Conico Ltd
Annual Report 2018

Plain-text annual report

ABN 49 119 057 457 for the Year Ended 30 June 2018 Table of Contents Highlights for the Year to 30 June 2018 Corporate Directory Review of Operations Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Additional Information for Listed Public Companies Tenement Schedule 3 4 5 11 16 17 18 19 20 21 32 33 36 37 * Cover Photo: Cuttings from drill hole through mineralised zone - Mt Thirsty Nickel-Cobalt-Manganese Oxide Project ASX Code: CNJ Page 2 of 37 Annual Report for Year Ending 30 June 2018 HIGHLIGHTS FOR THE YEAR TO 30 JUNE 2018 • Metallurgical testwork indicates that up to 80% of the cobalt and 27% of the nickel can be extracted by selective low cost sulphur dioxide leaching. • Mt Thirsty Scoping Study completed in October 2017 with robust financial metrics. • Pre Feasibility Study (PFS) tenders from a short list of four engineering companies were received and underwent rigorous assessment. AMEC Foster Wheeler Australia Pty Ltd (a Wood company) was selected as the overall Study Engineer for the PFS. • Numerous other work packages in areas of resource estimation (upgrade to JORC tailings disposal, marketing, 2012), mine planning, hydrogeological studies, environmental and community studies and Native Title liaison were also tendered. • PFS now in progress. • Beneficiation size screening test work in progress has potential to significantly add value. Figure 1: Mt Thirsty Project Location ASX Code: CNJ Page 3 of 37 Annual Report for Year Ending 30 June 2018 CORPORATE DIRECTORY DIRECTORS: Gregory H Solomon LLB (Non-Executive Chairman) Douglas H Solomon BJuris LLB (Hons) (Non-Executive) Guy T Le Page B.A., B.Sc. (Hons).,M.B.A., F.FIN., MAusIMM (Non-Executive) James B Richardson Dip, Fin Plan (Non-Executive) COMPANY SECRETARY: Aaron P Gates B.Com CA AGIA REGISTERED OFFICE: Level 15, 197 St Georges Terrace Perth, Western Australia 6000 Tel +61 8 9282 5889 Fax +61 8 9282 5866 Email: mailroom@conico.com.au Website: www.conico.com.au SOLICITORS: Solomon Brothers Level 15, 197 St Georges Terrace Perth, Western Australia 6000 AUDITORS: Nexia Perth Audit Services Pty Ltd Chartered Accountants Level 3 88 William Street Perth, Western Australia 6000 SHARE REGISTRY: Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia 6009 STOCK EXCHANGE LISTING: ASX Code: CNJ (ordinary shares) Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. ASX Code: CNJ Page 4 of 37 Annual Report for Year Ending 30 June 2018 REVIEW OF OPERATIONS MT THIRSTY PROJECT, WA (Conico Ltd 50%, JV with Barra Resources Ltd) The Mt Thirsty Cobalt Project is located 16km northwest of Norseman (Figure 1) in the stable and ethical Western Australian mining jurisdiction. The project is a 50:50 joint venture (MTJV) between Barra Resources Ltd and Conico Ltd. In addition to the Cobalt-Nickel Oxide Deposit, the Project also hosts nickel sulphide (Ni-S) mineralisation. The Mt Thirsty joint venture tenements cover a total area of 17km2. The undeveloped Mt Thirsty Cobalt Project has a significant JORC (2004) compliant resource with the potential to have a long mine life. The Mt Thirsty Cobalt-Nickel Oxide deposit is a shallow flat lying deposit formed by deep weathering of ultramafic host rocks and is amenable to open pit mining. The Project is close to all necessary infrastructure (rail, road, power, water, and sea port) and being in a mining orientated state, has the potential to attract a variety of interested parties including end users of cobalt. The Joint Venture partners are working collaboratively to exploit this joint opportunity and remain confident Mt Thirsty has the potential to become a major supplier to the burgeoning battery supply chain. A Scoping Study completed in 2017 has shown that 73% of the cobalt is readily won through agitated atmospheric leaching using sulphur dioxide (SO2) as a preferred reagent. This is a key competitive advantage for the project over many peers who require significantly higher capital to liberate cobalt and nickel through high pressure acid leaching. It is also why Mt Thirsty is so heavily leveraged to the cobalt price, with approximately 79% of all revenue forecast to come from cobalt rather than nickel. The Scoping Study is the base case for the project and is targeted to be significantly optimised in all areas, including metal recovery, during a Prefeasibility Study (PFS) which is now in progress. Cobalt Market Outlook The long-term demand for cobalt remains very encouraging due to the electric vehicle and solar energy storage battery revolution .In addition, the battery industry is also competing with demand for cobalt from producers of superalloys, aircraft turbines and chemical industries. While there has been some short-term softening in the spot price for cobalt, the medium- and long-term fundamentals remain strong. Demand is likely to escalate exponentially with battery production; however, supply is uncertain as 56% of global supply comes from the politically unstable African countries such the Democratic Republic of Congo, typically as a by-product of nickel and copper mining. Work Completed Work carried out by the joint venture during the year has involved metallurgical testwork, completion of a Scoping Study and commencement of a PFS. Metallurgical Testwork Metallurgical testwork carried out as part of the Scoping Study has indicated that up to 80% of the cobalt and 27% of the nickel can be extracted by selective low cost SO2 leaching at atmospheric pressure over 24 hours duration (Figure 2). The overall metal recovery from run of mine ore to a mixed sulphide precipitate (MSP) end product with the selected low capex flowsheet was modelled to be 73% for cobalt and 21.5% for nickel. Waste heat from the production of SO2 would be used for power generation and in process heating. ASX Code: CNJ Page 5 of 37 Annual Report for Year Ending 30 June 2018 Ni Figure 2: Graph of cobalt and nickel recoveries based on residence times for test HY5350 at 70oC and atmospheric pressure (source: ALS Metallurgy, technical report, 4 August 2017). Scoping Study The Mt Thirsty Scoping Study was completed in October 2017 and returned a robust set of financial metrics over a long mine life. (refer CNJ ASX Announcement October 2017 for further details). The study was managed by Provide Advantage, with support from consultant engineers CPC Engineering, metallurgical support from ALS Metallurgy Pty Ltd and open pit optimisation and mine scheduling from CSA Global. The Scoping Study returned a preferred case Net Present Value (NPV) of A$290 million (within a range of A$245 million to A$335 million) over a 21-year mine life with a low capital cost of A$212 million (incl. A$34 million contingency), with a healthy 21.5% Internal Rate of Return (IRR) and an expected 4-year pay back. Life of mine operating costs are projected to be A$43 per tonne of treated ore due to the very low reagent consumption. The plant will employ an atmospheric SO2 leaching process with overall base case metal recoveries of 73% for cobalt and 21.5% for nickel. The first 5 years of production will be targeting 1,900 tonnes of cobalt and up to 1,760 tonnes of nickel per annum. Pre Feasibility Study (PFS) Following positive results from the 2017 Scoping Study the following contracts were awarded for the Mt Thirsty PFS in May 2018 and the study is now in progress. AMEC Foster Wheeler Australia Pty Ltd (a Wood company) has been selected as the overall Study Engineer for the PFS. Wood is a global leader in the delivery of project, engineering and technical services to energy and industrial markets. Snowden Mining Industry Consultants Pty Ltd has been selected to consult the Mining aspects of the study directly to the JV. Snowden