Element 25 Limited - Annual Report 2019
Annual Report 2019
Table of Contents
1.
2.
Letter from the Chairman ..................................................................................................................... 3
The Butcherbird Project ....................................................................................................................... 4
2.1.
Introduction ...................................................................................................................................4
2.2.
Simple Geology ..............................................................................................................................5
2.3.
A Unique Process ...........................................................................................................................6
2.4.
About High Purity Manganese .......................................................................................................6
2.5.
Pre-Feasibility Study .....................................................................................................................7
2.5.1.
Resource Infill Drilling ...........................................................................................................7
2.5.2.
Mineral Resource Estimate Upgrade ....................................................................................8
2.5.3.
Metallurgy ............................................................................................................................10
2.5.4.
Energy ..................................................................................................................................11
2.5.5.
Native Title, Heritage & Land Access ..................................................................................11
2.5.6.
Groundwater Exploration ...................................................................................................14
2.5.7.
Environmental .....................................................................................................................15
2.5.8.
Geotechnical planning ........................................................................................................16
2.6.
Sales and Marketing ....................................................................................................................16
2.7.
Project Finance ............................................................................................................................17
2.8.
ARENA IDE Grant Funding ...........................................................................................................18
3.
Corporate ............................................................................................................................................ 19
3.1.
Sale of the Holleton Project ........................................................................................................19
3.2.
Green Dam ...................................................................................................................................19
3.2.1.
Air Core Drilling Programme ...............................................................................................19
3.2.2.
Airborne Magnetic Survey ...................................................................................................21
4.
Appendices .......................................................................................................................................... 22
4.1. Mineral Resources .......................................................................................................................22
4.1.1.
Mineral Resource Estimate as at 30 June 2019 ..................................................................22
4.1.2.
Review of material changes ................................................................................................22
4.1.3.
Governance controls ...........................................................................................................22
4.1.4.
Mineral Resource Estimate as at 30 June 2018 ..................................................................23
4.2.
Competent Persons Statement ..................................................................................................23
4.2.1.
Disclaimer ............................................................................................................................24
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Annual Report 2019
1.
Letter from the Chairman
Dear Fellow Shareholders,
It is my pleasure to thank you all for your support and to acknowledge the work done by our
Company’s employees and my fellow directors.
Our Company is poised for an exciting year. While a lot has been achieved in the past year, it would not
be fair or accurate to describe the past year as particularly exciting. We are very close to finalising and
announcing a PFS on the Butcherbird high purity manganese project which will be a significant
milestone. As anyone who has been through the PFS process or indeed through any other detailed
study will confirm, the PFS process involves a very large amount of work by a relatively small team over
a long period of time. Thankfully the process is almost complete and its finalisation will allow us to
announce some key economic data for the Butcherbird high purity manganese project for the first
time. I am looking forward to this important development. The PFS will be important in and of itself but
shareholders should be aware that the PFS announcement will also act as a catalyst for other
opportunities which are dependant in whole or in part on us having the PFS economics in the public
domain.
In addition to the PFS work, during the past year our company completed a very well supported equity
raise in a challenging market and we continued to dispose of non-core assets so as to sharpen our
focus on Butcherbird. Our MD, Justin Brown, has done an exemplary job of protecting our capital
structure and realising value for non-core assets which means all shareholders are highly leveraged to
a successful outcome at Butcherbird. I know Justin is serious about ensuring that our capital structure
and resulting shareholder leverage are protected and am sure this is partly because Justin is a
significant shareholder in E25. This approach is not always popular in certain areas of the ASX investor
and advisor community but I believe that all shareholders stand to benefit as we continue to make
progress at Butcherbird.
Given that we are so close to finalising and announcing the PFS, which will be the most important
milestone for E25 in some time, I will keep this letter brief as I am sure the PFS will speak for itself and
am comfortable with the knowledge that nothing I say in this letter will be anywhere as interesting to
shareholders as the PFS.
Yours sincerely
Seamus Cornelius
Chairman
Element 25 Limited
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Annual Report 2019
2.
The Butcherbird Project
2.1.
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
(HPMSM).
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 4: ). A positive Scoping Study
was completed in the first quarter of 2018 and a Pre-Feasibility Study (PFS) is
nearing completion.
The development of the project will introduce new technology developed by the Company which will
allow significant skill building within the Western Australia workforce. The project will incorporate the
electrowinning of EMM 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. We
believe this will also make our decarbonised products more attractive to end users in a decarbonised
world.
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Annual Report 2019
Category
Measured
Indicated
Inferred
Total
Notes:
Tonnes (Mt)
Mn (%)
Si (%)
Fe (%)
Al (%)
16
41
206
263
11.6
10.0
9.8
10.0
20.6
20.9
20.8
20.8
11.7
11.0
11.4
11.4
5.7
5.8
5.9
5.9
• Reported at a 7% Mn cut-off for the Measured and Indicated categories and an 8% Mn cut-off for the Inferred categories.
• All figures rounded to reflect the appropriate level of confidence (apparent differences may occur due to rounding).
Table 1: Butcherbird Project JORC mineral resource estimate1. Note: there are no material changes to the assumptions
used to calculate the estimate since its publication.
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.
Figure 1: Geological N-S cross section looking west through the Yanneri Ridge manganese deposit.
1 Reference: Element 25 Limited ASX release dated 17 April 2019.
2 Reference: Element 25 Limited ASX release dated 10 May 2018.
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Annual Report 2019
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 for the production of
EMM. 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 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.
2.4. 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 14% of supply goes into the production of high purity manganese products
including Electrolytic Manganese Metal, Electrolytic Manganese Dioxide and Manganese Sulphate, both
as a fertiliser additive and for use in the production of Li-Ion battery cathodes.
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 expected to increase.
Manganese based batteries enable safe storage with high energy capacities and can be recharged from
renewable energy sources.
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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.
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.
2.5. Pre-Feasibility Study
Activities for the 2018/2019 financial year have primarily focussed on completing a Pre-Feasibility
Study (PFS)into the development of the Butcherbird Project as a high purity manganese production
hub, focussing initially on the production of EMM, but with a view to also producing battery grade
manganese sulphate monohydrate. The PFS has focussed on multiple parallel work streams.
2.5.1.
Resource Infill Drilling
A resource infill drilling programme was completed during the December 2018 quarter. The
programme comprised 210 aircore holes for a total of 6,672m3. The results from the programme
formed the basis of a revised mineral resource estimate to upgrade the planned starter pit area from
Inferred and Indicated to Indicated and Measured categories as a basis for a maiden reserve, expected
to be published with the PFS.
3 Refer Company ASX Release dated 23 January 2019
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Annual Report 2019
Figure 2: Completed infill drilling collar locations in relation to the previous drilling, Yanneri Ridge and Coodamudgi
resource outlines and infrastructure.
2.5.2. Mineral Resource Estimate Upgrade
Using the drilling data from the infill drilling programme combined with the existing database, IHC
Robbins prepared a revised Mineral Resource Estimate over four of the eight known manganese
deposits at the Project, including the Yanneri Ridge, Mundawindi, Coodamudgi and Richies Find
deposits. This resulted in a significant upgrade in JORC Mineral Resources for the Project4 to 263 Mt at
10% manganese, representing a 34% increase in the estimated contained manganese to 26.3 Mt. The
revised Mineral Resource Estimate for the updated areas is presented in Table 2: , the existing resource
areas which were not updated in this programme are shown in Table 3: and the revised global
resource for all deposits is shown in Table 4: .
