Annual Report 2014
Corporate Directory
Directors and Company Secretaries
Mr Calvin Treacy (Managing Director)
Mr Corey Nolan (Non-executive Director)
Mr Richard Seville (Non-executive Director)
Ms Linda Scott (Joint Company Secretary)
Mr Paul Crawford (Joint Company Secretary)
Head Office and Registered Office
Elementos Limited
Level 8, 26 Wharf Street
Brisbane QLD 4000
Tel: +61 7 3221 7770
Fax: +61 7 3221 7773
www.elementos.com.au
Auditors
BDO Audit Pty Ltd
Level 10, 12 Creek Street
Brisbane QLD 4000
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Share Registry
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Tel: 1300 737 760
Fax: 1300 653 459
www.boardroomlimited.com.au
Stock Exchange Listing
Australian Securities Exchange Ltd
ASX Code: ELT
Australian Business Number
49 138 468 756
2
Contents
Corporate Directory
Directors’ Letter
Corporate Strategy
Strategy
Capabilities
Objectives
Development
Exploration
Divestment and Joint Ventures
Acquisition
Review of Projects
Cleveland Province, Australia
Santo Domingo, Argentina
Millenium, Australia
Selwyn Range, Australia
Manantiales, Argentina and Tamaya, Chile
Competent Person’s Statements
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5
6
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7
7
7
8
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12
12
13
13
14
Consolidated Financial Report
15
3
CLEVELAND TIN AND COPPER MINE HISTORIC ADIT
NORTH-WEST TASMANIA, AUSTRALIA
4
Directors’ Letter
Dear Shareholders,
We are pleased to report that, during the year, the Company’s focus successfully shifted from
greenfield exploration to project development. In calendar year 2012, the board of Elementos
recognised a change in corporate strategy was necessary in response to the extremely
difficult environment for capital raising to fund greenfield exploration. The plan was to identify
advanced or brown-field assets which the Company believed could secure new funding. The
execution of this strategy led to the acquisition of the advanced Cleveland tin and copper
project through a merger with Rockwell Minerals Limited. The strategic rationale for the merger
was the strength of the tin industry supply-demand fundamentals. The strong demand for tin
continues as it progressively replaces lead in solder in electronics, whilst there has been little
investment in exploration or development in the past 20 years.
During the year, the board of Elementos was restructured to reflect the new direction of the
Company. Mr James Calaway and Mr A Anthony McLellan stood down as Directors having
guided the Company through a difficult period, and Mr Corey Nolan transitioned from
Managing Director to Non-executive Director.
As you will see in the following report, Cleveland is an exciting development prospect with
several potential projects contained in the one Province. In the short term, the Cleveland low
capex tailings project presents an opportunity to generate positive cash flows that can be
used in the ongoing development of the Province.
The market continues to be challenging for ASX listed mining companies, with the 2013/14
financial year being amongst the most difficult in memory. It is a credit to the foresight of the
former directors, the quality of the Cleveland asset and the hard work of the management
team that Elementos has been able to continue the development of Cleveland through this
period.
The board remains committed to the strategic direction that was set in 2012, and is confident
that, when the commodity markets improve, Elementos will be well positioned to thrive due to
the solid foundations that have been laid in the past 12 months.
Finally, none of the progress made would be possible without the ongoing support of our
shareholders, for which we are genuinely appreciative.
Sincerely,
Board of Directors.
5
Corporate
Strategy
S t r a t e g y
Elementos Limited (“Elementos” or the
“Company”) is an Australian based,
Australian Stock Exchange listed, minerals
exploration and development company,
focussed primarily on tin, copper and
tungsten in Tasmania.
The Company’s strategy is centred on the
development of cash flow positive projects
with low capital intensity, that have potential
to be funded by a combination of strategic
partnership investment, debt and equity. The
Company is committed to applying
innovative approaches and technologies in
all aspects of the business, from project
planning to mine operations.
The Company’s activities to support the
strategy during 2014 have included
exploration, mine development studies,
progression of government approvals, review
of acquisition opportunities, and divestment
of non-core assets.
C a p a b i l i t i e s
In the short term, the Company intends to
grow internal capabilities in the core
technical areas of:
Project development;
Mineral processing;
Mining; and
Geology.
These technical capabilities will be supported
by strong corporate functions in:
Project financing;
Investor relations;
Strategic partnering; and
Accounting and finance.
O b j e c t i v e s
Our objective is to generate positive cash
flows from existing assets in the short term, in
order to fund further exploration and
development, to build a mid-tier Australian
based mining house focused on tin, copper
and tungsten.
D e v e l o p m e n t
The Company has made significant progress
in the development of the Cleveland
Province in Tasmania, including the tin and
copper tailings project, and the tin and
copper underground mine redevelopment.
Key project milestones achieved this year
include:
Upgrades of the underground tin and
copper Mineral Resources;
Upgrade of the tailings Mineral Resource
from Inferred to Indicated;
Engineering studies of the infrastructure
requirements for both the tailings and
underground operations;
Mining studies and digitalisation of the
historic mine and workings;
Review of past metallurgical performance
and testwork;
Development of metallurgical flowsheets
for the tailings and underground mineral
processing; and
Continued progress on the Development
Proposal and Environmental
Management Plan as part of the
environmental permitting process.
The Company is now well placed to
accelerate the development of the tailings
project, with the objective of completing
environmental permitting, Mining Lease
(“ML”) approval, and engineering design of
the project in 2015.
Development Timing
Recent papers by the International Tin
Research Institute (“ITRI”) and the German
Federal Institute for Geosciences and Natural
Resources (“BRG”) state the demand for tin
6
remains strong due to its use as a major
constituent of solder for electronics. However,
there appears to be a looming shortage of tin
supply due to the lack of new mines that are
well advanced in the development cycle,
which is exacerbated by the depletion of
resources at several key tin mines. BRG
anticipates that by 2020 there will be a deficit
of as much as 80,000 tonnes of tin per annum
if additional projects are not fast tracked.
Furthermore, BRG states the effect of the
shortfall will be felt as soon as 2017 (see figure
below).
A key Company objective is to have the
tailings project in production as early as 2016,
in advance of any potential supply deficit
and resulting major price increase.
E x p l o r a t i o n
The Company’s exploration focus is on the
Cleveland suite of tenements in North-west
Tasmania.
During the year, the Company has
undertaken work to determine the
exploration potential of the following targets:
Cleveland tin and copper (desktop
studies);
Cleveland tungsten (desktop studies);
and
Cleveland lead/silver/zinc (rock and soil
sampling).
All the studies have demonstrated promising
results and the Company believes that, with
targeted drilling, good advances could be
made in defining further mineralisation in all
commodities. However, as access to
exploration capital remains scarce, the
Company will continue to minimise
exploration expenditure and focus on the
development of the known Cleveland
resources.
D i v e s t m e n t a n d J o i n t
V e n t u r e s
During the year, the Company has been
successful in forming two joint venture
agreements that will allow Millenium and
Selwyn Range to be explored, while focusing
its resources on Cleveland.
The Company remains committed to realising
value from its Santo Domingo project through
a joint venture, and have been
actively negotiating an agreement.
The non-core assets of Tamaya and
Manantiales have been divested in
line with Company strategy.
A c q u i s i t i o n
During the year, the Company
finalised the purchase of the
Cleveland Mine Exploration
Licence (“EL”) EL7/2005 from Lynch
Mining Pty Ltd. At the beginning of
the year, Rockwell Minerals Ltd held a 50%
stake in EL7/2005 with the right to purchase
the remaining 50% for $700,000. In June 2014,
the option to purchase agreement was
renegotiated and the final consideration was
settled in cash and equity. Elementos now
has 100% ownership of all its Tasmanian
tenements, EL7/2005, EL9/2006 and
EL15/2011.
The Company has also been investigating
other opportunities. However, given the
extremely difficult environment for raising
capital to fund greenfield exploration, the
focus has been on identifying assets that are
advanced and complementary to the
Cleveland Province.
7
Review of Projects
C l e v e l a n d P r o v i n c e,
A u s t r a l i a
The Cleveland Province, located in North-
west Tasmania, incorporates four projects, all
100% owned by the Company, across 96 km2
of contiguous tenure including:
Tailings Project
Rehabilitation of a tin and copper Mineral
Resource and surface mineralisation by
retreatment;
Cleveland Underground Redevelopment
Project
Recommencement of tin and
copper production from the
Cleveland underground Mineral
Resource;
Foley Project
Potential development of a large
underground tungsten Mineral
Resource; and
Near Mine Exploration
Focused on discoveries within the
surrounding highly prospective
geology.
Historical Mining
Situated within the Company’s tenure
is the historic Cleveland tin and copper
underground mine, operated by Aberfoyle
Limited between 1968 and 1986. Aberfoyle
was a major operator in the tin and tungsten
mining industry with four operating mines in
Australia. Cleveland mine was one of the
largest underground tin operations in the
world and produced approximately 23,000
tonnes of tin and 10,000 tonnes of copper in
18 years of operation. The mine closed in 1986
due to a rapid decline in tin prices caused by
the collapse of the International Tin Council.
The mine was operated successfully due to its
low-cost mining and innovative mineral
processing methods. The operation was
considered state of the art at the time, being
one of the first tin mines to utilise trackless
mining and tin flotation technologies.
Mine development extends to 400 metres
below the surface with the underground
decline and development drives still in place.
This potentially provides low capital cost
access to the existing tin-copper and
tungsten mineralisation.
Regional Infrastructure
North-west Tasmania hosts some of the
world’s most productive tin mines, including
the operational Renison Bell, and the historic
mines of Mount Bischoff and Cleveland. The
region also hosts operating iron ore,
lead/zinc, gold and copper mines.
North-west Tasmania has well developed
infrastructure and a strong mining culture. The
site is linked to Burnie Port by sealed roads.
Accessible power runs through the Cleveland
Province, and there is abundant water
available for use. The Burnie region has a
large, available, and experienced workforce.
The Tasmanian Government, Environmental
Protection Authority, and the Department of
Mineral Resources have all indicated support
for the Company’s projects.
Tailings Project
Historical mining at Cleveland produced a
tailings legacy that the Company proposes to
rehabilitate by reprocessing as part of its
stewardship of the Province. The tailings are
stored above ground on-site in two tailings
dams. The tailings contain a substantial
quantity of recoverable tin and copper due
8
in part to operational inefficiencies caused
by the International Tin Council quota system
(now defunct), and technical limitations of tin
processing whilst the mine was in operation.
The Company believes that advances in
technology, since Cleveland’s closure, will
allow the tailings to be economically
reprocessed using standard mineral
processing techniques of fine particle gravity
separation and flotation.
MiningOne Consultants independently
estimated the Mineral Resources for the
Cleveland Tailings Project. The current
Indicated Mineral Resource is approximately
3.85Mt @ 0.30% tin and 0.13% copper1 (0%
cut-off grade).
Cleveland Underground
Redevelopment
The tin and copper mineralisation at
Cleveland is principally hosted in semi-
massive sulphide lenses that have replaced
limestone. Tin occurs as cassiterite (tin oxide)
and in very minor amounts as stannite, and
copper as chalcopyrite.
The tin and copper lenses are more or less
vertically dipping, lenticular deposits with
strike lengths of up to 500 metres, across strike
thicknesses of up to 30 metres and down-dip
extents of up to 800 metres.
Extensive geological and mining records
have survived from the Aberfoyle operations,
including the drill database. The historic assay
data has been validated by resampling over
100 historical drill cores and assaying to
confirm the reliability of the historical
protocols and results.
The verified historic geological records have
allowed for the estimation of Mineral
Resources, reported in accordance with the
JORC Code (2012 Edition), without further
drilling. However, further drilling will enhance
the understanding of the deposit and
potentially the definition of further resources.
1 Elementos Limited ASX Announcement dated 17th June 2014 –
Resource Upgrade – Cleveland Tailings Resource – Reported in
accordance with the JORC Code (2012 Edition).
The Cleveland Underground Mineral
Resource is estimated using over 2,000 drill
holes, for a total drilled length of 130,000
metres, and 75,000 assay points for tin,
copper, tungsten and selected other metals.
All historical data has been digitised
including:
drill hole collar locations;
drill hole surveys;
drill hole assays;
lode intercepts;
mined out stopes;
surface contours of the mine;
location of the decline; and
location of drives and voids.
MiningOne Consultants independently
estimated the Mineral Resources for the
Cleveland Underground Redevelopment
Project. The current Indicated Mineral
Resource is approximately 5Mt @ 0.69% tin
and 0.28% copper, and an Inferred Mineral
Resource of approximately 2.4Mt @ 0.56% tin
and 0.19% copper2 (0.35% tin cut-off grade).
Foley Project
Cleveland also hosts tungsten mineralisation
in an area referred to as ‘Foley’, which was
discovered by Aberfolye in the 1980’s. The
prospect was never developed despite the
fact that the current decline provides access
to the mineralisation. Although proximal to
the Cleveland Tin and Copper Mineral
Resource, Foley is a separate Mineral
Resource due to its different host geology.
In the Foley Zone, tungsten is present as
wolframite hosted in tungsten bearing
porphyry quartz stock-work. The tungsten
bearing stock-work is currently considered to
dip vertically and has a known strike length of
about 300 metres, an across strike width of up
to 300 metres and a down dip extent of 900
metres.
2 Elementos Limited ASX Announcement dated 18th April 2013 –
Cleveland Tin, Copper and Tungsten JORC Resources. This
information was prepared and first disclosed under the JORC
Code 2004. It has not been updated since to comply with the
JORC Code 2012 on the basis that the information has not
materially changed since it was last reported
9
Proposed Development
Activities
Development activities planned
and in progress include:
Detailed engineering and
Metallurgical test-work and
optimisation of the tailings process
flow sheet utilising the latest tin
processing technologies;
cost estimation of the tailings
project;
application;
Mining Lease application;
Development of
Environmental permitting
concentrate off-take sales agreements;
and
Exploration for surface mineralisation.
Review of Ore Reserves and
Mineral Resources
During the year, the Company continued the
development of its Cleveland Mineral
Resources to provide:
An upgrade of the Tailings Mineral
Resource from an Inferred Resource of
3,850kt @ 0.30% tin and 0.13% copper to
an Indicated Resource of 3,850kt @ 0.30%
tin and 0.13% copper. The classification
was upgraded based on independent
confirmation of the mass of the tailings;
An increase in the Cleveland
Underground Mineral Resource from an
Indicated Resource of 4,239kt @ 0.70% tin
and 0.28% copper to an Indicated
Resource of 5,002kt @ 0.69% tin and
0.28% copper. The increase was due to
the inclusion of mineralisation that had
not previously been modelled; and
An increase in the Cleveland
Underground Mineral Resource from an
Inferred Resource of 1,880 @ 0.64% tin
and 0.19% copper to an Inferred
Resource of 2,442kt @ 0.56% tin and
0.19% copper. The increase was due to
the inclusion of mineralisation that had
not previously been modelled.
MiningOne Consultants have independently
reviewed historical data relating to Foley and
estimated an Inferred Mineral Resource3 of
approximately 3.98Mt@ 0.30%WO3 and for a
total contained metal of12,000 tonnes above
850RL, from 26 diamond drill holes, totaling
6,796 metres.
Near Mine Exploration Potential
Within the Cleveland Province there is
excellent potential to expand on the known
areas of mineralisation and generate further
discoveries.
