Annual
Report
2020
Corporate Directory
Directors
Oliver Kleinhempel
Non-executive Director (Appointed 12 August 2019)
Non-executive Chairman (Appointed 24 April 2020)
Share Register
Automic Pty Ltd
Level 5 126 Philip Street
Sydney NSW 2000
Stephen Layton
Non-executive Director
Zhui Pei Yeo
Non-executive Director (Appointed 12 August 2019)
Company Secretary
Suzanne Irwin (Appointed 1 September 2020)
Registered Office
Office 06-110
Level 6, 25 King Street
Bowen Hills QLD 4006
1300 288 664 (within Australia)
or +61 (0)2 9698 5414
Auditors
Nexia Melbourne Audit Pty Ltd
Level 12, 31 Queen Street
Melbourne VIC 3000
Telephone: +61 (0)3 8613 8888
Facsimile: +61 (0)3 8613 8800
Stock Exchange Listing
Listed on the Australian Securities Exchange (ASX)
Telephone: +61 (0)7 4094 3072
Website: www.specialitymetalsintl.com.au
info@specialitymetalsintl.com.au
Email:
ASX Code: SEI
ACN: 115 009 106
ABN: 77 115 009 106
Principal Place of Business
6888 Mulligan Highway
Mount Carbine QLD 4871
Contents
1
2
Chairman’s Address
Chief Executive Officer’s Letter
5 Operating and Financial Review
15 Tenement Schedule
16 Mineral Resources and Ore Reserves Statement
20 Directors’ Report
33 Consolidated Statement of Profit or Loss and Other Comprehensive Income
34 Consolidated Statement of Financial Position
35 Consolidated Statement of Cash Flows
36 Consolidated Statement of Changes in Equity
37 Notes to the Consolidated Financial Statements
63 Directors’ Declaration
64 Auditor’s Independence Declaration
65
Independent Auditor’s Report
68 Shareholder Information
70 Forward Looking Statements
Speciality Metals International Limited Annual Report 2020
1
Chairman’s Address
We invite you to continue to
support us in our journey to
realise the potential of Speciality
Metals to add significant value
beyond our existing assets and
for all stakeholders.
Dear Shareholders
Welcome to the 2020 annual report for Speciality
Metals International Limited (Speciality Metals or
Company). The past 12 months has been a period
of consolidation for the Company; building on the
momentum started in 2019 to transition from a
junior exploration company to an emerging tungsten
producer. Against the backdrop of the COVID-19
pandemic and these unprecedented times, we have
stayed on track.
Our leadership team changed during the year. We
thank you for your patience, trust and continued
support as the team assembled to execute the
operational strategies for our flagship projects at Mt
Carbine and to rebuild the corporate foundation. We
are committed and together, we have the mix of skills
and experience to navigate the Company through an
increasingly complex operating environment.
The world is facing enormous challenges such as
climate change, political and social polarisation,
rising protectionism and supply chain uncertainty.
Businesses and society are interdependent, and
Speciality Metals does not operate in a vacuum.
Society and investors now have expectations in
relation to a company’s environmental, social and
governance (ESG) performance and are increasingly
holding executives to account. Given these
fundamental shifts, the Board with the leadership
team have taken the time to reflect on the Company’s
purpose, values and positioning. We believe
everything starts with a purpose, and it is necessary
for all of us to align on what we are about so that
we can move in the same direction.
We have articulated our Purpose as:
Resourcing the new economy
for a better tomorrow
We are a value-oriented resources company,
sustainably producing and managing new
economy minerals and metals. We maximise
the potential of our assets through resource-
efficiency and investment in our people to
deliver materials that are critical for a better
tomorrow. It’s how we drive value in our
operations, approach new opportunities and at
the same time deliver positive societal impact
while minimising our environmental footprint.
Our focus on new economy minerals are those
which are in growing demand to meet the global
shifts in energy, industry and sustainability.
Tungsten has, just this month, been recognized by
the European Commission as having the highest
economic importance of all raw materials, and is
already listed by USA, Japan, India and Australia as
a critical mineral (that is, vital for its economy but
having a high supply risk). Our team is committed to
enhancing Speciality Metals’ existing portfolio and
business model to contribute to this globally relevant
agenda.
This is exciting and challenging. We invite you to
continue to support us in our journey to realise the
potential of Speciality Metals to add significant value
beyond our existing assets and for all stakeholders.
Oliver Kleinhempel
Non-Executive Chairman
2
Speciality Metals International Limited Annual Report 2020
Chief Executive Officer’s Letter
Mt Carbine Site
Dear Shareholders
The past year has been a momentous year for
Speciality Metals, transitioning from explorer to
emerging producer. Getting things right on the
operational front at our flagship Mt Carbine asset has
been our focus. The four key development areas are
visually presented in the project timeline set out in
the Operating and Financial Review section of this
report at page 5. In summary:
1. Leveraging the expertise and experience of our
unincorporated joint venture partner, CRONIMET
Australia Pty Ltd (part of the CRONIMET
diversified commodities group), the Retreatment
Plant has been successfully brought online and
commissioned. We are continuing to improve and
optimise the operations to increase production
levels toward sustainable commercial levels.
2. The XRT Pilot Plant has been installed and has
started processing bulk samples returning positive
initial results of up to a 28x upgrade from head
feed to concentrate. It is anticipated that the
sorting technology will be employed for low cost
bulk processing of the historical stockpiles around
Mt Carbine and expansion to firstly 300,000
tonnes per annum and then the targeted 1 million
tonnes per annum over the coming years,
maximising resource value already on surface.
3. We’ve made large strides in the modernisation
of Mt Carbine Quarries during the year having
secured the $4 million purchase order from
Bama Civil Pty Ltd. We are continuing to target
infrastructure projects and contractors in the
region for the sale of our various aggregates
products to grow the quarry business as a steady
source of revenue. At the same time, we are
investigating collaborations to develop higher
value/ lower emissions products.
4. The redefinition of the Mt Carbine resource has
started and we are tracing high-grade veins
labelled as “King Veins” with a view to developing
the next phase, underground mining as a narrow
underground deposit rather than block caving.
With our exploration assets, we have been somewhat
hindered in the further development of our gold
assets in New South Wales due to government travel
restrictions imposed in response to the COVID-19
pandemic. As the situation improves, we will be
looking to reinstate our works program in relation
to our licences.
Concurrently, we remain open to new opportunities
which fit our purpose and positioning. As previously
announced, during the year, we made the decision
not to renew our lithium interests in Chile as it was
no longer the best strategic fit for us.
Speciality Metals International Limited Annual Report 2020
3
Mt Carbine Open Pit
We take this opportunity to acknowledge that this
transition would not have been possible without
the tireless efforts of the leadership and site teams
working together. We are grateful our people have
dug deep to ramp up production capacities and
solve problems along the way in the execution of
the operations. We’re proud that this teamwork has
been extended in our interactions with technology
providers, suppliers and other stakeholders. We can
create more together than on our own in certain
areas, and our collaborative approach positions us
well to drive value in our operations for long-term
profitability and increased shareholder value.
Since joining the Company, I have been energised
to be part of a diverse, collaborative and highly
motivated team, fully supported by an engaged
Board.
Our team looks forward to continuing the
implementation of the operational strategies
outlined to continue the growth of the Company
in line with our purpose, values and positioning.
Kevin MacNeill
Interim-CEO
& Snr Technical Advisor
4
Speciality Metals International Limited Annual Report 2020
Drill core with wolframite mineralisation
Speciality Metals International Limited Annual Report 2020
5
Operating and Financial Review
The 2020 financial year has been a transformative year for Speciality Metals
and its flagship projects at Mt Carbine in Far North Queensland.
Highlights
The 2020 financial year has been a transformative year for Speciality Metals International Limited (Speciality
Metals or the Company) and its flagship projects at Mt Carbine in Far North Queensland.
The highlights in the year were:
− the successful integration of Mt Carbine quarrying operations (Mt Carbine Quarries) into the Speciality Metals
Group, following the 100% acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019;
− the start of the Company’s transition from a junior explorer to an emerging producer with the
commencement of production at the refurbished Mt Carbine Retreatment Plant, operated under an
unincorporated joint venture between Speciality Metals and CRONIMET Australia Pty Ltd and various trial
shipments to leading tungsten consumers in Asia, Europe and the US;
− establishment of a new multi-disciplinary leadership team to allow the Company to seize the opportunities
arising from the increasing focus in the resources industry on environmental, social and governance (ESG)
performance;
− the initiation of major expansion activities at Mt Carbine Quarries to grow the business as a steady source of
revenue and secure fulfilment of large orders, such as the $4 million purchase order received from Bama Civil
Pty Ltd to provide road base for a major road construction project in Far North Queensland; and
− continuation of the detailed geological review and reinterpretation of data at Mt Carbine to identify high-
grade veins traced to depth labelled as “King Veins” for next phase, underground mining.
A review of the Company’s operating and financial activities for the 2020 financial year up until the date of this
report is set out in this section.
Mt Carbine Project Timeline
The Company has continued to develop the operational and execution strategy for its Mt Carbine assets. The
below timeline was prepared to take into account the environmental permitting requirements, setting out major
milestones for the Environmental Authority (EA) amendment process to increase production capacity from
300,000tpa to 1,000,000tpa by Q2 2022.
The Company’s assessment of EA amendment requirements was commenced in Q2 2020 (refer to ASX
announcement Quarterly Activities Report and Cashflow Report released on 29 July 2020).
Mt Carbine Project Timeline
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6
Speciality Metals International Limited Annual Report 2020
Operating and Financial Review continued
Retreatment Plant
Retreatment Plant Activities
During the 2020 financial year, the Mt Carbine
Retreatment Plant was overhauled and refurbished,
enabling the production ramp-up and optimisation
phase to commence. Capital expenditure of
approximately $1.5 million was directed towards
upgrades, improvements and modifications which
were identified by the production and technical
team as being necessary for process design and
for increased operational efficiencies.
Improvements in the process design included the
installation of an additional re-crushing and wet
screening stage to achieve higher mineral liberation
and better tungsten recovery. The newly installed
wet screen and secondary rolls crushers were
commissioned during quarter ended June 2020
(refer to ASX announcement Mt Carbine Retreatment
Plant Commissioning and X-Ray Sorter Installation
Update released on 8 April 2020).
A summary of the major plant refurbishments during
the 2020 financial year are set out below:
− changeout of all pumps on the plant for new
Warman and Scat pumps;
− installation of high wearing pipelines;
− installation of additional wet screen and
secondary rolls crushers;
− installation of higher wearing impellers into the
slurry pumps; and
− purchase of a large impact crusher to increase
head feed throughput tonnages (scheduled for
installation in the quarter following FY2020).
25,000
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Head Feed Throughout
FEB
MAR
APR
MAY
JUN
JUL
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Average Run Time %
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70%
60%
50%
40%
30%
20%
10%
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FEB
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Speciality Metals International Limited Annual Report 2020
7
The final commissioning phase and initial ramp-up of the Retreatment Plant occurred during these
unprecedented times caused by the global COVID-19 pandemic. Whilst the operation was not directly affected
by any enforced shut-downs, logistical challenges for the delivery of spare parts and additional equipment were
experienced which led to delays for some of the ramp-up activities.
Mt Carbine Mixed Tungsten Concentrate
Mt Carbine Mixed Tungsten Concentrate (under UV light)
The teething challenges experienced during the
early phases of ramp-up improved the team’s
understanding of the process and resulted in
improved stability and continuity of operations.
However, those early challenges resulted in volume
fluctuations in the production and inconsistencies in
the concentrate grade. The XRT Sorter feasibility test
work (further detailed in section below on XRT Sorter
Development) is currently effecting intermittent
increases in the concentrate tonnages.
In accordance with the Offtake Agreement between
the unincorporated JV formed by the Company
and CRONIMET Australia Pty Ltd (CRONIMET
Australia) on the one hand and CRONIMET Asia
Pte Ltd (CRONIMET Asia) on the other, CRONIMET
Asia has, to date, taken delivery of approximately
40 tonnes of concentrate. Individual production lots
are tested against agreed quality parameters, upon
which CRONIMET Asia determines the acceptance
of concentrate. Currently, additional concentrate is
pending final cleaning (that is, a process of upgrading
WO3 concentration and reducing impurities) prior to
delivery to CRONIMET Asia. The first shipment was
transported from site to Brisbane, Queensland in July
2020 for export to an Asian customer (refer to ASX
announcement Operational Update on Retreatment
Plan X-ray Pilot Production Schedule released on
20 July 2020) with a subsequent shipment sent
to Europe.
Concentrate production is continuing to improve on a
month-on-month basis, with the Company expecting
to reach sustainable commercial levels for the quarter
ending December 2020 when the testing program
in relation to the XRT Sorter is well underway and
the scheduled installation of the impact crusher is
completed.
Staffing requirements for the Retreatment Plant
have been met predominantly from the local region,
in line with the Company’s commitment to support
the communities in which it operates. As activities
at the Mt Carbine site ramp-up with increased
operational complexities, the Company has invested
in the provision of both external and internal safety
training for its staff. The Company is committed to
the continuous upskilling of its employees.
The Company is undertaking an assessment of its
current energy usage with the aim of identifying cost
reductions and lowering its carbon footprint. Upon
completion of assessment, the Company expects an
energy efficiency roadmap will be available for the
consideration of options and the implementation
of meaningful targets.
8
Speciality Metals International Limited Annual Report 2020
Operating and Financial Review continued
XRT Sorter
XRT Sorter Development
The installation and commissioning of the XRT Sorter
Pilot Plant was completed during the quarter ended
June 2020. Bulk testing of several stockpiles around
the Mt Carbine site has commenced to determine
the economic optimisation of XRT sorting on the
material. Along with the installation of the XRT Sorter
Pilot Plant, the Company purchased an additional
cone crusher to optimise the size of the material prior
to being fed into the downstream gravity processing
plant to complement the production of tungsten
concentrate.
This is the first step in the process of scaling up
the tungsten processing operations at Mt Carbine
to the targeted throughput of 1 million tonnes per
annum (refer to figure on page 5, Mt Carbine Project
Timeline). Using XRT sorting and gravity processing,
the Company aims to recover the tungsten units
left behind in the historical waste rock stockpiles
and scale up operations in accordance with its
project timeline.
The trial operations are synchronising the recovery
of tungsten units with the preparation of quarry
feedstock which allows the Company to sustainably
lower its OPEX and environmental footprint, while
maximising value from its assets.
The test work results from the XRT Sorter are also
being compiled for a collaborative project study
titled Optimized X-Ray Ore Sorting Technologies and
Material Handling Concepts for Historic Tungsten
Mine Waste Transformation. The project consortium
is led by CRONIMET Australia and further consists
of the Company, The University of Queensland -
WH Bryan Mining and Geology Research Centre,
TOMRA Sorting Pty Ltd and DAS Mining Solutions
Pty Ltd (refer ASX announcement Quarterly Activities
and Cashflow Report released on 29 July 2020).
The project will establish the physical controls on
separation efficiency of the low-grade stockpile
materials at Mt Carbine to develop new mine planning
and scheduling models and optimise scale-up
application of ore sorting technologies.
In July 2020, the Project consortium’s application
to METS Ignited Australia Limited (METS Ignited)
for a $220,000 grant under the Queensland METS
Collaborative Projects Fund was awarded (refer to
ASX announcement Government Support for Mt
Carbine Mine Waste Transformation Initiative released
24 July 2020). This was a positive endorsement
by both the Commonwealth and Queensland
Governments (facilitated by METS Ignited) and the
work completed under this grant program (expected
to take nine months) will be a contributor to the
ongoing development of the sorting operation.
Preliminary results from the sorter testing program
has achieved upgrade ratio as high as 28:1 (refer to
ASX announcement, Pilot Sorter Delivers Significant
Tungsten Ore Upgrade released on 7 September
2020).
Speciality Metals International Limited Annual Report 2020
9
Quarry Activities
Following the 100% acquisition of Mt Carbine
Quarries Pty Ltd on 28 June 2019, the established
quarry operations with substantial growth
opportunities and a steady revenue stream, have
been successfully integrated into the Speciality
Metals Group.
Mt Carbine Quarries is the largest and most northern
hard rock quarry in Queensland. It is a fully permitted,
established business which has been in operation for
over 20 years within the Mt Carbine Mining Leases.
The Company’s cost competitiveness is primarily
due to all of its feed stock being sourced from
readily available stockpiled mined rock, meaning
no drill and blast activities are necessary. The
synergies between the quarry and the Company’s
mining activities through beneficial waste reuse,
reinforces the Company’s commitment to reducing
its environmental footprint and maximising value
from all resources on site.
To ensure product and service standards were
maintained, existing operational employees were
retained by the Company following the acquisition.
The current employee base has over 60 years’
experience in the quarry industry.
Significant maintenance and upgrade work were
undertaken during the year on the plant and
equipment, workplace health and safety and
account and management systems. Whilst these
programs created additional operational expenses
initially, the investment is required to generate
increased efficiency and less down time, and lead
to increased profitability.
