CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
DIRECTORS' REPORT
Your Directors submit their report for the year ended 30 June 2017.
Directors
The names and details of the company’s directors in office during the financial year and until the date of this
report are as follows. Directors were in office for this entire period unless otherwise stated.
Dr Denis Clarke BSc, BA, PhD, FAIMM (Non‐Executive Chairman) (Appointed 1 April 1999)
•
Dr Denis Clarke has more than 40 years’ experience in exploration and mining operations. Over 15 years with
Plutonic Resources (“Plutonic”), he contributed significantly at the General Manager level to its success as it
developed from a small explorer in 1983 to one of Australia’s largest gold miners prior to its take‐over in 1998 in
a transaction which valued Plutonic at $1 billion. Dr Clarke at various times managed the exploration, finance,
administration and corporate divisions. He subsequently was a director and consultant to Troy Resources
Limited for eleven years as it developed from explorer to a successful international gold miner. During the past
three years Dr Clarke has been Chairman or Non‐Executive Director of the following listed companies:
LionGold Corp Ltd (from 1 October 2012 to present)
‐
‐ Hill End Gold Limited (from 25 February 2010 to 19 January 2016)
‐
Signature Metals Limited (from 14 September 2012 to present)
Dr Chris Ringrose BSc, PhD, MBA, MAIMM, MAICD (Managing Director) (Appointed 19 June 2003)
•
Dr Chris Ringrose has been an exploration geologist based mainly in Western Australia since he completed his
geology degrees in Scotland in 1982. His career has included experience with EZ, Chevron and Aztec, and prior to
joining Cullen, he was Exploration Manager with Troy Resources Limited for nine years. Dr Ringrose has also
completed an MBA at Deakin University and brings to the Company significant management, exploration and
project evaluation experience gained both in Australia and overseas. Dr Ringrose has had no other directorships
of listed companies in the last three years.
Grahame Hamilton BSc, MSc, MAIG (Non‐Executive Director) (Appointed 1 April 1999)
•
Mr Grahame Hamilton, a graduate of the University of NSW, has extensive experience over 40 years in
exploration, corporate and project management. He has wide ranging expertise in project evaluation. Between
1994 and 1996 he managed the Brocks Creek exploration, environmental impact statement, feasibility study,
mine development and construction for Solomon Pacific Resources NL. Before Solomon, Mr Hamilton worked
with Getty Oil Development Co. ‐ Minerals Division as Queensland Manager.
John Horsburgh BSc, MSc, FAIMM (Non‐Executive Director) (Appointed 1 April 1999)
•
Mr John Horsburgh, a graduate of the Royal School of Mines, has over 40 years industry experience including 11
years with Solomon Pacific Resources NL. Prior to this he gained extensive experience in Australia and overseas
with Getty Oil Development Co., Billiton and RTZ Group. Mr Horsburgh was a co‐founder and Non‐Executive
Chairman of AIM and TSX listed public company Mariana Resources Limited, prior to its takeover by Sandstorm
Gold Ltd.
•
Wayne John Kernaghan BBus, ACA, FAICD, ACIS (Non‐Executive Director and Company Secretary)
(Appointed 11 November 1997)
Mr Wayne Kernaghan is a member of the Institute of Chartered Accountants in Australia with a number of years
experience in various areas of the mining industry. He is also a Fellow of the Australian Institute of Company
Directors. During the past three years Mr Kernaghan has held, and is currently a director and holds, the following
listed company directorships:
‐
‐
Gulf Industrials Limited (from 30 June 2005 to present)
South American Ferro Metals Limited (from 26 June 2013 to 24 April 2015)
‐ 14 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Principal Activities
The principal activity for the Consolidated Entity comprising Cullen Resources Limited ("the Company") and its
controlled entities (together "the Consolidated Entity") during the course of the financial year was mineral
exploration. There was no significant change in the nature of the Consolidated Entity's activities during the year.
Results
The loss attributable to the Consolidated Entity for the financial year was $ 918,042 [2016: loss $955,336]. No
income tax was attributable to this result [2016: $Nil].
Dividends
The directors do not recommend the payment of a dividend for this financial year. No dividend has been
declared or paid by the Company since the end of the previous financial year.
Significant Changes in the State of Affairs
In the opinion of the directors there were no significant changes in the state of affairs of the Consolidated Entity
that occurred during the financial year under review not otherwise disclosed in this report or the consolidated
financial statements.
Review of Operations
Cullen is a mineral exploration company seeking deposits of gold, nickel, copper, cobalt, lithium and iron ore
either in its own right, or managed by other partners in Joint Ventures.
During the year under review, the Company continued its mineral exploration activities including: project
generation, database reviews, field mapping, geochemical surveying, and drilling programmes. Company
exploration activities, including joint operations, were focused in Western Australia with additional activities in
Finland as follows:
Ashburton Province, WA (Mt Stuart JV and Paraburdoo JV iron ore projects)
North Eastern Goldfields, WA (Gunbarrel/Mt Eureka and Irwin Bore, gold and nickel projects)
Eastern Goldfields, WA (Killaloe JV, gold and nickel project)
Murchison, WA (North Tuckabianna , copper and gold project)
Forrestania, WA (Forrestania JV, gold project)
Central Lachlan Fold Belt, NSW (Minter tungsten project)
Finland (Project generation for copper‐cobalt, gold and lithium).
Drilling by Cullen during the year to 30 June 2017 focussed on programmes for gold deposits in the Mt Eureka
project area. Other exploration field work has included: field reconnaissance and evaluations of new project
opportunities and project generation. The Company continued to market projects as potential farm‐out
opportunities and also initiated the development of a portfolio of exploration projects in Finland.
A total of $410,661 (2016: $986,422) was spent on exploration by Cullen during the year, with Joint Venture
Partners contributing further exploration funds on Cullen tenements.
On 12 April 2017 the Consolidated Entity sold its 30% contributing interest in the Mt Stuart Iron Ore Joint
Venture, and all of the other rights and interests in the Joint Venture tenements for the following consideration:
a lump sum cash payment of $1million on the completion of the Sale(received);
a further lump sum cash payment of $1million payable on making an unconditional final investment
decision to proceed with development of an iron ore mine on the tenements; and
an uncapped 1% FOB royalty on all iron ore extracted from the area of the Tenements.
The directors have determined the fair value of the consideration received is approximately the same as the
carrying value of the exploration assets disposed and have therefore recognised no gain or loss from the sale.
‐ 15 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Cullen will continue to identify and evaluate both advanced and "grass roots" opportunities throughout Australia
and in selected overseas locations. Cullen’s portfolio is under continual evaluation to focus on projects likely to
result in discovery of an economic mineral deposit.
Corporate
At 30 June 2017 available cash totalled $770,780 (2016: $531,471).
After Balance Date Events
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect the
operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated
Entity in the subsequent financial years.
Likely Developments and Future Results
Other than as referred to in this report, further information as to likely developments in the operations of the
Consolidated Entity and the expected results of those operations would, in the opinion of the directors, be
speculative and not in the best interests of the Consolidated Entity.
Environmental Regulation
The exploration activities of the Consolidated Entity in Australia are subject to environmental regulation under
the laws of the Commonwealth and the States in which those exploration activities are conducted. The
environmental laws and regulations generally address the potential impact of the Consolidated Entity's activities
in the areas of water and air quality, noise, surface disturbance and the impact upon flora and fauna. The
directors are not aware of any environmental matter which would have a materially adverse impact on the
overall business of the Consolidated Entity.
Options
As at the date of this report the Company has 20,000,000 (2016: 26,000,000) options which were outstanding.
During the year nil (2016: nil) options were issued and 6,000,000 (2016: nil) options expired. Refer to Note 12 of
the financial statements for further details of the options outstanding.
During the year no fully paid ordinary shares were issued by virtue of the exercise of options (2016: Nil). Since
the end of the financial year no shares have been issued by virtue of the exercise of options (2016: Nil).
Directors’ Interest
At the date of this report, the interest of the directors in the shares and options of the company were:
2017
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
Direct
Fully Paid Shares
‐
11,835,342
228,571
8
3,428,574
Options
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
Indirect
Fully Paid Shares
17,428,513
‐
30,289,143
33,437,149
14,275,417
Options
‐
‐
‐
‐
‐
‐ 16 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Directors' Meetings
During the year the Company held eight meetings of directors. The attendance of the directors at meetings of
the Board were:
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
No. of meetings
attended
8
8
7
6
8
Maximum possible
eligible to attend
8
8
8
8
8
Indemnification and insurance of Directors and Officers
The Company has entered into deeds of indemnity with the Directors indemnifying them against certain
liabilities and costs to the extent permitted by law. The Company has paid premiums totalling $7,643 (2016:
$9,811) in respect of Directors and Officers Liability Insurance and Company reimbursement policies, which
covers all Directors and Officers of the Company. The policy conditions preclude the Company from any detailed
disclosures.
Indemnification of Auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
Employees
The Consolidated Entity employed two employees as at 30 June 2017 (2016: two).
Corporate Governance
In recognising the need for the highest standard of corporate behaviour and accountability, the directors of
Cullen Resources Limited support and have adhered to the principles of good corporate governance. The
Company’s corporate governance statement is on page 24.
Auditor Independence
The directors have received the auditor’s independence declaration for the year ended 30 June 2017 which is on
page 23 and forms part of this directors’ report. For the year Ernst & Young have provided non‐audit services to
the Consolidated Entity in the amount of $Nil (2016: $4,294).
The directors are satisfied that non‐audit services are compatible with the independence requirements of the
Corporations Act 2001. The nature and scope of the non‐audit services provided has meant that auditor
independence was not compromised.
‐ 17 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
REMUNERATION REPORT (AUDITED)
This report details the nature and amount of remuneration for each director of Cullen Resources Limited.
