DGR Global Limited ABN 67 052 354 837 dgrglobal.com.au DGRGLOBAL D G R G o b a l l A n n u a l R e p o r t 2 0 1 9 ANNUAL REPORT Year ended 30 June 2019 DGR GLOBAL LIMITED ABN 67 052 354 837 ii 2019 iv DGR Global and its subsidiariesdgrglobal.com.au Developing tomorrow’s resources, today. DGR Global is a resource company creator with a portfolio of both traditional and technology-driven natural resource projects which will be required to power and support future generations. Exposed to a wide array of commodities across a diverse range of jurisdictions, DGR Global is developing tomorrow’s resources, today. C O V E R P H O T O : At DGR Global, we believe that the future points to energy and we see this image as one that represents growth, urbanisation and electrification, which are seen as the key drivers for the demand of resources. v About Chairman’s letter Corporate governance Review of operations Introduction Corporate Investments in listed companies Exploration and development of unlisted subsidiaries and companies Mineral resources Future developments Directors’ report Directors’ report Remuneration report Auditor’s independence declaration Financial report Statements of comprehensive income Statements of financial position Statements of changes in equity Statements of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report Further information Shareholder information Interest in tenements Corporate directory 1 2 4 5 6 7 7 10 20 20 21 22 28 42 43 44 45 46 48 49 100 101 105 106 108 111 DGR Global and its subsidiaries 1 1 ABOUT vii DGR Global and its subsidiaries Chairman’s letter for the year ended 30 June 2019 Dear Shareholders, Recently, DGR Global’s long-standing General Manager, Greg Runge, retired from his full-time role with the Group. Greg was a DGR Global Group employee for 13 years and over that time handled a number of challenging operational and corporate issues with Over the course of the past 12 months, and often as a result of indirect global factors, the international junior mining sector has professionalism. On behalf of the Board, I would like to thank Greg for his dedication and many years of service, and I am pleased experienced more than its fair share of headwinds. It is during these times that the quality of a company’s management, projects and/ that he has agreed to remain a Director of Auburn Resources for the time being. or strategy come under the greatest internal and external pressures. In this regard, I remind shareholders that DGR Global continues to focus on the long game, banking on the continuing fundamental global demands that underpin and fuel the world’s ongoing urban My fellow Board members and the Company’s management team continue to work on the evolution and maturity of the Company’s and technological development. The global mega trends of our time point to increasing population and living standards, increasing business model, and I thank them for their continued efforts in this regard. As always, DGR Global’s CEO Nick Mather has travelled urbanisation and infrastructure requirements, increasing life expectancies and ageing populations, shifting economic power towards tirelessly and extensively this year both raising funds and promoting the broader Group in various markets around the world. Nick’s Asia, and the ever-increasing demands for energy across the board. All of these trends require the production and consumption efforts across the broader DGR Group are often under appreciated, and he deserves our sincere thanks. Yours faithfully, William (Bill) Stubbs Non-Executive Chairman of more, not less, resources. The generation of projects in globally demanded resources will therefore remain at the core of DGR Global’s business model. Touching on some of the major developments within the broader DGR Group over the year, I note the following: 1. In relation to Armour Energy, DGR Global reinvested the majority of its proceeds from the redemption of Armour’s Convertible Notes into Armour’s corporate bond issue. DGR continues to believe in the fundamental supply opportunity for the Australian domestic gas market, and the longer-term outlook for gas as an energy supply source even under published international climate change scenarios. 2. SolGold published its upgraded Mineral Resource Estimate and its Preliminary Economic Assessment for the Alpala Deposit within its flagship Cascabel Copper-Gold Porphyry Project in northern Ecuador. SolGold is now proceeding with work for a further Mineral Resource Estimate and a Pre-Feasibility Study for Alpala, as well as progressing the exploration of its regional package of 72 tenements across Ecuador. 3. In early 2019, IronRidge Resources announced the acquisition of the 400km2 Zaranou Gold Project, a potential company- making opportunity in Cote d’Ivoire. Work on this project has been prioritised for Q4, 2019 given the opportunity to discover a significant high-grade gold deposit. IronRidge now boasts an impressive inventory of gold and lithium projects across Africa, which it will continue to progress over the next 12 months. 4. DGR Global has continued to progress the Armour Uganda Oil Project, by funding and managing the first-phase exploration program and tenement renewal process. Work is continuing at the time of writing, with results to be announced from the seismic program once available. In the coming 12–24 months, DGR Global will aim to add not only Auburn Resources and the Ugandan Oil Project to its range of sponsored listed investments, but will also aim to add further projects and investments into the DGR stable. As stated earlier, continuous exploration for new opportunities and large-scale projects is the core of our business model. In looking at other successful diversified resource industry players and investment vehicles, it is clear that the market is prepared to ascribe a higher pricing to those companies that have eight or more portfolio interests, including a number that derive income. Accordingly, at full maturity, the DGR Global business model would have a greater number of portfolio interests or investments, have a number of investments that generate income, be self-funding from a project generation and investment perspective, obviating the need for capital raisings, and operate profitably, lending itself to the payment of dividends. 2 3 DGR Global and its subsidiariesdgrglobal.com.au Corporate governance Visit dgrglobal.com.au/corporate-governance The Board of Directors of DGR Global 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. The governance principles adopted by the Board are designed to achieve this outcome. Throughout the financial year ended 30 June 2019, DGR Global Limited’s Corporate Governance Statement has been adopted and structured with reference to the third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. Further details are available in DGR Global’s 2019 Appendix 4G and Corporate Governance Statement for the year ended 30 June 2019, as well as on the Company’s website. 2 REVIEW OF OPERATIONS 4 5 5 DGR Global and its subsidiariesdgrglobal.com.au Review of operations for the year ended 30 June 2019 INTRODUCTION CORPORATE Highlights for the Company during 2019 included: DGR Global’s business is resource-project generation and discovery across a range of commodities, including copper, gold, nickel, tin, iron ore, titanium, bauxite, lithium, cobalt, oil and gas. The group focuses on new project generation and value creation, delivering • Business model endorsed by the best performing hedge fund in the world in 2016 with Tribeca Investment Partners providing up to $10 million in converting note funding to further develop the resource company creation business1. value through discovery of ore bodies by the application of innovative exploration techniques and reassessment strategies of existing • DGR holds an 83.18% (Armour Energy 16.82%) interest in a highly prospective oil project in the Kanywataba Block, Uganda2. pre-development projects and to new greenfields areas. DGR Global is generating and developing several independently funded and • Continuation of support to Armour Energy in expanding its Roma Shelf gas production and distribution assets and fully managed resource companies in order to progress each of these projects. The company maintains its cornerstone investor position in subsidiaries that move to listing on a recognised stock exchange as illustrated in the corporate tree below. recommissioning the Kincora plant (refer later section). • Further support to SolGold (copper, gold) in progressing the Cascabel discovery. 11.06% 22.03% 16.65% 21.97% 16.73% 100.00% 100.00% 94.34% Private Public 613.2m Shares 44.98% 83.16% DGR GROUP CORPORATE TREE DGR Global-created listed investments (at 30 June 2019) • Supporting IronRidge Resources in securing gold and lithium prospects in Chad, Ghana and Ivory Coast. • Supporting AusTin Mining (Tin) and Dark Horse Resources in development and diversification projects (refer later sections). • Additional seed capital raising and progressing preparations for the IPO and ASX listing of Auburn Resources Limited. • HSE for the group entities for which DGR acts as Operator, maintained a rolling 12-month TRIFR of 0.00 and zero environmental incidents for the corresponding period, highlighting the continuous commitment to safe operations. INVESTMENTS IN LISTED COMPANIES SOLGOLD PLC | 11.06% LSE/TSX: SOLG | solgold.com.au • Focus on high grade world class copper gold porphyry systems at Cascabel in Ecuador. Cascabel is close to Quito, the Capital and ports, is at low elevation, and has abundant water supplies and access to hydropower. • Updated NI 43-101 compliant Alpala Mineral Resource estimate, released in November 2018, more than doubled the initial estimate reported in January 2018 – refer SolGold website for details3. • Sampling and mapping continued across SolGold’s additional 72 wholly owned Mineral Concessions in Ecuador to remain the dominant explorer in the country. • Extensive high-grade copper, gold and zinc mineralisation already discovered in outcrops on several concessions in Southern Ecuador, particularly at the La Hueca, Timbara and Porvenir Projects4. High grade epithermal gold mineralisation discovered at the Blanca and Cisne Loja Project5. 6.37% • Fresh discovery at Porvenir Target 156. • SolGold raises £45 million at 45p per share from BHP7. 30.42% 2.23% • Mapping and sampling at the Porvenir Project identified a significant porphyry copper gold system9. • Engagement of ten (10) drilling rigs onsite at Cascabel. Discovery of previously unknown high-grade mineralisation within existing low-grade inferred resource areas8. • Large copper and gold systems discovered at the Chical Project in Northern Ecuador10. • Strong epithermal gold and copper porphyry results for the Cisne Loja Project with copper, gold and silver mineralisation identified over an area 1.5km by 1km11. • Strong initial copper gold porphyry results for the Coangos Project in southern Ecuador indicated very high potential for a major copper gold porphyry project in the broader tenement area12. • Positive PEA Study results announced. Full details available on the SolGold website13. • Extensive lithocap identified at Rio Amarillo with significant copper and gold results14. • The Constitutional Court in Ecuador unanimously rejects the petition by the applicant that challenged the legality and validity of the future of mining in the Carchi and Imbabura Provinces in northern Ecuador15. • Discovery of a new copper gold molybdenum porphyry target at the Sharug Project in Central Ecuador16. 6 7 DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 INVESTMENTS IN LISTED COMPANIES CONTINUED ARMOUR ENERGY LIMITED | 21.97% ASX: AJQ | armourenergy.com.au • Holds highly prospective whole basin oil and gas positions in Northern Territory and North West Qld covering 139,000 km2. • $55 million refinancing through secured and amortising debt notes finalised, enabled the retirement of existing convertible note funding and assisting with the delivery of a material work program that is geared towards achieving 2019 growth objectives with a focus on the 20TJ/day production target17. DARK HORSE RESOURCES LIMITED | 16.73% ASX: DHR | darkhorseresources.com.au • Focussed on gold and lithium in Argentina. • Initial assay results from the extensive field exploration programme over the Santa Cruz Gold Projects revealed encouraging gold and silver results on several tenements with infill sampling at Cachi Prospects confirming gold-silver anomalism27 with further surface exploration work continuing to define drilling targets31. • Visible gold identified in iron sulphide/oxide breccia at the Morena Project32. • Participation in the Lakes Oil (ASX:LKO) entitlement offer subscribing for 500,000,000 shares for a cost of $500,00031 to • The LPG system of the Kincora Gas Plant successfully recommissioned and the whole plant is fully operational. Gas, LPG and increase DHR’s total holding to 10.1 billion LKO shares33. condensate from existing production wells has been processed and sold for the last twelve months18. • First phase drilling at Las Opeñas Gold Project targeting high grade gold silver and base epithermal veins discovered during • Awarded further Roma Shelf petroleum acreage near the Kincora plant19. • Independently verified 2P reserves increased by 56% since the previous assessment in October 201820. • Armour holds an Exploration Licence over the highly prospective Kanywataba Block in the Albertine Graben, Uganda. Less than 40% of the Albertine Graben has been explored to date, where 101 wells of approximately 115 wells drilled have encountered hydrocarbons21. • Initial production from the first well under the Federal Government’s Gas Acceleration Program (GAP) initiative, Myall Creek 4A, commenced with subsequent recompletion activities carried out and stabilised production achieved. The second well under the GAP initiative Myall Creek 5A was drilled and cased and connected into the Kincora gas pipeline network22. • Armour progressed to firm contracted gas supply agreement with APLNG23. • Petroleum acreage near Chinchilla awarded to the Armour-APLNG JV with first gas from this tenement area planned for delivery by mid-202124. IRONRIDGE RESOURCES LIMITED | 22.03% AIM (LSE): IRR | ironridgeresources.com.au surface mapping and sampling completed with high grade mineralised zones to moderate depths being confirmed34. • Mapping and geophysical programmes completed over some of the mineralised Cachi targets, providing drill targets for later in 201935. AUS TIN MINING LIMITED | 16.65% ASX: ANW | austinmining.com.au • Heads of agreement (non-binding) entered into for the sale of waste rock from the Granville East Mine36. • High-grade cobalt results from drilling at Mt Cobalt west of Gympie, Qld. Initial target zone 350m long and 25m wide open at depth37 with a further 5-hole drilling programme completed in April38. • Significant progress at the Granville Tin Project in Tasmania and civil works well advanced with the completion of the tailings storage facility, mining of the first ore block and transition in March to owner mining39. A strategic review is underway, with the objective of determining the best meast of extracting value. • JORC resource estimate confirmed Taronga as a world class tin project. The details of the resource (79% indicated) can be viewed on both ASX’s and Aus Tin’s websites. • Primary focus on gold (in Chad and Ivory Coast) and lithium (in Ghana and Ivory Coast) now firmly established with extensive • Metallurgical flow sheet completed for Taronga pre-feasibility study with the ore described as coarse grained, having simple tenement packages secured in all three countries. • Major gold discovery at the Dorothe Project and nearby Ouchar and Echbara licence areas in Chad, gold projects in Ivory Coast, and lithium projects with proven big, high grade lithium spodumene pegmatites in Ghana and Ivory Coast25. • Following on from access rights being secured via Earn-In Agreement to the Zaranou Gold Project application covering 397 km2 enhancing the existing Ivory Coast portfolio for a combined total of 3,584 km2 gold focussed land package, the application was granted. The due diligence period was successfully completed and the JV agreement formally ratified. Mapping and channel sampling field programmes were commenced26. • In late 2018 IronRidge raised £5.4m at 20p per share for development of gold and lithium projects27. • Exceptional metallurgical results for the Ewoyaa Pegmatite Project which forms part of the Cape Coast Lithium Portfolio28. • Completion of the acquisition of the Vavoua Projects, a highly prospective gold exploration portfolio in the Ivory Coast29. • Detailed face mapping, channel sampling, rock chip sampling and over 3,900m of air-core drilling undertaken in the Ivory Coast project portfolio30. • Retention of highly prospective hematite rich iron targets evident in Tchibanga and Belinga Sud licence areas in Gabon – total tenure 5,400 square km. Tchibanga is less than 70 km from the port of Mayumba. metallurgy and highly amenable to pre-concentration. • Capital raising of $450,000 by private placement in April to primarily fund commencement of Taronga Stage 140, which received final regulatory approval from the NSW Department of Planning and Environment in May41. • Successful completion of Share Purchase Plan in May which closed oversubscribed with accepted applications totalling $910,00042. 8 9 DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 EXPLORATION AND DEVELOPMENT OF UNLISTED SUBSIDIARIES AND PROJECTS During the year the group was strongly focused on advancing exploration projects within the parent and subsidiary companies. Field reconnaissance programs including mapping, soil, stream and rock sampling and diamond drilling were undertaken. Significant activities which occurred during the year are set out in this section. AUBURN RESOURCES LIMITED | 44.98% Tennant Creek and Mt Isa are the preeminent mineral resource hubs for the Northern Territory and Queensland. The region between these two hubs is a vast prospective frontier covered by a thin veneer of sediments. Geoscience Australia (GA), as part of the Federal Government’s Exploring for the Future program, undertook an extensive soil sampling survey in collaboration with the Northern Territory Geological Survey and the Geological Survey of Queensland. Catchment outlet sediment samples were collected at 776 sites (including duplicates) and analyzed for elemental composition using three different analytical techniques1. The black dots in Figure 3 show all the sample points. Subsequently, GA undertook a wide spaced airborne electromagnetic (EM) survey over the entire area to primarily define sulphide mineralization targets. • Continuation of development and consolidation as a nickel-copper-cobalt, gold and zinc company exploring in QLD and NT, with highly prospective areas in the NT covered by granted MEL applications43. In mid-2018 GA started the public release of the Northern Australian Geochemical Survey. DGR Global Limited (DGR) geoscientists • Key Iron Oxide Copper Gold (IOCG) and lead-zinc targets identified and secured in the Tanumbirini district of the Northern started to interrogate the released data sets. DGR focused on the total lead assays rather than other base metals such as copper and Territory43. • Potential for world class copper gold discoveries at Mt Abbott, Calgoa and Marodian Projects and large sulphide nickel-cobalt- copper discoveries near Hawkwood44. • Exploration targets defined for the Ban Ban Zinc Project. • Planning well advanced for IPO and ASX listing (subject to market conditions) during 2020. nickel as lead is relatively insoluble thus not moving far from its point of origin. Figure 3 shows the result of this data search. The total lead footprint at Tanumbirini is larger in area than that at Mt Isa to the east, and comparable in magnitude given that Tanumbirini is all under cover and Mt Isa is exposed and has been mined for approximately a century. Lead high values to 46.2 ppm characterize Mt Isa and 34 ppm characterizes the Tanumbirini area. The Northern Territory Government has granted all 12 of the Exploration Licenses that make up the Tanumbirini and Victoria River Projects to Pennant Resources Pty Ltd, a wholly owned subsidiary of Auburn Resources Limited (see Figures 1 and 2 below). FIGURE 1 Location of the Tanumbirini and Victoria River Projects in the Northern Territory FIGURE 2 The Tanumbirini Project Area – traversed by the sealed Carpentaria Highway and the gas pipeline to the McArthur River Mine 10 11 FIGURE 3 Geoscience Australia overbank fine stream sediment sample points, with regional lead anomalism (Total Lead > 25 ppm by ICP-MS) shown in dark pink DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 EXPLORATION AND DEVELOPMENT OF UNLISTED SUBSIDIARIES AND PROJECTS CONTINUED AUBURN RESOURCES LIMITED CONTINUED IOCG Targets Coincident with DGR’s research, Greatland Gold plc announced its Havieron IOCG discovery at the Paterson Ranges about 40 kms east of Telfer. Greatland had previously announced that anomalous rare earths in soils were an exploration tool for IOCG deposits, so DGR revisited the NAGS data sets to search for rare earths. As shown in Figure 5 (below), rare earths point to a massive IOCG target More detailed investigation of the Northern Australia Geochemical Survey (NAGS) data sets further confirmed a large area of zone on the western section at Tanumbirini (yet to be supported by gravity and magnetic data). base metal anomalism at Tanumbirini. Examining the data sets for lead and copper by Mobile Metal Ion™ (partial leach) (MMI™) geochemistry indicated an even larger anomalous footprint at Tanumbirini, with a significant indication of