During the quarter ended June 2020, Mt Carbine
Quarries was awarded its largest purchase order to
date for approximately $4 million (including GST)
from Bama Civil Pty Ltd (Bama) for the supply of
various quarry materials for a major road construction
project in Far North Queensland. Delivery of the
material and the corresponding revenue recognition
is scheduled to progressively occur during the
half-year ending December 2020 (refer to ASX
announcement $4 Million Contract Enhances Order
Intake for the Mt Carbine Quarrying Operations
released on 1 July 2020).
The quarry’s general order intake has also
improved throughout May and June 2020, with
the easing of COVID-19 travel restrictions and the
recommencement of various construction projects
around Far North Queensland. These orders re-
affirm the focus to position the quarrying operations
to be a consistent cash generating business unit
for the Company. With significant infrastructure
funding being made available by the Queensland
Government, Mt Carbine Quarries will continue to
target the supply of quarry products to government-
funded infrastructure projects as well as developing
its project pipeline for the private sector.
Additional quarry material has been stockpiled
comprising various products ready for despatch.
The Company has also purchased new equipment
in preparation for the Bama contract deliveries
to ensure output targets are met and the gradual
modernisation plan for the quarry is implemented.
This will improve the quarry’s capability and reliability,
particularly for the supply of large infrastructure
contracts such as the Bama contract.
Mt Carbine Quarries
Quarry Stockpiles
10
Speciality Metals International Limited Annual Report 2020
Operating and Financial Review continued
In parallel with the modernisation plan, the Company continues to look for innovative solutions for the quarry
that will allow for sustainable and continuous income. In this connection, the Company has started investigating
potential value-add technologies to transform rock waste not merely into quarrying products but into higher-
value, lower-carbon intensive building products.
The Company takes this opportunity to extend a warm welcome to the newly appointed Quarry Manager, Mr
Michael Bartlett, who commenced employment with the Company mid-August 2020 to support the continued
growth and development of the quarry. Mr Bartlett holds tertiary qualifications in Commerce, quarrying
management experience and Site Senior Executive certifications and has significant experience in quarrying
operations in diverse industries including mining, transport, and local government.
Exploration Activities
Mt Carbine
Exploration and tenement administration work has been ongoing with respect to the Mt Carbine tenements,
which now includes the newly granted EPM 27394. Part of this work has involved the Company’s geological team
reviewing historical maps of the area within and immediately adjacent to the Mt Carbine Mining Leases. These
areas have been remapped and all available geological data has been updated. The Company’s digital database
is continually being updated with this information.
A detailed review of the geology of Mt Carbine has given the Company new insights into its mineralisation. Since
the discovery of the mine in 1895, Mt Carbine traditionally attracted old-time miners who produced considerable
amounts of tungsten by hand from mining rich veins of tungsten in narrow tunnels and shafts. The miners were
able to follow these narrow high-grade veins for hundreds of metres. By using careful computer modelling, the
Company has highlighted where these high-grade veins can be traced to depth. Core intercepts of these veins
have been labelled ‘King Veins’ in recognition of their high-grade and robust mineralisation as shown below.
Drill core shed
Drill core with wolframite mineralisation
Mt Carbine is one of the world’s largest tungsten resources which was previously treated as a large bulk target
with a significant development cost. However, work is now being completed to identify the high-grade structural
zones and to redefine the mining approach to be taken at Mt Carbine.
Some of the Mt Carbine drill core dates back over 40 years, it was therefore necessary to undertake a clean-
up and re-logging of the core for the Company’s new database. At the same time, new high-resolution core
photography is being completed that will be computer linked to their intervals. This is a start in the re-evaluation
of the database to provide the necessary data to undertake an evaluation of this high-grade target.
Speciality Metals International Limited Annual Report 2020
11
Once high grade zones have been confidently identified, the Company will commence mine planning for a high-
grade, low tonnage deposit that will have a lower cost of production and reduced environmental footprint. To
this end, the Company has now engaged a full-time geologist and various external consultants to redefine the
underground resource at Mt Carbine.
Panama Hat – Broken Hill
Subsequent to the 2020 financial year, the Company
received and accepted renewal conditions for EL
8024 for a further term to 29 November 2024.
Panama Hat has been the focus of past detailed
exploration with a line of gold workings stretching
over an 8km strike-length. This zone is known as
the Huonville Gold Field and sits entirely within the
Company’s tenement. Gold located to date has been
in high-grade narrow quartz veins that are hosted in
the Willyama Supergroup Formation, with the largest
mine being the Panama Hat Mine.
Exploration in this area has been hampered by
extensive calcrete cover and recent scientific
developments have shown that sampling of calcrete
can identify underlying tracing of gold deposits. The
initial orientation test sampling showed anomalies
in the calcrete emerging and showed a strong trend
across the known ‘line of lodes’. Given the success
of this approach, the Company will complete the
survey over the entire gold field and then review
for drill targets once the COVID-19 inter-state
travel restrictions are eased.
EL8024 Panama Hat, Willyong Tank and Williams prospects
hosted by shear zones (after Burton 1992)
Plot of god values (ppb) obtained in calcrete samples of Panama
Hat Grid, ≥5ppb is the threshold for gold anomalous value
Plot of gold values (ppb) obtained in calcrete samples of Willyong
Tank ≥ 5ppb is the threshold for gold anomalous value
12
Speciality Metals International Limited Annual Report 2020
Operating and Financial Review continued
Tungsten Market Outlook
Tungsten prices recovered towards the end of
the 2020 financial year, coming from the peak
of European FOB APT price US$352/mtu in June
2018 and a floor of US$200/mtu in September 2019
(source: Roskills Tungsten: Outlook to 2029 Report
as announced by StreetInsider Premium on 22 April
2020). In the opinion of the Company, the APT
price has bottomed out throughout the first half
of 2020 and is now steadily increasing in response
to positive impacts on manufacturing activities
as a results of economic stimulus packages by
governments globally.
In its ‘Tungsten Outlook to 2029 Report’, Roskill
forecasts tungsten demand to rise by over 1% per
year between 2019 and 2029, driven by increased
consumption in the cemented carbides and steel
and alloys sectors. The lower demand from the
automotive sector, due to rise of EV (electric vehicles)
and lesser demand for cemented carbide tools used
in their production, is expected to be offset by a
larger demand for cemented carbide tools in other
sectors, such as marine and mining. Roskill predicts
the highest growth rate is set to be seen in the
steel and alloys sector.
According to another report (’Global Tungsten
Carbide Market 2020-2024’ report published
by ResearchAndMarkets.com, as announced on
globenewswire.com on 29 June 2020), the tungsten
carbide market is poised to grow by $4.04bn during
2020-2024 progressing at a compound annual
growth rate (CAGR) of 4% during the forecast
period. The factors identified by the author as driving
the growth include the vast reserves of tungsten
ores in China, dynamic properties of tungsten
carbide, increasing demand from mining and
construction industries and emerging applications
of tungsten carbide.
Crow Mountain – New England
The Crow Mountain tenement covers part of the
Great Serpentine Belt in the western New England
province of north eastern NSW. Shallow marine
sediments of late Devonian age on the western side
of the tenement are separated from much older deep
marine sediments and intrusive rocks on the eastern
side of the tenement by a major north-south trending
structure, the Peel Fault. The fault is well known for
the belt of serpentinite, formed by alteration of pre-
existing ultra-mafic intrusives exposed for several
hundred kilometers along the fault.
Peel fault and associated known gold occurrences
Historical work has shown that mineralisation occurs
within the structure and is likely the conduit for much
of the mineralisation surrounding the fault
Targeting for drilling will concentrate on this
conduit, however a mapping program will initially be
undertaken, as the first step in the process, once the
COVID-19 inter-state travel restrictions are eased.
Chile
The adverse geo-political climate in Chile during
the 2020 financial year resulted in the Company
deciding not to pursue any further exploration
activities in this sector. The Company did not renew
its Exploration Concessions (Pinta 1-15 and Bellavista
1-5) upon expiry of their initial term (refer to ASX
announcement Quarterly Activities and Cashflow
Report released on 30 April 2020).
Speciality Metals International Limited Annual Report 2020
13
Ms Cavallaro commenced with the Company
immediately following 2020 financial year on 1 July
2020 and is working with the Board and Mr MacNeill
to implement organisational frameworks in relation to
the Company’s corporate and commercial processes
to support its growth as a sustainable resources
management company. Work is being finalised
to align and agree on the Company’s corporate
identity and direction and to embed the purpose,
values and positioning into strategy, operations,
and people practices.
Additional organisational changes subsequent
to the 2020 financial year included:
− the departure of Mr Chris Godfrey, Chief
Operating Officer on 31 July 2020;
− the appointment of Mr Michael Bartlett to the
newly created Quarry Manager role, on 10 August
2020; and
− the appointment of Ms Suzanne Irwin as Company
Secretary on the resignation of Mr Adrien Wing
on 1 September 2020.
The Company will continue to engage staff,
as required, to build capacity and operational
efficiencies for the Retreatment Plant, the XRT
Sorter and quarry operations at Mt Carbine.
Corporate Activities
Board Of Directors
Subsequent to the acquisition of Mt Carbine Quarries
Pty Ltd, the Company was pleased to welcome
Mr Oliver Kleinhempel and Mr Zhui Pei Yeo as
Non-executive Directors to its Board following
their appointment on 12 August 2019 (refer ASX
announcement Change of Directors released on
12 August 2019).
As part of the Board changes, Mr Roland Nice
resigned as a Director on the same day. Mr Nice
provided six years of valuable service to the
Company in his role as a Non-executive Director.
Leadership Team
During the quarter ended June 2020, the Company
undertook an organisational alignment to support
the Company’s transition from a junior explorer to
an emerging and sustainable minerals and metals
producer. The resignation of the former Executive
Chairman and Chief Executive Officer, Mr Russell
Krause took place in April 2020 (refer to ASX
announcement Executive Chairman/CEO Resignation
released on 24 April 2020) and the appointment of
two senior executives were made in the following
month: Mr Kevin MacNeill was appointed as Interim
Chief Executive Officer and Senior Technical Adviser,
and Ms Kim Cavallaro as Chief Commercial Officer
and Chief Executive Officer-designate (refer to
ASX announcement, Leadership Appointments and
Organisational Update released on 13 May 2020).
At the same time, it was announced that Mr Oliver
Kleinhempel would assume the role of Non-executive
Chairman for a transition period.
Mr MacNeill commenced with the Company in May
2020 and has focused on the day-to-day operations
at Mt Carbine as well as overseeing the assessment of
the Company’s project portfolio to outline a strategic
roadmap for the Mt Carbine developments and the
gold exploration activities in New South Wales.
14
Speciality Metals International Limited Annual Report 2020
Operating and Financial Review continued
Strategy Review
Throughout the 2020 financial year, the Board has continued to guide the Company’s corporate strategy and
long-term vision, seeking to leverage the Company’s core competencies and its outstanding Mt Carbine assets,
to position the Company to be a value-oriented resources company, sustainably producing and managing new
economy minerals and metals.
The potential of the Mt Carbine assets is being realised through resource-efficiency and investment in our people
and operations. The ongoing resource exploration (redefinition) targeting high-grade envelopes for underground
mining (refer to figure 1 Mt Carbine Development Projects Timeline) is consistent with our approach to drive
value in our operations and at the same time reduce our environmental footprint.
The Company is continuing to evaluate corporate and exploration opportunities within the new economy and
critical minerals sector to create shareholder value.
Capital Raisings
Non-Renounceable Entitlements Offer
In July 2019, the Company raised $2,900,000 by way of an underwritten pro-rata non-renounceable shareholder
entitlement offer (Offer). Pursuant to the Offer, all eligible shareholders were entitled to 1 new share for every
5 existing shares held in the Company at 0.018 cents per share and the Offer was fully underwritten by Rymill
Global Ventures Ltd. The Offer resulted in a short-fall as set out below (also refer to ASX announcement Rights
Issue Closure and Notification of Shortfall released on 26 July 2019).
Event
Shares on issue before the Offer
Total shares applied for under the Offer
Shortfall shares remaining after close of the Offer
No of Shares Applicable Funds
798,107,881
112,733,514
$2,029,203
46,888,236
$843,988
On 2 August 2019, all unsubscribed shares were taken up and issued to Rymill Global Ventures Ltd in accordance
with the underwriting agreement.
On the same day, the 25,000,000 Performance Rights, granted to Directors at a price of $0.0132 at the General
Meeting on 22 June 2018, were also issued to Directors having satisfied the vesting condition relating to the
purchase of Mt Carbine Quarries Pty Ltd.
Placement
On 6 March 2020, the Company raised $4,500,000 via the placement of 125,000,000 fully paid ordinary shares
at a price of 3.6 cents. The placement was undertaken pursuant to the Company’s placement capacity under
Listing Rule 7.1 (15% Rule) (refer to ASX announcement Capital Raising Successfully Completed released on
6 March 2020).
Speciality Metals International Limited Annual Report 2020
15
Tenement Schedule
Details of mining tenements held by the Company and its controlled entities:
State
Ownership
Area
Status
Notes
Expiry Date
Queensland, Australia
ML 4867
ML 4919
EPM 14871
EPM 14872
EPM 27394
Mt Carbine
Quarries Pty Ltd
(wholly owned
subsidiary of the
Company) 100%
Mt Carbine
Quarries Pty Ltd
(wholly owned
subsidiary of the
Company) 100%
Speciality Metals
International
Limited 100%
Speciality Metals
International
Limited 100%
Speciality Metals
International
Limited 100%
Acquired on 28 June
2019 as part of the
Company’s 100%
acquisition of Mt
Carbine Quarries
Pty Ltd.
Acquired on 28 June
2019 as part of the
Company’s 100%
acquisition of Mt
Carbine Quarries
Pty Ltd.
358.5 ha
Granted
7.891 ha
Granted
10 sub-blocks
Granted
21 sub-blocks
Granted
4 sub-blocks
Granted
5 Year Term
Granted 1 June 2020
31/07/2022
31/08/2023
12/12/2020
(Note 1)
11/12/2020
(Note 1)
01/06/2025
New South Wales, Australia
EL 6648
EL 8024
Speciality Metals
International
Limited 100%
Speciality Metals
International
Limited 100%
9 Units
Granted
Acquired 9 September
2016
19/10/2020
(Note 2)
19 Units
Granted
5 Year Term
Granted 1 September
2020
29/11/2024
ML = Mining Lease EPM = Exploration Permit for Minerals EL = Exploration Licence
Note 1: Renewal lodged and received by Department of Natural Resources Mines and Energy
Note 2: Renewal in progress
16
Speciality Metals International Limited Annual Report 2020
Mineral Resources and Ore Reserves Statement
Summary of Results of Annual Review of Resources and Reserves
There were no material changes in Speciality Metals’ mineral resources and ore reserves holdings against that
from the previous year which have been reported in accordance with Appendix 5A (JORC Code).
The resources and reserves at Mt Carbine comprise three components:
1. The resources and reserves in mineralised rock proposed to be mined by open pit and/or underground
mining, beneath and adjacent to the existing open pit.
2. The mineralised rock that was mined and stockpiled in what is now termed the Low Grade Stockpile (“LGS”).
3. The tailings from the previous mining operation, principally the tailings in Tailings Storage Facility No 4.
There are also other significant mineralised stockpiles and mine dumps, particularly the Optical Ore Sorter Reject
(“OOSR”) stockpile from the previous mining operation, estimated to comprise several million tonnes. Except for
the OOSR stockpile these have not been quantified nor sampled for grade.
1. Mineralised Hard Rock
The resources and reserves estimates for the mineralised hard rock in the Mt Carbine tungsten deposit were
updated to comply with the 2012 JORC Code for reporting of reserves and resources in November 2012 (SEI -
CNQ ASX announcements 20/11/2013; 24/11/2013 and 9/01/2014). No further sampling or work has been done
since that update that impacts on the resource estimate to 2012 JORC Code requirements and therefore the
resources and reserves estimates for the Mt Carbine tungsten deposit are left unchanged.
2. Low Grade Stockpile
Speciality Metals announced an upgrade of the Low Grade Stockpile resources in September 2012. To comply
with the 2012 JORC Code, a more detailed reporting of the upgrade was provided in Appendix 1 to the 2019
annual report.
The Low Grade Stockpile is comprised of mineralised rock extracted during open pit mining operations between
1974 and 1987. Grade control practice during this open pit mining discriminated between ore sent for processing
and mineralised rock deemed at the time to be too low grade to justify treatment. Independent research has
since established that the grade control practice, based on an estimate of quartz vein percentage as a direct
indicator of tungsten grade, was invalid.
In the historical records of this mining operation the material consigned to the stockpile is described as “mullock”
or “low grade”, but also includes 3.5Mt of “ore”. Geological examination and drilling indicates that the previous
mining at Mt Carbine was all in mineralised rock. No sampling or record of possible grade variation was kept of
material sent to the stockpile.
Historical mine records indicate that there is approximately 12Mt of broken rock in the stockpile. This reconciles
with the tonnes consigned to the LGS, derived from the independent estimate of total tonnes of rock mined in
the previous open pit of 22Mt, less the 10Mt recorded as having been processed through the mill.
