Empire Resources Limited
Annual Report 2020

Plain-text annual report

EMPIRE RESOURCES LIMITED OPERATIONS REVIEW EMPIRE RESOURCES LIMITED ABN 32 092 471 513 Annual Report 30 June 2020 EMPIRE RESOURCES LIMITED Corporate Directory Directors Company Secretary Registered Office Auditor Share Registry : : : : : Michael Ruane Sean Richardson Jeremy Atkinson Simon Storm Registered Office and Principal Place of Business 159 Stirling Highway Nedlands WA 6009 Telephone: (08) 9386 4699 Email info@resourcesempire.com.au Website www.resourcesempire.com.au HLB Mann Judd (WA) Partnership Level 4 130 Stirling Street Perth WA 6000 Automic Group Level 2 267 St Georges Terrace Perth WA 6000 Australian Securities Exchange Home Branch: Perth Code: ERL ABN : 32 092 471 513 1 Empire Resources Limited Review of Operations REVIEW OF OPERATIONS Figure 1 : Project Location Map Penny’s Gold Project (WA) The Penny’s Gold Project is located 50km east of Kalgoorlie, Western Australia within the north-northwest trending Gindalbie greenstone belt consisting of a sequence of mafic-ultramafic volcanic rocks with intercalated horizons of felsic volcanic rocks and metasediments. The sequence has been subjected to multiple deformation events resulting in significant folding, pronounced foliation, and a northerly plunging mineral lineation. To the east of the project is the GMQ shear where subsidiary structures are common and locally appear to influence spatial distribution of gold mineralisation, particularly where structures intersect or bifurcate. Outcrop within the project area is poor with the regolith dominated by a deeply dissected laterite weathering profile and the subsequently derived colluvial products. Gold mineralisation at Penny’s occurs within a lower order northwest trending shear that intersects a northerly trending structure. This structure is interpreted to continue to the north through the project area. To the east of this structure and within the project area lie multiple northerly and northwest trending structures interpreted from reprocessed aeromagnetic data. During the June 2019 quarter, the Company engaged an independent geological consultant to complete a comprehensive geological review of the Company’s Penny’s Gold Project. The review included the collection, collation and interpretation of geochemical (surface and drilling), geological mapping and geophysical datasets (aeromagnetic and electromagnetic surveys) from Company and historical sources. Drilling during the year demonstrated the strong potential for the project to host structurally controlled gold mineralisation comparable to the Penny’s Find open pit mine (now excluded from the Project area), where 18,356oz was recovered by Empire from 138,272 tonnes grading 4.47g/t Au between 2017 and 2018. 2 Empire Resources Limited Review of Operations Yuinmery Project (Cu-Au) The Yuinmery Copper-Gold project is located in the Mid-West region of Western Australia and consists of five granted tenements, two mining and three exploration, for a total area of 84.5 km2. The project has a current JORC 2012 Resource of 2.52Mt @ 1.31% Cu, 0.49g/t Au and 1.76g/t Ag using a 0.5% Cu cut-off (refer ASX:ERL announcement “Updated copper-gold Resource Yuinmery Project” 17 May 2016). The Yuinmery project area covers the eastern portion of the Archaean Youanmi greenstone belt with rock types consisting largely of mafic and ultramafic volcanics with altered chloritic felsic and intermediate volcanic units. The volcanic units contain a number of intercalated strongly sulphidic cherty sediments, which are host to Volcanic Massive Sulphide (VMS) copper-gold mineralisation. The project area lies between the Youanmi Shear zone (western boundary) and the Yuinmery Shear zone (eastern boundary) with the southern area covering the southern closure of a northerly plunging syncline. During the June 2019 quarter, Empire commenced a comprehensive geological review of the Yuinmery Project. The review included research of historical exploration activities undertaken at the project since Western Mining Corporation commenced exploration in 1969. A database of 115,179m of historical and Company drilling, and 10,228 geochemical samples have been compiled across the broader project area. The geological review also included the compilation and assessment of several generations of geophysical surveys. The Company has engaged geophysical consultants to assist in the compilation and review of all registered geophysical surveys across the broader project area. The historical data offers a rich collection of information that, when assessed as a collective, will allow the Company to refine existing targets as well as identify new areas for detailed follow up exploration. The Company completed several drilling campaigns at Yuinmery during the year and looks forward to further exploration in the future. Barloweerie Project (Zn-Pb-Ag-Au-Cu) 2 The Company has been granted a 113km exploration licence located approximately 155km west of Cue, WA. The exploration licence covers part of the Barloweerie greenstone belt where historical exploration discovered highly anomalous zinc, lead, silver, gold and copper mineralisation in a volcanogenic massive sulphide (VMS) setting. CORPORATE ACTIVITIES Rights Issue During the December 2019 quarter, the Company conducted a 2:5 Rights Issue which raised $1,227,352, before costs, by the issue of 153,418,999 fully paid shares. An additional 24,550,000 shares were issued in January 2020 as part of a short fall and small scale offering placement, raising $196,400. FYI Resources Limited During the year, the Company sold 1,334,743 shares in FYI Resources Limited (ASX:FYI), realising proceeds of $87,590. Empire’s holding in FYI at the close of the June quarter was nil shares. NTM Gold Ltd During the year the Company took a placement of 46.15M fully paid ordinary shares in NTM Gold Limited (ASX:NTM) by investing $1.5M at $0.0325 per share. At completion, Empire held 8.70% of NTM’s expanded capital. Empire’s investment in NTM followed an extensive review of exploration and investment opportunities in the Eastern Goldfields. Empire believes that there are significant opportunities for junior gold exploration and development companies in the current economic climate and the recent record Australian dollar gold price underpins Empire’s view that some quality junior gold companies are currently undervalued. During the year, the Company sold 261,292 shares in NTM Gold Limited (ASX:NTM), realising proceeds of $22,210. Empire’s holding in NTM at 30 June 2020 was 45,888,708 shares. Dr Ruane has held NTM stock since early 2018 and currently holds 43.76 million shares. This combined with the Company’s holding comprises 13% of NTM’s expanded capital. Dr Ruane was appointed a Director of NTM in April 2020. 3 Empire Resources Limited Review of Operations Loan Facility The investment in NTM was funded from cash reserves and an unsecured loan of $1.5M provided by Empire’s Non- Executive Chairman and major shareholder, Dr Michael Ruane. The key terms and conditions of the loan facility were as follows: Commencement Date: Lender: Term: Interest Rate: Security: Purpose: 11 July 2019. Kesli Chemicals Pty Ltd 12 months 7.5% per annum. Interest accrues daily on outstanding money and will be paid quarterly in arrears. The loan money and interest are unsecured. Board approved payments for working capital, direct exploration and investments. The term was extended indefinitely in July 2020. Project Assessment Empire continued to assess opportunities in the Eastern Goldfields of Western Australia complimentary to its existing portfolio. The Company assessed several prospective projects during the quarter. Legal claim Johannes (Steve) Norregaard commenced an action in the Supreme Court of Western Australia against Empire Resources Ltd and Brimstone Resources Ltd, the joint venture participants in the Penny’s Find project. Both Empire and Brimstone defended the claim which settled in January 2020. Eastern Goldfields Milling Services (EGMS) Empire remains in dispute with Eastern Goldfield Milling Services Pty Ltd regarding unaccounted gold following a toll treatment milling campaign conducted by EGMS at its Burbanks Gold Processing facility in late 2017. The Company is seeking to recover gold to a value in excess of $1 Million. The matter has been referred to Arbitration. COMPETENT PERSON STATEMENTS The information is this report concerning the Mineral Resources for the Just Desserts deposits have been estimated by Mr Peter Ball B.Sc who is a director of DataGeo Geological Consultants and is a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Ball has sufficient experience which is relevant to the styles of mineralization and types of deposit under consideration and qualifies as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Ball consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. 