4 Reference: Company ASX release dated 17 April 2019.
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Annual Report 2019
Prospect
Category
Tonnes (Mt)
Mn (%)
Si (%)
Fe (%)
Al (%)
Yanneri Ridge
Richies Find
Coodamudgi
Mundawindi
Total
Measured
Indicated
Inferred
Inferred
Inferred
Inferred
16
41
47
39
32
33
208
11.6
10.0
9.7
9.3
9.8
10.2
9.9
20.6
20.9
20.4
21.5
20.5
19.5
20.6
11.7
11.0
10.7
11.2
11.7
11.3
11.2
5.7
5.8
5.8
6.1
6.1
5.5
5.9
Table 2: Butcherbird High Purity Manganese Project Mineral Resource Estimate (2019).
(1) Mineral resources reported at a cut-off grade of 7.0% Mn.
(2) Rounding of totals may result in differences in the last decimal place.
Prospect
Category
Tonnes (Mt)
Mn (%)
Si (%)
Fe (%)
Al (%)
Ilgarrarie Ridge
Bindi Hill
Bugdie Hill
Cadgies Flat
Total
Inferred
Inferred
Inferred
Inferred
35.6
14.4
4.50
0.291
54.8
9.94
10.4
9.34
10.0
10.0
21.5
21.3
21.2
21.6
21.4
12.5
10.1
13.2
11.1
11.9
5.9
6.3
5.9
6.5
6.0
Table 3: Butcherbird High Purity Manganese Project Mineral Resource Estimate (2017)2.
(1) Mineral resources reported at a cut-off grade of 8.0% Mn.
(2) Rounding of totals may result in differences in the last decimal place.
Category
Measured
Indicated
Inferred
Total
Tonnes (Mt)
Mn (%)
Si (%)
Fe (%)
Al (%)
16
41
206
263
11.6
10.0
9.8
10.0
20.6
20.9
20.8
20.8
11.7
11.0
11.4
11.4
5.7
5.8
5.9
5.9
Table 4: Butcherbird High Purity Manganese Project global Mineral Resource Estimate
(2017 and updated 2019).
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Annual Report 2019
2.5.3. Metallurgy
In the first phase of the PFS metallurgical
programme, bulk testing was conducted
on four representative PQ diamond drill
hole core samples from the Butcherbird
Project successfully produced EMM using
the E25 flowsheet5.
The tests were completed as part of a
progressive scale up of the processing
flowsheet developed for the purposes of
extracting manganese into solution from
Figure 3: High Purity EMM plated onto the cathodes.
Butcherbird ores to produce high purity
manganese (HPM) including battery grade
manganese sulphate and EMM.
The leaching and purification of the first
bulk sample from Butcherbird achieved a
purity of 99.95% Mn, well above the
industry standard for EMM of 99.7% Mn.
Following the completion of this initial
scale up test, Lycopodium Ltd
coordinated the metallurgical assessment
of 13 diamond drill holes which were
Figure 4: High Purity EMM flakes. 99.95% Mn.
completed in February 20196. The drilling provided approximately 2 tonnes of suitable material for
ongoing test work from within the Measured and Indicated resource areas.
The samples were despatched to ALS Laboratories and 6 composite samples were constructed from
the 9 metallurgical holes. A successful multi-staged metallurgical assessment program was completed
on these composite samples, from comminution, through to leaching, purification and electrowinning,
with the production of high purity EMM at or exceeding industry requirements.
5 Reference: Company ASX release dated 12 February 2019
6 Reference: Company ASX release dated 26 February 2019
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Annual Report 2019
2.5.4.
Energy
E25 is aiming to implement a lower cost, low emissions solution as this will improve the project
economics and allow the Company to produce a product which has a lower carbon footprint than
conventionally produced EMM.
Producing EMM requires significant electrical energy in the electrolytic process and therefore the
power solution is a key part of the project. The Company also 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.
Specialist consultants Advisian were engaged to develop and manage a power implementation
strategy. This comprised a part of a three-stage process which included modelling to select the
optimum energy mix, developing a Request for Proposal (RFP) document and undertaking a
competitive tender process for price discovery purposes and finally at in conjunction with a final
investment decision, will ultimately lead to the award of power contracts.
The first stage in conjunction with the RFP process confirmed that the most economic energy mix for
the Butcherbird Project is likely to include a combination of gas, wind and solar power to drive the
electrowinning process. Details of the outcomes will be delivered as part of the final PFS.
In order to provide a robust wind data set for modelling and commercial discussions, a SODAR (SOnic
Detection And Ranging) device with an accompanying pyranometer (to collect solar data) has been
commissioned at site. A SODAR is a device that measures wind velocity and direction at multiple
vertical increments utilising acoustic signalling technology. The data is collected at 10 minute intervals
and to date the equipment has collected approximately three months of data. Results to date support
preliminary assumptions around the wind resource at the Project. Data collection is ongoing.
Figure 5: Butcherbird – Raw SODAR Results for June 2019
2.5.5. Native Title, Heritage & Land Access
Engagement with the representatives of the Traditional Owners of the Nyiaparli Native Title Claim area
were initiated in 2018 to negotiate a native title agreement to allow the granting of the mining lease
application M52/1074 to progress.
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Annual Report 2019
As part of this process and to allow the planned resource infill drilling to be completed, an
archaeological and ethnographic site avoidance heritage survey of the Butcherbird Project area was
conducted by the Nyiaparli Traditional Owners and Wilypa Pty Ltd in September 2018. The heritage
survey only identified one basal grindstone fragment, which is in an area not presently planned for
disturbance.
The survey also cleared localised areas around planned geotechnical drilling locations which will
provide baseline data for the design of wind turbine installations as part of the site power solution.
Key findings include:
• No DPLH registered Aboriginal sites were identified;
• No lodged DPLH OHPs were identified;
• No stored DPLH OHPs were identified; and
• No newly identified sites were recorded.
• Area is cleared for infill drilling and infrastructure development.
Subsequent to the heritage survey, a Native Title Agreement to allow the grant of M52/1074 and
development of the Butcherbird Project was signed with the Karlka Nyiyaparli Aboriginal
Corporation RNTBC (KNAC).
On 26 September 2018 the Federal Court of Australia made an approved determination of native
title in respect of the native title determination applications numbered WAD 6280 of 1998
(Nyiyaparli Claim) and WAD 196 of 2013 (Nyiyaparli #3 Claim) that native title exists in the
Determination Area and is held by the Nyiyaparli People. KNAC is the registered native title body
corporate that holds the native title rights and interests the subject of the Nyiyaparli determination
area in trust for the Nyiyaparli People.
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Annual Report 2019
Figure 6: Heritage Clearance Plan - shaded area indicates the portion of MLA52/1074 which has been cleared for
drilling and infrastructure development by the Nyiyaparli Native Title Claim Group.