There has been significant drilling to define
tin-copper mineralisation. However, it is still
open at depth and along strike. The Foley
Zone is also an open resource, but unlike the
tin-copper resource, the tungsten resource
has never been developed.
The Province is under-explored for base
metals such as silver, lead and zinc, despite
extensive evidence of historical base metal
mining operations on the Company’s ELs and
in surrounding areas.
3 Elementos Limited ASX Announcement dated 18th April 2013 –
Cleveland Tin, Copper and Tungsten JORC Resources. This
information was prepared and first disclosed under the JORC
Code 2004. It has not been updated since to comply with the
JORC Code 2012 on the basis that the information has not
materially changed since it was last reported
10
The Foley Tungsten Mineral Resource remains unchanged.
The Mineral Resources at 30 June 2014 are:
Cleveland Tin and Copper Tailings Mineral Resource
(ASX Release: 17 June 2014 Cleveland Tailings Resource Upgrade)
0% Sn Cut-Off
Category
Tonnage
% Sn as
Cassiterite
Tin Metal
(tonnes)
% Cu
Copper Metal
(tonnes)
Indicated
3,850,000
Total
3,850,000
0.30
0.30
11,500
0.13
5,000
11,500
0.13
5,000
Cleveland Tin and Copper Mineral Resource Estimate
(ASX Release: 5 March 2014 Cleveland JORC Resources Significantly Expanded)
0.35% Sn Cut-Off
Category
Tonnage
% Sn
Indicated
5,002,000
Inferred
2,442,000
Total
7,444,000
0.69
0.56
0.65
Tin Metal
(tonnes)
34,500
13,900
48,400
% Cu
0.28
0.19
0.25
Copper Metal
(tonnes)
14,000
4,600
18,600
Cleveland Tungsten Mineral Resource Estimate
(ASX Release: 18 April 2013 Cleveland Tin, Copper and Tungsten JORC Resources)
0.2% WO3 Cut-Off
Category
Tonnage
% WO3
Contained WO3 (tonnes)
Inferred
3,980,000
Total
3,980,000
0.30
0.30
12,000
12,000
Governance Arrangements and Internal Controls
A summary of the governance and controls
applicable to the Company’s Mineral
Resource processes is as follows:
Review and validation of drilling and
sampling methodology and data
spacing, geological logging, data
collection and storage, sampling and
analytical quality control;
Geological interpretation — review of
known and interpreted structure,
lithology and weathering controls;
Estimation methodology — relevant to
mineralisation style and proposed
mining methodology;
Comparison of estimation results with
previous mineral resource models,
and with results using alternate
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modeling methodologies;
Visual validation of block model
against raw composite data; and
Internal peer review by senior
company personnel.
S a n t o D o m i n g o ,
A r g e n t i n a
Santo Domingo comprises a series of
exploration tenements covering nearly 250
km2. Located approximately 120 km east of
San Juan city, Santo Domingo is a low
altitude project with well-established regional
infrastructure and access compared to
higher Andes Cordillera projects.
Since the Company’s public float in
December 2009, systematic exploration
programs, including mapping, sampling, and
ground-magnetometry and Induced
Polarisation geophysics, have been
completed at Santo Domingo. This has
resulted in the discovery of an extensive
mineralised system, with a number of distinct
styles and structures, including
Yvette high-grade gold and silver-
polymetallic shear zones;
El Arriero west high grade gold and silver
zone;
Divisoria gold-copper porphyry system;
El Arriero (copper – molybdenum)
porphyry target; and
El Arriero Extension (copper – gold)
porphyry.
Elementos believes that Santo Domingo
could host a world-class deposit, which would
require significant investment in exploration
and infrastructure, including additional
geophysics and deep drilling. As a result,
Elementos has begun discussions with
potential joint venture partners with the
financial capacity to explore and develop a
large porphyry target, to complement the
Company’s technical understanding of the
project.
twice yearly from 18 October 2014 until 18
April 2018. The final option exercise price is
US$530,000 payable on 18 October 2018.
M i l l e n i u m , A u s t r a l i a
Millenium is situated near Cloncurry in the
world-class Mt Isa Inlier, a significant gold and
base metal producing region, and host to
major copper/gold and lead/silver/zinc
deposits. The district has established mining,
processing and transportation infrastructure in
close proximity to the regional centres of Mt
Isa and Cloncurry.
The Company has consolidated a large
tenement position over the Corella Fault
zone, 40 kilometres north-west of Cloncurry.
The Government has now granted all 289km2
of Exploration Permits (“EPMs”). In addition,
the Company exercised an Option-to-
Purchase agreement with Forte Energy NL to
acquire 134 hectares of MLs for $100,000.
Exploration has been undertaken on the five
MLs outlining a large zone of cobalt and
copper mineralisation.
The Millenium MLs host a number of historical
copper mine workings and prospects that
were operated around the turn of the
century. Historically, the Federal mine
exploited copper in bornite and chalcopyrite
down to 135 metres, producing some 10,000
tonnes of ore at exceptionally high grade
(~25% copper). Other workings along a shear
“lode” structure were less successful for
copper mining, but the lodes were noted to
be rich in cobalt.
Between 1964 and 1991, several companies
explored the district with trenching and
drilling programs targeting both copper and
cobalt mineralisation, including Carpentaria
Exploration Company Pty Ltd, Tasman
Minerals NL, and Murchison United NL.
Encouraging results were reported from
drilling on the Millenium MLs, confirming the
thickness of the cobalt mineralisation
The Company’s acquisition agreement for
Santo Domingo includes US$45,000 payable
Elementos completed a number of outcrop
sampling programs during 2010/2011 to study
12
the areas historically mined and drilled within
the MLs. Copper, cobalt, gold and other
metallic anomalies were identified along the
trend of the Corella structure, including the
areas of historic drilling. Subsequently, a soil
survey extended the footprint of the
mineralisation 1,500 metres north to the limit
of the MLs, and remains open, apparently
extending onto the newly granted EPMs. The
survey extended the potential mineralisation
over an area of limited exposure and no
historical drilling, reinforcing the potential for
further mineralisation over the newly granted
EPMs.
Additionally, rare earth elements and Yttrium
have been identified in check-assays of rock-
chip surface samples announced by the
Company in 2010. Total Rare Earths
anomalies of up to 0.17% were identified in
multiple samples from oxidised surface
outcrops and shallow historic trenching. The
average anomaly over 36 samples of varied
composition and distribution was >400ppm.
This is considered a significant surface
anomaly and the future drill program will test
for these elements at depth.
The Company has entered an earn-in joint
venture with Chinalco Yunnan Copper
Resources Ltd (“CYU”) at the Millenium
project, on the following terms:
CYU will make a payment of a $100,000
cash option fee for the exclusive right to
explore the properties subject to the joint
venture;
CYU will have the right to earn 51% of the
project by investing $1.2 million over 3
years; and
CYU may increase its interest by a further
19% of the project, by investing an
additional $1.3 million over a further 2
years.
Once CYU earns its 70% interest, each party
can either contribute or dilute according to
an agreed formula and work program. If
either party achieves a 90% interest in the
project, the 10% interest immediately
converts to a 1% NSR.
S e l w y n R a n g e , A u s t r a l i a
Selwyn Range consists of 109 km2 of largely
contiguous EPMs, 19371, 19375, 19426, all of
which were granted during the year.
Selwyn Range is situated 35 kilometres north
of Osborne, 10 kilometres east of the prolific
Selwyn trend (which includes the Merlin
molybdenum rhenium development project),
and 40 kilometres west of the Cannington
mine. The EPMs are located over an area of
inflection in a prospective north-south
structural trend, a feature often related to
major deposits and mineralised systems in the
district. The target style and criteria are similar
to those in the existing Millenium properties
120 kilometres to the north-west. A thorough
review has been carried out of open-file data
and satellite imagery in order to help plan
future exploration activities.
The Company has signed a binding term
sheet for an earn-in joint venture with Below
Ground Technology (“BGT”) at the Selwyn
Range project, on the following terms:
The right to earn 51% of the project by
investing $0.6 million over 3 years; and
The option to increase its interest by a
further 19%, by investing an additional
$0.6 million over a further 2 years.
Once BGT earns a 70% interest, each party
can either contribute or dilute according to
an agreed formula and work program. If
either party achieves a 90% interest in the
project, the other party’s 10% interest
immediately converts to a 2% NSR.
M a n a n t i a l e s , A r g e n t i n a
a n d T a m a y a , C h i l e
During the year, the Company relinquished its
options over the Manantiales and Tamaya
projects.
13
C o m p e t e n t P e r s o n ’ s S t a t e m e n t s
The information in this report that relates to Exploration Results, Mineral Resources or Ore
Reserves at the Cleveland tin-copper and tungsten project is based on and fairly represents
information compiled by Mick McKeown of Mining One Consultants, a Competent Person
who is a Fellow of the Australian Institute of Mining and Metallurgy. Mick McKeown is a full-
time employee of Mining One Pty Ltd, a mining consultancy which has been paid at usual
commercial rates for the work which has been completed for Elementos Limited.
Mick McKeown has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration and to the activity being undertaken to qualify as a
Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves’. Mick McKeown consents to the
inclusion in the report of the matters based on his information in the form and context in
which it appears.
The information in this report that relates to Exploration Results, Mineral Resources or Ore
Reserves at the Tamaya project, Chile, the Manantiales and Santo Domingo projects,
Argentina, and the Millenium and Selwyn Range projects, Australia, is based on and fairly
represents information compiled by Mr Gustavo Delendatti, a member of the Australian
Institute of Geoscientist. Mr Delendatti is a full-time employee of Elementos Ltd and its
subsidiaries, and has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration and to the activity which they are undertaking to qualify
as Competent Persons as defined in the 2012 Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves’. Mr Delendatti consents to the
inclusion in the report of the matters based on his information in the form and context in
which it appears.
14
ELEMENTOS LIMITED
ABN 49 138 468 756
CONSOLIDATED FINANCIAL REPORT
FOR THE YEAR ENDED
30 JUNE 2014
15
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
The directors submit their report on the consolidated entity (“Group”) consisting of
Elementos Limited and the entities it controlled at the end of, and during, the
financial year ended 30 June 2014.
Directors
The directors of the Company at any time during or since the end of the financial
year are listed below. During the year, there were seven meetings of the full board
of directors. The meetings attended by each director were:
Directors
C Treacy (appointed 14/10/13)
C Nolan (continued)
R Seville (appointed 14/10/13)
A A McLellan (resigned 14/10/13)
M D McCauley(resigned 06/08/13)
J D Calaway (resigned 14/10/13)
Board
Audit and Risk
Committee*
Meetings Attend Meetings Attend Meetings Attend
Remuneration
Committee*
5
7
5
2
1
2
5
7
5
2
1
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*The Directors consider that the Company is not of a size and that its affairs are of such
complexity as to justify the formation of special or separate committees.
The directors have been in office since the start of the financial year to the date of
this report unless otherwise indicated.
Company Secretary
Linda Scott, the Company’s Chief Financial Officer, held the position of (Joint)
Company Secretary at the end of the financial year. Ms Scott is a Chartered
Accountant and holds a Bachelor of Commerce degree.
Paul Crawford held the position of (Joint) Company Secretary at the end of the
financial year. Mr Crawford is a CPA and holds accounting, company secretarial
and business law qualifications. Mr Crawford has been Company Secretary of the
Company since its incorporation.
Principal Activities
The principal activity of the Group during the year was project development in
Australia. The Group completed the process of finding an advanced project,
given the very difficult environment for raising new equity capital for greenfield
exploration, culminating in the merger of Elementos Limited and Rockwell Minerals
Limited.
As a result of the merger, the Group’s strategy transitioned from exploration for
copper and gold in South America and Australia, to the development of the
Cleveland Tin and Copper Mineral Resource in Tasmania, acquired through the
merger.
The Group’s short term objective is to generate positive cash flow by a staged
development of its Tasmanian mineral deposits.
During the year, the Group’s focus was the project development of the Cleveland
Project. However, the Group also continued development of joint arrangements
for its others assets in South America and Australia.
16
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Review of Operations
Exploration and development activities at the Group’s projects during the year are
detailed below.
At the Cleveland Project in North-western Tasmania, the Group carried out the
following activities:
• Resource Definition
o Upgrading of the Tin and Copper Mineral Resource report to 2012
JORC standard;
o Enlarged the Tin and Copper Mineral Resource by the inclusion of
additional drill data to the model; and
o Undertook addition studies to define the exploration potential of the
known porphyry tungsten resource, and the tin and copper resource
at Cleveland.
• Environmental Permitting
o The Group continued progress towards the environmental approval
for the Cleveland tailings reprocessing project and the dewatering of
the Cleveland Mine, including the completion of a draft response to
the "Development Plan and Environmental Management Plan
Guidelines" issued by the Tasmanian EPA.
•
Technical Studies
o Completion of mining, metallurgy and infrastructure studies of the
Cleveland Tin and Copper project, to assist in determining the
feasibility of developing the tailings reprocessing operation and
ultimately reopening the underground mine.
• Exploration
o The Group undertook preliminary exploration on the Tasmanian
Exploration Leases neighboring the Cleveland Project that delivered
very promising lead, zinc and silver mineralisation results.
•
Tailings Dam Study
o A fifteen-hole sonic drilling program was completed on the tailings
dam for geotechnical, environmental, metallurgical and resource
investigation, along with additional geotechnical and hydrogeology
work on site.
• Lidar Survey
o A Lidar survey of the Cleveland area was integrated into the
resource model. The survey provides detailed surface topography
including the location of haul roads, ventilation ducts, historic mining
operations and portals.
• Quantitative Mineralogical Study
o A quantitative mineral analysis of the tin-copper and tungsten lodes
from historical drill core was completed. The data will provide
modern insights into the metallurgical characteristics of the various
lodes for flow-sheet design.
17
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
At Santo Domingo
negotiations with third parties, including:
in Argentina, activities
focused on
joint arrangement
• Geological site visits; and
• Extensive due diligence.
At the Millenium Project in the Mt Isa district, activities included:
• Entering an earn-in agreement with Chinalco Yunnan Copper Resources
Limited (“CYU”) to explore for copper, cobalt and gold, as well as agreeing
amended terms with Forte Energy NL on its Millenium Option-to-Purchase
contract. The terms of the agreement are:
o CYU will make a payment of a $100,000 cash option fee for the
exclusive right to explore the properties subject to the agreement;
o CYU will have the right to earn 51% of the project by investing $1.2
million over 3 years;
o CYU may increase its interest by a further 19% of the project, by
investing an additional $1.3 million over a further 2 years; and
o Once CYU earns its 70% interest, each party can either contribute or
dilute according to an agreed formula and work program. If either
party achieves a 90% interest in the project, the 10% interest
immediately converts to a 1% Net Smelter Royalty. The agreement is
subject to finalisation of a full agreement and the transfer of the
Millenium Mining Leases to Elementos.
• CYU completed an initial copper-gold drilling program at Millenium. See
ASX release titled “Completion of Initial Copper/Gold Drilling Program at
Millenium – Large Mineral System Identified” created on 4 December 2013
and available at www.cycal.com.au.
