Corvus Gold Inc.
Annual Report 2019

Plain-text annual report

KKORA AB R AND C RESO CONTR OURC ROLLE CES ED ENT LIM TITIES D MITED ABN 1 17 082 14 40 252 AN NNUA AL R REPO ORT FOR R THE YEAR ENDED D 30 J UNE 20 019 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 TABLE OF CONTENTS Corporate Directory ............................................................................................................................................ 3 Directors’ Report ........................................................................................................................................... 4-14 Auditor’s Independence Declaration ................................................................................................................. 15 Consolidated Statement of Profit and Loss and Other Comprehensive Income .............................................. 16 Consolidated Statement of Financial Position .................................................................................................. 17 Consolidated Statement of Cash Flows ........................................................................................................... 18 Consolidated Statement of Changes in Equity ................................................................................................. 19 Notes to the Financial Statements .............................................................................................................. 20-42 Directors’ Declaration ....................................................................................................................................... 43 Independent Auditor’s Report ..................................................................................................................... 44-47 Corporate Governance ............................................................................................................................... 48-51 Additional Shareholder Information ............................................................................................................ 52-56 2 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CORPORATE DIRECTORY DIRECTORS Andrej K. Karpinski (Executive Chairman) Rodney H.J. Skeet (Non-Executive Director) Daniel A. Smetana (Non-Executive Director) Anthony G Wills (Non-Executive Director) COMPANY SECRETARY Andrej K. Karpinski REGISTERED & PRINCIPAL OFFICE 20 Prowse Street West Perth WA 6005 Telephone: (08) 9474 6166 Facsimile: (08) 9322 6333 E-mail: information@korabresources.com.au Website: www.korabresources.com.au AUDITORS HLB Mann Judd Level 4 130 Stirling Street Perth WA 6000 SHARE REGISTRY Link Market Services Limited Level 12, QV1 Building 250 St Georges Terrace Perth, WA 6000 Telephone: 1300 554 474 International Telephone: +61 2 8280 7761 Facsimile: (02) 9287 0303 Email: registrars@linkmarketservices.com.au SECURITIES EXCHANGE LISTING Securities of Korab Resources Limited are listed on ASX Limited (securities code KOR: shares) 3 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT The directors present their report together with the financial report of the consolidated entity, being Korab Resources Limited (“Korab” or “Company”) and its subsidiaries (“consolidated entity” or “Group”), at the end of and for the year ended 30 June 2019. Korab Resources Limited is a listed public company incorporated and domiciled in Australia. (LOSS) FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT Annual loss after taxation ($ million) Basic and diluted loss per share (cents per share) 2019 (0.543) (0.18) 2018 (0.491) (0.17) 2017 (0.602) (0.26) DIRECTORS The names and details of the Company’s Directors in office at any time during the financial year and up to the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Andrej K. Karpinski, FAICD, F Fin (Executive Chairman) Appointed April 1998 Responsibilities: Mr. Karpinski has responsibilities for business development, all capital raisings, investor relations, ASX liaison, risk identification and management, strategic direction and financial management of the Company, performance evaluations and corporate governance. Qualifications: Mr. Karpinski’s background is in mining, investment banking, commodities trading and funds management. He has held senior positions with Australian and international companies operating in mining and exploration, oil and gas, corporate finance, commodities trading and funds management. He brings to the Company his network of Australian and international contacts within the resources and securities sectors, his administrative skills and his expertise in project evaluation and sourcing, financial risk management, treasury management, project financing and resources banking. Mr. Karpinski is a Fellow of the Australian Institute of Company Directors, a Fellow of the Financial Services Institute of Australasia and a Professional Member of the Society of Petroleum Engineers. Mr. Karpinski is the founder of Korab Resources Limited and he has been its Executive Chairman since March 1998 when the Company was incorporated. Other Directorships: During the past three years Mr Karpinski has not held any other listed company directorships. Mr Karpinski is a Director of unlisted public company Polymetallica Minerals Limited (formerly Uranium Australia Limited). Rodney H. J. Skeet (Non-Executive Director) Appointed November 2002 Responsibilities: Mr. Skeet contributes his resources financing skills as well as his investment banking and resources sector contacts. Qualifications: Mr. Skeet’s background is in commodities financing and investment banking. During his career spanning 39 years he has held senior positions with financial institutions in the UK and USA including Phillip & Lion, IndoSuez, Credit Agricole, Rudolf Wolf and Brody White, Inc. His most recent position was as vice president with Dean Witter- Morgan Stanley Group in New York. He brings to the Company his broad network of international contacts within resources and securities sectors and his expertise in resources financing. Other Directorships: During the past three years Mr Skeet has not held any other listed company directorships. Mr Skeet is a director of unlisted public company Polymetallica Minerals Limited (formerly Uranium Australia Limited). 4 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT Daniel A. Smetana (Non-Executive Director) Appointed 28 October 2013 Responsibilities: Mr. Smetana contributes his corporate governance experience and his strategic planning expertise. Qualifications: Mr. Smetana has been Chairman of ASX listed Joyce Corporation Ltd since 1984. He is also the Chairman of Bedshed Franchising Pty Ltd. He is a past President of the Industrial Foundation for Accident Prevention and remains a Director. He is a Director of St John of God Foundation and Chairman of the St John of God Comprehensive Cancer Centre Fundraising Committee. His past board memberships include: Director of Edge Employment Solutions Inc, Deputy Chairman of Youth Focus Inc (1998 - 2007), Deputy Chairman Western Power Corporation and Chairman of its Finance Committee until 2003, Chairman and National Councillor of the Defence Reserves Support Council - WA (1997 - 2006), Director of WA Symphony Orchestra until 2003. Vice President and Councillor of the WA Federation of Police and Community Youth Centres (Inc.), Mr Smetana, Dip Comm, is a Fellow of CPA Australia, a Fellow of Australian Institute of Management and a Fellow of Australian Institute of Company Directors. His awards include 2003 Centenary Medal for Service to Commerce and Community, 2007 Ian Chisholm Award for Distinguished Service to Occupational Health and Safety, 1998 WA Business Executive of the Year Award. Other Directorships: During the past three years Mr Smetana has been Chairman of ASX listed Joyce Corporation Ltd and a Director of unlisted public company Polymetallica Minerals Ltd (2008 - 2019). Anthony G Wills (Non-Executive Director) Appointed 1 May 2015 Responsibilities: Mr. Wills brings to the Company experience in strategic planning, operations, security and risk management, communications, public relations and foreign affairs gained over his 30-year career. Qualifications: Mr. Wills’ background is in defence and finance. Mr Wills has for the last 15 years been involved in the finance industry. Prior to that he served for 20 years in the Australian Defence Force, including 10 years in the Specials Forces serving with the SAS Regiment. Mr. Wills also brings to the Company his extensive network of Australian and overseas contacts established through his involvement with the United Nations and its various missions. Mr Wills is a member of the Australian Institute of Company Directors and a senior associate of the Financials Services Institute of Australasia. Mr. Wills continues his longstanding involvement with the SAS Regiment through his ongoing work for the SAS Resources Fund. Other Directorships: During the past three years Mr Wills has not held any other listed company directorships. COMPANY SECRETARY Mr Andrej K. Karpinski was appointed Company Secretary in March 1998. Mr Karpinski (FAICD, F Fin) has a number of years’ experience in the position of Company Secretary. 5 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT PRINCIPAL ACTIVITIES The principal activity of the consolidated entity during the year was mineral exploration and the evaluation of mineral properties. There were no significant changes in the nature of these activities during the financial year. DIVIDENDS PAID OR RECOMMENDED No dividends were paid during the year and the directors do not recommend payment of a dividend in respect of the reporting period (2018: Nil). OPERATING RESULTS The loss of the consolidated entity after providing for income tax amounted to $543,380 (2018 loss: $490,813) primarily related to corporate compliance and administration costs of $766,925 (2018: $609,026). FUTURE DEVELOPMENTS Likely future developments in the operations of the Company are referred to in the Directors’ Report. The directors are of the opinion that further information as to likely developments in the operations of the consolidated entity would prejudice the interests of the consolidated entity and accordingly it has not been included. PROCEEDINGS ON BEHALF OF COMPANY No person has applied for leave to the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. REVIEW OF OPERATIONS On 25 July 2018 the Company announced that subsidiaries Australian Copper Pty Ltd and Australian Copper Holdings Pty Ltd (together “Auscopper”) had executed a term sheet with a third party for the third party to acquire an option to purchase the Mt. Elephant Project (“Project”) located in Western Australia. The term sheet is binding upon the parties but is subject to shareholder approval, if required under the ASX Listing Rules, and the third party being admitted to the official list of the ASX. The third party paid Auscopper a $50,000 option fee to acquire an option to purchase the Project. The option term was 9 months from 21 July 2018. Upon exercise of the option the consideration for the Project will be $500,000 payable in ordinary shares of the third party. Australian Copper Holdings Pty Ltd will be responsible for defending the forfeiture action in respect of one of the Project tenements. Should it be forfeited the third party will have 30 days to decide if it wants to terminate the option. If the third party so terminates the option, Auscopper will refund the third party the $50,000 option fee plus 50% of the exploration expenditure, tenement rent, and local government rates paid for by the third party in respect of the Project. On 25 July Company announced that its subsidiary Geolsec Phosphate Operations Pty Ltd signed an agreement with a third party (the “Miner”) for the Miner to sub-lease the Geolsec phosphate deposit located in the Northern Territory for a fixed monthly fee plus a royalty. The terms of the transaction are as follows: In exchange to having the rights to quarry the phosphate rock, and explore the Geolsec tenement (the “Tenement”) for additional phosphate rock, the Miner will pay Geolsec: 1. 2. 3. Fixed fee of $20,000 per month. Gross royalty of $2/tonne of phosphate rock removed from the Tenement. Interim Additional Royalty of $5/tonne of phosphate rock removed from the Tenement. The term of the agreement is for a period from 21 July 2018 (“Commencement Date”) until the date when the Tenement expires, or otherwise ceases. Geolsec can terminate the agreement at its discretion if the Miner 6 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT does not achieve the minimum production level of 60,000 tonnes of phosphate rock quarried and removed from the Tenement in any continuous 2 year period. The Miner will be responsible for all Tenement maintenance costs including rent, local government rates, statutory reporting, etc. The Miner will also be responsible for all phosphate quarry permitting, preparation and submission of any mine management plans in respect of the phosphate rock, obtaining any required authorisations, quarry development, quarry operations, phosphate rock sales, payment of statutory royalties levied by the Northern Territory government, phosphate rock marketing and shipping, and the rehabilitation of the Tenement, etc. Geolsec will retain all property rights in the Tenement and will retain the rights to explore for other commodities within the Tenement and to develop any discoveries of all minerals other than phosphate rock. If any Gross Royalty will be payable by the Miner in any particular month, $10,000 of the $20,000 Fixed Fee payable by the Miner for that particular month will count towards the amount of Gross Royalty due for that month. Any Fixed Fees paid in other months will not be affected. Interim Additional Royalty will be initially payable by the Miner for a period of 5 years from the Commencement Date. At the end of the 5 year period Geolsec will advise the Miner of any amounts that were paid or are payable by Geolsec in respect of any third parties claims (if any) regarding phosphate rock production, and any surplus amount over and above these claims (if any) will be split 50-50 between Geolsec and the Miner. If no claims were paid or are payable by Geolsec at the end of the 5 year initial period, the Miner will no longer be required to pay the Interim Additional Royalty to Geolsec. On 6 August 2018, the Company reported that it had decided to withdraw the applications for exploration licences forming the Pilbara project so it can concentrate on the Winchester magnesite project and the adjacent Batchelor polymetallic project (both located in the Northern Territory). On 12 September 2018 the Company reported in a report titled “ADDITIONAL INFORMATION - WINCHESTER MAGNESITE FEASIBILITY STUDY UPDATE”, additional information regarding the earnings estimates of potential additional revenue streams from production of caustic calcined magnesia (CCM) and dead burned magnesia (DBM) using output from the Winchester magnesite project as a raw material feed. The information was based on the update to the previously reported feasibility study and concerned the additional financial