The Native Title Agreement recognises the Nyiyaparli People as the traditional owners of the land and
KNAC as the registered native title body corporate in relation to the land. E25 is committed to building
a mutually beneficial relationship with KNAC and the Nyiyaparli People through effective engagement,
consultation and communication. The Native Title Agreement provides opportunities for KNAC and the
Nyiyaparli People to participate in the Butcherbird Manganese Project, as well as a future royalty
stream.
The signing of the native title agreement with KNAC, together with the previous Native Title Agreement
with the Ngarlawangga People who hold Native title over the western portion of E25’s planned
development within and around the mining lease application area, gives the Company certainty in
relation to the development of the Butcherbird Project.
The Company has entered into the Butcherbird Mining Agreement (BMA) with the owners of the
Kumarina Pastoral Station. This facilitated the removal of the objection by the pastoral station’s owner
to the grant of M52/1074. Discussion with the owner of the Bulloo Downs pastoral station are ongoing.
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Annual Report 2019
2.5.6. Groundwater Exploration
A gravity survey was conducted during November 2018 at the Butcherbird Project as a tool to guide
water exploration for the process water requirements for the plant. The gravity survey lines spanned
across interpreted palaeochannels mainly delineated from an airborne electromagnetic survey (XTEM).
The aim of the gravity survey was to map out gravity lows associated with the palaeochannel system.
The negative gravity anomalies (i.e. gravity lows) have been interpreted and ranked based on simple
anomaly strength and gradient criteria. Modelling has not been undertaken.
The programme was successful in defining a number of gravity anomalies interpreted as possible
paleochannels which will be tested for their suitability as production bore sites.
Figure 7: Residual Gravity Image, created by subtracting the upward continued gravity grid (200m continuation
distance) from the Bouguer Anomaly Grid. Contour interval is 0.1 mGal.
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Annual Report 2019
2.5.7.
Environmental
Work completed in the June 2019 quarter comprised wet season baseline flora and fauna surveys
including Short Range Endemics (SME’s) and bats. The flora and fauna surveys has not indicated any
significant species within the Butcherbird Project area.
Work programs planned in the remainder of 2019 include:
• Subterranean fauna assessment;
• Soils and landform assessment; and
• Tailings and mine waste characterisation.
These studies will be incorporated into the upcoming hydrogeological assessment programs.
The current information is sufficient to provide input into the PFS/Feasibility Study and is expected to
provide sufficient information for the project approvals process.
Figure 8: The Butcherbird Project looking south east over the processing plant area. February 2019.
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Annual Report 2019
2.5.8. Geotechnical planning
The diamond core samples from the
February 2019 programme were, in
addition to the metallurgical test
work, used as the basis for a
geotechnical assessment of the
proposed twenty five year open cut
starter-pit.
Three geotechnical reviews were
completed using these samples:
Peter O’Bryan and Associates Pty Ltd
completed a preliminary assessment
of the wall stability for open pit design
purposes. Open pit wall design
Figure 9: Diamond Drilling at Butcherbird February 2019.
parameters have been proposed for short term and long term stability of the proposed mining at
Yanneri Ridge.
4DG Pty Ltd completed a diggability assessment of the proposed open pit area. This allowed mining
contractors to better assess excavation rates required for mine planning and mining cost estimations.
The report confirmed previous assessment that the majority of the orebody at Yanneri Ridge can be
excavated using only minimal ripping and free digging with a hydraulic excavator.
Advisian also conducted preliminary foundation assessments on 3 holes drilled to assess a potential
area for a future wind farm. Good ground conditions were encountered in all holes.
2.6.
Sales and Marketing
Mr Sias Jordaan joined the Company during the year in the role of Marketing Manager. Mr Jordaan has
been involved in the stainless steel production and raw material supply markets as well as rare metals
markets for over 25 years. Mr Jordaan held various roles within BHP Billiton in South Africa, The
Netherlands and Western Australia in the Stainless Steel, Ferro Chrome and Nickel divisions. As a result
he has gained extensive experience in the procurement, marketing and logistics of various steel
making metals.
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Annual Report 2019
Mr Jordaan will be reviewing the EMM and HPMS markets with a view to establishing interest in future
product offtake as well as gaining a more detailed understanding of high purity manganese market
dynamics.
In order to provide a current, independent review of the relevant markets, Roskill Information Services
were engaged to provide the research and market analysis for the PFS.
Contact has also been made with numerous potential offtake parties for EMM product in Japan, South
Korea, the USA, Europe and South East Asia. A number of trading entities have been contacted and two
visits to Perth have been completed by Japanese trading and investment groups. Reciprocal visits are
planned for October 2019. Contact has also been made with well known and respected investment
agencies from North East Asia.
From a Li-Ion battery grade manganese sulphate perspective contact has been made with well known
battery and vehicle manufacturers, and visits by interested parties are also planned for the next
quarter.
Initial feedback on product quality has been positive and there appears to be a very clear desire within
the market to source both EMM and battery grade manganese sulphate from a reliable source located
in a Tier 1 mining jurisdiction such as Western Australia.
E25 has also engaged a consultant with significant experience in the EMM market in China to assist with
marketing and production related technical issues as well as vendor engagement for the supply of key
capital items for the processing plant.
2.7. Project Finance
During the year, the Company announced the appointment of leading independent finance advisory
group BurnVoir Corporate Finance (BurnVoir) as financial adviser to commence the process of
arranging financing for the development of the Project.
BurnVoir is working with E25 to secure an attractive, flexible funding package for the development of
the Butcherbird Project that would maximise value for shareholders. BurnVoir has assisted in
arranging development finance for a number of projects in the Pilbara region in recent years, including
for Pilbara Minerals Limited (Pilgangoora Project, lithium) and Kalium Lakes Limited (Beyondie Project,
potash).
Although no funding decisions have occurred, at this stage, potential funding sources may include:
•
Strategic Funding – The expected growth in the traditional high purity manganese markets as
well as the battery manufacturing sector will require increased levels of supply of raw
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Annual Report 2019
materials, including manganese metal and manganese sulphate. End users of raw materials
may provide funding in order to secure supply. Steel makers and battery manufacturers
therefore are a potential source of debt or equity funding for the Project.
• North Australian Infrastructure Fund (NAIF) – NAIF has been set up by the Australian
government to provide loans to infrastructure projects in Northern Australia. With the Project
being located in the southern Pilbara, NAIF funding has been identified as a potential source of
debt funding. Subsequent to year end, the Company announced that it has received approval
to enter the due diligence phase with NAIF, the third in a four step approvals process which will
culminate in an investment proposal.
• Project Finance – The positive economic results highlighted in the scoping study, supported
by an independent review of the scoping study financial forecasts demonstrate that the project
may be of appeal to traditional project financiers. Further detailed feasibility work would be
required including a Feasibility Study.
•
Equity – The positive economic results highlighted in the scoping study may allow a significant
portion of the capital costs to be funded by the equity markets.
About BurnVoir Corporate Finance
BurnVoir Corporate Finance is a leading independent Australian investment and advisory house with
extensive experience and a strong track record in financial services across the energy, resources and
infrastructure sectors. Details on BurnVoir can be found at burnvoir.com.au
2.8. ARENA IDE Grant Funding
During the year, on behalf of the Australian Government, the Australian Renewable Energy Agency
(ARENA) awarded funding to the Company to assist with the demonstration of technology to maximise
project economics by increasing renewable energy penetration for the production of high purity
metals, specifically EMM, at the Butcherbird Project.