At the Selwyn Range project in the Mt Isa district, activities included:
• Granting of the large strategic tenement position in the Cloncurry district, in
geologically prospective areas, situated near major mines and deposits. This
included109 km2 of new exploration permits at a new prospect south of
Cloncurry;
• Signing a binding term sheet for an earn-in joint agreement with Below
Ground Technology Pty Ltd (“BGT”), to explore for copper and gold at the
Selwyn Range project. The terms of the agreement are:
o The right to earn 51% of the project by investing $0.6M over 3 years;
o The option to increase its interest by a further 19%, by investing an
additional $0.6M over a further 2 years;
o Once BGT earns a 70% interest, each party can either contribute or
dilute according to an agreed formula and work program. If either
party achieves a 90% interest in the project, the other party’s 10%
interest immediately converts to a 2% NSR; and
o The agreement is subject to finalisation of a full agreement.
18
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
During the period, the Group relinquished its options over the Tamaya project in
Chile and the Manantiales Project in Argentina, following unsuccessful exploration
programs.
Significant Changes in State of Affairs
On 14 October 2013, Elementos Limited completed a merger transaction with
Rockwell Minerals Limited, resulting in the Rockwell Minerals Limited shareholders
becoming the controlling shareholders of Elementos Limited.
In accordance with the Australian Accounting Standards, the financial statements
reflect a continuation of the Rockwell Minerals Limited financial statements.
The Group’s operating loss for the financial year, after applicable income tax was
$1,491,656 (2013: $340,896). Exploration and evaluation expenditure during the
year totalled $1,319,395 (2013: $499,105).
At 30 June 2014, the Group’s net assets totalled $6,755,762 (2013: $2,852,949) which
included cash assets of $682,689 (2013: $143,733).
During the year, the Company raised $2.85 million (166,073,334 shares) from private
placements.
Subsequent to year end, $1.53 million (127,502,634 shares) was raised from a rights
issue and private placements.
Information on Directors
The board has a strong combination of technical, managerial and capital markets
experience. Expertise and experience includes operating and mineral exploration
in Australia, Chile and Argentina. The names and qualifications of the current
directors are summarised as follows:
Calvin Treacy (appointed 14 October 2013)
Managing Director
Mr Treacy (BEng, MBA, MAICD) has over twenty years senior management
experience in mining, mining technology and manufacturing. He has a strong
track record of founding and growing companies, and brings a wealth of
experience in the areas of strategic planning and capital raising.
Mr Treacy is a qualified Mechanical Engineer and holds a Masters of Business
Administration, with extensive experience across a range of industries and
positions.
Mr Treacy has worked in a range of roles including Non-executive Director, Chief
Executive Officer, Chief Operating Officer and Production Manager, providing a
blend of experience from hands-on management through to executive oversight
and strategic management.
Directorships held in other ASX listed companies in the last three years: Nil
19
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Corey Nolan
Non-executive Director
Mr Nolan (BCom, MMEE, Graduate of AICD) has twenty years of diverse
experience in the resources sector. This has included experience in mining
operations, global resource evaluation, and the financing and development of
new opportunities in Australia, South Africa, Asia and South America.
Mr Nolan is a qualified mineral economist. He has held specialist roles as an
equities analyst in the mining and natural resources sector of stock broking firms
Morgan Stanley and Wilson HTM. During this period, he undertook detailed
coverage of the Australian and global resources sector including the commodities
market.
Mr Nolan has been a Director at PWC in the corporate finance and valuations
practice, specialising in resources industry valuations for Australian and global
resources firms.
Directorships held in other ASX listed companies in the last three years: Leyshon
Resources Limited.
Richard Seville (appointed 14 October 2013)
Non-executive Director
Mr Seville (BSc, MEngSc, MAusIMM, ARSM) is a mining geologist and geotechnical
engineer with thirty years’ experience in exploration, mine development and
operations. He also has significant corporate experience, in the roles of Chief
Execuitve Officer and Operations Director in ASX/AIM listed mining companies.
Directorships held in other ASX listed companies in the last three years: Leyshon
Resources Limited and Orocobre Limited.
The relevant interest of each director held directly or indirectly in shares and
options issued by the Company at the date of this report is as follows:
Directors
C Treacy
C Nolan
R Seville
Shares
Unlisted Options
22,750,004
1,047,372
16,981,177
6,200,000
3,300,000
-
20
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Remuneration Report (Audited)
This report details the nature and amount of remuneration for each director and
other key management personnel.
The Group’s remuneration policy seeks to align director and executive objectives
with those of shareholders and business, while at the same time, recognising the
early development stage of the Group and the criticality of funds being utilised to
achieve development objectives. The board believes the current policy has been
appropriate and effective in achieving a balance of these objectives.
The remuneration structure for executives is based on a number of factors,
including length of service, particular experience of the individual concerned, and
overall performance of the Group.
The Group’s policy for determining the nature and amount of remuneration of
board members and key executives is set out below.
The executives receive payments provided for under an employment agreement,
which may include cash, superannuation, short-term incentives, and equity based
performance remuneration.
Board policy is to remunerate non-executive directors at market rates for
comparable companies for time, commitment and responsibilities. Individuals may
elect to salary sacrifice part of their fees as increased payments towards
superannuation. 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 and is not linked to the performance of the Group. However, to
align directors’ interests with shareholder interests, directors are encouraged to
hold equity interests in the Group. The maximum aggregate amount of fees that
can be paid to non-executive directors approved by shareholders is currently
$250,000. One-third, by number, of non-executive directors retires by rotation at
the Company’s Annual General Meeting. Retiring directors are eligible for re-
election by shareholders at the Annual General Meeting of the Company.
The Group’s remuneration policy provides for long-term incentives to be offered
through a director and employee share option plan. Options were granted under
financial year to align directors’, executives’,
these plans during current
employees’ and shareholders’ interests. The Group does not remunerate any key
management personnel with securities that are not performance based.
The board of directors is responsible for determining and reviewing the Group’s
remuneration policy, remuneration levels and performance of both executive and
non-executive directors. Independent external advice will be sought when
required. No independent external advice was sought during the current year.
The board is presently reassessing the remuneration policy to ensure it incorporates
appropriate elements given the Group’s status and planned activities. Through this
review process, the directors aim to provide clearer and more manageable
performance criteria for remuneration incentives including the issue of employee
and executive options, while also securing greater loyalty from key employees and
executives, reducing administration costs and the regulatory burden on the Group.
21
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Performance-Based Remuneration
remuneration
includes both short-term and
Performance-based
long-term
incentives and is designed to reward key management personnel for reaching or
exceeding specific objectives or as recognition for strong individual performance.
Short-term incentives are available to eligible staff of the Group and are
comprised of cash bonuses, determined on a discretionary basis by the chief
executive officer and the board. No short-term incentives were made available
during the year.
Long-term incentives are comprised of share options, which are granted from time-
to-time to encourage sustained strong performance in the realisation of strategic
outcomes and growth in shareholder value.
The exercise price of the options is determined after taking into account the
underlying share price performance in the period leading up to the date of grant
and if applicable, performance conditions attached to the share options. Subject
to specific vesting conditions, each option is convertible into one ordinary share.
The names of key management personnel of Rockwell Minerals Limited prior to the
merger or Elementos Limited subsequent to the merger who have held office
during the financial year are:
Calvin Treacy
Corey Nolan
Richard Seville
Mike Adams
Chris Dunks
Richard Trevillion
Managing Director - Executive - continuing Director
Rockwell Minerals Limited and appointed 14 October
2013 Elementos Limited
Director - Non-executive – appointed 15 November
2013 Rockwell Minerals Limited and continuing Director
Elementos Limited
Director - Non-executive - appointed 15 November
2013 Rockwell Minerals Limited and 14 October 2013
Elementos Limited
Director Non-executive – resigned 16 November 2013
Rockwell Minerals Limited
Director Non-executive – resigned 16 November 2013
Rockwell Minerals Limited
Director Non-executive – appointed 10 October 2012
Rockwell Minerals Limited, resigned 22 July 2013
The name of key management personnel of Elementos Limited prior to the merger
and who are not key management personnel of Elementos Limited subsequent to
the merger are:
A Anthony McLellan
Chairman – Non-executive – resigned 14 October 2013
Elementos Limited
James Calaway
Director – Non-executive – resigned 14 October 2013
Elementos Limited
22
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Remuneration Details of Key Management Personnel
The remuneration of the key management personnel of Rockwell Minerals Limited
prior to the merger, and Elementos Limited subsequent to the merger, was as
follows:
Key Management
Personnel
C Treacy
C Nolan
R Seville (appointed
14 October 2013)
C Dunks (resigned 16
November 2013)
M Adams (resigned 16
November 2013)
R Trevillion (resigned 22
July 2013)
Year Ended 30 June 2014
Short Term Benefits
Salary
and Fees
Bonuses
($)
102,644
67,173
28,602
-
-
-
198,419
($)
-
-
-
-
-
-
-
Equity
Settled
Shares
($)
50,000
-
-
50,000
50,000
50,000
Equity
Settled
Options
($)
42,780
-
-
Post
Employment
Super-
annuation
($)
9,494
6,213
2,646
-
-
-
-
-
-
Total
($)
204,918
73,386
31,248
50,000
50,000
50,000
200,000
42,780
18,353
459,552
Year Ended 30 June 2013
Key Management
Personnel
C Treacy
M Adams
C Dunks
R Trevillion (Appointed 10
October 2012)
Short Term Benefits
Salary
and Fees
Bonuses
($)
63,000
-
-
-
63,000
($)
-
-
-
-
-
Equity
Settled
Shares
($)
Equity
Settled
Options
($)
Post
Employment
Super-
annuation
($)
-
-
-
-
-
-
-
-
-
-
Total
($)
68,670
-
-
-
5,670
-
-
-
5,670
68,670
23
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
The remuneration of key management personnel of Elementos Limited prior to the
merger was as follows:
Year Ended 30 June 2014
Key Management
Personnel
C Nolan
A Anthony McLellan
J Calaway
M McCauley
Short Term Benefits
Salary
and Fees
Bonuses
($)
50,000
72,456
11,534
3,990
137,980
($)
-
-
-
-
-
Equity
Settled
Shares
($)
-
-
-
-
-
Equity
Settled
Options
($)
-
-
-
-
-
Post
Employment
Super-
annuation
($)
4,625
6,630
-
369
11,624
Total
($)
54,625
79,086
11,534
4,359
149,604
Key Management
Personnel
A A McLellan
C Nolan
M D McCauley (resigned
06/08/13)
J D Calaway
A Grahame (redundant
07/02/13)
Year Ended 30 June 2013
Short Term Benefits
Salary
and Fees
Bonuses
($)
119,000
228,475
40,000
40,000
157,840
585,315
($)
-
-
-
-
-
-
Equity
Settled
Shares
($)
Equity
Settled
Options
($)
Post
Employment
Super-
annuation
($)
-
-
-
-
-
-
2,274
2,599
1,137
1,624
2,055
9,689
10,710
21,833
3,600
-
11,297
47,440
Total
($)
131,984
252,907
44,737
41,624
171,192
642,444
Following are employment details of persons who were key management
personnel of the Group during the financial year:
Key Management
Personnel
Position Held
Contract Details
C Treacy
Managing Director
C Nolan
R Seville
Non-executive
Director
Non-executive
Director
No fixed term, 3
months notice to
terminate
No fixed term,
termination as
provided by
Corporations Act
No fixed term,
termination as
provided by
Corporations Act
Proportion of
Remuneration
Equity
Based
Salary and
Wages
45.28%
54.72%
0.00%
100.00%
0.00%
100.00%
24
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Options Granted as Remuneration
Remuneration options granted during the current year are summarised below.
All options were granted for nil consideration. Options granted do not convey
dividend or voting rights and each option converts into one ordinary share in the
Company.
Year Ended 30 June 2014
Key Management
Personnel
Number
Vested
Number
Granted
Grant
Date
Per Option
Total
Exercise
Price
First
Exercise
Date
Last
Exercise
Date
C Treacy
6,200,000
6,200,000
20/3/14
0.69 cents
42,780
3 cents
20/3/14
20/3/18
Value at Grant Date
Terms and Conditions of Grant
No remuneration options were exercised during the year. There have not been any
changes to the terms and conditions of any options since grant date.
Employment Contract of Executives
The contract for service between the Company and the managing director was
executed in October 2013. It does not provide for a fixed term of employment but
provides for annual review of the compensation value.
In the case of serious misconduct, the Company may terminate employment of
any executive at any time.
The terms of appointment of the non-executive directors provide for the payment
of fixed directors’ fees and consulting fees for services provided in addition to their
commitment as directors.
Company Performance, Shareholder Wealth, and Director and Executive
Remuneration
During the financial year, the Company has generated losses as its principal
activity was mineral exploration.
The following table shows the share price of the Company since incorporation in
2011.
Share Price at year end ($)
0.02
0.015
0.079
.225
30 June 2014 30 June 2013 30 June 2012 30 June 2011
As the Company is still in the exploration and development stage, the link between
remuneration, company performance and shareholder wealth is tenuous. Share
prices are subject to the influence of metal prices and market sentiment towards
the sector, and as such, increases and decreases might occur independent of
executive performance and remuneration.
25
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Options Held by Key Management Personnel
Details of options held directly, indirectly or beneficially by key management
personnel are as follows:
Key
Management
Personnel
Balance
at 1 July
2013
Granted as
Compen-
sation
Exercised
Other
Changes
Balance
at 30 June
2014
Total
Vested
30 June
2014
Total
Vested and
Exercised
30 June
2014
-
6,200,000
C Treacy
C Nolan
R Seville
C Dunks
M Adams
R Trevillion
3,300,000
-
-
-
-
A A McLellan
J Calaway
M McCauley
2,700,000
1,500,000
850,000
-
-
-
-
-
-
-
-
8,350,000
6,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,700,000)
(1,500,000)
(850,000)
6,200,000
6,200,000
6,200,000
3,300,000
3,300,000
3,300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,050,000)
9,500,000
9,500,000
9,500,000
Shares Held by Key Management Personnel
Details of shares held directly, indirectly or beneficially by key management
personnel are as follows:
Key
Management
Personnel
Balance
at 1 July
2013
Granted as
Compen-
sation
Received
on Exercise
of Options
Other
Changes
Balance
at 30 June
2014
C Treacy
C Nolan
R Seville
C Dunks
M Adams
R Trevillion
-
-
264,215
783,157
15,700,072
1,281,105
-
-
-
A A McLellan
3,428,976
J Calaway
43,958,674
M McCauley
789,720
-
-
-
-
-
-
64,141,657
2,064,262
This is the end of the Remuneration Report.
-
-
-
-
-
-
-
-
-
-
22,750,004
22,750,004
-
-
-
-
-
(3,428,976)
(43,958,674)
(789,720)
1,047,372
16,981,177
-
-
-
-
-
-
(25,427,366)
40,778,553
26
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Dividends
No dividend has been proposed or paid since the start of the financial year.
Options
At the date of this report, the unissued ordinary shares of the Company under
options are as follows:
Unlisted Options
Grant Date
Expiry Date
23 October 2009
23 October 2015
Exercise
Price
$0.226(i)
7 September 2010
7 September 2015
$0.226 (i)
30 November 2010
29 November 2015
$0.226 (i)
28 March 2011
18 January 2017
$0.326(i)
4 December 2012
3 December 2016
$0.06 (i)
8 February 2013
20 January 2017
$0.06 (i)
20 March 2014
20 March 2018
$0.03 (i)
No. Under Option
4,500,000
550,000
500,000
1,000,000
200,000
2,350,000
9,300,000
(i) The Trust Deeds relating to the grant of these options provides for a reduction in the
option exercise price where the Company undertakes a pro-rata issue of securities.