4 Empire Resources Limited Directors’ Report Your Directors submit their report on Empire Resources Limited (the “Company”) and its controlled entity (the “Group”) for the financial year ended 30 June 2020. Directors The Company’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Michael Ruane – Non Executive Chairman BSc, PHD Dr Ruane holds BSc and PhD qualifications in chemistry from UWA and has been involved in the mining and chemical industries for over 35 years. Dr Ruane has been responsible for the listing or development of numerous Public Companies including Metaliko Resources Ltd (merged with Echo Resources Ltd 2017 (ASX: EAR)), lntermin Resources Ltd (ASX: HRZ), Reward Minerals Ltd (ASX: RWD), Haddington Resources Ltd (now Altura Mining Limited (ASX: AJM) and Wedgetail Exploration Ltd (now Millennium Minerals Ltd (ASX: MOY). Company Position Reward Minerals Ltd NTM Gold Ltd Executive Director Director Appointed 02/12/2004 24/04/2020 Sean Richardson – Managing Director MBA, MSc (Curtin) – Appointed 4 July 2019 Mr Richardson is an experienced Minerals Executive, a graduate of the Western Australian School of Mines (WASM) and a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM). Mr Richardson has over 25 years’ operational, consultancy and managerial experience in Australian, North American, African, South-East and Central Asian mineral projects. His experience ranges from exploration through project development to production, having held senior management positions for a number of ASX listed and private exploration, mining and consultancy companies including; Bardoc Gold Limited, North West Nickel and Atlas Iron. Jeremy Atkinson – Non Executive Director BA CPA GradDipAppFin Mr Atkinson is a qualified CPA (Australia), professionally trained in project financial modelling. In the past eight years Mr Atkinson has specialised professionally in the construction of financial models for mining projects in Australia, Africa, Europe and South America and is very conversant with commercial terms and cost parameters associated with mining and processing of a range of mineral commodities including gold. He also holds a degree in modern languages from Oxford University and speaks English, French and German languages fluently. Prior to his involvement in the mining industry Mr Atkinson spent 18 years in senior strategic and operational positions in the development and turnaround of various international manufacturing businesses. David Sargeant - Non-Executive Director - BSc. MAusIMM – Resigned 15 August 2020 Mr Sargeant – who holds a Bachelor of Science degree in economic geology from the University of Sydney – has more than 40 years experience as a geologist, consultant and company director. As such, he has been involved in numerous mineral exploration, ore deposit evaluation and mining development projects and is a member of AusIMM and the Geological Society of Australia. During his career, Mr Sargeant has held a range of senior positions, including that of senior geologist with Newmont Pty Ltd and senior supervisory geologist with Esso Australia Ltd at the time of the Harbour Lights Gold Mine discovery and development. Further, Mr Sargeant was the first chief geologist at Telfer Gold Mine during exploration, development and production at that project. In addition, he was exploration manager for the Adelaide Petroleum NL group of companies, manager of resources development for Sabminco NL and a technical director of Western Reefs Limited during the period in which that company became a successful producer at the Dalgaranga Gold Project. Mr Sargeant has been a director of the following listed company during the past three years. Company Position Appointed FYI Resources Ltd Non-executive Director 30/11/2009 Company Secretary Simon Storm - BCom. BCompt(Hons). CA, FGIA Mr Storm is a Chartered Accountant with more than 30 years of Australian and international experience in the accounting profession and commerce. He commenced his career with Deloitte Haskins & Sells in Africa then London 5 Empire Resources Limited Directors’ Report before joining Price Waterhouse in Perth. During the past 18 years he has held various senior finance and company secretarial roles with the resources, agribusiness, banking, construction, in listed and unlisted entities telecommunications, property development and funds management industries. He was a non-executive Director and Company Secretary of West African Resources Ltd until his retirement in May 2020, CFO and Company Secretary of BlackEarth Minerals Ltd until September 2020 and currently acts as CFO & Company Secretary for two unlisted companies. Principal Activities During the period, the principal activities of the Company consisted of mineral exploration and evaluation of properties in Australia. Dividends No dividends have been paid during the period and no dividends have been recommended by the Directors. Result for the Financial Period Profit from ordinary activities after provision for income tax was $422,038 (2019: Loss $1,323,987). Review of results and operations The operations and results of the Company for the financial year are reviewed below. This review includes information on the financial position of the Company, and its business strategies and prospects for future financial years. Revenue In July 2019, the Company made an investment in NTM Gold Limited (NTM) by investing $1.5 million at 3.25 cents per share for 46.15 million shares. At 30 June 2020, the Company recognised a gain on NTM financial assets of $2,193,431 (2019: $Nil) which represented an increase in the market value of NTM to 8 cents per share. Expenses Interest expense was up to $110,651 (2019: $7,567) due to the 7.5% interest on an unsecured loan of $1.5 million from an entity associated with Dr Michael Ruane. The Company conducted exploration activities at its various exploration projects with expenditure on exploration increasing 436% to $846,643 (2019: $157,379) which was mainly attributable to the drilling program at Yuinmery. During the year, the Company incurred legal fees relating to the EGMS dispute of $190,808 (2019:$69,824) which was included as a care and maintenance expense for the Penny’s Find mine. Operating cash flows Cash outflow from operating activities was $1,787,470 (2019: $2,219,870) due to the reduced care and maintenance mining work at the previously owned Penny’s Find mine. The payments for exploration and evaluation expenditure were increased due to the Yuinmery drilling program. Investing cash flows Cash inflows from investing activities were $119,800 (2019: $800,372) due to the sale of FYI Resources shares and NTM shares for $109,800 (2019: $346,594). In the prior year, the Company received the first payment for the sale of the Penny’s Find mine for $200,000 and on settlement with Brimstone Resources Ltd, the cash acquired was $313,591. Financing cash flows Cash inflows from financing activities were $1,372,415 (2019: $1,304,738) following share placements of $1,372,415 net of share issue costs (2019: $1,304,738). Statement of financial position Current assets Current assets increased by 256% to $4,631,702 (2019:$1,299,466) mainly due to the increase in value of the investment in NTM Gold Ltd shares. Non-current assets Non-current assets decreased by 43% to $47,532 (2019: $82,708) due to the depreciation of plant and equipment. Current liabilities Current liabilities increased by 415% to $1,834,119 (2019: $356,383) due to the $1.5 million loan with an entity associated with Dr Michael Ruane. 6 Empire Resources Limited Directors’ Report Review of Operations Refer pages 2-4 for details. Significant Changes in State of Affairs In the opinion of the Directors, there were no other significant changes in the state of affairs of the Company other than as discussed elsewhere in this Report. Remuneration Report (Audited) This report details the amount and nature of remuneration of each director of the Company and other key management personnel. Remuneration Policy The principles used to determine the nature and amount of remuneration are applied through a remuneration policy which ensures the remuneration package properly reflects the person’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality. The remuneration policy, setting the terms and conditions for the executive Directors has been developed internally by the board and taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. The remuneration policy is to provide a fixed remuneration component. The board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate in aligning Directors’ objectives with shareholder and businesses objectives. The remuneration framework has regard to shareholders’ interests in the following ways: • • Focuses on sustained growth as well as focusing the Directors on key non-financial drivers of value, and Attracts and retains high calibre Directors. The remuneration framework has regard to Directors’ interests in the following ways: • • • • Rewards capability and experience, Reflects competitive reward for contributions to shareholder growth, Provides a clear structure for earning rewards, and Provides recognition