copper on the western section of the project area (see Figures 4 and 5). The highest copper in the unpolluted Tanumbirini area is 4310 ppb by MMI™. Excluding polluted exceptions, this compares to the Mt Isa area high of 2970 ppb and 2,000–3,000 ppb in the Mt Oxide Gunpowder copper district. FIGURE 4 Lead (light green) and Copper (light blue) anomalism by MMI™ (partial leach) geochemistry cation of the Tanumbirini and Victoria River Projects in the Northern Territory DGR considers that in the Tanumbirini Project Area, Auburn Resources has secured two new potential mineral fields: 1. a pyritic dolomitic shale sub basin of the broader McArthur Basin prospective for lead zinc deposits at Tanumbirini East; and 2. an iron oxide copper gold target area at Tanumbirini West. Figure 6 below is a composite diagram incorporating mapped fault structures and EM supported geology on a magnetic image, indicating the interpretation of a fault bounded pyritic dolomitic shale sub basin prospective for lead zinc deposits on the east, and iron oxide copper gold (IOCG) targets on the west. The standout feature through Tanumbirini is an 80 km long magnetic terrane boundary (shaded in purple), and which DGR considers is the source of the copper-gold-uranium-molybdenum-rare earth anomalism. The soil geochemistry and EM data from the Geoscience Australia surveys adds to an already extensive knowledge of surface geology and faults in the area, as well as available detailed magnetic data and a general understanding of the local stratigraphy. FIGURE 5 Copper, gold, uranium, rare earths and molybdenum association at Tanumbirini – indicative of large iron oxide copper gold (IOCG) targets under relatively shallow cover 12 13 FIGURE 6 Geological interpretation on magnetic image – fault bounded pyritic dolomitic shale sub-basin on the east DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 EXPLORATION AND DEVELOPMENT OF UNLISTED SUBSIDIARIES AND PROJECTS CONTINUED AUBURN RESOURCES LIMITED CONTINUED FIGURE 7 Conceptual SW-NE geological cross-section of the Tanumbirini Project area ARMOUR UGANDA LIMITED (83.16%) Armour Uganda’s flagship project is the Kanywataba Block which is highly prospective for oil and gas. The project covers approximately 344km2 and is located in a rift basin within the Albertine Graben, Uganda. The project area is in close proximity to the Total and CNOOC operations to the North. Activities in the year and which are ongoing include: reprocessing of existing 2D seismic data; geochemical surface soil gas sampling program; 2D seismic programme; Basin Analysis study; and pursuing renewal of the permit. FIGURE 8 Location of the Kanywataba Block, Armour Uganda’s flagship project PINNACLE GOLD PTY LTD (94.34%) Pinnacle Gold holds substantial gold exploration tenements south of Charters Towers, QLD. Most of the area is soil covered, with previous exploration efforts by earlier explorers largely confined to areas of outcrop and focused on mapping and sampling known workings. Only two areas have been drilled. To date there has been no wide ranging systematic geochemical survey undertaken, yet the area clearly lies on potentially mineralising structures (Charters Towers – Black Jack – Mt Leyshon). Previous explorers appear to have been distracted by small high-grade gold bearing quartz veins with no size potential. Significant stream sediment anomalisms (see Figure 10 below) may not all be due to the proximate small veins. After further interrogation of historical exploration programs, Pinnacle reconsidered the exploration strategy for this mostly soil covered area. Looking for large targets, Pinnacle has undertaken a field program of low gold detection limit soil lines on a grid pattern with infill gridding of any elevated results. Initial shallow RC drilling on 2 of the EPMs were undertaken in late 2018 with mixed results, warranting further exploration and drilling to better define drill targets. FIGURE 9 Pinnacle Gold‘s EPM locations, Queensland 14 15 FIGURE 10 Overview of gold stream sediment geochemistry south of Charters Towers (compiled from historical data) DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 EXPLORATION AND DEVELOPMENT OF UNLISTED SUBSIDIARIES AND PROJECTS CONTINUED COOLGARRA MINERALS PTY LTD (100%) Coolgarra Minerals is focussed on discovery and development of gold, antimony, nickel and cobalt and holds five granted EPMs to the south of Greenvale, QLD and one EPM west of Theodore in Central Queensland. The southernmost permit covers substantial historic gold workings at Janelle’s Hope and Wade’s with the Northern tenement areas immediately adjacent to the south of the Sconi nickel-cobalt project. Initial exploration was focused around several historical small-scale mining areas, in particular Wally’s Hope and Janelle’s Hope Prospects in the southern section of EPM 19270, and what is recorded as a long (several kilometres) strata bound gold occurrence in the northern section now referred to as Wade’s Prospect. First pass shallow drilling campaign on the Greenvale South project area result highlights include a gold intercept of 14 metres @ 1.67g/t and a cobalt-nickel intercept of 8 metres @ 0.16% cobalt and 0.74% nickel45. Figure 12 over the page is a satellite image of the southern section of EPM 19270 showing the soil grid lines with a macro view of the soil gold concentration contours at >25 ppb, >50 ppb, and >100 ppb. FIGURE 11 Coolgarra Minerals’ EPM locations, Queensland FIGURE 13 Drilling Hole PAN 22 – Intercepted 0.16% cobalt and 0.74% nickel over 6 metres FIGURE 12 Soil Sample Grid on southern section of EPM 19270 16 17 DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 EXPLORATION AND DEVELOPMENT OF UNLISTED SUBSIDIARIES AND PROJECTS CONTINUED HARTZ RARE EARTHS PTY LTD (100%) Hartz Rare Earths (HRE) have applications for two exploration licenses in the Northern Territory. The project area is located approximately 855km south of Darwin and 420km north-west of Alice Springs. The target is a uranium copper molybdenum anomalous area highlighted in the recent Geoscience Australia survey. The geology and metal association indicate the potential for roll front uranium deposits within dry stream channels on the margin of the Tanami Desert. On grant of the exploration licenses, HRE is proposing to investigate this previously large unexplored target specifically for uranium, copper, molybdenum and vanadium using a denser geochemical survey. Initially this will involve further MMI™ and conventional sampling, followed by traverses of shallow drilling. FIGURE 14 Geoscience Australia MMI™ stream sediment geochemistry map FIGURE 15 License application location map ALBATROSS BAUXITE PTY LTD (100%) Albatross Bauxite holds two exploration permits in the Kingaroy region located approximately 175km north-west of Brisbane and 25km west of Kingaroy. The Kingaroy Project comprises EPM 26838 (Jumna Creek) and EPM 26839 (Holland Creek) and was established to explore for Lithium, Caesium and Tantalum pegmatites (LCT) within the Kingaroy pegmatite field (refer Figure 16). FIGURE 16 Jumna Creek and Holland Creek tenement location map 18 19 DGR Global and its subsidiariesdgrglobal.com.au Review of operations continued for the year ended 30 June 2019 MINERAL RESOURCES Following a resource drilling programme that was announced to the ASX on 4 August 201446, the Shamrock Tailings Dam contains a JORC 2012 compliant Mineral Resource of: • indicated: 770,000 tonnes @ 0.58 g/t Au for 450,000 grams (14,000 ounces) gold, and • inferred: 770,000 tonnes @ 11 g/t Ag for 8,242,400 grams (265,000 ounces) silver. There has been no change to this Mineral Resource since that time. FUTURE DEVELOPMENTS DGR Global aims to hold its key positions in the listed resource companies that it has created as they mature and develop. This review has identified unlisted subsidiaries that may progress to listing within the next 12–18 months, subject to further exploration, development and market conditions. FOOTNOTES 1DGR ASX Release 22/8, 25/10/17, 26/9/18 3SOLG LSE & TSX Releases 20/11/18, 3/1/19 5SOLG LSE & TSX Releases 20/03, 7/6, 18/7/18 7SOLG LSE & TSX Releases 16/10, 8/11/18 9SOLG LSE & TSX Release 07/05/19 11SOLG LSE & TSX Release 09/05/19 13SOLG LSE & TSX Releases 20/05, 28/06/19 15SOLG LSE & TSX Releases 06/06, 21/06, 27/06/19 17AJQ ASX Release 29/3/19 19AJQ ASX Releases 15/11, 21/12/18 21AJQ ASX Release 19/9/17 23AJQ ASX Release 6/12/18 25IRR LSE:AIM Releases 2/5, 16/8, 24/9/18 27IRR LSE:AIM Release 21/11/18 29IRR LSE:AIM Release 12/6/19 31DHR ASX Releases 16/1, 5/3/19 33DHR ASX Releases 19/2, 22/2/19 35DHR ASX Release 27/5/19 37ANW ASX Releases 23/1, 16/2/18 39ANW ASX Releases 18/1, 18/2, 13/3/19 41ANW ASX Release 13/5/19 43DGR ASX Release 20/5/19 45DGR ASX Release 8/2/19 2AJQ ASX Release 14/9/17 4SOLG LSE & TSX Releases 24/2, 25/5/18 6SOLG LSE & TSX Release 2/1/19 8SOLG LSE & TSX Release 10/04/19 10SOLG LSE & TSX Release 08/05/19 12SOLG LSE & TSX Release 10/05/19 14SOLG LSE & TSX Release 30/05/19 16SOLG LSE & TSX Release 13/06/19 18AJQ ASX Releases 21/1, 12/2/18 20AJQ ASX Release 18/2/19 22AJQ ASX Releases 28/3, 29/6, 1,12,21,27/11, 13/12/18, 30/05/19 24AJQ ASX Release 30/05/19 26IRR LSE:AIM Release 14/2, 23/04, 06/06, 20/06, 25/06/19 28IRR LSE:AIM Release 21/5/19 30IRR LSE:AIM Release 1/7/19 32DHR ASX Release 16/1/19 34DHR ASX Releases 2/4, 1/5, 27/5/19 36ANW ASX Release 29/3/19 38ANW ASX Releases 21/3, 27/3, 10/05/19 40ANW ASX Release 12/4/19 42ANW ASX Release 28/5/19 44DGR ASX Releases 3/7, 5/7/17, 8/11/18 46DGR ASX Release 4/8/14 COMPETENT PERSON’S STATEMENT The information herein that relates to Exploration Results is based on information compiled by Nicholas Mather B.Sc (Hons) Geol., who is a Member of The Australian Institute of Mining and Metallurgy. Mr Mather is employed by Samuel Capital Pty Ltd which provides certain consultancy services including the provision of Mr Mather as the Managing Director of DGR Global (and a director of DGR Global’s subsidiaries and associates). Mr Mather has more than five years experience which is relevant to the style of mineralization and type of deposit being reported and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. This public report is issued with the prior written consent of the Competent Person(s) as to the form and context in which it appears. 20 3 DIRECTORS’ REPORT 21 21 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report for the year ended 30 June 2019 Your Directors submit their report for the year ended 30 June 2019. 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. William (Bill) Stubbs Non-Executive Chairman Nicholas Mather Managing Director and Chief Executive Officer Brian Moller Non-Executive Director Vincent Mascolo Non-Executive Director Ben Cleary Non-Executive Director WILLIAM (BILL) STUBBS | NON-EXECUTIVE CHAIRMAN LLB Mr Stubbs is a lawyer of over 35 years’ experience and has previously worked with DGR Global CEO Nick Mather on the boards of numerous emerging globally significant resource companies. He was the co-founder of the legal firm Stubbs Barbeler and has practiced extensively in the area of commercial law including stock exchange listings and all areas of mining law. Mr Stubbs has held the position of director of various public companies over the past 25 years in the mineral exploration and biotech fields. He is also the former Chairman of Alchemia Ltd, and Bemax Resources NL which discovered and developed extensive mineral sands resources in the Murray Basin. He was the founding Chairman of Arrow Energy NL which originally pioneered coal seam gas development in Queensland’s Bowen and Surat Basins from 1998, and is now a world-wide coal seam gas company. During the past three years Mr Stubbs has also served as a director of the following listed and public companies: – Armour Energy Limited (retired 27 November 2018) – Lakes Oil NL (retired 13 November 2018) – Stradbroke Ferries Pty Ltd (formerly Stradbroke Ferries Limited) Mr Stubbs is the Chair of both the Audit and Risk Committee and the Remuneration and Nomination Committee. NICHOLAS MATHER | MANAGING DIRECTOR AND CEO BSc (Hons, Geol), MAusIMM Mr Mather has 30 years of experience in exploration and resource company management. His career has taken him to a variety of countries exploring for precious and base metals and fossil fuels. He has focused his attention on the identification of and investment in large resource exploration projects. Mr Mather was Managing Director of Bemax Resources NL and instrumental in the discovery of the world class Gingko mineral sand deposit in the Murray Basin in 1998. As an Executive Director of Arrow Energy NL, he drove the acquisition and business development of Arrow’s large Surat Basin Coal Bed Methane project in South East Queensland. Mr Mather was Managing Director of Auralia Resources NL, a junior gold explorer before its $23 million merger with Ross Mining NL in 1995. He was also a Non-Executive Director of Ballarat Goldfields NL, having assisted that company in its re-emergence as a significant emerging gold producer. During the past three years Mr Mather has also served as a director of the following listed companies: – Armour Energy Limited – Lakes Oil NL – Aus Tin Mining Limited – Dark Horse Resources Limited – SolGold plc, which is listed on the London Stock Exchange and the Toronto Stock Exchange – IronRidge Resources Limited, which is listed on the AIM submarket of the London Stock Exchange 22 23 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 DIRECTORS CONTINUED BRIAN MOLLER | NON-EXECUTIVE DIRECTOR LLB (Hons) Brian Moller is a partner in the Brisbane-based law firm HopgoodGanim. He was admitted as a solicitor in 1981 and has been a partner since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions. He holds an LLB (Hons) from the University of Queensland and is a member of the Australian Mining and Petroleum Law Association. Mr Moller acts for many public listed resource and industrial companies and brings a wealth of experience and expertise to the board particularly in the corporate regulatory BEN CLEARY | NON-EXECUTIVE DIRECTOR BEcon, GDipFin Mr Cleary has had an extensive career in the natural resources sector having worked in a number of specialist, director-level roles at Macquarie Bank, RBC and RBS over the past 15 years. In 2015, Mr Cleary founded Tribeca Global Natural Resources following the merger of Cleary Capital with Tribeca Investment Partners and has grown the team into one of Australia’s largest dedicated natural resources investment groups at a time where a number of investment management firms have exited the sector. The Tribeca Global Natural Resources team have been instrumental in corner-stoning more than $5bn of announced transactions and governance areas. During the past three years Mr Moller has also served as a director of the following listed companies: in Australasia, Europe and North America since Mr Cleary founded the business. Mr Cleary is based in Singapore and is the Chief – Aus Tin Mining Limited – Platina Resources Limited – Dark Horse Resources Limited – SolGold plc, which is listed on the London Stock Exchange and the Toronto Stock Exchange – Aguia Resources Limited – Lithium Consolidated Mineral Exploration Limited Executive Officer for Tribeca Investment Partners Asia. Mr Cleary has not during the past three years served as a Director of the any other listed companies. DIRECTORS’ HOLDINGS As at the date of this report, the interest of the Directors in the shares and options of DGR Global Limited were: Mr Moller is a member of both the Audit and Risk Committee and the Remuneration and Nomination Committee. Number of ordinary shares Number of options over ordinary shares VINCENT MASCOLO | NON-EXECUTIVE DIRECTOR BEng (Mining), MAusIMM, MIEAust Mr Mascolo is a qualified mining engineer with extensive experience in a variety of fields including, gold and coal mining, quarrying, civil-works, bridge-works, water and sewage treatment and estimating. Mr Mascolo has completed numerous assignments in the civil and construction industry, including construction and project management, engineering, quality control and environment and safety management. He is also a member of both the Australian Institute of Mining and Metallurgy and the Institute of Engineers of Australia. During the past three years Mr Mascolo has also served as a director of the following listed companies: – IronRidge Resources Limited, which is listed on the AIM submarket of the London Stock Exchange – Lithium Consolidated Mineral Exploration Limited Mr Mascolo is a member of both the Audit and Risk Committee and the Remuneration and Nomination Committee. William (Bill) Stubbs Nicholas Mather Brian Moller Vincent Mascolo Ben Cleary 6,428,082 112,142,553 7,254,618 9,650,000 1,000,000 2,312,500 8,250,000 2,312,500 2,312,500 2,312,500 COMPANY SECRETARY KARL SCHLOBOHM BComm, BEcon, MTax, CA, FGIA Karl Schlobohm is a Chartered Accountant with over 25 years of experience across a wide range of industries and businesses. He has extensive experience with financial accounting, corporate governance, company secretarial duties and board reporting. He currently also acts as the Company Secretary for ASX-listed Aus Tin Mining Limited, Armour Energy Limited, Dark Horse Resources Limited, LSE(AIM)-listed IronRidge Resources Limited, and LSE– and TSX-listed SolGold plc. 24 25 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 PRINCIPAL ACTIVITIES Liquidity and funding On 26 September 2018, DGR Global Ltd requested to draw down the remaining $2 million under the convertible note funding facility The principal activity of the Group during the financial year was the generation of projects, and the provision of services and support with Tribeca. At 30 June 2019 the cash balance of the Group was $1,671,891. Together the Group’s cash and the Group’s ability to to sponsored listed companies, within the mineral resources industry. There were no significant changes in the nature of the Group’s sell interests in its listed investments will provide the Group with sufficient funding for a minimum of 12 months from the date of this principal activities during the financial year. DIVIDENDS PAID OR RECOMMENDED report. OPERATING RESULTS There were no dividends paid or recommended during the current and previous financial years. For the year ended 30 June 2019, the Group loss after income tax was $4,432,875 (2018: $74,792). The loss for the year has been REVIEW OF OPERATIONS Detailed comments on operations and exploration programs up to the date of this report are included separately in the Annual Report under Review of Operations. REVIEW OF FINANCIAL CONDITION CAPITAL STRUCTURE Ordinary shares largely driven by: • management fee income; • interest income on convertible notes; • reversal of impairment on equity accounted investments; offset by • recognition of share of associate losses; • fair value adjustments on convertible notes; and • interest expense on the Tribeca convertible notes. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no new ordinary shares issued during the financial year ended 30 June 2019. The following shares were issued during the In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial financial year ended 30 June 2018: year under review not otherwise disclosed in this report or the financial statements of the Group for the financial year. • On 2 August 2017, 2,000,000 $0.065 ordinary shares were issued pursuant to the exercise of unlisted options held under the Employee Share Option Plan. SIGNIFICANT EVENTS AFTER REPORTING DATE • On 29 September 2017, 17,720,000 $0.065 ordinary shares were issued pursuant to the exercise of unlisted options held under On 20 September 2019, the Company provided a letter of funding support to Aus Tin Mining Ltd for an amout of up to $1,000,000 the Employee Share Option Plan. and for a term of up to 12 months, with funding requests to be accompanied by details of proposed expenditure and subject the • On 27 November 2017, 22,950,000 $0.065 ordinary shares were issued pursuant to the exercise of unlisted options held under the Director Share Option Plan. Company’s approval. POSITION AT 30 JUNE 2019 AND POSITION AT THE DATE OF THIS REPORT Financial position Subsequent to 30 June 2019, the Company has sold an additional $2,050,000 of Armour Energy Corporate Bonds (Corporate Bonds) bringing the total of Corporate Bonds held to $6,700,000 at the date of this report. The net assets of the Group have increased by $15,853,524 to $119,248,190 as at 30 June 2019 from $103,394,666 as at 30 June The Directors are not aware of any other significant changes in the state of affairs of the Group or events after the reporting date that 2018. This increase has largely resulted from: would have a material impact on the consolidated financial statements. • increase in value of SolGold plc investment accounted for as assets at fair value through other comprehensive income; • increase in exploration and evaluation assets primarily due to the exploration work carried out in Uganda; offset by FUTURE LIKELY DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES • increase in other financial liabilities resulting from the draw down of the remaining $2 million under the convertible note funding Likely developments in the operations of the Group and the expected results of those operations in subsequent financial years have facility with Tribeca Investment Partners (Tribeca). During the past year the Group has continued investing in its mineral exploration tenements. been discussed where appropriate in the Annual Report under Review of Operations. ENVIRONMENTAL REGULATION AND PERFORMANCE Treasury policy The Group is subject to environmental regulation in relation to its exploration activities. The Group has conducted an extensive review The Group does not have a formally established treasury function. The Board is responsible for managing the Group’s currency risks of the environmental status of the Mining Leases and has estimated the potential costs for future rehabilitation and restoration to be and finance facilities. The Group does not currently undertake hedging of any kind. $1,041,313. There are no matters that have arisen in relation to environmental issues up to the date of this report. 