Element 25 Limited - Annual Report 2018
Annual Operations Report 2018
Table of Contents
1. Letter from the Chairman ................................................................................................3
2. The Butcherbird Project ..................................................................................................5
2.1.
2.2.
2.3.
Introduction ............................................................................................................5
Simple Geology ......................................................................................................6
A Unique Process ..................................................................................................6
3. About High Purity Manganese ........................................................................................7
4. Scoping Study Summary ................................................................................................8
4.1.
Study Summary......................................................................................................8
5. Pre-Feasibility Study .....................................................................................................10
5.1. Metallurgy ............................................................................................................11
5.2.
5.3.
Energy .................................................................................................................11
Environmental ......................................................................................................12
5.4. Geotechnical ........................................................................................................12
5.5.
5.6.
5.7.
5.8.
Project Finance ....................................................................................................12
Resource Development ........................................................................................12
Native Title ...........................................................................................................12
Flowsheet Development .......................................................................................13
6. Mining Lease Application ..............................................................................................14
7. Resource Estimation ....................................................................................................14
8. Other Exploration Activities ...........................................................................................16
8.1. Green Dam ..........................................................................................................16
8.2.
8.3.
8.4.
Pinnacles .............................................................................................................17
Holleton ................................................................................................................19
Sale of the Holleton Project ..................................................................................21
9. Change of Company Name ..........................................................................................21
10. Investment Portfolio (as at 30 June 2018) ....................................................................22
11. Appendices...................................................................................................................23
11.1. Summary of JORC Resources .............................................................................23
11.1.1. Review of material changes ..........................................................................23
11.1.2. Governance controls ....................................................................................24
11.1.3. Mineral Resource Estimate as at 30 June 2017 ............................................24
11.2. Competent Persons Statement ............................................................................25
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Annual Operations Report 2018
1.
Letter from the Chairman
Dear Fellow Shareholders,
On behalf of the board, management and staff of Element 25 Limited, I thank all
shareholders for their continued support over the last twelve months.
The 2017/2018 financial year has represented an important year of progress for the
Company as it advances the Butcherbird Manganese Project.
The Company’s vision is to become a high purity manganese producer by utilising innovative
processing technology to develop the world class manganese resource at the 100% owned
Butcherbird Manganese Project. As part of this initiative, the Company changed its name
from Montezuma Mining Company Ltd to Element 25 Limited during the year to reflect the
decision to focus on the development of Butcherbird. This is a significant shift in the direction
of the Company and its priorities with the new name reflective of manganese being the 25th
element of the periodic table.
The year has also provided the Company with the opportunity to consider all existing non-
core assets with the view to delivering shareholder value. Subsequent to the financial year
end, the Company disposed of the Holleton Project for $1M in cash and a 1% net smelter
royalty on all future production from Holleton. The funds received will be applied to the
continued advancement of Butcherbird.
In addition, a number of key objectives were completed during the year, including the
successful completion of the Butcherbird Scoping Study. The Study provided positive results
and provided strong encouragement for the Company to commit to a Preliminary Feasibility
Study “PFS”, which has been initiated. Work on the PFS is progressing on target and is
within anticipated timeframes.
Your Company is striving to advance all work streams with the view to developing Australia’s
largest onshore manganese resource. If successful, this work will provide a long-term
business opportunity that will transform the Company and generate employment
opportunities for many people.
The year ahead offers to be equally pivotal as we progress the development efforts at
Butcherbird in order to create value for shareholders and all stakeholders.
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Annual Operations Report 2018
I look forward to continuing this journey as a shareholder as the Company progresses the
development of an outstanding project which has the potential to provide an exciting future
for the Company.
Once again, my thanks to all shareholders for their continued support as we continue our
development journey, as well as the management, staff and all consultants whose diligent
efforts are the driving force behind the Company’s success.
I look forward to an exciting year ahead for your Company.
Yours sincerely
Seamus Cornelius
Chairman
Element 25 Limited
Page 4 of 25
Annual Operations Report 2018
2.
2.1.
The Butcherbird Project
Introduction
Element 25 Limited (“E25” or “Company”) is developing the Butcherbird manganese deposit
via a strategy of integrated downstream processing with the aim of producing high purity
manganese products including Electrolytic Manganese Metal (“EMM”) and battery grade
manganese sulphate (“HPMS”).
The project is located 1,050 km North of Perth and
130km south of Newman in the Southern Pilbara. The
project comprises seven resource areas, the largest of
which is the Yanneri Ridge deposit. This is the planned
start up location, selected due to a higher grade and its
location underlying both the Great North Highway and
Goldfields Gas Pipeline. The Yanneri Ridge
mineralisation also has minimal overburden, allowing
simple and low cost mining, requiring no drill and blast.
The deposit was discovered by E25 and was
subsequently drilled out to establish the maiden
mineral resource estimate (see Table 1). A positive
Scoping Study was completed in the first quarter of
2018 and a Pre-Feasibility Study (PFS) is currently
underway.
The development of the project will introduce a new
technology developed by the Company and the CSIRO
which will allow significant skill building within the
Western Australia workforce. The project will
incorporate the electrowinning of Electrolytic
Manganese Metal which has not been produced in
Australia for some decades.
The integration of renewable energy as part of the power solution will provide opportunities
to further expand the State’s proportion of renewable energy in the mining industry and more
broadly.
Page 5 of 25
Annual Operations Report 2018
Prospect
Tonnes (Mt)
Mn (%)
SiO2 (%) Fe (%)
P2O5 (%) Al2O3 (%)
Yanneri Ridge
Inferred
Indicated
48.0
22.5
Additional Deposits
Inferred
Total
110.3
180.8
10.7
12.0
10.6
10.8
43.0
43.8
44.4
43.9
11.1
11.6
11.9
11.7
0.262
0.297
0.3
0.3
10.7
10.6
11.0
10.9
Table 1: Butcherbird Project JORC mineral resource estimate1. Note: there are no material changes to
the assumptions used to provide the JORC 2012 Butcherbird Resource Estimate.
2.2.
Simple Geology
The mineralisation at Butcherbird forms a
flat-lying, stratiform ore body. The very
simple geology ensures continuity of
mineralisation, which simplifies mining. The
ore zone starts at surface and is laterally
continuous and no selective mining is
required. The strip ratio is estimated at 0.2:1
based on preliminary pit optimisations2. The
ore zone is above the water table. It is
expected to be a primarily free-dig operation
with localised ripping.
2.3.
A Unique Process
The development strategy has been based around a flowsheet which was developed in
conjunction with the CSIRO in 2017. The plant flowsheet consists of proven unit operations
including crushing, scrubbing, grinding, hydrometallurgical recovery and purification and
electrolysis/evaporation for final product production. The plant also includes reductant
preparation, product handling, tailings neutralisation and reagents storage facilities.
The process represents a significant improvement when compared to conventional
processing methods in terms of both carbon intensity and cost competitiveness. Key
1 Reference: Element 25 Limited ASX release dated 12 October 2017 (originally released under the MZM ticker
code)
2 Reference: Element 25 Limited ASX release dated 10 May 2018.
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Annual Operations Report 2018
differences from the traditional flowsheets used in China which are expected to positively
impact project economics include:
• Access to low strip ratio, outcropping ore from our 100% owned deposit;
• Ambient temperature, atmospheric pressure leach;
• Gas pipeline transects the project providing access to gas fired baseload power;
• Potential to integrate significant proportion of renewable energy to lower energy
costs and decarbonise the product; and
• Bitumen highway transects the resource providing a turnkey logistics solution.
3.
About High Purity Manganese
Manganese is the twelfth most abundant element in the earth's crust, with the bulk of
commercial production coming from South Africa, China, Australia, Brazil, India and Gabon.
Europe, North America, Japan, Korea and many other countries import 100% of their
manganese requirements. Manganese is a critical raw material to many industries, and
large portions of the world economy depend on its continued supply.
Manganese is a critical ingredient in steel production, which consumes around 90% of global
manganese supply. Around 10% of supply goes into the production of high purity
manganese products including Electrolytic Manganese Metal (“EMM”), Electrolytic
Manganese Dioxide (“EMD”) and Manganese Sulphate.
A key end-use of high purity manganese is in batteries, including both rechargeable lithium-
ion batteries and non-rechargeable alkaline cells. Consequently, as battery storage
becomes an increasingly important part of the global energy solution, manganese demand is
rapidly increasing. Manganese based batteries enable safe storage with high energy
capacities and can be recharged from renewable energy sources.
Demand for high purity manganese metal and high purity manganese sulphate is expected
to increase dramatically in the foreseeable future, driven by growth in traditional end use
markets but also a rapid expansion in electric vehicle production and grid storage devices
capacity in Asia, Europe and North America. Nickel-Cobalt-Manganese (NMC) and Lithiated
Manganese (LMO) battery cathode chemistries both contain significant amounts of
manganese and are widely anticipated to be the dominant formulations in the rapidly
growing market for electric vehicles and grid-storage.
Manufacturing high performance Li-ion batteries that utilise manganese in the cathode
requires reliable, high-purity manganese supply to ensure that the batteries meet
increasingly demanding performance, safety and durability standards.
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Annual Operations Report 2018
In addition to the increase in demand for manufacturing Li-ion batteries, strong demand is
also expected from the traditional alkaline battery markets. Because of these factors, all
three of the main high purity manganese products EMM, EMD and Manganese Sulphate are
expected to grow strongly for the foreseeable future.
4.
Scoping Study Summary
As a key highlight of the year’s activities, the Company completed a Scoping Study3 which
focused on the Yanneri Ridge deposit, one of the mineralised resources at the 100% owned
Butcherbird Project (“Project”).
The study was completed with assistance from the following reputable industry consultant
groups:
§ Mining Solutions Pty Ltd (Scoping study management and reporting, Mine
optimisation, design and scheduling, Financial modelling);
§ Extomine Pty Ltd (resource model);
§ Simulus Engineers Pty Ltd (Metallurgical process design, capital and operating cost
estimates);
§ Enviroworks Pty Ltd and Martinick Bosch Sell Pty Ltd (MBS Environmental),
environmental review and costings;
§ Qube Logistics Ltd (Logistics solution and costings);
§ Tenet Consulting Pty Ltd and Advisian (Power cost estimates);
§ Metal Bulletin Research Ltd (Metals Market research including volume and price
forecasts) and
§ Numerous other Western Australian mining industry suppliers.
