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
There is no current material exposure to foreign exchange risk.
Interest rate risk
The Consolidated Entity currently has no significant debt
subject to variable interest rates. Accordingly the Consolidated
Entity has limited exposure to interest rate movements.
The Consolidated Entity has a term deposit facility used
as security for bank guarantees and credit card debts,
and short term deposit facilities with variable interest rates
which mature within 90 days.
72
Fair value sensitivity analysis for fixed-rate instruments
The Consolidated Entity does not account for any fixed-rate
financial assets or liabilities at fair value through profit or loss,
and the Consolidated Entity does not designate derivatives
(interest rate swaps) as hedging instruments under a fair value
hedge accounting model. Therefore a change in interest rates
at the reporting date would not affect profit or loss. A change
of 100 basis points in interest rates would have increased or
decreased equity by approximately nil after tax (2016: $nil).
Credit risk
Credit risk is the risk of financial loss to the Consolidated
Entity if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally
from the Consolidated Entity’s receivables from customers.
The carrying amount of financial assets represents the
maximum credit exposure.
Trade and other receivables
The Consolidated Entity’s exposure to credit risk relating to
trade and other receivables of $993,000 (2016: $302,000)
is influenced mainly by the individual characteristics of each
customer. The demographics of the Consolidated Entity’s
customer base, including the default risk of the industry and
country, in which customers operate, has less of an influence
on credit risk. Geographically there is an Australian
concentration of credit risk.
The Consolidated Entity is exposed to concentrations of credit
risk in relation to project revenue, due to the progress on
projects. The Board has established a credit policy under
which each new significant customer is analysed individually
for creditworthiness before the Consolidated Entity’s standard
payment and delivery terms and conditions are offered. Each
new contract of works to be undertaken by the Consolidated
Entity, which is greater than a predetermined value, must be
approved by the Board prior to the contract being signed.
Many of the Consolidated Entity’s customers are typically large
multinationals and government organisations. Losses relating
to recovery of amounts owing to the Consolidated Entity have
occurred very infrequently since the inception of the business.
The majority of sales transactions undertaken by the
Consolidated Entity require the customer to make payments
as contract milestones are achieved. Failure of the customer
to make payment by the due date will result in the further
supply of goods and services being put on hold until such
time as payment is received by the Consolidated Entity.
In monitoring customer credit risk, customers are grouped
according to their credit characteristics, including whether
they are an individual or legal Entity, whether they are a
wholesale, retail or end-user customer, geographic location,
industry, aging profile, maturity and existence of previous
financial difficulties. The Consolidated Entity’s trade and other
receivables relate mainly to the Group’s wholesale customers
who are predominantly made up of public companies and
government bodies. Customers that are graded as “high risk”
are placed on a restricted customer list, and future sales are
made on a prepayment basis with approval of executive
management. From inception to the date of this report, the
Consolidated Entity has only ever had two minor trade bad
debts. Refer to note 10 for debtors aging analysis.
Guarantees
The Consolidated Entity’s policy is to provide financial
guarantees only to wholly-owned subsidiaries. As at the
reporting date, there are no outstanding guarantees.
Cash and cash equivalents
The Consolidated Entity held cash and cash equivalents
of $88,863,000 as at 30 June 2017 (2016: $7,226,000).
The cash and cash equivalents are held with top tier banks.
Liquidity risk
Liquidity risk is the risk that the Consolidated Entity will not
be able to meet its obligations associated with its financial
liabilities as they fall due. The Consolidated Entity’s approach
to managing liquidity is to ensure, as far as possible, that it will
have sufficient liquidity to meet its liabilities when they are due,
under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Consolidated
Entity’s reputation.
The Consolidated Entity adopts milestone and progress
invoicing, which assists it in monitoring cash flow
requirements and optimising its cash return on investments.