The funding will contribute 50% of the total budget of $980K to demonstrate the viability of
Intermittent Dynamic Electrowinning (IDE). This technology will allow manganese metal to be
produced under dynamic conditions to more closely match the generation of electricity using
intermittent supply from wind and solar, thereby allowing a higher percentage of renewable
generation as part of the overall power solution. The long mine life of the Butcherbird Project and
relatively short electrowinning cycle of manganese makes it particularly suited to take the lead on this
technology.
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The test work is being undertaken at the Murdoch University (College of Science, Health, Engineering
and Education) Extractive Metallurgy Division. The team is headed up by Associate Professor
Aleksandar Nikoloski.
Advisian is currently providing consulting services in relation to commercialisation of IDE as well as
commissioning and managing the installation of a SODAR device on site to gather long term wind and
solar data to improve the power modelling for the Butcherbird Project.
3.
Corporate
3.1.
Sale of the Holleton Project
During the year, 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 Project7.
3.2. Green Dam
3.2.1.
Air Core Drilling Programme
An aircore drilling programme was completed at the Green Dam Project during the year8. The drilling
was designed to test a regionally extensive “gold in soil” anomaly in the southern area (Flanker
prospect) of the project (previously reported in December 2017 Quarterly Report). This anomaly trends
in a NW direction and is highlighted by elevated gold values exceeding 5ppb Au (up to a maximum of
35ppb Au) over an area of approximately 3km by 1.5km. The prospect is located 18km to the east of the
1.1 Moz Bombora Gold Deposit (Breaker Resources). There are several other gold and nickel anomalies
that remain untested within the Green Dam Project tenure.
The initial testing of this southern anomaly was completed using broad spaced aircore drilling (600m x
100m). A total of 49 holes for 1,104m covering four drill traverses were completed. Significant results
from this drilling are outlined below.
7 Refer to the Company’s ASX release dated 18 October 2018
8 Reference: Company ASX release dated 29 January 2019
Page 19 of 24
Annual Report 2019
Hole_ID
From
GDAC0022
GDAC0025
GDAC0041
40
16
16
To
48
24
29
Interval
Au (ppb)
Comments
8
8
13
55
EOH = 60m
244 ppb EOH
Incl 3m @ 581ppb Au
113 ppb EOH
Table 5: Significant Results returned from Green Dam aircore drilling. It is unknown whether the holes are true width.
Assays were completed by Minanalytical in Perth using Aqua Regia digest and ICP-MS finish.
Figure 10: Green Dam aircore drilling programme collar location plan over surface geology.
Page 20 of 24
Annual Report 2019
3.2.2.
Airborne Magnetic Survey
An airborne magnetics survey was
completed of the entire Green Dam
Project as an aide to structural
interpretation and targeting9.
The survey was flown at a nominal 100m
line spacing and 40m sensor height. The
survey collected both magnetic and
radiometric data sets with the following
instrumentation:
Magnetometer
Geometrics GR823 tail sensor; mounted
in a stinger housing.
• Sensor Type:
• Resolution:
• Sensitivity:
• Sample Rate:
interval)
• Compensation:
Caesium vapour
0.001 nT
0.01 nT
20 Hz (≈3.5 metre sample
3-axis fluxgate magnetometer
Gamma-Ray Spectrometer
RSI RS-500 gamma-ray spectrometer,
incorporating 2x RSX-4 detector packs.
• Total Crystal Vol.: 32 L (downward-looking)
1024
• Channels:
2Hz
• Sample Rate:
• Multi-peak automatic gain stabilisation
Figure 11: Green Dam TMI Aeromagnetic image.
9 Reference: Company ASX release dated 29 January 2019
Page 21 of 24
Annual Report 2019
4.
Appendices
4.1. Mineral Resources
4.1.1. Mineral Resource Estimate as at 30 June 2019
Category
Measured
Indicated
Inferred
Total
Notes:
Tonnes (Mt)
Mn (%)
Si (%)
Fe (%)
Al (%)
16
41
206
263
11.6
10.0
9.8
10.0
20.6
20.9
20.8
20.8
11.7
11.0
11.4
11.4
5.7
5.8
5.9
5.9
• Reported at a 7% Mn cut-off for the Measured and Indicated categories and an 8% Mn cut-off for the Inferred categories.
• All figures rounded to reflect the appropriate level of confidence (apparent differences may occur due to rounding).
Table 6: Butcherbird Manganese project Mineral Resource Classification as at 17 April 2019.
4.1.2.
Review of material changes
Element 25 Limited updated its Mineral estimates for the Butcherbird Project at the 100% owned Butcherbird High
Purity Manganese Project on 17 April 2019. The previously published resource was released on 16 October 2017.
Total reported Measured, Indicated and Inferred Mineral Resource estimates are 263 million tonnes at 10.0% per cent
manganese for 26 million tonnes of contained manganese.
This represents a 45 per cent net increase in contained manganese compared with the 30 June 2017 estimate,
constituting a significant change related to geological reinterpretation, additional drilling to increase the resource
confidence and hence classifications and a reduction in cut-off grades from to 7% Mn.
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 April 2019 and that all material assumptions and technical parameters
underpinning the estimates continue to apply and have not materially changed.
4.1.3. 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.
Page 22 of 24
Annual Report 2019
4.1.4. Mineral Resource Estimate as at 30 June 2018
Prospect
Tonnes (Mt) Mn (%)
SiO2 (%)
Fe (%)
P2O5 (%)
Al2O3 (%)
Yanneri Ridge
Inferred
Indicated
Richies Find
Coodamudgi
Mundawindi
48.0
22.5
22.7
16.5
16.3
Ilgarrarie Ridge
35.6
Bindi Hill
Bugdie Hill
Cadgies Flat
Total
14.4
4.50
0.291
180.8
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
4.2. Competent Persons Statement
The information in this report that relates to Exploration Results and Exploration Targets is based on information
compiled by Mr Justin Brown 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 Brown was an employee of Element 25 Limited. Mr
Brown 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 Brown
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 the Yanneri Ridge, Coodamudgie, Mundawindi and Ritchies Mineral
Resources is based on, and fairly represents, information and supporting documentation prepared by Mr. Greg Jones,
who acts as Consultant Geologist for Element25 and is a full time employee of IHC Robbins. Mr. Jones is a Member of the
Australasian Institute of Mining and Metallurgy and has sufficient experience that is relevant to the style of
mineralisation and type of deposits 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 (JORC Code). Mr. Jones consents to the inclusion in this report of the Mineral Resources
estimates and supporting information in the form and context in which it appears.
The information in this report that relates to the Bindi, Ilgarrari, and Cadgies Mineral Resources is based on, and fairly
represents, information and supporting documentation prepared 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
Page 23 of 24
Annual Report 2019
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.
4.2.1. Disclaimer
The views expressed herein are not necessarily the views of the Australian Government, and the Australian Government
does not accept responsibility for any information or advice contained herein.