The results of the Study were positive and provided strong encouragement for the Company
to commit to a Preliminary Feasibility Study which is currently underway.
4.1.
Study Summary
The Scoping Study was designed to focus on open pit development and processing of the
Yanneri Ridge mineral resource which forms part of the global Butcherbird mineral resource.
The Study supports the aim to complete a Preliminary Feasibility Study and apply for
regulatory consents in 2018/2019, with development targeted in 2020/2021.
3 Refer Company Announcement dated 10 May 2018
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Annual Operations Report 2018
Mining Solutions Pty Ltd (“Mining Solutions”), were engaged to carry out a Scoping Study on
the Butcherbird project, producing a high-level indicative mining and processing schedule
utilising Whittle shells, inclusive of a high-level financial analysis. Given the level of study,
and that Inferred Resources was used as an economic driver, no Ore Reserves were
reported from the Study.
The study was completed to a higher level of detail than a traditional scoping study to enable
fatal flaws or other potential problems to be identified and mitigated early in the project’s life,
and included:
§ Budget level pricing from two potential contract miners;
§ Scoping Study level pricing from freight companies for road haulage, port and
international shipping solutions;
§ PFS level design and pricing from metallurgical consultants;
§ Scoping Study level pricing from two power supply consultants for power solutions
for the project;
§ Budget level quotes for many miscellaneous suppliers including:
§ Camp and office infrastructure;
§ Flights;
§ Airstrip construction;
§ Salaries and Wages;
§ Vehicles;
§ Communications establishment and operating;
§ Water Supply and Pumping; and
§ Environmental, Heritage and other approval related studies.
§ Manganese Market Studies including forward looking price and volume forecasts by
Metal Bulletin Research PLC.
Full details in relation to the study can be found on the Company’s website:
http://www.element25.com.au/site/the-manganese-project/scoping-study
The Company is not aware of any new information or data that materially affects the
information included in the announcement and in the case of estimates of mineral resources
and ore reserves, all material assumptions underpinning the estimates continue to apply and
have not materially changed.
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Annual Operations Report 2018
Figure 1:
Infrastructure overview at the Butcherbird Project.
5.
Pre-Feasibility Study
Based on the results of the Scoping Study, and the demand forecast from Metal Bulletin for
high purity manganese products, which indicated robust growth in demand and pricing over
the forecast period, the Company initiated a Pre-Feasibility Study (“PFS”) to assess in more
detail the pathway to commercialisation for this world class resource.
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Annual Operations Report 2018
The Company has formally engaged a number of key consulting groups to undertake or
manage the various elements of the study, and all key work streams are underway and
progressing with the PFS on track to be completed within the forecast time frame of
approximately 18 months.
The following appointments have been made and key work streams are under way:
5.1.
Metallurgy
Simulus has helped develop projects and conducted project
assessments in over 25 countries around the world for over 75
companies. Their services span the entire product development
lifecycle from simulation, laboratory testwork, engineering and modular and mobile plants.
Simulus offers full, multidisciplinary engineering capability whilst maintaining a strong focus
on the early stages of project development, including scoping, prefeasibility and bankable
feasibility studies. Simulus is currently undertaking the first stage of the flowsheet upscaling
test work, including a programme of small scale optimisation followed by a bulk leach of
approximately 600kg of sample from the Yanneri Ridge orebody. The work will provide detail
on small scale variability within the deposit as well as taking the process through to the
production of both manganese sulphate and EMM product samples.
5.2.
Energy
Advisian, the global consulting firm of Worley Parsons has been engaged by E25 to provide
consulting support in relation to the project. E25 is aiming to implement a lower cost, low
emissions solution as this will improve the project economics and potentially allow the
Company to produce a product which has a lower carbon footprint than conventionally
produced EMM. Producing battery grade high purity manganese sulphate using E25’s
process is exothermic and thereby energy neutral, however producing EMM requires large
amounts of electrical energy and therefore the work on the power solution is important to
that part of the project. The Company believes that being able to provide a low cost, low
emission product may provide a marketing advantage in the future, as potential E25
customers (steel and battery manufacturers) seek to decarbonise their respective supply
chains.
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Annual Operations Report 2018
5.3.
Environmental
MBS Environmental has a skilled in-house team of environmental scientists,
geochemists, environmental engineers and geoscientists which have provided
environmental and management services to the mining sector for a wide range
of exploration, mining and onshore gas projects for over 30 years. MBS have been engaged
to plan and manage the various tasks required to take the Butcherbird Project through the
environmental permitting process.
5.4.
Geotechnical
In addition to these key appointments, a geotechnical and “diggability”
assessment of drill core has been completed by independent
specialist consultants 4DG. No issues were identified and the work concluded that the
majority of the deposit will likely not require drill and blast. Localised ripping may be required
in parts of the lateritic cap.
5.5.
Project Finance
As part of the funding solution for the Butcherbird Project, the Company is in discussions
with a number of independent advisory groups to provide early stage project financing
services including initial engagement with potential funders, and advice on the available
funding structures and strategies in relation to the project.
5.6.
Resource Development
Drilling programmes for infill drilling of the resource to measured status as well EIS funded
high grade placer manganese exploration work have been planned and POW’s are lodged
and approved respectively. Heritage clearances have been received and drilling has
commenced. The drilling is expected to take approximately four weeks, with all assays
expected in the December 2018 quarter. This data will form the basis of an upgraded
mineral resource estimate and ultimately a maiden reserve statement once the PFS is
completed.
5.7.
Native Title
Engagement has commenced with the representatives of the Traditional Owners of the
Nyiaparli Native Title Claim area to negotiate a native title agreement to allow the granting of
the mining lease application at Butcherbird to progress.
Page 12 of 25
Annual Operations Report 2018
5.8.
Flowsheet Development
In November 2017, the Company reported that the test work being conducted in conjunction
with the CSIRO successfully produced a PLS which exceeds industry specifications for the
production of a high purity EMM or EMD product4. The impurity levels for all key
contaminants are well below their respective limits.
Discussions with CSIRO in relation to agreeing on a structure to collaboratively develop and
commercialise the process technology that has been developed for the Butcherbird project
are progressing and the Company looks forward to announcing details when available.
The assay results from the purified PLS are shown below, normalised to 100 g/l Mn content
and benchmarked against a widely used, industry accepted North American specification.
The results exceed expectations and are comfortably below the requisite contaminant levels,
meaning the PLS is compatible with the production of both EMM and EMD.
Element
Mn
g/l
Cu
ppm
Co
pp
m
3
Ni
pp
m
3
Fe
pp
m
3
K
pp
m
41
Li
ppm
Na
pp
m
41
407
Ca
ppm
Mg
ppm
122
2
407
2
P
pp
m
2
Cl
ppm
203
6
Al
pp
m
Cr
pp
m
204
2
Ti
pp
m
2
B
pp
m
2
1
0.2
1.5
0.2
0.3
17.3
-1
44
536
585
-1
*
0.9
0.3
0.2
-1
As
ppm
2
V
pp
m
2
Ba
pp
m
2
Bi
pp
m
2
Tl
ppm
Cd
pp
m
0.2
0.2
Ga
pp
m
10
Se
ppm
Te
ppm
Mo
pp
m
Sb
ppm
Ge
pp
m
Pb
pp
m
Hg
pp
m
Zn
pp
m
2
2
2
0.2
0.2
0.2
0.2
0.2
0.1
0.2
0.3
0
-1
0.05
7
8.1
-1
-1
-1
-1
-1
-1
-1
0.4
10
0
10
0
Industry
Standard PLS
(normalised to
100g/l Mn)
Purified
Butcherbird
PLS
(normalised to
100 g/l Mn)
Industry
Standard PLS
(normalised to
100g/l Mn)
Purified
Butcherbird
PLS
(normalised to
100 g/l Mn)
Table 2: Assay of the purified PLS from the leaching of Butcherbird manganese ores showing levels of
key contaminants important in the production of EMM and EMD. Assays undertaken by
Bureau Veritas using the ICP-AES method. -1 indicates assay is below detection.* indicates
assay value pending.
4 Reference: Company Announcement dated 22 November 2017
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Annual Operations Report 2018
6.
Mining Lease Application
The Yanneri Ridge Manganese deposit has been identified during historical resource
definition work and a more recent mining study as the optimum location to commence
mining operations. To allow the necessary permitting activities to be initiated, a Mining
Lease Application has been submitted that will cover the Yanneri Ridge and Coodamudgi
Manganese deposits which contain the manganese resources being assessed in the
Scoping Study.
7.
Resource Estimation
During the year, the previous Snowden December 2011 JORC 2004 Butcherbird
Manganese Deposit Resource for the Yanneri Ridge Deposit was reviewed and re-reported,
updating the resource to JORC 2012 and the resource confidence category for the Yanneri
Ridge deposit5. The revised resource estimate is tabulated in Section 11.
Drill samples used in the resource are from Reverse Circulation (RC) Drilling with Drill-Rig
mounted riffle splitters and collected at one-meter intervals. All drilling is vertical with the
average depth of 30m. The manganese ore zones are close to flat lying and therefore
drillhole intersections approximate true width. All drilling is dry and above the water table.
Additional Diamond holes are drilled primarily for metallurgy and have been used to aid
interpretation.
All data is captured electronically and has to pass extensive quality assurance and quality
control (QAQC) procedures to be used. QAQC processes include validation of hole
coordinates, field standards, lab standards, field duplicates. This estimation incorporates all
of the validated RC holes drilled in the Yanneri Ridge by the Company from 2010 to 2011.
All data is stored in the company’s GBIS database.
Density was calculated from down hole gamma gamma geophysical density. Average
densities by geological unit and mineralisation have been applied globally to the model. No
account has been made for moisture and reported tonnes are wet tonnes.
The main mineralised shale unit along with regolith boundaries for the base of hard capping
and the base of oxidisation were modelled in 3D using Micromine.
5 Refer Company Announcement dated 16 October 2017
Page 14 of 25
Annual Operations Report 2018
Variography and detailed statistics were performed on the modelled domains. This
variography was used to determine the estimation parameters for the grade modelling.
A block model was constructed for use in grade estimation with block dimensions of 50m NS
by 50m EW and 2.5m in the vertically with sub blocking 12.5m by 12.5m by 0.625m. The
deposit was estimated using ordinary kriging (“OK”) grade interpolation of 1m composited
data within domained hard boundaries. Grades were estimated are Mn, Fe, SiO2, Al2O3,
P2O5, MgO, CaO, TiO2, Na2O, CaO, S, K2O, LOI total, Cr2O3, Ba, Cu, Pb and Zn.