Typically the Consolidated Entity ensures that it has sufficient
cash on demand to meet expected operational expenses for
a period of not less than 90 days, including the servicing of
financial obligations. This excludes the potential impact of
extreme circumstances that cannot reasonably be predicted,
such as natural disasters.
Exposure to liquidity risk
The following tables detail the Consolidated Entity’s remaining
contractual maturity for its financial liabilities at the reporting
date. The amounts are gross and undiscounted, and include
estimated interest payments.
73
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Consolidated – 2017
Non–derivatives
Non-interest bearing
Trade payables
Other payables
Notes payable
Interest bearing – fixed rate
Deferred consideration payable
Total non-derivatives
Consolidated – 2016
Non–derivatives
Non-interest bearing
Trade payables
Other payables
Notes payable
Interest bearing – fixed rate
Deferred consideration payable
Total non-derivatives
Contractual cash flows
Carrying
amount
$’000
1 year or less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5 years
$’000
Total
$’000
2,520
652
2,850
–
6,022
2,520
652
3,000
–
6,172
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,520
652
3,000
–
6,172
Contractual cash flows
Carrying
amount
$’000
1 year or
less $’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5
years $’000
Total
$’000
412
303
2,684
–
3,399
412
303
–
–
–
–
3,000
–
715
3,000
–
–
–
–
–
–
–
–
–
–
412
303
3,000
–
3,715
The cash flows in the maturity analysis above are not expected
to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Trade and other receivables are initially recognised at fair
value and subsequently measured at amortised cost using the
effective interest rate method, less any provision for impairment.
Trade and other payables are measured at fair value on
recognition and at amortised cost using the effective interest
rate method subsequently. Due to their short term nature
neither trade and other receivables or trade and other
payables are discounted.
Borrowings are recognised at fair value of consideration
received, net of transaction costs, and subsequently
measured at amortised cost using the effective interest rate
method. In estimating amortised cost the Consolidated Entity
takes into account its borrowing capacity and the source of
its borrowings. The categorisation of the borrowings based
on the fair value hierarchy is detailed in note 30.
74
Note 30. Fair value measurement
Fair value hierarchy
The following tables show the carrying amounts and fair values of the Consolidated Entity’s financial assets and financial liabilities,
measured or disclosed at fair value, using a three level hierarchy, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated – 2017
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities not measured at fair value
Trade and other payables
Other borrowings
Notes payable
Consolidated – 2016
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities not measured at fair value
Trade and other payables
Other borrowings
Notes payable
Carrying
amount
$’000
88,863
993
80
89,936
(3,172)
–
(2,850)
(6,022)
Carrying
amount
$’000
7,226
302
377
7,905
(715)
–
(2,684)
(3,399)
Fair value
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,892)
(2,892)
Fair value
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,892)
(2,892)
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,691)
(2,691)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,691)
(2,691)
There were no transfers between levels during the financial year.
The tables do not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
75
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Financial instruments measured at fair value – valuation technique
Type
Valuation technique
Significant unobservable inputs
Promissory notes
Discounted cash flows
Risk adjusted discount rate of 6.69% (2016: 6.69%)
Unless otherwise stated, the carrying amounts of financial
instruments reflect their fair value. The carrying amounts of cash
and cash equivalents, trade and other receivables and other
financial assets and trade and other payables are assumed
to approximate their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting
the remaining contractual maturities at the current market
interest rate that is available for similar financial instruments.
Compliance with the Consolidated Entity’s standards is
supported by a programme of periodic reviews undertaken
by management.