The reduction in exercise price is calculated in accordance with the formula
provided in the ASX Listing Rules.
There have been no unissued shares or interests under option of any controlled
entity within the economic entity during or since reporting date. Option holders do
not have any rights to participate in any share issue or other interests in the
Company or any other entity.
Subsequent Events
There are no matters or circumstances that have arisen since the end of the 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.
Subsequent to year end, the Group completed a rights issue, raising $1.53 million
(127,502,634 shares).
Subsequent to year end, the Group’s Chilean subsidiary was officially closed down.
There will be no material effect on the financial accounts, as the Group’s Tamaya
project was fully written off in the 2014 year.
Environmental Issues
The Group is subject to significant environmental regulations under the laws of the
Commonwealth of Australia and states of Australia in which the Group operates.
The Group is also subject to environmental regulation in relation to its exploration
activities in Chile and Argentina.
27
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
The directors monitor the Group’s compliance with environmental obligations. The
directors are not aware of any compliance breach arising during the year and up
to the date of this report.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and
accountability, the directors of Elementos Limited support and, where practicable
or appropriate, have adhered to the ASX Principles of Corporate Governance. The
Company’s corporate governance statement is contained within this annual
report.
Indemnifying Directors and Auditors
The Company has entered into a Deed with each of the directors whereby the
Company has agreed to provide certain indemnities to each director to the
extent permitted by the Corporations Act and to use its best endeavours to obtain
and maintain directors’ and officers’ indemnity insurance, subject to such
insurance being available at reasonable commercial terms.
The economic entity has paid premiums to insure each of the directors of the
Company against liabilities for costs and expenses incurred by them in defending
any legal proceedings arising out of their conduct while acting in the capacity of
director of the Company, other than conduct involving a wilful breach of duty in
relation to the Company. The contracts include a prohibition on disclosure of the
premium paid and nature of the liabilities covered under the policy.
The Company has not given an indemnity or entered into an agreement to
indemnify, or paid or agreed to pay insurance premiums in respect of any person
who is or has been an auditor of the Company or a related entity during the year
and up to the date of this report.
Proceedings on Behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the
Company or intervene in any proceedings to which the Company is a party for the
purpose of taking responsibility on behalf of the Company for all or any part of
those proceedings. The Company was not a party to any such proceedings during
the year.
28
ELEMENTOS LIMITED
ABN 49 138 468 756
DIRECTORS’ REPORT
Non-Audit Services
The board of directors is satisfied that the provision of non-audit services during the
year is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The directors are satisfied that the services
disclosed below did not compromise the external auditor’s independence for the
following reasons:
(a) all non-audit services are reviewed and approved by the board of directors to
ensure they do not adversely affect the integrity and objectivity of the auditor;
and
(b) the nature of the services provided does not compromise the general principles
relating to auditor independence in accordance with APES 110: Code of Ethics
for Professional Accountants set by the Accounting Professional and Ethical
Standards Board.
The following fees were paid or payable to the auditors for non-audit services
provided during the financial year:
Paid to BDO Audit Pty Ltd and its related entities
Total paid to the auditors for non-audit services
$ 7,500
$ 7,500
Auditor’s Independence Declaration
lead auditor’s
The
Corporations Act 2001 is attached to this financial report.
independence declaration under section 307C of the
Signed in accordance with a resolution of the board of directors.
C Treacy
Managing Director
Dated this 30th September 2014
Brisbane, Queensland
29
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY ANTHONY WHYTE TO DIRECTORS OF
ELEMENTOS LIMITED
As lead auditor of Elementos Limited for the year ended 30 June 2014, I declare that, to the best of my
knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Elementos Limited and the entities it controlled during the period.
BDO Audit Pty Ltd
A J Whyte
Director
Brisbane, 30 September 2014
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
30
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
ASX Corporate Governance Principles and Recommendations
Elementos Limited (“Elementos” or the “Company”) is committed to implementing
sound corporate governance practices. In order to set appropriate corporate
governance standards, the Company has used the reporting recommendations set
out by the Australian Securities Exchange (ASX) Corporate Governance Council’s
Corporate Governance Principles and Recommendations (ASX Principles and
Recommendations). These have been categorised into eight core principles.
While seeking to implement sound corporate governance practices, the Company
recognises that not all the recommendations are applicable to the Company due
to its current size, the nature of its operations, and its stage of development. Where
the Company has not fully adopted the relevant recommendation, the reasons are
set out below.
PRINCIPLE 1 - LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Pursuant to Principle 1, the Company has established the functions reserved to the
board and established the functions delegated to the managing director. The
board’s role is to govern the Company rather than to manage it, representing the
interests of all shareholders. In governing the Company, the directors are required
to act in the best interests of the Company as a whole. It is the role of the
managing director to manage the Company in accordance with the direction and
delegations of the board and it is the responsibility of the board to oversee the
activities of the managing director in carrying out these delegated duties.
1.1 Companies should establish the functions reserved for the board and those
delegated to the senior executives and disclose those functions.
The Company has developed a Statement of matters reserved for the board which
sets out the role and responsibilities of the board, a summary of which is as follows:
• provide leadership to the Company;
• oversee the development and implementation of an appropriate strategy;
• oversee planning activities including the development and approval of
strategic plans, annual corporate budgets and long-term budgets including
operating budgets, capital expenditure budgets and cash flow forecasts;
•
review the progress and performance of the Company in meeting these
plans and corporate objectives, including reporting the outcome of such
reviews on at least an annual basis;
• ensure corporate accountability to the shareholders, primarily through
effective shareholder communications;
• oversee the control and accountability systems to ensure the Company is
progressing towards the goals set by the board and in line with the
Company’s purpose, the agreed corporate strategy, legislative requirements
and community expectations;
• ensure that robust and effective risk management, compliance and control
systems (including legal compliance) are in place and operating effectively;
• appoint the managing director and review the delegation to, and
performance of, the Company’s senior executives; and
31
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
• make all decisions outside the scope of powers delegated to senior
management.
In general, the board is responsible for, and has the authority to determine, all
matters relating to the policies, practices, management and operations of the
Company. It is required to do all things that may be necessary to be done in order
to carry out the objectives of the Company, which includes supervising the
Company’s framework of control and accountability systems to enable risk to be
assessed and managed.
The board convenes regular meetings with such frequency sufficient to discharge
its responsibilities appropriately.
The board has delegated powers to the managing director necessary to carry out
the business of the Company effectively and efficiently.
Newly appointed directors are provided with formal appointment letters setting out
the key terms and conditions regarding their appointment. Similarly, senior
formal
executives
appointment letters making clear their responsibilities, remuneration, appointment
term, and entitlements on termination.
the managing director) are provided with
(including
1.2 Companies should disclose the process for evaluating the performance of senior
executives
The remuneration structure for executive officers is based on a number of factors,
including length of service, particular experience of the individual concerned, and
overall performance of Elementos.
Senior executives’ performance is reviewed against a range of quantitative and
qualitative measures and past performance of Elementos as well as of the
individual, and market practice with respect to comparable positions are taken into
account.
The non-executive directors are responsible for evaluating regularly the managing
director’s performance. This evaluation is based on the Company’s business
performance and whether strategic objectives are being achieved. The managing
director reviews other executives’ and staff performance. Performance pay
components of executives’ packages are dependent on the outcome of the
evaluations. The results of the managing director’s annual performance reviews of
senior executives and staff are reported to the board for information.
1.3 Reporting on Principle 1
Details of the functions reserved for the board and delegated to the managing
director are outlined in the Company’s Board Governance Protocols, and available
on the Company’s website at www.elementos.com.au.
PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE
Pursuant to Principle 2, the board should be of a size, composition and have the
level of commitment to adequately discharge its responsibilities and duties. To add
value to the Company, given the size and operations of the Company, the board
has been formed so that it has effective composition, size and commitment to
adequately discharge its responsibilities and duties.
The Elementos board is comprised of three directors (as at the date of this Annual
Report) that have wide-ranging experience in the mineral exploration and mining
32
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
sector and a diverse skill set which is detailed in the Directors’ Report in this Annual
Report along with details of the directors, period of office, their qualifications and
experience.
2.1 A majority of the board should be independent directors
As at the date of this report, the board comprises one Executive Director, Mr Calvin
Treacy, who is the Managing Director and is not independent because he is
employed in an executive capacity. There are two Non-executive Directors: Mr C
Nolan and Mr R Seville. The Non-executive Directors meet the criteria for
independence proposed by the ASX Principles and Recommendations.
While determining the independent status of directors, the board has considered
whether the director:
• holds less than five percent of the voting shares of the Company (in
conjunction with their associates), or is an officer of the Company, or
otherwise associated directly with a shareholder of more than five percent of
the voting shares of the Company;
• has within the last three years, been employed in an executive capacity by
the Company or another group member;
• has within the last three years been a principal of a material professional
adviser or a material consultant to the Company or another group member,
or an employee materially associated with the service provided. In this
context, the relationship with the professional adviser or consultant shall be
deemed to be material if payments from the Company exceed 10% of the
Company’s annual expenditure to all professionals and consultants or
exceed 10% of the recipient’s annual revenue for advisory or consultancy
services;
•
is a material supplier or customer of the Company or another group
member, or an officer of or otherwise associated directly or indirectly with a
material supplier or customer. In this context, the relationship with the supplier
or customer shall be deemed to be material if annual payments to or from
that supplier or customer exceed 10% of the annual consolidated gross
revenue of either the Company or that supplier or customer; and
• has a material contractual relationship with the Company or other group
member other than as a director of the Company.
2.2 The chairperson should be an independent director
The Directors consider that the board is not of a size to have a chairperson.
2.3 The roles of the Chairperson and Chief Executive Officer should not be exercised
by the same person
The Directors consider that the board is not of a size to have a chairperson.
2.4 The board should establish a nomination committee
The Directors consider that the Company is not of a size and that its affairs are of
such complexity as to justify the formation of special or separate committees.
33
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
2.5 Companies should disclose the process for evaluating the performance of the
board, its committees and individual directors
The board considers the evaluation of
its directors and senior executive
performance as fundamental to establishing a culture of performance and
accountability. The chairman undertakes a review of the board and individual
director’s performance at least once a year at a meeting of the board. The board
evaluated its performance and the directors’ individual performance in relation to
goals set at the time of the board’s annual strategic planning session.
The chairman provides each non-executive director with confidential feedback on
his or her performance. The board does not endorse the re-appointment of a
director who is not performing the role satisfactorily.
The Directors consider that the Company is not of a size and that its affairs are of
such complexity as to justify the formation of special or separate committees.
Induction and Education
New directors will undergo an induction process in which they will be given a full
briefing on the Company. Where possible, this will include meetings with key
executives, a tour of the premises, an induction package and presentations.
Information conveyed to new directors will include:
• details of the roles and responsibilities of directors;
•
formal policies on director appointment;
• outline of all relevant legal requirements including:
o Corporations Act;
o Tax Office requirements; and
o other major statutory bodies;
• a copy of the Board Governance Protocols;
• guidelines on board processes;
• details of past, recent and likely future developments relating to the board,
including anticipated regulatory changes;
• background information on and contact information for key people in the
organisation including an outline of their roles and capabilities;
• an analysis of the Company including:
o core competencies of the Company;
o an industry background briefing;
o a recent competitor analysis;
o details of past financial performance;
o current financial structure; and
o any other important operating information;
• a synopsis of the current strategic direction of the Company including a
copy of the current strategic plan and annual budget;
• a copy of the Constitution of the Company; and
• Director’s Deed of Indemnity and Right of Access to Documents, if
applicable.
34
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
In order to achieve continuing improvement in board performance, all directors are
encouraged to undergo continual professional development.
Access to information and Independent Professional Advice
Each director has the right of access to all Company information and to the
Company’s executives. Further, the board collectively and each director, subject
to the approval of the Chairman, has the right to seek independent professional
advice from a suitably qualified advisor, at the Company’s expense, to assist them
to carry out their responsibilities. A copy of this advice is to be made available to all
other members of the board.
2.6 Reporting on Principle 2
The board assesses the necessary competencies of the board, reviews board
succession plans, and develops policies and processes for evaluation of the Board
and the nomination, appointment and re-election of directors. These responsibilties,
as set out in the board Governance Protocols, are carried out by the board rather
than a seprate nomination committee.
The Company's Constitution provides that directors are subject to retirement by
rotation, by order of length of appointment. Retiring directors are eligible for re-
election by shareholders at the Annual General Meeting of the Company.
PRINCIPLE 3 - PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Principle 3 is to actively promote ethical and responsible decision-making.
3.1 Companies should establish a code of conduct and disclose the code or a
summary of the code
The Company acknowledges that the community expects businesses to be aware
of their wider social obligations and to promote practices to maintain confidence in
the Company’s integrity. The Elementos board requires high standards of conduct
and responsibility from directors, senior executives and employees at all times. As
part of its commitment to recognising the expectations of their stakeholders, the
Company has established a Code of Ethics and Conduct for directors and
employees within its board Governance Protocols to guide compliance with legal
and other obligations to stakeholders, which include employees, clients, customers,
government authorities, creditors and the community. Directors are required to
adhere to industry standards in conduct and dealings and promote a culture of
honesty, fairness and ethical behaviour into its internal compliance policy and
procedures as well as dealing with stakeholders.
The board also requires the Company’s employees and consultants, to have similar
high standards who are expected to adhere to industry standards in their conduct
and dealings, including trading in securities. The Elementos board has built the
promotion of a culture of honesty, fairness and ethical behaviour into its internal
compliance policy and procedures.
A copy of the Code of Ethics and Conduct is given to contractors and relevant
personnel, including directors and each individual is accountable for such
compliance. Any breach of applicable laws, accepted ethical commercial
practices or other aspects of the Code of Ethics and Conduct will result in
disciplinary action.
35
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
Depending on the severity of the breach, such disciplinary action may include
reprimand, formal warning, demotion or termination of employment/engagement
(as the case may be). Similar disciplinary action may be taken against any
manager who directly approves of such action or has knowledge of the action and
does not take appropriate remedial action.
Breach of applicable laws or regulations may also result in prosecution by the
appropriate authorities.
The Company will not pay, directly or indirectly, any penalties imposed on
personnel as a result of a breach of law or regulation.
Personnel are expected to report any instances of suspected non-compliance and
investigate reports of unethical practices. These instances will be investigated fairly.
Individuals who
faith will be
appropriately protected.
report suspected non-compliance
in good
Company Securities Trading Policy
The Company has a Securities Trading Policy pursuant to ASX Listing Rule 12.9.
According to this policy, all directors, senior executives, employees, contractors
and consultants, whilst in possession of material, non-public, market price sensitive
information, are subject to three restrictions:
•
•
•
they must not deal in securities where they are in possession of inside
information;
they must not cause or procure anyone else to deal in those securities;
and
they must not communicate the information to any person if they know or
ought to know that the other person will use the information, directly or
indirectly, for dealings in securities.
Directors, senior executives, employees, contractors and consultants are required to
advise the chairman and company secretary of their intentions prior to undertaking
any transaction in the Company’s securities. If a director, senior executive,
employee, contractor or consultant is considered to possess material, non-public,
market price sensitive information, they will be precluded from making a security
transaction until after the time of public release of that information.
The Securities Trading Policy is available on the Company’s website.