information as regards the potential earnings that would result from diverting a part or the whole of the raw magnesium carbonate rock to be produced by the Winchester quarry to the toll-treatment processing into CCM and/or DBM. This update was based on the production target initially reported on 21 March 2018, in a report titled ”WINCHESTER MAGNESITE DIRECT SHIPPING ORE FEASIBILITY STUDY RESULTS (EARNINGS, NPV, EBITDA, CAPEX, AND OPEX)”. The Company confirms that all the material assumptions underpinning the production target in the initial public reports released on 21 March 2018 and 12 September 2018 continue to apply and have not materially changed. The Company further confirms that all the material assumptions underpinning the forecast financial information derived from a production target in the initial public reports released on 21 March 2018 and 12 September 2018 continue to apply and have not materially changed. The reports can be downloaded directly from the ASX website by either following the links below or by cutting and pasting these links into your browser: “WINCHESTER MAGNESITE DIRECT SHIPPING ORE FEASIBILITY STUDY RESULTS (EARNINGS, NPV, EBITDA, CAPEX, AND OPEX)” – 21 March 2018 https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01964262 ”WINCHESTER MAGNESITE DIRECT SHIPPING ORE FEASIBILITY STUDY RESULTS (EARNINGS, NPV, EBITDA, CAPEX, AND OPEX)” – 12 September 2018 https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=02021411 On 30 November 2018 and 4 December 2018 Korab reported that it had expanded the agreement with the operator of Darwin Port to 800,000 tonnes per year to allow for additional volumes of magnesium carbonate rock to be shipped for toll-processing. This rock will be shipped through Darwin Port in addition to DSO magnesium carbonate rock. The agreement envisages exporting of up to 800,000 tonnes per year of magnesium carbonate rock through Darwin Port East Arm Wharf and includes sub-leasing of the land, access to various port facilities, use of loaders, and other equipment. The Heads of Agreement provides the basis for the final port agreement 7 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT which will allow for shipping of the magnesium carbonate rock through Darwin port. The costs of, and the fees for the sub-leasing of the land, access to various port facilities, use of loaders, and other equipment have not yet been agreed between the Company and Darwin Port. They will be determined in the final port agreement. East Arm Wharf is a multi-user facility with 4 berths spaced along 865 metres of quay line. Berth 2 is used for bulk ore exports and has a rail mounted dry bulk ship loader. The continuous length of wharf facilitates flexibility in berth allocations to visiting ships. East Arm Wharf can accommodate PANAMAX class bulk carriers up to 75,000 tonnes. East Arm Wharf has a rail mounted bulk minerals ship loader with a maximum capacity of 2,000 tonnes per hour. Bulk minerals, such as iron ore, magnesium carbonate, or manganese, can be delivered to stockpile areas by haulage trucks, or transferred from rail wagons to the stockpile areas using a dedicated rail dump and conveyor systems. The minerals are transported by truck from the stockpiles to the ship loader truck dump for loading onto bulk carriers. On 17 January 2019 Korab Group reported that it had executed an agreement with ZM Ropczyce SA (“Ropczyce”) regarding an off-take and co-operation with regards to funding, research and development, markets expansion, and development of new products. This followed on the series of meetings with the Ropczyce senior management team and multiple visits by Korab staff to Ropczyce operations in Poland. Under the agreement, the parties want to develop a long-term strategic relationship. The agreement envisages Korab supplying up to 20,000 tonnes (depending on market conditions) per year of Dead Burned Magnesia (“DBM”, or “sintered magnesia”) to Ropczyce, and Ropczyce providing Korab with R&D support associated with the co-operation under the agreement and also aimed at broadening Ropczyce’s product range and markets. The parties allow for capital co-operation in respect of the funding required to develop and expand production of DBM. The terms of the capital co-operation have not been agreed yet. The actual pricing of DBM will be set six-monthly and will be determined in the formal agreement which will be prepared in the future. Ropczyce is a producer and supplier of refractories essential to the production of steel, cement, and glass, as well as in other processes requiring work at high temperatures. Ropczyce is listed on the Warsaw Securities Exchange (GPW) and has been operating since 1975. For the nine months ending 30 September 2018 it had sales of approximately PLN 275 Mln ($102 Mln). The company provides a full product range with a wide spectrum of complex services connected with refractory ceramics across the entire product life cycle, starting from the design and technical advice through the supply of ceramics, installation, and installation supervision until servicing. It currently supplies end users operating in steel, cement, foundries, glass, and non-ferrous metals sectors. On 18 January 2018, Korab reported the strategy regarding the development of the Winchester project. The overall strategy of Korab is to secure several offtakes for magnesium carbonate rock, CCM, and/or DBM prior to commencing the operations at Winchester. At this point in time, Korab’s preference is to have the offtakes being subject to Korab being in a position to quarry the raw material, which means Korab having secured all required permits and approvals, completing the arrangements with relevant stakeholders, and completing the construction of the quarry and the related infrastructure. It is Korab’s belief that this approach will reduce the operational and financial risks for the Company. Notwithstanding the above preference, should any of the potential buyers be willing to enter into an offtake agreement which would be binding on the buyer but not on the Korab Group, Korab would be pleased to enter into such an agreement. Magnesium carbonate, CCM, and DBM markets have undergone significant level of disruption over the last 18 months due to Chinese government focusing on pollution control and environmental protection which resulted in many of the older and more polluting magnesium carbonate quarries and kilns located in China being shut down. This has caused a sharp increase in prices for raw magnesium carbonate rock, CCM, and DBM in the global markets. Korab Group aims to take advantage of this disruption to enter the market as a new supplier of magnesium carbonate rock, CCM, and DBM at the time of reduced overall supply and elevated prices. The Company aimed to have the Winchester project in production in the second half of 2019, although this goal was subject to the quarry operator (Ausmag Pty Ltd, a wholly owned subsidiary of Korab) securing all required permits, and approvals, and completing the arrangements with relevant stakeholders. On 29 January 2019, Korab Group reported that it had unexpectedly received several expressions of interest to buy up to 60,000 tonnes per year of low grade CCM and low grade DBM which could be produced (using kilns owned and operated by third parties on toll-processing basis) from the fines resulting from crushing and screening of raw magnesium carbonate rock and from the other low grade material. The fines resulting from crushing and screening and the low grade magnesium carbonate rock were considered by us until now to be a “waste” product. The mining and crushing/screening cost have already been absorbed into the overall costings of the Winchester project operations reported earlier and the cost of toll-processing of this material 8 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT is relatively low. Therefore the additional revenue stream from processing and sales of what was previously considered a “waste” product appears attractive. The discussions with interested parties are ongoing but are incomplete and details are confidential. There can be no certainty that any agreement or agreements can be reached or that any transaction will eventuate from these discussions. No commercial terms have been agreed between the parties. Accordingly, no investment decision should be made on the basis of this information. Korab will advise the market if and when an agreement or agreements have been reached. On 6 March 2019 the Company announced that two of the Mt Elephant exploration licences had been extended for a period of 5 years. On 5 April 2019 the Company provided the results of an update of the feasibility study assessing potential economic impact of the toll-treatment processing of low grade magnesite material into caustic calcined magnesia (CCM) and dead burned magnesia (DBM) and their sales (as an additional product stream). The Company confirms that all the material assumptions underpinning the production target in the initial public reports released on 21 March 2018, 12 September 2018, and 5 April 2019 continue to apply and have not materially changed. The Company further confirms that all the material assumptions underpinning the forecast financial information derived from a production target in the initial public reports released on 21 March 2018, 12 September 2018, and 5 April 2019 continue to apply and have not materially changed. On 24 April 2019 the Company announced extension of the option over Mt. Elephant project granted to Great Fingal Mining Company to 21 October 2019 for an option premium of $10,000. Following the end of the period, on 24 September 2019 the Company provided an update regarding the Bobrikovo project located in eastern Ukraine. Batchelor Polymetallic Project During the year Korab continued exploration of the project within licences listed in the schedule of tenements on page 52. No material exploration results were generated. Mt. Elephant Gold and Copper Project During the year Korab continued exploration of the project within licences listed in the schedule of tenements on page 53. No material exploration results were generated. Corporate On 4 October 2018 the Company issued 3,500,000 shares at 2.9 cents per share to raise $101,500 to unrelated exempt investors. On 7 January 2019 the Company issued 2,000,000 shares at 2.5 cents per share to raise $50,000 to unrelated exempt investors. On 29 April 2019 the Company issued 2,342,856 shares at 3.5 cents per share to raise $82,000 to unrelated exempt investors. On 14 June 2019 the Company issued 600,645 shares at 3.1 cents per share to raise $18,620 to unrelated exempt investors. DIRECTORS’ INTERESTS At the date of this report, the relevant interests of the directors in securities of the Company are as follows: Name Ordinary shares Options over ordinary shares Andrej K. Karpinski Rodney H.J. Skeet Daniel A. Smetana Anthony G Wills 59,734,739 569,238 951,407 - ENVIRONMENTAL ISSUES - - - - The Group has a policy of complying with or exceeding its environmental performance obligations. The Board believes that the Company has adequate systems in place for the management of its environmental requirements. The Group aims to ensure the appropriate standard of environmental care is achieved, and in 9 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Group are not aware of any breach of environmental legislation for the financial year under review. IDENTIFICATION OF INDEPENDENT DIRECTORS The independent directors are identified in the Corporate Governance Statement section of this Financial Report as set out on pages 48 to 51. MEETINGS OF DIRECTORS The number of directors' meetings held during the financial year for each director who held office during the financial year and the number of meetings attended by each director is as follows: Director Andrej K. Karpinski Anthony G Wills Rodney H.J. Skeet Daniel A. Smetana Number eligible to attend 19 19 19 19 Meetings attended 19 19 1 16 SHARE OPTIONS Shares under option The following is the movement during the period in options over shares in the Company. Expiry date Exercise price Number 01/07/18 - Issued - Expired - Exercised - Number 30/06/19 - No options have been granted since the end of the reporting period. There have been no options exercised since the end of the reporting period. During the reporting period there was no forfeiture or vesting of options granted in previous periods. SUBSEQUENT EVENTS On 11 July 2019 the Company issued 5,000,000 shares at 3.1 cents per share to raise $155,000 to unrelated exempt investors. On 18 July 2019 the Company issued 400,000 shares at 3.5 cents per share to raise $14,000 to unrelated exempt investors. No other matter or circumstance has arisen since 30 June 2019 that in the opinion of the directors has significantly affected, or may significantly affect in future financial years the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Korab support and adhere to the principles of sound corporate governance. The Board considers that Korab is in compliance with the ASX corporate governance principles and recommendations which are of critical importance to the commercial operation of a junior listed resources company. The Company’s Corporate Governance Statement is set out on pages 48 to 51 of this Financial Report. SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than stated elsewhere in this report there have been no significant changes in the state of affairs of the consolidated entity during the period under review. 10 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT AUDITORS INDEPENDENCE DECLARATION The auditor’s independence declaration under Section 307C of the Corporations Act 2001 is set out on page 15. NON-AUDIT SERVICES There were no non-audit services provided by the auditors during the current or preceding financial years. REMUNERATION REPORT The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001. Principles used to determine the nature and amount of compensation The Board determines remuneration policies and practices, evaluates the performance of senior management, and considers remuneration for those senior managers. The Board assesses the appropriateness of the nature and amount of remuneration on an annual basis by reference to industry and market conditions, and with regard to the Company’s financial and operating performance. Total non-executive directors’ fees are approved by shareholders and the Board is responsible for the allocation of those fees amongst the individual members of the Board. The value of remuneration is determined on the basis of cost to the Company and consolidated entity. Remuneration of key management personnel is referred to as compensation, as defined in Accounting Standard AASB 124. Compensation levels for key management personnel of the Company and consolidated entity are competitively set to attract and retain appropriately qualified and experienced directors and senior executives. The Board obtains, when required, independent advice on the appropriateness of remuneration packages, given trends in comparative companies both locally and internationally. Compensation arrangements can include a mix of fixed and performance based compensation however the Company has not paid bonuses to directors or executives to date. Share-based compensation can be awarded at the discretion of the Board, subject to shareholder approval when required. It is the intention of the Board to tailor the remuneration policy to maximise the commonality of goals between shareholders and key management personnel. The method which is most likely to achieve this aim is the issue of options to key management personnel to encourage the alignment of personal and shareholder interests. The directors believe this policy will be the most effective in increasing shareholder wealth. Compensation structures take into account the overall level of compensation for each director and executive, the capability and experience of the directors and senior executives, the executive’s ability to control the financial performance of the relative business or geographical segment, the consolidated entity’s performance (including earnings and the growth in share price), and the amount of any incentives within each executive’s remuneration. Given the consolidated entity’s focus on exploration projects during the year, the Board did not have regard to the consolidated entity’s financial performance and / or change in shareholder wealth occurring in the current financial year and previous three financial years in setting remuneration. No dividends were paid or declared during this period (2018: Nil). Fixed compensation Fixed compensation consists of base compensation as well as any employer contributions to superannuation funds. 