Ian Finlayson (Independent Non-Executive Director)
Roger Harley (Independent Non-Executive Director)
Ian Knight (Independent Non-Executive Director)
Stefanie Loader (Independent Non-Executive Director)
Mike Spreadborough (Independent Non-Executive Director)
Other key management personnel
The following persons also had the authority and responsibility
for planning, directing and controlling the major activities of the
Consolidated Entity, directly or indirectly, during the financial year:
Note 31. Key management personnel disclosures
Scott Magee (Syerston Project Director)
Directors
The following persons were directors of Clean TeQ Holdings
Limited during the financial year:
Robert Friedland (Co-Chairman and Non-Executive Director)
Jiang Zhaobai (Co-Chairman and Non-Executive Director)
Ben Stockdale (Chief Financial Officer)
Compensation
The aggregate compensation made to directors and other
members of key management personnel of the Consolidated
Entity is set out below:
Sam Riggall (Managing Director)
Peter Voigt (Executive Director)
Li Binghan (Non-Executive Director)
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Consolidated
2017
$
1,118,674
93,739
29,615
–
4,212,906
5,434,934
2016
$
768,182
65,018
10,595
–
1,276,990
2,120,785
The key management personnel receive no compensation
in relation to the management of the Company. Key
management personnel are compensated for
management of the Consolidated Entity.
Information regarding individual directors and executives’
compensation and some equity instruments disclosures as
permitted by Corporations Regulations 2M.3.03 are provided
in the Remuneration Report section of the Directors’ Report.
Apart from the details disclosed in this note and note 35,
no director has entered into a material contract with the
Consolidated Entity since the end of the previous financial
year and there were no material contracts involving directors’
interests existing at the year end.
76
Note 32. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the Company:
Audit services – KPMG
Audit or review of the financial statements
Audit-related services
Other services – KPMG
Advisory services
Taxation services
Consolidated
2017
$
2016
$
64,201
60,000
–
–
64,201
60,000
–
76,500
76,500
140,701
–
88,650
88,650
148,650
Note 33. Contingent liabilities
The Consolidated Entity has a contingent liability, incurred in the financial year ended 30 June 2015, to pay a 2.5% gross
revenue royalty on output mined from the Syerston Project. This royalty is payable to Ivanhoe Mines, and is payable by
Scandium 21 Pty Ltd, a company within the consolidated group. This royalty was part of the consideration paid for the
acquisition of the Syerston Project from Ivanhoe Mines, on 31 March 2015.
Note 34. Commitments
Hire purchases
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Operating leases (non-cancellable)
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2017
$’000
2016
$’000
–
–
–
–
–
–
275
1,032
25
1,332
–
–
–
–
–
–
75
–
–
75
The Group has a capital commitment of $1,205,000 relating to the purchase of land which is expected to be settled by July 2017.
77
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 35. Related party disclosures
Parent Entity
Clean TeQ Holdings Limited is the Parent Entity.
Subsidiaries
Interests in subsidiaries are set out in note 37.
Key management personnel
Disclosures relating to key management personnel are set out
in note 31 and the remuneration report in the directors’ report.
Transactions with related parties
No transactions occurred with related parties during
the financial year ending 30 June 2017, or the
previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables
to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans outstanding at the reporting date
owed to related parties.
Note 36. Parent entity information
Set out below is the supplementary information about the Parent Entity.
Statement of profit or loss and other comprehensive income
Parent
2017
$’000
(5,949)
(5,949)
Parent
2017
$’000
–
141,215
2,850
9,541
137,517
8,484
(14,328)
131,673
2016
$’000
(2,452)
(2,452)
2016
$’000
–
40,032
–
5,253
39,856
3,302
(8,379)
34,779
Profit(loss) after income tax
Total comprehensive income/(loss)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
78
Guarantees entered into by the Parent Entity in relation
to the debts of its subsidiaries
The Parent Entity had no guarantees in relation to the debts
of its subsidiaries as at 30 June 2017 and 30 June 2016,
other than the cross guarantee referred to elsewhere in
these financial statements.
Contingent liabilities
The Parent Entity had no contingent liabilities as at
30 June 2017 and 30 June 2016.
Capital commitments – Property, plant and equipment
The Parent Entity had no capital commitments for property,
plant and equipment at as 30 June 2017 and 30 June 2016,
or since the end of the financial year.