The LGS has been bulk sampled (22,000 tonnes), the sample assayed and subjected to extensive sorting trials
with a pilot-scale X-ray sorter (SEI - CNQ - III ASX announcement 23 March 2011). The 2011 sorter trials indicated
that the low grade material could be pre-concentrated by sorting with an optimum 6 times upgrade. The grade
of the bulk sample was 0.075% WO3. This compares very favourably with a back-calculation from historic mine
records of production and mill recovery and based on the recent resource estimate which took account of the
resource mined during the previous open pit operation, of a global average grade of 0.07% WO3 for the Low
Grade Stockpile. Further sampling of the LGS for environmental permitting purposes involved taking 80 grab
samples from the surface of the stockpile. Each sample was approximately 20kg of minus ~100mm material.
The average grade of these samples was 0.088% WO3.
Following the 2011 X-ray sorter trials previously announced, and the costings determined in the corresponding
Feasibility Study, Speciality Metals has sufficient confidence in the tonnage and global average grade of the
stockpile to justify its inclusion in the resource inventory at Mt Carbine as an Indicated Resource.
− The original capital cost estimates determined as part of that Feasibility Study were revised by two
independent EPCM exercises completed in 2016, and since then the capital and operating cost estimates have
continually been reviewed, the last revision being carried out in August 2018.
− The quarry currently operated on site by Mt Carbine Quarries Pty Ltd (“Mt Carbine Quarries”) includes
crushing, screening and rock moving equipment used on a campaign basis. Speciality Metals has since
acquired Mt Carbine Quarries, and is using the quarry’s crushing, screening and rock moving equipment
Speciality Metals International Limited Annual Report 2020
17
as part of the process to pre-sort the mineralised material from the Low Grade Stockpile. This had been
estimated to result in capital expenditure saving of AU$6.5M with the capital cost for the remainder of the
plant to treat the stockpile estimated to be AU$8.5M.
− Otherwise, capital cost for treatment of Low Grade Stockpile only was estimated to be AU$15M, based on
a detailed EPCM exercise carried out in 2016 and revised in August 2018.
− Operating costs were estimated to be AU$8.50 per tonne, however possible price increases for electricity
were not factored into this estimate.
3. Tailings
Speciality Metals has previously stated that the tailings stockpile contained approximately 2Mt at a global
average grade of 0.1% WO3, based on comprehensive but non-JORC compliant historical studies. The stockpile
includes a basal layer 1-2m thick amounting to approximately 400,000 tonnes of slimes (<75micron particles)
with a global average grade of 0.35% WO3.
Mt Carbine Mineral Resource Summary – Tungsten Resource as WO3
(as announced to ASX on 13 January 2014)
Resource
Low Grade Stockpile
Main Zone Hard Rock
Main Zone Hard Rock
Resource
Indicated
Indicated
Inferred
Total
Cut-off Grade
(%)
Tonnes
(Mt)
0.00
0.05
0.05
12.0
18.0
29.3
59.3
WO3
(%)
0.07
0.14
0.12
WO3
(mtu)
840,000
2,520,000
3,516,000
6,876,000
Exploration targets adjacent to Inferred and Indicated Mineral Resources in the Mt Carbine sheeted quartz vein
tungsten deposit.
1. Sheeted quartz vein system:
Exploration drilling to date suggests that the Mt Carbine tungsten deposit may plunge to the north, and the
deposit is open in this direction, to the south east and at depth. The deposit contains an Indicated Mineral
Resource of 18Mt at 0.14% WO3 (at a cut-off of 0.05% WO3) based on drill core assays. These are considered
to be conservative and influenced by the nugget effect characterising the deposit. Exploration of the depth
extensions of the deposit will be carried out after production from this resource has commenced.
2. The Iron Duke prospect:
The Iron Duke prospect on the eastern side of the planned open pit had been intersected in 6 drill holes, and
mapped in detail on the surface and shown to extend more than 2km to the north of where it has been drilled.
Surface width of the sub-vertical zone that hosts the Iron Duke mineralisation ranges from 10m to 20m over this
strike length. Scheelite and minor wolframite mineralisation have been observed in rock chips along the entire
length of surface exposure.
The Iron Duke mineralisation is dominated by scheelite (whereas the main Mt Carbine sheeted quartz vein
tungsten deposit is dominated by wolframite) and the weighted average grade of the 6 drill intercepts in the
Iron Duke is 0.32% WO3 over an average true width of 8m. The 6 drill holes cover a strike length of 300m, and
the shallowest intersection of the prospect is at a depth of 100m immediately adjacent to the planned open
pit. Although the surface expression of the Iron Duke adjacent to the open pit is now covered by mine dumps,
historical maps indicate that it was recognised as a scheelite prospect at the surface in 1917, and therefore there
is a reasonable expectation that the prospect will extend from the surface to below its present maximum drilled
depth of 195m. The Iron Duke mineralisation is not included in either the present Inferred or Indicated Mineral
Resources.
Exploration of the Iron Duke to test grade, width and continuity was deferred due to market conditions in 2014.
The Exploration Target for the Iron Duke over a strike length of 400m immediately adjacent to the open pit
was 3.5Mt to 6.5Mt with possible grades ranging from 0.13% WO3 to 0.59% WO3 (based on drilling data), with
the weighted average grade of drill hole intersections of 0.32% WO3 possibly reflecting the average grade.
This Exploration Target did not include the potential for further mineralisation along the established northern
continuation of the prospect.
18
Speciality Metals International Limited Annual Report 2020
Mineral Resources and Ore Reserves Statement continued
The Exploration Targets at Mt Carbine was summarised in Table 1 below:
Mineralisation system
Exploration target tonnes
Exploration target grades
Main sheeted quartz vein system –
wolframite dominated
12Mt-16Mt
0.08% WO3 to 0.16% WO3
Iron Duke prospect – scheelite dominated
3.5Mt-6.5Mt
0.13% WO3 to 0.59% WO3
Hole No.
CB18
CB51
CB52
CB53
CB54
CB66
From (m)
To (m)
Interval (m)
%WO3
(XRF analysis)
163
130.25
94.5
160.5
162.5
113.3
198
146.5
112.5
172.5
169.35
127.62
35
8.73
18
12
6.85
14.32
0.299%
0.57%
0.18%
0.49%
0.59%
0.13%
Table 2. Drill intersections in the Iron Duke prospect adjacent to the open pit at Mt Carbine.
Governance and Internal Controls
The Company has followed the practice of obtaining independent, geostatistically based estimates of resources,
which themselves have been independently audited. These estimates have been qualified in-house where
geometallurgical research, economic modelling involving mine and processing studies and/or reconciliations
of historical mine data justify modification. The prime concern in this deposit is the extreme nugget character
of the mineralisation and in this respect, considerable confidence is placed on existing resource estimates that
they are (a) conservative with respect to grade estimation, and (b) that the previous mine operation and a nearly
complete set of records of this operation document what is in effect a 10Mt bulk sample of the ore body.
Competent Person Statement
a. The above Mineral Resources and Ore Reserves Statement is based on, and fairly represents, information and
supporting documentation prepared by competent persons; and
b. The information in this document relating to Exploration Targets and Mineral Resources is based on
information compiled by Dr Andrew White, who is a Fellow of the Australian Institute of Geoscientists and
principal consultant for Andrew White & Associates. Dr White has sufficient experience relevant to the style
of mineralisation, mining and processing the type of deposit under consideration to qualify as a Competent
Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves” (the JORC code). Dr White consents to the inclusion of matters based on his
information in the form and context in which it appears in this Annual Report.
Speciality Metals International Limited Annual Report 2020
19
Financial Report
The Directors of Speciality Metals present their report on the
consolidated entity (Group), consisting of Speciality Metals
and the entities it controlled at the end of, and during, the
financial year ended 30 June 2020.
Contents
18. Directors’ Report
33. Auditor’s Independence Declaration
34. Consolidated Statement of Comprehensive Income
35. Consolidated Statement of Financial Position
36. Consolidated Statement of Changes in Equity
38. Consolidated Statement of Cash Flows
39. Notes to the Financial Statements
99. Directors’ Declaration
100. Independent Auditor’s Report
102. Corporate Governance Statement
110. Additional Stock Exchange Information
Contents
20 Directors’ Report
33 Consolidated Statement of Profit or Loss and Other
Comprehensive Income
34 Consolidated Statement of Financial Position
35 Consolidated Statement of Cash Flows
36 Consolidated Statement of Changes in Equity
37 Notes to the Consolidated Financial Statements
63 Directors’ Declaration
64 Auditor’s Independence Declaration
65
Independent Auditor’s Report
68 Shareholder Information
70 Forward Looking Statements
20 Speciality Metals International Limited Annual Report 2020
Directors’ Report
DIRECTORS’ REPORT
The Directors of Speciality Metals present their report on the consolidated entity (Group), consisting of Speciality Metals and
the entities it controlled at the end of, and during, the financial year ended 30 June 2020.
DIRECTORS
The following persons were Directors of Speciality Metals during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Oliver Kleinhempel, Non-executive Director (appointed 12 August 2019 | Non-executive Chairman (appointed 24 April 2020)
Stephen Layton, Independent Non-executive Director
Zhui Pei Yeo, Non-executive Director (appointed 12 August 2019)
Russell H. Krause, Executive Chairman (resigned 24 April 2020)
Roland W. Nice, Independent Non-executive Director (resigned 12 August 2019)
COMPANY SECRETARY
Suzanne Irwin (appointed 1 September 2020)
Adrien Wing (resigned 1 September 2020)
PRINCIPAL ACTIVITIES
The principal activities of the Group during the 2020 financial year were to:
- maintain and where possible expand upon the existing Mt Carbine Quarrying operations acquired as part of the 100% acquisition
of Mt Carbine Quarries Pty Ltd on 28 June 2019;
-
refurbish and commence production from the existing Mt Carbine Retreatment Plant as part of the Company’s unincorporated
joint venture with CRONIMET Australia Pty Ltd for the development of the Mt Carbine Tungsten Tailings Retreatment and
Stockpile Projects. Production from the stockpiled tailings commenced during the first half of 2020 with the first commercial
concentrate shipment being despatched in June 2020;
- undertake a detailed review of the Mt Carbine geology (including structural geology) to gain a better understanding of
the wolframite/scheelite mineralisation zones within the deposit and define higher grade zones labelled as “King Veins”; and
- maintain its tungsten exploration assets in Far North Queensland whilst continuing to evaluate the exploration potential of its gold
exploration licences in New South Wales.
The Group also continues to evaluate other corporate and exploration opportunities within the new economy and critical minerals
sector.
RESULTS
The net result of operations for the consolidated entity after applicable income tax expense was a loss of $3,015,680 (2019 profit of
$3,808,863).
DIVIDENDS
No dividends were paid or proposed during the period.
OPERATING & FINANCIAL REVIEW
Information on the operations and financial position of the Group and its business strategies and prospects for future financial years
is set out earlier in this Annual Report. The auditors have issued an unqualified opinion.
CORPORATE STRUCTURE
Speciality Metals International Limited is a limited company that is incorporated and domiciled in Australia.
Page | 20
Speciality Metals International Limited Annual Report 2020
21
DIRECTORS’ REPORT
SIGNIFICANT CHANGES
Significant changes in the state of affairs of the Group for the financial year were as follows:
(a)
Increase in contributed equity of $7,748,192 resulting from:
Placement of 112,733,514 shares at $0.018 per share under the
Company’s Non-Renounceable Pro-Rata Entitlement Offer of
one (1) new share for every five (5) shares held (refer ASX
announcement dated 26 July 2019)
Placement of 46,888,236 shortfall shares at $0.018 per share
under the Company’s Non-Renounceable Pro-Rata Entitlement
Offer of one (1) new share for every five (5) shares held (refer
ASX announcement dated 26 July 2019)
Issue of 25,000,000 shares at $0.0132 per share to Directors
upon the satisfaction of the vesting conditions for the Performance
Rights issued to Directors on 22 June 2018 (refer ASX
announcement dated 2 August 2019)
Issue of 2,500,000 shares at $0.018 per share to consultants for
consulting services pursuant
the Mt Carbine Quarries
Transaction.
to
Placement of 125,000,000 shares at $0.036 per share to
institutional and sophisticated investors undertaken pursuant to
placement capacity under Listing Rule 7.1 (15% Rule) (refer ASX
announcement dated 6 March 2020)
Sub-Total
Share issue costs
TOTAL
Date
Shares
$
31-07-2019
112,733,514
2,029,204
02-08-2019
46,888,236
843,988
02-08-2019
25,000,000
330,000
27-12-2019
2,500,000
45,000
06-03-2020
125,000,000
4,500,000
7,748,192
(376,154)
7,372,038
(b) On 12 August 2019 the Company appointment two Non-executive Directors to the Board of Speciality Metals following
the acquisition of Mt Carbine Quarries Pty Ltd namely Mr Oliver Kleinhempel and Mr Zhui Pei Yeo. Mr Roland Nice resigned as
a Non-executive Director as part of the Board changes.
(c) The Company raised $2,029,204 via the placement of 112,733,514 shares under the Company’s Non-Renounceable Pro-Rata
Entitlement Offer of one (1) new share for every five (5) shares held. The offer was fully underwritten by Rymill Global Ventures
Ltd with all unsubscribed shares being taken up in accordance with the underwriting agreement raising a further $843,988 via
the issue of 46,888,236 shares.
(d) The Company raised $4,500,000 (with oversubscriptions) via the placement of 125,000,000 fully paid ordinary shares at
an issue price of $0.036 cents per share with the placement being undertaken pursuant to its placement capacity under Listing
Rule 7.1 (15% Rule). Refer ASX announcement “Capital Raising Successfully Completed dated 6 March 2020.
(e) Executive Chairman and Chief Executive Officer, Russell Krause, resigned from the Company on 24 April 2020.
(f) On 13 May 2020 the Company announced the following leadership appointments:
- Kim Cavallaro appointed as Chief Commercial Officer and subsequently taking the role as Chief Executive Officer and
Managing Director. Ms Cavallaro commenced with the Company on 1 July 2020;
- Kevin MacNeill appointed as Interim-CEO and Senior Technical Advisor, commencing immediately, with a senior technical
advisory role post CEO hand-over; and
- Oliver Kleinhempel appointed to the role of Non-executive Chairman for a transitional period.
(g) ~$4 Million Purchase Order (including GST) awarded to the Company’s wholly owned subsidiary Mt Carbine Quarrying
Operations Pty Ltd for the supply of various quarry materials for a road construction project located within the Cook Shire in
Far North Queensland (refer ASX Announcement “$4 Million Contract Enhances Order Intake – Mt Carbine” dated 1 July 2020).
(h) First concentrate shipment despatched from the Mt Carbine Tailings Retreatment Project during June 2020.
Page | 21
22
Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
The Directors are not aware of any other significant changes in the state of affairs of the Company occurring during
the financial period, other than as disclosed in this report.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
At the date of this Directors’ Report, the Directors are not aware of any matter or circumstance that has arisen that has 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
the financial year subsequent to 30 June 2020 other than:
-
Issue of the following options to Kim Cavallaro upon commencement of employment as the Group’s Chief Commercial Officer
on 1 July 2020:
§
§
two (2) million options exercisable at $0.04 on or before 1 July 2023. These options were issued under the Company’s Equity
Incentive Plan and will vest upon the completion of six (6) months employment with the Company; and
three (3) million options exercisable at $0.06 on or before 1 July 2023. These options were issued under the
Company’s Equity Incentive Plan and will vest upon the completion of twelve (12) months employment with the Company.
-
The Company was part of the project consortium awarded a $220,000 grant by METS Ignited Australia Limited under
the Queensland METS Collaborative Projects Fund for the mine waste transformation project titled “Optimised X-Ray Ore
Sorting Technologies and Material Handling Concepts
for Historic Tungsten Mine Waste Transformation”
(refer ASX announcement “Govt Support for Mt Carbine Mine Waste Transform. Initiative dated 24 July 2020).
- Ms Suzanne Irwin was appointed as Company Secretary on 1 September 2020 following the resignation of Mr Adrien Wing on
the same day (refer ASX announcement “Change in Company Secretary and Registered Office” dated 1 September 2020).
-
The Company also changed its registered office as from 1 September 2020 to:
Office 06-110
Level 6, 25 King Street
Bowen Hills Qld 4006
(refer ASX announcement “Change in Company Secretary and Registered Office” dated 1 September 2020; and
-
The commencement of the XRT Sorting Pilot Plant Test Program being undertaken with CRONIMET Australia Pty Ltd showing
positive early results and significant tungsten ore upgrade (refer ASX announcement “Pilot Sorter Delivers Significant Tungsten
Ore Upgrade” dated 7 September 2020).
LIKELY DEVELOPMENTS
The Company, will continue to expand upon its current operations at the Mt Carbine Mine Site with respect to its quarrying and
mineral processing activities which will include the XRT sorting of ~12 million tonnes of stockpiled material during 2021 financial year.