for contribution. Non-executive Directors The board policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non-executive Director and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Directors is subject to approval by shareholders at a General Meeting. Fees for Non-executive Directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and may receive options. The Directors have resolved that Non-executive Directors’ fees will be $36,000 per annum for the Chairman and for Directors, inclusive of statutory superannuation contributions. Shareholders have approved aggregate remuneration for all non-executive Directors at an amount of $150,000 per annum at a general meeting on 12 March 2004. Where applicable, superannuation contributions of 9.5% (2019: 9.5%) are paid on these fees as required by law. At the forthcoming AGM in November 2020, shareholder approval will be sought to increase the aggregate fee pool to $250,000 per year. 7 Empire Resources Limited Directors’ Report Share-based compensation Performance Related Share Issue The Managing Director, Sean Richardson was issued with 20 million performance rights in Empire subject to the price of Empire's shares remaining at or above a 20 day VWAP price of 1.5 cents for a period of not less than 20 days and within a period of two years of continuous employment from the date of his engagement in July 2019. The Company has established an option share plan, which is also available to Directors, employees and some consultants, known as the 2010 Empire Resources Option Plan and was approved by shareholders on 25 June 2010. The Empire Resources Option Plan is not currently active insofar as there have been no option issues in the last two years and shareholder renewal, which is required every three years, has not been sought. There were no options issued as share-based compensation to key management personnel during the current financial year or previous financial year. No shares were issued during the year upon the exercise of options. Executive Director The Executive Director provides his services via an employee services agreement. Non- executive Directors do not receive any retirement benefits. Options are not issued as part of remuneration for long term incentives. All remuneration paid to Directors and executives is valued at cost to the Company and expensed. 8 Empire Resources Limited Directors’ Report Compensation of Key Management Personnel The following table discloses the remuneration of the Key Management Personnel (‘KMP’) of the Company. KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise) of the Company. The information in this table is audited. Equity Holdings Equity instrument disclosures relating to Directors and other key management personnel Shareholdings The number of ordinary shares in the Company held during the year by each director and other key management personnel, including their personally related entities or associates, are set out below. 9 Directors' FeesConsulting FeesSalaryPost-employment benefitsShare-based paymentsValue of performance rightsPerformance based % of remunerationTotalOptions$$$$$$%DirectorsNon-ExecutiveDr M Ruane1202036,000- - - - 36,0000%201927,000- - - - 27,0000%Mr J Atkinson1202036,000- - - - 36,0000%201926,806- - - - 26,8060%Mr D Sargeant8202036,000- - - - 36,0000%2019- 142,050- - - 142,0500%Mr L Christensen2,32020- - - - - - 0%201925,000- - - - 25,0000%Mr A Jessup42020- - - - - - 0%2019- 1,700- - - 1,7000%Mr C Banasik5,62020- - - - - - 0%20198,760- - - - 8,7600%Mr B Fraser5,62020- - - - - - 0%201911,232- - - - 11,2320%ExecutiveMr S Richardson72020- - 198,35118,84324,871242,06510%Total Directors2020108,000- 198,35118,84324,871350,0657%201998,798143,750- - - 242,5480%1 Appointed 3 October 20182 Appointed 23 April 20183Resigned 27 November 20184Resigned 17 July 20185 Appointed 17 July 20186Resigned 2 October 20187 Appointed 4 July 20198Resigned 15 August 2020 Empire Resources Limited Directors’ Report All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares or options, have been entered into on an arm’s length basis. Performance rights The number of performance rights issued by the Company during the year and held by each director and other key management personnel, including their personally related entities or associates, are set out below. Mr. Sean Richardson received 20 million performance rights in the Company which vest when the price of the Company’s shares remain at or above a 20 day VWAP price of 1.5 cents for a period of not less than 20 days and within a period of two years of continuous employment from the date of employment. Option holdings There were no options over ordinary shares in the Company held during the reporting period by any director or key management personnel End of Remuneration Report. 10 DirectorsBalance at beginning of yearGranted as remunerationDisposedAcquiredBalance at end of yearMr D Sargeant28,016,668 - - 4,153,332 12,170,000 Dr M Ruane124,204,960 - (200,000)131,857,062 255,862,022 Mr J Atkinson5,266,667 - - 3,331,667 8,598,334 Mr S Richardson1500,000 - - 10,850,000 11,350,000 137,988,295 - (200,000)150,192,061 287,980,356 1 Appointed 4 July 20192 Resigned 15 August 20202020 Shareholdings of Key Management Personnel2020 Performance rights holdings of Key Management PersonnelDirectorsBalance at beginning of yearGranted as remunerationExercisedBalance at end of yearVested and exercisable at 30 June 2020Mr D Sargeant2- - - - - Dr M Ruane- - - - - Mr J Atkinson- - - - - Mr S Richardson1- 20,000,000 - 20,000,000 - - 20,000,000 - 20,000,000 - 1 Appointed 4 July 20192 Resigned 15 August 2020 Empire Resources Limited Directors’ Report Other transactions with Directors, their associates and director related entities are as follows: The above amounts relate to unpaid remuneration. Loans from Directors The company obtained an unsecured loan of $1.5 million with a 12 month term and 7.5% interest from an entity associated with the Non-executive Chairman, Dr Michael Ruane. The Company must repay the loan and interest on the earlier of:     11 July 2020, or on presentation of an Event of Default Notification, or seven days from the date of a successful capital raising in excess of $1.5 million, or seven days from the date on which any bidder for the Company becomes entitled to 50% or more of the Company’s fully paid securities. The term was extended indefinitely in July 2020. Share Options On 18 July 2019, 9 million unlisted options expired. At the date of this report there were no unissued ordinary shares of the Company under option. Directors’ Interests The relevant interest of each Director in the shares and performance rights issued by the Company at the date of this report is as follows: Company Performance Comments on performance are set out in the review of operations. 11 20202019$$Amounts payable at balance date to Key Management Personnel in relation to remunerationKirkdale Holdings Pty Ltd - Mr D Sargeant16,500 156,255 Kesli Chemicals Pty Ltd - Dr M Ruane18,000 27,900 Northshore Capital Advisors Pty Ltd - Mr J Atkinson3,300 3,300 37,800 187,455 Consolidated20202019$$Amounts payable to Directors as unsecured loansKesli Chemicals Pty Ltd - Dr M Ruane1,556,096 - 1,556,096 - Interest expense on unsecured loansKesli Chemicals Pty Ltd - Dr M Ruane109,726 6,267 ConsolidatedDirectorDirectIndirectDirectIndirectDr M Ruane- 256,862,022- - Mr J Atkinson- 10,538,334- - Mr S Richardson- 11,350,00020,000,000- Number of Ordinary SharesNumber of Rights Empire Resources Limited Directors’ Report Likely Developments and Expected Results Disclosure of likely developments in the operations of the Company and the expected results of those operations in future financial years, and any further information, has not been included in this report because, in the reasonable opinion of the Directors to do so would be likely to prejudice the business activities of the Company. Environmental Regulation The Company’s operations were subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities. The Directors are not aware of any breaches during the period covered by this report. Meetings of Directors The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2020 and the number of meetings attended by each director. As at the date of this report the Company has not formed any committees as the Directors consider that at present the size of the Company does not warrant such. Audit, corporate governance, Director nomination and remuneration matters are all handled by the full board. Proceedings on Behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of the proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. Indemnification and Insurance of Directors and Officers Indemnification The Company has agreed to indemnify current Directors and officers and past Directors and officers against all liabilities to another person (other than the Company or a related body corporate), including legal expenses that may arise from their position as Directors and officers of the Company and its controlled entity, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance The Directors have not included details of the amount of the premium paid in respect of the Directors’ and officers’ liability insurance contracts; as such disclosure is prohibited under the terms of the contract. Events subsequent to reporting date On 7 August 2020, the Company issued 108,966,333 shares at 1.2 cents raising $1,307,596. Other than this, no matter or circumstance has arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years. 