Note 37. Interests in subsidiaries
Significant accounting policies
The accounting policies of the Parent Entity are consistent
with those of the Consolidated Entity, as disclosed in note 2,
except for the following:
• Investments in subsidiaries are accounted for at cost,
less any impairment, in the Parent Entity.
• Investments in associates are accounted for at cost,
less any impairment, in the Parent Entity.
• Dividends received from subsidiaries are recognised
as other income by the Parent Entity and its receipt
may be an indicator of an impairment of the investment.
The Consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 2:
Name
Clean TeQ Limited
Clean TeQ Metals Pty Ltd
Clean TeQ Water Pty Ltd
Associated Water Pty Ltd
LiXiR Functional Foods Pty Ltd
Scandium Holding Company Pty Ltd
Scandium21 Pty Ltd
Clean World Japan Co Ltd ***
Uranium Development Pty Ltd
CLQW HK Limited
Syerston Scandium Pty Ltd
Principal place of business /
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Japan
Australia
Hong Kong
Australia
Shanyi Hoyo Clean TeQ Environmental Co Ltd* China
Clean Teq Environmental Protection
Technology(Beijing) co., Ltd**
China
* JV company set up in July 2016.
** Chinese entity set up during the year.
*** Liquidated on 9 February 2016.
Ownership interest
2017
%
100%
100%
100%
100%
100%
100%
100%
-%
100%
100%
100%
50%
100%
2016
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-%
-%
79
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 38. Deed of cross guarantee
The following entities are or were party to a deed of cross
guarantee under which each company guarantees the debts
of the others:
Clean TeQ Holdings Limited
Clean TeQ Limited
By entering into the deed, the wholly-owned entities have
been relieved from the requirement to prepare financial
statements and directors’ report pursuant to ASIC Corporations
(Wholly owned Companies) Instrument 2016/785.
The above companies represent a ‘Closed Group’ for the
purposes of the Class Order, and as there are no other parties
to the Deed of Cross Guarantee that are controlled by Clean
TeQ Holdings Limited, they also represent the ‘Extended
Closed Group’.
Set out below is a Consolidated statement of profit or loss
and other comprehensive income and statement of
financial position of the Closed Group.
Statement of profit or loss and other comprehensive income
Revenue
Raw materials and other direct costs
Employee benefits expenses
Impairment of investment in subsidiary
Depreciation and amortisation expenses
Legal and professional expenses
Occupancy expenses
Marketing expenses
Impairment of loan
Other expenses
Finance costs
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
Loss after income tax (expense)/benefit
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity – retained profits
Retained profits/(accumulated losses) at the beginning of the financial year
Loss after income tax (expense)/benefit
Accumulated losses at the end of the financial year
2017
$’000
1,040
(76)
(8,608)
–
(802)
(489)
(359)
(746)
–
(157)
(170)
(10,367)
–
(10,367)
–
(10,367)
2017
$’000
(20,765)
(10,367)
(31,132)
2016
$’000
1,183
(61)
(4,028)
–
(435)
(511)
(329)
(520)
(326)
(764)
(274)
(7,183)
–
(6,065)
–
(6,065)
2016
$’000
(14,700)
(6,065)
(20,765)
80
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other financial assets
Non-current assets
Receivables
Other financial assets
Plant and equipment
Intangible assets
Investment in subsidiary companies
Total assets
Current liabilities
Trade and other payables
Notes payable
Employee benefits
Deferred revenue
Non-current liabilities
Deferred revenue
Notes payable
Employee benefits
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
2017
$’000
88,861
936
96
2,088
–
91,981
20,607
80
135
9,036
1,055
30,913
122,894
4,210
2,850
300
47
7,407
495
–
68
55
618
8,025
114,869
137,517
8,484
(31,132)
114,869
2016
$’000
7,192
972
96
2,395
377
11,032
7,222
–
75
9,805
253
17,355
28,387
2,405
–
274
46
2,725
544
2,684
41
–
3,269
5,994
22,393
39,856
3,302
(20,765)
22,393
81
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 39. Events after the reporting period
No matters or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the
Consolidated Entity’s operations, the results of those operations, or the Consolidated Entity’s state of affairs in future financial years.