3.2 Companies should establish a policy concerning diversity and disclose the
policy or a summary of that policy
The Diversity Policy is a commitment by the Company to actively seek to maintain a
diverse workforce to create a workplace that is fair and inclusive, applies fair and
equitable employment practices and provides a working environment that will
allow all employees to reach their full potential.
3.3 Companies should disclose in each Annual Report the measurable objectives
for achieving gender diversity set by the board in accordance with the Diversity
Policy and progress towards achieving them
The Company is of the view that any measurable statistical objectives on a diverse
workforce must be fit for purpose, in line with the Company strategic objectives and
ensure the Company is in compliance with all relevant legislative requirements. As
at the date of this Annual Report, the Company is of the opinion that measurable
36
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
objectives are not appropriate at its present stage of development, however, the
Company will consider implementation of measurable objectives in future.
3.4 Companies should disclose in each Annual Report the proportion of women
employees in the whole organisation, women in senior executive positions and
women on the board
Due to the size and scale of operations of the Company, the board believes that a
longer term gender diversity objective is more appropriate.
As at the date of this Annual Report, 0% of board, 29% of employees and 30% of
senior executives are women.
3.5 Reporting on Principle 3
The Code of Ethics and Conduct is available on the Compoany’s website. The
Securities Trading Policies, incorporated in the Board Governance Protocols
manual, is also available on the Company’s website under Corporate Governance.
PRINCIPLE 4 - SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Principle 4 is to have a structure of review and authorisation in place which
independently verifies and safeguards the integrity of the Company’s financial
reports. The compilation and timely disclosure of accurate and true and fair
information about the Company’s financial position and performance is vital for the
integrity of the market in the Company’s securities.
Elementos has established a structure of reporting and oversight to achieve these
objectives.
4.1 The board should establish an audit committee
The Directors consider that the Company is not of a size and that its affairs are of
such complexity as to justify the formation of special or separate committees.
PRINCIPLE 5 - MAKE TIMELY AND BALANCED DISCLOSURE
Pursuant to Principle, 5 listed companies should make timely and balanced
disclosure to the ASX of all material information concerning the Company.
The Elementos board has adopted a policy and rules to ensure the Company
complies with its obligations under the ASX Listing Rules on continuous disclosure
and ensures accountability at a senior executive level for that compliance. The
board has designated the managing director as the person responsible for
overseeing and co-ordinating disclosure of information to the ASX as well as
communicating with the ASX.
In accordance with the ASX Listing Rules, the Company immediately notifies the
ASX of information:
• concerning the Company that a reasonable person would expect to have a
material effect on the price or value of the Company’s shares; and
•
that would, or would be likely to, influence persons who commonly invest in
securities in deciding whether to acquire or dispose the Company’s shares.
Such matters are advised to the ASX immediately they are identified as being
material. Upon confirmation of receipt from the ASX, the Company posts all
information disclosed in accordance with this policy on its website under the
Investors section and then Announcements.
37
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
Elementos has established Contiuous Disclosure Policies.
5.2 Reporting on Principle 5
A summary of
communications is outlined in the Board Governance Protocols manual.
the Company’s policy
for media contact and external
In addition, the Company’s Continuous Disclosure Policies are incorporated in the
Board Governance Protocols, which is available on the Company’s website under
Corporate Governance.
PRINCIPLE 6 - RESPECT THE RIGHTS OF SHAREHOLDERS
Pursuant to Principle 6, companies should design a communications policy to
promote effective communication with shareholders.
6.1 Communications policy
The Elementos board respects the rights of its shareholders, and to facilitate the
effective exercise of those rights it has adopted a policy on communication with
shareholders, and implemented a set of processes to ensure timely and effective
communication with shareholders and the wider investment community. The
Company is committed to:
• communicating effectively with shareholders through releases to the market
via ASX, the Company’s website, information mailed to shareholders, and
the general meetings of the Company;
• giving shareholders
ready access to balanced and understandable
information about the Company and its corporate proposals;
• making it easy for shareholders to participate in general meetings of the
Company and ask questions regarding the conduct of audit and about the
functioning of the Company generally; and
• making it possible for shareholders to receive communication by electronic
means.
6.2 Reporting on Principle 6
A summary of
for media contact and external
communications is outlined in the Board Governance Protocols manual, available
on the Company’s website under Corporate Governance.
the Company’s policy
PRINCIPLE 7 - RECOGNISE AND MANAGE RISK
Principle 7 provides that companies should establish a sound system of risk oversight
and effective management and internal control.
7.1 Risk Management and Internal Control System
The primary objectives of the risk management and internal control system at the
Company are to ensure:
• all major sources of potential, opportunity for and harm to the Company
treated
identified, analysed and
(both existing and potential) are
appropriately;
• business decisions throughout the Company appropriately balance the risk
and reward trade off;
•
regulatory compliance and integrity in reporting is achieved; and
38
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
•
the board, senior executives and investors understand the risk profile of the
Company.
The system covers:
• operations risk;
•
financial reporting; and
• compliance.
Any matters of significance to the Company or materially relevant to its assets,
liabilities or profits are signed off by the board after discussion and evaluation of
submissions made by the managing director or other party.
Some of the Company's key assets are located outside Australia. Control over the
operations is exercised by the managing director. Specific control measures have
been implemented to manage the distribution of funds in Chile and Argentina in
relation to activities undertaken there.
Identifying Significant Business Risks
The board regularly monitors the operational and financial performance of the
Company's activities. The board monitors and receives advice on areas of
risk
operation and
management. All operational and financial strategies adopted are aimed at
improving the value of the Company. However, the directors recognise that
mineral exploration and evaluation is inherently risky.
risk and considers strategies
for appropriate
financial
7.2 Report on risk management and internal control system
The board has required the managing director to design and implement the risk
management and internal control systems to manage the Company’s material
business risks. As required by the board, the managing director has reported to the
board that the Company’s material business risks have been managed effectively.
The managing director reviews risk in response to changing business conditions and
regulations. Regular reviews of risk and a regular update of the risk profile is
undertaken by the board. This normally occurs in conjunction with the strategic
planning process. The board oversees the internal audit process that analyses and
appraises the adequacy and effectiveness of the Company’s risk management
and internal control system. The internal audit function is independent of the
external auditor.
7.3 Attestation by chief executive officer (or equivalent) and chief financial officer
(or equivalent)
The managing director/CEO and the chief financial officer provide a written
assurance that the risk management system is effective, efficient and accurately
reflected in the Company’s financial statements and that:
•
•
the declaration provided
in accordance with section 295A of the
Corporations Act is founded on a sound system of risk management and
internal control ; and
the Company’s risk management and internal control system is operating
effectively in all material respects in relation to financial reporting risks.
39
ELEMENTOS LIMITED
ABN 49 138 468 756
CORPORATE GOVERNANCE STATEMENT
7.4 Reporting on Principle 7
The Company’s risk management, internal compliance, and control system policies
that have been established to manage material business risks are discussed with
the board, senior executives, management and other employees. The Company
envisages disclosing a summary of these policies on its website in future.
PRINCIPLE 8 - REMUNERATE FAIRLY AND RESPONSIBLY
Principle 8 provides that companies should ensure the level and composition of
remuneration is sufficient and reasonable and that its relationship to corporate and
individual performance is defined. Elementos is committed to remunerating its
directors and officers in a manner that is market competitive, consistent with best
practice, and in the interests of shareholders.
8.1 The board should establish a remuneration committee
The Directors consider that the Company is not of a size and that its affairs are of
such complexity as to justify the formation of special or separate committees.
8.2 Structure of Non-executive and Executive Director Remuneration
The remuneration structure for executives, including the managing director, is
based on a number of factors, including length of service, particular experience of
the
individual concerned, and overall performance of the Company. The
remuneration policy, setting the terms and conditions for the managing director
was developed and approved by non-executive directors. The managing director,
and other senior executives receive a base salary, superannuation, fringe benefits
and equity-based performance remuneration. Superannuation payments consist of
payments in accordance with the provisions of the Superannuation Guarantee
Scheme legislation. Individuals may elect to salary sacrifice part of their salary to
increased payments towards superannuation. No other form of retirement benefit is
paid.
The board’s policy is to remunerate non-executive directors at market rates for
time commitment and
regard
comparable companies, having
responsibilities. The maximum aggregate amount of fees that can be paid to non-
executive directors is subject to approval by shareholders, and is not linked to the
performance of the Company. However, to align director’s
interests with
shareholder interests, directors are encouraged to hold equity interests in the
Company. The maximum aggregate amount of fees that can be paid to non-
executive directors approved by shareholders is currently $250,000.
the
to
The Company’s remuneration policy provides for long-term incentives through
participation in the Company’s Employee and Officers Share Option Plan. Any
equity based remuneration proposed to be granted to the managing director will
only be granted with shareholder approval.
The Company has prohibited the entering into transactions in associated products
which limit the economic risk of participating in unvested entitlements under any
equity-based remuneration.
8.3 Reporting on Principle 8
Details of the Company’s remuneration policy are outlined in the Remuneration
Report section of the Directors’ Report.
40
ELEMENTOS LIMITED
ABN 49 138 468 756
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2014
Note
30 June 2014
30 June 2013
2
3
8
19
4
3
Revenue
Corporate and administrative expenses
Writeoff of exploration assets
Listing expenses
Loss before income tax expense
Income tax expense
Loss for the year attributable to members of
the parent entity
Other comprehensive income
Items that will be reclassified to profit or loss:
Exchange differences on translation of
foreign operations
Other comprehensive income for the year
net of tax
$
$
12,641
3,885
(1,026,188)
(277,473)
(200,636)
(344,781)
-
-
(1,491,656)
(340,896)
-
-
(1,491,656)
(340,896)
(594,929)
(594,929)
-
-
Total comprehensive income attributable to
members of the parent entity
(2,086,585)
(340,896)
Basic and diluted earnings per share (cents
per share)
15
(0.33)
(0.16)
The accompanying notes form part of these financial statements.
41
ELEMENTOS LIMITED
ABN 49 138 468 756
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration and evaluation assets
Property, plant and equipment
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Note 30 June 2014 30 June 2013
$
$
5
6
7
8
9
10
682,689
25,527
14,406
143,733
153,368
18,850
722,622
315,951
6,456,348
36,060
26,047
2,879,676
-
-
6,518,455
2,879,676
7,241,077
3,195,627
Trade and other payables
11
485,315
342,678
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
485,315
342,678
485,315
342,678
6,755,762
2,852,949
12
13
10,924,168
(530,759)
(3,637,647)
4,998,940
-
(2,145,991)
6,755,762
2,852,949
The accompanying notes form part of these financial statements.
42
ELEMENTOS LIMITED
ABN 49 138 468 756
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
Note
Contributed
Equity
Accumulated
Losses
Share-Based
Payments
Reserve
$
$
$
Foreign
Currency
Translation
Reserve
$
Balance at 30 June 2012
2,796,440
(1,805,095)
Loss for the period
Other comprehensive income for the period
Total comprehensive income
-
-
-
(340,896)
-
(340,896)
Shares issued during the period
12
2,202,500
-
Balance at 30 June 2013
4,998,940
(2,145,991)
Loss for the period
Other comprehensive income for the period
Total comprehensive income
Rockwell shares issued prior to merger
Shares issued due to capital raising
Equity settled compensation
Shares issued other
Transaction costs
Share based payments
Deemed value of notional merger shares issued
13
12
12
12
12
12
19
19
-
-
-
(1,491,656)
-
(1,491,656)
444,500
2,605,800
40,665
52,308
(59,794)
-
2,841,749
-
-
-
-
-
-
-
-
-
-
64,170
-
-
-
-
-
-
-
-
-
-
Total
$
991,345
(340,896)
-
(340,896)
2,202,500
2,852,949
-
-
-
-
-
-
-
(594,929)
(1,491,656)
(594,929)
(594,929)
(2,086,585)
444,500
2,605,800
40,665
52,308
(59,794)
64,170
2,841,749
-
-
-
-
-
-
Balance at 30 June 2014
10,924,168
(3,637,647)
64,170
(594,929)
6,755,762
The accompanying notes form part of these financial statements.
43
ELEMENTOS LIMITED
ABN 49 138 468 756
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Other receipts
Payments to suppliers and employees
Note 30 June 2014
30 June 2013
$
$
11,141
1,500
(1,088,016)
1,591
-
(165,294)
Net cash provided by/(used in) operating activities
14
(1,075,375)
(163,703)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation assets
Cash acquired on acquistion of subsidiary
Purchase of property, plant and equipment
(1,319,395)
149,056
(208)
(499,105)
-
-
Net cash provided by/(used in) investing activities
(1,170,547)
(499,105)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Costs associated with share issues
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash held
Cash at Beginning of Year
Effect of exchange rates on cash holdings in foreign
currencies
2,845,300
(57,394)
2,787,906
541,984
143,733
752,500
-
752,500
89,692
54,041
(3,028)
-
Cash at End of Year
5
682,689
143,733
The accompanying notes form part of these financial statements.
44
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are general purpose financial statements that have been
prepared in accordance with the Corporations Act 2001 , Australian Accounting Standards,
and other authoritative pronouncements of the Australian Accounting Standards Board.
Elementos Limited is a for-profit entity for the purpose of preparing the financial statements.
The financial statements are presented in Australian dollars.
Compliance with Australian Accounting Standards ensures that the financial statements
and notes also comply with International Financial Reporting Standards.
The financial statements are for the economic entity consisting of Elementos Limited and its
Controlled Entities. Elementos Limited is a public company, incorporated and domiciled in
Australia. The financial statements have been prepared on an accruals basis and are
based on historical cost modified by the measurement at fair value of selected non-current
assets, financial assets and liabilities. The financial report was authorised for issue on 30
September 2014 by the directors of the Company.
Separate financial statements for Elementos Limited as an individual entity are no longer
presented following a change to the Corporations Act 2001. However, financial information
required for Elementos Limited as an individual entity is included in Note 25.
Material accounting policies adopted in the preparation of these financial statements are
presented below. They have been consistently applied unless otherwise stated.
Going Concern
The financial
statements have been prepared on a going concern basis, which
contemplates the continuity of normal business activities and the realisation of assets and
discharge of liabilities in the ordinary course of business. The Group has not generated
significant revenues from operations. Subsequent to year end, the Group has raised $1.53
million from the issue of 127,502,634 shares. The Group’s ability to continue to adopt the
going concern assumption will depend upon a number of matters including subsequent
successful raising in the future of necessary funding and the successful exploration and
subsequent exploitation of the Group’s tenements. In the absence of these matters being
successful, there exists a material uncertainty that may cast significant doubt on the
Group’s ability to continue as a going concern with the result that the Group may have to
realise its assets and extinguish its liabilities other than in the ordinary course of business, and
at amounts different from those stated in the financial statements. No adjustments for such
circumstances have been made in the financial statements.
45 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Acquisition of Rockwell Minerals Ltd and its Controlled Entities
During the year, Rockwell Minerals Limited's original shareholders obtained a majority share
interest in Elementos Limited after the merger transaction. This transaction did not meet the
definition of a business combination in Australian Accounting Standard AASB3 Business
Combinations . The transaction has therefore been accounted for in the consolidated
financial statements in accordance with Australian Accounting Standard AASB2 Share-
based Payment and has been accounted for as a continuation of the financial statements
of Rockwell Minerals Limited together with a deemed issue of shares, equivalent to the
shares held by the former shareholders of Elementos Limited. The deemed issue of shares is,
in effect, a share-based payment
transaction whereby Rockwell Minerals Limited is
deemed to have received the net assets of Elementos Limited, together with the listing
status of Elementos Limited. The overall accounting effect is very similar to that of a reverse
acquisition in AASB3.