This remuneration report outlines the director and executive remuneration arrangements of the Consolidated
Entity in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of
this report, key management personnel (KMP) of the Consolidated Entity are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the Consolidated Entity,
directly or indirectly, including any director (whether executive or otherwise) of the parent company. Only
directors of the Consolidated Entity meet the definition of key management personnel as the executive role is
performed by the executive director.
Details of key management personnel:
Directors
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
Chairman (Non‐Executive)
Managing Director
Director (Non‐Executive)
Director (Non‐Executive)
Director (Non‐Executive)
Remuneration Policy
The remuneration policy of Cullen Resources Limited has been designed to align director objectives with
shareholder and business objectives by providing a fixed remuneration component and offering specific long‐
term incentives. The board of Cullen Resources Limited believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best executives and directors to run and manage the Company as
well as create goal congruence between directors and shareholders.
The Board’s policy for determining the nature and amount of remuneration for Board members is as follows.
The remuneration policy, setting the terms and conditions for the executive director was developed by the
Board. The executive receives a base salary on factors such as length of service and experience, superannuation,
options and incentives. The Board reviews executive packages annually by reference to executive performance
and comparable information from industry sectors and other listed companies in similar industries.
The Board policy is to remunerate non‐executive directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non‐executive directors and reviews
their remuneration annually, based on market practice, duties and accountability. Independent external advice is
sought when required. The maximum aggregate amount of fees that can be paid to non‐executive directors is
subject to approval by shareholders at the Annual General Meeting. Fees for non‐executive directors are not
linked to either long term or short term performance of the Consolidated Entity. However, to align directors’
interest with shareholder interests, the directors are encouraged to hold shares in the Company. There is a
specified aggregate directors fees of $250,000 for non‐executive directors which was approved by shareholders
at a general meeting of the Company. The $250,000 excludes other services outside of non‐executive directors'
fees. No remuneration consultants have been engaged during the current and prior years.
Remuneration Incentives
Director and executive remuneration is currently not linked to either long term or short term performance
conditions. The Board feels that the expiry date and exercise price of options when issued to the directors and
executives are sufficient to align the goals of the directors and executives with those of the shareholders to
maximise shareholder wealth, and as such, has not set any performance conditions for the directors or the
executives of the Company. The Board will continue to monitor this policy to ensure that it is appropriate for the
Company in future years.
‐ 18 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Group performance and shareholder wealth
Below is a table summarising key performance and shareholder wealth statistics for the Consolidated Entity over
the last five years.
Financial Year
30 June 2013
30 June 2014
30 June 2015
30 June 2016
30 June 2017
Loss After Tax
$
2,078,566
1,880,593
1,414,969
955,336
918,042
EPS
Cents
(0.28)
(0.21)
(0.13)
(0.06)
(0.05)
Share Price
Cents
0.8
1.7
0.4
0.3
0.1
Employment Contract ‐ Managing Director
Pursuant to an agreement Dr Ringrose will provide managing director services to the Company. The term of this
arrangement is from 1 November 2006 and will continue thereafter unless terminated on not less than three
months' notice given at any time. Effective from 1 April 2011 Dr Ringrose’s salary is $265,000pa and from 1 April
2017 this has been reduced to $180,000 pa. The position of the director will become redundant under this
agreement in the limited circumstances where the employment of the Managing Director is terminated as a
result of a takeover or merger of the Company. The Company will pay the Managing Director the equivalent of
four weeks per year of service or part thereof of his base salary as a redundancy payment.
As part of Dr Ringrose's employment package he was issued with 10,000,000 options on 1 December 2014 with
the following terms. The options will expire on the earlier of the date which is one month after the Director to
whom the options are issued ceases to be a Director of the Company (or such longer period as determined by
the Board of Directors) or at 5.00 pm on 30 November 2017 ("the Expiry Date") with an exercise price of $0.016.
This is contained in the notice of meeting which was approved by shareholders.
During the year the Board paid a discretionary bonus of Nil (2016: Nil) to Dr Ringrose.
Non Executive Directors
The non executive directors have been issued with 2,500,000 options each on 1 December 2014 with an exercise
price of $0.016 each. The options will expire on the earlier of the date which is one month after the Director to
whom the options are issued ceases to be a Director of the Company (or such longer period as determined by
the Board of Directors) or at 5.00 pm on 30 November 2017 ("the Expiry Date"). This is contained in the notice of
meeting which was approved by shareholders.
Directors’ and Executives’ Remuneration
Details of remuneration provided to directors for the year ended 30 June 2017 are as follows:
Directors
Short Term
Director
Fees
$
32,083
Salary/
Consulting
$
Bonus
$
‐
‐
256,283
27,500
27,500
‐
‐
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
27,500
33,250**
Total
114,583
289,533
Post
Employ‐
ment
Super‐
annuation
$
3,048
Long
Term
Long
Service
Leave
$
Share
Based
Paymen
Options
$
‐
‐
Non
Monetary
Benefits
$
‐
* 5,417
28,707
2,063
‐
‐
‐
2,613
2,613
2,613
‐
‐
‐
5,417
39,594
2,063
‐
‐
‐
‐
‐
Perfor‐
mance
Related
%
‐
‐
‐
‐
‐
‐
Total
$
35,131
292,470
30,113
30,113
63,363
451,190
‐
‐
‐
‐
‐
‐
* This relates to the provision of a motor vehicle.
**Consultancy payments were made to Mosman Corporate Services Pty Ltd totalling $33,250 which is a company
controlled by Mr W Kernaghan. There was $1,750 outstanding at 30 June 2017.
‐ 19 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Details of remuneration provided to directors for the year ended 30 June 2016 are as follows:
Directors
Short Term
Director
Fees
$
35,000
Salary/
Consulting
$
‐
‐
265,000
30,000
30,000
30,000
‐
‐
38,875**
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
Total
125,000
303,875
Bonus
$
‐
‐
‐
‐
‐
‐
Post
Employ‐
ment
Super‐
annuation
$
Long
Term
Long
Service
Leave
$
3,325
‐
25,175
5,088
Non
Monetary
Benefits
$
‐
* 5,417
‐
‐
‐
2,850
2,850
2,850
‐
‐
‐
5,417
37,050
5,088
Share
Based
Payments
Options
$
‐
‐
‐
‐
‐
‐
Perfor‐
mance
Related
%
‐
‐
‐
‐
‐
‐
Total
$
38,325
300,680
32,850
32,850
71,725
476,430
* This relates to the provision of a motor vehicle.
**Consultancy payments were made to Mosman Corporate Services Pty Ltd totalling $38,875 which is a company
controlled by Mr W Kernaghan. There was $2,000 outstanding at 30 June 2016.
Shares issued on exercise of remunerated options
During the financial year nil (2016: Nil) remunerated options were exercised. During the financial year 6,000,000
(2016: nil) options expired. The directors exercised nil (2016: Nil) options during the year.
Options granted as part of remuneration for the year ended 30 June 2017
There were no options granted as a part of remuneration for the year ended 30 June 2017.
Directors
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
Value of options
granted during the
year
$
‐
‐
‐
‐
‐
Value of options
exercised during the
year
$
‐
‐
‐
‐
‐
Value of options
expired during the year
$
‐
‐
‐
‐
‐
Total value of options
granted, exercised and
expired during the year
$
‐
‐
‐
‐
‐
Options granted as part of remuneration for the year ended 30 June 2016
There were no options granted as a part of remuneration for the year ended 30 June 2016.
Directors
D. Clarke
C. Ringrose
G. Hamilton
J. Horsburgh
W. Kernaghan
Value of options
granted during the
year
$
‐
‐
‐
‐
‐
Value of options
exercised during the
year
$
‐
‐
‐
‐
‐
Value of options
expired during the year
$
‐
‐
‐
‐
‐
Total value of options
granted, exercised and
expired during the year
$
‐
‐
‐
‐
‐
‐ 20 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Option holdings of directors
Balance at
beginning of
year 1 July 2016
Number
Options
issued
Number
Options
lapsed
Number
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Balance at end
of year
30 June 2017
Number
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
Vested and
exercisable at
30 June 2017
Number
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
Total
Number
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
20,000,000
20,000,000
Directors
D Clarke
C Ringrose
G Hamilton
J Horsburgh
W Kernaghan
Total
The outstanding options are exercisable at $0.016 and have an expiry date of 30 November 2017.
These options had a weighted average exercise price of $0.016 and a weighted average remaining contractual
life of 0.42 years.
Balance at
beginning of
year
1 July 2015
Number
Options
issued
Number
Options
lapsed
Number
Balance at end
of year
30 June 2016
Number
Total
Number
Vested and
exercisable at
30 June 2016
Number
Directors
D Clarke
C Ringrose
G Hamilton
J Horsburgh
W Kernaghan
Total
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
The outstanding options were exercisable at $0.016 and have an expiry date of 30 November 2017.
These options had a weighted average exercise price of $0.016 and a weighted average remaining contractual
life of 1.42 years.
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
2,500,000
10,000,000
2,500,000
2,500,000
2,500,000
20,000,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Shareholdings of directors
Directors
D Clarke
C Ringrose
G Hamilton
J Horsburgh
W Kernaghan
Total
Directors
D Clarke
C Ringrose
G Hamilton
J Horsburgh
W Kernaghan
Total
Balance
1 July 2016
Number
17,428,513
11,835,342
30,517,714
33,437,157
17,703,991
110,922,717
Balance
1 July 2015
Number
11,619,008
7,890,227
23,684,374
25,337,147
11,802,656
80,333,412
Options
Exercised
Number
Net Change
Purchase
Number
‐
‐
‐
‐
‐
‐
Options
Exercised
Number
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Net Change
Purchase
Number
5,809,505
3,945,115
6,833,340
8,100,010
5,901,335
30,589,305
Balance
30 June 2017
Number
17,428,513
11,835,342
30,517,714
33,437,157
17,703,991
110,922,717
Balance
30 June 2016
Number
17,428,513
11,835,342
30,517,714
33,437,157
17,703,991
110,922,717
The directors' shareholdings are held directly and indirectly.