12 DirectorMeetings attendedMeetings held whilst a DirectorDr Michael Ruane33Mr Jeremy Atkinson33Mr David Sargeant213Mr Sean Richardson1331 Appointed 4 July 20192Resigned 15 August 2020Directors’ Meetings Empire Resources Limited Directors’ Report Non-audit Services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (HLB Mann Judd) for audit and non-audit services provided during the year are set out below. During the period, the following fees were paid or payable for services provided by the auditors of the parent entity HLB Mann Judd, its related practices: Consolidated Year ended 30 June 2020 $ Year ended 30 June 2019 $ Assurance Services HLB Mann Judd (Current Auditor) 1. Audit and review services Audit and review of financial reports and other audit work under the Corporations Act 2001 Total remuneration 29,633 29,633 27,030 27,030 2. Joint Venture Audit services Audit of the Penny’s Find Joint Venture -2018 - 28,000 3. Company Tax Compliance Services 7,000 6,000 Auditors Independence Declaration Section 307C of the Corporations Act 2001 requires the company’s auditors, HLB Mann Judd, to provide the Directors with a written Independence Declaration in relation to their audit of the financial report for the year ended 30 June 2020. This written Auditor’s Independence Declaration is attached to the Independent Auditor’s Report to the members and forms part of this Directors’ Report. Signed in accordance with a resolution of Directors. _________________ Michael Ruane Director Perth, Western Australia 17 September 2020 13 EMPIRE RESOURCES LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 14 Note20202019$$Interest income2,4927,275Net fair value gain on financial assets92,193,431- Other income290,498559,285Interest expense(110,651)(7,567)Depreciation expense(3,517)(13,572)Exploration expense3(846,643)(157,379)Care and maintenance3(194,712)(395,810)Employee benefits expense(125,271)(85,616)Management fee expense- (143,750)Directors' fees expense(108,000)(98,798)Accounting expense(82,061)(88,360)Consultancy expense(87,167)(73,913)Share-based payment20(24,871)- ASX expense(19,976)(23,398)Corporate relations expense(610)(4,382)Insurance expense(19,660)(62,537)Net fair value loss on financial assets9- (500,678)Other expenses (241,244)(234,787)Profit/(loss) before income tax422,038 (1,323,987)Income tax benefit- - Net profit/(loss) for the year422,038 (1,323,987)Other comprehensive income for the year, net of tax- - Total comprehensive income/(loss) for the year422,038 (1,323,987)Basic and diluted earnings gain (loss) per share (cents per share)50.06 (0.24)Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 15 Note20202019ASSETS$$CURRENT ASSETSCash and cash equivalents6598,047 893,302 Trade and other receivables7352,558 316,757 Other financial assets810,000 20,000 Financial assets at fair value through profit or loss93,671,097 69,407 Total Current Assets4,631,702 1,299,466 NON-CURRENT ASSETSPlant and equipment1047,532 82,708 Total Non-Current Assets47,532 82,708 TOTAL ASSETS4,679,234 1,382,174 LIABILITIESCURRENT LIABILITIESTrade and other payables11278,023 356,383 Borrowings121,556,096 - Total Current Liabilities1,834,119 356,383 TOTAL LIABILITIES1,834,119 356,383 NET ASSETS2,845,115 1,025,791 EQUITYIssued capital1324,178,914 22,806,499 Reserves141,762,345 1,737,474 Accumulated losses(23,096,144)(23,518,182)TOTAL EQUITY 2,845,115 1,025,791 Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes 16 Issued Capital Accumulated LossesOption ReservesAsset Revaluation ReserveTotal$$$$$Balance at 1 July 201821,497,202 (22,740,195)1,737,474 546,000 1,040,481 Adjustment to the opening balance of accumulated losses on initial application of AASB 9 in relation to equity investments- 546,000 - (546,000)- 21,497,202 (22,194,195)1,737,474 - 1,040,481 Loss for the period- (1,323,987)- - (1,323,987)Other comprehensive income- - - - - Total comprehensive loss for the period- (1,323,987)- - (1,323,987)Shares issued during the period1,386,132 - - - 1,386,132 Equity issue expenses(76,835)- - - (76,835)Balance at 30 June 201922,806,499 (23,518,182)1,737,474 - 1,025,791 Balance at 1 July 201922,806,499 (23,518,182)1,737,474 - 1,025,791 Profit for the period- 422,038 - - 422,038 Other comprehensive income- - - - - Total comprehensive profit for the period- 422,038 - - 422,038 Shares issued during the period1,423,752 - - - 1,423,752 Equity issue expenses(51,337)- - - (51,337)Share based payment- - 24,871 - 24,871 Balance at 30 June 202024,178,914 (23,096,144)1,762,345 - 2,845,115 Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 17 Note20202019$$Cash Flows from Operating ActivitiesReceipts from customers29,934 1,200 Payments for exploration and evaluation expenditure(747,409)(187,671)Payments for suspension of operations(14,690)(400,129)Payments for surface mining expenditure(188,422)(259,263)Payments to employees and suppliers(815,349)(1,380,651)Interest received3,166 6,601 Other- 7,466 Interest paid(54,700)(7,423)Net cash outflow from operating activities6 (i)(1,787,470)(2,219,870)Cash Flows from Investing ActivitiesPurchase of plant and equipment- (63,813)Proceeds from sale of plant and equpment- 4,000 Cash acquired on acquisition of 40% share of Penny's Find JV- 313,591 Proceeds from sale of financial assets109,800 346,594 Proceeds from realisation of financial assets10,000 - Proceeds from sale of Tenement- 200,000 Net cash inflow from investing activities119,800 800,372 Cash Flows from Financing ActivitiesProceeds from issue of equity securities1,423,752 1,335,982 Equity securities issue costs(51,337)(31,244)Proceeds from borrowings- 500,000 Repayments of borrowings- (500,000)Net cash inflow from financing activities1,372,415 1,304,738 Net decrease in cash held(295,255)(114,760)Cash at the beginning of the period893,302 1,008,062 Cash at the end of the period6 598,047 893,302 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies The financial report covers the consolidated entity of Empire Resources Limited and its controlled entity (“Group”) and Empire as an individual parent entity (“Empire”). Empire is a listed public company limited by shares, incorporated and domiciled in Australia. The following is a summary of the material accounting policies adopted by the Group in the preparation of the financial report. The accounting policies have been consistently applied by the controlled entity and are consistent with those in the 30 June 2019 financial report, unless otherwise stated. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. It has been prepared on the historical cost basis. The financial report is presented in Australian dollars. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial report, comprising the financial statements and notes thereto, complies with the International Financial Reporting Standards (IFRS). For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity, and is presented in Australian dollars. The financial report was authorised for issue by the Board on 17 September 2020. (b) Basis of Consolidation A controlled entity is any entity over which Empire Resources Limited has the power to control the financial and operating policies of the entity so as to obtain benefits from its activities. Details of the controlled entity are contained in Note 9(b) to the financial statements. The controlled entity has a 30 June financial year end. All inter-company balances and transactions between entities in the consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Where a controlled entity enters or leaves the consolidated Group during the year, their operating results are included/excluded from the date control was obtained or until the date control ceased. Business Combinations Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method. The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. (c) Plant and Equipment Plant and equipment is measured on the cost basis less depreciation and impairment losses. The carrying amount of plant & equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from those assets. Recoverable amount is assessed on the basis of the expected net cash flows which will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation is calculated on the straight line basis and is brought to account over the estimated useful lives of all plant and equipment from the time the asset is held ready for use. The depreciation rates used are: Office furniture Office computer equipment Motor vehicles 15-33% 33% 20% 18 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to the assets are then transferred to accumulated losses. (d) Income Tax The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except:  when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or  when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:  when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or  when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. 