26 27 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) REMUNERATION POLICY All Directors have the opportunity to qualify for participation in the Directors’ and Executive Officers’ option plan, subject to the approval of shareholders. The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract, The remuneration of Non-Executive Directors for the year ended 30 June 2019 is detailed in this Remuneration Report. motivate and retain highly skilled Directors and Executives. EXECUTIVE DIRECTOR AND SENIOR MANAGEMENT REMUNERATION The Remuneration and Nomination Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and the Executive team. The Remuneration and Nomination Committee assesses the appropriateness of the nature and amount of remuneration of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and Executive team. Such officers are given the opportunity to receive their base remuneration in a variety of forms including cash and fringe benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for the Company. Further details on the remuneration of Directors and Executives are set out in this Remuneration Report. The Company aims to reward the Executive Director and Senior Management with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to: • reward Executives for company and individual performance against targets set by reference to appropriate benchmarks; • align the interests of Executives with those of shareholders; • link reward with the strategic goals and performance of the Company; and • ensure total remuneration is competitive by market standards. The remuneration of the Executive Director and Senior Management may from time to time be fixed by the Board. The remuneration will comprise a fixed remuneration component and also may include offering specific short and long-term incentives, in the form of: The Company aims to reward the Executive Director and Senior Management with a level and mix of remuneration commensurate • performance based salary increases and/or bonuses; and/or with their position and responsibilities within the Company. The Board’s policy is to align Director and Executive objectives with • the issue of options. shareholder and business objectives by providing a fixed remuneration component and offering long-term incentives. During the year the Group did not engage the services of Remuneration consultants. In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director and Senior Management remuneration is separate and distinct. During 2019 there were no discretionary bonuses paid (2018: $nil). There were no performace based salary increases or options issued that were performance related. All Directors and Executives have the opportunity to qualify for participation in the Directors’ and Executive Officers’ Option Plan, subject to the approval of shareholders. All employees have the opportunity to qualify for participation in the DGR Global Employee NON-EXECUTIVE DIRECTOR REMUNERATION Share Option Plan. The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Company’s specific policy for determining the nature and amount of remuneration of Board members of the Company is set out below. The Constitution of the Company provides that the Non-Executive Directors are entitled to remuneration as determined by the Company in general meeting to be apportioned among them in such manner as the Directors agree and, in default of agreement, equally. The aggregate remuneration currently determined by the Company is $350,000 per annum. Additionally, Non-Executive Directors are entitled to be reimbursed for properly incurred expenses. The remuneration of the Executive Director and Senior Management for the year ended 30 June 2019 is detailed in this Remuneration Report. RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE The Company and its subsidiaries’ principal activity is the generation of projects, and the provision of services and support provided to sponsored listed companies, within the mineral resources industry and accordingly only generates revenues for services and support provided and historically has generated losses. If a Non-Executive Director performs extra services, which in the opinion of the Directors are outside the scope of the ordinary duties of the Director, the Company may remunerate that Director by payment of a fixed sum determined by the Directors in addition to or Share price at year end Dividend declared instead of the remuneration referred to above. However, no payment can be made if the effect would be to exceed the maximum Earnings (loss) per share (cents per share) aggregate amount payable to Non-Executive Directors. A Non-Executive Director is entitled to be paid travelling and other expenses 2015 $0.036 $0.0025 1.6 2016 $0.025 - 0.1 2017 $0.135 - 0.5 2018 $0.09 - (0.0) 2019 $0.105 - (0.7) properly incurred by them in attending Director’s or general meetings of the Company or otherwise in connection with the business of During the year ended 30 June 2019 the market price of the Company’s ordinary shares ranged from a low of $0.083 to a high of the Company. 28 $0.165. 29 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE CONTINUED As the Company is still in the generation of projects and exploration stage, the link between remuneration, company performance and shareholder wealth is tenuous. Share prices are subject to the influence of metals prices and market sentiment toward the sector, and as such increases or decreases may occur quite independent of Executive performance or remuneration. Senior management The base salary of senior management are as follows: Position Company Secretary Chief Financial Officer Group General Counsel General Manager Base salary $218,500 $287,500 $350,000 $200,000 EMPLOYMENT CONTRACTS Employment contracts entered into with senior management contain the following key terms: It is the Board’s policy that employment agreements are entered into with all Executive Directors, Executives and employees. Contracts do not provide for pre-determining compensation values or method of payment. Rather the amount of compensation is determined by the Board in accordance with the remuneration policy set out above. The current employment agreement with the Managing Director has a notice period of three (3) months. All other Executive employment agreements have between 1 and 3 months’ notice periods. No current employment contracts contain early termination Event Duration Performance-based salary increases and/or bonuses Short– and long-term incentives, such as options Resignation / notice period Serious misconduct Company policy Non-specific Board discretion Board discretion 1–3 months Company may terminate at any time Payouts upon resignation or termination, outside industrial regulations (ie. ‘golden None clauses. The terms of appointment for Non-Executive Directors are set out in letters of appointment. handshakes’) Certain Key Management Personnel are entitled to their statutory entitlements of accrued annual leave and long service leave together with any superannuation on termination. No other termination payments are payable. Managing Director DGR Global Limited has an agreement with Samuel Capital Pty Ltd, an entity associated with Nicholas Mather, for the provision of certain consultancy services by Nicholas Mather. The agreement was last updated on 1 July 2015. Samuel Capital Pty Ltd will provide Nicholas Mather as the Managing Director of DGR Global Limited for a base fee of $250,000 per annum. Effective 1 March 2017 the Managing Director’s base fee was increased to $300,000 per annum. There is no fixed term specified in this agreement. Under the terms of the present contract: • both DGR Global Limited and Samuel Capital Pty Ltd are entitled to terminate the contract upon giving three (3) months written notice (6 months where triggered by a change of control); • DGR Global Limited is entitled to terminate the agreement upon the happening of various events in respect of Samuel Capital Pty Ltd’s solvency or other conduct or if Nicholas Mather ceases to be a Director of DGR Global Ltd; • the contract provides for a six-monthly review of performance by DGR Global Limited. The Company currently has not set any specific KPIs; and • the contract provides for the provision of a car park. There is no termination payment provided for in the Executive Service Contract with Samuel Capital Pty Ltd, other than the agreed DETAILS OF KEY MANAGEMENT PERSONNEL (i) Directors Bill Stubbs Non-Executive Chairman Nicholas Mather Managing Director and Chief Executive Officer Brian Moller Non-Executive Director Vincent Mascolo Non-Executive Director Ben Cleary Non-Executive Director (ii) Other Key Management Personnel The following persons are the Senior Executives of the Company: Greg Runge General Manager Karl Schlobohm Company Secretary Priy Jayasuriya Chief Financial Officer Peter Burge Group General Counsel notice periods. 30 31 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED REMUNERATION DETAILS Remuneration of Directors Directors Bill Stubbs 2019 2018 Nicholas Mather 2019 2018 Brian Moller 2019 2018 Vincent Mascolo 2019 2018 Ben Cleary 2019 2018 Sub-total remuneration 2019 2018 Short-term benefits Long-term benefits Post-employment Share-based payments Total Consisting of options Consisting of performance-related Salary & fees Cash bonus Non-cash and other* Long service leave accrual Superannuation $ $ $ $ $ Equity-settled Options $ Shares $ $ % % 70,000 70,000 300,000 300,000 50,000 50,000 50,000 50,000 50,000 37,121 520,000 507,121 - - - - - - - - - - - - 5,439 2,425 13,939 14,963 5,439 2,425 5,439 2,425 5,439 2,425 35,695 24,663 - - - - - - - - - - - - - - - - - - - - - - - - - 52,910 - 188,760 - 52,910 - 52,910 - 52,910 - 400,400 - - - - - - - - - - - - 75,439 125,335 313,939 503,723 55,439 105,335 55,439 105,335 55,439 92,456 555,695 932,185 - 42% - 37% - 50% - 50% - 57% * “Non-cash and other” short-term benefits include provision of a car park and/or an allocation of the Company’s Directors and Officers insurance premium. 32 - - - - - - - - - - 33 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED REMUNERATION DETAILS CONTINUED Remuneration of Key Management Personnel Other Key Management Salary & fees Personnel Greg Runge 2019 2018 Karl Schlobohm 2019 2018 Priy Jayasuriya 2019 2018 Peter Burge1 2019 2018 Neil Wilkins2 2019 2018 Sub-total remuneration 2019 2018 $ 182,648 182,648 218,440 218,455 262,558 262,558 330,769 - - 56,044 994,415 719,705 Total remuneration 2019 2018 1,514,415 1,226,826 Short-term benefits Long-term benefits Post-employment Share-based payments Total Consisting of options Consisting of performance-related Cash bonus $ Non-cash and other* Long service leave Superannuation Options Shares Equity-settled $ accrual $ $ $ $ $ % % - - - - - - - - - - - - - - 15,339 12,325 5,439 2,425 15,339 12,325 3,510 - - - 17,352 17,352 - - 4,288 3,839 24,943 24,943 13,872 482 31,423 - - 2,425 49,989 29,500 85,684 54,163 - - - 8,280 3,839 8,280 3,839 - - - 73,718 42,295 73,718 42,295 - 22,937 - 68,811 - 68,811 - - - 22,937 - 183,496 - 583,896 - - - - - - - - - - - - - - 218,849 235,262 223,879 289,691 307,128 372,476 376,546 - - - 10% - 24% - 18% - - - 81,406 28% 1,126,402 978,835 1,682,097 1,911,020 * “Non-cash and other” short-term benefits include provision of a car park and/or an allocation of the Company’s Directors and Officers insurance premium. 1 Peter Burge was appointed as Group General Counsel on 23 January 2018 and was considered a key management personnel commencing 1 July 2018. 2 Neil Wilkins retired as Exploration Manager on 30 June 2018. 34 - - - - - - - - - 35 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED REMUNERATION DETAILS CONTINUED Performance income as a proportion of total remuneration Performance based bonuses are paid on set monetary figures, rather than proportions of salaries. The remuneration committee has set these bonuses to encourage achievement of specific goals that have been given a high level of importance in relation to the future growth of the consolidated Group. The remuneration committee will review the performance bonuses to gauge their effectiveness against achievement of the set goals, and adjust future years’ incentives as they see fit, to ensure the most cost effective and efficient methods. There were no discretionary bonus payments made during the year ended 30 June 2019 (2018: $nil). Shares and options issued in DGR Global Limited as part of remuneration Shares and options are not issued based on performance criteria. Options are issued to the majority of key management personnel and executives to align comparative shareholder return and reward for Directors and executives. DGR Global Limited Directors Bill Stubbs Nicholas Mather Brian Moller Vincent Mascolo Ben Cleary Other Key Management Personnel Greg Runge Karl Schlobohm Priy Jayasuriya Peter Burge Total Balance on Received as part Received on Other# 30 June 2018 of remuneration exercise of Balance on 30 June 2019 options 6,428,082 112,142,553 7,254,618 9,650,000 1,000,000 13,009,415 6,500,000 2,000,000 - 157,984,668 - - - - - - - - - - - - - - - - - - - - - - - - - - 6,428,082 112,142,553 7,254,618 9,650,000 1,000,000 13,009,415 (250,000) 6,250,000 (1,970,000) - 30,000 - (2,220,000) 155,764,668 The terms and conditions of the grant of options over ordinary shares affecting remuneration of directors and other key management personnel during the financial year ended 30 June 2019 or future reporting years are set out below. # Other includes the balance of shares held on appointment / resignation, and shares acquired and sold for cash in on-market transactions. There were no shares held nominally at the end of the year. Auburn Resources Limited Key Management Grant date Vesting and Expiry date Exercise price Fair value per option at Personnel options exercisable date 7,000,000 17,500,000 3,000,000 9/11/2017 30/11/2017 12/02/2018 9/11/2017 8/11/2020 30/11/2017 28/11/2020 12/02/2018 12/02/2021 $0.20 $0.20 $0.20 grant date $0.0229 $0.0229 $0.0240 Options granted carry no dividend or voting rights. There was no amount paid or payable by the recipients. There were no options over ordinary shares granted to and vested by directors and other key management personnel as part of compensation during the year ended 30 June 2019. SHARES ISSUED ON EXERCISE OF REMUNERATION OPTIONS Directors Bill Stubbs Nicholas Mather Brian Moller Vincent Mascolo Ben Cleary There were no options exercised into ordinary shares by employees and Directors during the year that were previously granted as Other Key Management remuneration (2018: 34,950,000). The Board’s current policy does not allow Directors and executives to limit their risk exposure in relation to equities or options without the approval of the Board. ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL Share holdings Personnel Greg Runge Karl Schlobohm Priy Jayasuriya Neil Wilkins Total Balance on Received as part Received on Other 30 June 2018 of remuneration exercise of Balance on 30 June 2019 options - - 100,000 100,000 - 600,000 - - 200,000 1,000,000 - - - - - - - - - - - - - - - - - - - - - - (66,666) (66,666) - - - 33,334 33,334 - 600,000 1,200,000 - 50,000 1,412,742 1,929,410 - 50,000 1,612,742 2,929,410 The number of shares in the Company and controlled subsidiaries held during the financial year by each director and other member On 23 July 2018, Auburn Resources Limited consolidated its share capital on a 3-into-1 basis, resulting in its number of shares on issue reducing from 63,400,000 to 21,133,333 on that date. of the key management personnel of the consolidated entity, including their personally related parties is set out over the page. There were no shares held nominally at the end of the year. 36 37 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL CONTINUED Share holdings continued Pinnacle Gold Pty Ltd Directors Bill Stubbs Nicholas Mather Brian Moller Vincent Mascolo Ben Cleary Other Key Management Personnel Greg Runge Karl Schlobohm Neil Wilkins Priy Jayasuriya Total Balance on Received as part Received on Other 30 June 2018 of remuneration exercise of Balance on 30 June 2019 options 200,000 200,000 - 200,000 - 500,000 100,000 400,000 50,000 1,650,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 200,000 200,000 - 200,000 - 500,000 100,000 400,000 50,000 1,650,000 DGR Global Limited Balance Granted as Exercised Other# Balance Vested at Vested and Vested and on remuneration on 30 June the end of exercisable unexercisable Directors Bill Stubbs 30 June 2018 2,312,500 Nicholas Mather 8,250,000 Brian Moller Vincent Mascolo Ben Cleary 2,312,500 2,312,500 2,312,500 Other Key Management Personnel Greg Runge 1,000,000 Karl Schlobohm 3,000,000 Priy Jayasuriya 3,000,000 Peter Burge Total 3,000,000 27,500,000 2019 the year at the end at the end of of the year the year - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,312,500 2,312,500 2,312,500 8,250,000 8,250,000 8,250,000 2,312,500 2,312,500 2,312,500 2,312,500 2,312,500 2,312,500 2,312,500 2,312,500 2,312,500 1,000,000 1,000,000 1,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 - 27,500,000 27,500,000 27,500,000 - - - - - - - - - - # Other includes the balance of options held on appointment / resignation, and options expired during the period. Auburn Resources Limited There were no shares held nominally at the end of the year. There were no options over ordinary shares in Auburn Resources Limited held during the financial year by Directors or key Option holdings The number of options over ordinary shares in the Company and controlled subsidiaries held during the financial year by each management personnel. Pinnacle Gold Pty Ltd director and other members of key management personnel of the consolidated entity, including their personally related parties, is set There were no options over ordinary shares in Pinnacle Gold Pty Ltd held during the financial year by Directors or key management out over the page. personnel. Loans to Directors and Key Management Personnel There were no loans made, guaranteed or secured to directors and key management personnel by the entity or any of its controlled entities. 38 39 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued for the year ended 30 June 2019 REMUNERATION REPORT (AUDITED) CONTINUED ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL CONTINUED Other transactions with Key Management Personnel i) Mr Brian Moller (a Director), is a partner in the firm HopgoodGanim Lawyers. Hopgood Ganim Lawyers were paid $26,644 (2018: $81,702) for the provision of legal services to the Group during the year. The services were based on normal commercial terms and conditions. At 30 June 2019 there was a balance of $9,676 owing (2018: $4,176) included within current liabilities. ii) Mr Greg Runge, during the prior financial year advanced subsidiary Auburn Resources Limited an unsecured loan of $100,000 (2019: nil). There was no interest payable on the advance. During the year ended 30 June 2019 the loan was converted to shares in Auburn Resources at $0.10 per share. At 30 June 2018 there was a balance of $100,000 owing (2019: nil) iii) Mr Neil Wilkins, during the prior financial year advanced subsidiary Auburn Resources Limited an unsecured loan of $40,000 (2019: nil). There was no interest payable on the advance. During the year ended 30 June 2019 the loan was converted to shares in Auburn Resources at $0.10 per share. At 30 June 2018 there was a balance of $40,000 owing (2019: nil) (END OF REMUNERATION REPORT) DIRECTORS’ MEETINGS OPTIONS There were no shares issued as a result of the exercise of options during the year ended 30 June 2019 (2018: 42,670,000) and none since that date. At the date of this report, the unissued ordinary shares of DGR Global Limited under option are as follows: Grant date 9 November 2017 30 November 2017 12 February 2018 15 June 2018 30 October 2018 Date of expiry Exercise price Number under option 8 November 2020 28 November 2020 12 February 2021 12 February 2021 12 February 2021 $0.20 $0.20 $0.20 $0.20 $0.20 19,375,000 17,500,000 3,000,000 1,000,000 1,200,000 At the date of this report, there is no unissued ordinary shares of Auburn Resources Limited or Pinnacle Gold Pty Ltd under option. No option holder has any right under the options to participate in any other share issue of the Company or any other entity. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purposes of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. The number of meetings of Directors held during the period and the number of meetings attended by each Director are set out in the NON-AUDIT SERVICES table below. Nicholas Mather Bill Stubbs Brian Moller Vincent Mascolo Ben Cleary Board Audit & Risk Management Remuneration & Nomination Committee Committee CORPORATE GOVERNANCE There were no non-audit services provided by the entity’s auditor BDO Audit Pty Ltd for the year ended 30 June 2019 (2018: nil) Number of Meetings Number of Meetings Number of Meetings meetings held attended meetings held attended meetings held attended while in office while in office while in office 8 8 8 8 8 8 8 6 6 7 N/A N/A N/A N/A 2 2 2 2 1 2 - - - - - - N/A N/A N/A N/A In recognising the need for the highest standards of corporate behavior and accountability, the Directors of DGR Global Limited support the principles of good corporate governance. The Company’s Corporate Governance Statement has been released as a separate document and is located on our website at dgrglobal.com.au. AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s Independence Declaration forms part of the Directors’ Report and can be found on page 42. INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS Each of the Directors and the Secretary of the Company has entered into a Deed with the Company whereby the Company has provided certain contractual rights of access to books and records of the Company to those Directors. The Company has insured all of the Directors of DGR Global Limited. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act does not require disclosure of the information in these circumstances. The Company has not indemnified or insured its auditor. 40 Signed in accordance with a resolution of the Directors. Nicholas Mather Managing Director Brisbane 30 September 2019 41 DGR Global and its subsidiariesdgrglobal.com.au Directors’ report continued Auditor’s independence declaration Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEPENDENCE BY T J KENDALL TO THE DIRECTORS OF DGR GLOBAL LIMITED As lead auditor of DGR Global Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of DGR Global Limited and the entities it controlled during the year. T J Kendall Director BDO Audit Pty Ltd Brisbane, 30 September 2019 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 42 DGR Global Limited annual report for the year ended 30 June 2019 38 4 FINANCIAL REPORT 43 43 DGR Global and its subsidiariesdgrglobal.com.au Consolidated statement of financial position as at 30 June 2019 Financial report Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2019 Notes 2 2 13(a) 13(a) 18 11(b) 3 4 11(a) 4 13(a) Revenue and other income Revenue Interest and other income Total revenue and other income Expenses Finance costs Employee benefits expenses Depreciation Legal expenses Administration and consulting expenses Exploration and evaluation assets written-off Rehabilitation expense Share of profits / (losses) of associates Net reversal of impairment of investment in associates Movement in fair value of convertible note payable Movement in fair value of convertible note receivable Share based payments expense Profit / (loss) before income tax Income tax (expense) / benefit Profit / (loss) for the year Other comprehensive income: items that will not be reclassified into profit or loss Change in fair value of financial assets Income tax benefit relating to change in fair value of financial assets Share of associates other comprehensive income (net of tax) Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit / (loss) for the year attributable to: Owners of the parent company Non-controlling interests Total comprehensive income for the year attributable to: Owners of the parent company Non-controlling interests 2019 $ 2018 $ 1,596,000 1,596,000 Cash and cash equivalents Current assets 2,037,587 3,633,587 6,180,693 7,776,693 (1,162,022) (782,740) (2,463,681) (2,389,109) (24,882) (31,024) (34,701) (72,885) (1,957,966) (1,875,305) (61,844) (822,265) - - (4,127,440) (6,236,853) 655,120 (54,241) (636,345) (46,186) (6,276,924) 1,844,049 (4,432,875) 4,991,112 200,096 636,345 (941,717) 448,671 (523,463) (74,792) 27,143,133 (50,651,299) (8,040,671) 15,195,297 (341,695) 376,703 18,760,767 (35,079,299) 14,327,892 (35,154,091) (4,440,658) 7,783 (4,432,875) (65,382) (9,410) (74,792) Trade and other receivables Other current assets Current tax assets Total current assets Non-current assets Other financial assets Investments accounted for using the equity method Property, plant and equipment Exploration and evaluation assets Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Non-current liabilities Deferred tax liabilities Other financial liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses 14,320,109 (35,144,681) Equity attributable to owners of the parent company 7,783 (9,410) 14,327,892 (35,154,091) Non-controlling interests Total equity Notes 9 10 16 4 11 13 14 15 17 4 18 19 20 21 22 2019 $ 1,671,891 1,110,705 6,223 - 2018 $ 2,841,511 1,483,286 39,710 5,101 2,788,819 4,369,608 133,671,640 108,812,320 16,277,817 17,991,832 417,534 426,731 9,292,821 159,659,812 6,572,307 133,803,190 162,448,631 138,172,798 1,757,845 1,757,845 1,461,117 1,461,117 30,479,079 9,854,145 1,109,372 41,442,596 24,287,557 7,939,904 1,089,554 33,317,015 43,200,441 34,778,132 119,248,190 103,394,666 33,545,921 103,792,308 33,545,921 84,650,218 (19,732,747) (15,292,089) 117,605,482 102,904,050 1,642,708 119,248,190 490,616 103,394,666 Earnings per share attributable to owners of the parent company Cents / share Cents / share Basic earnings per share Diluted earnings per share 8 8 (0.7) (0.7) (0.0) (0.0) 44 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. The above consolidated statement of financial position sould be read in conjunction with the accompanying notes. 45 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Consolidated statement of changes in equity for the year ended 30 June 2019 Attributable to owners of the parent company Attributable to owners of the parent company Issued capital Accumulated losses Share-based Financial assets Change in Profit reserve Total Non-controlling Total equity payments reserve revaluation reserve proportionate interest interests Balance at 1 July 2017 30,787,204 (15,226,707) 6,898,865 85,107,269 17,927,599 8,854,067 134,348,297 reserve Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Issue of shares Exercise of options Share issue costs, net of tax Share-based payments Balance at 30 June 2018 Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Issue of shares to non-controlling interest Share-based payments Balance at 30 June 2019 - - - - 2,773,550 (14,833) - (65,382) - (65,382) - - - - 33,545,921 (15,292,089) - - - - - (4,440,658) - (4,440,658) - - 33,545,921 (19,732,747) - - - - - - 941,717 7,840,582 - - - - 46,186 7,886,768 - (35,079,299) (35,079,299) - - - - 50,027,970 - 18,760,767 18,760,767 - - 68,788,737 - - - - - - - - - - - - - - (65,382) (35,079,299) (35,144,681) - 2,773,550 (14,833) 941,717 500,026 (9,410) 134,848,323 (74,792) - (35,079,299) (9,410) (35,154,091) - - - - 2,773,550 (14,833) 941,717 17,927,599 8,854,067 102,904,050 490,616 103,394,666 - - - 335,137 - 18,262,736 - - - - - 8,854,067 (4,440,658) 18,760,767 14,320,109 335,137 46,186 117,605,482 7,783 - 7,783 1,144,309 - 1,642,708 (4,432,875) 18,760,767 14,327,892 1,479,446 46,186 119,248,190 46 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 47 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Consolidated statement of cash flows for the year ended 30 June 2019 Cash flows from operating activities Receipts in the course of operations (including GST) Payments to suppliers and employees (including GST) Interest received Interest and other costs of finance paid Income taxes paid Notes 2019 $ 1,343,800 (3,829,287) 1,938,134 (802,845) - 2018 $ 902,800 (4,231,104) 855,947 (778,743) (547,712) Net cash flows from operating activities 29 (1,350,198) (3,798,812) Cash flows from investing activities Security deposit (payment) / refunds Payments for property, plant and equipment Payments for financial assets at fair value through other comprehensive income (116,853) (15,685) (15,000) (3,849) (15,343) (15,000) Notes to the financial statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CORPORATE INFORMATION The consolidated financial report of DGR Global Limited for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the Directors on 30 September 2019. DGR Global Ltd (the Parent or the Company) is a public company limited by shares incorporated and domiciled in Australia. The Company’s registered office is located on Level 27, 111 Eagle Street, Brisbane QLD 4000. The Company is a for-profit entity. The nature of the operations and principal activities of the Group are described in the Director’s report. Basis of preparation This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Payments for investments in associates Proceeds from redemption of convertible notes Proceeds from the sale of corporate bonds Payments for exploration and evaluation assets Repayments of loans by related parties Net cash flows from investing activities Cash flows from financing activities Proceeds from the issue of shares Proceeds from the issue of shares in subsidiaries to non-controlling interests Capital raising expenses Proceeds from borrowings Borrowing expenses Net cash flows from financing activities Net increase / (decrease) in cash held Cash at the beginning of the year Cash at the end of the financial year (2,100,000) (3,611,705) Standards Board and the Corporations Act 2001 (Cth). 539,023 1,269,701 (2,202,925) - (2,641,739) - - (2,733,749) 1,000,000 (5,379,646) - 2,773,547 882,317 - 2,000,000 (60,000) 2,822,317 (1,169,620) 2,841,511 1,671,891 - (14,833) 8,140,000 (240,000) 10,658,714 1,480,256 1,361,255 2,841,511 9 The financial report covers the Group comprising of DGR Global Ltd and its subsidiaries and is presented in Australian dollars. Compliance with IFRS Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements and notes of DGR Global Limited comply with International Financial Reporting Standards (IFRS) and interpretations. Historical cost convention The financial statements have been prepared on a historical cost basis, except for the following: • financial assets carried at fair value through other comprehensive income – refer note 11(a); • investment in convertible notes carried at fair value through profit or loss – refer note 11(b); • convertible notes payable at fair value through profit or loss – refer note 18. Functional and presentation currency The financial statements are presented in Australian dollars ($) which is DGR Global Limited’s functional and presentation currency. Going concern The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. For the year ended 30 June 2019 the Group generated a consolidated loss after tax of $4,432,875 and incurred operating cash outflows of $1,350,198. As at 30 June 2019 the Group had $1,671,891 in cash and cash equivalents, net current assets of $1,030,974 and net assets of $119,248,190. Due to DGR’s ability to sell down investments in listed entities and corporate bonds held, the Directors consider it appropriate to prepare the financial statements on a going concern basis. 48 The above statements of cash flows should be read in conjunction with the accompanying notes. 49 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (A) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS The accounting policies adopted are consistent with those of the previous financial year except as follows. New and amended Australian Accounting Standards and AASB Interpretations that have been adopted as of 1 July 2018 are set out below. Reference Title Application date Application of standard date for the Group Reference Title AASB 16 Leases AASB 2017–6 AASB 2017–7 AASB 2018–1 AASB 2018–2 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint Ventures Amendments to Australian Accounting Standards – Annual Improvements 2015–2017 Cycle Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement Application date Application of standard date for the Group 1 January 2019 1 July 2019 1 January 2019 1 July 2019 1 January 2019 1 July 2019 1 January 2019 1 July 2019 1 January 2019 1 July 2019 AASB 15 Revenue from Contracts with Customers 1 January 2018 1 July 2018 AASB 17 Insurance Contracts 1 January 2021 1 July 2021 AASB 2014–5 Amendments to Australian Accounting Standards arising from AASB 15 1 January 2018 1 July 2018 AASB 2016–3 AASB 2016–5 AASB 2016–6 Amendments to Australian Accounting Standards – Clarifications to AASB 15 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions Amendments to Australian Accounting Standards – Applying AASB 9 Financial Instruments with AASB 4 Insurance Contracts Amendments to Australian Accounting Standards – Transfers of 1 January 2018 1 July 2018 Management has assessed the effects of applying AASB 16 Leases and the current operating lease for office space will result in the recognition of a right of use asset and lease liability. Based on the leases currently in place, the amount to be recognised in respect of 1 January 2018 1 July 2018 the right of use asset and lease liability would be approximately $2.2 million. 1 January 2018 1 July 2018 (B) BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements of DGR Global Limited and its subsidiaries as at and for the AASB 2017–1 Investment Property. Annual improvements 2014–2016 Cycle and Other 1 January 2018 1 July 2018 period ended 30 June each year (the Group). Amendments AASB 2017–3 Amendments to Australian Accounting Standards – Clarifications to AASB 4 1 January 2018 1 July 2018 The group has adopted AASB 15 Revenue from Contracts with Customers from 1 July 2018 which did not have any impact on the 30 June 2018 comparative results. In the previous years, the group derived its revenue from providing management services to its affiliated entities. Revenue from providing management services is recognised in the accounting period in which the services are rendered. Subsidiaries Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances, transactions, unrealized gains and The adoption of the other above standards and interpretations did not have any material impact on the current or any prior period and losses resulting from intra-group transactions and dividends have been eliminated in full. is not likely to materially affect future periods. Australian Accounting Standards and Interpretations that have been recently issued or amended but are not yet effective have not date on which control is transferred out of the Group. been adopted by the Company for the annual reporting period ended 30 June 2019. The Consolidated Entity is yet to evaluate the impact of those standards and interpretations on the financial statements. Investments in subsidiaries held by DGR Global Limited are accounted for at cost in the separate financial statements of the parent Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the The Company anticipates that all of the relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement. Information of new standards, amendments and interpretations that are expected to be relevant to the Company’s financial statements is provided over the page. 50 entity less any impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues by the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parent will assess whether any indicators of impairment of the carrying value of the investment in the subsidiary exist. Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss is recognised. 51 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (B) BASIS OF CONSOLIDATION CONTINUED Subsidiaries continued The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values. When the Group’s share of losses in an associate is equal to or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Joint arrangements Joint operations The difference between the above items and the fair value of consideration (including the fair value of any pre-existing investment in The proportionate interests in the assets, liabilities and expenses of a joint operation activity have been incorporated in the financial the acquiree) is goodwill or discount on acquisition. statements under the appropriate headings. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, Joint ventures goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the parent. Losses are attributed to the non-controlling interest even if that results in a deficit balance. Associates Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income where applicable. The cumulative post- acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates reduce the carrying amount of the investment. Investments in joint ventures are accounted for using the equity method. Under the equity method, the share of the profits or losses of the joint venture is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of financial position at cost plus post-acquisition changes in the consolidated entity’s share of net assets of the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Dividends receivable from joint venture entities reduces the carrying amount of the investment. Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non- controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non- controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of DGR Global Limited. When the Group ceases to have control, or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. 52 53 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (C) BUSINESS COMBINATIONS (F) TRADE AND OTHER RECEIVABLES Receivables generally have 30–60 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is The group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non- trade receivables, the group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree recognised from initial recognition of the receivables. either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. (G) FINANCIAL INSTRUMENTS Recognition and initial measurement When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the designation in accordance with contractual terms, economic conditions, the Group’s operating or accounting policies and other contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes pertinent conditions as at the acquisition date. established by marketplace convention. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value acquiree is remeasured to fair value through profit and loss. through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured. Classification and subsequent measurement (i) Financial assets at amortised cost (D) OPERATING SEGMENTS Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. The business model of An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur these financial assets is to hold to collect contractual cash flows and their contractual cash flows comprise of solely principal and expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about interest. Financial assets at amortised cost include cash and cash equivalents, trade and other receivables, corporate bonds issued resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This by Armour Energy Limited, cash on deposit and security bonds. may include start-up operations which are yet to earn revenues. (ii) Financial assets at fair value through profit or loss Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are to users of the financial statements. Information about other operating segments that are below the quantitative criteria are combined and disclosed in a separate category for “all other segments”. (E) CASH AND CASH EQUIVALENTS designated as hedges. Assets in this category are classified as current assets. These assets are measured at fair value with gains or losses recognised in the profit or loss. Convertible note receivables are held at fair value through profit or loss as the convertible feature does not meet the requirements of being held to collect soley payment of principal and interest and therefore cannot be carried at amortised cost or at fair value through other comprehensive income. The coupon rate received periodically over the term of the notes is classified as part of the fair value For the statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with banks, other short term gain or loss in other income. highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short- term borrowings in current liabilities on the statement of financial position. 54 55 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (G) FINANCIAL INSTRUMENTS CONTINUED Classification and subsequent measurement continued (iii) Financial assets at fair value through other comprehensive income Equity investments are classified as being at fair value through Other Comprehensive Income. After initial recognition at fair value Impairment of financial assets An assessment is made at each reporting date to determine whether there is objective evidence that a specific financial asset or a group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that asset is determined from available information such as quoted market prices or by calculating the net present value of future anticipated cash flows. In estimating these cash flows, management makes judgments about a counter-party’s financial situation and the net realisable value of any underlying collateral. Impairment losses are recognised in the profit or loss. (being cost), the Company has elected to present in Other Comprehensive Income changes in the fair value of equity instrument Impairment losses on financial assets measured at amortised cost using the effective interest method are calculated by comparing investments. the carrying value of the asset with the present value of estimated future cash flows at the original effective interest rate. Unrealised gains and losses on investments are recognised in the financial assets revaluation reserve until the investment is sold or (H) PROPERTY, PLANT & EQUIPMENT otherwise disposed of, at which time the cumulative gain or loss is transferred to retained earnings. Property, plant & equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. (iv) Financial liabilities The cost of property, plant & equipment constructed within the Group includes the cost of materials, direct labour, borrowing costs Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective and an appropriate portion of fixed and variable costs. Subsequent costs are included in the asset’s carrying amount or recognised interest rate method, except for convertible notes which are subsequently measured at fair value through profit or loss. as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Fair value Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial year in which they are incurred. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value of all other financial assets and liabilities, where appropriate, including recent arm’s length transactions, reference to similar Depreciation instruments and option pricing models. The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the The depreciable amount of all property, plant & equipment is depreciated over their useful life to the Group commencing from the fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value lease or the estimated useful lives of the improvements. gains and losses to profit or loss. Dividends from such investments continue to be recognised in profit or loss as other revenue when the Company’s right to receive payments is established (see note 11) and as long as they represent a return on investment. The depreciation rates used for each class of assets are set out below. Changes in the fair value of financial assets at fair value through profit or loss are recognised in other income or other expenses in the statement of profit or loss and other comprehensive income as applicable. Interest income from these financial assets is included in the net gains / (losses). Dividend income is presented as other revenue. Details on how the fair value of financial instruments is determined are disclosed in note 31. Derecognition Class of property, plant & equipment Freehold building Plant and equipment Computers and office equipment Furniture and fittings Motor vehicles Depreciation 2.5% straight line 10–35% straight line 33.3% straight line 20% straight line 25% straight line Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in profit or loss. party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Derecognition Financial liabilities are derecognized where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. 56 57 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (I) EXPLORATION AND EVALUATION ASSETS (K) TRADE AND OTHER PAYABLES Trade and other payables are carried at amortised cost and due to their short term nature they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such expenditures are usually paid within 30–60 days of recognition. comprise net direct costs and an appropriate portion of related overhead expenditure but do not include overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached (L) PROVISIONS AND EMPLOYEE BENEFITS Provisions a stage which permits reasonable assessment of the existence of economically recoverable reserves and active or significant Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable operations in relation to the area are continuing. that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be A regular review has been undertaken on each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any A provision is raised against exploration and evaluation assets where the Directors are of the opinion that the carried forward net reimbursement. cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present abandon the area is made. obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area recognised in finance costs. according to the rate of depletion of the economically recoverable reserves. Costs of site restoration are provided over the life of the area from when exploration commences and are included in the costs of that Employee benefits (i) Wages, salaries and annual leave stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structure, waste removal, Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of and rehabilitation of the site in accordance with clauses of mining permits. Such costs have been determined using estimates of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts future costs, current legal requirements and technology on an undiscounted basis. expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the and measured at the rates paid or payable. (ii) Long service leave costs have been determined on the basis that restoration will be completed within one year of abandoning the site. The liability for long service leave is recognised and measured as the present value of expected future payments to be made in (J) IMPAIRMENT OF NON-FINANCIAL ASSETS respect of services provided by employees up to the reporting date. Consideration is given to expected future wages and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields At each reporting date, the Group reviews the carrying values of its non-financial assets to determine whether there is any indication at the reporting date on Australian corporate bonds with terms to maturity and currencies that match, as closely as possible, the that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the estimated future cash outflows. asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. 58 59 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (M) LEASES (P) REVENUE The Goup generates revenue from the provision of management serveces to related entities. Revenue from contracts with customers is recognised when control of the services is transferred to a customer at an amount that reflects the consideration to which the Group expects to be entiteled to receive in exchange for those services. Leases of property, plant & equipment where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the Group are classified as finance leases. Services Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased those management services. Revenues are recognised over time, which are invoiced monthly based on contractual terms. The Group’s performance obligation on management fees charged to related entities are fulfilled over time as the Group provides property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the year. Interest Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the Group will obtain method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the ownership of the asset or over the term of the lease. effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial Interest revenue is recognized as interest accrues using the effective interest rate method in accordance with AASB 9. This is a Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight line basis over the lease term. All revenue is stated net of the amount of goods and services tax (GST). asset to the net carrying amount of the financial asset. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term. (Q) INCOME TAX (N) SHARE CAPITAL The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. from the equity proceeds, net of any income tax benefit. (O) SHARE-BASED PAYMENTS The current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the reporting date. The Group may provide benefits to Directors, employees or consultants in the form of share-based payment transactions, whereby services may be undertaken in exchange for shares or options over shares (equity-settled transactions). Deferred tax is recongised in respect of temporary differences arising between the tax bases of assets and liabilities and their The fair value of options granted to Directors, employees and consultants is recognised as an employee benefit expense with a excluding a business combination, where there is no effect on accounting or taxable profit or loss. corresponding increase in equity (share-based payments reserve). The fair value is measured at grant date and recognised over the period during which the recipients become unconditionally entitled to the options. Fair value is determined using the Black-Scholes Deferred tax is calculated at the tax rates expected to apply to the period when the asset is realised or liability is settled. Deferred option pricing model. An expense is still recognised for options that do not ultimately vest because a market condition was not met. tax is recognised in profit or loss except where it relates to items that may be recognised directly in other comprehensive income or carrying amounts in the financial statements. No deferred income tax is recognised from the initial recognition of an asset or liability, Where the terms of options are modified, the expense continues to be recognised from grant date to vesting date as if the terms had tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible never been changed. In addition, at the date of the modification, a further expense is recognised for any increase in fair value of the temporary differences and unused tax losses can be utilised. equity, in which case the deferred tax is recognised in other comprehensive income or directly against equity respectively. Deferred transaction as a result of the change. Where options are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to the profit or loss. If new options are substituted for the cancelled options and designated as a replacement, the combined impact of the cancellation and replacement options are treated as if they were a modification. 60 61 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (Q) INCOME TAX CONTINUED Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement (T) EARNINGS PER SHARE Basic earnings per share is calculated as net profit / (loss) attributable to members of the parent, adjusted to exclude any costs of servicing equity other than ordinary shares, divided by the weighted average number of ordinary shares, adjusted for any bonus element. or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. • the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and • the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (U) FOREIGN CURRENCIES DGR Global Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic consolidation regime. The Company is responsible for recognising the current tax assets and liabilities and deferred tax assets environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian attributable to tax losses for the tax consolidation group. The tax consolidated group have entered a tax funding agreement whereby dollars, which is the Company’s functional and presentation currency. each company in the tax consolidation group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidation group. (R) GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of GST except where 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. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Exchange differences arising from the translation of financial statements of foreign subsidiaries are taken to the foreign currency translation reserve at the reporting date. (V) COMPARATIVES taxation authority is included as part of receivables or payables in the statement of financial position. When required by Australian Accounting Standards, comparative figures have been adjusted to conform to changes in presentation Cash flows are included in the 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. for the current financial year. (W) FAIR VALUE MEASUREMENT Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value (S) BORROWINGS Loans and borrowings are initially recognised at the fair value of consideration received net of transaction costs. They are participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. subsequently measured at amortised cost using the effective interest method. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act Where there is an unconditional right to defer settlement of the liability for at least twelve months after the reporting date, the loans or borrowings are classified as non-current. in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. 62 Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. 63 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED (W) FAIR VALUE MEASUREMENT CONTINUED For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where The notes are convertible into ordinary shares of the parent entity, at the option of the holder, or repayable in October 2020. The conversion rate is based on a variable formula subject to adjustments for share price movement. Management determined that these terms give rise to a derivative financial liability. The initial consideration received for the note was deemed to be fair value of the liability at the issue date. The liability will subsequently be recognised on a fair value basis at each reporting period. The fair value at each reporting date has been determined using a binomial tree model. The key assumptions used and sensitivity of those assumpions in the binomial tree model has been disclosed in Note 31. there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a Key judgements – convertible note receivable verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (X) CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key judgments – exploration & evaluation assets The Armour Energy convertible notes in the prior year were measured at fair value through profit or loss for financial reporting purposes. As the Armour Energy convertible notes were not traded in an active market, its fair value was estimated by discounting the stream of future interest and principal payments at the rate of interest prevailing at the reporting date for instruments of similar term and risk (the market interest rate), and adding this value to the value of the convertibility feature which was estimated using a Black- Scholes model based on assumptions including risk free interest rate, expected dividend yield, expected volatility and expected remaining life of the Armour Energy convertible notes receivable. Any resulting change in fair value was reflected on the profit or loss. Management estimates that the market interest rate on similar borrowings without the conversion feature was approximately 22% and The Group performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward costs used an implied volatility of 55.81% volatility in valuing the convertibility feature. Refer to Note 31 which summarises the quantitative in relation to that area of interest. These reviews are based on detailed surveys and analysis of drilling results performed to reporting information about the significant unobservable inputs used in level 3 fair value measurements. date. Key judgments – corporate bonds The Directors have assessed that for the exploration and evaluation assets recognised at 30 June 2019, the facts and circumstances do not suggest that the carrying amount of an asset may exceed its recoverable amount. In considering this the Directors have had regard to the facts and circumstances that indicate a need for an impairment as noted in AASB 6 Exploration for and Evaluation of The Armour Energy corporate bonds are debt instruments measured at amortised cost for financial reporting purposes. The Group’s intention is to hold these corporate bonds to collect the contractual cash flows. The characteristics of the contractual cash flows are that of soley the principal and interest. On intial recognition these are carried at fair value and there after they have been carried at Mineral Resources. Exploration and evaluation assets at 30 June 2019 were $9,292,821 (2018: $6,572,307). Key judgements – significant influence over associates amortised cost in accordance with AASB 9. Key judgments – share based payment transactions The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms The Group currently holds between 20% and 50% of the issued ordinary shares of certain companies and management considered and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity settled share whether the Group had control over these companies and accordingly whether these companies should be consolidated into the based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but Group. Several factors including but not limited to the relative proportion of other large shareholders, composition of the Board and may impact the profit or loss and equity. the ability to direct decisions arrived at during Board meetings were considered. Based on the factors considered, it was concluded that the Group does not control these companies but rather has the ability to exert significant influence. Accordingly, the Group’s investments in these companies have been accounted for under the equity accounting method. Key judgements – convertible note payable The Group’s convertible notes have been treated as a financial liability, in accordance with the principles set out in AASB 132. The key criterion for liability classification is whether there is an unconditional right to avoid delivery of cash for another financial asset to settle the contractual obligation. The terms and conditions applicable to the convertible notes require the Group to settle the obligation in either cash, or in the Company’s own shares. 64 65 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 2: REVENUE AND OTHER INCOME Revenue from contracts with customers Management fees (related parties) Total revenue from contracts with customers 2019 $ 2018 $ 1,596,000 1,596,000 1,596,000 1,596,000 NOTE 4. INCOME TAX (a) Components of tax expense / (benefit) in profit or loss comprise: Current tax Deferred tax Income tax paid in relation to the prior year (over) / under provisions of deferred tax expenses in prior year Disaggregtation of renvenue is not presented as all revenue for the current and prior years was derived from the provision of management fees. Interest and other income Interest (see below) Net foreign exchange gains Gain on reclassification of equity-accounted investments to investments held at fair value through other comprehensive income Other income Total other income Interest revenue from: Deposits held with financial institutions Armour Energy Limited convertible notes Armour Energy Limited corporate bonds Total interest revenue NOTE 3: PROFIT / (LOSS) BEFORE INCOME TAX Profit / (loss) before income tax has been determined after: Finance costs External Related parties Total finance costs Share based payments expense Superannuation contributions expense Minimum lease rentals under operating leases (Gain) / loss on foreign exchange 2019 $ 2018 $ 1,751,816 1,680,518 - - 285,771 2,037,587 13,168 4,478,780 8,227 6,180,693 14,342 26,906 1,520,579 1,653,612 216,895 1,751,816 - 1,680,518 2019 $ 2018 $ 1,162,022 782,740 - - 1,162,022 782,740 46,186 159,844 542,502 713 941,717 140,705 520,738 (13,618) 2019 $ 5,101 (1,493,485) - (355,665) 2018 $ (5,101) 381,365 147,199 - (1,844,049) 523,463 8,040,671 8,040,671 (15,195,297) (15,195,297) Components of tax expense / (benefit) in other comprehensive income comprise: Deferred tax (b) The prima facie tax on profit / (loss) before income tax is reconciled to the income tax expense / (benefit) as follows: 2019 $ 2018 $ Prima facie tax on profit / (loss) before income tax at 30% (2018: 30%) (1,883,077) 134,601 Add tax effect of: Permanent differences Other Derecognised tax losses Less tax effect of: Permanent differences Prior year loss now recognised Other Recognition of temporary differences Income tax expense / (benefit) Amounts recognised directly in equity Net deferred tax debited / (credited) directly to equity Income tax provision recognised Income tax provision 25,859 - 8,675 (1,848,543) (197,873) 202,367 285,102 - 8,590 428,293 - - 95,170 - (1,844,049) 523,463 - - - - - (5,101) 66 67 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 4: INCOME TAX CONTINUED Opening Net charged to Net charged Net charged to Closing balance income to other comprehensive income other equity balance $ $ 2019 Deferred tax asset Carried forward tax losses 2,357,452 1,390,192 Accruals/provisions Capital raising costs expensed 241,430 106,627 2,705,509 (21,895) (39,600) 1,328,697 $ - - - - Deferred tax liability Financial assets at fair value through other comprehensive income (21,732,550) - (8,143,179) Convertible note - (108,693) - Investment in associates (4,322,261) 1,648,292 102,509 Exploration and evaluation assets (870,656) (1,019,146) Property, plant & equipment (67,599) - - - (26,993,066) 520,452 (8,040,671) Net deferred tax recognised (24,287,557) 1,849,149 (8,040,671) Deferred tax assets not recognised Unused tax losses Unused capital losses Temporary differences Tax benefit at 30% 1,790,677 28,915 67,848 - 557,558 - - 8,675 - - - - Opening Net charged to Net charged Net charged to Closing balance income to other comprehensive income other equity balance 2018 Deferred tax asset Carried forward tax losses Accruals/provisions Capital raising costs expensed Investment in associates AFS revaluation $ $ 1,716,256 164,945 83,964 372,124 405,059 2,742,348 641,196 76,485 22,663 (372,124) - 368,220 $ - - - - (405,059) (405,059) Deferred tax liability Financial assets at fair value through other comprehensive income (36,024,309) (1,308,596) 15,600,355 Related party loans Investment in associates Exploration and evaluation assets Property, plant & equipment (110,011) (4,313,455) (1,328,462) (67,599) 110,011 (8,806) 457,806 - - - - - (41,843,837) (749,585) 15,600,355 Net deferred tax recognised (39,101,489) (381,365) 15,195,296 Deferred tax assets not recognised Unused tax losses Unused capital losses Temporary differences Tax benefit at 30% 1,762,042 67,848 - 548,967 28,635 - - 8,590 - - - - $ - - - - - - - - - - - - - - - - - $ 2,357,452 241,430 106,627 - - 2,705,509 (21,732,550) - (4,322,261) (870,656) (67,599) (26,993,066) (24,287,557) 1,790,677 67,848 - 557,558 $ - - - - - - - - - - - - - - - $ 3,747,644 219,536 67,027 4,034,206 (29,875,729) (108,693) (2,571,460) (1,889,802) (67,599) (34,513,285) (30,479,079) 1,819,592 67,848 - 566,232 In order to recoup carried forward losses in future periods, either the Continuity of Ownership Test (COT) or Same Business Test must be passed. The majority of losses are carried forward at 30 June 2019 under the COT. Deferred tax assets which have not been recognised as an asset, will only be obtained if: the Company derives future assessable income of a nature and of an amount sufficient to enable the losses to be realised; the Company continues to comply with the conditions for deductibility imposed by the law; and a) b) c) no changes in tax legislation adversely affect the Company in realising the losses. 