The Company also plans on carrying out exploration programs within its exploration prospects within the coming financial year along
with continuing its exploration activities associated with the identification of additional tungsten deposits and other new economy and
critical minerals both within and outside of its existing exploration permits.
ENVIRONMENTAL REGULATION & PERFORMANCE
The Group is committed to minimising the environmental footprint of its operations, and has during the year, undertaken ongoing
reviews of environmental matters to ensure compliance with environmental regulations. The Group proactively engaged with
the Queensland Department of Environment and Science to submit reports and updates of its project development timeline. In
addition, the Group is actively reviewing its energy and water usage, to ensure efficiencies are identified and implemented.
The Group is also continuing its efforts to identify opportunities for mutually reinforcing social and business values with local
communities. An example is the Company’s engagement with the neighbouring wildlife conservancy to undertake an on-site weed
management program to support biodiversity of the native flora and fauna in the area.
Page | 22
Speciality Metals International Limited Annual Report 2020
23
DIRECTORS’ REPORT
INFORMATION ON CURRENT DIRECTORS
Oliver Kleinhempel
Non-executive Director – Appointed 12 August 2019 | Non-executive Chairman – Appointed 24 April 2020
Mr Kleinhempel was appointed Non-executive Director on 12 August 2019 and subsequently Non-executive Chairman on
24 April 2020 following the resignation of Mr Krause as Non-executive Chairman. Mr Kleinhempel started his career at Outotec,
a leading Minerals & Metals Processing Technology Company, where he spent several years in Europe, South America and
Southeast Asia on various assignments. In the recent 9 years Mr Kleinhempel held various Executive Management positions in
the project development, finance and commodity trading sector, with a regional focus on Asia-Pacific. Mr Kleinhempel holds a
Bachelor's Degree in Business Administration from the Cooperative State University Baden-Wuerttemberg (Germany) and obtained
a Master's Degree from the Mining Institute of the Clausthal University of Technology (Germany).
Special responsibilities: Chair of the Board and the Risk Committee. Member of both the Audit and the Remuneration & Nomination
Committees.
Stephen Layton | Non-executive Director
Mr Layton was appointed Non-executive Director on 14 November 2017 and has over 35 years’ experience in equity capital markets
in the UK and Australia. Starting as a Jobber (market maker) with BZW on the trading floor of the London Stock Exchange from 1980
to 1986, he became a Member of the London Stock Exchange in 1985. Since migrating to Australia in 1986, Mr Layton has worked
with various stockbroking firms and/or AFSL regulated corporate advisory firms. Having raised capital for many ASX-listed companies,
he has a depth of knowledge that only comes from a thorough immersion in the industry. Mr Layton has specialized in capital raising
services and opportunities, corporate advisory, facilitation of ASX listings and assisting companies grow. Mr Layton has held both
Principal and Director roles in his advisory career and his professional associations include Master Practitioner Member of
the Stockbrokers and Financial Advisors Association – MSAFAA.
Other listed company directorships: Non-executive Director of ASX listed Mithril Resources Limited [ASX:MTH] since 15 May 2019
and New Age Exploration Limited [ASX:NAE] from 12 October 2018 to 26 September 2020.
Special responsibilities: Chair of the Audit Committee. Member of both the Remuneration & Nomination and Risk Committees.
Zhui Pei Yeo | Non-executive Director – Appointed 12 August 2019
Mr Yeo was appointed Non-executive Director on 12 August 2019. Mr Yeo graduated with first class honours from the Imperial
College London in Electrical and Electronic Engineering. Since then, Mr Yeo has been working at a leading system integrator in
the telecommunications industry in South-East Asia. Over the years, he has taken on executive, management and supervisory roles.
This has allowed him to gain a wide range of experience from project planning to resource management to commercial negotiations.
Mr Yeo is also a Director of a steel-product manufacturer.
Special responsibilities: Chair of the Remuneration & Nomination Committee. Member of both the Audit and Risk Committees.
INFORMATION ON FORMER DIRECTORS
Russell H. Krause | Executive Chairman – Resigned 24 April 2020
Mr Krause was appointed Non-executive Chairman of the Company on 30 June 2013, Executive Chairman on 14 November 2017
and resigned on 24 April 2020. Mr Krause has over 25 years’ executive management and director level experience in a range of
corporate advisory, stockbroking, and investment banking roles with some of Australia’s leading financial services firms. Mr Krause
also has extensive experience in the resources sector providing equity capital markets, capital raising and corporate advisory services
to a range of ASX listed mining and energy companies. Mr Krause is currently a Director of Novus Capital Limited.
Roland W. Nice (B.Sc (Metallurgical Engineering) | Independent Non-executive Director – Resigned 12 August 2019
Mr Nice was appointed a Non-executive Director of the Company on 30 June 2013. Mr Nice is a metallurgical engineer with over
45 years’ experience. Mr Nice has a strong track record in mineral processing and metallurgy, most recently as a consulting
metallurgical engineer in the role of Senior Associate for Behre Dolbear Australia, where he was involved in due diligence activities
and consulting on some of the world’s largest poly-metallic, gold and uranium projects including Newcrest’s Cadia, Ridgeway and
Telfer gold projects, Barrick’s Cowal gold project, LionOres’ Thunderbox gold project and numerous other non-ferrous metal mining
projects. Mr Nice’s work as a consultant has included specific experience in tungsten processing. Prior to this, Mr Nice was
the principal at a technical consulting firm, R.W. Nice and Associates, which followed approximately 20 years in a range of roles with
Pancontinental Mining Limited, including General Manager Technology and Metallurgy.
Page | 23
24 Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
DIRECTORS' INTERESTS IN SHARES, OPTIONS AND PERFORMANCE RIGHTS
Directors’ interests in shares, options and performance rights as at 30 June 2020 are set out in the table below.
Director
O. Kleinhempel
S. Layton
Z.P. Yeo
Shares Directly and
Indirectly Held
Options Directly and
Indirectly Held
Performance Rights Directly
and Indirectly Held
15,333,600
46,369,059
64,919,810
-
-
-
-
-
-
COMPANY SECRETARY
Adrien Wing (Resigned 1 September 2020)
Mr Wing held the position of Company Secretary for the Company as at the end of the financial year. Adrien is a certified practicing
accountant. He previously practiced in the audit and corporate advisory divisions of a chartered accounting firm before working with
a number of public companies listed on the ASX as a corporate and accounting consultant and company secretary.
Suzanne Irwin (Appointed 1 September 2020)
Ms Irwin was appointed as Company Secretary for the Company subsequent to the end of the financial year, on 1 September 2020.
Ms Irwin is a Fellow of the Governance Institute of Australia with over 9 years’ company secretarial experience with ASX300 member,
ERM Power Limited which was delisted from the ASX on acquisition by Shell Energy Australia in November 2019. Prior to this, having
completed CPA certification, Suzanne has over 10 years’ financial experience in business and commercial analyst roles at various
BHP mining and minerals extraction operations.
MEETINGS OF DIRECTORS
During the financial year, eleven (11) Board Meetings, one (1) Nomination & Remuneration Committee Meeting, two (2) Audit
Committee Meetings and one (1) Risk Committee Meeting were held.
Director
O. Kleinhempel
S. Layton
Z.P. Yeo
R.H. Krause
R.W. Nice
Meetings Eligible to Attend
Meetings Attended
9
11
9
10
2
9
11
9
10
2
The following table sets out the number of meetings of committees of Directors held during the financial year and the number of
meetings attended by each Director (while they were a committee member):
Remuneration & Nomination
Committee
Audit Committee
Risk Committee
Meetings
Eligible to
Attend
Meetings
Attended
Meetings
Eligible to
Attend
Meetings
Attended
Meetings
Eligible to
Attend
Meetings
Attended
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
Director
S. Layton
O. Kleinhempel
Z.P. Yeo
R.H. Krause
SHARE OPTIONS AND PERFORMANCE RIGHTS
The Company granted options during the reporting period to Key Management Personnel of the Group as part of their remuneration.
Refer to Remuneration Report for further details.
Page | 24
Speciality Metals International Limited Annual Report 2020
25
DIRECTORS’ REPORT
There are no unissued ordinary shares of Speciality Metals under vested options at the date of this report. During or since the end of
the financial year no unlisted options were exercised.
REMUNERATION REPORT - AUDITED
This report for the year ended 30 June 2020 outlines the remuneration arrangements for the Group in accordance with
the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited in accordance with
section 308(3C) of the Act.
The Remuneration Report details the remuneration arrangements of key management personnel (KMP) who are defined as those
persons having the 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 parent company.
For the purposes of this report, the term ‘Executive’ includes the executive directors, senior executives and general managers of
the Group, whilst the term ‘NED’ refers to Non-Executive Directors only.
The Remuneration Report is set out under the following main headings:
(a) Policy Used to Determine the Nature and Amount of Remuneration;
(b) Key Management Personnel;
(c) Details of Remuneration;
(d) Cash Bonuses;
(e) Equity Instruments;
(f) Options and Performance Rights Granted as Remuneration;
(g) Equity Instruments Issued on Exercise of Remuneration Options or Rights;
(h) Service Agreements; and
(i) Speciality Metals’ Financial Performance.
(a) Policy Used to Determine the Nature and Amount of Remuneration
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate
for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of
value for shareholders. The Board believes that executive remuneration satisfies the following key criteria:
§ competitiveness and reasonableness;
§ acceptability to shareholders;
§ performance linkage / alignment of executive compensation;
§
transparency; and
§ capital management.
These criteria result in a framework which can be used to provide a mix of fixed and variable remuneration and a blend of short
and long-term incentives in line with the Company’s limited financial resources.
Fees and payments to the Company’s Non-executive Directors and senior executives reflect the demands which are made on,
and the responsibilities of, the Directors and the senior management. Such fees and payments are reviewed annually by the
Board. The Company’s Executive and Non-executive Directors, senior executives and officers are entitled to receive
performance rights, options and/or shares under the Company’s Equity Incentive Plan which was approved by shareholders at
the General Meeting held on 22 June 2018.
Fees for Non-executive Directors are not linked to the performance of the Group.
Use of Remuneration Consultants
The Group has not used any remuneration consultants during the year.
Voting and Comments made at the Group’s 2019 Annual General Meeting
The Group received votes against its Remuneration Report for the 2019 financial year however did not receive any specific
feedback on its remuneration practices at the 2019 Annual General Meeting or during the year.
Page | 25
26 Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
(b) Key Management Personnel
The following persons were Key Management Personnel of the Group during the 2020 financial year:
Position
Appointment
Resignation
Directors
O. Kleinhempel
S. Layton
Z.P. Yeo
R.H. Krause
R.W. Nice
Executives
K.B. MacNeill
A.M. Wing
C.P. Godfrey
Non-executive Director
Non-executive Chairman
12 August 2019
24 April 2020
Independent Non-executive Director
14 November 2017
-
-
-
Non-executive Director
Non-executive Chairman
Executive Chairman
12 August 2019
30 June 2013
14 November 2017
24 April 2020
Independent Non-executive Director
30 June 2013
12 August 2019
Interim CEO & Senior Technical Advisor
4 May 2020
-
Company Secretary
Chief Operating Officer
1 February 2019
1 September 2020
4 November 2019
31 July 2020
(c) Details of Remuneration
Directors are entitled to remuneration out of the funds of the Company, but the remuneration of the Non-executive Directors
may not exceed in any year the amount fixed by the Company in general meeting for that purpose. The aggregate remuneration
of the Non-executive Directors has been fixed at a maximum of $200,000 per annum to be apportioned among the Non-
executive Directors in such a manner as they determine. Directors are also entitled to be paid reasonable travelling,
accommodation and other expenses incurred in consequence of their attendance at Board Meetings and otherwise in
the execution of their duties as Directors.
Details of the nature and amount of each element of the remuneration of each of the Key Management Personnel of
the Company and the consolidated entity during the year ended 30 June 2020 are set out in the following tables:
Page | 26
Speciality Metals International Limited Annual Report 2020
27
DIRECTORS’ REPORT
Short-term
employee
Share-based payments
benefits –
Post-employment
cash salary
benefits -
Termination
and fees
Superannuation
benefits
Shares
Performance
Rights and
Options7
$
$
$
$
$
Total
$
%
Performance
Based
150,000
48,000
16,000
20,000
29,100
263,100
Short-term
employee
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
195,737
65,246
65,246
345,737
113,246
81,246
56.6%
57.6%
80.3%
-
-
20,000
29,100
0.0%
0.0%
326,229
589,329
Share-based payments
benefits –
Post-employment
cash salary,
benefits -
Termination
fees and super
Superannuation
benefits
Shares
Performance
Rights and
Options7
$
$
$
$
$
Total
$
%
Performance
Based
42,581
48,000
42,581
228,121
24,000
218,056
54,000
-
-
-
-
-
13,875
-
-
-
-
137,500
-
-
-
657,339
13,875
137,500
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
-
-
-
-
-
-
-
42,581
48,000
42,581
365,621
24,000
231,931
54,000
-
808,714
2019
Directors
R.H. Krause1
S. Layton
R.W. Nice
Executives
A.M. Wing
D.W. Clark
Total key
management
personnel
compensation
2020
Directors
O. Kleinhempel2
S. Layton
Z.P. Yeo3
R.H. Krause1
Executives
K.B. MacNeill4
C.P. Godfrey5
A.M. Wing6
Total key
management
personnel
compensation
1 R.H. Krause resigned as Executive Director and Chief Executive Officer on 24 April 2020.
2 O. Kleinhempel appointed as Non-Executive Director on 12 August 2019 and as Non-executive Chairman on 24 April 2020.
3 Z.P. Yeo appointed as Non-Executive Director on 12 August 2019.
4 K.B. MacNeill appointed as Interim CEO & Senior Technical Advisor on 7 May 2020.
5 C.P. Godfrey employed as Chief Operating Officer on 4 November 2019. Mr Godfrey was engaged as a consultant prior to this date and ceased
employment with the Company on 31 July 2020.
6 A.M. Wing resigned as Company Secretary on 1 September 2020.
7 Performance rights and options do not represent cash payments to Directors or senior executives and performance rights/share options granted
may or may not be exercised by the Directors or executives.
Page | 27
28
Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
(d) Cash Bonuses
No cash bonuses were paid during the period.
(e) Equity Instruments
The Company rewards Directors and executives for their performance and aligns their remuneration with the creation of
shareholder wealth by issuing shares, options or performance rights. Share-based compensation is at the discretion of the Board
and no individual has an unconditional contractual right to participate in any share-based plan or receive any guaranteed
benefits.
(i) Shareholdings
The trading of shares issued pursuant to the Company’s Equity Incentive Plan are subject to the Company’s Securities
Trading Policy; further, Key Management Personnel and employees are encouraged not to trade shares granted in order
to align Director, Key Management Personnel and employee interests with those of all shareholders.
Details of equity instruments (other than options and rights) held directly, indirectly or beneficially by Key Management
Personnel and their related parties are as follows:
30 June 2020
Directors
O. Kleinhempel
S. Layton
Z.P. Yeo
R.H. Krause1
R.W. Nice1
Executives
C.P. Godfrey1
A.M. Wing1
Balance at
1 July 2019
Granted as
compensation
Received on
exercise of
Performance
Rights
Other
Changes
Balance at
30 June
2020
Balance
held
nominally
29,000,000
1,000,000
1,375,000
-
-
-
-
-
-
-
-
-
-
5,000,000
-
15,000,000
5,000,000
15,333,600
9,000,000
64,919,810
(16,000,000)
(6,375,000)
15,333,600
43,000,000
64,919,810
-
-
-
-
6,443,231
11,999,166
6,443,231
11,999,166
-
-
-
-
-
-
-
-
141,695,807
There were no shares granted to Key Management Personnel as remuneration in the 2020 Financial Year.
1 Deemed disposal upon resignation from the Board or Company.
85,320,807
31,375,000
25,000,000
-
(ii) Options and Performance Rights Holdings
Details of options and performance rights held directly, indirectly or beneficially by Key Management Personnel and
their related parties are as follows:
30 June
2020
Name
K.B. MacNeill
Balance
at 1 July
2019
Granted
as
compen-
sation
Rights
exercised
Other
changes
Balance
at 30
June 2020
Total
vested at
30 June
2020
Total
vested and
exercisable
at 30 June
2020
Total unvested
and
unexercisable
at 30 June 2020
-
-
-
-
-
-
5,000,000
5,000,000
5,000,000
5,000,000
-
-
-
-
5,000,000
5,000,000
The key terms options are as follows:
Type of Option:
Expiry Date:
Vesting:
Each Option entitles the holder to 1 fully paid ordinary share in the Company upon
exercise price, 2,000,000 options at $0.04 and 3,000,000 options at $0.06.
5 May 2023
The Options vest upon satisfaction of the following conditions:
(a) 2,000,000 options on the completion of the 6 months’ service; and
(b) 3,000,000 options on the completion of the 12 months’ service.