11 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT Non-executive directors Total remuneration for all non-executive directors is not to exceed $120,000 per annum. A non-executive director’s base fee is currently $26,000 per annum. The Executive Chairman currently does not and has never in the past received director’s fees. Rheingold Investments Corporation Pty Ltd, a company controlled by the Executive Chairman receives management fees which are disclosed elsewhere in this report. Non-executive directors do not receive any performance related remuneration, however they may be paid for work performed over and above their non-executive duties. Directors’ fees cover all main Board activities and membership of Board committees. The Company does not have any terms or schemes relating to retirement benefits for non-executive directors. Non-executive directors receive share-based compensation at the discretion of the Board, and subject to approval by shareholders. No remuneration consultants were used during the year. Service contracts The contract duration, notice period and termination conditions for key management personnel are: Andrej K Karpinski, Executive Chairman. In July 2008 the Company entered into an Executive Service Agreement with Rheingold Investments Corporation Pty Ltd. Under the terms of the agreement Mr Karpinski, being the director of Rheingold Investments Corporation Pty Ltd, has agreed to provide management services to the Company at a rate of $327,000 per annum plus GST. The Agreement may be terminated by the Company at any time by giving Rheingold Investments Corporation Pty Ltd twelve (12) months' notice. In the event the Company does not require the services provided under the Executive Service Agreement with Rheingold Investments Corporation Pty Ltd, the Company shall pay to Rheingold Investments Corporation Pty Ltd an amount of $327,000 plus GST. Key Management Personnel Remuneration Details of the nature and amount of each major element of the remuneration of group key management personnel are set out below. There was no share based or performance based remuneration in either the current or prior period. 2019 Short-term benefits 2019 year fees Post-employment benefits Superannuation contributions Performance related % Total 2018 Short-term benefits 2018 year fees Post-employment benefits Superannuation contributions Performance related % Total Andrej Karpinski $ Rodney Skeet $ Daniel Smetana $ Anthony Wills $ Total $ 327,000 26,000 26,000 26,000 405,000 - - 327,000 - - 26,000 2,470 - 28,470 2,470 - 28,470 4,940 - 409,940 Andrej Karpinski $ Rodney Skeet $ Daniel Smetana $ Anthony Wills $ Total $ 327,000 26,000 26,000 26,000 405,000 - - 327,000 - - 26,000 2,470 - 28,470 2,470 - 28,470 4,940 - 409,940 Loans to and other related transactions with key management personnel Mr Andrej Karpinski is a director and controlling shareholder of Rheingold Investments Corporation Pty Ltd (“Rheingold”). Management contract fees form part of the remuneration of directors and have been disclosed as such in the directors' report. 12 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 DIRECTORS’ REPORT Fees to Rheingold Investments Corporation Pty Ltd for: - Management contract fees Total fees to Rheingold Investments Corporation Pty Ltd 2019 $ 2018 $ 327,000 327,000 327,000 327,000 During the prior period the directors and Rheingold agreed to suspend payments of the executive services fees (management contract fees) and directors’ fees. The unpaid fees are being accrued. The balance of outstanding liabilities to Rheingold, Mr. Karpinski and his related entities at period end for loans to the parent entity and unpaid fees is $562,939 (2018: $486,694) at an average interest rate of 12.8%. This aggregate amount consists of loans of $29,291 at an interest rate of 22% (2018: $25,725) and $533,648 at an interest rate of 12% (2018: $460,969). The loans and unpaid fees are not payable prior to 30 September 2020. These loans and debt become payable immediately on change of control of Korab. Mr. Karpinski has not received any directors' fees from Korab or its subsidiaries since the formation of Korab in March 1998. During the reporting period accrued directors fees and Rheingold management fees were converted to loans and some of the prior year loans and converted fees were repaid. The balance of outstanding liabilities to directors, excluding Mr. Karpinski and their related entities at period end for loans to the parent entity and unpaid fees is $883,208 (2018: $586,928) at an average interest rate of 12%. The loans and unpaid fees are not payable prior to 30 September 2020. Mr Andrej Karpinski is a director and significant shareholder of Polymetallica Minerals Limited (formerly Uranium Australia Ltd). The balance of outstanding receivables from Polymetallica Minerals Limited at period end is $1,054,861 (2018: $1,012,965) at an interest rate of 8.5%. The receivable is not payable prior to 30 September 2020. The balance of outstanding receivables from Polymetallica Minerals Limited consist of funds provided by the Company to pay for tenement rents and other project related costs in relation to projects where the Company and Polymetallica have, or had joint venture arrangements, and/or production sharing agreements, plus any accrued interest. These joint venture arrangements and/or production sharing agreements were established when Polymetallica was a subsidiary of the Company prior to Polymetallica being demerged (spun-off) from the Company. The Company has registered security over all assets of Polymetallica. During the year Polymetallica paid the Company $44,250 (2018: $58,557) in interest with the remaining interest of $41,895 (2018: $25,362) accruing. Share options The movement during the reporting period in the number of options in Korab Resources Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: 2019 Director Andrej Karpinski Rodney Skeet Daniel Smetana Anthony Wills Held at 1/7/18 - - - - Issued / (expired) - - - - Held at 30/6/19 - - - - 13 KORAB RE & CONTRO ESOURCES OLLED ENTI LIMITED ITIES ANNUAL RE A EPORT 2019 DIREC CTORS’ RE EPORT Shares The movem held, directl follows: ment during ly, indirectly 2019 Director Andrej Karp Rodney Ske Daniel Sme Anthony Wi pinski eet etana ills the reporting or beneficial g period in t ly, by each k the number key manage of ordinary ment person shares in Ko n, including th Korab Resou heir related p d rces Limited s parties, is as Held at 1/ 59,734 569 951 /7/18 4,739 9,238 ,407 - Net acq uired - - - - Held at 59 t 30/6/19 ,734,739 569,238 951,407 - INDEMNIF FICATION AND INSU URANCE O F DIRECTO ORS AND O OFFICERS During the f and its con defending c the entity. financial yea ntrolled entit civil or crimin ar the Comp ties. The liab al proceedin any paid a p bilities insur ngs that may premium to i red are dam be brought nsure the di mages and le against the o rectors and egal costs t officers in the officers of th that may be eir capacity a he Company y e incurred in n f as officers of This report is signed in a accordance w with a resolu ution of the d directors. Andrej K K Perth, West 27 Septemb Karpinski, FA tern Australia ber 2019 AICD, F Fin, a, (Executive Chairman) 14 1 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Korab Resources Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 27 September 2019 M R Ohm Partner 15 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE FOR THE YEAR ENDED 30 JUNE 2019 INCOME Revenue Finance income Other income Finance expense Corporate compliance and management Foreign exchange (loss) Occupancy costs Conference, travel and public relations Impairment expense Share based payments Contractor expenses capitalised Loss before income tax Income tax expense Loss for the year Notes 2 8 4 30 June 2019 $ 30 June 2018 $ 60,000 86,448 30,631 (189,586) (766,925) (5,383) (38,059) (33,366) (10,086) - 322,946 - 83,374 99,651 (153,568) (609,026) (9,115) (39,863) (45,573) (145,133) 4,000 324,440 (543,380) (490,813) - - (543,380) (490,813) Other comprehensive income for the year net of income tax Items that may be classified to profit or loss Exchange difference on translation of foreign operations - - Total comprehensive loss for the year (543,380) (490,813) Basic and diluted loss per share (cents per share) 6 (0.18) (0.17) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes to the financial statements. 16 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Trade and other financial assets Exploration and evaluation Total non-current assets Total assets Current liabilities Trade and other payables Loans and other borrowings Total current liabilities Non-current liabilities Loans and borrowings Total non-current liabilities Total liabilities Net assets Equity Contributed equity Foreign currency translation reserve Non-controlling interest contribution reserve Accumulated losses Total equity Notes 30 June 2019 $ 30 June 2018 $ 7 7 8 9 10 10 14 14 14 14 82,716 59,416 142,132 24,069 46,710 70,779 1,066,756 2,858,610 3,925,366 1,024,861 2,759,630 3,784,491 4,067,498 3,855,270 521,037 118,445 639,482 389,733 135,218 524,951 1,725,004 1,725,004 1,336,047 1,336,047 2,364,486 1,860,998 1,703,012 1,994,272 19,037,575 (997,078) (1,036,227) (15,301,258) 1,703,012 18,785,455 (997,078) (1,036,227) (14,757,878) 1,994,272 The above consolidated statement of financial position should be read in conjunction with the accompanying notes to the financial statements. 17 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 Cash flows from operating activities Payments to suppliers and employees Interest received Interest paid Net cash flows used in operating activities Cash flows from investing activities Exploration and evaluation expenditure Exploration and evaluation expenditure reimbursed Net cash flows provided by / (used in) investing activities Cash flows from financing activities Cash received from issue of ordinary shares Proceeds from borrowings Option fee received Repayment of advances to other entities Cash used for repayments of borrowings Net cash flows provided by financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Notes 30 June 2019 $ 30 June 2018 $ (262,585) 303 (3,206) (265,488) (166,485) 390 (5,465) (171,560) 13 14(a) (112,908) 315,371 (281,973) - 202,463 (281,973) 252,120 172,912 60,000 44,250 (407,610) 121,672 380,500 169,973 - 57,622 (429,540) 178,555 58,647 (274,978) 24,069 299,047 Cash and cash equivalents at the end of the financial year 13 82,716 24,069 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes to the financial statements. 18 9 1 0 2 T R O P E R L A U N N A i n g e r o F y c n e r r u c - n o N t s e r e t n i g n i l l o r t n o c $ l a t o T $ $ e v r e s e r e v r e s e r $ s e s s o l l n o i t a s n a r t n o i t u b i r t n o c d e t a l u m u c c A $ n o i t p O e v r e s e R $ y t i u q e d e t u b i r t n o C Y T I U Q E N I S E G N A H C F O T N E M E T A T S D E T A D I L O S N O C 9 1 0 2 E N U J 0 3 D E D N E R A E Y E H T R O F I I D E T M L S E C R U O S E R B A R O K I I S E T T N E D E L L O R T N O C & , 9 8 5 4 7 9 1 , ) 8 7 0 7 9 9 ( , ) 7 2 2 , 6 3 0 , 1 ( ) 5 6 0 , 7 6 2 , 4 1 ( 0 0 0 , 4 9 5 9 , 0 7 2 , 8 1 7 1 0 2 e n u J 0 3 t a e c n a l a B ) 3 1 8 0 9 4 ( , ) 3 1 8 0 9 4 ( , 0 0 5 0 8 3 , 6 9 9 3 3 1 , ) 0 0 0 4 ( , - - - - - - - - - - ) 3 1 8 , 0 9 4 ( ) 3 1 8 , 0 9 4 ( ) 0 0 0 , 4 ( - - - - - - 0 0 5 , 0 8 3 6 9 9 , 3 3 1 s e r a h s r o f e u d i s e n o m n o i t p i r c s b u s i t s n a g a f f o - t e s t b e D s e r a h s i r o f e u d s e n o m n o i t p i r c s b u s i s a d e v e c e r h s a C : s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T r a e y e h t r o f s s o l i e v s n e h e r p m o c l a t o T s t n e m y a p d e s a b e r a h S r a e y e h t r o f s s o L , 2 7 2 4 9 9 1 , ) 8 7 0 7 9 9 ( , ) 7 2 2 , 6 3 0 , 1 ( ) 8 7 8 , 7 5 7 , 4 1 ( ) 0 8 3 3 4 5 ( , ) 0 8 3 3 4 5 ( , 0 2 1 2 5 2 , - - - - - - - ) 0 8 3 , 3 4 5 ( ) 0 8 3 , 3 4 5 ( , 2 1 0 3 0 7 1 , ) 8 7 0 7 9 9 ( , ) 7 2 2 , 6 3 0 , 1 ( ) 8 5 2 , 1 0 3 , 5 1 ( - - - - - 5 5 4 , 5 8 7 , 8 1 8 1 0 2 e n u J 0 3 t a e c n a l a B - - 0 2 1 , 2 5 2 5 7 5 , 7 3 0 , 9 1 : s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T r a e y e h t r o f s s o l i e v s n e h e r p m o c l a t o T 9 1 0 2 e n u J 0 3 t a e c n a l a B h s a c r o f d e u s s i s e r a h S r a e y e h t r o f s s o L . s t n e m e t a t s l i a c n a n i f e h t o t i s e t o n g n y n a p m o c c a e h t 9 1 h t i w n o j i t c n u n o c n i d a e r l e b d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e v o b a e h T KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Korab Resources Limited and its subsidiaries. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards (“AASBs”) (including Australian Accounting Interpretations), as adopted by the Australian Accounting Standards Board (“AASB”), other authoritative pronouncements of the AASB and the Corporations Act 2001. Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report of Korab Resources Limited complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. Comparative information is reclassified where appropriate to enhance comparability. The functional and presentation currency of the Company is Australian dollars. The financial report was authorised for issue by the directors on 27 September 2019. Korab Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Basis of measurement The financial report is prepared on a historical cost basis as modified by the revaluation of financial assets and liabilities at fair value through profit and loss. Going concern The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Group’s assets and the discharge of its liabilities in the normal course of business. At balance date, the Group had an excess of current liabilities over current assets of $497,350 (2018: $454,172) and had a net cash outflow from operations for the year ended 30 June 2019 of $265,488 (2018: $171,560). The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. The Company believes it will need to seek additional funding in the coming year in order to meet its operating expenditure and planned exploration expenditure for the next twelve months from the date of signing these financial statements. The directors are confident of being able to obtain additional funding through increase in debt, raising of additional share capital, or sale of assets. Should this not occur, or not occur on a sufficiently timely basis, there is 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. Use of estimates and judgements The preparation of the financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements, are as follows: 20 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 (i) Exploration and evaluation assets Exploration and evaluation expenditure is accumulated in respect of each identifiable area of interest. These costs are carried forward in respect of an area that has not at balance date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in or relating to, the area of interest are continuing. (ii) Functional currency Companies in the consolidated entity have to determine their functional currencies based on the primary economic environment in which each entity operates. In order to do that management has to analyse several factors, including which currency mainly influences sales prices of product sold by the entity, which currency influences the main expenses of providing services, in which currency the entity has received financing, and in which currency it keeps its receipts from operating activities. (iii) Taxation A subsidiary, Donetsky Kryazh LLC, operates mainly in the Ukraine and is within that country’s tax jurisdiction. The Ukrainian tax system is characterised by numerous taxes and laws that change frequently, can contradict each other, and can be interpreted in various ways. Judgement is required in the determination of the Company’s tax provisions, however the directors believe that these have been calculated based on the best information available. (iv) Recoverability of loan to Polymetallica Minerals Limited Korab has been advised by Polymetallica that it is in the process of arranging of a debt and equity funding from third parties to raise funds to repay the loans made by Korab. (b) Principles of consolidation Subsidiaries The consolidated financial report comprises the financial statements of the Company and its controlled entities. A controlled entity is any entity controlled by the Company whereby the parent entity has the power to control the financial and operating policies of an entity so as to obtain benefits from its activities. All inter- company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Where a subsidiary enters or leaves the consolidated entity during the year, its operating results are included or excluded from the date control was obtained or until the date control ceased. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those applied by the parent entity. (c) Recoverable amount of assets and impairment testing Assets that have an indefinite useful life are not subject to depreciation and are tested annually for impairment by estimating their recoverable amount. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Where such an indicator exists, a formal assessment of recoverable amount is then made. Where this is less than carrying amount, the asset is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future cash flows expected to be derived from the asset or cash generating unit. In estimating value in use, a pre-tax discount rate is used which reflects the current market assessments of the time value of money and the risks specific to the asset. Any resulting impairment loss is recognised immediately in the statement of comprehensive income. 21 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 (d) Receivables Trade and other receivables are stated at fair value and subsequently measured at amortised cost, less expected credit losses. (e) Business combinations The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or business under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the consolidated entity. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the consolidated entity recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the consolidated entity’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified as either equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in the statement of comprehensive income. (f) Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that the consolidated entity’s rights of tenure to the area are current and that the costs are expected to be recouped through the successful development of the area or by its sale, or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Each area of interest is assessed for impairment to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Impairment testing is carried out in accordance with Note 1(d). Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine development properties. 22 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 (g) Taxes The charge for current income tax expense is based on the result for the year adjusted for any non- assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by balance date. Deferred tax is accounted for using the statements of financial position 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 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 recognised in the statement of comprehensive income except where it relates to items recognised directly in equity, in which case it is recognised in equity. Deferred income 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 tax losses. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis. 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 consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. The carrying amount of deferred tax assets is reviewed at each balance date and only recognised to the extent that sufficient future assessable income is expected to be obtained. Tax consolidation The Company and its wholly-owned Australian resident controlled entities have formed a tax-consolidated entity and are therefore taxed as a single entity. Korab Resources Limited is the head entity of the tax- consolidated entity. In future periods the members of the consolidated entity will, if required, enter into a tax sharing agreement whereby each company in the consolidated entity contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated entity. (h) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchases of these goods and services. Trade and other payables are represented as current liabilities unless payment is not due within 12 months. (i) Earnings per share The consolidated entity presents basic and diluted earnings per share (“EPS”) for its ordinary shares. Basic EPS is calculated by dividing the result attributable to equity holders of the Company by the weighted number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all potential ordinary shares, which comprise share options granted. (j) Share based payments The fair value of shares and share options granted as compensation is recognised as an expense with a corresponding increase in equity. Fair value is measured at grant date and recognised over the period during which the grantees become unconditionally entitled to the shares or share options. The fair value of share grants at grant date is determined by the share price at that time. The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, any vesting and performance criteria, the share price at grant date, the expected price 23 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. Upon the exercise of the option, the balance of the share-based payments reserve relating to the option is transferred to contributed equity. (k) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short- term, and 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. (l) Employee benefits Provision is made for the consolidated entity’s liability for employee benefits and termination indemnities arising from services rendered by employees to balance date. (i)Short-term benefits Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. (ii) Long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. (m) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to an equity transaction are shown as a deduction from equity, net of any recognised income tax benefit. (n) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (o) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period. (p) Foreign currency Functional and presentation currency The functional currency of each of the consolidated entity’s entities is measured using the currency of the primary economic environment in which that entity operates (the “functional” currency). The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transactions and balances 24 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate at balance date. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Exchange differences arising on the translation of monetary items are recognised in the profit and loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Foreign operations The financial performance and position of foreign operations whose functional currency is different from the consolidated entity’s presentation currency are translated as follows: • • assets and liabilities are translated at exchange rates prevailing at statement of financial position date. income and expenses are translated at transaction date or average exchange rates for the period, whichever is more appropriate. Exchange differences arising on translation of foreign operations are transferred directly to the consolidated entity’s foreign currency translation reserve as a separate component of equity. These differences are recognised in the statement of comprehensive income upon disposal of the foreign operation. (q) Revenue recognition Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Interest Revenue is recognised as interest accrues using the effective interest rate 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. (r) Borrowing costs Interest expenses comprise interest expense on borrowings and the unwinding of the discount on provisions. (s) Parent entity financial information The financial information for the parent entity, Korab Resources Limited, disclosed in Note 20 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Korab Resources Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. (t) Financial instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and 25 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: • amortised cost • fair value through profit or loss (FVTPL) • equity instruments at fair value through other comprehensive income (FVOCI) • debt instruments at fair value through other comprehensive income (FVOCI). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. The classification is determined by both: - the entity’s business model for managing the financial asset, and - the contractual cash flow characteristics of the financial asset. Subsequent measurement of financial assets (i) Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): • they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. (ii) Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. (iii) Equity instruments at fair value through other comprehensive income (Equity FVOCI) Investments in equity instruments that are not held for trading are eligible for an irrevocable election at inception to be measured at FVOCI. Under Equity FVOCI, subsequent movements in fair value are recognised in other comprehensive income and are never reclassified to profit or loss. Dividend from these 26 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 investments continue to be recorded as other income within the profit or loss unless the dividend clearly represents return of capital. This category includes unlisted equity securities that were previously classified as ‘available-for-sale’ under AASB 139. Any gains or losses recognised in other comprehensive income (OCI) are not recycled upon derecognition of the asset. (iv) Debt instruments at fair value through other comprehensive income (Debt FVOCI) Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business model of collecting the contractual cash flows and selling the assets are accounted for at debt FVOCI. The Group accounts for financial assets at FVOCI if the assets meet the following conditions: • they are held under a business model whose objective it is to “hold to collect” the associated cash flows and sell financial assets; and • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and • financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). • ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward- looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. 27 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). (u) Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Leases which transfer to a lessee substantially all the risks and benefits incidental to ownership of the leased asset are classified as finance leases. Other lease agreements are treated as operating leases. Finance leases are capitalised at the inception of the lease at the fair value of the leased assets or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income except for borrowing costs related to the financing of assets constructed for own use (during the construction period). Capitalised leased assets used in mining operations are expensed on a unit of production basis so as to write off the costs in proportion to the depletion of the estimated recoverable reserves or over the life of the lease. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. (v) Provisions Provisions are recognised when the consolidated entity 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. Provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Site restoration Provisions for the cost of site restoration are recognised at the time that an environmental disturbance occurs or a constructive obligation is determined. Costs included in the provision encompass all closure and rehabilitation activity expected to occur progressively over the life of the operation and at the time of closure in connection with disturbances as at the reporting date. Estimated costs included in the determination of the provision reflect the risks and probabilities of alternative estimates of cash flows required to settle the obligation. The expected rehabilitation costs are estimated based on the cost of external contractors performing the work or the cost of performing the work internally depending on management’s intention. The timing of the actual rehabilitation expenditure is dependent upon a number of factors including the currently approved life of the mine and changes in local environmental regulations. Expenditures may occur before and after closure and can continue for an extended period of time depending on rehabilitation requirements. The expected future cash flows exclude the effect of inflation. The unwinding of the discount is included in finance costs and results in an increase in the amount of the provision. The provision is updated each year for the effect of a change in the discount rate and exchange rate, when applicable, and the change in estimate is added or deducted from the related asset and depreciated prospectively over the asset’s useful life. Significant judgments and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows. Those expectations are formed based on existing environmental and regulatory requirements or, if more stringent, our environmental policies which give rise to a constructive obligation. When expected cash flows change, the revised cash flows are discounted using the current US dollar real risk-free pre-tax discount rate and an adjustment is made to the provision. 