Interpolation parameters were based on the geometry of geology and geostatistical
parameters determined by variography.
A detailed validation of the block model was completed, which included both visual and
statistical reviews. The model is considered to be globally robust.
The resource has been categorised as Indicated, and Inferred in accordance with JORC
requirements (2012). The portion of the resource drilled at a spacing of 100 x 100 or better
displayed good continuity of mineralisation and was classified as indicated. The remaining
areas have been classified as inferred and have been drilled at 200 x 100 and at 400 x
100m, showing good geological and statistical continuity.
Figure 2:
N-S Section through the Yanneri Ridge resource area (773,500E) showing Manganese Resoruce
Blocks. Note: vertical exaggeration 5:1.
Page 15 of 25
Annual Operations Report 2018
8.
8.1.
Other Exploration Activities
Green Dam
During the year, 930 soil samples
were collected from the Green Dam
Project to infill historic data to the north
and to test for geochemical anomalism
in an area to the south where the
regolith was deemed amenable to this
style of exploration, interpreted as
subcropping greenstones.
The main target commodity was gold,
with recent discoveries in the area by
Breaker Resources NL6 (directly west)
and Apollo Consolidated Limited7
(northeast) demonstrating the potential
for this area to host both large and
high grade gold deposits.
The programme highlighted a number
of significant gold anomalies, with one
returning continuous elevated gold
values and a peak value of 35ppb gold
over an area approximately 3km by
1.5 km in size8.
Follow up work has taken place to
ground truth the anomalies and generate specific target areas for either infill soil sampling or
drill testing.
6 https://www.breakerresources.com.au/wp-content/uploads/announcements/180110-ASX-Lake-Roe-
RCDD_Final.pdf
7 http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01941129
8 Reference: Element 25 Limited ASX release dated 12 October 2017 (originally released under the MZM ticker
code)
Page 16 of 25
Annual Operations Report 2018
8.2.
Pinnacles
The Company undertook an exercise in
historic data compilation and review
which highlighted potential for gold and
nickel sulphide mineralisation in addition
to the historically identified nickel/cobalt
laterite mineralisation.
On completion of the data review, a
surface EM programme was conducted
to test for nickel sulphide targets
beneath an historic nickel intersection
which had a chemical signature
compatible with a nickel sulphide body.
The survey identified two late time
conductive targets.9
A drilling programme comprising eight
reverse circulation drill holes completed
for 1,335m to test multiple target types
with the following results.
Cobalt: Drillhole PNRC0003.
Confirmation drilling of high grade cobalt identified in historic drilling and supply of sample
material for metallurgical test work. Drillhole PNRC0003, which was designed to validate the
historical cobalt values intersected within the main laterite zone, has confirmed exceptional
grades over broad widths with a best intercept of 14m @ 0.15% Co, and a maximum cobalt
value of 0.45% Co recorded over 1m at 35m. This intersection closely matches the
thickness and grade of intersections in nearby historical drill holes.
Nickel sulphide: Drillholes PNRC0001, 2 and 8. Two late time bedrock conductors
identified in a recent EM survey, one of which is located beneath a historic sulphide intercept
of 2m @2.3% Ni. Drilling encountered a thick cumulate ultramafic up to 150m in downhole
thickness. Visual observations and portable XRF readings indicated the potential presence
of weakly disseminated (cloud) nickel sulphide within the ultramafic. Laboratory assays
9 Reference: Element 25 Limited ASX release dated 21 August 2017 (originally released under the MZM ticker
code)
Page 17 of 25
Annual Operations Report 2018
support these observations, and show that the likely magmatic sulphides are confined to
discrete zones proximal to the margins of the ultramafic, with nickel/copper values up to
0.35% Ni/0.03% Cu (The non-mineralised ultramafic averages ~0.10-0.22% nickel). The
location of sulphides and geochemical profile of the stratigraphy is typical of a
differentiated ultramafic that is intrusive in origin. The EM target remains untested and
ranks highly given the presence of potential magmatic nickel sulphides within the host
ultramafic and lack of other conductive lithologies encountered within PNRC0001.
Gold: The drill testing of historical geochemical anomalies and stratigraphic targets has
revealed a number of strong coincident gold / pathfinder anomalies (Au-As-Bi-Te-Cu+/-Mo),
and is indicative of the presence of a widespread hydro-thermal event. The recent results
(supported by historical geochemistry) upgrade the potential for the discovery for gold
mineralisation within the project tenure. Drill hole PNRC0007 was drilled to the west of the
planned target due to restricted access, but still encountered strong alteration and shearing
associated with the ultramafic/mafic contact.
The results also indicate that the ultramafic/mafic contact is a valid gold exploration target
with anomalous gold (up to 116ppb Au) and other pathfinder elements (As-Bi-Te-Cu-Mo).
Figure 3:
Schematic section along 6642425N showing historical drill holes, interpreted geology
of PNRC0001 and untested DHEM conductor. Intercepts are downhole widths.
Page 18 of 25
Annual Operations Report 2018
8.3.
Holleton
A dipole-dipole array induced
polarisation (“IP”) step out
survey was completed at the
Company’s 100% owned
Holleton Gold Project to follow
up the encouraging results from
the previously announced
orientation survey10.
The purpose of the IP survey
was to test whether the
technique can be used to target
areas with higher sulphide
concentrations along the 2km
long basement gold anomaly at
the Brahma Prospect. Two lines
were completed parallel to the
orientation line at 100m
spacings, with the remainder of
the strike of the basement
Figure 4:
geochemical anomaly tested at
300m line spacing
Plan view of the Holleton Gold Prend showing basement
gold anomalies and the location of the IP survey stations
at the Brahma Prospect overlaying magnetics (RTP
1VD).
Limited historical drilling, where only three holes have been drilled deeper than 40m,
returned a best intersection of 73m @ 0.3 g/t Au (including 4m @ 1.6 g/t Au and 1m @ 7.6
g/t Au), with all three diamond holes returning broad mineralised intervals. The higher grade
gold zones are typically associated with a higher sulphide content.
The results of the survey confirmed a high amplitude (33 mV/V) chargeability anomaly
located to the north of the basement geochemical expression. The anomaly plunges to the
west and is located under approximately 60m of interpreted cover. The known extent of the
anomaly extends over 300m and is open along strike in both directions. On section, the
10 See company announcement dated 11 September 2017.
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Annual Operations Report 2018
anomaly overlaps the previous drilling and shows a weaker chargeability response (8-10
mV/V) coincident with the gold and sulphide mineralisation on the same section. Importantly,
directly above the chargeability anomaly, there is a surface gold geochemical signature
which appears to be ‘bleeding’ through the transported cover.
The survey has been successful in highlighting the highest priority part of the 2.5km long
geochemical anomaly. If the interpretation of the various datasets is correct, the IP data
should be mapping the higher concentrations of sulphides in the basement rocks, which are
expected to have the best potential for higher gold grades.
Figure 5:
Plan view of the Brahma gold trend showing gold geochemical contours and the location of the IP
survey stations overlaying magnetics (RTP 1VD).
Page 20 of 25
Annual Operations Report 2018
Figure 6:
Sectional view of the inversion model along section A-B showing chargebility (mV/V) and historical
drilling. Drill traces show gold values and sulphur assays. The lower order sulphur assays are
coincident with the lower amplitude chargeability response indicating the undrilled higher amplitude
anomaly may be indicative of higher gold grades.
8.4.
Sale of the Holleton Project
Subsequent to the financial year end, the Company sold the Holleton Project to Ramelius
Resources Ltd (RMS) wholly owned RMS subsidiary Edna May Operations Pty Ltd (EMO).
Pursuant to the sale agreement, EMO has acquired 100% of the Holleton Project. E25
received $1M in cash and a 1% NSR on all future production from the Holleton Project.
9.
Change of Company Name
Pursuant to the Company announcement on 14 May 2018 and following approval by
shareholders at a General Meeting held on 10 May 2018, the Company formally changed its
name from Montezuma Mining Company Ltd to Element 25 Limited to reflect the decision to
focus on the development of the Butcherbird Manganese Project.
The new name is a reference to the fact that manganese is the 25th element of the periodic
table and is a reflection of the Company’s intention to focus on becoming a high purity
manganese producer by utilising our innovative processing technology to develop the world
class manganese resource at the 100% owned Butcherbird project.
The Company’s ASX code changed from “MZM” to “E25” effective Thursday, 17 May 2018.
Page 21 of 25
Annual Operations Report 2018
10.
Investment Portfolio (as at 30 June 2018)
In addition to cash reserves, the Company held securities in the following listed entities at 30
June 2018:
Listed securities at market value:
No. Held
Closing Price
Market Value
Alt Resources Ltd (ARS)
1,250,000
$0.053
$66,250
Magmatic Resources Ltd (MAG)
3,770,485
$0.066
$248,852
Buxton Resources Ltd (BUX)
150,000
$0.165
$24,750
Buxton Resources Ltd (BUX) 12.5c Options
2,000,000
N/A
-
Duketon Mining (DKM)
1,450,000
$0.250
$362,500
Anova Metals Ltd (AWV)
7,000,000
$0.039
$273,000
Lefroy Exploration (LEX)
4,200,000
$0.165
$693,000
Danakali Limited (DNK)
8,846,597
$0.67
$5,971,453
Total Market Value as at 30 June 2018
$7,639,805
Page 22 of 25
Annual Operations Report 2018
11.
11.1.
Appendices
Summary of JORC Resources
Prospect
Yanneri Ridge
Inferred
Indicated
Richies Find
Coodamudgi
Mundawindi
Tonnes
(Mt)
48.0
22.5
22.7
16.5
16.3
Ilgarrarie Ridge
35.6
Bindi Bindi Hill
14.4
Bugdie Hill
4.50
Cadgies Flat
0.291
Total
180.8
Mn (%)
SiO2 (%)
Fe (%)
P2O5 (%)
Al2O3 (%)
10.7
12.0
10.9
11.0
11.9
9.94
10.4
9.34
10.0
10.8
43.0
43.8
44.8
42.9
40.3
46.0
45.5
45.4
46.2
43.9
11.1
11.6
11.6
12.5
11.7
12.5
10.1
13.2
11.1
11.7
0.262
0.297
0.24
0.28
0.30
0.31
0.22
0.35
0.29
0.3
10.7
10.6
11.2
11.0
9.9
11.1
11.9
11.2
12.3
10.9
Table 3: Butcherbird Manganese project Mineral Resource Classification as at 30 June 2018. Mineral
Resource Estimates at the Butcherbird Manganese Project are reported at a 8% Mn cut.