Page | 28
Speciality Metals International Limited Annual Report 2020
29
DIRECTORS’ REPORT
Refer to Subsequent Events Note 20 for information pertaining to the options granted to Chief Commercial Officer,
K. Cavallaro, subsequent to the reporting period.
(iii) Loans to Key Management Personnel
No loans have been made to Key Management Personnel of the consolidated Group, including their personally-related
entities.
(iv) Other Transactions and Balances
Consulting Services
Payments made for Key Management Personnel noted in (c) Details of Remuneration above are to Penause Pty Ltd,
Bodie Investments Pty Ltd, Specialised Metallurgical Projects (Pty) Limited and Northern Star Nominees Pty Ltd as
payments for consulting services.
(f) Options and Performance Rights Granted as Remuneration
The following options were granted by the Company to the Directors and Executives of the Group during the financial year as
part of their remuneration.
Number of
granted
Options
Grant date
Expiry date
Fair Value
per Option
at grant date
Total
Fair Value
of Options
Expensed
in prior
years
Expensed
in the 2020
year1
AASB 2
Not yet
expensed
Share-Based Payments
30 June 2020
Name
K.B. MacNeill
2,000,000
13 May 2020
5 May 2023
K.B. MacNeill
3,000,000
13 May 2020
5 May 2023
5,000,000
0.01747
$0.1471
34,938
44,122
79,060
-
-
-
-
-
-
34,938
44,122
79,060
1 No expense recognised during the 2020 financial year due to vesting conditions attached to the options not being satisfied as
at 30 June 2020.
(g) Equity Instruments Issued on Exercise of Remuneration Options or Rights
Equity instruments were issued during the 2020 financial year to Directors or other Key Management Personnel as a result of
options or rights exercised that had previously been granted as remuneration.
(h) Service Agreements
Remuneration and other terms of employment for the Directors and Executives are formalised in Service/Appointment
Agreements. All contracts with Directors and executives may be terminated by either party with regards to the stipulated notice
period, subject to any termination payments as detailed below.
R.H. Krause
There was a written agreement with Mr Krause dated 1 July 2019 in his role as Executive Chairman of the Company. Cash
payments and benefits totalling $365,621 were paid to Mr Krause during the 2020 financial year. The payments were made
through Penause Pty Ltd, a company in which Mr Krause has a substantial interest. Mr. Krause held this position until
24 April 2020.
S. Layton
There is a written agreement with Mr Layton dated 9 November 2017 in his role as a Non-executive Director of the Company.
Cash payments and benefits totalling $48,000 were paid to Mr Layton during the 2020 financial year. The payments were made
through Bodie Investments Pty Ltd, a company in which Mr Layton has a substantial interest.
O. Kleinhempel
There is a written agreement with Mr Kleinhempel dated 12 August 2019 in his role as a Non-executive Director of the Company
and subsequently as Non-Executive Chairman on 24 April 2020. Cash payments and benefits totalling $42,581 were paid to
Mr Kleinhempel during the 2020 financial year.
Z.P. Yeo
There is a written agreement with Mr Yeo dated 12 August 2019 in his role as a Non-executive Director of the Company.
Cash payments and benefits totalling $42,581 were paid to Mr Yeo during the 2020 financial year.
Page | 29
30 Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
A.M. Wing
There was an agreement dated 22 January 2019 between the Company and Mr Wing whereby Mr Wing agrees to provide
company secretarial services to the Company. The Company or Mr Wing may terminate the contract by giving one month’s
written notice. Cash payments and benefits totalling $54,000 were paid to Mr Wing during the 2020 financial year. The payments
were made through Northern Star Nominees Pty Ltd, a company in which Mr Wing has a substantial interest. Mr Wing resigned
as Company Secretary as of 1 September 2020.
C.P. Godfrey
There was a written employment agreement with Mr Godfrey dated 9 November 2019 in his role as a Chief Operating Officer
of the Company. Cash payments, super and benefits totalling $231,931 were paid to Mr Godfrey during the 2020 financial year.
Mr Godfrey ceased employment with the Company on 31 July 2020.
K.B. MacNeill
There is a written agreement with Mr MacNeill dated 5 May 2020 in his role as an Interim Chief Executive Officer and Senior
Technical Advisor of the Company. Cash payments and benefits totalling $24,000 were paid to Mr MacNeill during the 2020
financial year. The payments were made through Specialised Metallurgical Projects (Pty) Limited, a company in which Mr
MacNeill has a substantial interest. Mr MacNeill’s contract will continue the earlier of one (1) year from its commencement or
until a subsequent engagement agreement is entered into, with the ability to extend the term on a yearly basis.
K. Cavallaro
There is a written executive employment agreement with Ms Cavallaro dated 8 May 2020 for the role of Chief Commercial
Officer and Chief Executive Officer Designate. No cash payments nor benefits were paid to Ms Cavallaro during the 2020
financial year due to Ms Cavallaro commencing employment on 1 July 2020. The Company or Ms Cavallaro may terminate
the contract by giving three (3) months’ written notice.
(i) Speciality Metals’ Financial Performance
Speciality Metals’ financial performance for the five years to 30 June 2020 is summarised below and the relationship between
results and performance is discussed.
Year ended
Net profit / (loss) after tax
Net assets
Cash and cash equivalents
Cash flows from operating activities
EBITDAX
Share price at 30 June
Basic earnings / (loss) per share
Measure
$
2020
(3,015,680)
2019
3,808,863
2018
(1,478,746)
2017
(9,888,710)
2016
(2,101,010)
$
$
$
$
$
Cents
14,936,296 10,905,040
2,672,436
2,371,501 10,744,570
2,989,859
217,962
602,675
1,048,000
761,413
(2,948,321)
(2,789,350)
(1,627,127)
3,847,034
(1,368,767)
(1,022,747)
(916,448)
(865,010)
(1,023,157)
(943,493)
$0.028
(0.30)
$0.031
0.67
$0.019
(0.29)
$0.010
(2.27)
$0.030
(0.56)
Page | 30
Speciality Metals International Limited Annual Report 2020
31
DIRECTORS’ REPORT
Financial Performance
The loss for the consolidated Group for the financial year after tax amounted to $3,015,680 (2019 profit of $3,808,863).
This result was primarily brought about by an increase in operating costs associated with the commencement of operations
at Mt Carbine Quarries and Tailings Retreatment Project.
The Group has created value for shareholders via the acquisition on 28 June 2019 of Mt Carbine Quarries Pty Ltd an entity
that owns and operated the Mt Carbine Quarries and holds Mining Leases ML 4867 and ML 4919. This acquisition also
resulted in the Company entering into an unincorporated joint venture with CRONIMET Australia Pty Ltd for the development
of the Mt Carbine Tungsten Tailings and Stockpile Projects. The Company finalised the commissioning of the Mt Carbine
Tailings Retreatment Plant and commenced production during the second half of 2020 with the first concentrate shipment
being despatched during June 2020. The Company’s wholly owned subsidiary, Mt Carbine Quarrying Operations Pty Ltd (the
operator of the Mt Carbine Quarries), was also awarded a purchase order for ~$4 Million (including GST) for the supply of
quarry materials for a major road construction project in Far North Queensland. The revenues from this order are expected to
be realised during the second half of the 2020 calendar year. The Company will continue to evaluate its NSW Exploration
Licences in conjunction with the development and commercialisation of its tungsten assets in Far North Queensland.
Financial Position
In accordance with the Company’s accounting policy, the recoverability of the carrying amounts of Deferred Exploration and
Evaluation Expenditure were reassessed during the 2020 financial year with the deferred exploration and evaluation
expenditure associated with its Chilean Exploration Concessions being impaired in full following the Company’s decision not
to pursue further exploration activities within Chile. Separately to this, exploration and evaluation costs of $212,753 were
capitalised for the 2020 financial year. The carrying value of the exploration assets as at 30 June 2020 is $6,896,994 (2019:
$6,834,416).
At 30 June 2020, the Group had a net working capital surplus of $2,558,501 (2019: $531,722 deficit). The increase was due
largely to the increase in cash assets from the capital raisings undertaken during the 2019-2020 financial year.
As the Group is an exploration and development entity, ongoing exploration and development activities are reliant on future
capital raisings. During the year, the Company raised $6,997,038 (after share issue costs) from a number of placements.
INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
Indemnification
The Company has not, during or since the end of the financial period, in respect of any person who is or has been an Officer of
the Company or a related body corporate indemnified or made any relevant agreement for indemnifying against a liability incurred as
an Officer, including costs and expenses in successfully defending legal proceedings.
Insurance Premiums
During the financial period the Company has paid premiums to insure each of the Directors and Officers against liabilities for costs
and expenses incurred by them in defending any legal proceedings arising out of their conduct whilst acting in the capacity of a
Director or Officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company.
The premiums paid are not disclosed as such disclosure is prohibited under the terms of the insurance contract.
Page | 31
32
Speciality Metals International Limited Annual Report 2020
Directors’ Report continued
DIRECTORS’ REPORT
AUDIT AND NON–AUDIT SERVICES
During the financial year, the following fees for audit and non-audit services were paid or payable to Nexia Melbourne Audit Pty Ltd
and Nexia Melbourne Pty Ltd:
Audit-related services
Amounts paid or payable to Nexia Melbourne Audit Pty Ltd
- Audit services
Taxation services
Amounts paid or payable to Nexia Melbourne Pty Ltd
- Tax compliance services (tax returns)
- Other tax advice
2020
$
2019
$
74,000
53,000
46,600
11,180
131,780
6,000
6,488
65,488
The Directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001.
On the advice of the Audit Committee, the Directors are satisfied that the provision of non-audit services by the auditor, as set out
above, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
-
all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact the integrity and objectivity
of the auditor; and
-
none of the non-audit services undermine the general principles relating to auditor independence as set out in APES 110 Code
DIRECTORS’ REPORT
of Ethics for Professional Accountants.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out and located
after the Director’s Declaration and forms part of this report.
CORPORATE GOVERNANCE
A statement disclosing the extent to which the Company has followed the best practice recommendations set by the ASX Corporate
Governance Council during the period is displayed on the Company’s website at http://www.specialitymetalsintl.com.au/corpgov.
Signed this 28th day of September 2020 in accordance with a resolution of Directors.
[Insert Signature]
OLIVER KLEINHEMPEL
Non-executive Chairman
Page | 32
Page | 33
Speciality Metals International Limited Annual Report 2020
33
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Consolidated Statement of Profit or Loss
AND OTHER COMPREHENSIVE INCOME
and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
For the year ended 30 June 2020
Revenue
Other income
Total revenue & other income
Administration expenses
Consultant expenses
Depreciation
Development and testwork costs
Exploration expenses written-off
Finance costs
Foreign exchange gains (losses)
Note
2
2
2020
$
748,578
338,867
1,087,445
2019
$
22,515
223,421
245,936
(514,412)
(259,941)
(172,600)
(848,185)
9
(219,655)
(14,511)
(351,955)
(124,277)
(29,361)
-
(7,448)
(23,660)
(91,226)
(9,794)
Impairment reversal (deferred exploration and evaluation assets)
Impairment expense (deferred exploration and evaluation assets)
10
-
5,635,331
10, 19
(140,855)
-
Occupancy expenses
Other expenses
Production expenses
Salaries and employee benefits expense
Share based payments
Superannuation
Travel and accommodation
Total Expenses
PROFIT (LOSS) BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
PROFIT (LOSS) AFTER INCOME TAX EXPENSE
Other comprehensive income/(loss)
Gain/(loss) on revaluation of financial assets
26
(53,193)
(60,353)
(8,564)
(664,773)
-
-
(1,626,893)
(608,255)
(45,000)
(92,772)
-
(8,075)
(85,191)
(110,326)
(4,103,898)
3,567,954
(3,016,453)
3,813,890
3
-
-
(3,016,453)
3,813,890
773
(5,027)
TOTAL COMPREHENSIVE PROFIT / (LOSS)
ATTRIBUTABLE TO OWNERS OF SPECIALITY METALS INTERNATIONAL LIMITED
(3,015,680)
3,808,863
Basic profit (loss) per share
Diluted profit (loss) per share
13
13
Cents
(0.30)
(0.30)
Cents
0.67
0.67
Page | 34
34 Speciality Metals International Limited Annual Report 2020
Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
AS AT 30 JUNE 2020
CURRENT ASSETS
Cash assets
Trade and other receivables
Prepayments
Inventory
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Plant and equipment
Inventory
Deferred exploration and evaluation expenditure
Financial assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Employee benefits
Lease liability
Short term borrowings
Contract liability - sublease
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Employee benefits
Lease liability
Contract liability - sublease
Contract liability - offtake
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated profit / (loss)
TOTAL EQUITY
,
Note
2020
$
2019
$
21(b)
2,989,859
7
7
4
332,212
309,547
108,000
217,962
190,622
75,212
-
3,739,618
483,796
8
9,17
4,17
10
5
1,086,681
2,254,941
7,437,413
6,896,994
2,113
770,021
331,674
7,545,413
6,834,416
1,289
17,678,142
15,482,813
21,417,760
15,966,609
11, 25
27
23, 25
11
22
736,610
105,090
200,715
780,155
26,473
-
-
200,000
125,818
-
1,168,233
1,006,628
27
12,884
23, 25
968,094
8,890
-
22
22
1,784,638
1,911,911
2,547,615
2,134,140
5,313,231
4,054,941
6,481,464
5,061,569
14,936,296
10,905,040
12
15,023,117
7,651,079
-
330,000
(86,821)
2,923,961
14,936,296
10,905,040
Page | 35
Speciality Metals International Limited Annual Report 2020
35
Consolidated Statement of Cash Flows
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
FOR THE YEAR ENDED 30 JUNE 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from sales to customers
Proceeds from R & D tax offset
Proceeds from diesel fuel rebate
Proceeds from Government COVID-19 relief packages
Payment to suppliers and employees
Interest paid
Interest paid for lease liabilities
Interest received
Note
2020
$
651,494
203,427
15,676
60,000
(3,865,957)
(23,002)
(855)
10,896
2019
$
-
-
9,883
-
(1,659,865)
-
-
22,855
NET CASH FLOWS USED IN OPERATING ACTIVITIES
21(a)
(2,948,321)
(1,627,127)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for the purchase of plant and equipment
Payments for the purchase of Mt Carbine Quarries Pty Ltd
Proceeds from the sale or disposal of plant and equipment
Payments for the purchase of tenements
Payments for tenement security deposits
Proceeds from the release of other security deposits
NET CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of shares
Payments for share issue costs
Proceeds from long-term loan facilities
Payments for lease liabilities
Proceeds from short-term loan facilities
Payment of short-term loan
Proceeds from working capital loan (unincorporated joint venture)
Proceeds from Mt Carbine sublease rent received in advance
(2,223,308)
-
-
(1,502)
(309,047)
-
(12,837)
(7,330,000)
424,869
-
(1,000)
3,248
(2,533,857)
(6,915,720)
7,503,491
(554,456)
1,175,036
(7,037)
-
(200,000)
330,718
-
4,248,166
(113,853)
-
200,000
-
3,823,821
NET CASH FLOWS FROM FINANCING ACTIVITIES
8,247,752
8,158,134
Net (decrease)/increase in cash held
Add opening cash brought forward
Effect of movement in exchange rates on cash held
2,765,574
(384,713)
217,962
6,323
602,675
-
CLOSING CASH CARRIED FORWARD
21(b)
2,989,859
217,962
Page | 36
36 Speciality Metals International Limited Annual Report 2020
Consolidated Statement of Changes in Equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED
AT 1 JULY 2018
Profit / (loss) for the period
Other comprehensive income for the period
Total comprehensive loss for the period
Issue of share capital
Share issue costs
Share based payments
Performance Rights Vested but not Exercised
Total transactions with owners
in their capacity as owners
BALANCE AT 30 JUNE 2019
AT 1 JULY 2019
Profit / (loss) for the period
Prior year adjustment
Other comprehensive income for the period
Total comprehensive loss for the period
Issue of share capital
Share issue costs
Share based payments
Performance rights converted to shares
Total transactions with owners
in their capacity as owners
BALANCE AT 30 JUNE 2020
Attributable to the Shareholders of
Speciality Metals International Limited
Issued
Capital
$
Accumulated
Losses
$
Reserves
$
Total Equity
$
3,553,567
(1,318,746)
437,615
2,672,436
-
-
-
3,813,890
(5,027)
3,808,863
-
-
4,378,166
(280,654)
-
-
-
-
-
-
-
3,813,890
(5,027)
3,808,863
4,378,166
(280,654)
433,844
(433,844)
-
-
326,229
326,229
4,097,512
433,844
(107,615)
4,423,742
7,651,079
2,923,961
330,000
10,905,040
7,651,079
2,923,961
330,000
10,905,040
-
-
-
(3,016,453)
4,898
773
(3,010,782)
7,703,192
(376,154)
45,000
-
7,372,038
-
-
-
-
-
15,023,117
(86,821)
-
-
-
-
-
-
-
(3,016,453)
4,898
773
(3,010,782)
7,703,192
(376,154)
45,000
(330,000)
(330,000)
-
-
7,042,038
14,936,296
Page | 37
Speciality Metals International Limited Annual Report 2020
37
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Going Concern Basis for Preparation of Financial Statements
These financial statements have been prepared on the going concern basis which contemplates the continuity of normal
business activities and the realisation of assets and discharge of liabilities in the normal course of business. The ability of
the Company to continue to adopt the going concern assumption is based upon the Company now having a source of income
from its acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019 along with that from the Company’s joint venture with
CRONIMET Australia Pty Ltd for development of the Mt Carbine Retreatment Projects.