68 69 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 5: KEY MANAGEMENT PERSONNEL NOTE 9: CASH AND CASH EQUIVALENTS Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s Key Management Personnel for the year ended 30 June 2019. The totals of remuneration for Key Management Cash at bank and in hand Personnel during the year are set out below. Total Short-term employee benefits Long-term employee benefits Post-employment benefits Share-based payments Total 2019 $ 2018 $ 1,600,100 1,280,990 8,280 73,718 - 1,682,098 3,839 42,295 583,896 1,911,020 NOTE 6. DIVIDENDS AND FRANKING CREDITS There were no dividends paid or recommended during the financial year ended 30 June 2019 (2018: nil). NOTE 10: TRADE AND OTHER RECEIVABLES Trade receivables Interest receivables GST receivable Other receivables Total 2019 $ 1,671,891 1,671,891 2018 $ 2,841,511 2,841,511 2019 $ 745,483 - 107,409 257,813 1,110,705 2018 $ 809,906 394,136 171,873 107,371 1,483,286 The receivables were not exposed to foreign exchange risk. No receivables were impaired at 30 June 2019 (2018: nil). NOTE 7: AUDITOR’S REMUNERATION Past due but not impaired receivables are set out below. Amounts paid / payable to the auditor of the parent of the Group for: Audit and review of the financial reports of the Group NOTE 8: EARNINGS PER SHARE (EPS) (a) Earnings 2019 $ 87,200 87,200 2018 $ 81,200 81,200 2019 $ 2018 $ Earnings used to calculate basic and diluted earnings per share (4,440,658) (65,382) (b) Weighted average number of shares Used in calculating basic EPS Weighted average number of dilutive options Weighted average number of ordinary shares and potential ordinary shares, used in calculating dilutive EPS 2019 shares 2018 shares 613,181,877 599,230,366 - - 613,181,877 599,230,366 Options granted are not included in the determination of diluted earnings per share as they are considered to be anti dilutive. 2019 2018 Total Amount Amount not Total Amount Amount not impaired impaired impaired impaired Not past due Past due 30 days Past due 30–60 days Past due >60 days Total $ 94,565 27,500 45,990 577,428 745,483 $ - - - - - $ 94,565 27,500 45,990 577,428 745,483 $ 297,719 2,872 50,589 458,726 809,906 $ - - - - - $ 297,719 2,872 50,589 458,726 809,906 All receivables that are neither past due nor impaired are with long standing clients who have a good credit history with the entity. As at 30 June 2019, included in trade and other receivables is two significant debtors accounting for 93% (2018: one significant debtor accounting for 56%) of the total trade receivables. 70 71 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 11: OTHER FINANCIAL ASSETS On 16 December 2016, DGR Global subscribed for $9.4 million worth of Convertible Notes in Armour Energy, in part repayment of 2019 $ 2018 $ • Issue Price: Face value of $0.11 per Convertible Note • Interest Rate: 15% per annum the Bridging Finance Facility, the key terms of the notes are as follows: Financial assets at fair value through other comprehensive income (refer (a) below) 123,273,136 96,115,003 • Interest Payments: Interest paid half yearly in arrears and the interest may be paid in certain circumstances at Armour’s election Convertible notes (refer (b) below) Corporate bonds (refer (c) below) Cash on deposit held as security (refer (d) below) Security bonds (refer (e) below) (a) Financial assets at fair value through other comprehensive income Opening balance at 1 July Additions Additions – conversion of Lakes Oil NL convertible notes Additions – reclassification on loss of significant influence from investments accounted for using the equity method initially recognised at fair value Disposal of financial assets at fair value through other comprehensive income Fair Value adjustment through other comprehensive income Closing balance at 30 June - 11,175,368 8,750,000 - 314,000 314,000 1,334,504 1,207,949 133,671,640 108,812,320 2019 $ 2018 $ 96,115,003 138,522,943 15,000 - - - 406,030 367,500 7,469,829 - 27,143,133 (50,651,299) 123,273,136 96,115,003 Financial assets at fair value through other comprehensive income comprise an investment in the ordinary issued capital of SolGold plc, listed on the London Stock Exchange (LSE) and Toronto Stock Exchange (TSX), an investment in the ordinary issued capital of Block X Capital Corp. (listed on the TSX), an investment in the ordinary issued capital of Aus Tin Mining Limited (listed on the ASX), an investment in the ordinary issued capital of Lakes Oil NL (listed on the ASX), and an investment in the ordinary issued capital of Dark Horse Resources Limited (listed on the ASX). Classification of financial assets at fair value through other comprehensive income For equity securities that are not held for trading, the Company has made an irrevocable election at initial recognition to recognise changes in fair value through other comprehensive income rather than profit or loss. These securities are presented separately in the statement of financial position. (b) Convertible notes at fair value through profit or loss Opening balance at 1 July Additions – Conversion of Armour Energy Convertible note interest Fair value movement Conversion of Lakes Oil NL convertible notes into ordinary shares Redemption of Armour Energy Convertible note Closing balance at 30 June 72 2019 $ 2018 $ 11,175,368 10,173,116 - (636,345) 733,407 636,345 - (367,500) (10,539,023) - - 11,175,368 by the issue of further Convertible Notes; • Maturity Date: 30 September 2019 • Conversion Terms: Convertible at any time at the Convertible Note holder’s election into one ordinary share in Armour subject to usual adjustment mechanisms in certain circumstances On 5 April 2017, interest accrued on the Armour Energy convertible notes to 31 March 2017 of $405,616 was paid via the issue of additional convertible notes at the Company’s election. Armour Energy Limited redeemed all the outstanding convertible notes on 29 March 2019. (c) Corporate bonds at amortised cost Opening balance at 1 July Additions Sale / Disposals Closing balance at 30 June 2019 2018 $ - 10,000,000 (1,250,000) 8,750,000 $ - - - - On 29 March 2019, post the redemption of the Armour Energy convertible notes, the Company applied for a $10,000,000 investment in the new secured and amortising notes (New Notes) in Armour Energy Limited. The offer was managed by FIIG Securities Limited and the key terms of the New Notes are as follows: • Issue Price: $1,000 • Interest Rate: 8.75% • Interest Payments: Interest paid quarterly in arrears • Term: 5 years • Security: The New Notes will be secured over all of the assets of the Armour Energy Limited (d) Cash on deposit held as security at amortised cost Cash on deposit held as security is held in a term deposit account restricted under a bond with the Department of Natural Resources and Mining as security for rehabilitation works required. (e) Security bonds at amortised cost Security bonds are held with the Department of Natural Resources and Mining as security for rehabilitation works required. (f) Fair value Refer to note 31 for fair value disclosures. 73 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 12: CONTROLLED ENTITIES AND TRANSACTIONS WITH NON- CONTROLLING INTERESTS (a) Controlled entities Parent entity: DGR Global Limited Country of Principal Activity Principal Percentage owned Incorporation place of business 2019 2018 Australia Mineral Exploration Australia Subsidiaries of DGR Global Limited: Pennant Resources Pty Ltd1 Australia Mineral Exploration Australia Auburn Resources Ltd1 Barlyne Mining Pty Ltd1 Australia Mineral Exploration Australia Australia Mineral Exploration Australia Albatross Bauxite Pty Ltd Australia Mineral Exploration Australia Coolgarra Minerals Pty Ltd Australia Mineral Exploration Australia DGR Zambia Ltd Zambia Mineral Exploration Zambia Hartz Rare Earths Pty Ltd Australia Mineral Exploration Australia Pinnacle Gold Pty Ltd Australia Mineral Exploration Australia Tinco Pty Ltd DGR Bolivia Pty Ltd Australia Mineral Exploration Australia Australia Mineral Exploration Australia Andean Explomining SRL Bolivia Mineral Exploration Bolivia 45% 45% 45% 100% 100% 100% 100% 94% 100% 100% 100% 63% 63% 63% 100% 100% 100% 100% 94% 100% 100% - 1 Auburn Resources Limited (previously Archer Resources Limited) is the immediate parent of Barlyne Mining Pty Ltd and Pennant Resources Pty Ltd (previously Aimfire Resources Pty Ltd). These companies are wholly owned and directly held by Auburn Resources Limited and indirectly by DGR Global Limited. (b) Transactions with non-controlling interests During the financial year ended 30 June 2019, Auburn Resources Limited issued a total of 17,402,199 new ordinary shares (2018: nil). (c) Summarised financial information Summarised financial information of the subsidiaries with non-controlling interests that are material to the consolidated entity is set out below. Auburn Resources Limited – non-controlling interest 45% (2018: 37%) Summarised statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Summarised statement of profit or loss and other comprehensive income Revenue Expenses Profit / (loss) before income tax expense Income tax (expense) / benefit Profit / (loss) after income tax expense Other comprehensive income Total comprehensive income Statement of cash flows Net cash used in operating activities Net cash used in investing activities Net cash from financing activities Net increase / (decrease) in cash and cash equivalents Other financial information Profit / (loss) attributable to non-controlling interests Accumulated non-controlling interests at the end of reporting period Dividends paid to non-controlling interests 2019 $ 2018 $ 552,966 2,668,198 3,221,164 32,354 2,225,907 2,258,261 24,018 - 24,018 398,582 546,024 944,606 3,197,146 1,313,655 - (29,503) (29,503) - - (24,700) (24,700) - (29,503) (24,700) - - (29,503) (24,700) (41,882) (311,584) 882,314 528,848 (18,434) (205,104) 228,894 5,356 7,911 1,635,617 - (9,116) 496,587 - There are no significant restrictions on the ability of DGR Global Limited to access the assets of the subsidiaries with non- controlling interests. 74 75 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Name Principle activity Ownership Country of Shares Carrying amount incorporation and principle place of business interest 2019 2018 % % 2019 $ 2018 $ Armour Energy Ltd Australia Oil & gas exploration IronRidge Resources Ltd Australia Mineral exploration ORD ORD 22% 22% 22% 7,497,281 7,635,576 24% 8,780,536 10,356,256 16,277,817 17,991,832 (a) Movements during the year in equity accounted investments Balance at beginning of year Additional investment Sale of investment Share of associates losses after income tax Share of associates other comprehensive income Net reversal of impairment Reclassification on loss of significant influence to financial assets classified at fair value through other comprehensive income – derecognised carrying amount Balance at end of year 2019 $ 17,991,832 2,100,000 - (4,127,440) (341,695) 655,120 - 16,277,817 2018 $ 17,035,638 4,816,283 - (6,236,853) 376,703 4,991,112 (2,991,051) 17,991,832 Net reversal of impairment relates to the investments in Armour Energy Ltd. At 30 June 2018 the share price of Armour Energy Ltd was $0.084. The share price of Armour Energy Ltd at 30 June 2019 was $0.067. The investment in Armour Energy Ltd has been written up to the lower of fair value, less costs to sell or the equity accounted value, while the investment in IronRidge Resources has been further impaired following the recognition of the Group’s share of profits in excess of the increase in share price. (b) Fair value of investments in associates with published price quotations Fair value of investment in Armour Energy Limited Fair value of investment in IronRidge Resources Limited Closing balance at 30 June Refer note 31 for further details on fair value. 2019 $ 2018 $ 7,497,281 7,635,576 19,336,537 26,833,818 34,095,692 41,731,268 (c) Summarised financial information of associates The results of the Group’s associates and its aggregated assets (including goodwill) and liabilities are set out below. Ownership interest Current assets Non-current assets Current liabilities 2019 Armour Energy Limited IronRidge Resources Limited 2018 Armour Energy Limited Dark Horse Resources Limited* IronRidge Resources Limited 2019 Armour Energy Limited IronRidge Resources Limited 2018 % 22% 22% 22% - 24% $ $ $ 14,376,248 6,923,588 21,299,836 102,175,981 25,546,351 127,722,332 6,690,858 1,395,416 8,086,274 9,037,623 92,483,704 10,543,173 - 9,208,488 18,246,111 - 16,890,343 109,374,047 - 1,452,776 11,995,949 Non-current liabilities Revenues Profit/loss Other comprehensive $ $ $ 65,102,608 - 65,102,608 27,819,335 45,945 27,865,280 income $ (1,488,893) (66,529) (1,555,422) 1,487,500 - 176,843 1,664,343 (11,683,748) (7,137,728) (18,821,476) (11,557,788) (2,216,375) (13,191,397) (24,749,185) Armour Energy Limited 46,132,323 14,748,819 Dark Horse Resources Limited* IronRidge Resources Limited - - 23,214 52,648 46,132,323 14,801,467 * Dark Horse Resources Limited was transferred to financial assets carried at fair value through other comprehensive income. The profit/loss and other comprehensive income for represent results up to the date of loss of significant influence on 19 April 2018. 76 77 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD CONTINUED (d) Reconciliation of the carrying amount of the Group’s investment in associates Armour Energy Dark Horse Resources IronRidge Resources 2019 $ 2018 $ Opening carrying amount 7,635,576 5,253,500 Share of profits (loss) after tax (2,566,375) (2,592,947) Share of other comprehensive income (327,041) 333,715 Additional investment 2,100,000 1,204,578 Reversal of impairment/ (impairment) 655,120 3,436,730 Reclassification to financial assets at fair value through other comprehensive income - Closing carrying amount 7,497,281 7,635,576 2019 $ - - - - - - - 2018 $ 2019 $ 2018 $ 1,867,429 10,356,256 9,914,709 (430,762) (1,561,065) (3,213,146) - - 1,554,383 (2,991,050) (14,655) 42,988 - - - 3,611,705 - - - 8,780,536 10,356,256 (e) Reconciliation of the share of net assets to the carrying amount of the Group’s investment in associates NOTE 14: PROPERTY, PLANT AND EQUIPMENT Land at cost Freehold building at cost Accumulated depreciation Plant and equipment at cost Accumulated depreciation Site infrastructure at cost Accumulated depreciation Motor vehicles at cost Accumulated depreciation Share of net assets Goodwill Net impairment Closing carrying amount Armour Energy Dark Horse Resources IronRidge Resources 2019 $ 2018 $ 9,831,416 10,060,995 15,796,335 16,360,171 (18,130,470) (18,785,590) 7,497,281 7,635,576 2019 2018 $ - - - - $ - - - - 2019 $ 2018 $ 6,844,295 6,003,258 1,936,241 4,352,998 - - 8,780,536 10,356,256 Computers and office equipment at cost Accumulated depreciation Furniture and fittings at cost Accumulated depreciation 2019 $ 2018 $ 345,000 345,000 79,234 (35,569) 43,665 72,728 (33,735) 38,993 360,593 359,309 (352,604) (349,083) 7,989 10,226 2,443,532 2,443,532 (2,443,532) (2,443,532) - - 25,082 (25,082) - 197,450 (187,940) 9,510 108,903 (97,533) 11,370 25,082 (25,082) - 189,555 (182,931) 6,624 108,903 (83,015) 25,888 417,534 426,731 Land Freehold Plant & Computers Furniture & Total building equipment & office fittings 2019 Balance at the beginning of the year 345,000 $ Additions Disposals Depreciation expenses - - - Carrying amount at the end of the year 345,000 $ 38,993 6,506 - (1,834) 43,665 equipment $ 6,624 7,895 - (5,009) 9,510 $ 10,226 1,284 - (3,521) 7,989 $ $ 25,888 426,731 - - (14,518) 11,370 15,685 - (24,882) 417,534 78 79 DGR Global and its subsidiariesdgrglobal.com.au 2019 $ 2018 $ 9,854,145 7,799,904 - 9,854,145 140,000 7,939,904 2019 $ 2018 $ 7,799,904 8,000,000 2,000,000 54,241 9,854,145 - (200,096) 7,799,904 Financial report continued Notes to the financial statements continued NOTE 14: PROPERTY, PLANT AND EQUIPMENT CONTINUED Furniture & Land Computers Freehold Plant & NOTE 18: OTHER FINANCIAL LIABILITIES Total 2018 Balance at the beginning of the year 345,000 $ Additions Disposals Depreciation expenses - - - Carrying amount at the end of the year 345,000 building equipment & office fittings equipment $ 38,736 2,028 - (1,771) 38,993 $ 7,544 9,032 - (6,350) 10,226 $ $ $ 13,861 4,287 - (11,524) 6,624 40,944 446,085 - - (15,056) 25,888 15,347 - (34,701) 426,731 NOTE 15: EXPLORATION AND EVALUATION ASSETS Exploration and evaluation assets Movements in carrying amounts Balance at the beginning of the year Additions Written-off Carrying amount at the end of the year 2019 $ 2018 $ 9,292,821 6,572,307 6,572,307 4,428,211 2,782,358 2,966,361 (61,844) 9,292,821 (822,265) 6,572,307 The exploration and evaluation assets written off during the year are as a result of the total abandonment of certain areas of tenure. Convertible notes at fair value through profit or loss Loans from related parties Movements in convertible notes carrying value Opening balance Face value of convertible notes issued Additions Movement in fair value The principal terms of the convertible notes are as follows: • Number of notes issued: 50,000,000 • Issue price: Face value of $0.20 per convertible note • Interest rate: 12% per annum • Interest payments: Interest paid quarterly in arrears. Interest is payable as cash. • Maturity date: 26 September 2020 • Conversion terms: Convertible at any time at the Convertible Note holder’s election into one ordinary share in DGR based on a price of $0.20 per share, subject to usual adjustment mechanisms in certain circumstances. As a result of the adjustment mechanism the fixed-for-fixed test is not met therefore the convertible notes are carried at fair value through profit or loss. The recoverability of the carrying amount of exploration and evaluation assets is dependent on the successful development and • Security: Secured by DGR’s share holding in IronRidge Resources. commercial exploitation or, alternatively, the sale of the respective areas of interest. NOTE 16: OTHER ASSETS Prepayments NOTE 17: TRADE AND OTHER PAYABLES Trade payables Sundry payables and accrued expenses Employee benefits 2019 $ 6,223 2018 $ 39,710 2019 $ 687,489 770,504 299,852 1,757,845 2018 $ 852,997 248,386 359,734 1,461,117 Trade and other payables are non-interest bearing and are generally on 30–60 day terms. Due to the short term nature of these payables, their carrying value is assumed to approximate fair value. 80 NOTE 19: PROVISIONS – NON-CURRENT Site restoration Long service leave 2019 $ 1,041,313 68,059 1,109,372 2018 $ 1,041,313 48,241 1,089,554 The Group has conducted an extensive review of the environmental status of the Mining Leases with a view to making an assessment of the appropriate provision it should make for liabilities in respect of rehabilitation and restoration. In the course of this exercise, advice was received from different parties providing estimations on the potential costs for future rehabilitation and restoration. Based on this information, the Group has provided in respect of these restoration liabilities an amount of $1,041,313. 81 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 20: ISSUED CAPITAL 613,181,877 (30 June 2018: 613,181,877) fully paid ordinary shares Share issue costs 2019 $ 2018 $ 35,004,941 35,004,941 (1,459,020) 33,545,921 (1,459,020) 33,545,921 NOTE 21: RESERVES NATURE AND PURPOSE OF RESERVES (i) Share-based payments reserve The share-based payments reserve is used to recognise the grant date fair value of options issued to employees and other service providers. (ii) Change in proportionate interest reserve Ordinary shares participate in dividends and the proceeds on winding up the Company. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on show of hands. The change in proportionate interest reserve is used to recognise differences between the amount by which non-controlling interests are adjusted and any consideration paid or received which may arise as a result of transactions with non-controlling interests that do There is no par value or authorised capital. (a) Ordinary shares At 1 July 2 August 20171 29 September 20172 27 November 20173 At 30 June 2019 Number 2018 Number 2019 $ 2018 $ 613,181,877 570,511,877 35,004,941 32,231,391 - - - 2,000,000 17,720,000 22,950,000 - - - 130,000 1,151,800 1,491,750 613,181,877 613,181,877 35,004,941 35,004,941 1 On 2 August 2017, 2,000,000 $0.065 ordinary shares were issued upon the exercise of options. 2 On 29 September 2017, 17,720,000 $0.065 ordinary shares were issued upon the exercise of options. 3 On 27 November 2017, 22,950,000 $0.065 ordinary shares were issued upon the exercise of options. (b) Options Unlisted employee options Unlisted Director options Unlisted employee options Unlisted employee options Total options on issue (c) Capital management Number Exercise Price 19,375,000 17,500,000 3,000,000 2,200,000 42,075,000 $0.20 $0.20 $0.20 $0.20 Expiry 08/11/20 28/11/20 12/02/21 12/02/21 not result in a loss of control. (iii) Financial assets revaluation reserve Changes in the fair value of investments, such as equities, classified as financial assets at fair value through other comprehensive imcome, are recognised in other comprehensive income, as described in note 1(g) and accumulated in a separate reserve within equity. Movements in the financial assets revaluation reserve are set out below. Balance 1 July Revaluation – gross Deferred tax Share of other comprehensive income in associate (net of tax) (iv) Profit reserve 2019 $ 2018 $ 50,027,970 85,107,269 27,143,133 (50,651,299) (8,040,671) 15,195,297 (341,695) 376,703 68,788,737 50,027,970 The Profit Reserve is used to quarantine annual profits when available. This allows the Company to be able to pay dividends to shareholders at its discretion. Movements in the profit reserve are set out below. Management controls the capital of the Group in order to provide capital growth to shareholders and ensure the Group can fund its operations and continue as a going concern. The Group’s capital comprises equity as shown on the statement of financial position. Balance 1 July There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s Transfer of Profit after tax to profit reserve financial risk and adjusting its capital structure in response to changes in these risks and the market. These responses include the Dividend declared management of share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. 