11.1.1.
Review of material changes
Element 25 Limited updated its Mineral estimates for the Yanneri Ridge Manganese Deposit at the 100% owned
Butcherbird High Purity Manganese Project as at 30 June 201811.
Total reported Indicated Mineral Resource estimates are 22.5 million tonnes at 12.0% per cent manganese for
2.7 million tonnes of contained manganese. Inferred Mineral Resources are 158.3 million tonnes at 10.6 per cent
manganese for 16.8 tonnes of contained manganese.
This represents a 2.6 per cent net increase in contained manganese compared with the 30 June 2017 estimate,
constituting is a minor change related to geological reinterpretation and remodelling of the Yanneri Ridge
Deposit.
The Company confirms that it is not aware of any new information or data that materially affects the information
included in the original announcement dated 16 October 2017 and that all material assumptions and technical
parameters underpinning the estimates continue to apply and have not materially changed.
11 Refer to Company ASX Release dated 16 October 2017
Page 23 of 25
Annual Operations Report 2018
11.1.2.
Governance controls
All Mineral Resource estimates are prepared by qualified professionals following JORC Code compliant
procedures and follow standard industry methodology for drilling, sampling, assaying, geological interpretation, 3
dimensional modelling and grade interpolation techniques.
The Mineral Resource estimates have been calculated by a suitably qualified consultant and overseen by
suitably qualified Element 25 Limited employee and/or consultant.
11.1.3.
Mineral Resource Estimate as at 30 June 2017
Classification
Cut-off
Deposit
Bindi Bindi Hill
Budgie Hills
Cadgies Flats
Coodamudgi
Illgararie Ridge
Mundawindi
Richies Find
SUBTOTAL
Yanneri Ridge
GLOBAL TOTAL
Inferred Resource
10% Mn
Tonnes (Mt)
Mn (%)
8.75
1.03
0.25
12.9
17.0
14.2
16.1
70.2
48.8
119.0
11.09
10.82
11.08
11.48
10.71
12.23
11.56
11.4
11.8
11.6
Table 1. Inferred Mineral Resource Estimates at the Butcherbird Manganese Project are reported at a 10% Mn cut.
Classification
Cut-off
Deposit
Bindi Bindi Hill
Budgie Hills
Cadgies Flats
Coodamudgi
Illgararie Ridge
Mundawindi
Richies Find
SUBTOTAL
Yanneri Ridge
GLOBAL TOTAL
Inferred Resource
8-10% Mn
Tonnes (Mt)
Mn (%)
5.7
3.5
0.2
3.6
18.5
2.1
6.6
40.1
15.8
55.9
9.2
8.9
9.1
9.5
9.2
9.4
9.4
9.3
9.4
9.3
Table 2. Inferred Mineral Resource Estimates at the Butcherbird Manganese Project are reported at 8-10% Mn.
Page 24 of 25
Annual Operations Report 2018
11.2.
Competent Persons Statement
The information in this report that relates to Exploration Results and Exploration Targets is based on information
compiled by Mr David O’Neill who is a member of the Australasian Institute of Mining and Metallurgy. At the time
that the Exploration Results and Exploration Targets were compiled, Mr O’Neill was an employee of Element 25
Limited. Mr O’Neill is a geologist and has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration 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’. Mr O’Neill consents to the inclusion of this information in the form and context in which it
appears in this report.
The information in this report that relates to Mineral Resources is based on information compiled by Mr Mark
Glassock who is a member of the Australasian Institute of Mining and Metallurgy. At the time that the Mineral
Resources were compiled, Mr Glassock was a consultant to Element 25 Limited. Mr Glassock is a geologist and
has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration
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’. Mr Glassock
consents to the inclusion of this information in the form and context in which it appears in this report
Please note with regard to exploration targets, the potential quantity and grade is conceptual in nature, that there
has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will
result in the determination of a Mineral Resource.
Page 25 of 25
Element 25 Limited
(formerly Montezuma Mining Company Limited)
ABN 46 119 711 929
Annual Financial Report
for the year ended 30 June 2018
Element 25 Limited
Corporate Information
ABN 46 119 711 929
Directors
Seamus Cornelius (Non-Executive Chairman)
Justin Brown (Executive Director)
John Ribbons (Non-Executive Director)
Company Secretary
John Ribbons
Registered Office
Suite 2, 11 Ventnor Avenue
WEST PERTH WA 6005
Principal Place of Business
Level 2, 45 Richardson Street
WEST PERTH WA 6005
Telephone: +61 8 6315 1400
Facsimile: +61 8 9486 7093
Solicitors
House Legal
86 First Avenue
MT LAWLEY WA 6050
Bankers
National Australia Bank Limited
1232 Hay Street
WEST PERTH WA 6005
ANZ Banking Corporation
Level 1, 1275 Hay Street
WEST PERTH WA 6005
Share Register
Security Transfer Australia Pty Ltd
770 Canning Highway
APPLECROSS WA 6153
Telephone: 1300 992 916
Facsimile: +61 8 6365 4086
Auditors
Rothsay Chartered Accountants
Level 1, Lincoln Building
4 Ventnor Avenue
WEST PERTH WA 6005
Internet Address
www.element25.com.au
Stock Exchange Listing
Element 25 Limited shares (Code: E25) are listed on the Australian Securities Exchange.
1
Element 25 Limited
Contents
Directors' Report
Audit Independence Letter
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Audit Report
ASX Additional Information
3
9
10
11
12
13
14
31
32
36
2
Directors’ Report
Element 25 Limited
Your directors submit their report on the consolidated entity (referred to hereafter as the Group) consisting of Element 25 Limited (formerly
Montezuma Mining Company Limited) and the entities it controlled at the end of, or during, the year ended 30 June 2018.
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. Where
applicable, all current and former directorships held in listed public companies over the last three years have been detailed below. Directors
were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Seamus Cornelius, (Non-Executive Chairman, Chairman of remuneration committee, audit committee member)
Mr Cornelius brings twenty-five years of corporate experience in both legal and commercial negotiations. Mr Cornelius has been based in
Shanghai and Beijing since 1993 where he has been living and working as a corporate lawyer.
From 2000 to 2012, Mr Cornelius was an international partner with one of Australia’s leading law firms and specialised in dealing with
cross border investments, particularly in the energy and resource sectors. Mr Cornelius has for many years advised large international
companies on their investments in China and in recent years advised Chinese state owned entities on their investments in natural resource
projects outside China, including Australia. Mr Cornelius is also chairman of Buxton Resources Limited, Danakali Limited and Duketon
Mining Limited. Mr Cornelius has not held any former directorships in the last 3 years.
Justin Brown, B.Sc. (Hon), (Executive Director, audit committee member)
Mr Brown is a geologist with extensive experience in global minerals exploration. He has a strong technical background with experience
in the full spectrum of mineral exploration and mining from grass roots target generation through to resource mining and mine production.
Mr Brown has held a number of board positions and is an experienced company director in both executive and non-executive capacities.
He has a strong track record of closing successful commercial transactions and brings a well-rounded set of skills to the management of
the Company’s activities.
Mr Brown was most recently a non-executive director of Exterra Resources Ltd, which has now merged with Anova Metals Ltd via a
Scheme of Arrangement. Mr Brown was the founding Managing Director of the Company.
John Ribbons, B.Bus., CPA, ACIS (Non-Executive Director, Chairman of audit committee, remuneration committee member)
Mr Ribbons is an accountant who has worked within the resources industry for over twenty years in the capacity of group financial
controller, chief financial officer or company secretary.
Mr Ribbons has extensive knowledge and experience with ASX listed production and exploration companies. He has considerable site
based experience with operating mines and has also been involved with the listing of several exploration companies on ASX. Mr Ribbons
has experience in capital raising, ASX and TSX compliance and regulatory requirements. Mr Ribbons has not held any former directorships
in the last 3 years.
COMPANY SECRETARY
John Ribbons
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Element 25 Limited were:
Seamus Cornelius
Justin Brown
John Ribbons
Ordinary
Shares
3,278,970
4,412,500
500,000
Options over
Ordinary
Shares
2,550,000
4,850,000
2,550,000
PRINCIPAL ACTIVITIES
During the year the Group carried out exploration on its tenements and applied for or acquired additional tenements with the objective of
identifying economic mineral deposits.
There was no significant change in the nature of the Group’s activities during the year.
DIVIDENDS
No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made.
3
Element 25 Limited
Directors' Report continued
REVIEW OF OPERATIONS
Finance Review
The Group began the financial year with a cash reserve of $4,175,060. Funds were used to advance the Group’s projects located in Australia.
During the year total tenement acquisition and exploration expenditure incurred by the Group amounted to $1,632,873 (2017: $1,492,785).
In line with the Group’s accounting policies, all exploration expenditure was expenses as incurred. The Group recognised a net fair value
gain on financial assets of $72,551 (2017: $2,172,701 fair value gain), and income of $835,000 (2017: $904,465) on the sale of mineral
properties. Net administration expenditure incurred amounted to $952,713 (2017: $584,156). This has resulted in an operating loss after
income tax for the year ended 30 June 2018 of $1,678,035 (2017: $1,000,225 profit).
At 30 June 2018 surplus funds available totalled $2,194,663.
Operating Results for the Year
Summarised operating results are as follows:
Consolidated entity revenues and profit from ordinary activities before income tax expense
Shareholder Returns
Basic and diluted (loss)/earnings per share (cents)
2018
Revenues
$
Results
$
970,851
(1,678,035)
2018
(2.0)
2017
1.2
Risk Management
The board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with
the risks and opportunities identified by the board.
The Group believes that it is crucial for all board members to be a part of this process, and as such the board has not established a separate
risk management committee.
The board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified
by the board. These include the following:
• Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholders needs and manage business
risk.
Implementation of board approved operating plans and budgets and board monitoring of progress against these budgets.
•
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as disclosed in this Annual Report, no significant changes in the state of affairs of the Group occurred during the financial year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
No matters or circumstances, besides those disclosed at note 21, have arisen since the end of the financial year which significantly affected
or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial
years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group expects to maintain the present status and level of operations and hence there are no likely developments in the Group’s
operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation in respect to its exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance
with all environmental legislation. The directors of the Group are not aware of any breach of environmental legislation for the year under
review.