Should additional funds be necessary the Directors are confident of securing these funds if and when necessary to meet
the Company’s obligations as and when they fall due and consider the adoption of the going concern basis to be appropriate
in the preparation of these financial statements.
(b)
Basis of Preparation
These general purpose financial statements have been prepared in accordance with the requirements of the Australian
Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001. These financial statements have been prepared on a historical cost basis.
The financial report is presented in Australian currency. The consolidated entity operates on a for-profit basis.
(c)
Statement of Compliance
The financial statements have been prepared and comply with Australian Accounting Standards. The financial statements
also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board.
(d)
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) as at 30 June each year. Control is defined as entities which the Group has power over and the
rights to, or is exposed to, variable returns from its involvement with the entity and has the ability to use its power to affect
those returns.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been
eliminated in full.
Subsidiaries are fully consolidated from the date upon which control is transferred to the Group and cease to be consolidated
from the date upon which control is transferred out of the Group.
Interests in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets,
and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing
control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its
interest in a joint operation:
§ its assets, including its share of any assets held jointly;
§ its liabilities, including its share of any liabilities incurred jointly;
§ its revenue from the sale of its share of the output arising from the joint operation;
§ its share of the revenue from the sale of the output by the joint operation; and
§ its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenue and expenses relating to its interest in a joint operation in accordance
with the IFRS Standards applicable to the particular assets, liabilities, revenue and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution
of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains
and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent
of other parties’ interests in the joint operation.
Page | 38
38
Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets),
the Group does not recognise its share of the gains and losses until it resells those assets to a third party. The requirements
of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s
investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including
goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of
value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to
any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is
recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.
(e)
Property, Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated
either on a diminishing value or straight-line basis over the estimated useful life of the asset. Plant and equipment useful life
ranges from 1 – 10 years.
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable.
An item of plant and equipment is derecognised upon disposal.
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the income statement in the period the item is derecognised.
(f)
Inventory
Inventories are valued at the lower of cost and net realisable value as per AASB 102 with the exception of the 7 million tonnes
of stockpiled inventory which was recognised at fair value as part of the business combination upon the acquisition of
Mt Carbine Quarries Pty Ltd on 28 June 2019. This inventory will be consumed on a units of operation basis.
The cost of partly-processed and saleable products is generally the cost of production, including:
-
-
labour costs, materials and contractor expenses which are directly attributable to the processing of quarry material or
the production of tungsten concentrate;
the depreciation of property, plant and equipment used in the processing of quarry material or the production of tungsten
concentrate; and
- Production overheads.
(g)
Borrowings
Borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest
rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings
is recognised over the term of the borrowings in accordance with the accounting policy for borrowing costs.
Borrowings are classified as current unless the Group has an unconditional right to defer the settlement of the liability for at
least 12 months after the reporting date.
(h)
Recoverable Amount of Assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator
of impairment exists, the Group makes a formal estimate of the recoverable amount. Where the carrying amount of an asset
exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use.
(i)
Exploration, Evaluation, Development and Restoration Costs
Exploration and Evaluation
Exploration and evaluation expenditure incurred by or on behalf of the Company is accumulated separately for each area of
interest. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure but does
not include general overheads or administrative expenditure not having a specific connection with a particular area of interest.
Exploration and evaluation costs in relation to separate areas of interest for which rights of tenure are current are brought to
account in the year in which they are incurred and carried forward provided that:
§
such costs are expected to be recouped through successful development and exploitation of the area, or alternatively
through its sale; or
Page | 39
Speciality Metals International Limited Annual Report 2020
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
§
exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves.
Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area
of interest is aggregated within costs of development.
Exploration and Evaluation – Impairment
The Directors assess at each reporting date whether there is an indication that an asset has been impaired and for exploration
and evaluation costs whether the above carry forward criteria are met.
Accumulated costs in respect of areas of interest are written off or a provision made in profit or loss when the above criteria
do not apply or when the Directors assess that the carrying value may exceed the recoverable amount. The costs of productive
areas are amortised over the life of the area of interest to which such costs relate on the production output basis, provisions
would be reviewed and if appropriate, written back.
Development
Development expenditure incurred by or on behalf of the Company is accumulated separately for each area of interest in
which economically recoverable reserves have been identified to the satisfaction of the Directors. Such expenditure comprises
net direct costs and, in the same manner as for exploration and evaluation expenditure, an appropriate portion of related
overhead expenditure having a specific connection with the development property.
All expenditure incurred prior to the commencement of commercial levels of production from each development property is
carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant
development property, or from the sale of that property, is reasonably assured.
No amortisation is provided in respect of development properties until a decision has been made to commence mining. After
this decision, the costs are amortised over the life of the area of interest to which such costs relate on a production output
basis.
Remaining Mine Life
In estimating the remaining life of the mine at each mine property for the purpose of amortisation and depreciation calculations,
due regard is given not only to the volume of remaining economically recoverable reserves but also to limitations which could
arise from the potential for changes in technology, demand, product substitution and other issues that are inherently difficult
to estimate over a lengthy time frame.
(j)
Cash and Cash Equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of any outstanding bank overdrafts, if any.
(k)
Revenue
With the adoption of AASB 15, revenue from contracts with customers is measured based on the consideration specified in a
contract with a customer and excludes amounts collected on behalf of third parties. The revenue is recognised when it transfers
control over a product to a customer.
In the comparative period, revenue was measured at the fair value of the consideration received or receivable. Revenue from
the sale of goods was recognised when the significant risks and rewards of ownership had been transferred to the customer,
recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably,
there was no continuing management involvement with the goods and the amount of revenue could be measured reliably.
Where payment is received upfront a contract liability is recognised on receipt of payment and revenue is recognised over
a period in time as product/services are delivered.
In addition to the above, the following specific recognition criteria must also be met before revenue is recognised:
Sublease Rent
Revenue is recognised in accordance with the Retreatment Operations Sublease Agreement when the gross value of
the consideration of the minerals extracted from the subleased area has been received.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of
the financial asset.
Page | 40
40 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Research and Development Refundable Tax Offset
The Research and Development Refundable Tax Offset is recognised as revenue when it is received as it relates to
expenditure incurred in the past.
(l)
Leases
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-
use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-
term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such a tablets and
personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease
payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
§
fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
§ variable lease payments that depend on an index or rate, initially measured using the index or rate at
the commencement date;
§
§
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
§ payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
§ The lease term has changed or there is a significant event or change in circumstances resulting in a change in
the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting
the revised leave payments using a revised discount rate.
§ The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an
unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case
a revised discount rate is used).
§ A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using
a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is
recognized and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included
in the related right-of-use asset, unless those costs are incurred to produce inventories.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
Page | 41
Speciality Metals International Limited Annual Report 2020
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified impairment
loss as described in the “Property, Plant and Equipment” policy (as outlined in the financial report for the annual reporting
period).
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-
of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers
those payments occurs and are included in the line “Other Expenses” in profit or loss.
As a practical expedient, AASB 16 permits a lessee not to separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement.
(m)
Income Tax
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 at reporting date.
Deferred income tax is provided on all temporary differences at reporting 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 where the deferred income tax liability 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; and
§
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences 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, the carry-forward of unused tax assets and unused tax losses can be utilised:
§ except where 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; and
§
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse
in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting 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.
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 reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
(n)
Other Taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
§
§
where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the Balance Sheet.
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 is classified as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
Page | 42
42 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(o)
Currency
Both the functional and presentation currency is Australian dollars (A$).
In preparing the financial statements of the Group entities, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
§
§
§
exchange differences on foreign currency borrowings relating to assets under construction for future productive use,
which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those
foreign currency borrowings;
exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial
instruments/hedge accounting); and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign
operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss
on disposal or partial disposal of the net investment.
(p)
Investment in Subsidiaries
The parent entity’s
investment
in the Company’s financial statements included in Note 18.
its subsidiaries
in
is accounted
for under
the cost method of accounting
(q) Critical Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation
to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, which management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Accounting for Acquisition of Businesses
Accounting for acquisition of businesses requires judgement and estimates in determining the fair value of acquired assets
and liabilities. The relevant accounting standard allows the fair value of assets acquired to be refined for a window of a year
after the acquisition date and judgement is required to ensure that any adjustments made reflect new information obtained
about facts and circumstances that existed as of the acquisition date.
Impairment of Non-Financial Assets
The consolidated entity assesses impairment of non-financial assets at each reporting date by evaluating conditions specific
to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists,
the recoverable amount of the asset is determined. This involves fair value less costs to sell or value-in-use calculations, which
incorporate a number of key estimates and assumptions. Refer to notes 9, 10, and 19 for further detail regarding judgements
made when assessing impairment of plant and equipment and deferred exploration and evaluation costs and determining their
recoverable amount.
(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 Mr K. MacNeill, Interim CEO and Senior Technical Advisor (since his
appointment) and prior to his appointment the Board of Directors of the Company.
Page | 43
Speciality Metals International Limited Annual Report 2020
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. REVENUE AND OTHER INCOME
Revenue
Sales and hire income
Sub-lease rent (unincorporated joint venture)
Interest received – other persons/corporation
Other income
COVID-19 Relief (Various)
R&D Tax Offset
Gain on disposal of non-current assets
Diesel fuel rebates
Other income
Total revenue and other income
3.
INCOME TAX
(a) Reconciliation of income tax expense to prima facie tax payable
Profit / (loss) before income tax
Tax at the Australian rate of 27.5% (2019: 27.5%)
Tax effect of amounts which are not taxable in calculating taxable income:
Non-deductible expenses
Non-assessable income
Deferred tax assets not recognised
(b) Unrecognised deferred tax assets
Balance at beginning of year
Current year not recognized
Adjustments in respect of prior year tax balances
Tax rate change from 27.5% to 26%
Balance at end of year
Deferred tax assets have not been recognized in respect of the following items:
Tax losses
Less: other timing differences
2020
$
735,480
1,455
11,643
748,578
107,228
199,186
-
32,453
-
338,867
1,087,445
2019
$
-
-
22,515
22,515
-
-
212,434
10,239
748
223,421
245,936
2020
2019
$
(3,015,680)
(829,312)
$
3,808,863
1,047,437
11,725
(54,776)
872,363
-
89,713
(1,485,010)
347,860
-
5,583,942
872,363
(876,769)
(360,268)
5,219,268
6,278,688
(1,059,420)
5,219,268
5,236,082
347,860
-
-
5,583,942
5,589,329
(5,387)
5,583,942
-
(c) Total tax losses
Total deferred tax benefits which may arise (2019: 26%)
24,148,795
6,278,688
20,324,832
5,589,329
Page | 44
44 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
No provision for income tax is considered necessary in respect of the Company for the period ended 30 June 2020.
Deferred tax assets have not been recognised in respect of these items because it is not probable in the short to medium term
that these assets will be realised. The Group has total tax losses at 30 June 2020 of $24,148,795 (2019: $20,324,832). A future
income tax benefit which may arise from tax losses of 26% of approximately $6,278,688 will only be obtained if:
-
-
-
the parent and the subsidiaries derive future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised;
the parent and the subsidiaries continue to comply with the conditions for deductibility imposed by the law; and
no changes in tax legislation adversely affect the Parent and the Subsidiaries in realising the benefit from the deductions
for the losses, i.e. current tax legislation permits carried forward tax losses to be carried forward indefinitely.
No franking credits are available for subsequent years.
Tax consolidation
The tax consolidation scheme is applicable to the Company. As at the date of this report the Directors have assessed
the financial effect the scheme may have on the Company and its consolidated entities and have made a decision to be taxed
as a consolidated entity. The financial effect of the tax consolidation scheme on the Group has not been recognised in
the financial statements.
4.
INVENTORY
Current
Non-current
2020
$
108,000
7,437,413
7,545,413
2019
$
-
7,545,413
7,545,413
The above amount represents the fair value of the estimated 7 million tonnes of stockpiled inventory acquired as part of
the acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019. This inventory will be consumed on a units of operation
basis.
In accordance with AASB 102 all other inventory, regardless of the type and stage in the production process, will be valued
at the lower of cost and net realisable value.
5. FINANCIAL ASSETS
Shares in listed companies:
Force Commodities Limited (ASX: 4CE)
2020
$
2019
$
2,113
1,289
Equity instruments are measured at fair value as at reporting date with all changes recognised as other comprehensive
income / (loss) in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Page | 45
Speciality Metals International Limited Annual Report 2020
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. AUDITOR’S REMUNERATION
Audit-related services
Amounts paid or payable to Nexia Melbourne Audit Pty Ltd
-
Audit services
Taxation Services
Amounts paid or payable to Nexia Melbourne Pty Ltd
-
Tax compliance services (tax returns)
- Other tax advice
7. TRADE & OTHER RECEIVABLES
Trade Receivables
Less Allowance
Other Receivables
Total Trade & Other Receivables
Prepayments
Trade Receivables
2020
$
2019
$
74,000
53,000
46,600
11,180
131,780
6,000
6,488
65,488
178,697
60,622
-
178,697
153,515
332,212
-
60,622
130,000
190,622
309,547
75,212
The average credit period on sales of product is 30 days. No interest is charged on outstanding trade receivables.
The collectability of trade receivables is assessed continuously, and individual receivables are written off when management
deems them unrecoverable. No provision has been made for doubtful debts as all trade receivables were within terms
as at reporting date.
8. RECEIVABLES – NON-CURRENT
Tenement security deposits
Other security deposits
1,083,797
769,921
2,884
100
1,086,681
770,021
The tenement deposits are restricted so that they are available for any rehabilitation that may be required on the mining leases
and/or exploration tenements (refer to Notes 15 and 16).
Page | 46
46 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. PLANT AND EQUIPMENT AT COST
Plant and equipment
Accumulated depreciation
Plant and equipment – right of use assets
Accumulated depreciation
Reconciliation of the carrying amount of plant and equipment at the beginning and end of
the current and previous financial year
Carrying amount at beginning
Additions
Disposals
Plant and equipment written down
Depreciation expense
10. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE
Costs brought forward
Costs incurred during the period
Costs recognised upon acquisition of MCQ on 28 June 2019
Exploration and evaluation expenditure written down
Capitalised portion of R&D Tax Offset
Impairment reversal1
Costs carried forward
Exploration expenditure costs carried forward are made up of:
Expenditure on joint venture areas
Expenditure on non-joint venture areas
Costs carried forward
2020
$
2019
$
2,436,535
1,776,719
(1,380,777)
(1,445,045)
1,201,234
(2,051)
-
-
2,254,941
331,674
331,674
2,151,486
(8,564)
-
(219,655)
2,254,941
3,861
342,323
-
-
(14,510)
331,674
6,834,416
212,753
(5,079)
(140,855)
(4,241)
596,066
347,919
255,100
-
-
-
5,635,331
6,896,994
6,834,416
-
-
6,896,994
6,834,416
6,896,994
6,834,416
The above amounts represent costs of areas of interest carried forward as an asset in accordance with the accounting policy
set out in Note 1. The ultimate recoupment of deferred exploration and evaluation expenditure in respect of an area of interest
carried forward is dependent upon the discovery of commercially viable reserves and the successful development and
exploitation of the respective areas or alternatively sale of the underlying areas of interest for at least their carrying value.
Amortisation, in respect of the relevant area of interest, is not charged until a mining operation has commenced.
The Directors reassess the carrying value of the Group’s tenements at each half year, or at a period other than that, should
there be any indication of impairment.
1 As a result of the Company successfully completing the 100% acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019
and its newly formed unincorporated joint venture with CRONIMET Australia Pty Ltd the Directors have reassessed their
previous decision to impair, in full, the capitalised exploration and evaluation expenditure associated with the Mt Carbine
Tungsten Project and have determined that the 2017 impairment be reversed in full.
The basis for this decision is that via the Company’s 100% acquisition of Mt Carbine Quarries Pty Ltd it has removed
the previous uncertainty surrounding the unresolved sublease issues with the Quarry and Mining Leaseholder thus removing
any adverse impact on the technical feasibility and commercial viability of the Mt Carbine Tungsten Project.