82 2019 $ 2018 $ 8,854,067 8,854,067 - - - - 8,854,067 8,854,067 83 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 22: ACCUMULATED LOSSES NOTE 25: SHARE-BASED PAYMENTS 2019 $ 2018 $ On 9 November 2017, 19,375,000 DGR Global Ltd share options were granted to management and employees under the Employee Share Option Plan. The options are to take up one ordinary share in DGR Global Ltd at a price of 20 cents each. The options vested Accumulated losses attributable to members of DGR Global Ltd at beginning of the financial year (15,292,089) (15,226,707) immediately and are due to expire on 8 November 2020. A value of $444,407 was calculated using the Black Scholes valuation Profit / (loss) for the year Transfer of reserves on disposal of investments (4,440,658) (65,382) methodology (refer below). - - Accumulated losses attributable to members of DGR Global Ltd at the end of the financial year (19,732,747) (15,292,089) On 30 November 2017, 17,500,000 DGR Global Ltd share options were granted to Directors as approved by shareholders at AGM of NOTE 23: COMMITMENTS FOR EXPENDITURE (a) Future exploration 29 November 2017. The options are to take up one ordinary share in DGR Global Ltd at a price of 20 cents each. The options vested immediately and are due to expire on 28 November 2020. A value of $400,399 was calculated using the Black Scholes valuation methodology (refer below). The Group has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Group. The commitments to be undertaken are set out below. On 12 February 2018, 3,000,000 DGR Global Ltd share options were granted to management under the Employee Share Option Plan. The options are to take up one ordinary share in DGR Global Ltd as a price of 20 cents each. The options vested immediately and are due to expire on 12 February 2021. A value of $71,897 was calculated using the Black Scholes valuation methodology (refer Payable within one year Payable between one and five years 2019 $ 2,422,406 544,000 2018 $ 557,000 784,000 2,966,406 1,341,000 To keep the exploration permits in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, the Group has the option to negotiate new terms or relinquish the tenements. The Group also has the ability to meet expenditure requirements by joint venture or farm in agreements. (b) Lease expenditure commitments Operating leases (non-cancellable) Minimum lease payments Not later than one year Later than one year and not later than five years Later than five years 2019 $ 2018 $ 518,357 488,014 2,289,230 40,799 50,696 - 2,858,283 528,813 Operating leases relate to office premises. The original terms of the operating leases ranged from 1 to 7 years with options to renew. NOTE 24: CONTINGENT LIABILITIES The Directors are not aware of any contingent assets and liabilities at 30 June 2019. below). On 15 June 2018, 1,000,000 DGR Global Ltd share options were granted to management under the Employee Share Option Plan. The options are to take up one ordinary share in DGR Global Ltd as a price of 20 cents each. The options vested immediately and are due to expire on 12 February 2021. A value of $25,014 was calculated using the Black Scholes valuation methodology (refer below). On 30 October 2018, 1,200,000 DGR Global Ltd share options were granted to employees under the Employee Share Option Plan. The options are to take up one ordinary share in DGR Global Ltd as a price of 20 cents each. The options vested immediately and are due to expire on 12 February 2021. A value of $46,186 was calculated using the Black Scholes valuation methodology (refer below). Movements in a number of options are set out below. 2019 2018 No. of options Weighted average No. of options Weighted average exercise price exercise price Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at year-end Exercisable at year-end 40,875,000 1,200,000 - - - 42,075,000 42,075,000 $ $0.20 $0.20 - - - $0.20 $0.20 42,670,000 40,875,000 - (42,670,000) - 40,875,000 40,875,000 $ $0.065 $0.20 - $0.065 - $0.20 $0.20 The weighted average exercise price of options outstanding at the end of the year was $0.20 (2018: $0.20). The weighted average remaining contractual life of the options was 1.41 years (2018: 2.41 years). All options on issue will settle for one share each when exercised. There are no vesting conditions attached to the options. 84 85 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 25: SHARE-BASED PAYMENTS CONTINUED FAIR VALUE RECONCILIATION OF SHARE-BASED PAYMENTS EXPENSE The fair values of options granted were calculated by using a Black-Scholes options pricing model applying the following inputs. DGR Global Ltd options Total share-based payments expense 2019 $ 46,186 46,186 2018 $ 941,717 941,717 DGR Global Limited 2019 Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate Number of options issued Fair value (Black-Scholes) per option Total value of options issued DGR Global Limited ESOP $0.20 2.29 years $0.145 60.20% 1.97% 1,200,000 $0.038 $46,186 2018 Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate Number of options issued Fair value (Black-Scholes) per option Total value of options issued DGR Global Limited DGR Global Limited ESOP $0.20 Director Options $0.20 2.41 years 2.42 years $0.085 – $0.10 61.36% – 74.36% 1.94% – 2.13% $0.10 61.36% 1.89% 23,375,000 17,500,000 $0.023 – $0.025 $541,317 $0.023 $400,400 Expected share price volatility was estimated based on historical share price volatility. RECONCILIATION OF RESERVE MOVEMENTS Opening balance at 1 July Total share issue costs recognised in equity Total share based payments expense Closing balance at 30 June 2019 $ 2018 $ 7,840,582 6,898,865 - - 46,186 941,717 7,886,768 7,840,582 NOTE 26: RELATED PARTY DISCLOSURES Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (A) PARENT AND ULTIMATE CONTROLLING ENTITY i) The parent entity and ultimate controlling entity is DGR Global Ltd which is incorporated in Australia. The names and other information about subsidiaries are provided in Note 12. (B) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL i) Transactions with Key Management Personnel are provided in the Remuneration Report within the Directors’ Report on page 28. (C) TRANSACTIONS WITH RELATED PARTIES i) DGR Global Ltd has a commercial agreement with Armour Energy Ltd, for the provision of administrative services. In consideration for the provision of the services, Armour Energy Ltd pays DGR Global Ltd a monthly management fee. For the year ended 30 June 2019 $456,000 (2018: $456,000) was paid or payable to DGR Global Ltd Ltd for the provision of the services. The total amount receivable at year end was $396 (2018: $859). ii) DGR Global Ltd has a commercial agreement with Aus Tin Mining Ltd for the provision of administrative Services. In consideration for the provision of the Services, Aus Tin Mining Ltd pays DGR Global Ltd a monthly management fee. For the year ended to 30 June 2019 $192,000 (2018: $192,000) was paid or payable to DGR Global Ltd for the provision of the Services. The total amount receivable at year end was $572,392 (2018: $455,185). iii) DGR Global Ltd has a commercial agreement with Dark Horse Resources Ltd, for the provision of administrative services. In consideration for the provision of the services, Dark Horse Resources Ltd pays DGR Global Ltd a monthly management fee. For the year ended 30 June 2019 $300,000 (2018: $300,000) was paid or payable to DGR Global Ltd for the provision of the services. The total amount receivable at year end was $124,144 (2018: $51,386). iv) DGR Global Ltd has a commercial agreement with IronRidge Resources Ltd for the provision of administrative Services. In consideration for the provision of the Services, IronRidge Resources Ltd pays DGR Global Ltd a monthly management fee. For the year ended 30 June 2019 $288,000 (2018: $288,000) was paid or payable to DGR Global for the provision of the Services. The total amount receivable at year end was $547 (2018: $44,797). v) DGR Global Ltd has a commercial agreement with SolGold Plc, for the provision of administrative services. In consideration for the provision of the services, SolGold Plc pays DGR Global Ltd a monthly management fee. For the year ended 30 June 2019 $360,000 (2018: $360,000) was paid or payable to DGR Global Ltd Ltd for the provision of the services. The total amount receivable at year end was $37,654 (2018: $117,320). (D) LOANS WITH RELATED PARTIES There were no loans with related parties during the financial years ended 30 June 2019 and 2018. 86 87 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 27: OPERATING SEGMENTS SEGMENT INFORMATION Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Basis of accounting for purposes of reporting by operating segments (a) Accounting policies adopted SEGMENT REPORTING The Group reports information to the Board of Directors along company lines. That is, the financial position of DGR and each of its subsidiary companies is reported discreetly, together with an aggregated Group total. Accordingly, each company within the Group that meets or exceeds the relevant threshold tests is separately disclosed below. The financial information of the subsidiaries that do not exceed the relevant thresholds outlined above, and are therefore not reported separately, is aggregated and disclosed as Others. 30 JUNE 2019 Segment performance Revenue External revenue Inter-segment revenue Total segment revenue DGR Global Auburn Others $ 1,596,000 - $ - - $ - - Total $ 1,596,000 - 1,596,000 - 1,596,000 Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual Reconciliation of segment revenue to Group revenue Elimination of intersegment revenue Total Group revenue financial statements of the Group. (b) Inter-segment transactions Segment net profit / (loss) before tax (2,741,508) (29,504) (33,592) (2,804,604) Corporate charges are allocated to segments based on the segments’ overall proportion of overhead expenditure within the Group. The Board of Directors believes this is representative of likely consumption of head office expenditure that should be used in assessing segment performance and cost recoveries. Reconciliation of segment result to Group net profit / (loss) before tax Reversal of impairment of investment in associate Share of losses of associates Net profit / (loss) before tax 655,120 (4,127,440) (6,276,924) Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction Segment assets costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on Assets 164,435,386 3,221,164 1,199,681 168,856,231 market interest rates. This policy represents a departure from that applied to the statutory financial statements. (c) Segment assets Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. Reconciliation of segment assets to Group assets Inter-segment receivables and investments eliminated Total Group assets All segment asset additions occur in Australia. (6,407,600) 162,448,631 (d) Unallocated items The following items of revenue, expenses and assets are not allocated to operating segments as they are not considered part of the core operations of any segment: • impairment of assets and other non-recurring items of revenue or expense; • income tax expense; and • current and deferred tax. 88 89 DGR Global and its subsidiariesdgrglobal.com.au $ - - Others $ - - Total $ 1,596,000 - 1,596,000 - 1,596,000 4,991,112 (6,236,853) 448,671 Financial report continued Notes to the financial statements continued NOTE 27: OPERATING SEGMENTS CONTINUED SEGMENT REPORTING CONTINUED 30 JUNE 2018 DGR Global Auburn $ Segment performance Revenue External revenue Inter-segment revenue Total segment revenue Reconciliation of segment revenue to Group revenue Elimination of intersegment revenue Total Group revenue 1,596,000 - Segment net profit / (loss) before tax 1,880,261 (24,700) (161,149) 1,694,412 Reconciliation of segment result to Group net profit / (loss) before tax Reversal of impairment of investment in associate Share of losses of associates Net profit / (loss) before tax Segment assets Assets Reconciliation of segment assets to Group assets Inter-segment receivables and investments eliminated Total Group assets All segment asset additions occur in Australia. NOTE 28: PARENT COMPANY 141,174,358 2,225,907 502,171 143,902,436 (5,729,638) 138,172,798 The Corporations Act requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by Regulation 2M.3.01 which requires limited disclosure in regard to the parent entity (DGR Global Ltd). The consolidated financial statements incorporate the assets, liabilities and results of the parent entity in accordance with the accounting policy described in Note 1(b). The limited financial statements of the parent company are set out over the page. Statement of financial position Current assets Non-current assets Loans (intragroup receivables) Loans (related parties) Security bonds Property plant and equipment Exploration and evaluation assets Investment in Block X Capital Corp (formerly Lions Gate Metals Inc) Investment in SolGold plc Investment in Dark Horse Resources Ltd Investment in Aus Tin Mining Ltd Investment in Armour Energy Ltd Investment in Auburn Resources Ltd Investment in IronRidge Resources Ltd Investment in Lakes Oil NL Investment in other subsidiaries Convertible notes in Armour Energy Ltd Corporate bonds Armour Energy Ltd Total non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Share-based payments reserve Financial assets revaluation reserve Profit reserve Accumulated profits Total shareholders’ equity Statement of comprehensive income Profit / (loss) for the year Total comprehensive income for the year 2019 $ 2018 $ 2,211,232 4,318,643 - - - 1,755,861 1,587,119 1,479,315 417,534 426,726 5,413,448 3,913,292 137 2,280 117,948,582 82,865,069 1,322,481 5,620,427 3,259,777 6,134,173 7,497,280 7,635,576 2,166,667 4,056,401 19,336,537 34,095,692 742,159 1,484,319 10 - 10 11,175,368 8,750,000 - 168,441,731 160,644,509 170,652,963 164,963,152 1,597,253 8,860,327 41,442,596 25,377,112 43,039,849 34,237,439 127,613,114 130,725,713 33,545,924 33,545,924 7,886,768 7,756,175 79,344,737 76,806,997 8,854,067 8,854,067 (2,018,382) 3,762,550 127,613,114 130,725,713 (5,780,932) (439,140) 25,324,700 (12,398,292) 90 91 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 28: PARENT COMPANY CONTINUED At 30 June 2019, the Company’s investments in associates and investments at fair value through other comprehensive income (excluding investments in Convertible Notes) are set out below. Listed investment Number of Number of options/ Share price# Quoted value shares warrants (unlisted) Block X Capital Inc (previously Lions Gate Metals Inc) 17,500 SolGold plc Dark Horse Resources Ltd Aus Tin Mining Ltd Armour Energy Ltd IronRidge Resources Ltd Lakes Oil NL Total quoted value 204,151,800 330,613,371 362,197,351 111,899,712 68,522,667 742,159,370 - - - - - - - C$0.05 $ 951 £0.32 117,947,478 $0.004 $0.009 $0.067 1,322,453 3,259,776 7,497,281 £0.1563 19,336,537 $0.001 742,159 150,106,635 # Share price represents the market quoted price for listed investments at 30 June 2019. All quoted values above are level 1 in the fair value heirarchy. GUARANTEES No guarantees have been entered into by the parent entity in relation to debts of its subsidiaries. CONTRACTUAL COMMITMENTS There were no contractual commitments for the acquisition of property, plant and equipment entered into by the parent entity at 30 June 2019 (2018: nil). OPERATING LEASE COMMITMENTS Refer note 23(b) to review operating lease commitments. CONTINGENT LIABILITIES The parent entity has no contingent liabilities. NOTE 29: CASH FLOW INFORMATION (a) Reconciliation of cash flow from operations with profit / (loss) after tax Profit / (loss) after tax Depreciation Exploration and evaluation assets written off Share based payments expense Share of losses associates Reversal of impairment of investment in associate Gain on loss of significant influence of Dark Horse Resources Ltd Fair value movement on convertible note receivable Fair value movement on convertible note payable Interest converted to convertible notes Interest capitalised to related party loans Management fees converted to shares Changes in operating assets and liabilities, net of the effects of purchase and disposal of subsidiaries: (Increase) / decrease in trade and other receivables (Increase) / decrease in other assets Increase / (decrease) in trade and other payables Increase / (decrease) in deferred tax liabilities Net cash flow from operations Non-cash investing and financing activities Issue of shares in lieu of cash for services Conversion of receivables for shares and convertible notes Conversion of loans with related parties for shares Redemption of Armour convertible notes* Investment in Armour corporate bonds Conversion of loans to shares in subsidiaries 2019 $ (4,432,875) 24,877 61,845 46,189 2018 $ (74,792) 34,701 822,265 941,717 4,127,440 6,236,854 (655,120) (4,991,112) - (4,478,780) 636,345 (636,345) 54,241 (200,096) - - - (733,406) (58,227) (200,000) 479,991 (610,374) 33,487 (9,053) 117,431 (365,383) (1,844,049) 523,219 (1,350,198) (3,798,812) - - - - (243,679) (1,057,799) 10,000,000 (10,000,000) (140,000) - - - * Represents the principal amount of the convertible notes early redeemed. The early redemption premium and interest have been included in the net cash flows from operating activities. (b) Reconciliation of liabilities arising from financing activities Opening balance Financing cash flow Non cash flow changes Closing balance Proceeds from Fair value movement of borrowings convertible notes Convertible notes 7,799,904 2,000,000 $ $ $ 54,241 $ 9,854,145 92 93 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 30: FINANCIAL RISK MANAGEMENT Financial assets Cash and cash equivalents Trade and other receivables Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Cash on deposit Security bonds Corporate bonds Financial liabilities Trade and other payables Other financial liabilities 2019 $ 2018 $ 1,671,891 2,841,511 1,110,705 1,488,387 123,279,087 96,115,003 - 11,175,368 314,000 314,000 1,328,553 1,207,949 8,750,000 - 136,454,236 113,142,218 1,748,087 1,461,117 9,854,145 11,602,232 7,939,904 9,401,021 The maximum exposure to credit risk, excluding the value of any collateral or other security, in the event other parties fail to discharge their obligations under financial instruments in relation to each class of financial asset at reporting date is the carrying amount in the statement of financial position which, for the relevant assets, is summarised in the table above. Credit risk is reviewed regularly by the Board and the audit committee. It primarily arises from exposure to receivables as well as through deposits with financial institutions. There is no collateral held as security. The Group’s material credit risk exposure is to loans with related parties, related party debtors, investments in convertible notes and corporate bonds. (c) Liquidity risk Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet financial obligations as they fall due. The objective of managing liquidity risk is to ensure, as far as possible, that the Group will always have sufficient liquidity to meets its liabilities when they fall due, under both normal and stressed conditions. Liquidity risk is reviewed regularly by the Board and the audit committee. (a) General objectives, policies and processes The Group manages liquidity risk by monitoring forecast cash flows and liquidity ratios such as working capital. The Group’s working capital, being current assets less current liabilities, has decreased from a surplus of $2,903,390 in 2018 to a surplus of $1,040,732 in In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note 2019. describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The Group’s financial instruments consist mainly of deposits with banks, receivables and payables, shares in listed corporations, investements in convertible notes and corporate bonds. 2019 MATURITY ANALYSIS Financial liabilities amount cash flows $ $ $ Carrying Contractual < 6 months 6–12 months 1–3 years > 3 years Trade and other payables 1,748,087 1,748,087 1,748,087 Other financial liabilities 9,854,145 11,492,603 600,000 Total 11,602,232 13,240,690 2,348,087 600,000 600,000 10,292,603 10,292,603 The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Group’s risk management policies and objectives are designed to minimise the potential impacts of these risks on the results of the Group where such impacts may be material. 