were specifically selected for their expertise in geo-metallurgical optimisation of the mine plan. Golder Associates Pty Ltd has been selected to consult many technical functions directly to the JV including mineral resources, hydrogeology and tailings management. Talis Consultants Pty Ltd has been selected to progress the Environment and Community aspects of the study. The JV will also contract directly with several independent consultants in the fields of geology, marketing and metallurgy to form the owner’s team. Each is an expert in its own field. Following detailed collaboration between these consultants and the owners’ team the MTJV has agreed several outcomes to firm up the definition of the project. ASX Code: CNJ Page 6 of 37 Annual Report for Year Ending 30 June 2018 Value Adding Themes Under Study The MTJV has selected three processing themes for study during the PFS; an optimised scoping study flowsheet as the base case, and two potentially value adding variations to this; beneficiation and the addition of varying amounts of sulphuric acid. The scoping study base case has been endorsed by our expert metallurgical consultants as having no fatal flaws and it is agreed that the scoping study flowsheet is a sound basis for the project to move forward on. The beneficiation option has been put forward by Wood as an opportunity to significantly add value to the project and is subject to a successful testwork outcome. This option involves desliming the ore feed at 10 microns, and in the laboratory this is achieved using a process of low energy attritioning and low density cycloning. This will have the effect of significantly increasing the Co grade and reducing the volume of feed going to the leach circuit for a given Co production, thereby reducing capital and operating costs. It is anticipated that most of the cobalt will report to the coarse size fraction as it is contained in the easily leached manganese mineral, asbolane. Asbolane will preferentially report to the coarse fraction due to its coarse grain size and due to its high mineral density, which cyclone desliming will also benefit from. The addition of sulphuric acid in conjunction with SO2 has been long known to the MTJV as being a method to increase nickel and to a lesser extent cobalt recoveries at Mt Thirsty. The PFS will test a range of acid additions at varying concentrations to optimise the additional reagent costs and potential materials of construction costs against the significant increases to metal recovery and revenue expected. To enable all cases to be compared on equivalent terms and to maximise the NPV of the project, a 12-year initial mine life will be targeted. This nominally corresponds with a 2.5Mwmtpa (million wet metric tonnes per annum) feed rate in all cases, and a proportionately lower leach feed rate for the beneficiation case. The PFS has also been able to eliminate options at this stage to frame a sensible number of options for study. Expensive High-Pressure Acid Leaching (HPAL) and the production of metal or battery grade sulphate salts on site at Mt Thirsty as part of this project have been eliminated as study options for the PFS. Metallurgical testwork programs have been developed to test these themes in detail and are presently proceeding (Figure 3). Figure 3: Laboratory scale low energy deagglomeration of -38 micron sample utilising glass beads as grinding media Mt Thirsty Mineralogy Mineralogical studies at Mt Thirsty have improved the understanding of the orebody and likely beneficiation and metallurgical performance. The cobalt is known to exist at Mt Thirsty in dark coloured veins of the manganese mineral asbolane evident at varying scales as shown in Figures 4, 5, and 6. The rock exhibits the relict texture from the precursor peridotite bedrock including pseudomorphs of olivine. A horizontal fabric is consistent with the volume reduction that has occurred during weathering. Back-scatter electron images in Figure 5 illustrate that the nickel is more broadly dispersed ASX Code: CNJ Page 7 of 37 Annual Report for Year Ending 30 June 2018 in the goethitic matrix as well as being concentrated in the asbolane veins, although not to the same extent as the manganese and its associated cobalt. As the cobalt in the asbolane is more readily leached than the nickel which is held by stronger chemical bonds in the goethite, the leach yields of nickel are lower than the leach yields of the higher value cobalt. Figure 4: Asbolane veining (bluish colour) in costean at Mt Thirsty. Image is 1m across. Figure 5: Photomicrograph of polished Mt Thirsty drill core illustrating asbolane veins (black). Image is 4mm across. ASX Code: CNJ Page 8 of 37 Annual Report for Year Ending 30 June 2018 Figure 6: Back Scatter Electron Images of Mt Thirsty drill core. The manganese mineral asbolane, which hosts the cobalt, is shown highlighted in blue in the top right hand image. Other Studies A desktop hydrogeological study for Mt Thirsty has been completed and identified several potentially suitable water sources within 30km of the project. Drilling programs to test these targets are now being planned. Environmental studies have now commenced with fieldwork anticipated in early Spring. Preliminary work on the upgrading of the Mt Thirsty resource from JORC 2004 to JORC 2012 to enable an Ore Reserve to be declared at the completion of a positive PFS is underway by Golder. Snowden attended the PFS options selection workshop and are expected to play a key role in assessing the economic benefits of the three options under study. Product Strategy The product strategy from the 2017 scoping study to produce a mixed sulphide product (MSP) has now been ratified. The advice from our expert marketing consultants indicates that the lion’s share of the value can be captured by producing an intermediary product such as an MSP for a low capital cost. The MSP is a very suitable feedstock into numerous downstream processes in both the burgeoning batteries market and the presently undersupplied metals market, including into refineries both overseas and within Australia. The practicalities of producing final battery grade specifications in outback Western Australia are also a consideration, although pleasingly this option remains open as the MSP product would be a necessary intermediary step for potential value adding future downstream investments, even if they were made on site at Mt Thirsty. Other intermediaries such as mixed hydroxide products (MHP) were also considered, however the manganese mineralogy and metallurgical process employed at Mt Thirsty lend themselves to the MSP product and market intelligence suggests that MSP products would attract a pricing premium over MHP products. R & D Claim An R&D claim was prepared for the year ended 30 June 2017 by Ernst and Young and lodged with AusIndustry for Mt Thirsty metallurgical process development work. $41,656 was returned to each of Conico and Barra from the ATO. ASX Code: CNJ Page 9 of 37 Annual Report for Year Ending 30 June 2018 Mt Thirsty Project - Mineral Resources Statement In view of the current status of the project and lack of any new information no annual review of the company’s mineral resources which are entirely located within R63/4 (previously E63/373) at Mt Thirsty has been undertaken. Mt Thirsty Oxide Resources Category Indicated Resource Inferred Resource Total Resource Tonnes 16,600,000 15,340,000 31,940,000 Co% 0.14 0.11 0.13 Ni% 0.60 0.51 0.55 Mn% 0.98 0.73 0.86 The figures shown in this table were estimated within a wireframed mineralised envelope which was based mostly on a 0.06% Co cut off. In some places where Co was less than 0.06% a Ni cut off of 0.7% was used. Estimation Governance Statement The