‐ 21 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
End of Remuneration Report
Signed in accordance with a resolution of the directors
C. Ringrose
Director
Perth, WA
18 September 2017
‐ 22 ‐
Ernst & Young
Ernst & Young
11 Mounts Bay Road
11 Mounts Bay Road
Perth WA 6000 Australia
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
Fax: +61 8 9429 2436
ey.com/au
ey.com/au
Auditor’s Independence Declaration to the Directors of Cullen Resources
Limited
As lead auditor for the audit of Cullen Resources Limited for the financial year ended 30 June 2017, I
declare to the best of my knowledge and belief, there have been:
a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b. no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cullen Resources Limited and the entities it controlled during the financial
year.
Ernst & Young
V L Hoang
Partner
18 September 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MH:NL:CULLEN:020
23
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
CORPORATE GOVERNANCE STATEMENT
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of
Cullen Resources Limited have adhered to the principles of corporate governance and this statement outlines
the main corporate governance practices in place throughout the financial year. The ASX Corporate Governance
Council released revised Corporate Governance Principles and Recommendations on 27 March 2014. Having
regard to the size of the Company and the nature of its enterprise, it is considered that the Company complies
as far as possible with the spirit and intentions of the ASX Corporate Governance Council's Corporate
Governance Principles and Recommendations. Unless otherwise stated, the practices were in place for the
entire year.
Board of Directors
The Board of Directors of the Company is responsible for the corporate governance of the Company. The Board
guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are
elected and to whom they are accountable.
As the Board acts on behalf of shareholders, it seeks to identify the expectations of shareholders, as well as
other ethical expectations and obligations. In addition, the Board is responsible for identifying areas of
significant business risk and ensuing arrangements are in place to adequately manage those risks.
The primary responsibility of the Board includes:
formulation and approval of the strategic direction, objectives and goals of the Company;
monitoring the financial performance of the Company, including approval of the Company’s financial
statements;
ensuring that adequate internal control systems and procedures exists and that compliance with these
systems and procedures is maintained;
the identification of significant business risks and ensuring that such risks are adequately managed;
the review of performance and remuneration of executive directors; and
the establishment and maintenance of appropriate ethical standards.
The responsibility for the operation and administration of the Company is carried out by the directors, who
operate in an executive capacity, supported by senior professional staff. The Board ensures that this team is
suitably qualified and experienced to discharge their responsibilities, and assesses on an ongoing basis the
performance of the management team, to ensure that management’s objectives and activities are aligned with
the expectations and risks identified by the Board.
The Directors of the Company are as follows:
Dr Denis Clarke
Dr Chris Ringrose
Grahame Hamilton
John Horsburgh
Wayne Kernaghan
For information in respect to each director refer to the Directors' Report.
‐ 24 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Independent Directors
Under ASX guidelines, four of the current Board of five directors are considered to be independent directors.
Dr Ringrose is the executive director and under the ASX guidelines deemed not to be independent by virtue of
his position. The Board is satisfied that the structure of the Board is appropriate for the size of the Company and
the nature of its operations and is a cost effective structure for managing the Company.
Board Composition
When the need for a new director is identified, selection is based on the skills and experience of prospective
directors, having regard to the present and future needs of the Company. Any director so appointed must then
stand for election at the next Annual General Meeting of the Company.
Terms of Appointment as a Director
The constitution of the Company provides that a Director, other than the Managing Director, may not retain
office for more than three calendar years or beyond the third annual general meeting following his or her
election, whichever is longer, without submitting for re‐election. One third of the Directors must retire each
year and are eligible for re‐election. The Directors who retire by rotation at each annual general meeting are
those with the longest length of time in office since their appointment or last election.
Board Committees
In view of the size of the Company and the nature of its activities, the Board has considered that establishing
formally constituted committees for audit, board nominations and remuneration would contribute little to its
effective management. Accordingly audit matters, the nomination of new Directors and the setting, or review,
of remuneration levels of Directors and senior executives are reviewed by the Board as a whole and approved
by resolution of the Board (with abstentions from relevant Directors where there is a conflict of interest).
Where the Board considers that particular expertise or information is required, which is not available from
within their number, appropriate external advice may be taken and reviewed prior to a final decision being
made by the Board.
Remuneration
Remuneration and other terms of employment of executives, including executive directors, are reviewed
periodically by the Board having regard to performance, relevant comparative information and, where
necessary, independent expert advice. Remuneration packages are set at levels that are intended to attract and
retain executives capable of managing the Company’s operations.
The terms of engagement and remuneration of executive directors is reviewed periodically by the Board, with
recommendations being made by the non‐executive directors. Where the remuneration of a particular
executive director is to be considered, the director concerned does not participate in the discussion or decision
making.
Make Timely and Balanced Disclosure
The board has in place written policies and procedures to ensure the Company complies with its obligations
under the continuous disclosure rule 3.1 and other ASX Listing Rule disclosure requirements.
Independent Professional Advice
Directors have the right, in connection with their duties and responsibilities as directors, to seek independent
professional advice at the Company’s expense. Prior approval of the Chairman is required, which will not be
unreasonably withheld.
‐ 25 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Code of Conduct
In view of the size of the Company and the nature of its activities, the Board has considered that an informal
code of conduct is appropriate to guide executives, management and employees in carrying out their duties and
responsibilities.
Diversity Policy
The Company is in the process of establishing a diversity policy having regard to the size of the company and the
nature of its business.
As at 30 June 2017, 50 % (2016: 50%) of the workforce is female with no females at board or senior
management level. There are only two employees, one female and one male.
Communication to Market & Shareholders
The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all
information necessary to assess the performance of the directors and the Company. Information is
communicated to shareholders and the market through:
the Annual Report which is available to all shareholders;
other periodic reports which are lodged with ASX and available for shareholder scrutiny;
other announcements made in accordance with ASX Listing Rules;
special purpose information memoranda issued to shareholders as appropriate;
the Annual General Meeting and other meetings called to obtain approval for board action as appropriate;
and,
The Company's website.
Share Trading
Dealings are not permitted at any time whilst in the possession of price sensitive information not already
available to the market. In addition, the Corporations Act 2001 prohibits the purchase or sale of securities whilst
a person is in possession of inside information.
External Auditors
The external auditor is Ernst and Young. The external auditors are invited to attend the annual general meeting
and be available to answer shareholder questions about the conduct of the audit and the preparation and
content of the auditor's report.
Full details of the company’s corporate governance practices can be viewed at its website
www.cullenresources.com.au.
‐ 26 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Consolidated Statement of Financial Position
as at 30 June 2017
Current Assets
Cash and cash equivalents
Receivables
Total Current Assets
Non Current Assets
Other financial assets
Plant & equipment
Exploration & evaluation
Intangible assets
Total Non Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Share based payment reserve
Accumulated losses
Total Equity
Note
22(i)
5
6
7
8
9
10
11
12
13
14
Consolidated
2017
$
770,780
8,456
779,236
10,000
3,148
17,518
4,747,995
4,778,661
5,557,897
80,756
68,801
149,557
2016
$
531,471
43,971
575,442
10,000
5,606
5,811,317
‐
5,826,923
6,402,365
153,734
107,999
261,733
149,557
261,733
5,408,340
6,140,632
43,668,213
1,459,725
(39,719,598)
5,408,340
43,482,463
1,459,725
(38,801,556)
6,140,632
These financial statements should be read in conjunction with the accompanying notes.
‐ 27 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Consolidated Statement of Changes in Equity
for the year ended 30 June 2017
Note
Issued
Capital
$
Share Based
Payment
Reserve
$
Accumulated
Losses
$
Total
Equity
$
At 1 July 2015
42,276,087
1,459,725
(37,846,220)
5,889,592
Loss for the year
Other comprehensive income
Total comprehensive
income/(loss) for the year
Issue of share capital
Share issue costs
‐
‐
‐
1,246,181
(39,805)
Share based payments
13
‐
‐
‐
‐
‐
‐
‐
(955,336)
(955,336)
‐
‐
(955,336)
(955,336)
‐
‐
‐
1,246,181
(39,805)
‐
At 30 June 2016
43,482,463
1,459,725
(38,801,556)
6,140,632
Note
Issued
Capital
$
Share Based
Payment
Reserve
$
Accumulated
Losses
$
Total
Equity
$
At 1 July 2016
43,482,463
1,459,725
(38,801,556)
6,140,632
Loss for the year
Other comprehensive income
Total comprehensive
income/(loss) for the year
Issue of share capital
Share issue costs
‐
‐
‐
200,000
(14,250)
Share based payments
13
‐
‐
‐
‐
‐
‐
‐
(918,042)
(918,042)
‐
‐
(918,042)
(918,042)
‐
‐
‐
200,000
(14,250)
‐
At 30 June 2017
43,668,213
1,459,725
(39,719,598)
5,408,340
These financial statements should be read in conjunction with the accompanying notes.
‐ 28 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2017
Note
3
8
4
Revenues
Rent
Salaries and consultants' fees
Compliance expenses
Impairment of exploration expenditure
Depreciation
Other expenses
Loss before income tax
Income tax
Net loss attributable to members of
Cullen Resources Limited after tax
Consolidated
2017
$
2016
$
126,891
122,906
(38,262)
(339,840)
(77,627)
(456,465)
(2,458)
(130,281)
(36,741)
(307,114)
(135,197)
(504,392)
(1,844)
(92,954)
(918,042)
(955,336)
‐
‐
(918,042)
(955,336)
Other Comprehensive Income:
‐
‐
Total comprehensive loss
for the period
Basic (loss) per share
(cents per share)
Diluted (loss) per share
(cents per share)
(918,042)
(955,336)
(0.05)
(0.06)
(0.05)
(0.06)
23
23
These financial statements should be read in conjunction with the accompanying notes.