28 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 When a provision for site restoration is initially recognized, the corresponding cost is capitalized as an asset, representing part of the cost of acquiring the future economic benefits of the operation. The capitalized cost of closure and rehabilitation activities is recognized in property, plant and equipment and depreciated over the expected economic life of the operation to which it relates. (w) Contingencies Contingent liabilities are defined as:    possible obligations resulting from past events whose existence depends on future events; obligations that are not recognised because it is not probable that they will lead to an outflow of resources; obligations that cannot be measured with sufficient reliability. Contingent liabilities are not recognised in the statement of financial position, but are disclosed in the notes to the financial statements, with the exception of contingent liabilities where the probability of the liability occurring is remote. (x) New accounting standards and interpretations Standards and Interpretations applicable to 30 June 2019 In the period ended 30 June 2019, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current reporting periods beginning on or after 1 July 2018. As a result of this review, the Group has initially applied AASB 9 and AASB 15 from 1 July 2018. Due to the transition methods chosen by the group in applying AASB 9 and AASB 15, comparative information throughout the interim financial statements has not been restated to reflect the requirements of the new standards. AASB 9 Financial Instruments AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and makes changes to a number of areas including classification of financial instruments, measurement, impairment of financial assets and hedge accounting. Financial instruments are classified as either held at amortised cost or fair value. Financial instruments are carried at amortised cost if the business model concept can be satisfied. All equity instruments are carried at fair value and the cost exemption under AASB 139 which was used where it was not possible to reliably measure the fair value of an unlisted entity has been removed. Previously classified available- for-sale investments, now carried at fair value are exempt from impairment testing and gains or loss on sale are recognised in profit or loss. The AASB 9 impairment model is based on expected loss at day one rather than needing evidence of an incurred loss, which is likely to cause earlier recognition of bad debt expenses. Most financial instruments held at fair value are exempt from impairment testing. The Group has applied AASB 9 retrospectively with the effect of initially applying this standard recognised at the date of initial application, being 1 July 2018 and has elected not to restate comparative information Accordingly, the information presented for 30 June 2018 has not been restated. There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or comparative years. AASB 15 Revenue from contracts with Customers 29 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 AASB 15 replaces AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. AASB 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised, including in respect of multiple element arrangements. The core principle of AASB 15 is that it requires identification of discrete performance obligations within a transaction and associated transaction price allocation to these obligations. Revenue is recognised upon satisfaction of these performance obligations, which occur when control of goods or services is transferred, rather than on transfer of risks or rewards. Revenue received for a contract that includes a variable amount is subject to revised conditions for recognition, whereby it must be highly probable that no significant reversal of the variable component may occur when the uncertainties around its measurement are removed. There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or comparative years. Other than the above, the Directors have determined that there is no material impact of the other new and revised Standards and Interpretations on the Company and therefore, no material change is necessary to group accounting policies. Standards and Interpretations in issue not yet adopted The directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2019. As a result of this review the directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group and, therefore, no change necessary to Group accounting policies. 2. REVENUE Option fee - point in time revenue 3. SEGMENT REPORTING 2019 $ 60,000 60,000 2018 $ - - AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the consolidated entity that are reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance. The Executive Chairman of Korab reviews internal reports prepared such as consolidated financial statements, and strategic decisions of the consolidated entity are determined upon analysis of these internal reports. During the year the consolidated entity operated predominantly in one business segment, being the minerals exploration sector. Accordingly, under the “management approach” outlined only one operating segment has been identified and no further disclosure is required in the notes to the consolidated financial statements. The geographic location of non-current assets and revenue is set out in the table below: Australia – non-current assets Australia - revenue Australia – interest revenue 2019 $ 2018 $ 3,925,366 60,000 86,448 3,784,491 - 83,374 30 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 4. INCOME TAX EXPENSE Numerical reconciliation of income tax expense to prima facie tax expense: Loss before income tax expense Prima facie income tax benefit on pre-tax loss at the Australian income tax rate of 27.5% (2018: 27.5%) Tax effect of: Current year tax benefit not brought to account Income tax expense 2019 $ (543,380) 2018 $ (490,813) (149,430) (134,974) 149,430 - 134,974 - The consolidated entity has a deferred tax asset in respect of income tax losses. This asset has not been brought to account in the Statement of Financial Position as realisation is not considered probable. 5. AUDITORS’ REMUNERATION Audit and review services: Auditors of the Company: HLB Mann Judd 6. BASIC EARNINGS PER SHARE Loss from operations attributable to ordinary equity holders of Korab used to calculate basic and diluted earnings per share Weighted average number of shares 1 July Shares issued 30 June (basic and diluted) 2019 $ 2018 $ 52,530 52,530 55,850 55,850 (543,380) (490,813) Number of shares Number of shares 303,355,982 3,953,880 307,309,862 228,213,270 6,944,135 295,157,405 All potential ordinary shares, being options to acquire ordinary shares, are not considered dilutive in the calculation of earnings per share as the exercise of the options would not increase the loss per share. 31 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 7. TRADE AND OTHER FINANCIAL ASSETS Current Other receivables and prepayments: third parties Non-current Other financial assets: third parties 2019 $ 59,416 59,416 2018 $ 46,710 46,710 1,066,756 1,066,756 1,024,861 1,024,861 $1,054,861 (2018: $1,012,965) of the non-current third party loan is an unsecured receivable from Polymetallica Minerals Limited (formerly Uranium Australia Ltd), a company in which Mr Andrej Karpinski is Executive Chairman and a significant shareholder. The loan has an interest rate of 8.5% and is not payable prior to 30 September 2020. The balance of outstanding receivables from Polymetallica Minerals Limited consist of funds provided by the Company to pay for tenement rents and other project related costs in relation to projects where the Company and Polymetallica have, or had joint venture arrangements, and/or production sharing agreements, plus any accrued interest. These joint venture arrangements and/or production sharing agreements were established when Polymetallica was a subsidiary of the Company prior to Polymetallica being demerged (spun-off) from the Company. The Company has registered security over all assets of Polymetallica. 8. EXPLORATION AND EVALUATION Areas of interest in the exploration and evaluation phase: Cost at beginning of the year Capitalised contractor fees Other expenditure capitalised during the period Expenditure reimbursed and reimbursable Cost at end of the year Impairment provision Carrying amount at the end of the year 2019 $ 2,904,763 322,946 140,941 (354,821) 3,013,829 (155,219) 2,858,610 2018 $ 2,244,703 324,440 335,620 - 2,904,763 (145,133) 2,759,630 The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective areas. Australian Copper Pty Ltd and Australian Copper Holdings Pty Ltd (together Auscopper) granted an option to Great Fingall Mining (“GFM”) to acquire the tenements forming Mt. Elephant project for a consideration of $500,000. Consequently, Auscopper booked an impairment expense of $10,086 in the current period, and $145,133 in a prior period, to write-down the value of these tenements to $500,000. GFM paid the Company an option fee of $60,000 in the current period. Under the option agreement, this third party is responsible for all exploration, overheads, and tenement maintenance costs including the shire rates and tenement rent in respect of the tenements forming the Mt. Elephant Project. These costs are included in the expenditure reimbursed and reimbursable. Australian Copper Holdings Pty Ltd (part of the Group) is responsible for the costs of defence of the forfeiture application in respect of one of the Mt. Elephant tenements. The Directors are of the opinion that whilst the tenure of the Bobrikovo project and related operations are not affected by the current political developments in Ukraine, the uncertainty as to the future direction of the developments there makes it prudent to be conservative. The exploration and evaluation expenditure attributable to the Bobrikovo project has been written-off at consolidation level in earlier reporting periods to reflect this conservative approach. 32 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective areas. 9. TRADE AND OTHER PAYABLES Current Trade payables and accrued expenses (i) Trade payables - related parties 2019 $ 450,813 70,224 521,037 2018 $ 370,816 18,917 389,733 (i) Trade payables are non-interest bearing and are normally settled within 45 days. 10. LOANS AND BORROWINGS Current Loans payable - related parties – unsecured (i) Loans payable - third parties – unsecured (ii) Non-current Loans payable - related parties – unsecured (i) Loans payable - third parties – unsecured (ii) 2019 $ 56,800 61,645 118,445 1,504,980 220,024 1,725,004 2018 $ 30,000 105,218 135,218 1,140,144 195,903 1,336,047 (i) The terms and conditions of related party loans and borrowings are set out Notes 16 and 17, Related Party Transactions and Key Management Personnel Disclosures respectively. (ii) The third party loans and borrowings are on arms-length terms and conditions. 11. SUBSEQUENT EVENTS On 11 July 2019 the Company issued 5,000,000 shares at 3.1 cents per share to raise $155,000 to unrelated exempt investors. On 18 July 2019 the Company issued 400,000 shares at 3.5 cents per share to raise $14,000 to unrelated exempt investors. No other matter or circumstance has arisen since 30 June 2019 that in the opinion of the directors has significantly affected, or may significantly affect in future financial years the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs. 12. SUBSIDIARIES Held by parent Lugansk Gold Pty Limited Geolsec Phosphate Operations Pty Limited Melrose Gold Mines Pty Limited Australian Copper Pty Limited Ausmag Pty Limited Held by Australian Copper Pty Limited Country of incorporation Class of shares Equity holding 2019 2018 Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Australia Australia Australia Australia Australia 33 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 Australian Copper Holdings Pty Limited Held by Lugansk Gold Pty Limited LLC “Donetsky Kryazh” Australia Ordinary 100% 100% Ukraine Ordinary 100% 100% 13. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES (a) Reconciliation of (loss) after income tax to net cash flow from operating activities (Loss) for the year Non-cash items Capitalised contactor fees Management fees set off against loans Impairment expense Share based payment Option fee included in financing activities Foreign exchange loss Net interest expense Change in assets and liabilities - Decrease / (increase) in trade and other receivables - Increase in trade and other payables Net cash outflow from operating activities (b) Cash and cash equivalents Cash at bank and at call 2019 $ 2018 $ (543,380) (490,813) (322,946) 429,900 10,086 - (60,000) 5,040 100,235 26,744 88,833 (265,488) (324,440) 429,900 145,133 (4,000) - 4,550 65,119 (8,698) 11,689 (171,560) 82,716 24,069 Cash balance includes $12,900 term deposit securing a bank guarantee in favour of the Department of Primary Industry and Resources. (c) Risk exposure The consolidated entity’s exposure to interest rate risk is discussed in Note 16. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above. (d) Changes in liabilities arising from financing activities – unsecured borrowings Balance at 1 July Net cash used in financing activities Shares issued as set off against loans payable Interest accrued Fees converted to debt Other Balance at 30 June 2019 $ 1,471,265 (234,698) - 186,380 429,900 (9,398) 1,843,449 2018 $ 1,282,153 (259,567) (133,996) 148,103 429,900 4,672 1,471,265 34 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 14. CAPITAL AND RESERVES (a) Contributed equity: Movements in ordinary shares on issue 1 July Issue of shares for cash Issue of shares in extinguishment of borrowings 30 June 2019 Number 2019 $ 2018 Number 2018 $ 303,355,982 8,443,501 - 311,799,483 18,785,455 252,120 - 19,037,575 288,213,270 18,270,959 380,500 133,996 303,355,982 18,785,455 10,357,143 4,785,569 Ordinary shares have the right to one vote per share at meetings of the Company, to receive dividends as declared and, in the event of a winding-up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held. (b) Accumulated losses 1 July Loss for the period 30 June 2019 $ 2018 $ (14,757,878) (543,380) (15,301,258) (14,267,065) (490,813) (14,757,878) (c) Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity. 1 July 30 June (d) Option reserve (997,078) (997,078) (997,078) (997,078) The option reserve is used to record the value of equity benefits provided to employees, directors and other parties for goods and services provided and for proceeds received on the issue of options. 