19 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. (e) Statement of Significant Accounting Policies (continued) Cash & Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Statement of Financial Position. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (f) Acquisition of Assets The purchase method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of the acquisition plus costs incidental to the acquisition. Transaction costs arising on the issue of equity instruments are recognised directly in equity. (g) Impairment of assets At each reporting date, the Group 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 Statement of Comprehensive Income. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (h) Financial instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:     amortised cost fair value through profit or loss (FVTPL) equity instruments at fair value through other comprehensive income (FVOCI) debt instruments at fair value through other comprehensive income (FVOCI). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. The classification is determined by both:   the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. 20 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) Subsequent measurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):   they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under IAS 39. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between:    financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Level 1’) and financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Level 2’). ‘Level 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial 21 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. Derecognition of financial assets A financial asset is derecognised when:    the rights to receive cash flows from the asset have expired or been transferred; has transferred substantially all the risks and rewards of the asset, or The Group no longer controls the asset. (i) Exploration, Evaluation and Development Expenditure Exploration, evaluation and acquisition costs are expensed in the year they are incurred. Development costs are capitalised. Development expenditure is recognised at cost less accumulated amortisation and any impairment losses. Exploration and evaluation expenditure is classified as development expenditure once the technical feasibility and commercial viability of extracting the related mineral resource is demonstrable. Where commercial production in an area of interest has commenced, the associated costs together with any forecast future capital expenditure necessary to develop proved and probable reserves are amortised over the estimated economic life of the mine on a units-of-production basis. Changes in factors such as estimates of proved and probable reserves that affect unit-of-production calculations are dealt with on a prospective basis. (j) Employee Entitlements Salaries, wages and annual leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within twelve months of the reporting date are recognised in other creditors in respect to employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Equity settled transactions The Group provides benefits to employees (including senior executives) of the Group in the form of share- based payments, whereby employees render services in exchange for shares or rights over shares (equity- settled transactions). There are currently two plans in place to provide these benefits:   the Employee Share Option Plan (ESOP), which provides benefits to Directors and senior executives; and the Employee Share Loan Plan (ESLP), which provides benefits to all employees, excluding senior executives and Directors. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black Scholes or Binomial option pricing model, further details of which are given in Note 20. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Empire Resources Limited (market conditions) if applicable. 22 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 5). The Group expenses equity-settled share-based payments such as share and option issues after ascribing a fair value to the shares and/or options issued. The fair value of option and share plan issues of option and share plan shares are recognised as an expense together with a corresponding increase in the share based payments reserve or the share option reserve in equity over the vesting period. The proceeds received net of any directly attributable transaction costs are credited to share capital when options are exercised. The value of shares issued to employees financed by way of a non recourse loan under the employee Share Plan is recognised with a corresponding increase in equity when the company receives funds from either the employees repaying the loan or upon the loan termination, pursuant to the rules of the share plan. All shares issued under the plan with non recourse loans are considered, for accounting purposes, to be options. (k) Trade and other receivables All trade receivables are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for doubtful debts is raised where some doubt as to collection exists. (l) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (m) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 23 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) (n) Revenue Recognition Amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised as follows: (i) Interest Interest earned is recognised as and when it is receivable, including interest which is accrued and is readily convertible to cash within two working days. Accrued interest is recorded as part of other debtors. (ii) Sundry income Sundry income is recognised as and when it is receivable. Income receivable, but not received at balance date, is recorded as part of other debtors. (o) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST 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 and the fuel tax rebate. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (p) Critical accounting estimates and judgements The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key Estimates — Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black and Scholes model or Binomial option pricing model, using the assumptions detailed in Note 20. The Group measures the cost of cash-settled share-based payments at fair value at the grant date taking into account the terms and conditions upon which the instruments were granted, as discussed in Note 20. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is re-measured to fair value at each balance date up to and including the settlement date with changes in fair value recognised in profit or loss. (q) Adoption of new and revised standards Changes in accounting policies on initial application of Accounting Standards In the year ended 30 June 2020, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company’s operations and effective for annual reporting periods beginning on or after 1 July 2019. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations of the Group and, therefore, no material change is necessary to Group accounting policies. 24 Empire Resources Limited Notes to the Financial Statements 30 June 2020 1. Statement of Significant Accounting Policies (continued) Standards and Interpretations in issue not yet adapted The Directors have also reviewed all new Standards and Interpretation that have been issued but are not yet effective for the year ended 30 June 2020. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Company and, therefore, no change necessary to Group accounting policies. (r) 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 Board of Directors of Empire Resources Limited. The Group operates only in one business and geographical segment being predominantly in the area of mineral exploration and exploitation in Western Australia. The Group considers its business operations in mineral exploration and exploitation to be its primary reporting function. (s) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net loss attributable to members of the parent, adjusted for:   costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.  (t) Parent Entity Financial Information The financial information for the parent entity, Empire Resources Limited disclosed in Note 23 has been prepared on the same basis as the Group. 