‐ 29 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Consolidated Statement of Cash Flows
for the year ended 30 June 2017
Note
Consolidated
2017
$
2016
$
Cash flows from operating activities
Sale of tenements
Research and development grant
Cash payments in the course of operations
GST refunded
Sundry income
Interest received
120,000
‐
(1,126,701)
53,369
4,795
2,096
75,000
42,942
(1,220,002)
44,519
‐
4,964
Net operating cash flows
22(ii)
(946,441)
(1,052,577)
Cash flows from investing activities
Payments for plant & equipment
Proceeds from sale of Joint Venture
Payments for exploration & evaluation
Net investing cash flows
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Net financing cash flows
Net increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at the
beginning of the financial year
Cash and cash equivalents at the end
of the financial year
‐
1,000,000
‐
(7,450)
‐
(482,030)
1,000,000
(489,480)
200,000
(14,250)
1,246,181
(39,805)
185,750
1,206,376
239,309
(335,681)
531,471
867,152
22(i)
770,780
531,471
These financial statements should be read in conjunction with the accompanying notes.
‐ 30 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Notes to the Financial Statements
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
(a)
The financial statements are general purpose financial statements, which have been prepared in accordance with the requirements
of the Corporations Act 2001, and Australian Accounting Standards. The financial statements have also been prepared in
accordance with the historical cost convention using the accounting policies described below.
Statement of compliance
(b)
The financial statements comply with Australian Accounting Standards as issued by the Australian Accounting Standards Board and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Accounting policies and disclosures
(c)
The Consolidated Entity has adopted all new and amended Australian Accounting Standards and AASB interpretations which were
applicable as of 1 July 2016. Adoption of other new and amended Australian Accounting Standards and AASB interpretations did not
have any effect on the financial position or performance of the Consolidated Entity.
The Consolidated Entity has not elected to early adopt any new standards or amendments.
Going Concern
The accounts have been prepared on the going concern basis, which contemplates continuity of normal business activities and the
realisation of assets and liabilities in the normal course of business.
The Consolidated Entity had cash and cash equivalents of $770,780 at 30 June 2017. The directors acknowledge that continued
exploration and development of the consolidated group’s mineral exploration projects will necessitate further capital raisings.
The Consolidated Entity remains dependent on its ability to raise funding in volatile capital markets. However, the directors
continue to believe that the going concern basis of accounting by the Consolidated Entity is appropriate as the Consolidated Entity
has successfully completed a capital raising during the year to 30 June 2017, notwithstanding the challenging conditions in equity
markets.
In consideration of the above matters, the directors have determined that it is reasonably foreseeable that the Consolidated Entity will
continue as going concern and that it is appropriate that the going concern method of accounting be adopted in the preparation of the
financial statements. In the event that the Consolidated Entity is unable to continue as a going concern (due to inability to raise future
funding requirements), it may be required to realise its assets at amounts different to those currently recognised, settle liabilities other
than in the ordinary course of business and make provisions for other costs which may arise as a result of cessation or curtailment of
normal business operations.
Accordingly, the financial statements do not include adjustments relating to the recoverability and classification of assets amount
or to the amounts and classification of liabilities that might be necessary if the Consolidated Entity does not continue a going
concern.
Principles of consolidation
(d)
The consolidated financial statements include the financial statements of Cullen Resources Limited and the results of all of its
controlled entities which are referred to collectively throughout these financial statements as the “Consolidated Entity”. The results
of controlled entities are prepared for the same reporting period as the parent, using consistent accounting policies. All inter‐entity
balances and transactions, and unrealised profits arising from intra‐economic entity transactions, have been eliminated in full.
Taxes
(e)
Income tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; or
31
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interest in joint venture,
where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry‐forward of unused tax assets and unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences,
and the carry‐forward of unused tax credits and unused tax losses can be utilised, except:
where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse
in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the Consolidated Statement of
Comprehensive Income.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST
is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
Consolidated Statement of Financial Position. Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis
and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Provision for employee benefits
(f)
Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave and long service
leave. Annual leave provisions expected to be settled within twelve months are measured at their nominal amounts. Long service
leave provisions are measured at the present value of the estimated future cash outflow to be made in respect of services provided
by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to
Australian corporate bond securities which have terms to maturity approximating the terms of the related liabilities are used.
Investments in controlled entities
(g)
Investments in controlled entities are carried in the company’s financial statements at the lower of cost and recoverable amount.
Dividends and distributions are brought to account when they are proposed by the controlled entities.
Exploration and Evaluation Expenditure
Expenditure is deferred
(h)
(i)
Expenditure on exploration and evaluation is accounted for in accordance with the 'area of interest' method. Exploration and
evaluation expenditure is capitalised provided the rights to tenure of the area of interest is current (or in the process of being re‐
applied for) and either:
the exploration and evaluation activities are expected to be recouped through successful development and exploitation of the
area of interest or, alternatively, by its sale; or
exploration and evaluation activities in the area of interest have not at the reporting date reached a stage that 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.
32
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any
capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification,
capitalised exploration and evaluation expenditure is assessed for impairment.
Impairment
The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the area of interest level
whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount.
An impairment exists when the carrying amount of an area of interest exceeds its estimated recoverable amount. The area of
interest is then written down to its recoverable amount. Any impairment losses are recognised in the Consolidated Statement of
Comprehensive Income.
(i)
Both the functional and presentation currency of Cullen Resources Limited and its Australian subsidiaries is Australian dollars ($A).
Foreign currency
Foreign currency transactions are translated to Australian currency at the rate of exchange ruling at the date of the transactions.
Monetary items in foreign currencies at balance date are translated at the rates of exchange ruling on that date.
Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account in the Consolidated
Statement of Comprehensive Income in the financial year in which the exchange rates change, as exchange gains or losses.
(j)
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.
Plant and equipment
Depreciation is calculated on a straight‐line basis over the estimated useful life of the assets as follows:
Plant and equipment – over 3 to 8 years.
The assets residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate at each financial year
end.
Intangible Asset
(k)
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are
carried at cost less amortisation and any impairment losses. Intangible assets with finite lives are amortised over their useful life
and tested for impairment whenever there is an indication that they may be impaired. The amortisation period and method is
reviewed at each financial year‐end.
The Consolidate Entity’s intangible assets represents the deferred consideration payable on the unconditional final investment
decision to proceed and royalties on all iron ore extracted from the area of the tenements of the Mt Stuart Iron Ore Joint Venture.
These, although entitling the Consolidated Entity to cash upon the unconditional final investment decision to proceed and the
commencement of production, are not considered to fall within the definition of financial assets in accordance with AASB 139
Financial Instruments: Recognition and Measurement (“AASB 139”). The Consolidated Entity considers, amongst the characteristics
listed in AASB 139 that they do not contain an absolute right to receive cash as the Consolidated Entity cannot force the owner to
make the investment decision to proceed and to produce and, furthermore, the counterparty can avoid the payment of cash by
deciding not to proceed.
The useful life of the intangible assets will be determined by reference to planned development schedule and mine life on
commencement of mining and the cost of the royalty contract will be amortised on a systematic basis over the life of the mine.
Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of mine. At 30 June 2017, the decision
to proceed has not been made and hence the assets remain unamortised.
Revenue
(l)
Other revenue includes interest revenue on short term deposit received from other persons. It is brought to account 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.
Refundable research and development tax offset is brought to account when the funds are received.
Joint Operations
(m)
The Consolidated Entity recognises in relation to its joint operations:
‐
Assets, including its share of any assets held jointly
‐
Liabilities, including its share of any liabilities incurred jointly
‐
Revenue from the sale of its share of the output arising from the joint operation
33
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
‐
‐
Share of the revenue from the sale of the output by the joint operation
Expenses, including its share of any expenses incurred jointly
Payables
(n)
Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the
future for goods and services received, whether or not billed to the Consolidated Entity.
Cash and cash equivalents
(o)
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short‐term deposits with an original
maturity 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. For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and in banks,
and money market investments readily convertible to cash within two working days.
Leases
(p)
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.
Operating lease payments are recognised as an expense in the Consolidated Statement of Comprehensive Income on a straight‐line
basis over the lease term.
(q)
Issued and paid up capital is recognised at the fair value of the consideration received by the Consolidated Entity. Any transaction
costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
Issued capital
Earnings per share (EPS)
(r)
Basic EPS is calculated as net profit/(loss) attributable to members, adjusted to exclude costs of servicing equity, divided by the
weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net profit/ (loss)
attributable to members, adjusted for:
costs of servicing equity;
the after tax effect of interest associated with dilutive potential ordinary shares that have been recognised as expenses;
and
other non‐discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
(s)
The accounting policies adopted are consistent with those of the previous year, except as noted at Note 1(c).
Change in accounting policies
Share based payments
(t)
At each subsequent reporting date until vesting, the cumulative charge to the Consolidated Statement of Comprehensive Income is
the product of:
(i)
(ii)
The grant date fair value of the option.
The current best estimate of the number of options that will vest, taking into account such factors as the likelihood of
employee turnover during the vesting period and the likelihood of non‐market performance conditions being met.
The expired portion of the vesting period.
(iii)
The charge to the Consolidated Statement of Comprehensive Income for the period is the cumulative amount as calculated above
less the amounts already charged in previous periods. There is a corresponding entry to equity.
The company may also issue options that do not have any vesting conditions.
Until an option has vested, any amounts recorded are contingent and will be adjusted if more or fewer options vest than were
originally anticipated to do so. Any option subject to a market condition is considered to vest irrespective of whether or not that
market condition is fulfilled, provided that all other conditions are satisfied.
If the terms of an equity‐settled option are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share‐based payment
arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity‐settled option is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the option is recognised immediately. However, if a new option is substituted for the cancelled option and
designated as a replacement option on the date that it is granted, the cancelled and new option are treated as if they were a
modification of the original option, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per
share.