Page | 47
Speciality Metals International Limited Annual Report 2020
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. CURRENT LIABILITIES
PAYABLES
Trade creditors
Accrued expenses
Other
OTHER CURRENT LIAIBLITIES
Short-Term Borrowings1
2020
$
2019
$
587,105
149,505
-
533,055
242,299
4,801
736,610
780,155
-
-
200,000
200,000
1 Unsecured third-party shareholder loans payable on or before 30 August 2019 with an interest rate of 10%.
12. CONTRIBUTED EQUITY
Share Capital
1,110,229,631 (2019: 798,107,881) ordinary shares fully paid
2020
$
2019
$
15,023,117
7,651,079
15,023,117
7,651,079
(a) Movements in Ordinary Share Capital
1 July 2019 to 30 June 2020
Balance b/fwd
Placement of 112,733514 shares at $0.018 per share
under the Company’s Non-Renounceable Pro-Rata
Entitlement Offer of one (1) new share for every five (5)
shares held (refer ASX announcement dated 26 July 2019)
Placement of 46,888,236 shortfall shares at $0.018 per
share under the Company’s Non-Renounceable Pro-Rata
Entitlement Offer of one (1) new share for every five (5)
shares held (refer ASX announcement dated 26 July 2019)
Issue of 25,000,000 shares at $0.0132 per share to
Directors upon the satisfaction of the vesting conditions for
the Performance Rights issued to Directors on 22 June
2018 (refer ASX announcement dated 2 August 2019)
Issue of 2,500,000 shares at $0.018 per share to
consultants for consulting services pursuant to the Mt
Carbine Quarries Transaction.
Placement of 125,000,000 shares at $0.036 per share to
institutional and sophisticated investors undertaken
pursuant to placement capacity under Listing Rule 7.1
(15% Rule) (refer ASX announcement dated
6 March 2020)
Share issue costs
Balance as at 30 June 2020
Date
Number of
Shares
798,107,881
Issue Price
$
7,651,079
31-07-2019
112,733,514
$0.0180
2,029,204
02-08-2019
46,888,236
$0.0180
843,988
02-08-2019
25,000,000
$0.0132
330,000
27-12-2019
2,500,000
$0.0180
45,000
06-03-2020
125,000,000
$0.0360
4,500,000
1,110,229,631
(376,154)
15,023,117
Page | 48
48 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 July 2018 to 30 June 2019
Balance b/fwd
Tranche 1 – Placement of 83,231,463 shares at $0.018
per share to institutional and sophisticated investors to
fund the 100% acquisition Mt Carbine Quarries Pty Ltd
which owns the Mt Carbine Quarry and mining leases
ML4867 and ML 4919 (refer ASX announcement dated
14 May 2019).
Tranche 2 – Placement of 160,000,000 shares to
institutional and sophisticated investors to fund the 100%
acquisition of Mt Carbine Quarries Pty Ltd at $0.018 per
share following approval by shareholders at a General
Meeting held on 17 June 2019 (refer ASX announcement
dated 14 May 2019).
Share issue costs
Balance as at 30 June 2019
Terms and Conditions of Contributed Equity
Ordinary Shares
Date
Number of
Shares
554,876,418
Issue Price
$
3,553,567
16-05-2019
83,231,463
$0.018
1,498,166
26-06-2019
160,000,000
$0.018
2,880,000
798,107,881
(280,654)
7,651,079
Ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to participate in
the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up, on the shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Option holders
have no voting rights until the options are exercised.
Options
The following options were outstanding at the end of the reporting period:
(b) Movements in Options
Options
Date
Number of
Options
Vesting conditions
Maturity
2,000,000 ($0.04 exercise price)
13-05-2020
2,000,000 Completion of 6 months service
05-05-2023
3,000,000 ($0.06 exercise price)
13-05-2020
3,000,000 Completion of 12 months service
05-05-2023
Balance as at 30 June 2020
5,000,000
Performance Rights
No performance rights were outstanding at the end of the reporting period.
Page | 49
Speciality Metals International Limited Annual Report 2020 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. EARNINGS PER SHARE
Profit (Loss) after income tax attributable to the owners of the Company used in
calculating basic and diluted earnings per share
Weighted average number of ordinary shares on issue used in the calculation of
basic loss per share
Weighted average number of ordinary shares used in calculating diluted earnings
per share. Note options outstanding at reporting date have not been brought to
account as they are anti-dilutive.
Basic profit (loss) per share (cents)
Diluted profit (loss) per share (cents)
14. KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment superannuation
Other long-term benefits
Termination benefits
Share based payments
Balance at the end of period
15. CONTINGENT LIABILITIES
2020
$
2019
$
(3,015,680)
3,808,863
Number
Number
1,008,440,208
567,557,643
1,008,440,208
567,557,643
(0.30)
(0.30)
2020
$
657,339
13,875
-
137,500
-
808,714
0.67
0.67
2019
$
589,329
-
-
-
-
589,329
The Group has provided guarantees totalling $1,083,797 in respect of mining exploration tenements and environmental bonds.
These guarantees in respect of mining and exploration tenements are secured against deposits with the relative State
Department of Mines. The Company does not expect to incur any material liability in respect of the guarantees.
16. COMMITMENTS
Exploration licence expenditure requirements – The Queensland Government has approved a number of changes to
Exploration Permits under the Natural Resources and Other Legislation Amendment Act 2019 (known as NROLA Act).
This Act commenced in May 2020 which results in a change from an expenditure-based approach upon which a company’s
compliance with its licence conditions will be assessed on an outcomes-based approach.
17. ACQUISITIONS
On 28 June 2019, the Group acquired 100% of the equity instruments of Mt Carbine Quarries Pty Ltd, a Mt Carbine based
business. The acquisition was made for the purpose of securing the established quarry business which operates within Mining
Leases (ML 4867 and ML 4919), along with the Mining Leases themselves to provide surety of tenure for the Company’s
Mt Carbine Tungsten Project. The quarry is a fully permitted, established business that has been in operation for over 20 years
that offers substantial growth opportunities and a steady revenue stream, and also synergies between the quarry and
the Company’s future mining activities through beneficial waste re-use.
Page | 50
50 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The details of the business combination are as follows:
Fair value of consideration transferred:
Amount settled in cash
Total
Recognised amounts of identifiable net assets
Plant & Equipment
Capitalised exploration & evaluation costs
Total non-current assets
Inventory
Total current assets
Identifiable net assets
Net cash outflow on acquisition
Acquisition costs charged to expenses
Net cash paid relating to the acquisition
Consideration transferred
2019
$
8,130,000
8,130,000
329,487
255,100
584,587
7,545,413
7,545,413
8,130,000
8,130,000
588,740
8,718,740
The acquisition of Mt Carbine Quarries Pty Ltd was settled in cash for $8,130,000.
Acquisition-related costs amounting to $588,741 are not included as part of the consideration transferred and have been
recognised as an expense in the consolidated statement of profit or loss and other comprehensive income, as part of
consultants’ expenses. This amount also includes the costs associated with the establishment of the unincorporated joint
venture between the Company and CRONIMET Australia Pty Ltd for the development of the Mt Carbine Retreatment Projects.
No adjustment under AASB 3 Business Combinations has been made during the reporting period.
Identifiable net assets
The fair value of the estimated 7 million tonnes of stockpiled inventory as part of the business combination amounted to
$7,545,413.
Mt Carbine Quarries Pty Ltd’s contribution to the Group results
As the acquisition took place ‘just before the end of the Group’s full year reporting period the impact on the Group’s revenue
and consolidated profit/(loss) for the period ending 30 June 2019 has been fully taken into account.
Page | 51
Speciality Metals International Limited Annual Report 2020
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18.
INVESTMENT IN SUBSIDIARIES
Parent Entity
Speciality Metals International Limited
Controlled Entities
South Eastern Resources Pty Ltd
Mt Carbine Retreatment Pty Ltd1
Troutstone Resources Pty Ltd
Mt Carbine Quarrying Operations Pty Ltd2
Mt Carbine Quarries Pty Limited3
Icon Resources Africa Pty Ltd
Special Metals Chile SpA4
Mt Carbine Retreatment Management Pty Ltd5
Equity Interest
2020
%
2019
%
100
100
100
100
100
100
-
50%
100
100
100
100
100
100
100
-
Cost of Parent Entity’s
Investment
2020
$
2
200
1
100
2019
$
3
2
2
-
8,130,000
8,130,000
10
-
50
10
6,060
-
1 Cast Resources Pty Ltd changed it name to Mt Carbine Retreatment Pty Ltd on 19 March 2019.
2 Kaowest Pty Ltd changed its name to Mt Carbine Quarrying Operations Pty Ltd on 19 March 2019.
3 Mt Carbine Quarries Pty Ltd acquired 28 June 2019.
4 Special Metals Chile SpA is in the final stages of being wound-up following the Company’s decision not to pursue further
exploration activities in Chile.
5 Mt Carbine Retreatment Management Pty Ltd acts as the agent for the unincorporated joint venture between Mt Carbine
Retreatment Pty Ltd and CRONIMET Australia Pty Ltd.
Speciality Metals International Limited and all of its subsidiaries, with the exception of Special Metals Chile SpA, are located
and incorporated in Australia.
19.
IMPAIRMENT OF DEFERRED EXPLORATION EXPENDITURE AND PLANT AND EQUIPMENT
The Directors reassess the carrying value of the Group’s assets including deferred exploration expenditure, tenements and
plant and equipment at each half year, or at a period other than that, should there be any indication of impairment to fair value.
When making their assessment for the 2020 financial year the Directors took the following into consideration:
§ During the financial year the Company through its Joint Venture with CRONIMET Australia Pty Ltd concluded the refurbishing
and commenced production from the Mt Carbine Retreatment Plant with its first tungsten concentrate shipment being
despatched during June 2020.
§ The Company’s wholly owned subsidiary, Mt Carbine Quarrying Operations Pty Ltd, received in June 2020 its largest order
to date for approximately $4 million (including GST) for the supply of various quarry materials. Efforts to support the continued
growth and development of the quarry are continuing. The revenues associated with this order are expected to the
recognised during the last half of the 2020 calendar year.
§ The Company has maintained its two (2) gold prospects in NSW with a further tungsten focused Exploration Permit being
granted in June 2020 (EPM 27394) to complement its existing two (2) tungsten focused Exploration Permits (EPM 14871 &
EPM 14872) located at Mt Carbine, North Queensland. EPM 14872 contains both the Iron Duke and Petersen’s Lode
prospects whilst EPM 14871 features the Mt Holmes tin-tungsten prospect.
The Company believes that EPM 14872 holds significant exploration upside given that the tungsten grades indicated in
the sampling of the Iron Duke and Petersen’s Lode are extensively higher than the estimated global average grade in
the present open-pit resource within the Mt Carbine Mining Leases. These unencumbered, greenfield sites also offer
the added advantage of having minimal environmental legacy issues.
§ Due to changes within the geo-political climate in Chile the Company concluded not to pursue any further exploration
activities with all expenses being impaired in full during the reporting period as detailed below:
Based on the above, Directors’ have assessed there to be no indication of impairment, other than that which relates to
the Company’s Chilean Exploration Concessions, which have been impaired in full during the 2020 financial year.
Impairment of Deferred Exploration Expenditure
Chile Exploration Concessions
2020
$
(140,855)
2019
$
-
Page | 52
52
Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
COMBINED DEFERRED EXPENDITURE, PLANT AND EQUIPMENT AND FINANCIAL ASSETS
Non-current assets
Receivables
Plant and equipment
Plant and equipment – at cost
Accumulated depreciation
Inventory
Quarry Inventory
Deferred exploration and evaluation expenditure
Exploration and evaluation expenditure
TOTAL
2020
$
1,086,681
1,086,681
2019
$
770,021
770,021
3,637,769
1,776,719
(1,382,828)
(1,445,045)
2,254,941
331,674
7,437,413
7,437,413
7,545,413
7,545,413
6,896,994
6,896,994
6,834,416
6,834,416
17,676,029
15,481,524
Reconciliation of the carrying amount of Mt Carbine assets at the beginning and end of
the current and previous financial year:
2020
$
2019
$
Combined assets carrying amount at the beginning of the year
Additions – Plant & Equipment
Additions – Inventory (Quarry)
Increase in tenement & other security deposits
Capitalised exploration and evaluation expenses
Capitalised portion of R&D Tax Offset
Capitalised exploration and evaluation expenses recognised upon MCQ acquisition
Impairment reversal
Receivables reduction – in-active EPM financial assurance refund
Current-asset recognition – Quarry inventory
Plant and equipment WDV of disposals
Exploration and evaluation expenditure written down
Depreciation expense
TOTAL
15,481,524
1,371,448
2,151,486
342,323
-
7,545,413
316,660
212,753
(4,241)
(5,079)
-
-
(108,000)
(8,564)
(140,855)
(219,655)
-
347,919
-
255,100
5,635,331
(1,500)
-
-
-
(14,510)
17,676,029
15,481,524
Page | 53
Speciality Metals International Limited Annual Report 2020
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. SUBSEQUENT EVENTS
There have been no material events subsequent to 30 June 2020 that have not previously been reported other than:
-
issue of the following options to Kim Cavallaro upon commencement of employment as the Group’s Chief Commercial
Officer on 1 July 2020:
§
§
Two (2) million options exercisable at $0.04 on or before 1 July 2023. These options were issued under
the Company’s Equity Incentive Plan and will vest upon the completion of six (6) months employment with
the Company; and
Three (3) million options exercisable at $0.06 on or before 1 July 2023. These options were issued under
the Company’s Equity Incentive Plan and will vest upon the completion of twelve (12) months employment with the
Company;
-
the Company as part of the project consortium awarded a $220,000 grant by METS Ignited Australia Limited under
the Queensland METS Collaborative Projects Fund for the Company’s mine waste transformation project titled
“Optimised X-Ray Ore Sorting Technologies and Material Handling Concepts for Historic Tungsten Mine Waste
Transformation” (refer ASX announcement “Govt Support for Mt Carbine Mine Waste Transform. Initiative dated
24 July 2020);
- appointment of Ms Suzanne Irwin as Company Secretary on 1 September 2020 following the resignation of Mr Adrien
Wing on the same day (refer ASX announcement “Change in Company Secretary and Registered Office” dated
1 September 2020);
-
the Company also changed its registered office as from 1 September 2020 to:
Office 06-110
Level 6, 25 King Street
Bowen Hills Qld 4006
(refer ASX announcement “Change in Company Secretary and Registered Office” dated 1 September 2020); and
-
the commencement of the XRT Sorting Pilot Plant Test Program being undertaken with CRONIMET Australia Pty Ltd
showing positive early results and significant tungsten ore upgrade. (refer ASX announcement “Pilot Sorter Delivers
Significant Tungsten Ore Upgrade” dated 7 September 2020).
Page | 54
54 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. STATEMENT OF CASH FLOWS
Reconciliation of net cash outflow from operating activities to operating loss
after income tax
(a)
Operating profit / (loss) after income tax
Depreciation
Share based payments expense
Performance rights expense
Gain on disposal of assets
Loss on disposal of assets
Share issue cost accruals
Impairment reversal of capitalised exploration & evaluation assets
Impairment of capitalised exploration and evaluation assets
(Revaluation) Devaluation of investment to market value
Unrealised foreign exchange (gains) losses
Realised foreign exchange (gains) losses capitalised
R&D Tax Offset capitalised portion
Change in assets and liabilities:
Decrease (Increase) in receivables
Decrease (Increase) in other assets
Increase/(decrease) in trade and other creditors
Net cash outflow from operating activities
2020
$
2019
$
(3,015,680)
3,808,863
219,655
45,000
-
-
8,564
14,510
-
325,481
(212,434)
-
-
-
(166,800)
(5,635,331)
140,855
(773)
82,142
5,793
4,241
-
5,027
9,795
-
-
(109,884)
(36,633)
(380,607)
(358,266)
52,373
618,661
(2,948,321)
(1,627,127)
(b)
For the purpose of the Statement of Cash Flows, cash includes cash on hand, at bank, deposits and bank bills used
as part of the Company’s cash management function. The Company does not have any unused credit facilities.
The balance at 30 June 2020 comprised:
Cash assets
Cash on hand
22. CONTRACT LIABILITIES
Contract Liability - Sublease1
Current
Non-current
Contract Liability - Offtake2
Balance at beginning of the year
Plus: Offtake Final Contribution
Less: Unrealised Foreign Exchange Loss
2,989,859
2,989,859
217,962
217,962
2020
$
2019
$
125,818
1,784,638
-
1,911,911
1,910,456
1,911,911
2,134,140
355,685
57,780
2,134,140
-
-
2,547,615
2,134,140
1 Mt Carbine Sublease Rent prepaid to Mt Carbine Quarries Pty Ltd as per the Retreatment Operations Sublease Agreement
between Mt Carbine Quarries Pty Ltd, CRONIMET Australia Pty Ltd and Mt Carbine Retreatment Pty Ltd.
2 The Company’s wholly owned subsidiary and 50% unincorporated joint venture partner, Mt Carbine Retreatment Pty Ltd’s,
Offtake Advance recognition. The Loan is denominated in USD and the terms and repayment of this advance are governed by
the Offtake Advance Agreement between CRONIMET Asia Pte Ltd, CRONIMET Australia Pty Ltd and Mt Carbine Retreatment
Pty Ltd.
Page | 55
Speciality Metals International Limited Annual Report 2020
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The contract liability arrangements for the Offtake Advance are secured as follows:
• general security deed from Mt Carbine Retreatment Pty Ltd over its present and subsequent acquired assets;
• general security deed from CRONIMET Australia Pty Ltd over all its present and subsequent acquired assets; and
• mortgage from Mt Carbine Quarries Pty Ltd over mining leases ML4867 and ML4919. This mortgage also includes an interest
over “Featherweight Property” which is all other property of Mt Carbine Quarries Pty Ltd other than the mining leases.