Page 24 of 24
Element 25 Limited
ABN 46 119 711 929
Annual Financial Report
for the year ended 30 June 2019
Element 25 Limited
Corporate Information
ABN 46 119 711 929
Directors
Seamus Cornelius (Non-Executive Chairman)
Justin Brown (Managing 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
Corporate Governance Statement
3
9
10
11
12
13
14
32
33
37
40
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 and the
entities it controlled at the end of, or during, the year ended 30 June 2019.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. 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), (Managing Director [appointed 27 June 2019, previously Executive Director], audit committee member)
Mr Brown is a geologist with over 20 years of experience in global mineral exploration and mining. He has been involved in the full
spectrum of mineral exploration through to mining in a range of commodities.
Mr Brown has also held a number of board positions, including an executive role with Element 25 Limited since 2006. 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 the founding Managing Director of the Company.
Mr Brown was most recently a non-executive director of Exterra Resources Ltd (ceased 20 September 2017), which merged with Anova
Metals Ltd via a Scheme of Arrangement.
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
3,450,400
5,255,360
585,715
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
Directors' Report continued
Element 25 Limited
REVIEW OF OPERATIONS
The year ended 30 June 2019 has seen significant progress for Element 25 Limited across multiple work streams. Work has continued to
progress the Pre-Feasibility Study (PFS) in relation to the Butcherbird High Purity Manganese Project (Project), where the Company
intends to produce high purity manganese including manganese sulphate for lithium ion batteries and Electrolytic Manganese Metal.
The Company is working to finalise the PFS which is anticipated to provide a robust base case for the commercialisation of the Company’s
manganese resource.
Work streams have focused on the following areas:
•
•
•
•
•
•
Element 25 Limited has been actively advancing all work streams with the view to completing the PFS in order to assess project economics.
This is an exciting time in the development of the Company as it continues to work hard for its shareholders with the view to creating
shareholder value.
metallurgical assessment of the high purity manganese process;
assessment of a hybrid wind/gas power solution;
mine planning, including open pit optimisation, mine design and mine scheduling;
environmental work, comprising wet season baseline flora and fauna surveys;
have been completed and are currently being compiled; and
project finance.
Finance Review
The Group began the financial year with a cash reserve of $2,194,663. During the year the Company raised $1,490,012 via a share purchase
plan and associated shortfall placement, and the exercise of 500,000 unlisted options, issuing a total of 8,442,924 fully paid ordinary shares.
Funds were used to advance the Group’s 100% owned Butcherbird Manganese Project located in Australia.
During the year total tenement acquisition and exploration expenditure incurred by the Group amounted to $3,745,629 (2018: $1,632,873).
In line with the Group’s accounting policies, all exploration expenditure was expenses as incurred. The Group recognised a net fair value
loss on financial assets of $506,400 (2018: $72,551 fair value gain), and income of $1,700,000 (2018: $835,000) on the sale of mineral
properties. The Group also received a research and development tax incentive of $208,653 (2018: nil). Net administration expenditure
incurred amounted to $1,081,958 (2018: $952,713). This has resulted in an operating loss after income tax for the year ended 30 June
2019 of $3,633,987 (2018: $1,678,035).
At 30 June 2019 surplus funds available totalled $2,552,400.
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 per share (cents)
2019
Revenues
$
Results
$
1,944,322
(3,633,987)
2019
(4.3)
2018
(2.0)
Risk Management
The board is responsible for ensuring that risks, and 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.
4
Directors' Report continued
Element 25 Limited
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.
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 2019 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 2019.
Voting and comments made at the Company’s 2018 Annual General Meeting
The Company received approximately 87.2% of “yes” votes on its remuneration report for the 2018 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
Directors
Seamus Cornelius
2019
2018
Justin Brown
2019
2018
John Ribbons
2019
2018
Salary
& Fees
$
60,000
60,000
220,000
220,000
42,000
42,000
Total key management personnel compensation
2019
2018
322,000
322,000
Non-Monetary Superannuation
$
$
Long-Term
Long Service
Leave
$
Share-based
Payments
Total
Options
$
$
-
-
4,883
3,374
-
-
4,883
3,374
-
-
-
-
20,900
20,900
48,182
-
-
-
-
-
36,350
28,500
72,700
57,000
36,350
28,500
96,350
88,500
366,665
301,274
78,350
70,500
20,900
20,900
48,182
-
145,400
114,000
541,365
460,274
Service agreements
The details of service agreements of the key management personnel of the Group are as follows:
Justin Brown, Managing Director (appointed 27 June 2019, previously Executive Director. No change to contract terms):
• 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 $220,000 (plus 9.5% statutory superannuation), plus the provision of income protection insurance. Mr Brown’s salary
is reviewed on an annual basis.
• There is no provision for the payment of termination benefits by the Company, other than for accrued entitlements.
Share-based compensation
Options
Options are issued to key management personnel as part of their remuneration. The options are not issued based on performance criteria
but are issued to the majority of key management personnel of Element 25 Limited to increase goal congruence between key management
personnel and shareholders. The following options were granted to or vesting with key management personnel during the year:
Grant Date
Granted
Number Vesting Date Expiry Date
Exercise
Price
(cents)
Value per
option at
grant date
(cents) (1)
Exercised
Number
% of
Remuneration
Directors
Seamus Cornelius
Justin Brown
John Ribbons
29/11/2018
29/11/2018
29/11/2018
500,000
1,000,000
500,000
29/11/2018
29/11/2018
29/11/2018
28/11/2023
28/11/2023
28/11/2023
26.1
26.1
26.1
7.3
7.3
7.3
Nil
Nil
Nil
37.7
19.8
46.4
(1)
The value at grant date in accordance with AASB 2: Share Based Payments of options granted during the year as part of
remuneration. For options granted during the current year, the valuation inputs for the Black-Scholes option pricing model were
as follows:
Directors
Underlying Share
Price (cents)
19.5
Exercise Price
(cents)
26.1
Risk Free
Volatility
50.0%
Interest Rate Valuation Date
2.3%
29/11/2018
Expiry Date
28/11/2023
6
Directors' Report continued
Element 25 Limited
Details of ordinary shares in the Company provided as a result of the exercise of remuneration options to key management personnel of
the Group are set out below:
Directors
Justin Brown
Number of ordinary shares
issued on exercise of options
during the year
Amount paid per ordinary
share (cents)
Value exercised ($) (1)
500,000
20.0
7,500
No amounts are unpaid on any shares issued on the exercise of options.
(1)
The value at exercise date of the options that were granted as part of remuneration and were exercised during the year has been
determined as the intrinsic value of the options at that date.
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.