Note 40. Reconciliation of cash used in operating activities
Consolidated
Note
2017
$’000
2016
$’000
Loss after income tax expense for the year
(12,184)
(6,423)
Adjustments for:
Depreciation, amortisation and impairment
Share-based payments
Impairment of loan
Write off of bad debts
Non-cash finance costs
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in other assets
Decrease/(increase) in income tax refund due net of capitalised research and
development
(Increase)/decrease in accrued revenue
Increase/(decrease) in trade and other payables
Increase/(decrease) in employee benefits
Net cash used in operating activities
7
7
7
7
813
5,182
–
2
166
(692)
–
2,746
(48)
2,457
54
(1,504)
704
2,239
326
–
194
(105)
–
664
(46)
108
6
(2,333)
82
Note 41. Earnings per share
Earnings per share for loss from continuing operations
Loss after income tax attributable to the owners of Clean TeQ Holdings Limited
(12,184)
(6,423)
Consolidated
2017
$’000
2016
$’000
Weighted average number of ordinary shares used in calculating
basic earnings per share
Weighted average number of ordinary shares used in calculating
diluted earnings per share
Basic earnings per share
Diluted earnings per share
2017
Number
2016
Number
490,055,864
412,872,218
490,055,864
412,872,218
2017
Cents
(2.49)
(2.49)
2016
Cents
(1.56)
(1.56)
Consolidated
2017
$’000
2016
$’000
Earnings per share for loss
Loss after income tax attributable to the owners of Clean TeQ Holdings Limited
(12,184)
(6,423)
Weighted average number of ordinary shares used in calculating
basic earnings per share
Weighted average number of ordinary shares used in calculating
diluted earnings per share
Basic earnings per share
Diluted earnings per share
2017
Number
2016
Number
490,055,864
412,872,218
490,055,864
412,872,218
2017
Cents
(2.49)
(2.49)
2016
Cents
(1.56)
(1.56)
Options have been classified as potential ordinary shares and are included in the determination of diluted earnings per share,
except where the potential ordinary shares are anti-dilutive.
The options and convertible notes on issue throughout the current financial year are not dilutive in effect,
as the Consolidated Entity recorded a net loss in the financial year.
83
Clean TeQ Holdings Limited Annual Report 2017 Notes to the Financial Statements
continued
Note 42. Share-based payments
On 24 September 2007 the Company introduced a share option plan for employees, directors and service providers of the
Consolidated Entity (‘the Plan‘). The Plan entitles key management personnel, service providers and employees to receive shares
and options in the Company.
Set out below are summaries of options granted under the Plan:
2017
Grant date
Expiry date
Exercise price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance
at the end
of the year
30/06/2011
30/06/2016
$0.3960
500,000
19/12/2014
19/06/2017
$0.1155 2,000,000
19/12/2014
19/06/2017
$0.1455 2,000,000
25/02/2015
25/02/2018
$0.1574
8,000,000
01/03/2015
01/03/2018
$0.1495
6,000,000
06/07/2015
30/06/2018
$0.3010
1,000,000
20/11/2015
30/06/2018
$0.2305
8,000,000
20/11/2015
31/03/2018
$0.1450
2,000,000
20/11/2015
30/11/2018
$0.2712
3,500,000
16/05/2016
16/05/2019
$0.2820
5,000,000
–
–
–
–
–
–
–
–
–
–
(200,000)
(300,000)
(2,000,000)
(2,000,000)
–
(2,000,000)
(333,787)
–
–
–
(1,700,000)
–
–
–
–
–
–
–
–
–
–
–
–
8,000,000
4,000,000
666,214
8,000,000
2,000,000
3,500,000
3,300,000
25/08/2016
25/08/2019
06/09/2016 16/05/2019
06/09/2016 16/05/2019
15/12/2016
15/12/2019
22/02/2017 22/02/2020
20/06/2017 20/06/2020
$0.6320
$0.2820
$0.3100
$0.5850
$0.6549
$0.9500
–
–
–
–
–
–
3,000,000
1,000,000
9,125,000
500,000
3,000,000
600,000
–
–
–
–
–
–
(3,000,000)
–
–
–
–
–
–
1,000,000
9,125,000
500,000
3,000,000
600,000
Weighted average exercise price:
$0.2033
$0.3407
$0.1578
$0.6306
$0.1497
38,000,000
17,225,000
(8,233,787)
(3,300,000) 43,691,214
*Denotes options expired during the year
The weighted average number of years for share options issued under the Plan is 2.00 years (2016: 2.83 years).