Because the consolidated financial statements represent a continuation of the financial
statements of Rockwell Minerals Limited, the principles and guidance on the preparation
and presentation of the consolidated financial statements in a reverse acquisition set out in
AASB 3 have been applied:
for
- fair value adjustments arising at acquisition were made to Elementos Limited assets and
liabilities, not those of Rockwell Minerals Limited;
- the cost of the acquisition and the amount recognised as issued capital to affect the
transaction is based on the notional amount of shares that Rockwell Minerals Limited would
have needed to issue Elementos Limited shareholders,
them to hold the same
shareholding percentage in Rockwell Minerals Limited as they have in the Group post the
actual transaction;
- accumulated losses and other equity balances in the consolidated financial statements
at acquisition date are those of Rockwell Minerals Limited;
- a share-based payment transaction arises whereby Rockwell Minerals Limited is deemed
to have issued shares in exchange for the net assets of Elementos Limited (together with the
listing status of Elementos Limited). The listing status does not qualify for recognition as an
intangible asset and has therefore been expensed in profit or loss as a listing expense;
- the equity structure in the consolidated financial statements (the number and type of
equity instruments issued) at the date of the acquisition reflects the equity structure of
Elementos Limited, including the equity instruments issued to effect the acquisition;
- the results for the year ended 30 June 2014 comprise the consolidated results for the year
of Rockwell Minerals Limited together with the results of Elementos Limited from the
acquisition date, being 14 October 2013; and
- the comparatives represent the consolidated comparatives of Rockwell Minerals Limited
only.
46 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Principles of Consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries
of Elementos Limited ("Company" or "parent entity") as at 30 June 2014, and the results of all
subsidiaries for the year then ended. Elementos Limited and its subsidiaries together are
referred to in these financial statements as the Group or the economic entity.
The names of the subsidiaries are contained in Note 23. All subsidiaries have a 30 June
financial year end and are accounted for by the parent entity at cost.
Subsidiaries are all entities over which the Group has control. The Group has control over an
entity when the Group is exposed to, or has a right to, variable returns from its involvement
with the entity, and has the ability to use its power to affect those returns.
Subsidiaries are fully consolidated from the date on which control
Group. They are de-consolidated from the date that control ceases.
is transferred to the
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 asset transferred. Accounting policies of
controlled entities have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Changes in ownership interests
When the Group ceases to have control, joint control or significant influence, any retained
interest in the entity is remeasured to its fair value, with the change in the carrying amount
recognised in the profit or loss.
The fair value is the initial carrying amount for the purposes of subsequently accounting for
the retained interest as an associate, joint venture 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 the profit or loss.
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 Managing Director.
47 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Income Tax
The income tax expense/(income)
expense/(income) and deferred tax expense/(income).
for
the year comprises current
income tax
Current income tax expense charged to the profit or loss is the tax payable on taxable
income calculated using applicable income tax rates enacted, or substantially enacted,
as at reporting date. Current tax liabilities/(assets) are therefore measured at the amounts
expected to be paid to/(recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax
liability balances during the period as well unused tax losses.
Current and deferred income tax expense/(income) is charged or credited directly to
equity instead of the profit or loss when the tax relates to items that are credited or
charged directly to equity.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is settled, based on tax rates
enacted or substantively enacted at reporting date. Their measurement also reflects the
manner in which management expects to recover or settle the carrying amount of the
related asset or liability.
Deferred tax assets and liabilities are ascertained based on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets also result where amounts have been fully expensed but
future tax deductions are available. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business combination, where there is
no effect on accounting or taxable profit or loss.
Deferred tax assets relating to temporary differences and unused tax losses are recognised
only to the extent that it is probable that future taxable profit will be available against
which the benefits of the deferred tax asset can be utilised.
The amount of benefits brought to account or which may be realised in the future is based
on the assumption that no adverse change will occur in income taxation legislation and
the anticipation that the economic entity will derive sufficient future assessable income to
enable the benefit to be realised and comply with the conditions of deductibility imposed
by the law.
48 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Business Combinations
The acquisition method of accounting is used to account for business combinations
regardless of whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair value of the assets
transferred, equity instruments issued or liabilities incurred by the acquirer to former owners
of the acquiree and the amount of any non-controlling interest in the acquiree. For each
business combination, the non-controlling interest in the acquiree is measured at either fair
value or at the proportionate share of the acquiree's identifiable net assets. All acquisition
costs are expensed as incurred.
On the acquisition of a business, the consolidated entity assesses the financial assets
acquired and liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic conditions, the consolidated entity's
operating or accounting policies and other pertinent conditions in existence at the
acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures
its previously held equity interest in the acquiree at the acquisition-date fair value and the
difference between the fair value and the previous carrying amount is recognised in profit
or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-
date fair value. Subsequent changes in the fair value of contingent consideration classified
as an asset or liability is recognised in profit or loss. Contingent consideration classified as
equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired,
liabilities
assumed and any non-controlling interest in the acquiree and the fair value of the
consideration transferred and the fair value of any pre-existing investment in the acquiree is
recognised as goodwill. If the consideration transferred and the pre-existing fair value is less
than the fair value of the identifiable net assets acquired, being a bargain purchase to the
acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on
the acquisition-date, but only after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest
if any, the
consideration transferred and the acquirer's previously held equity interest in the acquirer.
in the acquiree,
49 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Exploration and Evaluation Assets
Exploration and evaluation expenditure incurred is accumulated in respect of each
identifiable area of
interest. Such expenditures comprise net direct costs and an
appropriate portion of related overhead expenditure but do not include overheads or
administration expenditure not having a specific nexus with a particular area of interest.
These costs are only carried forward to the extent that they are expected to be recouped
through the successful development of the area or where activities in the area have not
yet
the existence of
economically recoverable reserves and active or significant operations in relation to the
area are continuing.
reached a stage which permits
reasonable assessment of
A regular
appropriateness of continuing to carry forward costs in relation to that area of interest.
review has been undertaken on each area of
interest to determine the
A provision is raised against exploration and evaluation assets where the directors are of
the opinion that the carried forward net cost may not be recoverable or the right of tenure
in the area lapses. The increase in the provision is charged against the results for the year.
Accumulated costs in relation to an abandoned area are written off in full against profit in
the year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are
amortised over the life of the area according to the rate of depletion of the economically
recoverable reserves.
Restoration Costs
Costs of site restoration are provided over the life of the facility from when exploration
commences and are included in the costs of that stage. Site restoration costs include the
dismantling and removal of mining plant, equipment and building structures, waste
removal, and rehabilitation of the site in accordance with clauses of the exploration and
mining permits. Such costs have been determined using estimates of future costs, current
legal requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted for on a prospective basis. In
determining the costs of site restoration, there is uncertainty regarding the nature and
extent of
the restoration due to community expectations and future legislation.
Accordingly, the costs have been determined on the basis that the restoration will be
completed within one year of abandoning the site.
The economic entity currently has no obligation for any restoration costs in relation to
discontinued operations, nor is it currently liable for any future restoration costs in relation to
current areas of interest. Consequently, no provision for restoration has been deemed
necessary.
50 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Impairment of Assets
At each reporting date, the economic entity reviews the carrying values of its tangible and
intangible assets to determine whether there is any indication that those assets have been
impaired. If such an indication exists, the recoverable amount of the asset, being the
higher of the asset’s fair value less costs to sell and value in use, is compared to the asset's
carrying value. Any excess of the asset's carrying value over its recoverable amount is
expensed to the profit or loss.
Financial Instruments
Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised
when the entity becomes a party to the contractual provisions of the instrument. Trade
date accounting is adopted for financial assets.
instruments are initially measured at fair value plus transactions costs where the
Financial
instrument is not classified as at fair value through profit or loss. Transaction costs related to
instruments classified as at fair value through profit or loss are expensed to profit or loss
immediately.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows
expires or the asset is transferred to another party whereby the entity no longer has any
significant continuing involvement in the risks and benefits associated with the asset.
Financial liabilities are derecognised where the related obligations are either discharged,
cancelled or expire. The difference between the carrying value of the financial
liability
extinguished or transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
Classification and Subsequent Measurement
Financial
effective interest rate method, or cost.
instruments are subsequently measured at fair value, amortised cost using the
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date.
Amortised cost is calculated as:
(a)
recognition;
the amount at which the financial asset or financial
liability is measured at initial
(b) less principal repayments;
(c) plus or minus the cumulative amortisation of the difference,
if any, between the
amount initially recognised and the maturity amount calculated using the effective interest
method; and
(d) less any reduction for impairment.
51 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Financial Instruments (cont)
The effective interest method is used to allocate interest income or interest expense over
the relevant period and is equivalent to the rate that exactly discounts estimated future
receipts (including fees, transaction costs and other premiums or
cash payments or
discounts) through the expected life (or when this cannot be reliably predicted, the
contractual term) of the financial
instrument to the net carrying amount of the financial
liability. Revisions to expected future net cash flows will necessitate an
asset or financial
adjustment to the carrying value with a consequential
recognition of an income or
expense in profit or loss.
The economic entity does not designate any interests in subsidiaries, associates or joint
venture entities as being subject to the requirements of accounting standards specifically
applicable to financial instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and are subsequently measured at
amortised cost.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either
designated as such or that are not classified in any of the other categories. They comprise
investments in the equity of other entities where there is neither a fixed maturity nor fixed or
determinable payments.
Financial Liabilities
Non-derivative financial
measured at amortised cost.
liabilities
(excluding financial guarantees) are subsequently
Impairment
At each reporting date, the economic entity assesses whether there is objective evidence
that a financial
instrument has been impaired. In the case of available-for-sale financial
instruments, a significant or prolonged decline in the value of the instrument is considered
to determine whether an impairment has arisen. Impairment losses are recognised in the
profit or loss.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and
other short-term highly liquid investments with original maturities of less than 3 months.
Issued Capital
Ordinary shares are classified as equity. Transaction costs (net of tax where the deduction
can be utilised) arising on the issue of ordinary shares are recognised in equity as a
reduction of the share proceeds received.
52 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Share Based Payments
The economic entity makes equity-settled share based payments to directors, employees
and other parties for services provided or the acquisition of exploration assets. Where
applicable, the fair value of the equity is measured at grant date and recognised as an
expense over the vesting period, with a corresponding increase to an equity account. The
fair value of shares is ascertained as the market bid price. The fair value of options is
lattice pricing model which incorporates all market vesting
ascertained using a binomial
conditions. Where applicable, the number of shares and options expected to vest is
reviewed and adjusted at each reporting date such that the amount recognised for
services received as consideration for the equity instruments granted shall be based on the
number of equity instruments that eventually vest.
Where the fair value of services rendered by other parties can be reliably determined, this is
used to measure the equity-settled payment.
Revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates
applicable to the financial assets.
Employee Benefits
Short-term employee benefit obligations
Liabilities for wages and salaries,
leave and
accumulating sick leave expected to be settled wholly within 12 months after the end of
the reporting period are recognised in liabilities in respect of employees' services rendered
up to the end of the reporting period and are measured at amounts expected to be paid
when the liabilities are settled.
including non-monetary benefits, annual
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST (or overseas VAT),
except where the amount of GST incurred is not recoverable. In these circumstances the
GST (or overseas VAT) is recognised as part of the cost of acquisition of the asset or as part
of an item of the expense. Receivables and payables in the statement of financial position
are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis except for the GST
component of investing and financing activities which are disclosed as operating cash
flows.
Foreign Currency Transactions and Balances
Functional and presentation currency:
The functional and presentation currency of Elementos Ltd and its Australian subsidiaries is
Australian dollars ($A).
53 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Foreign Currency Transactions and Balances (cont)
Transactions and balances:
Foreign currency transactions are translated into functional currency using the exchange
rates prevailing at the date of the transaction. Foreign currency monetary items are
translated at the year-end exchange rate. Non-monetary items measured at historical cost
continue to be carried at the exchange rate at the date of the transaction. Non-monetary
items measured at fair value are reported at the exchange rate at the date when fair
values were measured.
Exchange differences arising on the translation of monetary items are recognised in the
profit or loss, except where deferred in equity as a qualifying cash flow or net investment
hedge.
Group Companies:
The financial results and position of foreign operations whose functional currency is different
from the economic entity’s presentation currency are translated as follows:
- assets and liabilities are translated at period-end exchange rates prevailing at that
reporting date;
- income and expenses are translated at average exchange rates for the period; and
- retained earnings are translated at the exchange rates prevailing at the date of the
transaction.
Exchange differences arising on translation of foreign operations are recognised in other
comprehensive income.
Earnings Per Share (EPS)
Basic earnings per share is calculated by dividing the loss attributable to equity holders 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 period
adjusted for any bonus elements in ordinary shares issued during the period.
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.
Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgments incorporated into the financial statements
based on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic
data, obtained both externally and within the economic entity.
54 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Critical Accounting Estimates and Judgements (cont)
Key Judgements
Exploration and Evaluation Assets
The economic entity performs regular reviews on each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area of interest.
These reviews are based on detailed surveys and analysis of drilling results performed to
reporting date.
Exploration and evaluation assets at 30 June 2014 were $6,456,348 (2013: $2,879,676).
Acquisition of Elementos Ltd
During the year, Rockwell Minerals Ltd's original shareholders acquired a majority share
interest in Elementos Ltd as part of the merger transaction. For the purpose of accounting
for this transaction, Elementos Ltd was no considered a business as defined in AASB3
Business Combinations. Contributing to this judgement is the fact that at the date of the
merger, proven and probable reserves had not yet been established for the Elementos
tenements, and significant additional expenditure was required to establish the viability of
these tenements.
New and Amended Standards and Interpretations
None of the new standards and amendments to standards that are mandatory for the first
time for the financial year beginning 1 July 2013 affected any of the amounts recognised in
the current period or any period prior and are not likely to affect future periods.
A number of new standards and amendments to the standards are effective for financial
reporting periods beginning and after 1 July 2014 and have not been applied in preparing
these financial statements. None of these are expected to have a significant effect on the
financial statements when they are first applied.
Fair Values
Fair values may be used for financial asset and liability measurement as well as for sundry
disclosures.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. It is based
on the presumption that the transaction takes place either in the principal market for the
asset or liability or, in the absence of a principal market, in the most advantageous market.
The principal or most advantageous market must be accessible to, or by, the Group.
Fair value is measured using the assumptions that market participants would use when
pricing the asset or liability assuming that market participants act in their best economic
interest.
The fair value measurement of a non-financial asset takes into account the market
participant's ability to generate economic benefits by using the asset at its highest and best
use or by selling it to another market participant that would use the asset at its highest and
best use.
In measuring fair value, the Group uses valuation techniques that maximise the use of
observable inputs and minimise the use of unobservable inputs.