2019
Received
during the
year on the
exercise of
options
Balance at
start of the
year
Other changes
during the
year
Balance at end
of the year
Directors of Element 25 Limited
Ordinary shares
Seamus Cornelius
Justin Brown
John Ribbons
3,278,970
4,412,500
500,000
171,430
842,860
85,715
-
-
-
3,450,400
5,255,360
585,715
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:
2019
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
2,550,000
4,850,000
2,550,000
500,000
1,000,000
500,000
-
(500,000)
-
(500,000)
(500,000)
(500,000)
2,550,000
4,850,000
2,550,000
2,550,000
4,850,000
2,550,000
-
-
-
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
DIRECTORS’ MEETINGS
During the year the Company held seven meetings of directors. The attendance of directors at meetings of the board were:
Directors Meetings
Audit Committee Meetings
Remuneration Committee
Meetings
A
7
7
7
B
7
7
7
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
1
1
1
B
1
1
1
A
-
*
-
B
-
*
-
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)
26.0
26.1
35.5
32.5
20.0
22.0
30.0
30.0
35.0
21.5
Date options granted
22 February 2019
29 November 2018
1 December 2017
3 November 2017
2 December 2016
2 December 2016
2 December 2016
22 August 2016
20 November 2015
18 November 2014
Expiry date
22 February 2024
28 November 2023
28 November 2022
3 November 2022
24 November 2021
2 December 2019
2 December 2019
22 August 2020
20 November 2020
18 November 2019
Total number of options outstanding at the date of this report
Number of options
1,600,000
2,000,000
1,200,000
600,000
2,000,000
200,000
200,000
2,000,000
2,200,000
2,750,000
14,750,000
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 $12,365 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
Managing Director
Perth, 6 September 2019
8
Consolidated Statement of Comprehensive Income
Element 25 Limited
YEAR ENDED 30 JUNE 2019
Notes
Consolidated
REVENUE
Other income
EXPENDITURE
Administration expenses
Depreciation expense
Exploration expenditure
Fair value losses on financial assets
Salaries and employee benefits expense
Secretarial and share registry expenses
Share based payment expense
LOSS BEFORE INCOME TAX
INCOME TAX EXPENSE
2019
$
35,669
1,908,653
(511,161)
(4,251)
(3,745,629)
(506,400)
(378,517)
(187,911)
(244,440)
4
5
24(b)
2018
$
63,300
907,551
(470,416)
-
(1,632,873)
-
(269,137)
(111,400)
(165,060)
(3,633,987)
(1,678,035)
7
-
-
LOSS FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF ELEMENT 25 LIMITED
(3,633,987)
(1,678,035)
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 FOR THE YEAR ATTRIBUTABLE TO MEMBERS
OF ELEMENT 25 LIMITED
(10,431)
(10,431)
(5,997)
(5,997)
(3,644,418)
(1,684,032)
LOSS PER SHARE FOR LOSS ATTRIBUTABLE TO THE ORDINARY EQUITY
HOLDERS OF THE COMPANY
Basic and diluted loss per share (cents per share)
23
(4.3)
(2.0)
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 2019
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
Employee benefits obligations
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee benefits obligations
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
2019
$
2,552,400
75,573
6,200,565
8,828,538
12,157
12,157
2018
$
2,194,663
110,866
7,639,805
9,945,334
16,660
16,660
8,840,695
9,961,994
808,639
209,922
1,018,561
249
249
108,652
121,491
230,143
-
-
1,018,810
230,143
7,821,885
9,731,851
15,841,862
3,812,239
(11,832,216)
7,821,885
14,351,850
3,578,230
(8,198,229)
9,731,851
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 2019
Consolidated
BALANCE AT 1 JULY 2016
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
Notes
Contributed
Equity
$
14,351,850
-
Share-Based
Payments
Reserve
$
3,439,193
-
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
$
Total
$
(20,026)
-
(6,520,194)
(1,678,035)
11,250,823
(1,678,035)
-
-
-
24(b)
-
-
(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
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
Shares issued during the year
Employee and consultant share-based
payments
-
-
-
1,490,012
-
-
-
-
24(b)
-
244,440
-
(3,633,987)
(3,633,987)
(10,431)
(10,431)
-
(3,633,987)
(10,431)
(3,644,418)
-
-
-
-
1,490,012
244,440
BALANCE AT 30 JUNE 2019
15,841,862
3,848,693
(36,454)
(11,832,216)
7,821,885
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 2019
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
Research and development tax incentive received
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares
NET CASH INFLOW FROM FINANCING ACTIVITIES
NET INCREASE/(DECREASE) 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
22
8
2019
$
(917,567)
37,121
1,700,000
(3,131,449)
1,024,105
(62,500)
208,653
(1,141,637)
2018
$
(853,116)
60,903
410,000
(1,652,839)
1,127,911
(1,045,455)
-
(1,952,596)
8,410
8,410
(28,959)
(28,959)
1,490,012
1,490,012
356,785
2,194,663
952
2,552,400
-
-
(1,981,555)
4,175,060
1,158
2,194,663
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 2019
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
6 September 2019. 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 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.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group include:
•
AASB 9 Financial Instruments and related amending Standards;
AASB 15 Revenue from Contracts with Customers and related amending Standards; and
•
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions.
AASB 9 Financial Instruments and related amending Standards
In the current year, the Group has applied AASB 9 Financial Instruments (as amended) and the related consequential amendments to other
Accounting Standards that are effective for an annual period that begins on or after 1 January 2018. The transition provisions of AASB 9
allow an entity not to restate comparatives however there was no material impact on adoption of the standard.
Additionally, the Group adopted consequential amendments to AASB 7 Financial Instruments: Disclosures.
In summary AASB 9 introduced new requirements for:
•
The classification and measurement of financial assets and financial liabilities;
Impairment of financial assets; and
•
General hedge accounting.
AASB 15 Revenue from Contracts with Customers and related amending Standards
In the current year, the Group has applied AASB 15 Revenue from Contracts with Customers (as amended) which is effective for an annual
period that begins on or after 1 January 2018. AASB 15 introduced a 5-step approach to revenue recognition. Far more prescriptive guidance
has been added in AASB 15 to deal with specific scenarios.
There was no material impact on adoption of the standard and no adjustment made to current or prior period amounts.
(iii) Early adoption of standards
The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30
June 2019. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised
Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.
(iv) Historical cost convention
These financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities
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.
14
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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.
(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
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.
15
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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.
(g) Leases
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) Investments and other financial assets
(i) Classification
From 1 July 2018 the Company classifies its financial assets in the following measurement categories:
•
Those to be measured subsequently at fair value (either through OCI or through profit or loss); and
Those to be measured at amortised cost.
•
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other comprehensive income (FVOCI).
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commits to purchase or
sell the asset. 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.
(iii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at FVPL are expensed in profit or loss.
16
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment
of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
•
•
•
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using
the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in
other income or expenses. Impairment losses are presented as a separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through
OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are
recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in other income or expenses. Interest income from these financial assets is
included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other income
or expenses and impairment losses are presented as a separate line item in the statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in profit or loss and presented net within other income or expenses in the period
in which it arises.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair
value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss
following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income
when the Company’s right to receive payment is established.
Changes in the fair value of financial assets at FVPL are recognised in other income or expenses in the statement of profit or loss as
applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately
from other changes in fair value.
(iv) Impairment
From 1 July 2018 the Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried
at amortised cost and FVOCI. The impairment methodology depends on whether there has been a significant increase in credit risk.
(v) Accounting policies applied until 30 June 2018
The Company has applied AASB 9 retrospectively but has elected not to restate comparative information. As a result, the comparative
information provided continues to be accounted for in accordance with the Company’s previous accounting policy.
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.
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.
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.
17
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
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.
(k) Plant and equipment
All plant and equipment are 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.
(l) Exploration and evaluation costs
Exploration and evaluation costs are written off in the year they are incurred.
(m) 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.
(n) 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.