The options vest immediately at grant date to the holder, except for 4,000,000 options granted on 20 November 2015, with a
vesting date of 31 December 2015, the 3,000,000 options granted on 22 February 2017, and the 600,000 options granted
on 20 June 2017. Of those options granted on 22 February 2017 and 20 June 2017, 50% of the options vest one year after
grant date and the balance two years after grant date.
84
For the options granted during the current financial period, a Black-Scholes pricing model was used to value the options. The
valuation model inputs used to determine the fair value at the grant date are as follows:
2017
Grant date
Expiry date
25/08/2016
25/08/2019
06/09/2016 16/05/2019
06/09/2016 16/05/2019
15/12/2016
15/12/2019
22/02/2017 22/02/2020
20/06/2017 20/06/2020
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Interest rate
Fair value at
grant date
$0.50
$0.55
$0.55
$0.55
$0.80
$0.73
$0.6320
$0.2820
$0.3100
$0.5850
$0.6549
$0.9500
85.18%
85.35%
85.35%
85.49%
84.98%
86.62%
-%
-%
-%
-%
-%
-%
1.85%
1.90%
1.90%
2.87%
2.84%
2.41%
$0.248
$0.378
$0.367
$0.300
$0.439
$0.382
Set out below are summaries of performance rights granted under the Plan:
2017
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
08/07/2015
01/07/2018
$0.00
1,594,416
20/11/2015
01/07/2018
16/05/2016
01/07/2019
06/09/2016 06/09/2019
$0.00
$0.00
$0.00
880,000
1,756,281
–
–
–
–
1,292,706
4,230,697
1,292,706
Expired/
forfeited/
Other*
Balance at
the end of the
year
(428,000)
1,166,416
–
880,000
(217,474)
1,538,807
–
1,292,706
(645,474)
4,877,929
–
–
–
–
–
*Performance rights forfeited as the employee ceased employment.
The performance rights have the following vesting conditions:
• Rights vesting if the Company’s total shareholder return outperforms a comparator group of listed companies over a three year
period from the grant date; and
• Continuous service from Date of Grant to Vesting Date.
For the performance rights granted during the current financial period, a Binomial Option Valuation model was used to value the
performance rights. A probability adjustment for market vesting conditions is then attached to the value of the performance rights.