25 Empire Resources Limited Notes to the Financial Statements 30 June 2020 2. Revenue and other income 3. Loss from ordinary activities 1 The reversal of the provision for rehabilitation and restoration was recognised on disposal of the Penny’s Find Mine. 26 20202019$$Other incomeNet gain on disposal of financial assets18,183 6,679 Net gain on sale of tenement- 159,911 Net gain on acquistion of share of Penny's Find JV- 299,687 Option agreement income- 80,000 Royalty income27,213 - Other income45,102 13,008 90,498 559,285 Consolidated20202019$$The loss from ordinary activities before income tax has been determined after:(a) ExpensesDrilling401,212 - Exploration Geologist87,032 22,518 Assaying80,528 - Other277,871 134,861 Exploration expense846,643 157,379 Labour- 16,757 Rehabilitation written back1- (384,943)Other surface mining costs3,904 636,219 Legal190,808 69,824 Underground- 57,953 Care and maintenance194,712 395,810 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 4. Income tax A deferred tax asset attributable to income tax losses has not been recognised at balance date as the probability criteria disclosed in Note 1(d) is not satisfied and such benefit will only be available if the conditions of deductibility also disclosed in Note 1(d) are satisfied. 27 (a)Numericalreconciliationbetweenincometaxexpenseandtheprofit before income tax20202019$$Profit (loss) before tax422,038 (1,323,987)Income tax benefit/(expense) at 27.5% (2019:27.5%)(116,060)364,096 Tax effect of:- deductible capital raising expenditure32,686 30,235 - non deductible expenditure- (217)- non assessable income- 82,414 - deductible temporary differences28,755 168,992 - net fair value gain on financial assets603,194 - - share based payment(6,840)- Deferred tax asset not recognised(541,735)(645,520)Income tax benefit attributable to profit from ordinary activities before tax- - Consolidated(b) Unrecognised deferred tax balancesTax losses attributable to members of the Group - revenue17,235,465 16,108,421 Potential tax benefit at 27.5%4,739,753 4,429,816 Amounts recognised in statement of comprehensive income- employee provisions600 25,809 - provision for impairment of receivables57,577 57,577 - other9,350 9,350 - financial assets- 137,686 - accrued interest- (409)Amounts recognised in equity- share issue costs59,715 59,715 Net unrecognised deferred tax asset at 27.5%4,866,995 4,719,544 Empire Resources Limited Notes to the Financial Statements 30 June 2020 5. Earnings per share 6. Cash and cash equivalents Cash at bank earns interest at floating rates base on daily deposit rates. (i) Reconciliation of cash flow from operations with loss after income tax 28 20202019CentsCentsBasicanddilutedearnings(loss)pershare(centsper share)0.06 (0.24)Profit/(Loss)usedinthecalculationofbasicEPS($)422,038 (1,323,987)Weighted average number of shares outstanding during the period used in calculations of basic loss per share716,927,344 557,988,511 Consolidated20202019$$Cash at bank and in hand598,047 893,302 598,047 893,302 Consolidated20202019$$Profit/(loss) after income tax422,038 (1,323,987)Depreciation 35,176 86,381 Share based payments expense24,871 - Gains on disposal of financial assets(18,183)(6,679)Proceeds from sale of motor vehicle- (4,000)Interest expense56,220 - Net gain from sale of tenement- (159,911)Gain on acquistion of share of Penny's Find JV- (299,687)Fair value gain on financial assets(2,193,431)- Fair value loss on financial assets- 500,678 (1,673,309)(1,207,205)Changes in assets and liabilities, net of the effects of purchase of subsidiaries:(Increase)/decrease in trade and other receivables(20,548)222,994 (Decrease)/increase in trade and other payables(12,997)(668,215)(Decrease)/increase in employee benefits(80,616)(182,501)(Decrease)/increase in provisions- (384,943)Net cash outflow from operating activities (1,787,470)(2,219,870)Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 7. Trade and other receivables Provision for impairment of receivables Current trade receivables are non-interest bearing and generally on 30 day terms. In addition, the Group applies AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. A provision for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. A portion of the other receivables balance of $516,108 and the impairment provision of $209,370 relate to a dispute over gold not accounted for from a milling campaign conducted by Eastern Goldfields Mining Services (EGMS) late in 2017. The Company is seeking to recover gold owed with a value in excess of $1 Million. The matter is currently being referred to Arbitration. 8. Financial assets 29 20202019$$CurrentTrade receivables2,530 - GST receivables23,556 8,533 Other receivables535,842 517,594 Provision for impairment of receivables(209,370)(209,370)352,558 316,757 Consolidated20202019$$Aging of past due30-60 days- - 60-90 days- - 90-120 days516,108 516,108 Total516,108 516,108 20202019$$Deposit10,000 20,000 10,000 20,000 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 9. Financial assets at fair value through profit or loss (a) Financial assets available for sale through profit or loss The investment is level 1 in the fair value hierarchy and is valued using quoted prices in an active market. (b) Investments in subsidiary 10. Plant and equipment 30 20202019$$Listed shares-investment in FYI Resources Ltd - at fair value- 69,407 Listed shares-investment in NTM Gold Ltd - at fair value3,671,097 - 3,671,097 69,407 Financial AssetsBalance at the beginning of year69,407 910,000 Additions1,499,875 - Disposals(109,799)(339,915)Net fair value gain / (loss) on financial asset2,193,431 (500,678)Net gain on disposal of financial assets18,183 - Carrying amount at the end of the period3,671,097 69,407 ConsolidatedCountry of incorporationPercentage OwnedPercentage Owned20202019Controlled entity%%Parent Entity:Empire Resources LimitedAustraliaSubsidiary of Empire Resources Limited:Torrens Resources Pty LtdAustralia100 100 20202019$$Plant and Equipment Cost54,562 54,562 Accumulated depreciation(54,541)(52,692)21 1,870 Motor Vehicles Cost166,472 166,472 Accumulated depreciation(118,961)(85,634)47,511 80,838 Total Plant and Equipment47,532 82,708 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 10. Plant and Equipment (continued) 11. Trade and other payables Trade payables are non-interest bearing and are normally settled on 30 day terms. 1 Included in these balances are amounts owing to key management personnel at balance date of $37,800 (2019: $187,455). 12. Borrowings 1 Refer to note 18 for terms and conditions of Director loans. 31 20202019$$Plant and EquipmentBalance at the beginning of year1,870 57,266 Additions on settlement of PFJV- 37,695 Disposals- (40,089)Depreciation expense(1,849)(53,002)Carrying amount at the end of the year21 1,870 Motor VehiclesBalance at the beginning of year80,838 94,054 Additions on settlement of PFJV- 20,163 Depreciation expense(33,327)(33,379)Carrying amount at the end of the year47,511 80,838 Total Plant and Equipment47,532 82,708 Consolidated20202019$$Trade payables and accruals1264,787 262,531 Employee benefits13,236 93,852 278,023 356,383 Consolidated20202019$$Director and other loans at 1 July- - Additions to borrowings1,500,000 500,000 Finance costs incurred109,726 6,267 Repayment of borrowings- (500,000)Finance costs paid(53,630)(6,267)Balance at 30 June1,556,096 - Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 13. Issued Capital (a) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares. On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (b) Options As at 30 June 2020 (30 June 2019: 9,000,000) the Company had zero options on issue over ordinary shares. 32 20202019$$799,783,689 (30 June 2019: 621,814,690) fully paid ordinary shares24,178,91422,806,499No.No.(i) Ordinary shares - numberAt 1 July621,814,690 483,201,475 Shareplacement-131,098,215on11December2018 at $0.01- 131,098,215 Issueof2,500,000sharesat$0.01on6March2019- 2,500,000 Issueof5,015,000sharesat$0.01on6March2019- 5,015,000 Issueof153,418,999sharesat$0.008on12December 2019153,418,999 - Issueof24,550,000sharesat$0.008on24January 202024,550,000 - Balance at 30 June799,783,689 621,814,690 Consolidated20202019$$(ii) Ordinary shares – valueAt 1 July 22,806,499 21,497,202 Shareplacement-131,098,215on11December2018 at $0.01- 1,310,982 Issueof2,500,000sharesat$0.01on6March2019- 25,000 Issueof5,015,000sharesat$0.01on6March2019- 50,150 Issueof153,418,999sharesat$0.008on12December 20191,227,352 - Issueof24,550,000sharesat$0.008on24January 2020196,400 - Less share issue costs(51,337)(76,835)Balance at 30 June24,178,914 22,806,499 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 14. Reserves The options reserve is used to recognise the fair value of rights and options issued to Directors, employees and consultants but not exercised. The asset revaluation reserve was used to record increases in the fair value of available-for-sale investments and decreases to the extent that such decreases relate to an increase on the same asset previously recognised in equity. 15. Financial risk management The Group’s financial situation is not complex. Its activities may expose it to a variety of financial risks in the future: market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk. At that stage the Group’s overall risk management program will focus on the unpredictability of the financial markets and seek to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out under an approved framework covering a risk management policy and internal compliance and control by management. The Board identifies, evaluates and approves measures to address financial risks. 