34
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Investment and other financial assets
(u)
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets
at fair value through profit or loss, loans and receivables, held‐to‐maturity investments, or available‐for‐sale investments, as
appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value
through profit or loss, directly attributable transactions costs. The Consolidated Entity determines the classification of its financial
assets after initial recognition and, when allowed and appropriate, re‐evaluates this designation at each financial year‐end.
Impairment of non‐financial assets
(v)
Non‐financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely
independent of the cash inflows from other assets or groups of assets (cash‐generating units). Non‐financial assets other than
goodwill that suffered impairment are tested for possible reversal of the impairment whenever events or changes in circumstances
indicate that the impairment may have reversed.
New accounting standards and interpretations
(w)
International Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have
not been adopted by the Group for the annual reporting period ended 30 June 2017. These are outlined in the table below.
35
Accounting
Standard
AASB 9,and
relevant
amending
standards
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Title
Summary
Application
date of
standard
Application
date for Group
Financial
Instruments
AASB 9 replaces AASB 139 Financial Instruments:
Recognition and Measurement
1 January 2018
1 July 2018
Except for certain trade receivables, an entity initially
measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through
profit or loss, transaction costs.
Debt instruments are subsequently measured at fair
value through profit or loss (FVTPL), amortised cost,
or fair value through other comprehensive income
(FVOCI), on the basis of their contractual cash flows
and the business model under which the debt
instruments are held.
There is a fair value option (FVO) that allows financial
assets on initial recognition to be designated as
FVTPL if that eliminates or significantly reduces an
accounting mismatch.
Equity instruments are generally measured at FVTPL.
However, entities have an irrevocable option on an
instrument‐by‐instrument basis to present changes in
the fair value of non‐trading instruments in other
comprehensive income (OCI) without subsequent
reclassification to profit or loss.
For financial liabilities designated as FVTPL using the
FVO, the amount of change in the fair value of such
financial liabilities that is attributable to changes in
credit risk must be presented in OCI. The remainder
of the change in fair value is presented in profit or
loss, unless presentation in OCI of the fair value
change in respect of the liability’s credit risk would
create or enlarge an accounting mismatch in profit or
loss.
All other AASB 139 classification and measurement
requirements for financial liabilities have been carried
forward into AASB 9, including the embedded
derivative separation rules and the criteria for using
the FVO.
The incurred credit loss model in AASB 139 has been
replaced with an expected credit loss model in AASB
9.
The requirements for hedge accounting have been
amended to more closely align hedge accounting
with risk management, establish a more principle‐
based approach to hedge accounting and address
inconsistencies in the hedge accounting model in
AASB 139.
‐ 36 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Application
date of
standard
Application
date for Group
1 January 2018
1 July 2018
Accounting
Standard
AASB 15,and
relevant
amending
standards
Title
Summary
Revenue from
Contracts with
Customers
AASB 15 replaces all existing revenue requirements in
Australian Accounting Standards (AASB 111
Construction Contracts, AASB 118 Revenue, AASB
Interpretation 13 Customer Loyalty Programmes,
AASB Interpretation 15 Agreements for the
Construction of Real Estate, AASB Interpretation 18
Transfers of Assets from Customers and AASB
Interpretation 131 Revenue – Barter Transactions
Involving Advertising Services) and applies to all
revenue arising from contracts with customers,
unless the contracts are in the scope of other
standards, such as AASB 117 (or AASB 16 Leases,
once applied).
The core principle of AASB 15 is that an entity
recognises revenue to depict the transfer of promised
goods or services to customers in an amount that
reflects the consideration to which an entity expects
to be entitled in exchange for those goods or services.
An entity recognises revenue in accordance with the
core principle by applying the following steps:
► Step 1: Identify the contract(s) with a customer
► Step 2: Identify the performance obligations in the
contract
► Step 3: Determine the transaction price
► Step 4: Allocate the transaction price to the
performance obligations in the contract
► Step 5: Recognise revenue when (or as) the entity
satisfies a performance obligation.
AASB 2014‐10
AASB 2016‐5
Amendments to
Australian
Accounting
Standards – Sale or
Contribution of
assets between an
Investor and its
Associate or Joint
Venture
Amendments to
Australian
Accounting
Standards –
Classification and
Measurement of
Share‐based
Payment
Transactions
The amendments clarify that a full gain or loss is
recognised when a transfer to an associate or joint
venture involves a business as defined in AASB 3
Business Combinations. Any gain or loss resulting
from the sale or contribution of assets that does not
constitute a business, however, is recognised only to
the extent of unrelated investors’ interests in the
associate or joint venture.
AASB 2015‐10 defers the mandatory effective date
(application date) of AASB 2014‐10 so that the
amendments are required to be applied for annual
reporting periods beginning on or after 1 January 2018
instead of 1 January 2016.
This Standard amends AASB 2 Share-based
Payment, clarifying how to account for certain types
of share-based payment transactions. The
amendments provide requirements on the
accounting for:
► The effects of vesting and non-vesting conditions
on the measurement of cash-settled share-based
payments
► Share-based payment transactions with a net
settlement feature for withholding tax obligations
► A modification to the terms and conditions of a
share-based payment that changes the classification
of the transaction from cash-settled to equity-settled.
1 January 2018
1 July 2018
1 January 2018
1 July 2018
‐ 37 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Accounting
Standard
AASB 2016‐6
AASB 2017‐1
AASB
Interpretation
22
Title
Summary
Amendments to
Australian
Accounting
Standards –
Applying AASB 9
Financial
Instruments with
AASB 4 Insurance
Contracts
Amendments to
Australian
Accounting
Standards –
Transfers of
Investments
Property, Annual
Improvements
2014‐2016 Cycle
and Other
Amendments
Foreign Currency
Transactions and
Advance
Consideration
This Standard amends AASB 4 Insurance Contracts
to permit issuers of insurance contracts to:
► Choose to apply the ‘overlay approach’ that
involves applying AASB 9 Financial Instruments and
also applying AASB 139 Financial Instruments:
Recognition and Measurement to eligible financial
assets to calculate a single line item adjustment to
profit or loss so that the overall impact on profit or
loss is the same as if AASB 139 had been applied;
or
► Choose to be temporarily exempt from AASB 9
when those issuers’ activities are predominantly
connected with insurance, provided they make
additional disclosures to enable users to make
comparisons with issuers applying AASB 9.
The amendments clarify certain requirements in:
► AASB 1 First-time Adoption of Australian
Accounting Standards – deletion of exemptions for
first-time adopters and addition of an exemption
arising from AASB Interpretation 22 Foreign
Currency Transactions and Advance Consideration
► AASB 12 Disclosure of Interests in Other Entities –
clarification of scope
► AASB 128 Investments in Associates and Joint
Ventures – measuring an associate or joint venture
at fair value
► AASB 140 Investment Property – change in use.
The Interpretation clarifies that in determining the spot
exchange rate to use on initial recognition of the related
asset, expense or income (or part of it) on the
derecognition of a non‐monetary asset or non‐monetary
liability relating to advance consideration, the date of the
transaction is the date on which an entity initially
recognises the non‐monetary asset or non‐monetary
liability arising from the advance consideration. If there
are multiple payments or receipts in advance, then the
entity must determine a date of the transactions for each
payment or receipt of advance consideration.
Application
date of
standard
Application
date for Group
1 January 2018
1 July 2018
1 January 2018
1 July 2018
1 January 2018
1 July 2018
‐ 38 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Application
date of
standard
Application
date for Group
1 January 2019
1 July 2019
Accounting
Standard
Title
Summary
AASB 16
Leases
AASB 16 requires lessees to account for all leases
under a single on-balance sheet model in a similar
way to finance leases under AASB 117 Leases. The
standard includes two recognition exemptions for
lessees – leases of ’low-value’ assets (e.g., personal
computers) and short-term leases (i.e., leases with a
lease term of 12 months or less). At the
commencement date of a lease, a lessee will
recognise a liability to make lease payments (i.e., the
lease liability) and an asset representing the right to
use the underlying asset during the lease term (i.e.,
the right-of-use asset).
Lessees will be required to separately recognise the
interest expense on the lease liability and the
depreciation expense on the right-of-use asset.
Lessees will be required to remeasure the lease
liability upon the occurrence of certain events (e.g., a
change in the lease term, a change in future lease
payments resulting from a change in an index or rate
used to determine those payments). The lessee will
generally recognise the amount of the
remeasurement of the lease liability as an
adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged from
today’s accounting under AASB 117. Lessors will continue
to classify all leases using the same classification principle
as in AASB 117 and distinguish between two types of
leases: operating and finance leases.
Management is in the process of currently estimating the impact of these Standards.
2.
SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
In applying the Consolidated Entity’s accounting policies management continually evaluates estimates and assumptions
based on experience and other factors, including expectations of future events that may have an impact on the Consolidated
Entity. All estimates and assumptions made are believed to be reasonable based on the most current set of circumstances
available to management. Actual results may differ from the estimates and assumptions. Significant estimates and
assumptions made by the management in the preparation of these financial statements are outlined below:
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future
events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of certain assets and liabilities within the next annual reporting period are:
Impairment of capitalised exploration and evaluation expenditure
(a)
The future recoverability of capitalised exploration expenditure is dependent on a number of factors, including whether the
Consolidated Entity decides to exploit the related lease itself or, if not, whether it successfully recovers the related
exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of
reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including
changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised
exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be
reduced in the period in which this determination is made. In addition, exploration and evaluation is capitalised if activities in
the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be
written off, profits and net assets will be reduced in the period in which this determination is made.
Share‐based payment transactions
(b)
The Consolidated Entity measures the cost of equity‐settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an external valuer using either a
binomial or Black‐Scholes model, with the assumptions detailed in Note 17. The accounting estimates and assumptions
relating to equity‐settled share‐based payments would have no impact on the carrying amount of assets and liabilities within
the next annual reporting period but may impact expenses and equity.