resource information above was prepared and first disclosed under the JORC Code 2004. It has not been updated since or re- estimated to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported, refer ASX Announcement 8th March 2011: “Resource Upgrade”, available to view on www.conico.com.au). Disclaimer The interpretations and conclusions reached in this report are based on current geological theory and the best evidence available to the authors at the time of writing. It is the nature of all scientific conclusions that they are founded on an assessment of probabilities and, however high these probabilities might be, they make no claim for complete certainty. Any economic decisions that might be taken on the basis of interpretations or conclusions contained in this report will therefore carry an element of risk. It should not be assumed that the reported Exploration Results will result, with further exploration, in the definition of a Mineral Resource. Competent Person’s Statement The information in this report that relates to Exploration Targets, Exploration Results and Mineral Resources is based on and fairly represents information compiled by Michael J Glasson, a Competent Person who is a member of the Australian Institute of Geoscientists. Mr Glasson is an employee of Tasman Resources Ltd and in this capacity act as part time consultant to Conico Ltd. Mr Glasson hold shares in Conico Ltd. Mr Glasson has sufficient experience which is relevant to the style of mineralisation and type of the deposits under consideration and to the activity being undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Glasson consents to the inclusion in the report of the matters based on their information in the form and context in which it appears. ASX Code: CNJ Page 10 of 37 Annual Report for Year Ending 30 June 2018 DIRECTORS’ REPORT The directors present their report together with the consolidated financial statements of the Group comprising Conico Ltd (the Company) and its controlled entity and the Group’s interest in a joint venture for the financial year ended 30 June 2018. Directors The names of directors in office at any time during or since the end of the year are: Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Company Secretary The following person held the position of Company Secretary at the end of the financial year: Mr Aaron P Gates has worked for Conico Ltd for the past 10 years. He is a Chartered Accountant and Chartered Secretary, has completed a Bachelor of Commerce (Curtin University) with majors in accounting and business law and completed a Diploma of Corporate Governance. Prior to joining Conico he worked in public practice in audit and corporate finance roles. Principal Activities The principal activity of the Group during the financial year ended 30th June 2018 was mineral exploration for cobalt, nickel and manganese. There were no significant changes in the nature of the activities of the Group during the year. Operating Results The loss of the Group after providing for income tax amounted to $775,340 (2017: $325,673). Dividends Paid or Recommended No dividends were paid or declared for payment during the year. Review of Mineral Exploration Operations A review of the operations of the Group during the year ended 30 June 2018 is set out in the Review of Operations on Page 5. Financial position The net assets of the Group have decreased by $89,140 from 30 June 2017 to $14,933,885 in 2018. This decrease is largely resulted from the operating loss for the year. Significant Changes in State of Affairs In the opinion of the directors, other than disclosed elsewhere in this report, there were no significant changes in the state of affairs of the Group that occurred during the year. After Balance Date Events On 12 September 2018 the Company issued 21,598,199 shares and 21,598,199 options (exercisable at $0.048 and expiring on 30 June 2021) pursuant to a non-renounceable right issue raising $647,946 before costs. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Future Developments, Prospects and Business Strategies The Group proposes to continue with its exploration and evaluation program as detailed in the Review of Operations. Environmental Issues The Group is the subject of environmental regulation with respect to mining exploration and will comply fully with all requirements with respect to rehabilitation of exploration sites. ASX Code: CNJ Page 11 of 37 Annual Report for Year Ending 30 June 2018 Information on Directors Gregory H Solomon Non-Executive Chairman Qualifications Experience Interest in Shares and Options LLB Appointed chairman March 2006. Board member since March 2006. A solicitor with more than 30 years of Australian and international experience in a wide range of areas including mining law, commercial negotiation (including numerous mining and exploration joint ventures) and corporate law. He is a partner in the Western Australian legal firm, Solomon Brothers and has previously held directorships of various public companies since 1984 including two mining/exploration companies. 23,105,469 Ordinary Shares 2,000,000 Options Directorships held in other listed entities Eden Innovations Ltd Tasman Resources Ltd Douglas H Solomon Qualifications Experience Interest in Shares and Options Directorships held in other listed entities Guy T Le Page Qualifications Experience Non-Executive BJuris LLB (Hons) Board member since 30 March 2006. A Barrister and Solicitor with more than 20 years’ experience in the areas of mining, corporate, commercial and property law. He is a partner in the legal firm, Solomon Brothers. 21,511,875 Ordinary Shares 2,000,000 Options Eden Innovations Ltd Tasman Resources Ltd Non-Executive B.A., B.Sc. (Hons).,M.B.A., F.FIN., MAusIMM Board member since 30 March 2006. Currently a corporate adviser specialising in resources. He is actively involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles. He previously spent 10 years as an exploration and mining geologist in Australia, Canada and the United States. His experience spans gold and base metal exploration and mining geology and he has acted as a consultant to private and public companies. Interest in Shares and Options 15,852,502 Ordinary Shares Directorships held in other listed entities James B Richardson Qualifications Experience 2,000,000 Options Mt Ridley Mines Ltd Tasman Resources Ltd Non-Executive Dip, Fin Plan Red Sky Energy Ltd Board member since 11 November 2008. Currently a corporate advisor where he has been actively involved in a range of corporate activities, including the development, documentation, negotiation and marketing of a number of successful financial instruments for various companies encompassing various sectors of the investment market. He has also been employed as a specialist business development executive in some of the more successful national financial services organisations. Additionally, he has extensive experience in evaluating investment opportunities, structuring projects and negotiating financial transactions to meet the expectations of the investment market. Interest in Shares and Options 28,500,000 Ordinary Shares 2,000,000 Options None Directorships held in other listed entities ASX Code: CNJ Page 12 of 37 Annual Report for Year Ending 30 June 2018 Remuneration Report (Audited) This report details the nature and amount of remuneration for each director of Conico Ltd, and for the executives receiving the highest remuneration. Remuneration Policy The remuneration policy of Conico Ltd has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the company’s financial results. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the company, as well as create goal congruence between directors, executives and shareholders. The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the company is as follows: All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and options. Executives are also entitled to participate in the employee share and option arrangements. All directors and executives receive a superannuation guarantee contribution where required by the government, which is currently 9.5%, and do not receive any other retirement benefits. All remuneration paid to directors and executives is valued at the cost to the company and expensed. Options are valued using the Black-Scholes methodology or an appropriate market based pricing valuation methodology. The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Group does not have a policy on directors hedging their shares. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan. Details of Remuneration for Year Ended 30 June 2018 The remuneration for each director and each of the executive officers of the Group during the year was as follows: Key Management Personnel Remuneration – Key Management Person Short-term Benefits Post- employment benefits Other long-term benefits Termination Benefits Share-based payments Total Perfor- mance Related Salary and Fees Cash Non- profit share cash benefit Super- annuation Other Other Equity Options $ $ $ $ $ $ $ $ $ % 2018 Gregory H Solomon 62,500 Douglas H Solomon 34,000 Guy T Le Page 34,000 James B Richardson 34,000 Aaron P Gates (i) 164,500 2017 Gregory H Solomon 31,250 Douglas H Solomon 10,000 Guy T Le Page 10,000 James B Richardson 10,000 Aaron P Gates (i) 61,250 - - - - - - - - - - - - - - - - - - - - - - - - 5,937 3,230 3,230 3,230 - 15,627 2,969 950 950 950 - 5,819 - - - - - - - - - - - - - - - - - - - - - - - - - 40,000 108,437 - 40,000 77,230 - 40,000 77,230 - 40,000 77,230 - 50,400 50,400 - 210,400 390,527 - - - - - - - - - - - - 34,219 10,950 10,950 10,950 - 67,069 - - - - - - - - - - - - (i) - These management personnel are remunerated by Princebrook Pty Ltd under the Princebrook Management Services Contract. ASX Code: CNJ Page 13 of 37 Annual Report for Year Ending 30 June 2018 Options issued as part of remuneration for the year ended 30 June 2018 2,000,000 options were issued to each Director, pursuant to shareholder approval at the 2017 Annual General Meeting. These options are exercisable at 4.88 cents each, expire 20 November 2020 and had a value of $0.02 per option using the Black Scholes valuation method. 2,000,000 options were issued to Mr Gates, pursuant to Conico Employee Share Option Plan. These options are exercisable at 6.25 cents each, expire 28 August 2020 and had a value of $0.0252 per option using the Black Scholes valuation method. No other options were issued to directors and employees as part of their remuneration during the year and no shares were issued upon the exercise of options granted as remuneration. Number of Options Held by Key Management Personnel Balance 1.7.2017 Granted as Compen- sation Options Exercised Net Change Other Balance 30.6.2018 Total Vested 30.6.2018 Total Exer- cisable 30.6.2018 Total Unexer- cisable 30.6.2018 Gregory H Solomon - 2,000,000 Douglas H Solomon - 2,000,000 Guy T Le Page - 2,000,000 James B Richardson - 2,000,000 Aaron P Gates Total - 2,000,000 - 10,000,000 - - - - - - - - - - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - 10,000,000 10,000,000 10,000,000 - - - - - - Number of Shares Held by Key Management Personnel Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Aaron P Gates Total Balance 30.6.2017 Received as Compen- sation Options Exercised Net Change Other* Balance 30.6.2018 23,105,469 21,586,875 15,852,502 28,500,000 - 89,044,846 - - - - - - - - - - - - - 23,105,469 (75,000) 21,511,875 - - - 15,852,502 28,500,000 - (75,000) 88,969,846 *Net Change Other refers to shares purchased, sold or other movements. Directors Meetings During the financial year, three meetings of directors were held. Attendances by each director were as follows: Directors’ Meetings Number eligible to attend Number attended Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson 3 3 3 3 Indemnifying Officers or Auditor 3 3 3 3 The company has arranged for an insurance policy to insure the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The total premium payable is approximately $16,500. ASX Code: CNJ Page 14 of 37 Annual Report for Year Ending 30 June 2018 Proceedings on Behalf of Group No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. Options At the date of this report, the unissued ordinary shares of Conico Ltd under option are as follows: Date of Expiry Exercise Price Number under Option Grant Date Various 30 November 2019 29 August 2017 28 August 2020 27 November 2017 20 November 2020 12 September 2018 30 June 2021 $0.03 $0.0625 $0.0488 $0.048 30,875,000 6,000,000 8,000,000 21,598,199 66,473,199 During the year ended 30 June 2018, no ordinary shares of Conico Ltd were issued on the exercise of options granted under the Conico Ltd Employee Share Option Plan. No shares have been issued since. No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of any other body corporate. Non-audit Services The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: all non-audit services are reviewed and approved prior to commencement to ensure they do not adversely affect the • integrity and objectivity of the auditor; and • the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2018. Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2018 has been received and can be found on page 16. Signed in accordance with a resolution of the Board of Directors. Douglas H Solomon Director Dated this 21st day of September 2018 ASX Code: CNJ Page 15 of 37 Auditor’s independence declaration under section 307C of the Corporations Act 2001 To the directors of Conico Ltd I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2018 there have been: (i) no contraventions of the auditor’s independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Nexia Perth Audit Services Pty Ltd Amar Nathwani Director Perth 21 September 2018 Annual Report for Year Ending 30 June 2018 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR YEAR ENDED 30 JUNE 2018 Other Income Accounting and audit Depreciation and amortisation Exploration and evaluations assets written off Key management remuneration Legal and other consultants Management fees Other expenses Loss before income tax Income tax benefit Loss for the year Other Comprehensive Income Items that may be reclassified to profit or loss: Revaluations of financial assets Income tax relating to comprehensive income Total other comprehensive income Total Comprehensive Loss attributable to members of the parent entity, net of tax Note 2 4(d) Consolidated 2018 $ 2017 $ 11,548 (31,384) (1,463) - (390,527) (99,332) (144,000) (160,443) 12,528 (17,037) (1,738) (35,720) (67,069) (2,419) (144,000) (70,218) (815,601) (325,673) 3 40,261 - (775,340) (325,673) - - - - - - (775,340) (325,673) Basic/Diluted loss per share (cents per share) 6 (0.24) (0.11) The accompanying notes form part of these financial statements. ASX Code: CNJ Page 17 of 37 Annual Report for Year Ending 30 June 2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Exploration and evaluation TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. Note Consolidated 2018 $ 2017 $ 7 8 9 10 13 14 165,746 11,318 177,064 466,368 24,700 491,068 8,124 9,587 15,107,046 14,921,918 15,115,170 14,931,505 15,292,234 15,422,573 83,349 83,349 275,000 275,000 358,349 124,548 124,548 275,000 275,000 399,548 14,933,885 15,023,025 15 19,282,403 18,907,403 788,650 477,450 (5,137,168) (4,361,828) 14,933,885 15,023,025 ASX Code: CNJ Page 18 of 37 Annual Report for Year Ending 30 June 2018 