33 20202019$$Reserves1,762,345 1,737,474 Reserves comprise the following:Options reserveBalance as at start of financial year1,737,474 1,737,474 Performance rights issued to Director24,871 - Balance at 30 June1,762,345 1,737,474 Asset revaluation reserveBalance as at start of financial year- 546,000 Adjustment to the opening balance of accumulated losses in applying AASB 9 to the changes in the fair value of available-for sale investments- (546,000)Balance at 30 June- - Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 15. Financial risk management (continued) The Group holds the following financial instruments: (a) Market risk Interest rate risk The Group’s main interest rate risk arises from cash deposits to be applied to exploration and development of areas of interest. Deposits at variable rates expose the Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. During 2020 and 2019, the Group’s deposits at variable rates were denominated in Australian Dollars. As at the reporting date, the Group had the following variable rate deposits and there were no interest rate swap contracts outstanding: The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into the renewal of existing positions. Sensitivity – Consolidated and Parent entity During 2020 and 2019, if interest rates had been 1% higher or lower than the prevailing rates realised, with all other variables held constant, there would be an immaterial change in post-tax loss for the year. Equity would not have been impacted. 34 20202019$$Financial assetsCash and cash equivalents598,047 893,302 Trade and other receivables352,558 316,757 Term deposit10,000 20,000 Listed equity investments3,671,097 69,407 4,631,702 1,299,466 Financial liabilitiesTrade and other payables278,023 356,383 Short-term borrowings1,556,096 - 1,834,119 356,383 ConsolidatedWeighted average interest rateBalanceWeighted average interest rateBalance%$%$Deposit10,000 20,000 Other cash available598,047 893,302 Net exposure to cash flow interest rate risk0.3%608,047 0.8%913,302 20202019 Empire Resources Limited Notes to the Financial Statements 30 June 2020 15. Financial risk management (continued) Share price risk The Group’s listed equity investments expose it to the financial risk of changes in share price. At balance date the group is not materially exposed to share price risk. (b) Credit risk The Group has no significant concentrations of credit risk. Cash transactions are limited to high credit quality financial institutions. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures on outstanding receivables and committed transactions. In relation to other credit risk areas management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised at the beginning of this note. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group will aim at maintaining flexibility in funding by accessing appropriate committed credit lines available from different counterparties where appropriate and possible. Surplus funds when available are generally only invested in high credit quality financial institutions in highly liquid markets. 35 30 June 2020Weighted Average Effective Interest RateFloating Interest RateFixed Interest Rate Maturing Within Year1 to 5 YearsOver 5 YearsNon-interest bearingTotal$$$$$$Financial Assets:Cash and cash equivalents0.3%598,047 - - - - 598,047 Trade and other receivables- - - - 352,558 352,558 Other financial assets1.2%- 10,000 - - - 10,000 Listed equity investments- - - - 3,671,097 3,671,097 Total Financial Assets598,047 10,000 - - 4,023,655 4,631,702 Financial Liabilities:Trade and other payables- - - - 278,023 278,023 Short-term borrowings7.5%- 1,556,096 - - - 1,556,096 Total financial liabilities- 1,556,096 - - 278,023 1,834,119 Empire Resources Limited Notes to the Financial Statements 30 June 2020 15. Financial risk management (continued) Maturities of financial assets and liabilities The note above analyses the Consolidated and Parent entity's financial liabilities. The liabilities comprise trade and other payables that are non interest bearing and will mature within 12 months and Director loans that are interest bearing and will be repaid from the proceeds of a future share placement of ordinary shares. The amounts disclosed are the contractual undiscounted cash flows. There are no derivatives. Maturity analysis of financial assets and liability based on management’s expectation. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments that are not traded in an active market (for example, investments in unlisted subsidiaries) is determined using valuation techniques or cost (impaired if appropriate). The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. 36 30 June 2019Weighted Average Effective Interest RateFloating Interest RateFixed Interest Rate Maturing Within Year1 to 5 YearsOver 5 YearsNon-interest bearingTotal$$$$$$Financial Assets:Cash and cash equivalents0.8%893,302 - - - - 893,302 Trade and other receivables- - - - 316,757 316,757 Other financial assets2.4%- 20,000 - - - 20,000 Listed equity investments- - - - 69,407 69,407 Total Financial Assets893,302 20,000 - - 386,164 1,299,466 Financial Liabilities:Trade and other payables- - - - 356,383 356,383 Total financial liabilities- - - - 356,383 356,383 Year ended 30 June 2020<6 months6-12 months1-5 years>5 yearsTotalConsolidatedFinancial assetsCash & cash equivalents598,047 - - - 598,047 Trade & other receivables352,558 - - - 352,558 Other financial assets- 10,000 - - 10,000 Listed equity investments3,671,097 - - - 3,671,097 4,621,702 10,000 - - 4,631,702 Financial liabilitiesTrade & other payables(278,023)- - - (278,023)Short-term borrowings(1,556,096)- - - (1,556,096)(1,834,119)- - - (1,834,119) Empire Resources Limited Notes to the Financial Statements 30 June 2020 16. Commitments and Contingencies These commitments are based on the Group holding the tenements for the next 5 years. Contingent asset On 2 May 2019, the Company agreed with Orminex Penny’s Find Pty Ltd (Orminex) to sell the Penny’s Find mining tenements and some mining assets for $600,000 plus an ongoing royalty stream. The cash component consists of $600,000 from Orminex broken into three equal milestone payments:  Completion payment - on signing of full form documents, which was received in May 2019,  Mining Start payment - upon commencement of mining at the Penny's Find project, and  First Gold payment - at the first gold pour. Orminex has agreed to pay to the Company:   an initial royalty for the first 50,000 ounces of gold produced from the tenement, and a further royalty on all future product derived from the tenement. Orminex has agreed to pay to the Company:    $100,000 if underground mining has not commenced within 9 months of Orminex receiving licences from the WA Department of Water and Environmental Regulation, $100,000 every 6 months thereafter if underground mining has not commenced, and $100,000 if Orminex ceases mining operations for a continuous period exceeding 6 months, and $100,000 every 6 months thereafter. All payments related to the non-commencement or cessation of mining are: capped at a total of $400,000, and   will be treated as a prepayment of the Royalty. The directors consider it probable that Mining Start and First Gold payment will be received by the Company. 17. Directors and other key management personnel (i) Details of Key Management Personnel Chairman – non-executive Dr M Ruane Managing Director Mr S Richardson (from 4 July 2019) Mr D Sargeant (from 13 April 2000 – 3 July 2019) Resigned 15 August 2020 Non-Executive Director Mr J Atkinson 37 20202019$$Expenditure commitments contracted for:Exploration TenementsInordertomaintaincurrentrightsoftenuretoexplorationtenements,theCompanyisrequiredtooutlayrentalsandtomeettheminimumexpenditurerequirements.Theseobligationsarenotprovidedforinthefinancialstatementsandarepayable:- not later than 12 months363,041 197,947 - between 12 months and 5 years510,655 312,607 - greater than 5 years1,497,820 701,748 2,371,516 1,212,302 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 17. Directors and other key management personnel (continued) (ii) Compensation of Key Management Personnel The amounts outstanding to Key Management Personnel at the reporting date are included in Note 18. 18. Related Parties Directors and executives Disclosures relating to the remuneration and shareholdings of Directors and executives are set out in the Directors’ Report. Other transactions with Directors, their associates and director related entities are as follows: For the loan from Dr Michael Ruane, an interest rate of 7.5% was calculated daily and was payable at maturity. 