1 July Option expiry 30 June - - - 4,000 (4,000) - The movement in Company options during the reporting period was as follows: Options outstanding as at 1 July 2018 Options outstanding as at 30 June 2019 Number - - Weighted Average Exercise Price - - 35 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 14. CAPITAL AND RESERVES (continued) (e) Non-controlling interest contribution reserve The non-controlling interest contribution reserve represents the net proceeds from / expenditure on the sale of / acquisition of minority interests, net of the share of net assets disposed / acquired. 1 July 30 June 15. FINANCIAL RISK MANAGEMENT General objectives, policies and processes 2019 $ 2018 $ (1,036,227) (1,036,227) (1,036,227) (1,036,227) The consolidated entity’s activities expose it to credit risk, market risk (including interest rate risk, price risk and currency risk), liquidity risk, and commodity price risk. This note presents qualitative and quantitative information about the consolidated entity’s exposure to each of the above risks, their objectives, policies and procedures for managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The consolidated entity’s overall risk management approach focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the financial performance of the consolidated entity. The consolidated entity does not currently use derivative financial instruments to hedge financial risk exposures and therefore it is exposed to daily movements in commodity prices, interest rates and exchange rates. The consolidated entity uses various methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rates and ageing analysis for credit risk. 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. Given the stage of the consolidated entity’s development there are no formal targets set for return on capital. There were no changes to the consolidated entity’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. (a) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the consolidated entity. The consolidated entity has no significant concentration of credit risk. Exposure to credit risk is considered minimal but is monitored on an ongoing basis. Cash transactions are limited to financial institutions considered to have a suitable credit rating. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position at balance date. The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated entity’s maximum exposure to credit risk at the reporting date was: Carrying amount: Cash and cash equivalents Trade and other receivables Other financial assets 2018 $ 24,069 46,710 1,024,861 1,095,640 2019 $ 82,716 59,416 1,066,756 1,208,888 36 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 15. FINANCIAL RISK MANAGEMENT (continued) (b) Market risk (i) Interest rate risk The significance and management of the risks to the consolidated entity is dependent on a number of factors including (i) interest rates (current and forward) and the currencies that are held; (ii) level of cash and liquid investments;(iii) maturity dates of investments; and (iv) proportion of investments that are fixed rate or floating rate. The risk is managed by the consolidated entity maintaining an appropriate mix between fixed and floating rate investments. All cash assets are held in Australian dollars. The consolidated entity’s exposure to interest rate risk is considered minimal. The effective interest rates of variable rate income-earning financial assets at the reporting date are as follows. Variable rate instruments at call 2019 ($) Weighted average effective interest rate 2019 Variable rate instruments at call 2018 ($) Weighted average effective interest rate 2018 82,716 1.8% 24,069 1.8% Financial assets Cash and cash equivalents At the reporting date the carrying amount of the consolidated entity’s interest bearing financial assets was: Variable rate instruments Fixed rate instruments 2019 ($) 82,716 1,054,681 2018 ($) 24,069 1,012,965 At the reporting date the carrying amount of the consolidated entity’s interest bearing financial liabilities was: Fixed rate instruments 1,842,716 1,471,948 2019 ($) 2018 ($) Sensitivity analysis A 100 basis points increase or decrease in the weighted average year-end interest rate of variable rate instruments would have increased / (decreased) consolidated profit or loss and equity by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2018: 30 June 2019 increase 30 June 2019 decrease 30 June 2018 increase 30 June 2018 decrease (ii) Price risk Profit and loss ($) 8,271 (8,271) 2,407 (2,407) The consolidated entity was not exposed to equity securities price risk at 30 June 2019 or 30 June 2018. 37 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 15. FINANCIAL RISK MANAGEMENT (continued) (b) Market risk (continued) (iii) Currency risk The Company is exposed to currency risk on costs which are quoted in currencies (Ukrainian Hryvnias) other than the functional currency of the Company, being the A$. The consolidated entity does not hedge this risk, however it continues to monitor the exchange rate so that this currency exposure is maintained at an acceptable level. The major exchange rates relevant to the consolidated entity were as follows: A$ / US$ Year ended 30 June 2019 0.720 As at 30 June 2019 0.701 Year ended 30 June 2018 0.775 As at 30 June 2018 0.740 The consolidated entity’s exposure to foreign exchange risk at statement of financial position date was as follows, based on carrying amounts in A$: 2019 Cash and cash equivalents Other financial assets Trade and other receivables Loans and borrowings Trade and other payables 2018 Cash and cash equivalents Other financial assets Trade and other receivables Loans and borrowings Trade and other payables Sensitivity A$ 82,716 1,066,756 59,416 (1,843,449) (521,037) (1,155,598) A$ 24,069 1,024,861 46,710 (1,471,265) (389,733) (765,358) Total 82,716 1,066,756 59,416 (1,843,449) (521,037) (1,155,598) Total 24,069 1,024,861 46,710 (1,471,265) (389,733) (765,358) The consolidated entity had no material exposure from changes in foreign currency exchange rates at 30 June 2019 or 30 June 2018. 38 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 15. FINANCIAL RISK MANAGEMENT (continued) (c) Liquidity risk Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as and when they fall due. The consolidated entity’s approach to managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due under a range of financial conditions. The following are the contractual maturities of consolidated non-derivative financial liabilities: 2019 Trade and other payables Loans and borrowings 2018 Trade and other payables Loans and borrowings (d) Commodity price risk Carrying amount ($) Contractual cashflows ($) 6 months or less ($) 1 to 5 years ($) 521,037 1,843,449 2,364,486 389,733 1,471,265 1,860,998 521,037 1,843,449 2,364,486 389,733 1,471,265 1,860,998 521,037 118,445 639,482 389,733 135,218 524,951 - 1,725,004 1,725,004 - 1,336,047 1,336,047 The consolidated entity is not exposed to commodity price risk at 30 June 2019 or 30 June 2018. (e) Fair values The fair values of consolidated financial assets and financial liabilities, together with their carrying amounts shown in the statement of financial position, are as follows: Consolidated Carrying amount 2019 ($) Fair value Carrying amount 2018 ($) 2019 ($) Fair value 2018 ($) Cash and cash equivalents Other financial assets Trade and other receivables Loans and borrowings Trade and other payables 82,716 1,066,756 59,416 (1,843,449) (521,037) (1,155,598) 82,716 1,066,756 59,416 (1,843,449) (521,037) (1,155,598) 24,069 1,024,861 46,710 (1,471,265) (389,733) (765,358) 24,069 1,024,861 46,710 (1,471,265) (389,733) (765,358) Trade and other receivables / payables carrying amounts are considered to reflect their fair value. The basis for determining fair values is disclosed in Note 1(t). 16. RELATED PARTY TRANSACTIONS Korab Resources Limited is the ultimate parent entity. Interests in subsidiaries are disclosed in Note 12 and details of key management personnel compensation is set out in Note 17. The remuneration of key management personnel is set out in the Remuneration Report on page 12. Related party payables and loans and borrowings are disclosed in Notes 9 and 10. Mr Andrej Karpinski is a director and controlling shareholder of Rheingold Investments Corporation Pty Ltd (“Rheingold”). Management contract fees form part of the remuneration of directors and have been disclosed as such in the directors' report. Fees to Rheingold Investments Corporation Pty Ltd for: - Management contract fees Total fees to Rheingold Investments Corporation Pty Ltd 39 2019 $ 2018 $ 327,000 327,000 327,000 327,000 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 16. RELATED PARTY TRANSACTIONS (continued) During the prior period the directors and Rheingold agreed to suspend payments of the executive services fees (management contract fees) and directors’ fees. The unpaid fees are being accrued. The balance of outstanding liabilities to Rheingold, Mr Karpinski and his related entities at period end for loans to the parent entity and unpaid fees is $562,939 (2018: $486,694) at an average interest rate of 12.8%. This aggregate amount consists of loans of $29,291 at an interest rate of 22% (2018: $25,725) and $533,648 at an interest rate of 12% (2018: $460,969). The loans and unpaid fees are not payable prior to 30 September 2020. These loans and debt become payable immediately on change of control of Korab. Mr. Karpinski has not received any directors' fees from Korab or its subsidiaries since the formation of Korab in March 1998. During the reporting period accrued directors’ fees and Rheingold management contract fees were converted to loans and some of the prior year loans were repaid by Korab. The balance of outstanding liabilities to Mrs. Karpinski, at period end for loan to the parent entity is 80,753.86 United States Dollars (A$115,633 at the applicable foreign exchange rate) (2018: 71,097 United States Dollars, or $96,524 at applicable foreign exchange rate) at an interest rate of 12.00%. The loan is not payable prior to 30 September 2020. This loan becomes payable immediately on change of control of Korab. The balance of outstanding liabilities to directors, excluding Mr. Karpinski, and their related entities at period end for loans to the parent entity and unpaid fees is $883,208 (2018: $586,928) at an average interest rate of 12%. The loans and unpaid fees are not payable prior to 30 September 2020. Mr Andrej Karpinski is a director and significant shareholder of Polymetallica Minerals Limited (formerly Uranium Australia Ltd). The balance of outstanding receivables from Polymetallica Minerals Limited at period end is $1,054,861 (2018: $1,012,965) at an interest rate of 8.5%. The receivable is not payable prior to 30 September 2020. The balance of outstanding receivables from Polymetallica Minerals Limited consist of funds provided by the Company to pay for tenement rents and other project related costs in relation to projects where the Company and Polymetallica have, or had joint venture arrangements, and/or production sharing agreements, plus any accrued interest. These joint venture arrangements and/or production sharing agreements were established when Polymetallica was a subsidiary of the Company prior to Polymetallica being demerged (spun-off) from the Company. The Company has registered security over all assets of Polymetallica. During the year Polymetallica paid the Company $44,250 (2018: $58,557) in interest with the remaining interest of $41,895 (2018: $25,362) accruing. 17. KEY MANAGEMENT PERSONNEL DISCLOSURES Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year end. (a) Key management personnel compensation Names and positions of key management personnel: Name Andrej K. Karpinski Rodney H.J. Skeet Daniel A. Smetana Anthony G Wills Position Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Key management personnel compensation included in corporate compliance and management costs is as follows: Short term benefits Post-employment 2019 ($) 2018 ($) 405,000 4,940 409,940 405,000 4,940 409,940 40 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 17. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued) Information regarding individual directors and executives compensation is provided in the Remuneration Report. Details of equity instruments held directly, indirectly or beneficially by key management personnel and their related parties are included in the directors’ report. (b) Other key management personnel transactions Amounts payable to key management personnel at reporting date in respect of outstanding fees, expenses and loans are: Current Trade and other payables Loans and borrowings Non-current Loans and borrowings 18. COMMITMENTS Lease commitments 2019 ($) 23,857 56,800 2018 ($) 18,917 30,000 1,389,346 1,239,525 Non-cancellable operating leases (office lease) Within one year Later than one year but not later than 5 years 2019 $ 2018 $ - - - - - - The office lease, which commenced on 11 August 2013, has not been extended and now continues on a month-by-month basis. Mining tenements Annual expenditure commitments to maintain current rights to tenure of mining tenements Rehabilitation obligations 2019 $ 2018 $ 555,334 - 555,334 615,500 - 615,500 The consolidated entity has obligations to perform minimum exploration work and to meet annual payments in respect of rent and granted tenements. These obligations may be varied from time to time subject to approval and on this basis they are expected to be fulfilled in the normal course of operations. The Company can also meet its expenditure obligations by seeking joint venture partners, or by causing other parties to expend funds on exploration or mining, or by way of sale of all or part of an interest in a tenement, or by allowing tenements to lapse. Expenditure requirements for applications pending approval are not included. Mining tenements commitments by Korab Group and third parties Korab Group annual expenditure commitments Third parties annual expenditure commitments 19. CONTINGENT LIABILITIES 2019 $ 148,000 407,334 555,334 2018 $ 137,500 478,000 615,500 Australian Copper Holdings Pty Ltd is responsible for defending the forfeiture action in respect of one of the Mt. Elephant Project tenements. Should it be forfeited the Great Fingall Mining Company NL (GFM) which 41 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30 JUNE 2019 has an option Mt. Elephant Project will have 30 days to decide if it wants to terminate the option. If GFM so terminates the option, Auscopper will refund GFM the $60,000 option fee plus 50% of the exploration expenditure, tenement rent, and local government rates paid for by GFM in respect of the Project. Other than above in the opinion of the directors there were no material changes in contingent liabilities that existed as at 30 June 2018. Key Management Personnel Contracts Contingent liabilities arising from key management personnel contracts are set out in the Remuneration Report. 