2018 MATURITY ANALYSIS Financial liabilities Carrying Contractual < 6 months 6–12 months 1–3 years > 3 years amount cash flows $ $ $ Trade and other payables 1,461,117 1,461,117 1,461,117 The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these matters are set out below. Other financial liabilities Total 7,939,904 9,401,021 9,265,096 10,726,213 480,000 1,941,117 480,000 480,000 8,305,096 8,305,096 (b) Credit risk (d) Market risk Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Group incurring Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value a financial loss. This usually occurs when counterparties fail to settle their obligations owing to the Group. The Group’s objective is to or future cash flows of a financial instrument will fluctuate because of changes interest rates (interest rate risk), foreign exchange rates minimise the risk of loss from credit risk exposure. (currency risk) or other market factors (other price risk). The Group does not have any material exposure to market risk other than 94 interest rate risk and other equity securities price risk. 95 $ - $ - $ - $ - $ - - - $ - - - DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 30: FINANCIAL RISK MANAGEMENT CONTINUED (d) Market risk continued The Group has performed a sensitivity analysis relating to its exposure to interest rate risk. This demonstrates the effect on the profit and equity which could result from a change in these risks. Interest rate risk At 30 June 2019 the effect on profit and equity as a result of changes in the interest rate at that date would be as follows: The objective of interest rate risk management is to manage and control interest rate risk exposures with acceptable parameters while optimising the return. Interest rate risk is managed with a mixture of fixed and floating rate instruments. For further details on interest rate risk refer to the tables below. 2019 (i) Financial Assets Cash and cash equivalents 1,671,891 Floating interest Fixed interest Non-interest Total carrying Weighted rate bearing amount average effective interest rate $ % $ - 1,110,705 1,671,891 1,110,705 $ - - - 124,921,640 133,671,640 8,750,000 8,750,000 - - 126,032,345 136,454,236 - - - - 1,748,087 1,748,087 9,854,145 9,854,145 - 1,748,087 9,854,145 11,602,232 0.75% N/A N/A 8.75% N/A 12% Floating interest Fixed interest Non-interest Total carrying Weighted rate bearing amount average effective rate $ - - - 1,671,891 rate $ - - - (i) Financial Assets Cash and cash equivalents 2,841,511 $ - - $ - 1,483,286 2,841,511 1,483,286 11,489,368 97,322,952 108,812,320 - - - 2,841,511 11,489,368 98,806,238 113,137,117 - - - - 7,799,904 7,799,904 1,461,117 140,000 1,601,117 1,461,117 7,939,904 9,401,021 Trade and other receivables Other financial assets Corporate bonds Total financial assets (ii) Financial Liabilities Trade and other payables Other financial liabilities Total financial liabilities 2018 Trade and other receivables Other financial assets Related party loans Total financial assets (ii) Financial Liabilities Trade and other payables Other financial liabilities Total financial liabilities 96 Change in profit and equity Increase in interest rate by 1% Decrease in interest rate by 1% Equity securities price risk 2019 $ 2018 $ 16,719 (16,719) 28,415 (28,415) The Group has performed a sensitivity analysis relating to its exposure to equity securities price risk. The sensitivity demonstrates the effect on pre-tax profit and equity which could result from a change in these risks. At 30 June 2019 the effect on equity as a result of changes in equity security prices would be as follows: Change in equity* Increase in equity security price by 10% Decrease in equity security price by 10% * Financial assets revaluation reserve/other comprehensive income 2019 $ 2018 $ (12,327,909) (9,611,500) 12,327,909 9,611,500 The analysis assumes all other variables remain constant. It also assumes the investment in SolGold plc, Lions Gate Metals Inc, Aus Tin Mining Ltd, Dark Horse Resources Ltd and Lakes Oil NL, were remeasured to fair value on 30 June 2019 (and that the 10% interest rate $ % change had occurred as at that date). 1.02% - 14.44% - 12% It should be noted that the investment in associate is not included in the above analysis as it is outside the scope of Accounting Standard AASB 9 Financial Instruments, as it is accounted for in accordance with Accounting Standard AASB 128 Investments in Associates and Joint Ventures. Foreign exchange risk 2019 2018 Change in US dollar rate Effect on profit before tax % +10% -5% +10% -5% $ 71 (35) 103 (51) 97 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Notes to the financial statements continued NOTE 31: FAIR VALUE FAIR VALUE HEIRARCHY Description Fair value at Unobservable inputs* Range of Relationship of unobservable inputs to 30 June 2019 $ 2018 inputs fair value The following table details the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement being: Level 1 Level 2 Level 3 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or Convertible note receivable 11,175,368 indirectly. Unobservable inputs for the asset or liability. Share price volatility 55% FV by $362,084; higher volatility (+10 bps) Lower volatility (-10 bps) would increase would decrease FV by $315,500 Lower discount rate (-100 bps) would Risk-adjusted discount rate 22% increase FV by $102,414; higher discount rate (+100 bps) would decrease FV by Share price volatility 60% FV by $103,257; lower volatility (+10 bps) $101,169. Higher volatility (+10 bps) would increase (a) The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June: Level 1 Level 2 Level 3 2019 Financial assets at fair value through other comprehensive income 123,279,087 Convertible note payable - $ 2018 Financial assets at fair value through other comprehensive income 96,115,003 Convertible note receivable Convertible note payable - - $ - - - - - - 123,279,087 9,854,145 9,854,145 - 96,115,003 11,175,368 11,175,368 7,799,904 7,799,904 Total $ Convertible note payable 7,799,904 Risk-free interest rate 1.96% $ would decrease FV by $78,915. Lower discount rate (-25 bps) would increase FV by $23,820; higher discount rate (+25 bps) would decrease FV by $20,224. * There were no significant inter-relationships between unobservable inputs that materially affect fair values. (c) The following table presents the Group’s assets and liabilities which are not carried at fair value at 30 June wherein their carrying values do not approximate their fair value at 30 June: Level 1 Level 2 Level 3 Carrying value The financial assets at fair value through other comprehensive income and certain convertible note receivables are measured based 2019 on the quoted market prices at 30 June. The fair value of the remaining financial instruments is determined using discounted cash flow analysis. (b) The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value Investments accounted for using the equity method 26,833,818 2018 Investments accounted for using the equity method 41,731,267 $ $ - - $ - - $ 16,277,817 17,991,832 measurements: Description 2019 Fair value at Unobservable inputs* Range of Relationship of unobservable inputs to prices at 30 June. 30 June 2019 $ inputs fair value NOTE 32. SIGNIFICANT EVENTS AFTER REPORTING DATE The investments accounted for using the equity method displayed in the table above are measured based on the quoted market Share price volatility 62% FV by $95,564; lower volatility (-10 bps) and for a term of up to 12 months, with funding requests to be accompanied by details of proposed expenditure and subject the Higher volatility (+10 bps) would increase On 20 September 2019, the Company provided a letter of funding support to Aus Tin Mining Ltd for an amout of up to $1,000,000 Convertible note payable 9,854,145 Risk-free interest rate 1.00% would decrease FV by $89,650. Lower discount rate (-25 bps) would increase FV by $24,567; higher discount rate (+25 bps) would decrease FV by $24,468. Company’s approval. Subsequent to 30 June 2019, the Company has sold an additional $2,050,000 of Armour Energy Limited Corporate Bonds (Corporate Bonds), bringing the total of Corporate Bonds held to $6,700,000 at the date of this report. The Directors are not aware of any other significant changes in the state of affairs of the Group or events after reporting date that would have a material impact on the consolidated financial statements. 98 99 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Directors’ declaration 1. In the opinion of the Directors: a) the financial statements and notes of DGR Global Ltd for the financial year ended 30 June 2019 are in accordance with the Corporations Act, including: i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and performance for the year then ended; ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations; b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed 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 Independent auditor’s report Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia INDEPENDENT AUDITOR'S REPORT To the members of DGR Global Limited payable, as disclosed in Note 1; and Report on the Audit of the Financial Report d) the remuneration disclosures contained in the Remuneration Report comply with Section 300A of the Corporations Act. Opinion 2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act for the financial year ended 30 June 2019. Signed in accordance with a resolution of the Directors. Nicholas Mather Managing Director Brisbane 30 September 2019 We have audited the financial report of DGR Global Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 95 100 101 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Independent auditor’s report continued Independent auditor’s report Classification and carrying value of financial assets at fair value through other comprehensive income Key audit matter How the matter was addressed in our audit Refer to Note 11 of the financial report. Our audit procedures, amongst others, included: The Group carries investments in listed shares which are carried at fair value through other comprehensive income. The carrying amount of financial assets at fair value through other comprehensive income is a key audit matter due to the significance of the total balance. • • • • Obtaining from management a schedule of investments held by the Group and vouching the movements to supporting documentation. Agreeing a sample of the additions and disposals of investments during the year to supporting documentation, and ensuring that gains and losses arising were treated appropriately. Reviewing management’s assessment of the fair value of the investments by reference to quoted prices in active markets, ensuring that management have considered the effect of foreign exchange and that all gains and losses have been treated appropriately. Reviewing the adequacy of the disclosures of investments, including the fair value disclosures, by comparing these disclosures to our understanding the nature of the investment and the applicable accounting standards. Classification and carrying value of investments accounted for using the equity method Key audit matter How the matter was addressed in our audit Refer to Note 13 of the financial report. Our audit procedures, amongst others, included: The Group holds investments in associates accounted for using the equity method. The classification of each asset as an associate and measurement thereof is a key audit matter due to: • • • the level of judgement management were required to make in assessing the classification of the investment the significance of the closing balance the significance of the share of loss of associates and gain arising from discontinuing the use of equity method. • • • • Evaluating management’s assessment of whether control, joint control or significant influence existed. Agreeing the Group’s share of associate losses to the audited financial reports of the Associates and assessing the adequacy of the disclosures. Reviewing the financial information of the associate including assessing whether the accounting policies of the associates were consistent with DGR Global Limited. Recalculating the impairment reversals recorded by reference to the fair value of the investments based on quoted prices in active markets and checking that the reversal was not in excess of previously recorded impairments. • Reviewing the adequacy of the disclosures of in the financial report. Carrying value of convertible notes payable Other information Key audit matter How the matter was addressed in our audit Refer to Note 18 of the financial report. Our audit procedures, amongst others, included: The Group issued convertible notes which are carried at fair value through profit or loss in accordance with AASB 9. The carrying value of the convertible notes at fair value through profit and loss is a key audit matter due to: • • the significance of the total balance the determination of the fair value of convertible notes involves significant judgement regarding the valuation methodology and the inputs and assumptions. • • • • • Obtaining an understanding of and assessing the terms and conditions of the convertible note agreement to determine the accounting treatment. Providing the valuation model to our internal experts to assess the reasonableness of the methodology and assumptions applied in the model and evaluating the results of their work. Assessing the reasonableness of the inputs to the valuation. Reviewing management’s assessment of the movements in fair value of the convertible notes, ensuring that all gains and losses have been treated appropriately. Reviewing the adequacy of the disclosures in the financial report and agreeing these to the valuation model and the convertible note agreement. The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 96 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 97 103 102 DGR Global and its subsidiariesdgrglobal.com.au Financial report continued Independent auditor’s report continued Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report 105 We have audited the Remuneration Report included in pages 25 to 35 of the directors’ report for the year ended 30 June 2019. 40 28 In our opinion, the Remuneration Report of DGR Global Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit Pty Ltd T J Kendall Director Brisbane, 30 September 2019 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 98 104 5 FURTHER INFORMATION DGR Global and its subsidiaries Further information Shareholder information Additional information required by ASX and not shown elsewhere in this report is as follows The information is current as at 23 September 2019. (a) Distribution schedule 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 50,000 50,001 – 100,000 100,001 and over Total Ordinary shares Unlisted $0.20 options exercisable on or before 8 November 2020 Number of holders Number of shares Number of holders Number of options 210 183 235 473 151 405 1,657 16,894 580,196 2,026,606 12,842,886 11,954,093 585,761,202 613,181,877 - - - - - 16 16 - - - - - 19,375,000 19,375,000 Unlisted $0.20 options exercisable on or Unlisted $0.20 options exercisable on or Unlisted convertible notes at $0.20 per before 28 November 2020 before 12 February 2021 convertible note Number of holders Number of options Number of holders Number of options Number of holders Number of notes - - - - 4 4 - - - - 17,500,000 17,500,000 - - - - - 2 2 - - - - 5,200,000 5,200,000 - - - - - 2 2 - - - - - 50,000,000 50,000,000 The number of shareholders holding less than a marketable parcel of shares is 404 (holding a total of 655,131 ordinary shares). (b) Substantial shareholders Name Nicholas Mather* Tenstar Trading Limited * Includes indirect holdings (c) Voting rights All ordinary shares carry one vote per share without restriction. (d) Restricted securities As at the date of this report, there were no restrictions over the Company’s shares. Number of Shares Percentage ownership 112,142,553 110,012,044 % 18.29 17.94 (e) Twenty largest holders The names of the twenty largest holders, in each class of quoted security in DGR Global Limited are set out below. Ordinary shares Rank Name 1 2 3 4 5 6 8 9 CITICORP NOMINEES PTY LIMITED SAMUEL HOLDINGS PTY LTD* NICHOLAS MATHER & JUDITH MATHER J P MORGAN NOMINEES AUSTRALIA PTY LIMITED MR YEE TECK TEO MR JEFFREY DOUGLAS PAPPIN MR VINCENT DAVID MASCOLO PINEGOLD PTY LTD 10 NATIONAL NOMINEES LIMITED 11 MATHER FOUNDATION LIMITED 12 13 14 15 16 17 BETA GAMMA PTY LTD BNP PARIBAS NOMINEES PTY LTD AIKEN & ASSOCIATES LIMITED 3RD WAVE INVESTORS LTD DR STEVEN G RODWELL BRIAN MOLLER 18 MR WILLIAM STUBBS 20 HAYES PASTORAL CORPORATION PTY LTD Total of top twenty shareholders Balance of register Total shares on issue Holding as Issued at 23 Sep capital 2019 % 116,678,844 19.03 69,926,147 41,310,000 25,456,218 16,616,367 10,000,000 9,650,000 8,000,000 7,859,159 7,020,788 6,700,000 5,662,025 5,430,144 5,000,000 4,942,898 4,775,000 4,650,000 8.60 6.74 4.15 2.71 1.63 1.57 1.30 1.28 1.14 1.09 0.92 0.89 0.82 0.81 0.78 0.76 0.74 0.67 59.06 40.94 4,114,007 354,829,691 258,352,186 613,181,877 100.00 19 MR WILLIAM GREGORY RUNGE & MRS WENDY KAY RUNGE 4,509,415 * These shareholders have more than one shareholding and these shareholdings have been merged for the purposes of this table. 106 107 DGR Global and its subsidiariesdgrglobal.com.au Further information continued Interest in tenements As at the date of this report, the Group has an interest in tenements as set out below (and continued over the page). Tenure type, number and name Current holder Tenure type, number and name Current holder Registered interest of holder % Date of expiry continued continued Registered interest of holder % continued NT EL 32002 – Tanumbirini East Pennant Resources Pty Ltd NT EL 32006 – Victoria River Downs Pennant Resources Pty Ltd NT EL 32008 – Cooee Hill Pennant Resources Pty Ltd NT EL 32009 – Williams Creek Pennant Resources Pty Ltd NT EL 32010 – Lagoon Creek West Pennant Resources Pty Ltd NT EL 32011 – Lagoon Creek Pennant Resources Pty Ltd NT EL 32012 – Lansen Creek Pennant Resources Pty Ltd NT EL 32013 – Parsons Creek Pennant Resources Pty Ltd NT EL 32014 – Newcastle Creek Pennant Resources Pty Ltd NT EL 32039 – Bullock Creek Pennant Resources Pty Ltd EPM 25225 Mabel Jane EPM 25963 Leyshonview EPM 25964 Blind Freddy EPM 25965 Black Knob EPM 25966 Bulldog EPM 27289 Rannes West NT EL 32032 Blue Bush NT EL 32031 Corella Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd Pinnacle Gold Pty Ltd NT EL 32042 Green Swamp West Hartz Rare Earths Pty Ltd NT EL 32043 Green Swamp East Hartz Rare Earths Pty Ltd 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Date of expiry continued 6 May 2025 6 May 2020 6 May 2025 6 May 2025 6 May 2025 6 May 2025 6 May 2025 6 May 2025 6 May 2025 4 July 2025 14 January 2020 23 December 2020 23 December 2020 23 December 2020 23 December 2020 Under Application Under Application Under Application Under Application Under Application EPM 26838 Jumna Creek Albatross Bauxite Pty Ltd EPM 26839 Holland Creek Albatross Bauxite Pty Ltd EPM 19379 Three Sisters Auburn Resources Limited EPM 25948 Hawkwood Auburn Resources Limited EPM 26013 Walkers Road Auburn Resources Limited EPM 26245 Nerangy EPM 26248 Titi Creek EPM 26526 Auburn EPM 26529 Therevale EPM 26758 Hillgrove Auburn Resources Limited Auburn Resources Limited Auburn Resources Limited Auburn Resources Limited Auburn Resources Limited EPM 18534 Quaggy Creek Auburn Resources Limited EPM 26523 Calrossie Auburn Resources Limited EPMA 27217 Quaggy Extended Auburn Resources Limited EPM 15134 Gayndah EPM 18451 Calgoa EPM 19087 Mt Abbot EPM 26274 Euri Creek EPM 26607 Otter Ridge EPMA 27250 Kolbar Barlyne Mining Pty Ltd Barlyne Mining Pty Ltd Barlyne Mining Pty Ltd Barlyne Mining Pty Ltd Barlyne Mining Pty Ltd Barlyne Mining Pty Ltd EPM 19270 Pandanus Creek Coolgarra Minerals Pty Ltd EPM 26265 Britannia Coolgarra Minerals Pty Ltd EPMA 26355 Big Rush Coolgarra Minerals Pty Ltd EPM 26382 Crooked Creek Coolgarra Minerals Pty Ltd EPM 26386 Roebourne Coolgarra Minerals Pty Ltd EPM 27061 Wade Creek Coolgarra Minerals Pty Ltd ML 3678 United Reefs ML 3741 Shamrock Extd. ML 3749 North Chinaman ML 3752 Shamrock Tailings DGR Global Limited DGR Global Limited DGR Global Limited DGR Global Limited ML 3753 Shamrock Tailings Extended DGR Global Limited ML 50099 Manumbar Extended DGR Global Limited ML 50148 Tableland ML 50291 Black Shamrock DGR Global Limited DGR Global Limited EPM 26769 Stockhaven Pennant Resources Pty Ltd MDL 409 Daddamarine Pennant Resources Pty Ltd NT EL 31980 – Tanumbirini North Pennant Resources Pty Ltd NT EL 31981 – Tanumbirini South Pennant Resources Pty Ltd 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 14 October 2021 9 December 2021 29 January 2021 10 February 2021 13 March 2021 14 May 2020 29 January 2020 3 January 2021 23 August 2021 27 August 2021 11 October 2020 10 December 2020 Under Application 29 September 2021 20 May 2020 28 July 2020 28 May 2020 12 July 2021 Under Application 17 September 2021 15 March 2020 Under Application 8 May 2020 23 November 2020 20 May 2022 31 May 2022 30 September 2030 31 July 2027 31 January 2021 31 August 2021 31 August 2025 30 April 2029 Under Application 27 August 2021 31 December 2018 6 May 2025 6 May 2025 108 109 DGR Global and its subsidiariesdgrglobal.com.au Corporate directory Directors William (Bill) Stubbs Chairman / Non-Executive Director Nicholas Mather Managing Director / CEO Brian Moller Non-Executive Director Vincent Mascolo Non-Executive Director Ben Cleary Non-Executive Director Bankers Macquarie Bank Level 8 825 Ann Street Fortitude Valley QLD 4006 Australia Solicitors Hopgood Ganim Lawyers Level 8, Waterfront Place 1 Eagle Street Brisbane QLD 4000 Australia Auditors BDO Audit Pty Ltd Level 10 12 Creek Street Brisbane QLD 4000 Australia Stock exchange listing ASX (ticker code DGR) Internet address dgrglobal.com.au Twitter @DGRGlobal Country of incorporation Australia Australian Business Number 67 052 354 837 Postal and contact address DGR Global Limited GPO Box 5261 Brisbane QLD 4001 Australia Registered office and principal business address DGR Global Limited Level 27, 111 Eagle Street Brisbane QLD 4000 Australia 111 This page has been left blank intentionally. 110 DGR Global and its subsidiariesdgrglobal.com.au