55 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 2: REVENUE
Revenue from operating activities:
Interest received from other persons
Other
NOTE 3: EXPENSES
Included in expenses are the following items:
Depreciation
Foreign currency translation loss
Employee benefits expense comprises:
Salaries and wages
Contributions to defined contribution plans
Equity settled options
Annual leave expensed
Less capitalised as exploration assets
30 June 2014
30 June 2013
$
$
11,141
1,500
12,641
8,079
139
388,008
28,711
64,170
10,704
(51,605)
439,988
3,885
-
3,885
-
-
63,000
5,670
-
-
-
68,670
NOTE 4: INCOME TAX EXPENSE
The prima facie tax on the operating loss is reconciled to
income tax expense as follows:
Prima facie tax/(benefit) on loss from ordinary activities before
income tax at 30% (2013: 30%)
(447,496)
(102,269)
Adjust for tax effect of:
Non-deductible amounts
Deferred tax assets not recognised
Income tax expense/(benefit)
32,832
414,664
-
102,269
-
56
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
30 June 2014
$
30 June 2013
$
NOTE 4: INCOME TAX (CONT)
Deferred tax assets and liabilities not recognised, the net benefit of which will only be realised
if the conditions for deductibility set out in Note 1 occur:
Temporary differences
Tax losses (current year COT)
Tax losses (prior year SBT)
298,425
384,507
-
-
2,310,526
598,684
The Group has carried forward tax losses of $8,983,443 in Australia, of which $7,701,754 has
failed the Continuity of Ownership Test (COT), and the Same Business Test (SBT) must be
satisfied in order to utilise these.
NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short term deposits
NOTE 6: TRADE AND OTHER RECEIVABLES
Current:
Other receivables
639,462
43,227
682,689
143,733
-
143,733
25,527
153,368
There are no balances within other receivables that contain assets that are impaired or are
past due.
It is expected these balances will be received when due. There are no balances
with terms that have been renegotiated, but which would otherwise be past due or impaired.
These amounts are non-interest bearing and generally on 30 day terms. No collateral
over receivables.
is held
57
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 7: OTHER CURRENT ASSETS
Current:
Other deposits
Prepayments
30 June 2014
$
30 June 2013
$
790
13,616
14,406
-
18,850
18,850
NOTE 8: EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation expenditure carried forward in
respect of areas of interest are:
Exploration and evaluation phase - at cost
6,456,348
2,879,676
Movement in exploration and evaluation assets:
Opening balance - at cost
Acquisition of tenements
Capitalised exploration expenditure
Exploration and evaluation assets acquired on the merger
Foreign currency translation movement
Exploration and evaluation assets written off
Carrying amount at the end of the year
2,879,676
808,011
891,063
2,750,000
(594,929)
(277,473)
921,886
1,898,685
59,105
-
-
-
6,456,348
2,879,676
Recoverability of the carrying amount of exploration assets is dependent on the successful
development and commercial exploitation of projects, or alternatively, through the sale of the
areas of interest.
Elementos Limited completed a merger transaction during the year with Rockwell Minerals
Limited. As part of this merger, exploration assets with a fair value of $2,750,000 were acquired.
In regards to the Santo Domingo and Cleveland projects, payments have been made in
accordance with the respective agreements for these projects. There has been recent
exploration activity in relation to these projects, and ongoing activity is planned.
The carrying value of exploration assets includes approximately $1.8 million for the Santo
Domingo project in Argentina. The project is still subject to extensive due diligence. The next
project option payment is due in mid-October 2014. The directors will make an assessment on
the project at this time.
The Manantiales and Tamaya projects have been written off in full.
58
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
30 June 2014
$
30 June 2013
$
NOTE 9: PLANT AND EQUIPMENT
Plant and Equipment
At cost
Accumulated depreciation
Total plant and equipment
117,875
(81,815)
36,060
Reconciliation of the carrying amounts for property, plant and equipment is set out below:
Balance at the beginning of year
Additions on merger
Additions during the year
Disposals during the year
Depreciation expense
Foreign currency translation movement
Carrying amount at the end of year
NOTE 10: OTHER NON-CURRENT ASSETS
Security deposit
Tax credits
NOTE 11: TRADE AND OTHER PAYABLES
Current:
Trade payables and accrued expenses
Short term employee benefits
Total payables (unsecured)
The average credit period on purchases of goods and services is 30 days. No interest is
paid on trade payables.
476,813
8,502
485,315
337,008
5,670
342,678
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,524
208
-
(8,079)
(593)
36,060
7,950
18,097
26,047
59
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 12: CONTRIBUTED EQUITY
Fully paid ordinary shares
Balance as at 1 July
Rockwell shares issued prior to merger
26 July 2013
2 August 2013
Reversal of existing shares on merger
Existing Elementos shares on issue
Issue of shares on acquisition of Rockwell Minerals Limited
(refer note 19)
Other share issues:
31 December 2012
31 December 2012
30 June 2013
22 November 2013
22 November 2013
20 March 2014
20 March 2014
11 June 2014
11 June 2014
11 June 2014
11 June 2014
11 June 2014
Balance as at 30 June
Total transaction costs associated with share issues
Net issued capital
2014
2013
No. of Shares
$
70,390,006
4,998,940
No. of Shares
52,170,006
$
2,796,440
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(n)
(k)
(l)
(m)
4,000,000
4,890,000
(79,280,006)
188,638,746
200,000
244,500
-
-
277,480,026
2,841,749
632,507
68,950,000
15,000,000
887,923
48,066,667
29,166,667
120,000
3,395,135
973,199
633,310,870
12,081
1,379,000
300,000
14,278
576,800
350,000
2,400
49,908
14,306
10,983,962
(59,794)
10,924,168
6,020,000
11,200,000
1,000,000
752,500
1,400,000
50,000
70,390,006
4,998,940
-
4,998,940
60
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 12: CONTRIBUTED EQUITY (CONT)
Ordinary shareholders are entitled to participate in dividends and the proceeds on the winding up of the company in proportion to the
number of and amount paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one
vote on a show of hands or by poll. Ordinary shares have no par value.
(a) Issued at 5 cents each, pursuant to directors and executive staff salary sacrifice plan.
(b) Issued at 5 cents each, pursuant to a private placement.
(c) Issued at 12.5 cents each, pursuant to a private placement.
(d) Issued at 12.5 cents each, as payment for a tenement acquisition.
(e) Issued at 5 cents each, pursuant to directors and executive staff salary sacrifice plan
(f) Issued at 1.91 cents each, pursuant to directors and executive staff salary sacrifice plan.
(g) Issued at 2 cents each, pursuant to a private placement.
(h) Issued at 2 cents each, pursuant to a private placement.
(i) Issued at 1.608 cents each, pursuant to directors and executive staff salary sacrifice plan.
(j) Issued at 1.2 cents each, pursuant to a private placement.
(k) Issued at 2.0 cents each, as settlement of placement fees.
(l) Issued at 1.47 cents each, as payment of a tenement option payment.
(m) Issued at 1.47 cents each, pursuant to directors and executive staff salary sacrifice plan.
(n) Issued at 1.2 cents each, issued as payment to acquire an interest in a tenement.
61 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 12: CONTRIBUTED EQUITY (CONT)
Options
Unlisted Share Options
Balance at the beginning of the reporting period
Options acquired as part of the merger
Options issued during the period:
Issued to directors
Issued to staff
Exercised by directors
Exercised by staff
Lapsed by directors
Exercisable at end of year
(a) Issued to directors pursuant to shareholder approval
(b) Issued to staff pursuant to the Employee Share Option Plan
30 June 2013
30 June 2014
No. of Options No. of Options
(a)
(b)
18,400,000
-
9,100,000
6,200,000
3,100,000
-
-
-
18,400,000
-
-
-
-
-
-
-
-
-
Capital Management
Exploration companies such as Elementos Limited are funded almost exclusively by share capital. The Group has no debt. The Group's
capital comprises equity, as disclosed in the statement of financial position.
Management controls the capital of the Group to ensure it can fund its operations and continue as a going concern. Capital
management policy is to fund its exploration activities by way of equity. No dividend will be paid while the Group is in exploration stage.
There are no externally imposed capital requirements.
There have been no changes to the capital management policies during the period.
62
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 13: RESERVES
Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising on translation
of
loss when the
investment is disposed of.
foreign controlled subsidiaries. Amounts are reclassified to profit or
Share-Based Payments Reserve
The share-based payment reserve is used to recognise the fair value of options issued to
employees. This reserve can be reclassified as retained earnings if options lapse.
NOTE 14: CASH FLOW INFORMATION
Reconciliation of Cash Flow from Operations with Loss
after Income Tax:
Profit/(loss) after income tax
Non-cash flows in loss from ordinary activities:
Depreciation
Share based payment expense
Exploration expenditure
Equity settled compensation
Changes in operating assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/Decrease in prepayments and other
assets
(Decrease)/Increase in payables
Cash flows from operations
30 June 2014
$
30 June 2013
$
(1,491,656)
(340,896)
8,079
64,170
277,473
245,269
-
-
-
-
143,292
(158,485)
4,444
-
(326,446)
(1,075,375)
335,678
(163,703)
Refer to Note 19 for information regarding non-cash investing activities. During the year,
$350,000 in shares was issued as part settlement to acquire the remaining 50% interest in the
Cleveland project, and $49,908 in shares was issued as an option payment in relation to the
Santo Domingo project. There were no other non-cash financing and investing activities
during the period.
63
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
30 June 2014
$
30 June 2013
$
NOTE 15: EARNINGS PER SHARE
Net loss used in the calculation of basic and diluted
EPS
(1,491,656)
(340,896)
Weighted average number of ordinary shares
outstanding during the period used in the
calculation of basic EPS
452,331,868
211,982,076
Weighted average number of ordinary shares during the current period has been calculated
using:
(i) the number of ordinary shares outstanding from the beginning of the current period to the
acquisition date computed on the basis of the weighted average number of ordinary shares
of Rockwell Minerals Limited (accounting acquirer) outstanding during the period multiplied
by the exchange ratio of 1 Rockwell Minerals Limited share to 3.5 Elementos Limited shares;
(ii) the number of ordinary shares outstanding from the acquisition date to the end of that
period being the actual number of ordinary shares of Elementos Limited (the accounting
acquiree) outstanding during that period.
The basic earnings per share for the comparative period before the acquisition date
presented in the consolidated financial statements has been calculated using Rockwell
Minerals Limited's historical weighted average number of ordinary shares outstanding
multiplied by the exchange ratio of 1 Rockwell Minerals Limited share to 3.5 Elementos
Limited shares.
Options are considered potential ordinary shares. Options issued are not presently dilutive
and were not included in the determination of diluted earnings per share for the period.
NOTE 16: COMMITMENTS
(a) Exploration Commitments
The economic entity must meet minimum expenditure commitments in relation to option
agreements over exploration tenements and to maintain those tenements in good standing.
The following commitments exist at reporting date but have not been brought to account. If
the relevant option to acquire a mineral
is relinquished the expenditure
commitment also ceases.
tenement
Not later than 1 year
Later than 1 year but not later than 5 years
Total commitment
1,443,579
1,921,057
3,364,636
-
750,000
750,000
64
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 16: COMMITMENTS (CONT)
(b) Operating Lease Commitments
The operating leases consist of premises and
equipment leases.
Not later than 1 year
Later than 1 year but not later than 5 years
Total commitment
NOTE 17: CONTINGENT LIABILITIES
30 June 2014
$
30 June 2013
$
15,732
-
15,732
-
-
-
There were no contingent liabilities at the end of the reporting period.
NOTE 18: RELATED PARTY TRANSACTIONS
Parent Entity
Elementos Limited is the legal parent and ultimate parent entity of the Group, owning 100%
of all subsidiaries at 30 June 2014.
Subsidiary
Interest in subsidiaries are disclosed in Note 23.
Key Management Personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
NOTE 19: SHARE-BASED PAYMENTS
Merger
198,419
18,353
-
242,780
459,552
63,000
-
-
-
63,000
On 14 October 2013, Elementos Limited completed a merger transaction with Rockwell
Minerals Limited to acquire 100% of the issued capital through an off-market takeover offer.
Under the takeover offer, each Rockwell shareholder was offered 3.5 Elementos shares for
shareholders becoming the controlling
each Rockwell
shareholders of Elementos.
resulting in Rockwell
share,
Consequently, this transaction was accounted for as discussed in Note 1.
65
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 19: SHARE-BASED PAYMENTS (CONT)
The value of the transaction is as follows:
Assets and liabilities acquired
Cash and cash equivalents
Trade and other receivables
Other current assets
Property, plant and equipment
Exploration and evaluation assets
Trade and other payables
Fair value of notional shares that Rockwell Minerals Limited
issued to effect the transaction
Listing expense
149,056
37,907
3,591
44,524
2,750,000
(343,965)
2,641,113
2,841,749
200,636
The fair value of the shares was assessed on the basis of the fair value of the net assets
acquired and Elementos Limited's listing status.
Director and Employee Share-based Payments
issued to employees under employee share
Share based payment expense recognised during the year:
Options
option plan
Options issued to directors under director share option
plan
30 June 2014
$
30 June 2013
$
21,390
42,780
64,170
-
-
-
(a)
The following share-based payment arrangements existed at 30 June 2014:
(i) On 20 March 2014, 6,200,000 share options were issued to Calvin Treacy under the
Elementos Limited Directors and Officers Share Option Plan, to take up ordinary shares at an
exercise price of 3 cents. The options vested immediately and are exercisable on or before
20 March 2018. The options hold no voting or dividend rights and are not transferable.
(ii) On 20 March 2014, 3,100,000 share options were issued to staff under the Elementos
Limited Directors and Officers Share Option Plan, to take up ordinary shares at an exercise
price of 3 cents. The options vested immediately and are exercisable on or before 20 March
2018. The options hold no voting or dividend rights and are not transferable.
66
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 19: SHARE BASED PAYMENTS (CONT)
(b)
All options granted are over ordinary shares in Elementos Limited, which confer a right of one ordinary share per
option. The options hold no voting or dividend rights and are not transferrable. These options are summarised as:
2014
2013
Outstanding at the beginning of the year
Acquired as part of the merger
Granted
Forfeited
Exercised
Expired
Outstanding at year-end
Exercisable and vested at year-end
Number of
Options
No.
-
11,450,000
9,300,000
(850,000)
-
(1,500,000)
18,400,000
17,400,000
Weighted
Average
Exercise Price
$
Number of
Options
No.
Weighted
Average
Exercise Price
$
-
0.211
-
-
-
-
0.211
0.231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
There are no options subject to escrow at the end of the year.
The weighted average fair value of options granted in the year was 0.69 cents (2013: $nil). The fair values of options
were calculated using a binomial lattice pricing model. Volatility was based on historical share price as it is assumed
this is indicative of future movements.
No options were exercised during the year (2013: nil). The weighted average of the remaining contractual life of share
options outstanding at 30 June 2014 was 3.75 years (2013: nil).
67
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 19: SHARE BASED PAYMENTS (CONT)
The inputs used for the option pricing model for director and employee options granted during the year
ended 30 June 2014 were:
Number of options granted
Date of grant and exercise of options
Option expiry date
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate
Fair value at grant date
No options were granted during the year ended 30 June 2013.