‐ 39 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Intangibles
(c)
The recoverable amount of intangible assets is estimated on the basis of the discounted value of future cash flows. The
estimates of future cash flows are based on significant assumptions including:
timing of the unconditional investment decision to proceed;
estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of
economic extraction and the timing of access to these reserves and resources;
future iron ore prices and exchange rates based on forecasts by a range of recognized economic forecasters as well as
recent spot prices and rates;
construction and production timetable and production rates; and
the discount rate used.
Refer to notes 1(k) and 8 for more information.
‐ 40 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
3. REVENUE AND EXPENSES
(Loss) after crediting the following revenues:
Other Revenues
Interest received
Research and development grant
Sundry income
Sale of tenements
Loss after charging the following expenses:
Consolidated
2017
$
2016
$
2,096
‐
4,795
120,000
126,891
4,964
42,942
‐
75,000
122,906
Auditors remuneration in respect of the Audit of the financial statements
31,944
33,928
Operating lease payments
Superannuation
4.
INCOME TAX
The major components of income tax expenses
are:
Income Statement
Current Income Tax
Current income tax charge/(benefit)
Deferred Income Tax
Relating to origination and reversal of
temporary differences
Income tax expense/(benefit) reported in the
statement of comprehensive income
Operating loss before income tax
Prima facie income tax (benefit)
calculated at 27.5% (2016: 28.5%)
Non‐deductible expenses
Non‐assessable income
Income tax losses carried forward/(utilised)
38,262
36,741
39,343
38,384
‐
‐
‐
‐
‐
‐
(918,042)
(955,336)
(252,462)
(272,271)
12,867
8,850
‐
(12,239)
239,595
275,660
Total income tax (expense)/benefit
‐
‐
Cullen Resources Limited and its 100% owned Australian subsidiaries have entered the tax consolidation regime
from 1 July 2002. The head entity of the tax consolidation group is Cullen Resources Limited.
The entity has adopted the stand alone taxpayer method for measuring current and deferred tax amounts. The
members of the income tax consolidated group have entered into a tax funding agreement.
‐ 41 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Consolidated
Deferred Tax Liabilities
Statement of Financial
Position
Statement of Comprehensive
Income
2017
$
2016
$
2017
$
2016
$
Exploration
(4,817)
(1,656,225)
(12,596)
137,375
Deferred Tax Assets
Provisions
Accruals
18,920
5,500
30,780
6,327
(10,779)
(605)
(904)
(2,365)
Deferred tax assets used to
offset deferred tax liabilities/(not recognised) (i)
(19,603)
1,619,118
1,212
(140,644)
Net Deferred Tax Recognised
in the Statement of Financial Position
‐
‐
‐
‐
(i)
As at 30 June 2017 future income tax benefits were available to the Consolidated Entity in respect of
operating losses and prospecting and exploration expenditure incurred. The directors estimate the
potential income tax benefit at 30 June 2017 in respect of tax losses not brought to account is $9,701,040
(2016: $9,461,445) and there is no expiry date. The benefit of these losses has only been brought to
account to the extent needed to offset deferred tax liabilities. The remaining benefit will only be obtained
if:
(a)
(b)
the Consolidated Entity derives future assessable income of a nature and of sufficient amount to
enable the benefit to be realised.
the Consolidated Entity continues to comply with the conditions for deductibility imposed by the
law; and
(c) no changes in tax legislation adversely affect the Consolidated Entity in realising the benefit.
5. RECEIVABLES
Current
Other debtors
Other debtors includes GST receivable which is non‐interest bearing.
6. OTHER FINANCIAL ASSETS
Non current
Security deposits
The security deposits are non‐interest bearing and relate to mining tenements.
Consolidated
2017
$
2016
$
8,456
43,971
10,000
10,000
10,000
10,000
‐ 42 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
7. PLANT & EQUIPMENT
Plant & Equipment at cost
Opening balance
Additions
Disposals
Closing balance
Plant & Equipment – Accumulated depreciation
Opening balance
Depreciation
Disposals
Closing balance
Total written down amount
(a) Reconciliation
Plant & Equipment
Carrying amount at beginning
Additions
Disposals
Depreciation expense
8. EXPLORATION & EVALUATION
Costs carried forward in respect of
areas of interest in the exploration
and evaluation phase
Opening balance
Expenditure incurred during the year
Less
Impairment (a)
Sale of 30% interest in Mt Stuart Iron Ore JV(b)
Closing balance net of impairment
Consolidated
2017
$
2016
$
115,812
‐
‐
115,812
(110,206)
(2,458)
‐
(112,664)
108,362
7,450
‐
115,812
(108,362)
(1,844)
‐
(110,206)
3,148
5,606
5,606
‐
‐
(2,458)
3,148
‐
7,450
‐
(1,844)
5,606
5,811,317
410,661
6,221,978
5,329,287
986,422
6,315,709
(456,465)
(5,747,995)
(504,392)
‐
17,518
5,811,317
Mining tenements are carried forward in accordance with the accounting policy set out in Note 1.
The ultimate recoupment of the book value of deferred costs relating to areas of interest in the exploration and
evaluation phase is dependent upon the successful development and commercial exploitation or, alternatively, sale
of the respective areas of interest and the Consolidated Entity’s ability to continue to meet its financial obligations to
maintain the areas of interest.
(a) Impairment
The Directors have reviewed all exploration projects for indicators of impairment in light of approved budgets.
Where substantive expenditure is neither budgeted nor planned the area of interest has been written down to its
fair value less costs to dispose. In determining fair value less cost of disposal the Directors had regard to the best
evidence of what a willing participant would pay in an arms length transaction. Where no such evidence was
available, areas of interest were written down to nil pending the outcome of any future farm‐out arrangement. The
Company will continue to look to attract farm‐in partners and/or recommence exploration should circumstances
change.
‐ 43 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
(b) Sale of 30% contributing interest in the Mt Stuart Iron Ore Joint Venture
On 12 April 2017 the Consolidated Entity sold its 30% contributing interest in the Mt Stuart Iron Ore Joint
Venture, and all of the other rights and interests in the Joint Venture tenements for the following consideration:
a lump sum cash payment of $1million on the completion of the Sale(received);
a further lump sum cash payment of $1million payable on making an unconditional final investment
decision to proceed with development of an iron ore mine on the tenements; and
an uncapped 1% FOB royalty on all iron ore extracted from the area of the Tenements.
The lump sum cash payment of $1million was received on the completion of the sale.
The further cash payment of $1 million payable on the unconditional final investment decision to proceed has
been recorded as an intangible asset. (Refer to Note 9)
The uncapped 1%FOB royalty on all iron ore extracted from the area of the Tenements has been recorded as an
intangible asset. (Refer to Note 9)
The Directors have assessed the future deferred consideration of the $1million payable on the decision to
proceed with development and the discounted value of potential future cash flows from the uncapped 1% FOB
royalty based on a Net Present Value calculation using the discounted cash flow model with a number of
assumptions including timing of unconditional investment decision to proceed, future iron ore prices, exchange
rate, timing for the development and production, future product volumes and discount rates. In their opinion,
this assessment supports the fair value of the consideration received from the sale is approximately the same as
the carrying value of the assets disposed and no gain or loss was therefore recognised from the sale. This
assessment also supports the conclusion that no impairment of the intangible asset is required at 30 June 2017.
9.
INTANGIBLE ASSETS
Deferred consideration (a) and royalty
stream(b)
4,747,995
4,747,995
‐
‐
(a) This amount is payable on the making of an unconditional final investment decision to proceed with the
development of an iron ore mine on the tenements. (Refer to Note 8(b)).
(b) This royalty is an uncapped 1% FOB royalty on all iron ore extracted from the area of the Tenements. (Refer to
Note 8(b)).
In July 2015 the Consolidated Entity sold its interest in the Wyloo project tenements to its partner Fortescue
Metals Group Limited and the deferred consideration is a 1.5 % F.O.B. royalty up to 15 Mt of iron ore production
from Wyloo project tenements, and will receive $900,000 cash if and when a decision is made to commence
mining on a commercial basis – E47/1649, 1650, ML 47/1490, and ML 08/502.No amount has been recorded in
the financial statements for this deferred consideration.
10. TRADE AND OTHER PAYABLES
Current
Trade creditors ‐ unsecured
80,756
153,734
Trade creditors are non‐interest bearing and are normally settled on 30 day terms.
‐ 44 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
11. PROVISIONS
Current
Employee benefits
12. CONTRIBUTED EQUITY
Issued capital
2,001,560,131 ordinary shares
(2016: 1,901,560,131)
Movement in issued shares for the year:
Beginning of the financial year:
Issued at 0.2 cents each (i)
Issued at 0.2 cents each(ii)
Issued at 0.3 cents each (ii)
Less share issue expenses
End of financial year:
Consolidated
2017
$
2016
$
68,801
107,999
43,668,213
43,482,463
2017
2016
Number of
Shares
1,901,560,131
‐
100,000,000
‐
‐
2,001,560,131
$
Number of
$
Shares
1,378,469,841
283,090,290
40,000,000
200,000,000
‐
1,901,560,131
42,276,087
566,181
80,000
600,000
(39,805)
43,482,463
43,482,463
‐
200,000
‐
(14,250)
43,668,213
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid
upon shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(i) Issued under a rights issue to shareholders
(ii) Issued under a placement
Options
As at 30 June 2017 there are 20,000,000 (2016: 26,000,000) unissued shares in respect of which options were
outstanding and the details of these are as follows:
Number
Grant Date
Vesting Date
Exercise
Price
Expiry Date
20,000,000
1/12/14
Nil
0.016
30 November 2017
The options have no rights until they are exercised and become ordinary shares.
During the year 6,000,000 (2016: nil) options lapsed.
During the year nil (2016:nil) options were issued to Directors to align their interest with shareholders.
Since the end of the financial year no shares have been issued by virtue of the exercise of options.
‐ 45 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
13. SHARE BASED PAYMENT RESERVE
The share based payment reserve represents the cost of share‐based payments to directors, employees and
third parties.