Each performance right, once vested, entitles the performance right holder to receive one fully paid ordinary share in the
Company for zero consideration. The valuation model inputs used to determine the fair value at the grant date are as follows:
2017
Grant date
Expiry date
Share price
at grant date
Risk-free
Interest rate
Expected
volatility Divi-
dend yield
Vesting prob-
ability
Fair value at
grant date
06/09/2016 06/09/2019
$0.55
1.48%
92.72%
-%
35.07%
$0.195
85
Clean TeQ Holdings Limited Annual Report 2017 Directors’ Declaration
In the directors’ opinion:
• the attached Consolidated financial statements and notes thereto, and the Remuneration report in the Directors’ reports, comply
with the Corporations Act 2001, the Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements;
• the attached Consolidated financial statements and notes thereto, comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 2(b) to the financial statements;
• the attached Consolidated financial statements and notes thereto and the Remuneration report in the Directors’ reports, give
a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017 and of its performance for the financial
year ended on that date;
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 38 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Sam Riggall
Managing Director
25 August 2017
Melbourne
86
lndependent Auditor’s Report
To the shareholders of Clean TeQ Holdings Limited
Independent Auditor’s Report
To the shareholders of Clean TeQ Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Clean TeQ Holdings Limited (the
Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Group’s financial position as at 30
June 2017 and of its financial
performance for the year ended on
that date; and
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2017
• Consolidated statement of profit or loss and other
comprehensive income, consolidated statement of
changes in equity, and consolidated statement of
cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
•
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 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 fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
100
87
Clean TeQ Holdings Limited Annual Report 2017
lndependent Auditor’s Report
To the shareholders of Clean TeQ Holdings Limited continued
Key Audit Matters
We have determined the matters
described below to be the Key Audit
Matters to be communicated in our
report:
• Valuation assessment for intangible
and exploration and evaluation (E&E)
assets
• Recognition of research and
development (R&D) tax concessions
Key Audit Matters are those matters that, in our
professional judgment, 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.
Valuation assessment for intangible assets $10.4 million and exploration and evaluation (E&E)
assets $14.4 million
Refer to significant accounting policies in Note 2 and Notes 16 and 17 to the Financial Report.
The key audit matter
How the matter was addressed in our audit
A discounted cash flow model is used in
determining the recoverable amount of the
Metals and Water cash generating units (CGUs)
to which intangible assets and E&E assets have
been allocated. The valuation of the Metals and
Water CGU intangible assets and E&E assets is
a key audit matter due to the audit effort
required by us in assessing the Group’s
judgements applied and inputs to the model,
including:
• Discount rates applied to forecast cash
flows, as each CGU displays unique
conditions varying the assessment of
discount rates
• Future resource prices
• Future foreign exchange rates
• For the Water CGU, forecasting the
probability of converting tender pipeline into
contracted revenue
• Future production/output, capital
expenditure and operating costs. In
particular, for the Metals CGU, the Group
has not incurred any capital expenditure for
production and has not yet commenced
operations. Therefore future
production/output, capital expenditure and
operating costs are estimated based on
management expertise/experience from
other mining operations
Our procedures included:
• Working with our valuation specialists and
utilising their expertise in assessing
discounted cash flow models and the mining
and water treatment industries, we
independently calculated a discount rate range
for each CGU and compared it to the discount
rates used by the Group;
• Testing the acceptability from a valuation
perspective of the discounted cash flow
models used to determine the recoverable
amount for each CGU in comparison to
common market practice and accounting
standard requirements;
• Performing sensitivity analysis in respect of
the discount rates, future production/output,
capital expenditure and operating costs future
resource prices, future foreign exchange rates,
to determine which inputs relative to the risk
of impairment, had the most impact on the
outcome of the models, and to focus our audit
effort thereon;
• Comparing future resource prices and foreign
exchange rates used in the models to external
market data, such as publicly available
forecasts and consensus views of market
commentators as well as historical information
to inform our view of price volatility and
current period forecasts;
101
88
• Reserves, including the success of
exploration, and appraisal activities,
including drilling and geological and
geophysical analysis
In assessing this key audit matter, we involved
senior audit team members, including valuation
specialists, who understand the Group’s
business, industry and the economic
environment it operates in.