18
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(ii) Other long-term employee benefit obligations
The Group also has liabilities for long service leave that are not expected to be settled wholly within 12 months after the end of the period
in which the employees render the related service. These obligations are therefore measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms
that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes
in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the Group does not have an unconditional right to defer settlement
for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(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.
(o) 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.
(p) 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.
(q) 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.
(r) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 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.
19
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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.
(s) 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 consider 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 considering exchange rate movements.
The risk is not material and sensitivity analysis does not result in a material effect on Group results or financial position.
(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 to pick up any significant adjustments to market prices.
Sensitivity analysis
At 30 June 2019, 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 $930,085 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 (2018: $1,145,971 lower/higher post-tax loss).
20
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
2.
FINANCIAL RISK MANAGEMENT (cont’d)
(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 $2,552,400 (2018: $2,194,663) 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 1.7% (2018: 1.9%).
Sensitivity analysis
At 30 June 2019, if interest rates had changed by +/- 50 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 $10,560 higher/lower (2018: $32,740 lower/higher post-tax loss on +/- 100
basis points) 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.
21
Element 25 Limited
Notes to the Consolidated Financial Statements continued
30 JUNE 2019
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
2019
$
2,552,400
75,573
6,200,565
8,828,538
2018
$
2,194,663
110,866
7,639,805
9,945,334
808,639
808,639
108,652
108,652
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 2019
Financial assets at fair value through profit or loss
Total as at 30 June 2019
30 June 2018
Financial assets at fair value through profit or loss
Total as at 30 June 2018
3.
SEGMENT INFORMATION
Level 1
$
6,200,565
6,200,565
7,639,805
7,639,805
Level 2
$
Level 3
$
-
-
-
-
Total
$
6,200,565
6,200,565
7,639,805
7,639,805
-
-
-
-
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.
22
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
3.
SEGMENT INFORMATION (cont’d)
Australia
France
Total
2019
$
2018
$
2019
$
2018
$
2019
$
2018
$
Segment revenue
-
-
-
-
-
-
Reconciliation of segment revenue to total
revenue before tax:
Interest revenue
Total revenue
35,669
35,669
63,300
63,300
Segment results
(1,998,605)
(1,453,304)
(47,024)
(172,569)
(2,045,629)
(1,632,873)
Reconciliation of segment result to net loss
before tax:
Interest revenue
Other income
Other corporate and administration
Net (loss)/profit before tax
35,669
208,653
(1,832,680)
63,300
907,551
(1,016,013)
(3,633,987)
(1,678,035)
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
Research and development tax incentive
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
23
8,840,695
9,961,994
8,840,695
9,961,994
Consolidated
2019
$
2018
$
35,669
63,300
1,700,000
208,653
-
1,908,653
122,841
47,194
2,573
835,000
-
72,551
907,551
137,562
57,479
818
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
7.
INCOME TAX
(a) Income tax benefit
Current tax
Deferred tax
Consolidated
2019
$
2018
$
-
-
-
-
-
-
(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% (2018: 27.5%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
(3,633,987)
(999,346)
(1,678,035)
(461,460)
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% (2018: 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% (2018: 27.5%)
Financial assets at fair value through profit or loss
Accrued income
67,221
2,872
(929,253)
165,489
763,764
-
24,215
69,897
227,390
2,314,115
2,635,617
672,250
339
672,589
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
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.
For the 2021 financial year, the tax rate will decrease to 26% and then 25% for the 2022 and later financial years. Element 25 Limited
satisfies the criteria to be a small business entity.
24
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
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
2019
$
2018
$
1,690,720
861,680
482,983
1,711,680
2,552,400
2,194,663
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
66,223
9,350
75,573
101,953
8,913
110,866
10. CURRENT ASSETS - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Australian listed equity securities
6,200,565
7,639,805
Changes in fair values of financial assets at fair value through profit or loss are recorded in other income for gains (note 5) or directly on
the face of the statement of comprehensive income for losses.
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
92,103
(79,946)
12,157
16,660
(4,251)
3,999
(4,251)
12,157
64,457
744,182
808,639
92,355
(75,695)
16,660
-
110
16,550
-
16,660
41,956
66,696
108,652
2019
2018
Notes
Number of
shares
$
Number of
shares
$
13(b), 13(d)
91,907,274
15,841,862
83,464,350
14,351,850
91,907,274
15,841,862
83,464,350
14,351,850
25
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
13.
ISSUED CAPITAL (cont’d)
(b) Movements in ordinary share capital
Beginning of the financial year
Issued during the year:
− Upon exercise of 20 cent options
− Pursuant to share purchase plan and shortfall
placement at 17.5 cents per share
End of the financial year
(c) Movements in options on issue
2019
2018
Notes
Number of
shares
$
Number of
shares
$
83,464,350
14,351,850
83,464,350
14,351,850
500,000
100,000
-
-
7,942,924
91,907,274
1,390,012
15,841,862
-
83,464,350
-
14,351,850
Beginning of the financial year
Issued during the year:
− Exercisable at 26 cents, on or before 22 February 2024
− Exercisable at 26.1 cents, on or before 28 November 2023
− Exercisable at 32.5 cents, on or before 3 November 2022
− Exercisable at 35.5 cents, on or before 28 November 2022
Exercised during the year at 20 cents, expiring 19 November 2018
Expired during the year:
− On 1 July 2017, exercisable at 20 cents
− On 19 November 2018, exercisable at 20 cents
− On 15 September 2017, exercisable at 27.5 cents
− On 17 June 2019, exercisable at 30 cents
− On 22 October 2018, exercisable at 32 cents
− On 31 January 2018, exercisable at 34 cents
− On 20 November 2018, exercisable at 35 cents
− On 30 November 2017, exercisable at 38 cents
End of the financial year
Number of options
2018
2019
13,850,000
16,700,000
1,600,000
2,000,000
-
-
(500,000)
-
(1,500,000)
-
(250,000)
(250,000)
-
(200,000)
-
14,750,000
-
-
600,000
1,200,000
-
(1,000,000)
-
(500,000)
-
-
(150,000)
-
(3,000,000)
13,850,000
(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 2019 and 30 June 2018 are as follows:
26
Element 25 Limited
Notes to the Consolidated Financial Statements continued
30 JUNE 2019
Consolidated
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
Employee benefit obligations (current)
Working capital position
14. RESERVES AND RETAINED EARNINGS
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve
2019
$
2,552,400
75,573
6,200,565
(808,639)
(209,922)
7,809,977
2018
$
2,194,663
110,866
7,639,805
(108,652)
(121,491)
9,715,191
(36,454)
3,848,693
3,812,239
(26,023)
3,604,253
3,578,230
(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
38,500
38,500
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
474,000
915,000
1,389,000
802,000
1,826,000
2,628,000
27
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
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
2019
$
2018
$
115,200
-
115,200
115,200
-
115,200
The property lease is a non-cancellable lease with a one-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 one-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
326,883
20,900
48,182
-
145,400
541,365
325,374
20,900
-
-
114,000
460,274
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
Element 25 Butcherbird Project Pty
Ltd (formerly Fortitude Metals
Limited)
France
Ordinary
2019
%
100
2018
%
100
Australia
Ordinary
100
100
(1) The proportion of ownership interest is equal to the proportion of voting power held.