38 20202019$$Short-term employee benefits306,351 242,548 Post-employment benefits18,843 - Share-based payments24,871 - 350,065 242,548 Consolidated20202019$$Amounts payable at balance date to Key Management Personnel in relation to remunerationKirkdale Holdings Pty Ltd - Mr D Sargeant16,500 156,255 Kesli Chemicals Pty Ltd - Dr M Ruane18,000 27,900 Northshore Capital Advisors Pty Ltd - Mr J Atkinson3,300 3,300 37,800 187,455 Consolidated20202019$$Amounts payable to Directors as unsecured loansKesli Chemicals Pty Ltd - Dr M Ruane1,556,096 - 1,556,096 - Interest expense on unsecured loansKesli Chemicals Pty Ltd - Dr M Ruane109,726 6,267 109,726 6,267 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2020 18. Related Parties (continued) 19. Remuneration of auditors The auditor of Empire Resources Ltd is HLB Mann Judd. 20. Share Based Payments (a) Performance rights The following table illustrates the number of and movements in performance rights during the year: The fair value of the performance rights is estimated as at the date of grant using the Binomial option pricing model taking into account the terms and conditions upon which the rights were granted. The following table lists the inputs to the model used for performance rights issued during the year: 39 20202019$$Other transactions with Directors for normal business reimbursementsKesli Chemicals Pty Ltd - Dr M Ruane45,310 - Tyson Resources Pty Ltd - Dr M Ruane64,858 - 110,168 - Consolidated20202019$$AmountsreceivedordueandreceivablebyHLBMann Judd for:Audit or review of the financial reports of the Company29,663 27,030 Audit of the Penny's Find Joint Venture - 2018- 28,000 Tax Compliance7,000 6,000 ConsolidatedNumberNumber20202019Outstanding at the beginning of the period- - Issued 13 November 201920,000,000 - Outstanding at the end of the period20,000,000 - Grant DateExpiry dateValue at grant date of rightsProbabilityOption lifeDirector Performance Rights13-Nov-1904-Jul-21$0.00841%1.6 yearsVesting PeriodVesting occurs when the price of Empire's ordinary shares remain at or above a VWAP price of 1.5 cents for a period of not less than 20 days Empire Resources Limited Notes to the Financial Statements 30 June 2020 20. Share Based Payments (continued) (b) Option plan The following table illustrates the number and weighted average exercise prices of and movements in share options issued during the year: The fair value of the equity-settled share options is estimated as at the date of grant using the Black and Scholes model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for options in existence during the year: (c) Expenses arising from share-based payment transactions There were $24,871 (2019: $Nil) expenses arising from share-based payment transactions recognised during the period. 21. Segment Information Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Empire Resources Limited. Consistent with prior year, the Group operates only in one business and geographical segment being predominantly in the area of mining and exploration in Australia. The Group considers its business operations in mineral exploration to be its primary reporting function. 22. Events after the Balance Date On 7 August 2020, the Company issued 108,966,333 shares at 1.2 cents raising $1,307,596. Other than this, there has not been any matter or circumstance not otherwise dealt with in the financial report that has significantly affected or may significantly affect the Group in future financial periods. 40 NumberWeighted average exercise priceNumberWeighted average exercise priceOutstanding at the beginning of the period9,000,000 $0.0432,102,000 $0.03Expired 3 May 2019- - (22,102,000)$0.025Expired 22 June 2019- - (1,000,000)$0.04Expired 18 July 2019(9,000,000)$0.04- - Outstanding at the end of the period- - 9,000,000 $0.0420192020Grant DateExpiry dateExercise priceVesting PeriodFair value at grant date of optionsExpected VolatilityOption lifeDividend yieldRisk-free interest rateGrant date share priceConsultant options18-Jul-1618-Jul-19$0.0418-Jul-16$0.02140%3 years0%1.57%$0.02 Empire Resources Limited Notes to the Financial Statements 30 June 2020 23. Parent Entity Financial Information The individual financial statements for the parent entity show the following aggregate amounts: 41 20202019ASSETS$$CURRENT ASSETSCash and cash equivalents598,047 893,302 Trade and other receivables352,558 316,757 Other financial assets10,000 20,000 Financial assets at fair value through profit or loss3,671,097 69,407 Total Current Assets4,631,702 1,299,466 NON-CURRENT ASSETSPlant and equipment47,532 82,708 Total Non-Current Assets47,532 82,708 TOTAL ASSETS4,679,234 1,382,174 LIABILITIESCURRENT LIABILITIESTrade and other payables278,023 356,383 Borrowings1,556,096 - Total Current Liabilities1,834,119 356,383 TOTAL LIABILITIES1,834,119 356,383 NET ASSETS2,845,115 1,025,791 EQUITYIssued capital24,178,914 22,806,499 Reserves1,762,345 1,737,474 Accumulated losses(23,096,144)(23,518,182)TOTAL EQUITY2,845,115 1,025,791 Profit / (loss) before income tax expense422,038 (1,324,236)Other comprehensive loss for the year, net of tax- - Total comprehensive income / (loss) for the year422,038 (1,324,236)Parent Entity DIRECTORS’ DECLARATION 1. In the Directors’ opinion: (a) the financial statements and notes are in accordance with the Corporations Act 2001 including: (i) (ii) the Australian Accounting complying with Australian Accounting Standards (including Interpretations), the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements; and giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date. (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. The Directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020. This declaration is made in accordance with a resolution of the Directors. ___________________ Michael Ruane Director Perth, Western Australia 17 September 2020 42 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Empire Resources Limited for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 17 September 2020 N G Neill Partner 43 INDEPENDENT AUDITOR’S REPORT To the members of Empire Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Empire Resources Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no matters to be communicated in our report. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2020 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. 44 In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. - 45 We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Empire Resources Limited for the year ended 30 June 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Chartered Accountants Perth, Western Australia 17 September 2020 N G Neill Partner 46 ASX ADDITIONAL INFORMATION Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 1 September 2020. (a) Distribution of shares The numbers of shareholders, by size of holding are: The number of shareholdings held in less than marketable parcels is 513. (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: (c) Substantial Shareholder 47 NumberCategory (size of holding)of Holders1 - 1,000103 1,001 - 5,000595,001 - 10,0008910,001 - 100,000665100,001 - and over549 1,465SHAREHOLDERSNumber of shares held% Holding1 KESLI CHEMICALS PTY LTD107,536,47911.83%2 TYSON RESOURCES PTY LTD88,610,6599.75%3 KESLI CHEMICALS PTY LTD 59,714,8846.57%4 BLAMNCO TRADING PTY LTD35,000,0003.85%5 BILL BROOKS PTY LTD 23,510,5502.59%6 YUCAJA PTY LTD 20,833,3332.29%7 RBJ NOMINEES PTY LTD 20,000,0002.20%8 FITALL GROUP LTD20,000,0002.20%9 AGENS PTY LTD 18,408,8522.03%10 ZINFANDEL EXPLORATION PTY LTD13,709,1251.51%11 SANGORA HOLDINGS PTY LTD13,000,0001.43%12 MR KENNETH JOSEPH HALL 11,900,0001.31%13 ARMCO BARRIERS PTY LTD11,000,0001.21%14 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED10,576,4941.16%15 MR JEREMY PAUL ATKINSON & MRS SARA CAROLINE ATKINSON 10,538,3341.16%16 MR LACHLAN ANTHONY CHRISTIE10,450,0011.15%17 LEEJAMESNOMINEESPTYLTD10,000,0001.10%18 CAMIRA HOLDINGS PTY LTD10,000,0001.10%19 HERA INVESTMENTS PTY LTD9,125,8331.00%20 1215 CAPITAL PTY LTD8,800,0000.97%512,714,54456.41%ShareholderNumber of sharesMICHAEL RUANE255,862,022 ASX ADDITIONAL INFORMATION (d) Securities Exchange Listing Listing has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. Quoted shares on ASX and total issued share capital 908,750,022 (e) Voting rights All shares carry one vote per unit without restriction. (f) Corporate Governance Statement The Company’s Corporate Governance Statement can be found at https://resourcesempire.com.au/corporate- governance/ (g) Unquoted Securities The following person holds 20% or more of the equity securities in an unquoted class: Class Performance Rights Holder Sean Richardson Number of units 20,000,000 % Held 100% INTERESTS IN MINING AND EXPLORATION TENEMENTS AT 1 SEPTEMBER 2020 PROJECT TENEMENT INTEREST REMARKS PENNY'S FIND YUINMERY E27/553 E27/591 E27/592 E27/593 P27/2245 P27/2262 M57/265 M57/636 E57/1037 E57/681 E57/1027 E57/1159 BARLOWEERIE E59/2306 POISON HILLS E51/1938 E20/968 E51/1985 WILUNA P53/1707 100% 100% 100% 100% 100% 100% 100% 100% 100% 91.89% 91.89% 100% 100% 48 Application Application Application Application 

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