• Reading tenders, correspondence with
prospective clients, memorandums of
understanding and contracts to inform our
view of the likelihood of the tender pipeline
being converted into contracted revenue;
• Comparing future production/output, capital
expenditure and operating costs used in the
Group’s models to other market participants;
• For the Metals CGU, analysing the Group’s
determination of recoupment through
successful development and exploitation of its
reserves by evaluating the Group’s
documentation of planned future/continuing
activities; and
• For the Metals CGU, we obtained the Group’s
project budgets identifying areas with existing
funding and those requiring alternate funding
sources. We compared this for consistency
with current E&E expenditure, for evidence of
the ability to fund continued activities. We
identified those areas relying on alternate
funding sources and evaluated the capacity of
the Group to secure such funding.
Recognition of research and development (R&D) tax concessions $2.09 million
Refer to significant accounting policies in Note 2 and Note 12 to the Financial Report.
The key audit matter
How the matter was addressed in our audit
The Group submits annual claims to the
Australian Tax Office (ATO) in respect of eligible
Research and Development (R&D) expenditure.
They are recognised as an income tax
receivable until cash is received from the ATO.
The recognition of the asset for R&D tax
concessions is a key audit matter as:
• Significant judgment is required in
determining the eligibility of items included
in the claim submitted to the ATO. We
focus on the assessment of the eligibility of
expenditure included in the Group’s claim
as a measure of the ultimate recognition of
the amount of the tax asset. We involve
our tax specialist given the complex nature
of R&D claims, assessment against
relevant tax legislation and rulings, and
against criteria in the accounting standards
for recognition.
Our procedures included:
• Assessing the Group’s accounting policy for
R&D tax concessions against applicable
Australian Accounting Standards;
• Testing the management reconciliation review
and approval control the Group use to
determine what expenditure is eligible for an
R&D tax concession by checking for evidence
of management review and approval of the
R&D tax concession schedule for a sample of
months during the financial year;
• Selecting a sample of expenditure incurred
during the year and checking these to
underlying documentation such as invoices
and contracts;
• Checking on claims previously submitted by
the Group to the ATO compared to actual
amounts received to check the historical
accuracy of the Group’s claims and inform the
focus of our further procedures;
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Clean TeQ Holdings Limited Annual Report 2017
lndependent Auditor’s Report
To the shareholders of Clean TeQ Holdings Limited continued
• The claims represent a significant portion of
the Group’s cash inflows in the year in
which they are received and a significant
portion of other income.
• Working with our R&D taxation specialists to
assess the eligibility criteria of a sample of
expenditure incurred, which is subject to claim
and is not yet paid by the ATO, against current
tax legislation and rulings; and
• Working with our R&D taxation specialists to
evaluate the methodology and processes
utilised by the Group in determining what
expenditure is included within a claim, against
current tax legislation and rulings and market
practice.
Other Information
Other Information is financial and non-financial information in Clean TeQ Holdings Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors
are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’
Report (excluding the Remuneration Report). The Other Information not obtained at the date of this
Auditor’s Report is the Chairman’s Report and CEO’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
• assessing the Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
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90
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They 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.
A further description of our responsibilities for the Audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Clean TeQ Holdings Limited for the
year ended 30 June 2017, complies with
Section 300A of the Corporations Act
2001.
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 responsibilities
We have audited the Remuneration Report included in
paragraphs A to F or pages 17 to 30 of the Directors’
report for the year ended 30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our Audit conducted in
accordance with Australian Auditing Standards.
KPMG
Dana Bentley
Partner
Melbourne
25 August 2017
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Clean TeQ Holdings Limited Annual Report 2017
Shareholder Information
The information below is current as at 31 July 2017.
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Equity security holders
Number of
holders of
ordinary shares
Number of
holders of options
over ordinary
shares
Number of hold-
ers of convertible
notes
323
951
698
1,476
315
3,763
–
–
–
–
16
16
–
–
–
–
–
–
Twenty largest quoted equity security holders
The names of the twenty largest security holders of fully paid ordinary shares as at 31 July 2017 are listed below:
Rank
Name of Share Holder
Number of
Shares Held
% of Total Shares
Issued
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
PENGXIN INTERNATIONAL GROUP LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
THIERVILLE PTY LTD
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