20. PARENT ENTITY INFORMATION The individual financial statements for the parent entity show the following aggregate amounts: Statement of Financial Position Current assets Total assets Current liabilities Total liabilities Equity Contributed equity Accumulated losses Loss for the year 2019 $ 101,818 3,742,171 358,628 2,039,159 2018 $ 58,763 3,573,384 243,064 1,579,112 19,037,575 (17,334,563) 1,703,012 18,785,455 (16,791,183) 1,994,272 (543,380) (490,813) Total comprehensive loss for the year (543,380) (490,813) The parent entity has not provided any financial guarantees in respect of subsidiaries, nor did it have any contingent liabilities as at 30 June 2019 or 30 June 2018. The Company has obligations to perform minimum exploration work and to meet annual payments in respect of rent and granted tenements. These obligations may be varied from time to time subject to approval and on this basis they are expected to be fulfilled in the normal course of operations. The Company can also meet its expenditure obligations by seeking joint venture partners, or by causing other parties to expend funds on exploration or mining, or by way of sale of all or part of an interest in a tenement, or by allowing tenements to lapse. Expenditure requirements for applications pending approval are not included. 42 KORAB RE & CONTRO ESOURCES OLLED ENTI LIMITED ITIES ANNUAL RE A EPORT 2019 DIRECTO OR THE YEA ORS’ DECL AR ENDED FO ARATION 30 JUNE 20 19 (1) In the e opinion of t the directors of Korab Re esources Lim mited: (a) (b) the financia Corporation al statements ns Act 2001, s and notes s including: set out on pa ages 16 to 42 2 are in acco ordance with the (i) (ii) givin 2019 ng a true and 9 and of its p d fair view of performance the consolid for the finan ated entity’s cial year end financial pos ded on that d sition as at 3 date; and 30 June com man plying with A datory profe Accounting S ssional repo Standards, th rting require e Corporatio ments; and ons Regulatio ons 2001, an nd other there are re when they easonable gr become due rounds to be e and payabl elieve that the e. e Company w will be able to to pay its deb bts as and (2) This direct declaration tors in accor has been m rdance with s made after section 295A receiving th A of the Corp he declaratio orations Act 2001. ons required d to be mad de to the Note 1(a) co as issued b onfirms that y the Interna the financial ational Accou statements unting Standa also comply ards Board. with Interna tional Financ cial Reportin s g Standards Signed in ac ccordance w with a resolut ion of the dir rectors. Andrej K. K Executive C Karpinski, F Chairman AICD, F Fin Perth, West 27 Septemb a tern Australia ber 2019 43 4 INDEPENDENT AUDITOR’S REPORT To the Members of Korab Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Korab Resources Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit of loss and other comprehensive income, the consolidated statement of changes in equity and the 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 Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1(a) in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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 matters described below to be the key audit matters to be communicated in our report. 44 Key Audit Matter How our audit addressed the key audit matter Classification of loans and borrowings (Refer to Notes 9 and 10) The operations of the Group are typically funded through capital raisings and borrowings from related and external parties. As at 30 June 2019, Korab Resources Limited had a total of $1,843,449 in relation to current and non-current borrowings representing 78% of total liabilities. Given the size of the loans and borrowings balance and the importance for continued operations, the accounting for the Group’s borrowings is considered a key audit matter. Carrying amount of exploration and evaluation asset (Refer to Note 8) In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, the Group capitalises exploration expenditure. Our audit focused on the Group’s assessment of the carrying amount of capitalised exploration and evaluation as this is one of the significant assets of the Group. There is a risk that the capitalised expenditure no longer meets the recognition criteria of the standard. In addition, we considered it necessary to facts and circumstances assess whether existed to suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Recoverability of Polymetallica Minerals Limited loan receivable (Refer to Note 7) As at 30 June 2019, Korab Resources Limited had a receivable of $1,054,861 in relation to the non-current loan to Polymetallica Minerals. The principal asset of Polymetallica expenditure on areas of in exploration and evaluation phase. interest is the 45 Our procedures included but were not limited to: - Obtaining confirmations from the material funders confirming borrowings, including amounts and interest rates; the party ensured - Where debt was regarded as non-current, we confirmed unconditional right to defer payment such that there were no repayments required within 12 months from the balance date; - Obtaining details of voluntary repayments of borrowings made by the entity between balance date and audit report date and classified the amount as current; and - Reviewing the contractual terms of loan agreements and minutes of Directors’ meetings to ensure loans and borrowings were complete and accruing appropriate interest. Our procedures included but were not limited to: - Obtaining an understanding of the key processes associated with management’s review of the exploration and evaluation asset carrying values; - Considering the Director’s assessment of potential indicators of impairment; - Obtaining evidence that the Group has current rights to tenure of its area of interest; - Discussion with management the nature of planned ongoing activities; - Determining whether we consider any impairment indicators under AASB 6 are present; and - Examining the disclosures made in the financial report. Our procedures included but were not limited to: - Reviewing the security interests in place over Polymetallica’s projects as security over loan repayment; We considered this to be a key audit matter due to its materiality and the significant audit effort directed towards this area. - Critically reviewing an independent valuation over the relevant areas of interest of Polymetallica; - Considering the skills and experience of the independent valuer; - Ensuring Polymetallica’s right to tenure are current; and - Obtaining a Polymetallica. loan confirmation from Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s financial report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 46 - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. - We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Korab Resources Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards HLB Mann Judd Chartered Accountants Perth, Western Australia 27 September 2019 M R Ohm Partner 47 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT The Board of Directors of Korab Resources Limited is responsible for corporate governance of the Company. The Board guides and monitors the business and affairs of Korab Resources Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. The Parent Company has neither full time nor part time employees. Most of the administration and technical functions are outsourced to contractors who observe their own diversity and equal opportunity policies. Subsidiaries that form the Korab Group are encouraged to seek diversification in their employment policies. For further information on corporate governance policies adopted by Korab Resources Limited, refer to our website: www.korabresources.com.au. BOARD OBJECTIVES The Board will develop strategies for the Company, review strategic objectives, and monitor the performance against those objectives. The overall goals of the corporate governance process are to: • • • drive shareholders value; assure a prudential and ethical base to the Company’s conduct and activities; and ensure compliance with the Company’s legal and regulatory obligations. Consistent with these goals, the Board assumes the following responsibilities; • • • • • developing initiatives for profit and assets growth; reviewing the corporate, commercial and financial performance of the Company on a regular basis; acting on behalf of, and being accountable to, the Shareholders; identifying business risks and implementing actions to manage those risks; and developing and effecting management and corporate systems to assure quality. The Company is committed to the circulation of relevant materials to directors in a timely manner to facilitate directors’ participation in Board discussions on a fully informed basis. STRUCTURE OF THE BOARD The skills, experience and expertise relevant to the position of director held by each director in office at the date of the financial report is included in the Directors’ Report. Election of Board members is substantially the province of the Shareholders in general meeting. However, the Company commits to the following principles: • • the Board to comprise of directors with a blend of skills, experience and attributes appropriate for the Company and its business; the principal criterion for the appointment of new directors being their ability to add value to the Company and its business. The Board has adopted the ASX Corporate Governance Councils definition of an independent director contained titled “The Principles of Good Corporate Governance and Best Practice Recommendations”. their report The current Board structure is considered to best serve the Company in meeting its objectives, given its small capitalisation, limited resources and existing operations. The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. 48 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT (Continued) STATEMENT CONCERNING AVAILABILITY OF INDEPENDENT PROFESSIONAL ADVICE If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director then, provided the director first obtains approval for incurring such expense from the Chairman, the Company will pay the reasonable expenses associated with obtaining such advice. SKILLS, EXPERIENCE, EXPERTISE AND TERM OF OFFICE OF EACH DIRECTOR A profile of each director containing the applicable information is set out in the directors' report. REMUNERATION COMMITTEE AND NOMINATION COMMITTEE At this time Korab has no remuneration or nomination committee. The board intends to form a remuneration committee during the current financial year. NOMINATION ARRANGEMENTS Where a vacancy is considered to exist, the board will select an appropriate candidate through consultation with external parties and consideration of the needs of shareholders and the Company. Such appointments will be referred to shareholders for re-election at the next annual general meeting. All directors, except the Executive Chairman, are subject to re-election by shareholders at least every three years. When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board will determine the selection criteria for the position based on the skills deemed necessary for the Board to best carry out its responsibilities. The Board will then appoint the most suitable candidate (assuming one is available) who must stand for election at the next annual general meeting. PERFORMANCE During the reporting period the entity did not have a formal process for evaluation of directors and executives due to there only being four in total. The Chairman will undertake an annual assessment of the performance of the individual directors and meet privately with each director to discuss this assessment. REMUNERATION ARRANGEMENTS It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality board by remunerating directors fairly and appropriately with reference to relevant employment market conditions. To assist in achieving the objective the Board intends to link the nature and amount of executive directors’ emoluments to the Company’s financial and operational performance. The expected outcomes of this remuneration structure will be: • • Retention and motivation of directors and executive officers Performance rewards to allow directors and executive officers to share the rewards of the success of Korab Resources Limited The remuneration of the Executive Chairman is decided by the non-executive directors. In determining competitive remuneration rates the directors review local and international trends among comparative companies and the industry generally. Directors intend to consider an employee share option plan during the current financial year. The maximum remuneration of non-executive directors is the subject of Shareholder resolution in accordance with the Company’s Constitution, and the Corporations Act as applicable. The duration of non- executive director’s remuneration within that maximum will be made by the Board having regard to the inputs and value of the Company of the respective contributions by each non-executive director. The Board may award additional remuneration to non-executive directors called upon to perform extra services or make special exertions on behalf of the Company. 