4
Directors' Report continued
Element 25 Limited
REMUNERATION REPORT
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Principles used to determine the nature and amount of remuneration
Remuneration Policy
The remuneration policy of Element 25 Limited has been designed to align key management personnel objectives with shareholder and
business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance
areas affecting the Group’s financial results. The board of Element 25 Limited believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best key management personnel to run and manage the Group.
The board’s policy for determining the nature and amount of remuneration for key management personnel of the Group is as follows:
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives (if any), was developed
by the board. All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation.
The board reviews executive packages annually by reference to the Group’s performance, executive performance and comparable
information from industry sectors and other listed companies in similar industries.
The board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the
highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives (if any) receive a superannuation guarantee contribution required by the government, which was
9.5% for the 2018 financial year, and do not receive any other retirement benefits. Some individuals may choose to sacrifice part of their
salary to increase payments towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the Group and expensed. Options are valued using the
Black-Scholes methodology.
The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and
responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market
practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can
be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting (currently $200,000). Fees for
non-executive directors are not linked to the performance of the Group. However, to align directors’ interests with shareholder interests,
the directors are encouraged to hold shares in the Company.
Performance based remuneration
The Group currently has no performance based remuneration component built into key management personnel remuneration packages.
Group performance, shareholder wealth and key management personnel remuneration
The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and key
management personnel performance. Currently, this is facilitated through the issue of options to the majority of key management personnel
to encourage the alignment of personal and shareholder interests. The Group believes this policy will be effective in increasing shareholder
wealth. At commencement of production, performance based bonuses based on key performance indicators are expected to be introduced.
Use of remuneration consultants
The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2018.
Voting and comments made at the Company’s 2017 Annual General Meeting
The Company received approximately 99.8% of “yes” votes on its remuneration report for the 2017 financial year. The Company did not
receive any specific feedback at the Annual General Meeting or throughout the year on its remuneration practices.
Details of remuneration
Details of the remuneration of the key management personnel of the Group are set out in the following table.
The key management personnel of the Group include only the directors as per page 3.
5
Element 25 Limited
Directors' Report continued
Key management personnel of the Group
Short-Term
Post-Employment
Share-based
Payments
Total
Non-Monetary Superannuation
$
$
Retirement
benefits
$
Options
$
$
Directors
Seamus Cornelius
2018
2017
Justin Brown
2018
2017
John Ribbons
2018
2017
Salary
& Fees
$
60,000
60,000
220,000
219,231
42,000
42,000
3,790
3,279
7,164
5,338
3,790
3,279
-
-
20,900
20,827
-
-
-
-
-
-
-
-
-
-
28,500
20,300
57,000
40,600
28,500
20,300
92,290
83,579
305,064
285,996
74,290
65,579
114,000
81,200
471,644
435,154
Total key management personnel compensation
2018
2017
322,000
321,231
14,744
11,896
20,900
20,827
Service agreements
The details of service agreements of the key management personnel of the Group are as follows:
Justin Brown, Executive Director:
• Term of agreement – until terminated in accordance with the agreement. The Company may terminate without cause at any time by
giving six months’ written notice, whilst the executive must provide three months’ written notice of termination (unless breach or
agreement by the Company). The agreement contains standard clauses on immediate termination for breach of contract or misconduct.
• Annual salary of $220,000 (plus 9.5% statutory superannuation), plus the provision of income protection insurance. Mr Brown’s salary
is reviewed on an annual basis.
• There is no provision for the payment of termination benefits by the Company, other than for accrued entitlements.
Share-based compensation
Options
Options are issued to key management personnel as part of their remuneration. The options are not issued based on performance criteria
but are issued to the majority of key management personnel of Element 25 Limited to increase goal congruence between key management
personnel and shareholders. The following options were granted to or vesting with key management personnel during the year:
Grant Date
Granted
Number Vesting Date Expiry Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents)
Exercised
Number
% of
Remuneration
Directors
Seamus Cornelius
Seamus Cornelius
Justin Brown
Justin Brown
John Ribbons
John Ribbons
01/12/2017
30/11/2012
01/12/2017
30/11/2012
01/12/2017
30/11/2012
300,000
750,000
600,000
1,500,000
300,000
750,000
01/12/2017
(1)
01/12/2017
(1)
01/12/2017
(1)
28/11/2022
30/11/2017
28/11/2022
30/11/2017
28/11/2022
30/11/2017
35.5
38.0
35.5
38.0
35.5
38.0
9.5
7.7
9.5
7.7
9.5
7.7
N/A
N/A
N/A
N/A
N/A
N/A
30.9
(1)
18.7
(1)
36.4
(1)
(1) These options had a market vesting condition, such that they would vest once the market capitalisation of the Company appreciated
100% from 30 November 2012. These options expired without vesting on 30 November 2017. The expense was recognised in full at
grant date.
There were no ordinary shares in the Company provided as a result of the exercise of remuneration options during the year.
6
Element 25 Limited
Directors' Report continued
Equity instruments held by key management personnel
Share holdings
The numbers of shares in the Company held during the financial year by each director of Element 25 Limited and other key management
personnel of the Group, including their personally related parties, and any nominally held, are set out below. There were no shares granted
during the reporting period as compensation.
2018
Directors of Element 25 Limited
Ordinary shares
Seamus Cornelius
Justin Brown
John Ribbons
Balance at
start of the
year
3,264,225
4,312,500
500,000
Received
during the
year on the
exercise of
options
Other changes
during the
year
Balance at end
of the year
-
-
-
14,745
100,000
-
3,278,970
4,412,500
500,000
Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Element 25 Limited and
other key management personnel of the Company, including their personally related parties, are set out below:
2018
Balance at
start of the
year
Granted as
compensation Exercised
Other
changes
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors of Element 25 Limited
Seamus Cornelius
Justin Brown
John Ribbons
3,000,000
5,750,000
3,000,000
300,000
600,000
300,000
All vested options are exercisable at the end of the year.
Loans to key management personnel
There were no loans to key management personnel during the year.
End of audited Remuneration Report
-
-
-
(750,000)
(1,500,000)
(750,000)
2,550,000
4,850,000
2,550,000
2,550,000
4,850,000
2,550,000
-
-
-
DIRECTORS’ MEETINGS
During the year the Company held seventeen meetings of directors. The attendance of directors at meetings of the board were:
Directors Meetings
Audit Committee Meetings
Remuneration Committee
Meetings
A
13
17
17
B
17
17
17
Seamus Cornelius
Justin Brown
John Ribbons
Notes
A - Number of meetings attended.
B - Number of meetings held during the time the director held office during the year.
* - Not a member of the Remuneration Committee
A
-
2
2
B
2
2
2
A
1
*
1
B
1
*
1
7
Directors' Report continued
Element 25 Limited
SHARES UNDER OPTION
Unissued ordinary shares of Element 25 Limited under option at the date of this report are as follows:
Exercise price (cents)
35.5
32.5
20
22
30
30
30
35
35
32
21.5
20
Date options granted
1 December 2017
3 November 2017
2 December 2016
2 December 2016
2 December 2016
22 August 2016
20 June 2016
30 November 2015
20 November 2015
22 October 2015
18 November 2014
19 November 2013
Expiry date
28 November 2022
3 November 2022
24 November 2021
2 December 2019
2 December 2019
22 August 2020
17 June 2019
20 November 2018
20 November 2020
22 October 2018
18 November 2019
19 November 2018
Total number of options outstanding at the date of this report
Number of options
1,200,000
600,000
2,000,000
200,000
200,000
2,000,000
250,000
200,000
2,200,000
250,000
2,750,000
2,000,000
13,850,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, Element 25 Limited paid a premium of $11,369 to insure the directors of the Company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the
officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause
detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and
those relating to other liabilities.
NON-AUDIT SERVICES
There were no non-audit services provided by the entity's auditor, Rothsay Chartered Accountants, or associated entities, during the year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company,
or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for
all or any part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations
Act 2001.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 9.
Signed in accordance with a resolution of the directors.
Justin Brown
Executive Director
Perth, 27 September 2018
8
Consolidated Statement of Comprehensive Income
Element 25 Limited
YEAR ENDED 30 JUNE 2018
Notes
Consolidated
REVENUE
Other income
EXPENDITURE
Administration expenses
Depreciation expense
Exploration expenditure
Salaries and employee benefits expense
Secretarial and share registry expenses
Share based payment expense
2018
$
63,300
907,551
(470,416)
-
(1,632,873)
(269,137)
(111,400)
(165,060)
4
5
24(b)
2017
$
103,111
3,077,166
(337,388)
(16,791)
(1,492,785)
(112,067)
(133,390)
(87,631)
(LOSS)/PROFIT BEFORE INCOME TAX
(1,678,035)
1,000,225
INCOME TAX EXPENSE
7
-
-
(LOSS)/PROFIT FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF ELEMENT 25
LIMITED
(1,678,035)
1,000,225
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR ATTRIBUTABLE TO
MEMBERS OF ELEMENT 25 LIMITED
(5,997)
(5,997)
2,492
2,492
(1,684,032)
1,002,717
(LOSS)/EARNINGS PER SHARE FOR (LOSS)/PROFIT ATTRIBUTABLE TO THE
ORDINARY EQUITY HOLDERS OF THE COMPANY
Basic and diluted (loss)/earnings per share (cents per share)
23
(2.0)
1.2
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the Notes to the Consolidated Financial Statements.
10
Consolidated Statement of Financial Position
Element 25 Limited
AT 30 JUNE 2018
Notes
Consolidated
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
2018
$
2,194,663
110,866
7,639,805
9,945,334
16,660
16,660
2017
$
4,175,060
35,410
7,253,475
11,463,945
-
-
9,961,994
11,463,945
230,143
230,143
230,143
213,122
213,122
213,122
9,731,851
11,250,823
14,351,850
3,578,230
(8,198,229)
9,731,851
14,351,850
3,419,167
(6,520,194)
11,250,823
8
9
10
11
12
13
14
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements.