Beginning of the year
Share based payments
End of the year
14. ACCUMULATED LOSSES
Accumulated losses at the beginning of the year
Net loss
Accumulated losses at the end of the year
Consolidated
2017
$
2016
$
1,459,725
‐
1,459,725
‐
1,459,725
1,459,725
(38,801,556)
(918,042)
(39,719,598)
(37,846,220)
(955,336)
(38,801,556)
15. PARTICULARS IN RELATION TO CONTROLLED ENTITIES
The consolidated financial statements at 30 June 2017 include the following controlled entities. The financial
years of all controlled entities are the same as that of the parent entity.
Name
Place of
Incorporation
Interest
%
Investment
$
June
2017
June
2016
June
2017
June
2016
Cullen Minerals Pty Limited
Cullen Exploration Pty Ltd
Bearmark Investments Pty Ltd
Cullen Resources Namibia Pty Ltd*
Cullen Finland OY
ARCTEX OY#
ARCTEX AB#
Australia
Australia
Botswana
Namibia
Finland
Finland
Sweden
100
100
100
‐
100
‐
‐
100
100
100
100
100
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
15
‐
‐
‐
*During the year this company was de‐registered.
# During the prior year this company was de‐registered.
16. KEY MANAGEMENT PERSONNEL
Compensation for key management personnel
Short‐term employee benefits
Post‐employment benefits
Other long‐term benefits
Termination benefits
Share‐based payments
Total compensation
‐ 46 ‐
Consolidated
2017
$
2016
$
409,533
39,594
2,063
‐
‐
451,190
434,292
37,050
5,088
‐
‐
476,430
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
17. SHARE BASED PAYMENTS
(a)
Recognised share based payment expenses
Director options
Employee options
2017
$
2016
$
‐
‐
‐
‐
‐
‐
Employee Options
(b)
For details/movements around the director options, please refer to the Remuneration Report.
(i)
Options held at the beginning of the reporting period – 1 July 2016
Number
Grant Date
Vest Date
Expiry Date
6,000,000
9/6/14
Various*
31/5/17
(ii)(a) Options lapsed during the year ‐ 2017
Weighted
Average
Exercise Price
$0.023
Number
Grant Date
6,000,000
9/6/14
Vest
Date
Various*
Expiry
Date
31/5/17
Weighted Average
Exercise Price
$0.023
(ii)(b) Options lapsed during the previous year ‐ 2016
Number
Grant Date
Vest
Date
‐
‐
‐
Expiry
Date
‐
Weighted
Exercise Price
Average
‐
(iii)(a) Options issued during the year ‐ 2017
Number
Grant Date
Vest Date
Expiry Date
‐
‐
‐
‐
(iii)(b) Options issued during the previous year ‐ 2016
Number
Grant Date
Vest Date
Expiry Date
‐
‐
‐
‐
(iv)
Options held at the end of the reporting period ‐30 June 2017
Number
Grant Date
Vest Date
Expiry Date
Weighted
Average
Exercise
Price
‐
Weighted
Average
Exercise
Price
‐
Exercise
Price
‐
‐
‐
‐
‐
*All these options have vested.
Weighted
Average
Share Price
‐
Weighted
Average
Share Price
‐
Weighted Average
Fair Value
of Options
‐
The fair value of the equity settled share options granted are estimated as at the date of allocation using a
Binomial Model taking into account the terms and conditions upon which they were granted.
‐ 47 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
(c)
Weighted average remaining contractual life
Options ‐ Employee
Options ‐ Directors
(d)
Range of exercise prices
Options ‐ Employee
Options ‐ Directors
(e)
Weighted average fair value at date of issue
Options ‐ Employee
Options ‐ Directors
2017
Years
‐
0.42
2017
cents
‐
1.6
2017
cents
‐
‐
2016
Years
0.92
1.42
2016
cents
2.3
1.6
2016
cents
‐
‐
Option pricing model
(f)
The fair value of the equity settled share options granted are estimated as at the date of allocation using a
Binomial Model taking into account the terms and conditions upon which they were granted.
The following table lists the inputs to the models used at the date of allocation for employee and directors’
options:
Expected volatility
Risk free interest rate
Exercise price
Share price at measurement date
18. JOINT OPERATIONS
2017
‐
‐
‐
‐
2016
‐
‐
‐
‐
The Consolidated Entity has interests in the following joint operations as at 30 June 2017:
Principal Activity
Other Participant
(a) Paraburdoo
Exploration
Fortescue Mining Group Limited (Fortescue)
(b) Forrestania
Exploration
Hannans Reward Limited (Hannans)
(c) Killaloe
Exploration
Matsa Resources Limited (Matsa)
a)
b)
c)
Fortescue can earn up to 80% in the iron ore rights, Cullen has a 100% interest.
Hannans has an 80% interest; Cullen is 20% free carried.
Matsa has an 80% interest; Cullen is 20% free carried.
The joint operations are not separate legal entities. They are contractual arrangements between the participants for the
sharing of costs and any outputs and do not, in themselves, generate revenue and profit. The net contribution of any jointly
controlled assets to the operating profit before income tax is $nil (2016: $nil). The Consolidated Entity’s assets employed in
the jointly controlled assets, are included in the balance sheet of the Consolidated Entity as follows:
Current Assets
Receivables
Non‐Current Assets
Exploration and expenditure
Current Liabilities
Trade and other payables
‐ 48 ‐
Consolidated
2017
$
‐
‐
‐
2016
$
28,536
5,775,245
55,786
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
19. COMMITMENTS
(a) Minimum exploration work
The Consolidated Entity has certain obligations to perform minimum exploration work and expend minimum amounts of
money on mineral exploration tenements. The Consolidated Entity is required to expend a minimum of $548,500 over the
next year to keep its current tenements in good standing.
(b) Lease expenditure commitments
Lease expenditure commitment
Operating leases (non‐cancellable) for premises
Minimum lease payments
‐
‐
not later than one year
later than one year and not later than five years
Aggregate lease expenditure contracted for at reporting
date but not provided for
Consolidated
2017
$
2016
$
‐
‐
‐
‐
‐
‐
A lease for the premises was entered into for the period 1 May 2014 to 30 April 2016 with an option for a further two
years. The lease was not renewed when it expired and is now on a month by month basis. There are no contingent rentals
or restrictions imposed by the lease arrangements.
20. RELATED PARTIES
Payments to director related companies
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated. Consultancy payments were made to Mosman Corporate Services Pty
Ltd totalling $33,250(2016:$38,875) which is a company controlled by Mr W Kernaghan. There was $1,750 (2016: $2,000)
outstanding at 30 June 2017.
21. OPERATING SEGMENTS
Identification of Reportable Segments
The Consolidated Entity has based its operating segment on the internal reports that are reviewed and used by the executive
management team in assessing performance and in determining the allocation of resources.
The Consolidated Entity currently does not have production and is only involved in exploration. As a consequence, activities
in the operating segment are identified by management based on the manner in which resources are allocated, the nature of
the resources provided and the identity of the manager and country of expenditure. Discrete financial information about
each of these areas is reported to the executive management team on a monthly basis.
Based on this criteria, the Consolidated Entity has only one operating segment, being exploration, and the segment
operations and results are the same as the Consolidated Entity’s results.
Non Current Assets by Geographical regions:
Australia
Consolidated
2017
$
2016
$
4,778,661
4,778,661
5,826,923
5,826,923
‐ 49 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
22. STATEMENT OF CASH FLOWS
(i) Reconciliation of cash
For the purposes of the Consolidated Statement of Cash Flows, cash includes cash at bank and short term deposits at call.
Cash at the end of the financial year as shown in the Consolidated Statement of Cash Flows is reconciled to the related items
in the Consolidated Statement of Financial Position as follows:
Cash on hand
(ii) Reconciliation of operating (loss)
after income tax to net cash used in operating activities
Operating (loss) after income tax
Add/(less) non cash items
Impairment of exploration
Depreciation
(Decrease) / Increase in provisions for employee benefits
(Decrease) / Increase in trade and other payables
Decrease / (Increase) in receivables
Net operating cashflows
23. EARNINGS/(LOSS)PER SHARE
Basic (loss) per share (cents per share)
Diluted (loss) per share (cents per share)
The following reflects the income and share data used
in the calculations of basic and diluted (loss) per share
Net (loss)
Weighted average number of ordinary shares used in
the calculation of basic and diluted earnings per share
Options on issue at year end are not dilutive and hence
not used in the calculation of diluted EPS
24. FINANCIAL INSTRUMENTS
Consolidated
2017
$
2016
$
770,780
531,471
(918,042)
(955,336)
45,804
2,458
(39,198)
(72,978)
35,515
‐
1,844
(3,172)
(145,746)
49,833
(946,441)
(1,052,577)
Consolidated
2017
2016
(0.05)
(0.05)
(0.06)
(0.06)
(918,042)
(955,336)
1,943,751,912
1,577,754,627
20,000,000
26,000,000
The Group's financial instruments comprise receivables, payables, and cash and short‐term deposits.
The Group manages its exposure to key financial risks, including interest rate risk in accordance with the Group's financial risk
management policy. The objective of the policy is to support the delivery of the Group's financial targets whilst protecting
future financial security.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board of Directors. Due to the size and
nature of the company's operations, and as the company does not use derivative instruments or debt, the directors do not
believe the establishment of a risk management committee is warranted.
‐ 50 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
Interest Rate Risk
(a)
The Group's exposure to market interest rates relates primarily to the Group's cash and cash equivalents.
The Group's exposure to interest rate risk for each class of financial assets and financial liabilities is set out below.
Financial Instruments
Financial Assets
Cash and cash equivalents
Total Financial Assets
Consolidated
Floating
interest rate
Floating
interest rate
2017
$
2016
$
770,780
531,471
770,780
531,471
Cash gives rise to interest rate risk because the interest rate is variable.