49 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT (Continued) There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. All remuneration paid to directors and executives is valued at the cost to the Company and expensed. AUDIT COMMITTEE The shareholders in general meeting are responsible for the appointment of the external auditors of the Company, and the Board from time to time will review the scope, performance and fees of those external auditors. The Board has not yet established an audit committee. It is the Board’s responsibility to ensure that an effective internal control framework exists within the Company. This includes both internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial and non-financial information. IDENTIFICATION AND MANAGEMENT OF RISK The Board’s collective experience will enable accurate identification of the principal risks which may affect the Company’s business. Management of these risks will be discussed by the Board at periodic (at least annual) strategic planning meetings. In addition, key operational risks and their management, will be recurring items for deliberation at Board meetings. ETHICAL STANDARDS The Board is committed to the establishment and maintenance of appropriate ethical standards to underpin the Company’s operations and corporate practices. INDEPENDENT DIRECTORS The independent directors are Rodney Skeet, Daniel Smetana, and Anthony Wills. FEMALE EMPLOYEES As at 30 June 2019 the parent company had no part time or full time employees. As at 30 June 2019 the proportion of males and females employed by the Korab Group (including local and overseas subsidiaries) was as follows: Directors Other Total Male 4 1 5 Female 0 0 0 Total % Female 0% 0% 0% 4 1 5 50 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT (Continued) EXPLANATIONS FOR DEPARTURES FROM BEST PRACTICE RECOMMENDATIONS (NOT COMPLETE) From 1 July 2018 to 30 June 2019 (the “Reporting Period”) the Company complied with the Corporate Governance Principles and the Recommendations as published by the ASX Corporate Governance Council ("ASX Principles and Recommendations"), other than in relation to the matters specified below: Notification of Departure Explanation of Departure 2.4 A majority of Board are not independent directors 2.5 is The Chairman an independent director and acts in the capacity of chief executive officer. not 1.5 The Company does not have a diversity policy. The Board consists of an Executive Chairman, and three independent non-executive directors. The Board does not consider it is cost effective to increase the size of the board to meet this recommendation given the size of the Company. The Board considers that the Company is currently of a size and complexity where the Chairman can act in an executive capacity. If the Company’s activities increase in size, scope and/or nature the appointment of a non- executive Chairman will be considered by the Board. The parent Company does not have either full time or part time employees. The contractors supplying services to the Company observe their own diversity and equal opportunity policies. The Board is confident that Korab Group’s recruitment practices result in the employment of the most suitable candidate without discriminating unfairly against any potential employee on the basis of gender, age, ethnicity, culture, or on any other basis. 2.1 4.1 8.1 6.3 A separate Nomination Committee has not been formed The Board intends to appoint a Nomination Committee during the 2020 financial year. The Company does not have an Audit Committee The Board intends to appoint an Audit Committee during the 2020 financial year. The Company does not have Remuneration Committee The Board intends to appoint a Remuneration Committee during the 2020 financial year. The Company has not adopted a policy to encourage participation at meetings of security holders The Board considers that shareholders currently receive both the information and adequate notice to participate at meetings of security holders. 7.1, 7.2 The Company does not have a Risk Committee 7.3 The Company does not have an internal audit function The Board considers that it was of an effective composition, its size and commitment responsibilities and duties during this period, however no formal review of the risk management framework occurred during the period. to adequately discharge The Board considers that the Company is not currently of a size to justify the formation of an internal audit function. The Board considers that it was of an effective composition, size and commitment its responsibilities and duties during this period. to adequately discharge 51 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION Additional information required by the ASX Limited (“ASX”) Listing Rules as at 27 September 2019 and not disclosed elsewhere in this report is set out below. SUBSTANTIAL SHAREHOLDERS The following shareholders have lodged substantial shareholder notices with ASX: Beneficial holder Andrej K. Karpinski, Shares 59,734,739 % 19.16 DISTRIBUTION OF SHAREHOLDERS The distribution of security holders is as follows: Range of holding 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1,000 Totals Shareholders 255 514 150 152 149 1,220 Number Of Ordinary Shares 293,949,643 21,466,169 1,280,955 472,877 29,839 317,199,483 The number of shareholders holding less than a marketable parcel of ordinary shares is 626. VOTING RIGHTS (ORDINARY SHARES) The voting rights attaching to Ordinary Shares are governed by the Constitution. On a show of hands every person present who is a member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. No options have any voting rights. SCHEDULE OF MINERAL TENEMENTS The details of tenements and land leases held by Korab Resources Limited and controlled entities as of 27 September 2019 are as follows: Winchester, Geolsec, and Batchelor Tenements Located in the Northern Territory Tenement Registered Holder/Applicant Status Grant Date EL31341 Korab Resources Limited Granted 28/11/2016 MLN512 Korab Resources Limited Granted 19/04/1982 MLN513 Korab Resources Limited Granted 19/04/1982 MLN514 Korab Resources Limited Granted 19/04/1982 MLN515 Korab Resources Limited Granted 19/04/1982 MLN542 Korab Resources Limited Granted 19/04/1982 MLN543 Korab Resources Limited Granted 19/04/1982 ML30587 AusMag Granted 21/10/2015 ML27362 Geolsec Phosphate Granted 22/04/2010 EL29550 Korab Resources Limited Granted 1/08/2012 Korab Group Share (%) Expiry Date Area Next Annual Rent Next Year Annual Minimum Expenditure 27/11/2022 6,500ha $1,877 $19,000 31/12/2023 31/12/2023 31/12/2023 31/12/2023 31/12/2023 31/12/2023 16ha 16ha 16ha 16ha 15ha 15ha $600 $600 $600 $600 $580 $580 20/10/2040 349.3ha 21/04/2035 234.3ha $7,634 $5,400 N/A N/A N/A N/A N/A N/A N/A N/A 31/07/2020 17,100ha $12,600 $129,000 $25,671 $148,000 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 52 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION (Continued) SCHEDULE OF MINERAL TENEMENTS (Continued) Mount Elephant Tenements Located in Western Australia Tenement Registered Holder/Applicant Status Grant Date Korab Group Share (%) Expiry Date Area Next Annual Rent Next Year Annual Minimum Expenditure E 08/2757 Australian Copper Granted 23/02/2017 E 52/2724 Australian Copper Holdings Granted 18/07/2013 E 08/2307 Australian Copper Holdings Granted 23/08/2013 E 08/2756 Australian Copper Granted 9/09/2016 E 08/2115 Australian Copper Holdings Granted 4/11/2010 100% 100% 100% 100% 100% 22/02/2022 5 Blks $1,165 $15,000 17/07/2023 70 Blks $25,242 $93,334 22/08/2023 43 Blks $12,600 $50,000 8/09/2021 16 Blks $3,728 $30,000 3/11/2020 73 Blks $43,873 $219,000 Sub-Total $86,608 $407,334 Bobrikovo Tenements Located in the Luhansk Region in Eastern Ukraine Tenement Registered Holder/Applicant Status Grant Date BKB169 LLC "Donetsky Kryazh" Granted 30/10/2007 4420381100 LLC "Donetsky Kryazh" Granted 29/07/2009 1589 2730 LLC "Donetsky Kryazh" Granted 29/07/2009 LLC "Donetsky Kryazh" Granted 17/06/2002 Korab Group Share 100% 100% 100% 100% Expiry Date Area Next Year Annual Rent Next Year Annual Minimum Expenditure 30/10/2037 17/07/2018* 17/06/2018* 17/06/2018* 25ha 8ha 13ha 12ha N/A N/A N/A N/A N/A N/A N/A N/A *On 24 September, the Company reported that it has received notification that on the basis of the Presidential Executive Order/Decree, all exploration licences, mining permits, and leases held by LLC “Donetsky Kryazh” whose term would have otherwise expired, have been prolonged until the end of the hostilities in the Luhansk region. The consolidated entity has obligations to perform minimum exploration work and to meet annual payments in respect of rent and granted tenements. These obligations may be varied from time to time subject to approval and on this basis they are expected to be fulfilled in the normal course of operations. The Company can also meet its expenditure obligations by seeking joint venture partners, or by causing other parties to expend funds on exploration or mining, or by way of sale of all or part of an interest in a tenement, or by allowing tenements to lapse. Expenditure requirements for applications pending approval are not included. On 25 July 2018, the Company reported that it has leased the Geolsec project (ML27362) to third party, with the lessee taking on the responsibility for the payments of rent, expenditure commitments, and shire rates. On 25 July 2018, the Company reported that it has granted to third parties an option to acquire the Mt. Elephant project (E08/2757, E52/2724, E08/2307, E08/2756, E08/2115). Under the agreement, third parties are responsible for the rent, shire rates, and the expenditure commitments of the mining tenements forming Mt. Elephant project. ON-MARKET BUYBACK There is no current on-market buyback. 53 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION (Continued) TWENTY LARGEST SHAREHOLDERS The names of the twenty largest shareholders are as follows: Rank Name 25 Sep 2019 % IC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 RHEINGOLD INVESTMENTS CORPORATION PTY LTD 59,734,739 18.83 RIADIS HOLDINGS PTY LTD CUSTODIAL SERVICES LIMITED CHANCERY HOLDINGS PTY LTD SERGIY ANTONENKO MR NEVILLE JOHN HOLZ & MRS LYNETTE HOLZ VECTOR NOMINEES PTY LTD LJM ENTERPRISES (WA) PTY LTD MR HONG WANG SELWYN BRUCE HATRICK SCOTT GILCHRIST MR SCOTT GORDON JOHN MORTON HATRICK MR IAN STUART WATSON & MRS CATHERINE JANE WATSON MR JIHAD MALAEB EST DENIS MELVILLE IRWIN MR ANDREW GORDON MCCREA MR LEON ISSAEVICH LEONOV LJM CAPITAL CORPORATION PTY LTD MR GARY WILLIAM LITTLE Total Balance of register Grand total 16,200,000 14,186,963 13,393,082 8,000,000 8,000,000 6,388,889 5,600,000 5,415,396 5,000,113 5,000,000 5,000,000 4,915,000 4,707,007 4,600,000 4,500,000 4,360,063 3,800,000 2,996,667 2,994,151 184,792,070 132,407,413 317,199,483 5.11 4.47 4.22 2.52 2.52 2.01 1.77 1.71 1.58 1.58 1.58 1.55 1.48 1.45 1.42 1.37 1.20 0.94 0.94 58.26 41.74 100.00 54 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION (Continued) MINERAL RESOURCE ESTIMATES Korab Resources Ltd holds two projects where mineral resources have been estimated: Winchester Project and Bobrikovo Project. Korab reviews its mineral resources annually utilising outside consultants, who have in excess of 5 years’ experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking and which is sufficient to qualify them as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Winchester Deposit within the Winchester Project in the Northern Territory Current estimate of mineral resource at Winchester is shown in the following table: At 40% MgO Cut-Off Indicated Inferred Total Mass ‘000 Tonnes 12,200 4,400 16,600 MgO grade % 43.1 43.6 43.2 MgO Mass ‘000 Tonnes 5,258 1,918 7,177 There has been no change to the Winchester mineral resource estimate since previous year. The Competent Person is not aware of any new information or data that materially affects the information included in the Company’s ASX Release - “Acquisition Of The Rum Jungle/Batchelor Project In Northern Territory” on 16 July 2007 and, in the case of mineral resources that all the material assumptions and technical parameters underpinning the estimates in the report released on 16 July 2007 continue to apply and have not materially changed. The form and context in which the findings of the report released on 16 July 2007 are presented have not been materially modified. This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. Winchester project consists of Mineral Lease ML30587 (100% AusMag Pty Ltd, a wholly owned subsidiary of Korab Resources Ltd). The project is located near town of Batchelor, some 70 km south of Darwin in the Northern Territory. The Company is confident that there are reasonable prospects for eventual economic extraction of the mineral resource. Competent Person Statement The information in this Annual Report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by the Company and reviewed by Malcolm Castle, a competent person who is a Member of the Australasian Institute of Mining and Metallurgy (“AusIMM”). Malcolm Castle is a consultant geologist employed by Agricola Mining Consultants Pty Ltd. Mr Castle has sufficient experience that is relevant to the style of mineralization and type of deposits under consideration and to the activity being undertaken 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” (“JORC Code”). Malcolm Castle consents to the inclusion in this Annual Report of the matters based on his information in the form and context in which it appears. Bobrikovo Deposit in Ukraine Current estimate of gold and silver mineral resource at Bobrikovo is shown in the following tables: CURRENT GOLD MINERAL RESOURCE AT BOBRIKOVO PROJECT (ABOVE 0.5 G/T AU CUT-OFF GRADE) At 0.5g/t Au Cut-Off Mass Au grade Measured Indicated Inferred Total Totals may differ due to rounding ‘000 Tonnes 2,317 5,194 98,404 105,916 g/t 1.6 1.4 0.9 1.0 55 Au Mass ‘000 Ounces 121 229 2,953 3,303 KORAB RESOURCES LIMITED & CONTROLLED ENTITIES ANNUAL REPORT 2019 ADDITIONAL SHAREHOLDER INFORMATION (Continued) MINERAL RESOURCE ESTIMATES (Continued) CURRENT SILVER MINERAL RESOURCE AT BOBRIKOVO PROJECT (ABOVE 5 G/T AG CUT-OFF GRADE) Ag Mass At 5g/t Ag Cut-Off Ag grade Mass Measured Indicated Inferred Total Totals may differ due to rounding ‘000 Tonnes 2,090 5,529 46,533 54,152 g/t 14.0 13.9 8.6 9.4 ‘000 Ounces 937 2,467 12,869 16,274 There has been no change to the Bobrikovo mineral resource estimate since previous year. The Bobrikovo Mineral Resource was first disclosed on 16 July 2013 and is based on information compiled and reviewed by Andrew Hawker, who is a principal geological consultant for HGS Australia Exploration Services. The Competent Person is not aware of any new information or data that materially affects the information first included in the Company’s ASX Release – “JORC Resource At Bobrikovo Estimated At 3.3 Million Oz. Au And 16.3 Million Oz. Ag” on 16 July 2013 and, in the case of mineral resources that all the material assumptions and technical parameters underpinning the estimates in the report released on 16 July 2013 continue to apply and have not materially changed. The form and context in which the findings of the report released on 16 July 2013 are presented have not been materially modified. This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. Bobrikovo project consists of tenements and land leases BKB169, 646545, 2730, 4101 (100% LLc “Donetsky Kryazh”, a wholly owned subsidiary) and is located 70km south of Luhansk in Ukraine. Bobrikovo Project is located in eastern part of Ukraine in the Donbas region. This project has been written- off in full at the consolidation level in Financial Report covering period ending 30 June 2014. For expiry dates of the tenements forming this project and relevant comments regarding extension of term please refer to the Schedule of Mineral Tenements on page 53. The Company is confident that there are reasonable prospects for eventual economic extraction of the mineral resource. Competent Person Statement The information in this Annual Report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by the Company and reviewed by Malcolm Castle, a competent person who is a Member of the Australasian Institute of Mining and Metallurgy (“AusIMM”). Malcolm Castle is a consultant geologist employed by Agricola Mining Consultants Pty Ltd. Mr Castle has sufficient experience that is relevant to the style of mineralization and type of deposits under consideration and to the activity being undertaken 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” (“JORC Code”). Malcolm Castle consents to the inclusion in this Annual Report of the matters based on his information in the form and context in which it appears. 56 

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