11
Consolidated Statement of Changes in Equity
Element 25 Limited
YEAR ENDED 30 JUNE 2018
Consolidated
BALANCE AT 1 JULY 2016
Profit for the year
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of
foreign operations
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
Shares issued during the year
Share issue transaction costs
Employee and consultant share-based
payments
Notes
Contributed
Equity
$
12,353,350
-
Share-Based
Payments
Reserve
$
3,265,162
-
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
(22,518)
-
(7,520,419)
1,000,225
8,075,575
1,000,225
-
-
-
-
2,492
2,492
-
1,000,225
2,492
1,002,717
13(b)
13(b)
24(b)
2,210,000
(211,500)
-
86,400
-
87,631
-
-
-
-
-
-
2,210,000
(125,100)
87,631
BALANCE AT 30 JUNE 2017
14,351,850
3,439,193
(20,026)
(6,520,194)
11,250,823
Loss for the year
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of
foreign operations
TOTAL COMPREHENSIVE LOSS
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
Employee and consultant share-based
payments
24(b)
-
-
-
-
-
-
-
-
(1,678,035)
(1,678,035)
(5,997)
(5,997)
-
(1,678,035)
(5,997)
(1,684,032)
165,060
-
-
165,060
BALANCE AT 30 JUNE 2018
14,351,850
3,604,253
(26,023)
(8,198,229)
9,731,851
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.
12
Consolidated Statement of Cash Flows
Element 25 Limited
YEAR ENDED 30 JUNE 2018
Notes
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
Proceeds on sale of mining interests
Expenditure on mining interests
Proceeds from disposal of financial assets at fair value through profit or loss
Payments for financial assets at fair value through profit or loss
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
22
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares
Payments for share issue transaction costs
NET CASH INFLOW FROM FINANCING ACTIVITIES
2018
$
(853,116)
60,903
410,000
(1,652,839)
1,127,911
(1,045,455)
(1,952,596)
(28,959)
(28,959)
-
-
-
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
8
(1,981,555)
4,175,060
1,158
2,194,663
2017
$
(502,481)
115,926
64,465
(1,588,497)
308,353
-
(1,602,234)
-
-
2,210,000
(125,100)
2,084,900
482,666
3,692,673
(279)
4,175,060
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.
13
Notes to the Consolidated Financial Statements
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting
of Element 25 Limited and its subsidiaries. The financial statements are presented in the Australian currency. Element 25 Limited is a
company limited by shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on
27 September 2018. The directors have the power to amend and reissue the financial statements.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board and the Corporations Act 2001. Element 25 Limited is a for-profit entity for the
purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Element 25 Limited Group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are relevant
to its operations and effective for the current annual reporting period. The adoption of these Accounting Standards and Interpretations did
not have any significant impact on the financial performance or position of the Group during the financial year.
(iii) Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2017.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at
fair value through profit or loss, which have been measured at fair value.
(b) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group
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 Group.
They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of the impairment of the transferred asset. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and
other comprehensive income, statement of changes in equity and statement of financial position respectively.
(ii) 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 Element 25 Limited.
When the Group ceases to have control, 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, jointly controlled entity 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 a jointly controlled entity or associate is reduced but joint control or 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.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the full Board of Directors.
14
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian
dollars, which is Element 25 Limited's functional and presentation currency.
(ii) Transactions and balances
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. They are deferred in equity if they are
attributable to part of the net investment in a foreign operation.
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement
of financial position;
income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates
(unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
•
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation
is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or
loss, as part of the gain or loss on sale.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. The Group recognises revenue when the amount of
revenue can be reliably measured and it is probable that future economic benefits will flow to the entity.
Interest income
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial assets.
(f) Income tax
The income tax expense or revenue 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 and to unused
tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period
in the countries where the Company’s subsidiaries and associated operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
15
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(g) Leases
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the
present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-
term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit
or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as
operating leases (note 18). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or
loss on a straight-line basis over the period of the lease.
(h) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or
more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
(i) Cash and cash equivalents
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts.
(j) Trade and other receivables
Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful
debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.
(k) Investments and other financial assets
Classification
The Company classifies its investments in the following categories: financial assets at fair value through profit or loss, and loans and
receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification
of its investments at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-
current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Company commits to purchase or sell
the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through
profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are
expensed to the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Loans and receivables are carried at amortised cost using the effective interest method.
16
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair
value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of comprehensive income within
other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss
is recognised in the statement of comprehensive income as part of revenue from continuing operations when the Group’s right to receive
payments is established.
Details on how the fair value of financial investments is determined are disclosed in note 2.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence
of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or
events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original
effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or
held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in profit or loss.
(l) Plant and equipment
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged
to the statement of comprehensive income during the reporting period in which they are incurred.
Depreciation of plant and equipment is calculated using the reducing balance method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the
shorter lease term. The rates vary between 20% and 40% per annum.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount (note 1(h)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of
comprehensive income. When revalued assets are sold, it is Company policy to transfer the amounts included in other reserves in respect
of those assets to retained earnings.
(m) Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(o) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
17
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(ii) Share-based payments
The Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions,
whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’), refer to note 24.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
The fair value is determined by an internal valuation using a Black-Scholes option pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which
the vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Company, will ultimately vest. This
opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award.
(p) Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of
the acquisition as part of the purchase consideration.
(q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(r) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(s) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and
have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out
below. New standards and interpretations not mentioned are considered unlikely to impact on the financial reporting of the Group.
AASB 9 Financial Instruments (applicable for annual reporting periods commencing on or after 1 January 2018).
AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for
hedge accounting and a new impairment model for financial assets. AASB 9 is effective for annual periods beginning on or after 1 January
2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative
information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.
The Group plans to adopt the new standard on the required effective date and will not restate comparative information. Based on the
Group’s current operations and financial assets and liabilities currently held, the Group does not anticipate any material impact on the
financial statements upon adoption of this standard. The Group does not presently engage in hedge accounting.
18
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
AASB 15 Revenue from Contracts with Customers (applicable for annual reporting periods commencing on or after 1 January
2018).
AASB 15 will replace AASB 118 which covers revenue arising from the sale of goods and the rendering of services and AASB 111 which
covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service
transfers to a customer and establishes a five-step model to account for revenue arising from contracts with customers. The standard permits
either a full retrospective or a modified retrospective approach for the adoption.
The Group plans to adopt the new standard on the required effective date using the full retrospective method. There will be no material
impact on the Group’s financial position or performance from the adoption of this new standard.
AASB 16 Leases (applicable for annual reporting periods commencing on or after 1 January 2019).
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the statement of financial position, as the
distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change.
The Group plans to adopt the new standard on the required effective date. The Group continues to assess the potential impact of AASB 16
on its consolidated financial statements.
None of the other amendments or Interpretations are expected to affect the accounting policies of the Group.
(t) Critical accounting judgements, estimates and assumptions
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements are:
Share based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model, using
the assumptions detailed in note 24.
Environmental Issues
Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and
the directors understanding thereof. At the current stage of the Group’s development and its current environmental impact the directors
believe such treatment is reasonable and appropriate.
Taxation
Balances disclosed in the financial statements and the notes thereto related to taxation are based on the best estimates of the directors.
These estimates take into account both the financial performance and position of the Group as they pertain to current income taxation
legislation, and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current
income tax position represents the directors’ best estimate, pending an assessment by the Australian Taxation Office.
2.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group.
Risk management is carried out by the full board of directors as the Group believes that it is crucial for all board members to be involved
in this process. The executive director, with the assistance of senior management as required, has responsibility for identifying, assessing,
treating and monitoring risks and reporting to the board on risk management.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Euro.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is
not the entity’s functional currency. The Group has not formalised a foreign currency risk management policy however, it monitors its
foreign currency expenditure in light of exchange rate movements.
The risk is not material and sensitivity analysis does not result in a material effect on Group results or financial position.
19
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
2.
FINANCIAL RISK MANAGEMENT (cont’d)
(ii) Price risk
The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified in the statement of
financial position as financial assets at fair value through profit or loss. Given the current level of operations, the Group is not currently
exposed to commodity price risk.
To minimise the risk, the Group’s investments are of high quality and are publicly traded on the ASX. The investments are managed on a
day to day basis so as to pick up any significant adjustments to market prices.
Sensitivity analysis
At 30 June 2018, if the value of the equity instruments held had increased/decreased by 15% with all other variables held constant, post-
tax profit for the Group would have been $1,145,971 higher/lower, with no changes to other equity balances, as a result of gains/losses on
equity securities classified as financial assets at fair value through profit or loss (2017: $1,088,021 lower/higher post-tax loss).
(iii) Interest rate risk
The Group is exposed to movements in market interest rates on cash and cash equivalents. The Group policy is to monitor the interest rate
yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The entire
balance of cash and cash equivalents for the Group $2,194,663 (2017: $4,175,060) is subject to interest rate risk. The proportional mix of
floating interest rates and fixed rates to a maximum of six months fluctuate during the year depending on current working capital
requirements. The weighted average interest rate received on cash and cash equivalents by the Group was 1.9% (2017: 2.3%).
Sensitivity analysis
At 30 June 2018, if interest rates had changed by +/- 100 basis points from the weighted average rate for the year with all other variables
held constant, post-tax profit for the Group would have been $32,740 higher/lower (2017: $45,601 lower/higher post-tax loss) as a result
of higher/lower interest income from cash and cash equivalents.
(b) Credit risk
The maximum exposure to credit risk at reporting date is the carrying amount (net of provision for impairment) of those assets as disclosed
in the statement of financial position and notes to the financial statements. The only significant concentration of credit risk for the Group
is the cash and cash equivalents held with financial institutions. All material deposits are held with the major Australian banks for which
the Board evaluate credit risk to be minimal.
As the Group does not presently have any debtors, lending, significant stock levels or any other credit risk, a formal credit risk management
policy is not maintained.
(c) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable
securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral
exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board
of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with
a view to initiating appropriate capital raisings as required.
The financial liabilities of the Group are confined to trade and other payables as disclosed in the Statement of financial position. All trade
and other payables are non-interest bearing and due within 12 months of the reporting date.
(d) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The equity investments held by the Group are classified at fair value through profit or loss. The market value of all equity investments
represents the fair value based on quoted prices on active markets (ASX) as at the reporting date without any deduction for transaction
costs. These investments are classified as level 1 financial instruments.
20
Element 25 Limited
Notes to the Consolidated Financial Statements continued
30 JUNE 2018
2.