21. EVENTS OCCURRING AFTER THE STATEMENT OF FINANCIAL POSITION DATE
During August 2019 the Company announced that government funding of $1,342,223 had been approved for the pilot plant test programme
for the Company’s 100% owned Butcherbird Manganese Project.
No other matter or circumstance has arisen since 30 June 2019, which has significantly affected, or may significantly affect the operations
of the Group, the result of those operations, or the state of affairs of the Group in subsequent financial years.
28
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
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
Decrease/(increase) in trade and other receivables
Decrease in financial assets at fair value through profit or loss
Increase in trade and other payables
Increase in employee benefit obligations
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
2019
$
2018
$
(3,633,987)
(1,678,035)
4,251
244,440
-
(6,987)
23,071
1,439,240
699,655
88,680
(1,141,637)
-
165,060
(425,000)
(7,138)
(62,449)
38,670
16,296
-
(1,952,596)
(3,633,987)
(1,678,035)
Number of shares
2019
Number of shares
2018
84,246,547
83,464,350
(c) Information on the classification of options
As the Group made a loss for the year ended 30 June 2019, 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.
29
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
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 2019 range from 20 cents to 35.5 cents per option, with expiry dates ranging from 18 November 2019 to
22 February 2024.
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 6.8 cents (2018: 9.2 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
2019
26.1
5.0
18.8
50.0%
2.0%
2018
34.5
5.0
25.2
50.0%
2.2%
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
2019
2018
Weighted
average
exercise price
cents
26.8
26.1
-
20.0
23.9
27.3
27.3
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
13,850,000
3,600,000
-
(500,000)
(2,200,000)
14,750,000
14,750,000
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 2.3 years (2018: 2.1
years), and the exercise prices range from 20 cents to 35.5 cents.
(b) Expenses arising from share-based payment transactions
Consolidated
2019
$
2018
$
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
244,440
244,440
165,060
165,060
30
Notes to the Consolidated Financial Statements continued
Element 25 Limited
30 JUNE 2019
25. PARENT ENTITY INFORMATION
Parent Entity
2019
$
2018
$
The following information relates to the parent entity, Element 25 Limited, at 30 June 2019. 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
Non-current liabilities
Total liabilities
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Loss for the year
Total comprehensive loss for the year
8,793,753
12,157
8,805,910
1,014,006
249
1,014,255
15,841,862
3,848,693
(11,898,900)
7,791,655
(3,639,311)
(3,639,311)
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)
31
Directors' Declaration
Element 25 Limited
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 10 to 31 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 2019 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
Managing Director
Perth, 6 September 2019
32
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 9 October 2019.
(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 NOM AUST PL
RANGUTA LTD
ALPHA BOXER LTD
DUKETON MINING LTD
ARADIA VENTURES PL
AUSTRADE HLDGS PL
DE JONG JACOBUS GERARDUS
DUKETON CONSOLIDATED PL
WATTS PAUL HARTLEY
DANE PAST CO PL
HSBC CUSTODY NOM AUST LTD
KONGMING INV LTD
DONGARRA LTD
BNP PARIBAS NOM PL HUB24
MANDIES MEATS PL
MI QING
SINO WEST ASSETS LTD
AVANIA NOM PL
CORNELIUS SEAMUS
LANGSFORD DEREK HAROLD
Ordinary shares
Number of holders Number of shares
63
149
119
266
94
691
110
15,291
456,464
980,137
9,807,769
80,647,613
91,907,274
100,569
Listed ordinary shares
Number of shares
9,513,881
7,180,440
5,474,006
5,382,500
4,723,215
3,250,000
3,183,359
3,085,715
2,700,000
1,907,390
1,726,372
1,382,733
1,361,967
1,162,627
1,151,796
1,111,287
1,104,852
1,000,000
962,815
962,556
Percentage of
ordinary shares
10.35
7.81
5.96
5.86
5.14
3.54
3.46
3.36
2.94
2.08
1.88
1.50
1.48
1.26
1.25
1.21
1.20
1.09
1.05
1.05
58,327,511
63.47
(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
4,312,500
37
Element 25 Limited
ASX Additional Information continued
(e) Schedule of interests in mining tenements as at 18 October 2019
Location
Eelya Hill
Yallon Well
Sunday Well
Pinnacles Nickel
Pinnacles Nickel
Flanker South
Pinnacles
Fraser Range
Mt Stewart
Mulga Tank
Black Hill
Mt Padbury
Butcher Bird Copper
Yaneri Bore
Dead Camel
Corner Bore
Millidie Creek
Neds Gap
Limestone Bore
Mt Padbury
Victory Bore
Cunyu Woolshed
Eileen Bore
Limestone Bore
Yanneri Ridge
(1) 100% interest held in all minerals other than iron ore and manganese.
Tenement
E20/659
E20/948
E20/953
E28/2577
E28/2701
E28/2761
E28/2908
E28/2925
E37/1295
E39/2135
E46/1300
E52/1529
E52/2350
E52/3606
E52/3663
E52/3704
E52/3708
E52/3710
E52/3735
E52/3738
E57/1060
E69/3541
E80/5056
L52/211
M52/1074
Percentage held / earning
10%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100% (1)
100% (1)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
38
Element 25 Limited
ASX Additional Information continued
(f) Unquoted Securities
At 9 October 2019, the Company had the following unlisted securities on issue:
Class
$0.20 Options, Expiry 24 November 2021
Number of
Securities
2,000,000
Number of
Holders
3
$0.215 Options, Expiry 18 November 2019
2,750,000
$0.22 Options, Expiry 2 December 2019
$0.26 Options, Expiry 22 February 2024
200,000
1,600,000
$0.261 Options, Expiry 28 November 2023
2,000,000
$0.30 Options, Expiry 2 December 2019
$0.30 Options, Expiry 22 August 2020
200,000
2,000,000
$0.325 Options, Expiry 3 November 2022
600,000
$0.35 Options, Expiry 20 November 2020
2,200,000
$0.355 Options, Expiry 28 November 2022
1,200,000
3
1
3
3
1
3
3
4
3
Holders of 20% or more of the class
Holder Name
Aradia Ventures Pty Ltd
Seamus Cornelius
Antoinette Janet Ribbons
Aradia Ventures Pty Ltd
Kongming Investments Ltd
Antoinette Janet Ribbons
Jane Abigail O’Neill
Duketon Consolidated Pty
Ltd
I D Huitson and E N Dinggal
Aradia Ventures Pty Ltd
Seamus Cornelius
John George Ribbons
Jane Abigail O’Neill
Zenix Nominees Pty Ltd
Francis Harper
JSR Nominees Pty Ltd
Liam Cornelius
Pato Negro Pty Ltd
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
1,250,000
750,000
750,000
200,000
1,000,000
500,000
1,000,000
500,000
500,000
200,000
1,000,000
500,000
500,000
300,000
200,000
1,000,000
500,000
500,000
600,000
300,000
300,000
39
Corporate Governance Statement
Element 25 Limited
Element 25 Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Element
25 Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd
edition) published by the ASX Corporate Governance Council.
The 2019 Corporate Governance Statement was approved by the Board on 18 October 2019 and is current as at 18 October 2019. A
description of the Group’s current corporate governance practices is set out in the Group’s Corporate Governance Statement which can be
viewed at www.element25.com.au.
40