The following summarises the effect on loss and equity of financial instruments held at balance date as a result of a 1%
movement in interest rates, with all other variables remaining constant.
Interest rate +1%
Interest rate ‐1%
Consolidated
(Decrease)/Increase in loss/equity
2017
$
(7,707)
7,707
2016
$
(5,314)
5,314
The selection of 1% sensitivity check was based on recent interest rate adjustments. The same basis was adopted in 2016.
(b) Currency Risk
The Consolidated Entity has limited exposure to foreign currency risk as it pays for its overseas exploration activities from
Australia in various overseas currencies.
(c) Credit Risk
Credit risk arises from the financial assets of the Consolidated Entity, namely trade and other receivables. The Consolidated
Entity's exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to its
carrying amount. Exposure at balance date is addressed in each applicable note.
The Consolidated Entity does not hold any credit derivatives to offset its credit exposure.
Receivable balances are monitored on an ongoing basis with the result that the Consolidated Entity's exposure to bad debts is
not significant. Receivables are due from the Australian Taxation Office and other government bodies which have very low
default risk.
There are no significant concentrations of credit risk within the Consolidated Entity and cash and cash equivalents are spread
amongst two of the big four Australian Banks.
(d) Liquidity Risk
The liquidity position of the Consolidated Entity is managed to ensure sufficient liquid funds are available to meet the
Consolidated Entity's financial commitments in a timely and cost‐effective manner. The Consolidated Entity funds its activities
through capital raisings in order to limit its liquidity risk which is monitored on a monthly basis.
Contractual maturity of the trade payables is within 30 day terms.
The Consolidate Entity manages its liquidity risk by monitoring the total cash inflows and outflows expected on a monthly basis.
The Consolidated entity has established comprehensive risk reporting covering its business units that reflect expectations of
management of the expected statement of financial assets and liabilities.
(e) Capital Management
Management controls the capital of the Consolidated Entity in order to provide the shareholders with adequate returns and
ensure that the group can fund its operations and continue as a going concern.
‐ 51 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
There are no externally imposed capital requirements.
Management effectively manages the group's capital by assessing the Consolidated Entity's financial risks and adjusting its
capital structure in responses to include the management of debt levels, distributions to shareholders and share issues.
The Consolidated Entity uses cash flow forecasts to manage and adjust its capital management.
There have been no changes in the strategy adopted by management to control the capital of the Consolidated Entity since the
prior year.
Capital managed by the Consolidated Entity consists of shareholders equity.
Shareholders equity
25. AUDITOR'S REMUNERATION
Amounts received or due and receivable
by Ernst and Young
‐
‐
an audit or review of the financial report
of the entity and any other entity in the
Consolidated Entity
taxation services provided to the Consolidated Entity
26. PARENT ENTITY INFORMATION
Information relating to Cullen Resources Limited:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Share based payment reserve
Total shareholders' equity
Loss of the parent entity
Total comprehensive income of the parent entity
Consolidated
2017
$
2016
$
5,408,340
6,140,632
Consolidated
2017
$
2016
$
31,944
‐
31,944
33,928
4,294
38,222
2017
$
2016
$
727,059
5,443,193
34,853
34,853
43,668,213
39,719,598
1,459,725
5,408,340
918,042
918,042
516,458
5,683,560
59,386
59,386
43,482,463
38,801,556
1,459,725
6,140,632
967,398
967,398
The parent entity has no contingent liabilities, nor does it have any contractual commitments for the acquisition of property,
plant or equipment.
27. SUBSEQUENT EVENTS
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors, to affect the operations of the Consolidated
Entity, the results of those operations or the state of affairs of the Consolidated Entity in the subsequent financial years.
28. CORPORATE INFORMATION
The financial report of Cullen Resources Limited for the year ended 30 June 2017 was authorised for issue in accordance with
a resolution of the directors on 18 September 2017.
Cullen Resources Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded
on the Australian Stock Exchange.
‐ 52 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
DIRECTORS' DECLARATION
In accordance with a resolution of the directors of Cullen Resources Limited, I state that:
In the opinion of the directors:
(a)
the financial statements and notes of the Consolidated Entity are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 1(b).
subject to the achievement of the matters in Note 1(c), there are reasonable grounds to believe
that the Company will be able to pay its debts as and when they become due and payable.
this declaration has been made after receiving the declaration required to be made to the
directors in accordance with section 295A of the Corporations Act 2001 for the financial year
ended 30 June 2017.
(b)
(c)
(d)
On behalf of the Board
C. Ringrose
Director
Perth, WA
18 September 2017
‐ 53 ‐
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent Auditor’s Report to the Members of Cullen Resources Limited
Report on the audit of the financial report
Qualified opinion
We have audited the financial report of Cullen Resources Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2017,
the consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, notes to the financial statements, including
a summary of significant accounting policies, and the directors’ declaration.
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our
report, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 and of
its consolidated financial performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for qualified opinion
As detailed in Note 8 and Note 9, on 12 April 2017 the Group sold its 30% contributing interest in the Mt
Stuart Iron Ore Joint Venture (‘MSIOJV’) for the consideration described in the notes. The fair value of the
consideration at the disposal date was determined by the directors to be equal to the carrying amount of the
MSIOJV exploration asset of $5,747,995 and therefore no gain or loss was recognised on the sale. In
estimating the fair value of the consideration receivable, the directors used a discounted cash flow model with
a number of assumptions as to the timing and quantum of cash flows and the discounting of those cashflows.
We have been unable to obtain sufficient appropriate audit evidence to assess the reasonableness of the
directors’ assumptions adopted in determining the fair value of the consideration receivable and therefore the
intangible asset recognised at the disposal date. Consequently, we are unable to determine the accuracy and
appropriateness of the gain or loss on the sale of the MSIOJV exploration asset together with the carrying
value of the intangible asset as disclosed in the year-end financial report.
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 APES110 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
qualified opinion.
Material uncertainty related to going concern
We draw attention to Note 1(c) in the financial report, which describes the principal conditions that raise doubt
about the Group’s ability to continue as a going concern. These events or conditions indicate that a material
uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MH:NL:CULLEN:021
54
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial report of the current year. Except for the matters described in the Basis for Qualified Opinion
and Material Uncertainty Related to Going Concern sections of our report, we have determined that there are
no other key audit matters to be communicated in our report.
Information other than the financial report and auditor’s report
The directors are responsible for the other information. The other information comprises the information
included in the Group’s 2017 Annual Report, but does not include the financial report and the auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance
opinion.
In connection with our audit of the financial report, our responsibility is to read the other information 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 upon 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 Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or 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 Australian Auditing Standards, we exercise professional judgment 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MH:NL:CULLEN:021
55
• 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 consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most significance
in the audit of the financial report of the current year 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 audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 18 to 22 of the directors' Report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Cullen Resources Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MH:NL:CULLEN:021
56
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.
Ernst & Young
V L Hoang
Partner
Perth
18 September 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
MH:NL:CULLEN:021
57
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
SHAREHOLDER INFORMATION
CAPITAL STRUCTURE
As at 15 September 2017, the company had the following securities on issue:
Issued Capital
Top 20 Shareholders
Total holding of twenty largest shareholders
% of total shares on issue
Distribution of shareholders
1 ‐ 1,000 shares
1,001 ‐ 5,000 shares
5,001 ‐ 10,000 shares
10,001 ‐ 100,000 shares
100,001 and over
Total
Fully paid
Ordinary shares
2,001,560,131
950,291,148
47.48%
162
166
323
1,399
992
3,042
Unmarketable Parcels as at 15 September 2017
Minimum $500.00
2,576
OPTIONS
As at 15 September 2017, 20,000,000 unissued shares in respect of options were outstanding.
These are as follows:
Number
20,000,000
Exercise Price
Expiry Date
$0.016
30 November 2017
SUBSTANTIAL SHAREHOLDERS
The company has two Substantial Shareholders as at 15 September 2017
Name
Perth Capital Pty Ltd, Wythenshawe
Pty Ltd & Associates
Baosteel Group Corporation & Aurizon
Holdings Limited
%
22.51
No. of shares
450,599,605
5.11
102,343,426
‐ 58 ‐
CULLEN RESOURCES LIMITED ‐ ANNUAL REPORT 2017
TWENTY LARGEST SHAREHOLDERS
The names of the twenty holders of the fully paid shares at 15 September 2017 are listed below:
Name
Perth Capital Pty Ltd
Aquila Resources Ltd
Perth Capital Pty Ltd
Bellarine Gold Pty Ltd
Warramboo Holdings Pty Ltd
Rojo Nero Capital Pty Ltd
HSBC Custody Nominees (Australia) Limited
Glyde Street Nominees Pty Ltd
Chiatta Pty Ltd
Warramboo Holdings Pty Ltd
Kitchsmith Pty Ltd
Innerleithen Pty Ltd
A N Superannuation Pty Ltd
327TH P&C Nominees Pty Ltd
CM Super Fund Pty Ltd
W L Houghton Pty Ltd
Mr Clark Briggs
Lindglade Enterprises Pty Ltd
WJK Investments Pty Ltd
C Y T Investments Pty Ltd
Total
No. of Shares
225,000,000
90,496,823
78,603,398
70,446,950
58,433,080
55,840,557
51,960,556
41,661,655
40,000,000
32,409,595
29,999,998
29,662,499
22,447,370
20,000,000
20,000,000
20,000,000
19,375,155
17,428,513
13,777,629
12,747,370
% Held
Rank
11.24
4.52
3.93
3.52
2.92
2.79
2.60
2.08
2.00
1.62
1.50
1.48
1.12
1.00
1.00
1.00
0.97
0.87
0.69
0.64
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
950,291,148
47.48
VOTING RIGHTS
Every member present in person or by representative shall on a show of hands have one vote, and on a poll
every member present in person or by representative, proxy or attorney shall have one vote in respect of each
fully paid share held by him.
‐ 59 ‐