FINANCIAL RISK MANAGEMENT (cont’d)
The carrying amounts and estimated fair values of financial assets and financial liabilities are as follows:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Total Financial Assets
Financial Liabilities
Trade and other payables
Total Financial Liabilities
Consolidated
2018
$
2,194,663
110,866
7,639,805
9,945,334
2017
$
4,175,060
35,410
7,253,475
11,463,945
230,143
230,143
213,122
213,122
The methods and assumptions used to estimate the fair value of financial instruments are outlined below:
Cash
The carrying amount is fair value due to the liquid nature of these assets.
Receivables/Payables
Due to the short-term nature of these financial rights and obligations, their carrying amounts are estimated to represent their fair values.
Fair value measurements of financial assets
The carrying values of financial assets and liabilities of the Group approximate their fair values. Fair values of financial assets and liabilities
have been determined for measurement and / or disclosure purposes.
Fair value hierarchy
The Group classifies assets and liabilities carried at fair value using a fair value hierarchy that reflects the significance of the inputs used
in determining that value. The following table analyses financial instruments carried at fair value by the valuation method. The different
levels in the hierarchy have been defined as follows:
Level 1:
Level 2:
quoted prices (unadjusted) in active markets for identical assets or liabilities;
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 3:
30 June 2018
Financial assets at fair value through profit or loss
Total as at 30 June 2018
30 June 2017
Financial assets at fair value through profit or loss
Total as at 30 June 2017
3.
SEGMENT INFORMATION
Level 1
$
7,639,805
7,639,805
7,253,475
7,253,475
Level 2
$
Level 3
$
-
-
-
-
-
-
-
-
Total
$
7,639,805
7,639,805
7,253,475
7,253,475
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. The Group is managed primarily on the
basis of geographic location of assets given that the type of work done in each location is of a similar nature. Operating segments are
therefore determined on this basis, with two segments being identified: Australia; and France.
The activities undertaken in each segment are those associated with the determination and assessment of the existence of commercial
economic reserves, from the Group’s mineral assets in the respective geographic location.
Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group’s
accounting policies.
21
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
3.
SEGMENT INFORMATION (cont’d)
Australia
France
Total
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
Segment revenue
-
-
-
-
-
-
Reconciliation of segment revenue to total
revenue before tax:
Interest revenue
Total revenue
63,300
63,300
103,111
103,111
Segment results
(1,453,304)
(1,399,196)
(172,569)
(93,589)
(1,632,873)
(1,492,785)
Reconciliation of segment result to net loss
before tax:
Interest revenue
Other income
Other corporate and administration
Net (loss)/profit before tax
63,300
907,551
(1,016,013)
103,111
3,077,166
(687,267)
(1,678,035)
1,000,225
Segment operating assets
-
-
-
-
-
-
Reconciliation of segment operating assets
to total assets:
Other corporate and administration assets
Total assets
4.
REVENUE
From continuing operations
Other revenue
Interest
5.
OTHER INCOME
Net gain on sale of mining interests
Fair value gains on financial assets at fair value through profit or loss
6.
EXPENSES
Profit or loss before income tax includes the following specific expenses:
Minimum lease payments relating to operating leases
Defined contribution superannuation expense
Net foreign exchange losses
9,961,994
11,463,945
9,961,994
11,463,945
Consolidated
2018
$
2017
$
63,300
103,111
835,000
72,551
907,551
137,562
57,479
818
904,465
2,172,701
3,077,166
312,232
49,064
-
22
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
7.
INCOME TAX
(a) Income tax benefit
Current tax
Deferred tax
Consolidated
2018
$
2017
$
-
-
-
-
-
-
(b) Numerical reconciliation of income tax expense/(benefit) to prima facie tax
payable
(Loss)/profit from continuing operations before income tax expense
Prima facie tax (benefit)/expense at the Australian tax rate of 27.5% (2017: 27.5%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
(1,678,035)
(461,460)
1,000,225
275,062
Share-based payments
Other
Movements in unrecognised temporary differences
Tax effect of current year tax losses for which no deferred tax asset has been recognised
Income tax expense/(benefit)
(c) Unrecognised temporary differences
Deferred Tax Assets at 27.5% (2017: 27.5%)
On Income Tax Account
Capital raising expenses
Accruals and provisions
Foreign carry forward tax losses
Australian carry forward tax losses
Deferred Tax Liabilities at 27.5% (2017: 27.5%)
Financial assets at fair value through profit or loss
Accrued income
45,392
3,249
(412,819)
35,872
376,947
-
36,594
40,865
229,215
1,731,482
2,038,156
819,135
837
819,972
24,099
24,708
323,869
(598,071)
274,202
-
29,036
31,368
154,504
1,280,865
1,495,773
1,157,506
35
1,157,541
Net deferred tax assets were not brought to account as it was not considered probable within the immediate future that tax profits would be
available against which deductible temporary differences and tax losses could be utilised.
The Group’s ability to use losses in the future is subject to each Group company satisfying the relevant tax authority’s criteria for using
these losses.
In April 2017, the Australian Government enacted legislation which reduces the corporate rate for small and medium business entities from
30% to 25% over the next decade. For the 2017 financial year the corporate tax rate reduced to 27.5% for small business entities with
turnover less than $10 million. This turnover threshold will progressively increase until it reaches $50 million in the 2019 financial year.
From the 2025 financial year, the tax rate will then progressively decrease until it reaches 25% for the 2027 and later financial years.
Element 25 Limited satisfies the criteria to be a small business entity.
23
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
8.
CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents as shown in the statement of financial position and
the statement of cash flows
Consolidated
2018
$
2017
$
482,983
1,711,680
271,353
3,903,707
2,194,663
4,175,060
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of
the Group, and earn interest at the respective short-term deposit rates.
9.
CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Sundry receivables
Prepayments
101,953
8,913
110,866
27,215
8,195
35,410
10. CURRENT ASSETS - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Australian listed equity securities
7,639,805
7,253,475
Changes in fair values of financial assets at fair value through profit or loss are recorded in other income or other expenses in the statement
of comprehensive income (notes 5 and 6 respectively).
11. NON-CURRENT ASSETS - PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated depreciation
Net book amount
Movements:
Opening net book amount
Exchange differences
Additions
Depreciation charge
Closing net book amount
12. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
13.
ISSUED CAPITAL
(a) Share capital
Ordinary shares fully paid
Total issued capital
92,355
(75,695)
16,660
-
110
16,550
-
16,660
41,956
188,187
230,143
145,156
(145,156)
-
16,791
-
-
(16,791)
-
57,978
155,144
213,122
2018
2017
Notes
Number of
shares
$
Number of
shares
$
13(b), 13(d)
83,464,350
14,351,850
83,464,350
14,351,850
83,464,350
14,351,850
83,464,350
14,351,850
24
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
13.
ISSUED CAPITAL (cont’d)
(b) Movements in ordinary share capital
Beginning of the financial year
Issued during the year:
−
Transaction costs incurred
End of the financial year
Issued for cash at 17 cents per share
(c) Movements in options on issue
2018
2017
Notes
Number of
shares
$
Number of
shares
$
83,464,350
14,351,850
70,464,350
12,353,350
-
-
83,464,350
-
-
14,351,850
13,000,000
-
83,464,350
2,210,000
(211,500)
14,351,850
Beginning of the financial year
Issued during the year:
− Exercisable at 20 cents, on or before 24 November 2021
− Exercisable at 22 cents, on or before 2 December 2019
− Exercisable at 30 cents, on or before 2 December 2019
− Exercisable at 30 cents, on or before 22 August 2020
− Exercisable at 32.5 cents, on or before 3 November 2022
− Exercisable at 35.5 cents, on or before 28 November 2022
Expired during the year:
− On 30 July 2016, exercisable at 20 cents
− On 30 June 2017, exercisable at 20 cents
− On 1 July 2017, exercisable at 20 cents
− On 15 September 2017, exercisable at 27.5 cents
− On 30 July 2016, exercisable at 30 cents
− On 30 November 2016, exercisable at 32.5 cents
− On 31 January 2018, exercisable at 34 cents
− On 30 November 2017, exercisable at 38 cents
End of the financial year
Number of options
2017
2018
16,700,000
18,320,000
-
-
-
-
600,000
1,200,000
-
-
(1,000,000)
(500,000)
-
-
(150,000)
(3,000,000)
13,850,000
2,000,000
200,000
200,000
2,000,000
-
-
(1,020,000)
(1,000,000)
-
-
(1,000,000)
(3,000,000)
-
-
16,700,000
(d) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number
of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each
share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to
provide returns for shareholders and benefits for other stakeholders.
Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the
primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital
position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure
appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as
required. The working capital position of the Group at 30 June 2018 and 30 June 2017 are as follows:
25
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
13.
ISSUED CAPITAL (cont’d)
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Trade and other payables
Working capital position
14. RESERVES AND RETAINED EARNINGS
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve
Consolidated
2018
$
2,194,663
110,866
7,639,805
(230,143)
9,715,191
2017
$
4,175,060
35,410
7,253,475
(213,122)
11,250,823
(26,023)
3,604,253
3,578,230
(20,026)
3,439,193
3,419,167
(c) Nature and purpose of reserves
(i) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in
note 1(d) and accumulated within a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
(ii) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options and performance rights granted.
15. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
16. REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
Audit services
Rothsay Chartered Accountants - audit and review of financial reports
Total remuneration for audit services
38,500
38,500
34,500
34,500
17. CONTINGENCIES
There are no material contingent liabilities or contingent assets of the Company at balance date.
18. COMMITMENTS
(a) Exploration commitments
The Company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an interest in.
Outstanding exploration commitments are as follows:
within one year
later than one year but not later than five years
802,000
1,826,000
2,628,000
621,000
1,492,000
2,113,000
26
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
18. COMMITMENTS (cont’d)
(b) Lease commitments: Group as lessee
Operating leases (non-cancellable):
Minimum lease payments
within one year
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities
Consolidated
2018
$
2017
$
115,200
-
115,200
115,200
115,200
230,400
The property lease is a non-cancellable lease with a two-year term, with rent payable monthly in advance. The lease allows for subletting
of all lease areas subject to permission from the lessor. The Company has obtained permission from the lessor and entered into a sublet
arrangement for the entire two-year term of the lease amounting to 50% of the commitment noted above.
19. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Element 25 Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 20.
(c) Key management personnel compensation
Short-term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Detailed remuneration disclosures are provided in the remuneration report on pages 5 to 7.