NOTE 20: AUDITORS' REMUNERATION
Remuneration of the auditor of the parent entity:
BDO Audit Pty Ltd and its related entities
- auditing or reviewing the financial reports
- independent experts report and associated advice
Director
Options
6,200,000
Staff Options
3,100,000
20 March 2014 20 March 2014
20 March 2018 20 March 2018
1.80 cents
3.00 cents
64%
4 years
nil
4.25%
0.69 cents
1.80 cents
3.00 cents
64%
4 years
nil
4.25%
0.69 cents
30 June 2014
$
30 June 2013
$
22,136
7,500
29,636
12,010
-
12,010
68
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 21: FINANCIAL RISK MANAGEMENT
(a) Financial Risk Management Policies
The Elementos Group's financial
payables. The main purpose of these financial
operations.
instruments comprises cash balances,
receivables and
instruments is to provide finance for Group
Treasury Risk Management
Key executives of the Company meet on a regular basis to analyse exposure and to
evaluate treasury management strategies in the context of the most recent economic
conditions and forecasts.
The board of directors has overall responsibility for the establishment and oversight of the
Group's risk management framework. Management is responsible for developing and
monitoring the risk management policies and reports to the board.
Financial Risks
The main risks the Group is exposed to through its financial instruments are interest rate risk,
foreign currency risk, credit risk and liquidity risk. These risks are managed through monitoring
of forecast cash flows, interest rates, economic conditions and ensuring adequate funds are
available.
Interest Rate Risk
The economic entity's exposure to interest rate risk, which is the risk that a financial
instrument's cash flows or fair value will fluctuate as a result of changes in market interest
rates, arises in relation to the economic entity's bank balances.
This risk is managed through the use of variable rate bank accounts.
Liquidity Risk
Liquidity risk is the risk that the economic entity will not be able meet its financial obligations
as they fall due. This risk is managed by ensuring, to the extent possible, that there is sufficient
liquidity to meet liabilities when due, without incurring unacceptable losses or risking damage
to the economic entity's reputation.
The economic entity's activities are funded from equity sources.
Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security,
at balance date to recognised financial assets, is their carrying amount, net of any provisions
for impairment of those assets, as disclosed in the statement of financial position and notes to
the financial statements.
Credit risk arises from exposures to deposits with financial institutions and sundry receivables.
Credit risk is managed and reviewed regularly by key executives. The key executives monitor
credit risk by actively assessing the rating quality and liquidity of counter parties:
- only banks and financial institutions with an ‘A’ rating are utilised; and
- all other entities are rated for credit worthiness taking into account their size, market
position and financial standing.
69 ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 21: FINANCIAL RISK MANAGEMENT (CONT)
At 30 June 2014, there was no concentration of credit risk, other than bank balances and on
geographical basis with most financial assets in Australia (2013: nil).
Foreign Currency Risk
The economic entity is exposed to fluctuations in foreign currencies arising from the purchase
of goods and services in currencies other than the relevant entity's functional currency.
Financial assets and liabilities exist for the economic entity's Argentine operations, and thus
there is exposure to the Argentine Peso. As this risk is minor, it is not hedged. At reporting date,
the net foreign currency risk (stated in $AUD) was $3,014 (2013: $nil).
Financial assets and liabilities exist for the economic entity's Chilean operations, and thus
there is exposure to the Chilean Peso. As this risk is minor, it is not hedged. At reporting date,
the net foreign currency risk (stated in $AUD) was $358 (2013: $nil).
(b) Financial Instrument Composition and Contractual Maturity Analysis
Financial assets:
Within 6 months
- cash & cash equivalents (i)
- receivables (ii)
Financial liabilities:
Within 6 months
- payables (ii)
30 June 2014 30 June 2013
$
$
682,689
25,527
708,216
143,733
153,368
297,101
(485,315)
(342,678)
(i) Floating interest rates, with weighted average effective interest rate 0.32%, with an average maturity of 5 days.
(ii) Non-interest bearing. The contractual cash flows do not differ to the carrying amount.
(c) Net Fair Values
Fair values of financial assets and financial liabilities are materially in line with carrying values.
(d) Sensitivity Analysis
The Company has performed sensitivity analysis relating to its exposure to interest rate risk. At
year end, the effect on profit and equity as a result of a 1% change in the interest rate, with
all other variables remaining constant would be +/- $6,821 (2013: $1,473).
The Group has performed sensitivity analysis relating to its exposure to foreign exchange risk.
At year end, the effect on profit and equity as a result of a 10% change in the Argentine
Peso, with all other variables remaining constant would be +/-$9,602 (2013: $Nil). The effect
on profit and equity as a result of a 10% change in the Chilean Peso, with all other variables
remaining constant would be +/-$462 (2013: $Nil).
70
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 22: SEGMENT REPORTING
Description of Segments
Operating segments have been determined on the basis of reports reviewed by the chief operating
decision maker. The Managing Director is considered to be the chief operating decision maker of the
Group. The Managing Director assesses and reviews activities based on each area of interest. Each
area of interest is aggregated on a geographic basis to form a reportable segment. The Group's
exploration activities in each area of interest are primarily centered around tin, copper and gold. The
Group's reportable segments are Australia, Chile and Argentina.
Information provided to the Managing Director
Segment information provided to the Managing Director for the year ended 30 June 2014 is as
follows:
2014
Depreciation
Write back/(off) of exploration assets
EBITDA
Segment Assets and Liabilities
Segment assets
Segment liabilities
Additions to capitalised exploration
expenditure
Australia
$
Chile
$
Argentina
$
Total
$
(6,656)
57,919
-
-
(1,423)
-
(8,079)
57,919
(733,416)
(11,978)
(436,342)
(1,181,736)
2,281,808
(412,254)
13,187
(6,638)
1,792,868
4,087,863
(21,127)
(440,019)
1,585,205
-
2,863,869
4,449,074
For the year ended 30 June 2013, the Group was considered to only have one segment.
71
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 22: SEGMENT REPORTING (CONT)
Segment profit or loss before tax
Interest received from other persons
Corporate and other expenses
Profit or loss before tax
30 June 2014
$
(1,181,736)
1,551
(311,471)
(1,491,656)
Segment assets excludes corporate assets. Segment assets reconciles to total assets as
follows:
Segment assets
Cash
Plant and equipment
Other corporate assets
Total assets
30 June 2014
$
4,087,863
660,999
35,121
2,457,094
7,241,077
Segment liabilities excludes corporate liabilities. Segment liabilities reconciles to total
liabilities as follows:
Segment liabilities
Trade and other payables
Total liabilities
30 June 2014
$
(440,019)
(45,296)
(485,315)
NOTE 23: SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of
the following wholly-owned subisdiaires in accordance with the accounting policy
described in Note 1:
Country of
incorporation
Ownership interest
2014
2013
Rockwell Minerals Limited
Rockwell Minerals (Tasmania) Pty Ltd
Element Minerals Australia Pty Ltd
Elementos Minerales S.A.
Elementos Chile Limitda
Australia
Australia
Australia
Argentina
Chile
100%
100%
100%
100%
100%
100%
100%
-
-
-
72
ELEMENTOS LIMITED
ABN 49 138 468 756
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 24: SUBSEQUENT EVENTS
Subsequent to year end, the Group completed a rights issue, raising $1.53 million (127,502,634 shares).
Subsequent to year end, the Group’s Chilean subsidiary was officially closed down. There will be no
material effect on the financial accounts, as the Group’s Tamaya project was fully written off in the
2014 year.
NOTE 25: PARENT ENTITY INFORMATION
The following information relates to the parent entity, Elementos Limited at 30 June 2014. This
information has been prepared using consistent accounting policies as presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Reserves
Accumulated losses
Total equity
Loss for the period
Other comprehensive income for the period
Total comprehensive income for the period
30 June 2014
$
684,820
17,098,985
17,783,805
106,183
-
106,183
26,819,699
1,073,392
(10,215,469)
17,677,622
(3,349,071)
-
(3,349,071)
30 June 2013
$
373,233
6,095,505
6,468,738
287,949
-
287,949
18,250,596
1,009,222
(13,079,029)
6,180,789
(8,273,952)
-
(8,273,952)
The Company has no contingent liabilities, nor has it entered into any guarantees in relation to the
debts of its subsidiaries (2013: nil).
The Company has not entered into any contractual commitments for the acquisition of property,
plant and equipment (2013: nil).
The Company and its Australian 100% owned controlled entities have formed a tax consolidated
group.
Members of the Group entered into a tax sharing arrangement. The agreement provides for the
allocation of income tax liabilities between the entities in proportion to their contribution to the
Group's taxable income. The head entity of the tax consolidated Group is Elementos Ltd.
NOTE 26: COMPANY DETAILS
The registered office and principal place of business is:
Level 8, 26 Wharf Street
Brisbane, Queensland, 4000 Australia
73
74 Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR’S REPORT
To the members of Elementos Limited
Report on the Financial Report
We have audited the accompanying financial report of Elementos Limited, which comprises the
consolidated statement of financial position as at 30 June 2014, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial
Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of Elementos Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
75
Opinion
In our opinion:
(a) the financial report of Elementos Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Emphasis of matter
Without modifying our opinion, we draw attention to Note 1 in the financial report, which indicates
that the ability of the consolidated entity to continue as a going concern is dependent upon the future
successful raising of necessary funding through equity, successful exploration and subsequent
exploitation of the consolidated entity’s tenements, and/or sale of non-core assets. These conditions,
along with other matters as set out in Note 1, indicate the existence of a material uncertainty that
may cast significant doubt about the consolidated entity’s ability to continue as a going concern and
therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the
normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2014. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Elementos Limited for the year ended 30 June 2014
complies with section 300A of the Corporations Act 2001.
BDO Audit Pty Ltd
A J Whyte
Director
Brisbane, 30 September 2014
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
76
ELEMENTOS LIMITED
ABN 49 138 468 756
ASX INFORMATION
Following is additional information required by the Australian Securities Exchange
Limited and not disclosed elsewhere in this report.
1.
Equity:
The following information is provided as at 13 October 2014
Shareholding
Distribution of Shareholders Number
Category Number
(Size of Holding)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Ordinary Shares
(Number)
54
86
93
327
332
892
Shares Held
(Number)
10,674
266,032
764,554
13,580,084
745,595,294
760,216,638
The number of shareholdings held in less than marketable parcels is 46.
Twenty Largest Holders - Ordinary Shares:
Shareholder
BOURSE SECURITIES PTY LTD
1 MR ANDREW CARLYLE GREIG
2
3 ANDES INVESTORS LLC
4
5 MR MICHAEL DAVID ADAMS & MRS CAROL ADAMS
6
J P MORGAN NOMINEES AUSTRALIA LIMITED
SEAFOUR INVESTMENTS PTY LIMITED
1514341 ONTARIO INC
7
8 WILLIAM RICHARDS GOODALL
9 MR PHILLIP GERRARD BERRY
10 CHRISTOPHER JOHN STAPLES & ANNA CLAIRE STAPLES
11
THE WELL BENEATH PTY LIMITED
12 RICHARD SEVILLE & ASSOCIATES PTY LTD
LEET INVESTMENTS PTY LIMITED
13
14 MR JOHN DOUGLAS JEFFERY & MRS ELSPETH LOUISE
JEFFERY
15 BELMONT PARK INVESTMENT PTY LTD
16 MR RICHARD PHILLIP SEVILLE
17 CALVIN PATRICK TREACY
18 MR NEIL FRANCES STUART
19 MR TIMOTHY NEWTON
20 KRAM NOMINEES PTY LTD
Number of
Shares Held
164,000,001
% of Total
Issued Capital
21.573
68,366,667
56,826,208
44,032,138
22,890,004
17,450,004
17,200,000
15,750,004
15,000,000
14,350,004
12,250,004
11,340,087
8,975,732
8,250,000
7,615,386
7,500,000
7,000,000
6,728,561
5,600,000
4,872,365
8.993
7.475
5.792
3.011
2.295
2.263
2.072
1.973
1.888
1.611
1.492
1.181
1.085
1.002
0.987
0.921
0.885
0.737
0.641
77
ELEMENTOS LIMITED
ABN 49 138 468 756
ASX INFORMATION
The substantial shareholders listed in the Company’s register as at 13 October 2014
are:
Shareholder
MR ANDREW CARLYLE GREIG
BOURSE SECURITIES PTY LTD
ANDES INVESTORS LLC
Number of
Shares Held
164,000,001
68,366,667
56,826,208
Unlisted Equity Securities
The following unlisted securities were on issue as at 13 October 2014.
Security
Number
No. of Holders
Options exercisable at 22.6 cents on
or before 23 October 2015
4,500,000
Options exercisable at 22.6 cents on
or before 7 September 2015
Options exercisable at 22.6 cents on
or before 30 November 2015
550,000
500,000
Options exercisable at 32.6 cents on
or before 18 January 2017
1,000,000
Options exercisable at 6 cents on or
before 3 December 2016
Options exercisable at 6 cents on or
before 20 January 2017
Options exercisable at 3 cents on or
before 20 March 2018
200,000
2,350,000
9,300,000
2
1
1
1
1
4
2
Voting Rights
Each ordinary share is entitled to one vote when a poll is called. Otherwise each
member present at a meeting has one vote on a show of hands.
There are no voting rights attaching to either the listed or unlisted Options, but
voting rights as detailed above will attach to the ordinary shares issued when the
Options are exercised.
2.
Registers of securities are held at the following address:
Boardroom Pty Ltd
Level 7
207 Kent Street
Sydney NSW 2000 Australia
78
ELEMENTOS LIMITED
ABN 49 138 468 756
ASX INFORMATION
3.
Stock Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all
Member Exchanges of the Australian Stock Exchange Limited, other than those
classified as restricted securities and detailed below.
4.
Restricted Securities
The Company has no restricted securities.
5.
Use of Cash and Convertible assets
During the year, the Company has used cash and assets readily convertible to
cash in a manner consistent with its business activities. The Company is involved in
an advanced stage tin-copper and tungsten project in Tasmania, as well as
mineral exploration in Australia and Argentina.
79
ELEMENTOS LIMITED
ABN 49 138 468 756
ASX INFORMATION
6.
Schedule of Tenements
Tenement Name
Cleveland
Millenium
Selwyn South
Santo Domingo
Tenement
Number
EL7/2005
EL9/2006
EL15/2011
ML 2512
ML 2761
ML 2762
ML 7506
ML 7507
EPM 18402
EPM 18773
EPM 18793
EPM 18982
EPM 19014
EPM 19036
EPM 19371
EPM 19375
EPM 19426
1124-493-G-07
1124-094-G-09
1124-454-G-09
1124-643-G-10
1124-309-G-12
1124-308-G-12
1124-149-G-14
1124-148-G-14
1124-350-G-14
1124-351-G-14
1124-494-G-07
1124-495-G-07
1124-496-G-07
1124-497-G-07
1124-499-G-07
1124-500-G-07
1124-265-G-08
1124-633-G-10
1124-022-G-11
1124-131-O-09
1124-132-O-09
Area
(Hectares)
Elementos
Interest
1798
4195
3358
4
20
16
50
45
5146
3859
2251
4184
6111
3216
3860
6433
643
497
511
500
1940
1500
200
1995
1499
340
1269
900
1338
900
900
900
900
2616
1179
1500
4953
9203
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nil - earning
Nil - earning
Nil - earning
Nil - earning
Nil – earning
Nil – earning
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Nil – earning(i)
Location of
Tenements
Tasmania
Tasmania
Tasmania
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
Argentina
(i) Tenements/Cateos in process of being granted/transferred
80
Level 8
26 Wharf Street
Brisbane, QLD, Australia
Tel: +617 3221 7770
Fax: +617 3221 7773
ASX: ELT
For further information please email:
admin@elementos.com.au
www.elementos.com.au