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2018 Consolidated Group Ordinary Share Capital Option Reserve Retained Earnings Total $ $ $ $ Balance at 30 June 2016 18,434,903 477,450 (4,036,155) 14,876,198 Net loss for the year Shares issued Other comprehensive Income - 472,500 - - - - (325,673) (325,673) - - 472,500 - Balance at 30 June 2017 18,907,403 477,450 (4,361,828) 15,023,025 Net loss for the year Shares issued Options issued Other comprehensive Income - 375,000 - - - - 311,200 - (775,340) (775,340) - - - 375,000 311,200 - Balance at 30 June 2018 19,282,403 788,650 (5,137,168) 14,933,885 The accompanying notes form part of these financial statements. ASX Code: CNJ Page 19 of 37 Annual Report for Year Ending 30 June 2018 CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2018 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received R&D tax rebate Note Consolidated 2018 $ 2017 $ 14,762 17,793 (546,931) (256,969) 1,414 40,261 2,568 - Net cash provided by (used in) operating activities 20 (490,494) (236,608) CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation expenditure Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issues Net cash provided by (used in) financing activities Net increase / (decrease) in cash held Cash at beginning of financial year Cash at end of financial year 7 The accompanying notes form part of these financial statements. (185,128) (167,313) (185,128) (167,313) 375,000 375,000 (300,622) 466,368 165,746 472,500 472,500 68,579 397,789 466,368 ASX Code: CNJ Page 20 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report of Conico Limited and controlled entities complies with all International Financial Reporting Standards (IFRS) in their entirety. The financial report covers the consolidated group of Conico Ltd and controlled entities as at and for the year ended 30 June 2018. Conico Ltd is a listed public company, incorporated and domiciled in Australia. The Group is a for- profit entity and primarily is involved in mineral exploration for cobalt, nickel and manganese. The following is a summary of the material accounting policies adopted by the group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of Preparation The accounting policies set out below have been consistently applied to all years presented. Reporting Basis and Conventions The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. These consolidated financial statements are presented in Australian dollars, which is the Group’s functional currency. Going Concern These financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities the realisation of assets and extinguishment of liabilities in the ordinary course of business. The Group has reported a net loss for the year of $775,340 (2017: $325,673) and a cash outflow from operating activities of $490,494 (2017: $236,608). The directors are confident that the Group, subject to being able to raise further capital, will be able to continue its operations as a going concern. Without such capital, the net loss for the year and the cash outflow from operating activities indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. The directors also carefully manage discretionary expenditure in line with the Group’s cash flow. The continuing applicability of the going concern basis of accounting is dependent upon the Group’s ability to source additional finance. Unless additional finance is received the Group may need to realise assets and settle liabilities other than in the normal course of business and at amounts which could differ from the amounts at which they are stated in these financial statements. Accounting Policies a. Principles of Consolidation A controlled entity is any entity Conico Ltd 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. A list of controlled entities is contained in Note 12 to the financial statements. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of controlled entities have been changed where necessary to ensure consistencies with those policies applied by the parent entity. b. Interests in a Joint Operation The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation and the expenses that the Group incurs and its share of the income that it earns from the joint operation. Details of the Group’s interests are shown at Note 11. c. Income Tax The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. ASX Code: CNJ Page 21 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 c. Income Tax continued Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future tax profits will be available against which they can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the group will derive sufficient future assessable income to enable the benefit to be realised. The R&D tax offset is recognised upon receipt. d. Property, Plant and Equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The depreciation rates used for each class of depreciable assets are: Plant and equipment 15.00–50.00% Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss. e. Exploration and Evaluation Expenditure Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward where right of tenure is current and to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. f. Impairment of Non-financial Assets At each reporting date, the Group reviews the carrying values of its non-financial / tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. h. Cash and cash equivalents Cash comprises current deposits with banks. ASX Code: CNJ Page 22 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 i. Financial Instruments Recognition Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Impairment At each reporting date, the Group assesses at a specific asset level whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement. j. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. k. Revenue Revenue from the sale of goods is recognised upon delivery of goods to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. l. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. m. New accounting standards and interpretations A number of new and revised standards became effective for the first time to annual periods beginning on or after 1 July 2017. There were no significant standards or interpretations and the adoption of the new standards and interpretations has not had a material impact on the Group. n. Segment reporting Segment results that are reported to the Group’s board of directors (the chief operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. o. Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. p. New accounting standards and interpretations not yet adopted A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2018, and have not been applied in preparing these consolidated financial statements. Management are of the view that these standards and amendments will not have a significant impact on the financials. q. Key estimates – Exploration and Evaluation The Group’s policy for exploration and evaluation is discussed in Note 1(e). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. At the date of this report the Group has sufficient reason to believe: • • • • exploration in specific areas is ongoing and the entity has not decided to discontinue such activities; and no specific sufficient data exists that indicates that the carrying amount of the exploration and evaluation asset is unlikely to be recovered. substantive expenditure on further exploration and evaluation in specific areas has been budgeted; rights to explore in specific areas, once expired, will be renewed; The consolidated financial statements were authorised for issue on 21 September 2018 by the board of directors. ASX Code: CNJ Page 23 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 2: OTHER INCOME — interest received — sale of goods / services Total Other Income NOTE 3: INCOME TAX BENEFIT 2018 $ 2017 $ 1,414 10,134 11,548 2,568 9,960 12,528 a. The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax payable on loss from ordinary activities before income tax at 27.5% (2017: 27.5%) Tax effect of: — — — Current year temporary differences not recognised Effect of tax rate change Current year tax losses not recognised Income tax expense / (benefit) b. Components of deferred tax Unrecognised deferred tax asset - losses Unrecognised deferred tax asset – provisions and accruals (224,290) (89,560) 62,726 (235,053) - (79,665) 201,825 404,278 40,261 - 2,293,322 2,091,497 93,103 83,254 Unrecognised deferred tax liabilities – exploration and evaluation (1,030,577) (979,667) Unrecognised deferred tax liabilities – capital raising costs Net Unrecognised deferred tax assets (227,481) (223,353) 1,128,367 971,731 Deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. The benefit of the tax losses will only be obtained if the Group complies with conditions imposed by the tax legislation in Australia. NOTE 4: KEY MANAGEMENT PERSONNEL COMPENSATION a. Names and positions held of key management personnel in office at any time during the financial year: Person Position Person Position Gregory H Solomon Chairman James B Richardson Non-Executive Director Douglas H Solomon Non-Executive Director Guy T Le Page Non-Executive Director Aaron P Gates Company Secretary/CFO Key management personnel remuneration is included in the Remuneration Report of the Directors’ Report. b. Options and Rights Holdings Number of Options Held by Key Management Personnel Balance 1.7.2017 Granted as Compen- sation Options Exercised Net Change Other Balance 30.6.2018 Total Vested 30.6.2018 Total Exer- cisable 30.6.2018 Total Unexer- cisable 30.6.2018 Gregory H Solomon - 2,000,000 Douglas H Solomon - 2,000,000 Guy T Le Page - 2,000,000 James B Richardson - 2,000,000 Aaron P Gates Total - 2,000,000 - 10,000,000 - - - - - - - - - - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - 10,000,000 10,000,000 10,000,000 - - - - - - ASX Code: CNJ Page 24 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 4: KEY MANAGEMENT PERSONNEL COMPENSATION CONTINUED c. Shareholdings Number of Shares held by Key Management Personnel Balance 30.6.2017 Received as Compen- sation Options Exercised Net Change Other* Balance 30.6.2018 Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Aaron P Gates Total 23,105,469 21,586,875 15,852,502 28,500,000 - 89,044,846 - - - - - - *Net Change Other refers to shares purchased or sold during the financial year. d. Remuneration Refer to disclosures contained in the Remuneration Report section of the Directors’ Report. The totals of remuneration paid to key management personnel of the Group during the year are as follows: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share based payments Total - - - - - - - 23,105,469 (75,000) 21,511,875 - - - 15,852,502 28,500,000 - (75,000) 88,969,846 2018 $ 2017 $ 164,500 61,250 15,627 5,819 - - 210,400 - - - 390,527 67,069 NOTE 5: AUDITOR’S REMUNERATION Remuneration of the auditor for auditing or reviewing the financial report 19,678 17,975 NOTE 6: LOSS PER SHARE a. Reconciliation of loss to profit or loss Profit/(loss) Loss used to calculate basic EPS b. Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS The share options on issue are not potentially dilutive shares. NOTE 7: CASH AND CASH EQUIVALENTS Cash at bank Reconciliation of cash Cash at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to items in the balance sheet as follows: Cash and cash equivalents ASX Code: CNJ (775,340) (325,673) (775,340) (325,673) 318,535,853 299,949,570 165,746 466,368 165,746 466,368 165,746 466,368 165,746 466,368 Page 25 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 8: TRADE AND OTHER RECEIVABLES Other receivables NOTE 9: PROPERTY, PLANT AND EQUIPMENT Equipment: At cost Accumulated depreciation Total Plant and Equipment 2018 $ 2017 $ 11,318 11,318 24,700 24,700 50,786 50,786 (42,662) (41,199) 8,124 9,587 a. Movements in Carrying Amounts Movement in the carrying amount between the beginning and the end of the current financial year. Opening balance Depreciation expense Closing balance b. Impairment losses 9,587 (1,463) 11,325 (1,738) 8,124 9,587 The total impairment loss recognised in the consolidated statement of profit or loss and other comprehensive income during the current year amounted to $Nil (2017: Nil). NOTE 10: EXPLORATION AND EVALUATION Balance at the beginning of the financial year Expenditure incurred during the year Expenditure written-off during the year Balance at the end on the financial year 14,921,918 14,768,889 185,128 188,749 - (35,720) 15,107,046 14,921,918 Capitalised costs amounting to $185,128 (2017: $167,313) have been included in cash flows from investing activities in the statement of cash flows for the consolidated entity. NOTE 11: JOINT OPERATION A controlled entity, Meteore Metals Pty Ltd, has a 50% interest in the Mt Thirsty Joint Venture, whose principal activity is the development of the Mt Thirsty nickel, cobalt and manganese project. The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation and the expenses that the Group incurs and its share of the income that it earns from the joint operation. Share of joint operation results and financial position: Current Assets Non-Current Assets Total Assets Current Liabilities Total Liabilities Revenue Expenses Profit / (Loss) before income tax Income tax expense Profit / (Loss) after income tax 17,002 45,519 2,655,754 2,470,626 2,672,756 2,516,145 33,713 58,713 - (18,919) (18,919) - 55,183 80,183 - (7,461) (7,461) - (18,919) (7,461) ASX Code: CNJ Page 26 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 12: CONTROLLED ENTITIES Controlled Entities Consolidated Meteore Metals Pty Ltd * Percentage of voting power is in proportion to ownership Country of Incorporation Australia Percentage Owned (%)* 2018 100 2017 100 NOTE 13: TRADE AND OTHER PAYABLES Trade payables Sundry payables and accrued expenses NOTE 14: PROVISIONS NON-CURRENT Other 2018 $ 2017 $ 17,812 65,537 92,163 32,385 83,349 124,548 275,000 275,000 275,000 275,000 This mainly relates to a provision of $250,000 that has been recognised in relation to the Group’s 50% share of the liability to pay the original owners of the Mt Thirsty project $500,000 upon the commencement of mining on the tenements. The directors believe this will not become due for at least a couple of years. This amount has not been recorded at present value as a timeframe for discounting is not determinable. NOTE 15: ISSUED CAPITAL 323,493,387 (2017: 310,993,387) ordinary shares 19,282,403 18,907,403 2018 $ 2017 $ 2017 2018 No. No. 2018 $ 2017 $ a. Ordinary shares At the beginning of reporting period 310,993,387 295,243,387 18,907,403 18,434,903 Shares issued during the year 12,500,000 15,750,000 375,000 472,500 At reporting date 323,493,387 310,993,387 19,282,403 18,907,403 Ordinary shares participate in dividends and in the proceeds of winding up in proportion to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The Company has no authorised share capital or par value. All issued shares are fully paid. ASX Code: CNJ Page 27 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 15: ISSUED CAPITAL CONTINUED b. Options At the beginning of reporting period Issued during the year Options lapsed during the year Options exercised during the year At reporting date c. Capital Management 2018 2017 43,375,000 64,626,000 14,000,000 - - (5,501,000) (12,500,000) (15,750,000) 44,875,000 43,375,000 Management controls the working capital of the Company in order to maximise the return to shareholders and ensure that the Company can fund its operations and continue as a going concern. Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of expenditure and debt levels, distributions to shareholders and capital raisings. There have been no changes in the strategy adopted by management to control the capital of the Company since the prior year. NOTE 16: RESERVES a. Option Reserve The option reserve records items recognised as expenses on valuation of share options. NOTE 17: PARENT COMPANY INFORMATION a. Parent Entity Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Accumulated losses Reserves Option reserve Total reserves Financial performance Profit / (Loss) for the year Other comprehensive income Total comprehensive loss Contingent Liabilities and Commitments 2018 $ 2017 $ 154,247 430,761 14,380,960 14,251,822 14,535,207 14,682,583 51,923 74,740 - - 51,923 74,740 19,282,403 18,907,403 (5,587,769) (4,777,010) 788,650 477,450 788,650 477,450 (810,759) (330,778) - - (810,759) (330,778) The Directors are not aware of any contingent liabilities or capital commitments as at 30 June 2018. Guarantees in respect of the debts of its subsidiaries There are no parent entity guarantees in respect of the debts of its subsidiary at year end. ASX Code: CNJ Page 28 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 18: CAPITAL AND LEASING COMMITMENTS a. Capital Expenditure Commitments Payable: — — not later than 12 months greater than12 months 2018 $ 2017 $ 31,500 - 31,500 - - - b. Exploration Expenditure Commitments In order to maintain current rights of tenure to exploration tenements, the company is required to perform minimum exploration work to meet the requirements specified by various State governments. It is anticipated that expenditure commitments for the twelve months will be tenement rentals of $6,178 (2017: $3,000) and exploration expenditure of $67,000 (2017: $33,500). NOTE 19: SHARE-BASED PAYMENTS All options granted to personnel are over ordinary shares in Conico Ltd, which confer a right of one ordinary share for every option held. When issued, the shares carry full dividend and voting rights. 2018 Share-based payments - Options 2017 Outstanding at the beginning of the year Granted Exercised Lapsed Outstanding at year-end Exercisable at year-end Number of Options Weighted Average Exercise Price $ - - 14,000,000 0.055 - - - - 14,000,000 0.055 14,000,000 0.055 Number of Options Weighted Average Exercise Price $ - - - - - - - - - - - - The options outstanding at 30 June 2018 had a weighted average exercise price of $0.055 and a weighted average remaining contractual life of 2.3 years. Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate. Volatility of 100% and a risk free rate of 1.61% were used in the Black-Scholes model to calculate the fair values which ranged from $0.2 and $0.242. The life of the options is based on the historical exercise patterns, which may not eventuate in the future. No options were exercised during the year ended 30 June 2018. Included under key management remuneration and other expense in the income statement is $311,200 (2017: Nil) and relates, in full, to equity settled share-based payment transactions. NOTE 20: CASH FLOW INFORMATION a. Reconciliation of Cash Flow from Operations with Loss after Income Tax Loss after income tax Non-cash flows in profit Depreciation Debt forgiveness Options expense Changes in assets and liabilities, net of non-cash payments (Increase)/decrease in trade and term receivables* Increase/(decrease) in trade payables and accruals* Cash flow used in operations * - Net of Exploration and Evaluation cash flows. (775,340) (325,673) 1,463 1,738 - 35,720 311,200 - 13,382 (41,199) 20,076 31,531 (490,494) (236,608) ASX Code: CNJ Page 29 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 21: RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 2018 $ 2017 $ Transactions with related parties: Key Management Personnel Management fees and administration fees paid to Princebrook Pty Ltd, a company in which Mr GH Solomon and Mr DH Solomon have an interest. At 30 June 2018 $12,000 (2017: $12,000) was included in Trade and Other Payables owing to Princebrook Pty Ltd. Legal and professional fees payable to Solomon Brothers, a firm of which Mr GH Solomon and Mr DH Solomon are partners. Corporate advisory fees paid to RM Corporate Finance Pty Ltd, a company in which Mr G T Le Page and Mr J B Richardson have an interest. 144,000 144,000 20,532 2,436 84,000 - Associated Companies Reimbursement to Tasman Resources Ltd (which has a 12.82% interest in the Company) for employee costs on an hourly basis, in relation to Tasman staff utilised by the Company. 36,179 27,586 NOTE 22: SEGMENT REPORTING The Group operates predominately in one geographical segment and one business segment, being mineral exploration and development in Western Australia. Operating segments are identified based on internal reports reviewed by the chief operating decision maker/s. NOTE 23: CONTINGENT LIABILITIES AND CONTINGENT ASSETS The Directors are not aware of any contingent assets or contingent liabilities as at 30 June 2018. NOTE 24: EVENTS AFTER THE BALANCE SHEET DATE On 12 September 2018 the Company issued 21,598,199 shares and 21,598,199 options (exercisable at $0.048 and expiring on 30 June 2021) pursuant to a non-renounceable right issue raising $647,946 before costs. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. NOTE 25: FINANCIAL INSTRUMENTS a. Financial Risk Exposures and Management The main risks the company is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. i. Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has minimal exposure to interest rate risk, the only asset / liability affected by changes in market interest rates is Cash and cash equivalents. ii. Liquidity Risk The Company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate funding is maintained. The Company’s operations require it to raise capital on an on-going basis to fund its planned exploration program and to commercialise its tenement assets. If the company does not raise capital in the short term, it can continue as a going concern by reducing planned but not committed exploration expenditure until funding is available and/or entering into joint venture arrangements where exploration is funded by the joint venture partner. All financial liabilities and assets are expected to be realised and settled within 6 months. iii. Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the company. The company has adopted a policy of only dealing with credit-worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. ASX Code: CNJ Page 30 of 37 Annual Report for Year Ending 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 25: FINANCIAL INSTRUMENTS CONTINUED iii. Credit risk continued The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. The Company does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the company. b. Financial Instruments i. Net Fair Values The aggregate net fair values of the financial assets and financial liabilities, at the balance date, are approximated by their carrying value. ii. Interest Rate Risk The company’s exposure to interest rate risk and effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Weighted Average Effective Interest Rate 2018 2017 Floating Interest Rate Non Interest Bearing Total 2018 $ 2017 $ 2018 $ 2017 $ 2018 $ 2017 $ Financial Assets: Cash and cash equivalents 0.60% 0.60% 165,746 466,368 - - 165,746 466,368 Trade and other receivables - - - - 11,318 24,700 11,318 24,700 Total Financial Assets 0.60% 0.60% 165,746 466,368 11,318 24,700 177,064 491,068 Financial Liabilities: Trade and sundry payables Total Financial Liabilities NOTE 26: COMPANY DETAILS - - - - - - - - 83,349 124,548 83,349 124,548 83,349 124,548 83,349 124,548 The registered office of the company is: The principal place of business is: Conico Limited Level 15, Conico Limited Level 15, 197 St Georges Terrace Perth Western Australia 6000 197 St Georges Terrace Perth Western Australia 6000 ASX Code: CNJ Page 31 of 37 Annual Report for Year Ending 30 June 2018 DIRECTORS’ DECLARATION In the opinion of the directors of Conico Ltd (the “Company”): a. the financial statements and notes set out on pages 17 to 31, and the Remuneration disclosures that are contained in pages 13 to 14 of the Remuneration Report in the Directors’ Report, are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance, for the financial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (iii) complying with International Financial Reporting Standards as disclosed in Note 1. the remuneration disclosures that are contained in pages 13 to 14 of the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. b. c. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Non-Executive Chairman and Chief Financial Officer for the financial year ended 30 June 2018. This declaration is made in accordance with a resolution of the Board of Directors. Douglas H Solomon Director Dated this 21st day of September 2018 ASX Code: CNJ Page 32 of 37 Independent Auditor’s Report to the Members of Conico Limited Report on the financial report Opinion We have audited the financial report of Conico Limited (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial report’ section of our report. We are independent of the entity 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 also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern Without modifying our opinion, we draw attention to Note 1 to the Financial Report, which indicates that the Group will require further funding in the next twelve months from the date of this report to fund its planned exploration and evaluation projects and operating costs. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our report. Key audit matter How our audit addressed the key audit matter Capitalisation evaluation assets of Exploration and Refer to Note 10 (Exploration and evaluation) As at 30 June 2018 the carrying value of assets was and Evaluation Exploration $15,107,046 (2017: $14,921,918). The Group’s accounting policy in respect of exploration and evaluation assets is outlined in Note 1e. the This is a key audit matter due to the fact that significant judgement is applied in determining capitalised Exploration and whether Evaluation assets continue the to meet terms of AASB 6 in recognition criteria Exploration for and Evaluation of Mineral Resources. procedures Our evaluating focussed management’s assessment of the capitalised Exploration and Evaluation assets’ carrying value. These procedures included, amongst others: on  verifying whether the rights to tenure of the areas of interest remained current at balance date;  obtaining evidence of the future intention for the areas of interest, including checking future budgeted expenditure and related work programmes; and  obtaining an understanding of the status of ongoing exploration programmes for the areas of interest. We also assessed the appropriateness of the accounting treatment and disclosure in terms of AASB 6. Other information The directors are responsible for the other information. The other information comprises the information in Conico Limited’s annual report for the year ended 30 June 2018, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the other information we are required to report that fact. We have nothing to report in this regard. Directors’ responsibility for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the entity or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibility for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at The at: Australian http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Assurance Standards Auditing website Board and We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 13 to 14 of the Directors’ Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Conico Limited for the year ended 30 June 2018, complies with Section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Nexia Perth Audit Services Pty Ltd Amar Nathwani Director Perth 21 September 2018 Annual Report for Year Ending 30 June 2018 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES 1. Shareholding as at 17 September 2018 a. Distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Number of Shareholders 34 60 134 529 290 1,047 b. c. The number of shareholdings held in less than marketable parcels at 17 September 2018 is 339. The names and relevant interests of the substantial shareholders listed in the holding company’s register as at 17 September 2018 are: Shareholder Tasman Resources Ltd J Richardson Arkenstone Pty Ltd March Bells Pty Ltd d. Voting Rights Number of Ordinary shares 46,660,821 29,377,083 25,993,654 24,200,860 Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. e 20 Largest Shareholders — Ordinary Shares Name Tasman Resources Ltd 1. 2 March Bells Pty Ltd Arkenstone Pty Ltd 3 Tadea Pty Ltd 4. Tadea Pty Ltd 5. 6. Peto Pty Ltd <1953 Superfund A/c> 7. Redcode Pty Ltd 8. Guy Le Page & Dina Le Page 9. Anthony Ford 10. BNP Paribas Noms Pty Ltd 11. Matthew Torenius & Oliver Torenius 12. GT Le Page & Associates Pty Ltd 13. Apostman Superannuation Pty Ltd 14. Guy Touzeau Le Page 15. D M Middleton Pty Ltd 16. Norman & Megan Parker < Parker Superfund A/C> 17. Flourish Super Pty Ltd 18. Hyun Ho Ok & Byung Hye Ok 19. JP Morgan Nominees Australia Limited 20. Arkenstone Pty Ltd Number Shares Held 46,660,821 23,319,141 19,142,579 15,250,000 14,127,083 9,562,500 8,437,500 6,342,761 6,000,027 5,827,772 5,800,000 5,780,597 5,484,375 5,062,509 5,000,000 5,000,000 4,500,000 4,481,493 4,431,188 4,317,188 204,528,151 % of Issued Capital 13.52% 6.76% 5.55% 4.42% 4.09% 2.77% 2.44% 1.84% 1.74% 1.69% 1.68% 1.68% 1.59% 1.47% 1.45% 1.45% 1.30% 1.30% 1.28% 1.25% 59.27% ASX Code: CNJ Page 36 of 37 Annual Report for Year Ending 30 June 2018 f 20 Largest CNJO Holders — Listed CNJO Options Name Tadea Pty Ltd Tasman Resources Ltd 1. 2 March Bells Pty Ltd 3 Arkenstone Pty Ltd 4. Peto Pty Ltd <1953 Superfund A/c> 5. Anthony Ford 6. Auxilium Capiital Pty Ltd 7. Redcode Pty Ltd 8. 9. Norman & Megan Parker < Parker Superfund A/c> 10. GT Le Page & Associates Pty Ltd 11. Apostman Superannuation Pty Ltd 12. Guy Touzeau Le Page 13. Arkenstone Pty Ltd 14. Anna De Lucia 15. ASB Nominees Limited <123619 A/c> 16. Arkenstone Pty Ltd 17. Colin McKenzie 18. Beniris Pty Ltd 19. Yongmei Chen 20. Matthew Edwards Number Shares Held 5,184,536 2,591,016 2,126,954 1,062,500 1,000,000 1,000,000 937,500 877,083 800,000 642,289 609,375 562,501 479,688 456,250 335,938 281,543 260,951 250,000 180,000 162,500 19,800,624 % of Issued Capital 24.00% 12.00% 9.85% 4.92% 4.63% 4.63% 4.34% 4.06% 3.71% 2.98% 2.82% 2.60% 2.22% 2.11% 1.56% 1.30% 1.21% 1.16% 0.83% 0.75% 91.68% 2. Unquoted Securities – Options as at 17 September 2018 Holder Name Date of Expiry Exercise Price Various Various Various 30 November 2019 28 August 2020 20 November 2020 $0.03 $0.0625 $0.0488 Number on issue Number of holders 30,875,000 6,000,000 8,000,000 44,875,000 15 3 4 17 TENEMENT SCHEDULE Table 1 lists further details on the tenements. Table 1: Conico Tenement Schedule State WA WA WA WA Licence Type EL P EL R Number E63/1790 P/2045 E63/1267 R63/4 Interest % 50 50 50 50 Locality Mt Thirsty Mt Thirsty Mt Thirsty Mt Thirsty Location Approximately 20 km NW of Norseman Approximately 20 km NW of Norseman Approximately 20 km NW of Norseman Approximately 20 km NW of Norseman ASX Code: CNJ Page 37 of 37 

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