(d) Loans to related parties
There were no loans to related parties, including key management personnel, during the year.
20. SUBSIDIARY
336,744
20,900
-
-
114,000
471,644
333,127
20,827
-
-
81,200
435,154
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(b):
Name
Country of Incorporation
Equity Holding(1)
Class of Shares
Cordier Mines SAS
Fortitude Metals Limited(2)
France
Australia
Ordinary
Ordinary
(1) The proportion of ownership interest is equal to the proportion of voting power held.
2018
%
100
100
2017
%
100
-
(2) Fortitude Metals Limited (“Fortitude”) was incorporated on 26 February 2018 with Element 25 Limited the sole shareholder. Fortitude
has been dormant since incorporation.
21. EVENTS OCCURRING AFTER THE STATEMENT OF FINANCIAL POSITION DATE
No matter or circumstance has arisen since 30 June 2018, which has significantly affected, or may significantly affect the operations of the
Company, the result of those operations, or the state of affairs of the Company in subsequent financial years.
27
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
22. CASH FLOW INFORMATION
Reconciliation of (loss)/profit after income tax to net cash outflow from
operating activities
(Loss)/profit for the year
Non-Cash Items
Depreciation of non-current assets
Employee and consultants share-based payments
Fair value of financial assets received on sale of mining interests
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
Decrease/(increase) in financial assets at fair value through profit or loss
Increase/(decrease) in trade and other payables
Net cash outflow from operating activities
23. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings/(loss) per share
(Loss)/profit attributable to the owners of the Company used in calculating
basic and diluted (loss)/earnings per share
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted (loss)/earnings per share
Consolidated
2018
$
2017
$
(1,678,035)
1,000,225
-
165,060
(425,000)
(7,138)
(62,449)
38,670
16,296
(1,952,596)
16,791
87,631
-
2,694
119,454
(2,754,348)
(74,681)
(1,602,234)
(1,678,035)
1,000,225
Number of shares
2018
Number of shares
2017
83,464,350
81,932,843
(c) Information on the classification of options
As the Group made a loss for the year ended 30 June 2018, the options on issue were considered anti-dilutive and were not included in the
calculation of diluted earnings per share. The options currently on issue could potentially dilute basic earnings per share in the future.
For the year ended 30 June 2017, all options on issue were anti-dilutive as the various exercise prices were all greater than the average
market price of the Company’s shares during the year. This resulted in the diluted earnings per share being the same as the basic earnings
per share.
28
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
24. SHARE-BASED PAYMENTS
(a) Employees and Contractors Options
The Company provides benefits to employees (including directors) and contractors of the Company in the form of share-based payment
transactions, whereby employees render services in exchange for options to acquire ordinary shares. The exercise price of the options
granted and on issue at 30 June 2018 range from 20 cents to 35.5 cents per option, with expiry dates ranging from 22 October 2018 to 28
November 2022.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the Company
with full dividend and voting rights.
Fair value of options granted
The weighted average fair value of the options granted during the year was 9.2 cents (2017: 4.0 cents). The price was calculated by using
the Black-Scholes European Option Pricing Model applying the following inputs:
Weighted average exercise price (cents)
Weighted average life of the option (years)
Weighted average underlying share price (cents)
Expected share price volatility
Risk free interest rate
2018
34.5
5.00
25.2
50%
2.16%
2017
25.1
4.36
14.8
50%
2.11%
Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is indicative of future
trends, which may not eventuate.
Set out below is a summary of the share-based payment options granted:
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at year-end
Exercisable at year-end
2018
2017
Weighted
average
exercise price
cents
27.7
34.5
-
-
32.9
26.8
26.8
Number of
options
16,700,000
1,800,000
-
-
(4,650,000)
13,850,000
13,850,000
Number of
options
18,320,000
4,400,000
-
-
(6,020,000)
16,700,000
14,700,000
Weighted
average
exercise price
cents
28.4
25.1
-
-
27.9
27.7
25.4
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 2.1 years (2017: 2.1
years), and the exercise prices range from 20 cents to 35.5 cents.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Options granted to employees and contractors expensed to profit or loss
Options granted to contractors included in share issue transaction costs
165,060
-
165,060
Consolidated
2018
$
2017
$
87,631
86,400
174,031
29
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2018
25. PARENT ENTITY INFORMATION
Parent Entity
2018
$
2017
$
The following information relates to the parent entity, Element 25 Limited, at 30 June 2018. The information presented here has been
prepared using accounting policies consistent with those presented in note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
(Loss)/profit for the year
Total comprehensive (loss)/income for the year
9,901,489
12,409
9,913,898
217,384
217,384
14,351,850
3,604,253
(8,259,589)
9,696,514
(1,703,180)
(1,703,180)
11,436,378
-
11,436,378
201,744
201,744
14,351,850
3,439,193
(6,556,409)
11,234,634
1,015,608
1,015,608
30
Directors' Declaration
Element 25 Limited
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 10 to 30 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the
financial year ended on that date;
(ii)
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
and
a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been
included in the notes to the financial statements.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Justin Brown
Executive Director
Perth, 27 September 2018
31
ASX Additional Information
Element 25 Limited
Additional information required by Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information
is current as at 18 September 2018.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
100,001
-
-
-
-
1,000
5,000
10,000
100,000
and over
The number of equity security holders holding less than a marketable parcel of securities
are:
(b) Twenty largest shareholders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted ordinary shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Ltd
Ranguta Ltd
Alpha Boxer Ltd
Duketon Mining Ltd
Aradia Ventures Pty Ltd
Austrade Holdings Pty Ltd
Jacobus Gerardus De Jong
Richard George Reading
Duketon Consolidated Pty Ltd
HSBC Custody Nominees Australia Ltd
Dane Pastoral Co Pty Ltd
Kongming Investments Ltd
Mandies Meats Pty Ltd
Paul Hartley Watts
Dongarra Ltd
Avania Nominees Pty Ltd
Seamus Cornelius
Sino West Assets Ltd
BNP Paribas Nominees Pty Ltd
B J + E B Borg
Ordinary shares
Number of holders Number of shares
62
152
113
269
76
672
136
14,073
468,269
946,165
9,908,237
72,127,606
83,464,350
167,438
Listed ordinary shares
Number of shares
9,134,811
6,994,725
5,388,291
5,382,500
4,137,500
3,600,000
3,220,807
3,000,000
2,880,000
2,014,600
1,854,437
1,297,018
1,151,796
1,090,000
1,046,252
1,000,000
962,815
885,398
748,152
727,938
Percentage of
ordinary shares
10.94
8.38
6.46
6.45
4.96
4.31
3.86
3.59
3.45
2.41
2.22
1.55
1.38
1.31
1.25
1.20
1.15
1.06
0.90
0.87
56,517,040
67.70
(c) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
Duketon Mining Limited
Marcel Mandanici
Justin Brown
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Number of Shares
5,382,500
4,699,935
4,112,500
36
Element 25 Limited
ASX Additional Information continued
(e) Schedule of interests in mining tenements as at 23 October 2018
Location
Eelya Hill
Yallon Well
Sunday Well
Yallon Well
Green Dam
Green Dam
Pinnacles
Pinnacles East
Pinnacles
Flanker South
Leonora
Leonora
Black Hill
Mt Padbury
Butcher Bird
Mt Padbury
Victory Bore
Dead Camel
Yanneri Bore
Neds Gap
Millidie Creek
Corner Bore
Corner Bore
Dead Camel
Yaneri Ridge
Victory Well
Milgoo Peak
Twin Peaks
Lake Johnston
Lake Johnston
Lake Johnston
Cunyu Woolshed
Holleton West
Holleton
Holleton
Eileen Bore
Cummins Range
(1) 100% interest held in all minerals other than iron ore and manganese.
Tenement
E20/0659
E20/0927
E20/0941
E20/0948
E28/2313
E28/2327
E28/2577
E28/2701
E28/2757
E28/2761
E37/1176
E37/1295
E46/1220
E52/1529
E52/2350
E52/3082
E57/1060
E52/3588
E52/3606
E52/3607
E52/3613
E52/3626
E52/3627
E52/3663
M52/1074
E57/1060
E59/2246
E59/2267
E63/1750
E63/1789
E63/1838
E69/3541
E70/5033
E77/2334
E77/2458
E80/5056
E80/5092
Percentage held / earning
10
100
100
100
100
100
100
100
100
100
100
100
100
100(1)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
85
85
85
100
100
100
100
100
100
37
Element 25 Limited
ASX Additional Information continued
(f) Unquoted Securities
At 23 October 2018, the Company had the following unlisted securities on issue:
Class
$0.20 Options, Expiry 19 November 2018
Number of
Securities
2,000,000
Number of
Holders
3
$0.20 Options, Expiry 24 November 2021
2,000,000
$0.215 Options, Expiry 18 November 2019
2,750,000
$0.22 Options, Expiry 2 December 2019
$0.30 Options, Expiry 17 June 2019
$0.30 Options, Expiry 2 December 2019
$0.30 Options, Expiry 22 August 2020
200,000
250,000
200,000
2,000,000
$0.325 Options, Expiry 3 November 2022
600,000
$0.35 Options, Expiry 20 November 2018
$0.35 Options, Expiry 20 November 2020
200,000
2,200,000
$0.355 Options, Expiry 28 November 2022
1,200,000
3
3
1
1
1
3
3
1
4
3
Holders of 20% or more of the class
Holder Name
Aradia Ventures Pty Ltd
Kongming Investments Ltd
Antoinette Janet Ribbons
Aradia Ventures Pty Ltd
Seamus Cornelius
Antoinette Janet Ribbons
Aradia Ventures Pty Ltd
Kongming Investments Ltd
Antoinette Janet Ribbons
Jane Abigail O’Neill
Christian Wirth
Jane Abigail O’Neill
Zenix Nominees Pty Ltd
Francis Harper
JSR Nominees Pty Ltd
Liam Cornelius
Pato Negro Pty Ltd
Michael Ashley Giles
Aradia Ventures Pty Ltd
Seamus Cornelius
Antoinette Janet Ribbons
Aradia Ventures Pty Ltd
Seamus Cornelius
Antoinette Janet Ribbons
Number of
Securities
1,000,000
500,000
500,000
1,000,000
500,000
500,000
1,250,000
750,000
750,000
200,000
250,000
200,000
1,000,000
500,000
500,000
300,000
200,000
200,000
1,000,000
500,000
500,000
600,000
300,000
300,000
38