The mortgage is limited recourse, in that it is limited to the value of the mining leases.
The contract liability arrangement for the unincorporated joint venture between Mt Carbine Retreatment Pty Ltd and
CRONIMET Australia Pty Ltd (Joint Venture) are as follows:
• Deed of Cross Security between the Joint Venture parties and Mt Carbine Retreatment Management Pty Ltd (as the manager)
which secures the performance of their obligations to each other under the Joint Venture; and
• General Security Deed from Mt Carbine Quarries Pty Ltd in favour of the Joint Venture parties over all present and
after acquired property of Mt Carbine Quarries Pty Ltd including its rights under the Mining Leases.
23. EQUIPMENT LEASES
Right-of-use assets
Balance at 1 July 2019
Additions:
- Plant & equipment
- Motor vehicle
Depreciation charge for the year
Balance at 30 June 2020
Lease Liability - Maturity Analysis
Less than 1 year
1 to 5 years
5+ years
Amounts Recognised in profit or loss
Interest on lease liabilities
Expenses relating to short-term leases
Amounts recognised in statement of cash flows
Total cash outflow for leases
24. CORPORATE INFORMATION
2020
$
-
1,201,234
32,848
(8,692)
1,225,390
200,715
968,094
-
1,168,809
855
-
855
7,892
2019
$
-
-
-
-
-
-
-
-
-
-
-
-
-
The Financial Report of the Group for the year ended 30 June 2020 was authorised for issue in accordance with a resolution
of the Directors on 23 September 2020.
Speciality Metals International Limited is a company limited by shares and incorporated in Australia. Its shares are publicly
traded on the Australian Securities Exchange under the ticker code “SEI”.
Page | 56
56 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s principal financial instruments comprise cash, short term deposits and available for sale investments.
The main purpose of these financial instruments is to finance the Company’s operations. The Company has various other
financial assets and liabilities such as trade receivable and trade payables, which arise directly from its operations. It is, and
has been throughout the entire period under review, the Company’s policy that no trading in financial instruments shall be
undertaken.
The main risks arising from the Company’s financial instruments are cash flow interest rate risk and equity price risk.
Other minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks.
(a)
Price Risk
The Group is not exposed to equity securities price risk.
(b)
Liquidity Risk
The Company manages liquidity risk by maintaining sufficient cash reserves and marketable securities and through
the continuous monitoring of budgeted and actual cash flows.
Contracted maturities for payables year ended 30 June 2020
Payable:
- less than 6 months
- 6 to 12 months
- 1 to 5 year
- later than 5 year
Total
2020
$
2019
$
797,892
139,433
968,094
-
780,155
-
-
-
1,905,419
780,155
(c)
Fair Value of Financial Instruments
The following tables detail the consolidated entity’s fair values of financial instruments categorised by the following
levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices).
Level 3:
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Consolidated – 2020
Assets
Ordinary shares
Total assets
Liabilities
Total liabilities
Consolidated - 2019
Assets
Ordinary shares
Total assets
Liabilities
Total liabilities
Level 1
2,113
2,113
-
Level 1
1,289
1,289
-
Level 2
Level 3
-
-
-
-
-
-
Level 2
Level 3
-
-
-
-
-
-
Total
2,113
2,113
-
Total
1,289
1,289
-
There were no transfers between levels during the financial year.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of
trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature.
Page | 57
Speciality Metals International Limited Annual Report 2020
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial instruments.
(d)
Commodity Price Risk
The Company is exposed to commodity price risk. This risk arises from its activities directed at exploration and mining
development of mineral commodities. If commodity prices fall, the market for companies exploring and/or mining for
these commodities is affected. The Company does not currently hedge its exposures.
(e)
Fair Values
For financial assets and liabilities, the fair value approximates their carrying value. No financial assets and financial
liabilities are readily traded on organised markets in standardised form, other than listed investments. The Company
has no financial assets including derivative financial assets and liabilities where the carrying amount exceeds the net
fair values at reporting date. The Company’s receivables at reporting date comprise of GST input tax credits refundable
by the Australian Taxation Office and other receivables. The balance (if any) of receivables comprises prepayments (if
any). The credit risk on financial assets of the Company which have been recognised on the Statement of Financial
Position is generally the carrying amount.
(f)
Capital Risk Management
The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern,
so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital. Consistently with others in the industry, the consolidated entity monitors capital
on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as
total borrowings less cash and cash equivalents. Total capital is calculated as “equity” as shown in the Statement of
Financial Position plus net debt. The gearing ratio as at 30 June 2020 and 30 June 2019 was 0% as net debt was
negative in both years.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen
as value adding relative to the current parent entity’s share price at the time of the investment. The consolidated entity
continues to evaluate corporate and exploration opportunities within the new economy and critical minerals sector.
The consolidated entity is subject to certain financing arrangements and covenants and meeting these is given priority
in all capital risk management decisions. There have been no events of default on the financing arrangements during
the financial year.
The capital risk management policy remains unchanged from the 30 June 2019 Annual Report. The consolidated entity
is not subject to externally imposed capital requirements.
26. SHARE-BASED PAYMENTS
(a)
Share based payments
Share-based payments expense
Share-based payments capitalised
Total share-based payments
2020
$
45,000
-
45,000
2019
$
-
-
-
Page | 58
58 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b)
Performance Rights
The following table details the number and movements in performance rights issued as employment incentives during
the year:
2020
Number
Total vested and
unexercised at
30 June 2020
2019
Number
Total unvested and
unexercisable at
30 June 2019
Outstanding at the beginning of the year
25,000,000
25,000,000
25,000,000
25,000,000
Granted during the year
Converted during the year1
-
-
(25,000,000)
(25,000,000)
-
-
-
-
Outstanding at the end of the year
-
-
25,000,000
25,000,000
(c)
Performance rights – key terms and conversion to shares
25,000,000 unlisted options were granted to Directors as an employment incentive following approval by shareholders
at the General Meeting held on 22 June 2018. The key terms of the performance rights, in accordance with the terms
approved by shareholders, are as follows:
Type of Performance Right:
Each Right entitles the Holder to 1 fully paid ordinary share in the Company
upon exercise.
Expiry Date:
Vesting:
22 June 2020 (2 years after the issue date)
The Rights vest upon satisfaction of the following conditions:
(a)
(b)
the Company completes the acquisition of Mt Carbine Quarries
Pty Ltd and associated mining leases; or
the Company share price on ASX trades on at least 3 consecutive
business days above $0.05.
1 Fully expensed during the 2018/2019 financial year due to the vesting condition relating to the completion of the
acquisition of Mt Carbine Quarries Pty Ltd and associated mining leases being satisfied on 28 June 2019. Shares were
issued on 2 August 2019.
(d)
Options
The following table details the number and movements in options issued as employment incentives during the year.
2020
Number
Total vested and
unexercised at
30 June 2020
2019
Number
Total unvested and
unexercisable at
30 June 2019
Outstanding at the beginning of the year
-
5,000,000
Granted during the year
Converted during the year
5,000,000
-
-
-
Outstanding at the end of the year
5,000,000
5,000,000
-
-
-
-
-
-
-
-
(e)
Option vesting conditions
5,000,000 listed options were granted to Interim CEO & Senior Technical Advisor, K. MacNeill, as an incentive following
his appointment 7 May 2020 for an initial one (1) year term. The options will expire on 5 May 2023 and are subject to
vesting conditions. The key terms of the options, as announced on 13 May 2020, are as follows:
Type of Performance Right:
Each option entitles the holder to 1 fully paid ordinary share the Company upon
exercise.
Expiry Date:
Vesting:
5 May 2023
2,000,000 Options exercisable at $0.04 will vest upon the successful
completion of a six (6) month period under the services agreement; and
3,000,000 Options exercisable at $0.06 will vest upon the successful
completion of a twelve (12) month period under the services agreement; and
Page | 59
Speciality Metals International Limited Annual Report 2020
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(f)
Valuation of Options Granted
30 June
2020
Exercise
Price $0.04
Exercise
Price $0.06
Number of
granted
Options
Grant date
Expiry date
Fair Value
per
Option at
grant date
Share-Based Payments
Total
Fair Value
of Options
Expensed
in prior
years
Expensed
in the 2020
year
AASB 2
Not yet
expensed
2,000,000
13 May 2020
5 May 2023
0.01747
34,938
3.000.000
13 May 2020
5 May 2023
0.01471
5,000,000
44,122
79,060
-
-
-
-
-
-
34,938
44,122
79,060
(g)
Performance Rights / Options lapsed during the reporting period
No performance rights or options lapsed during the reporting period without exercise.
27. EMPLOYEE BENFITS
Current
Annual Leave Benefits
Non-current
Long Service Leave Benefits
Total share-based payments
2020
$
2019
$
105,090
26,473
12,884
117,974
8,890
35,363
28. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Adoption of New Standards and Interpretations
Changes in accounting policies on initial application of Accounting Standards
From 1 July 2019, the Group has adopted all the standards and interpretations mandatory for annual periods beginning on or
after 1 July 2019 Adoption of these standards and interpretations did not have any effect on the statements of financial position
or performance of the Group. The Group has not elected to early adopt any new standards or amendments.
Page | 60
60 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Speciality Metals International Limited. The information presented has
been prepared using accounting policies that are consistent with those presented in Note 1.
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
FINANCIAL PERFORMANCE
Profit (loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive profit/(loss)
2020
$
2019
$
5,029,560
15,604,705
483,779
15,488,890
20,634,265
15,972,669
293,801
3,823,821
4,117,622
16,516,643
4,839,339
6,060
4,845,399
11,127,270
15,023,117
-
1,493,526
16,516,643
7,651,079
330,000
3,146,191
11,127,270
(1,653,438)
773
(1,652,665)
4,031,923
-
4,031,923
Contingent Liabilities
As at 30 June 2020 and 30 June 2019 the Company had no contingent liabilities.
Contractual Commitments
As at 30 June 2020 and 30 June 2019 the Company had no contractual commitments other than those disclosed in Note 16.
Guarantees Entered into by Parent Entity
As at 30 June 2020, the Company has not provided any financial guarantees.
Page | 61
Speciality Metals International Limited Annual Report 2020
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. OPERATING SEGMENTS
Segment Information
Identification of Reportable Segments
During the 2020 financial year, the Company operated principally in one business segment being mineral exploration and
in two geographical segments being Queensland and New South Wales, Australia.
The Company’s revenues and assets and liabilities according to geographical segments are shown below.
June 2020
Total
Queensland
NSW
$
$
$
Total
$
June 2019
Australia
$
Chile
$
REVENUE
Revenue & Other Income
Total segment revenue
RESULTS
Net profit / (loss) before
income tax
Income tax
Net profit / (loss)
ASSETS AND LIABILITIES
Assets
Liabilities
1,087,445
1,087,445
1,087,445
1,087,445
(3,016,453)
(3,016,453)
-
-
(3,016,453)
(3,016,453)
-
-
-
-
-
245,936
245,936
245,936
245,936
3,808,863
3,808,863
-
-
3,808,863
3,808,863
21,417,760
21,271,634
146,126
15,966,609
15,966,609
6,481,414
6,481,414
-
5,061,568
5,061,568
-
-
-
-
-
-
-
31. RELATED PARTY DISCLOSURES
a.
The Company’s main related parties are as follows:
Key management personnel:
Any person(s) having authority and responsibility for planning, directing and controlling the activities of
the Company, directly or indirectly, including any director (whether executive or otherwise), are considered
key management personnel.
The directors and officers in office during the year were as follows:
- Oliver Kleinhempel
- Russell Henry Krause
(Penause Pty Ltd)
- Roland Waynne Nice
(R.W. Nice & Assoc. Pty Ltd)
- Stephen Layton
(Bodie Investments Pty Ltd)
- Zhui Pei Yeo
- Adrien Michele Wing
(Northern Start Nominees Pty Ltd)
Appointed Non-executive Directtor 12 August 2019
Appointed Non-executive Chairman 24 April 2020
Appointed Non-executive Chairman on 30 June 2013
Appointed Executive Chairman on 14 November 2017
Resigned 24 April 2020
Appointed 30 June 2013 and resigned 12 August 2019
Appointed 14 November 2017
Appointed 12 August 2019
Appointed 1 February 2019 and resigned 1 September 2020
For details of disclosures relating to key management personnel, refer to Key Management Personnel disclosures
Directors and Remuneration Report.
Page | 62
62 Speciality Metals International Limited Annual Report 2020
Notes to the Consolidated Financial Statements continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b. Transactions with other related parties:
Transactions between other related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
There were no transactions with other related parties during the reporting period.
c. Receivable from and payable to related parties
There were no trade receivables from nor trade payables to related parties at the current and previous
reporting date.
d. Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
e. Parent entity
Speciality Metals International Limited is the parent entity.
f.
Subsidiaries
Interests in subsidiaries are set out in Note 18.
.
Page | 63
Speciality Metals International Limited Annual Report 2020
63
Directors’ Declaration
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1.
the Financial Statements, comprising the Statement of Profit or Loss and Other Comprehensive Income, Statement of
Financial Position, Statement of Cash Flows, Statement of Changes in Equity and accompanying Notes, are in accordance
with the Corporations Act 2001 and:
a)
b)
comply with Accounting Standards, which, as stated in the accounting policy Note 1, to the financial statements,
constitutes explicit and unreserved compliance with international Financial Reporting Standards (IFRS); and
give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on
that date of the company and consolidated group;
2.
the directors have been given the declaration required by s.295A of the Corporations Act 2001 by the Interim Chief Executive
Officer declaring that:
a)
b)
c)
the financial records of the company for the financial year have been properly maintained in accordance with
s 286 of the Corporations Act 2001;
the Financial Statements and notes for the financial year comply with Accounting Standards; and
the Financial Statements and notes for the financial year give a true and fair view; and
3.
in the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
This declaration is made in accordance with the resolution of the Board of Directors.
On behalf of the Board
[insert signature]
Oliver Kleinhempel
Non-executive Chairman
28 September 2020
Page | 64
64 Speciality Metals International Limited Annual Report 2020
Auditor’s Independence Declaration
Auditor’s Independence Declaration under Section 307C of
the
Corporations Act 2001 to the Directors of Speciality Metals International
Limited
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020, there
have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Nexia Melbourne Audit Pty Ltd
Melbourne
Geoff S. Parker
Director
Dated this 28th day of September 2020
Nexia Melbourne Audit Pty Ltd
Registered Audit Company 291969
Level 12, 31 Queen Street
Melbourne VIC 3000
p +61 3 8613 8888
f +61 3 8613 8800
e info@nexiamelbourne.com.au
w nexia.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Nexia Melbourne Audit Pty Ltd (ABN 86 005 105 975) is an independent firm of Chartered Accountants. It is a affiliated with, but independent
from Nexia Australia Pty Ltd, which is a member of Nexia International, a worldwide network of independent accounting and consulting firms.
Neither Nexia International nor Nexia Australia Pty Ltd, deliver services in its own name or otherwise. Nexia International Limited and the
member firms of the Nexia International network (including those members which trade under a name which includes NEXIA) are not part of
a worldwide partnership.
The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited and used under licence.
Speciality Metals International Limited Annual Report 2020
65
Independent Auditor’s Report
Independent Auditor’s Report to the Members of Speciality Metals International
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Speciality Metals International Limited, which comprises the
consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and 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 Specialty Metals International Limited is in accordance
with the Corporations Act 2001, including:
i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the ‘auditor’s responsibilities for the audit of the financial report’
section of our report. We are independent of the entity in accordance with the Corporations Act 2001
and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, has been given to
the Directors of the Company, as at the date of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Nexia Melbourne Audit Pty Ltd
Registered Audit Company 291969
Level 12, 31 Queen Street
Melbourne VIC 3000
p +61 3 8613 8888
f +61 3 8613 8800
e info@nexiamelbourne.com.au
w nexia.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Nexia Melbourne Audit Pty Ltd (ABN 86 005 105 975) is an independent firm of Chartered Accountants. It is a affiliated with, but independent
from Nexia Australia Pty Ltd, which is a member of Nexia International, a worldwide network of independent accounting and consulting firms.
Neither Nexia International nor Nexia Australia Pty Ltd, deliver services in its own name or otherwise. Nexia International Limited and the
member firms of the Nexia International network (including those members which trade under a name which includes NEXIA) are not part of
a worldwide partnership.
The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited and used under licence.
66 Speciality Metals International Limited Annual Report 2020
Independent Auditor’s Report continued
Key audit matter
How our audit addressed the key audit matter
Carrying value Deferred exploration and
evaluation expenditure
Refer to Note 10 non-current assets
The Group carries significant exploration and
evaluation assets at 30 June 2020 which is
material to the financial report.
As a result the capitalised exploration and
evaluation expenditure were required to be
considered for impairment indicators in
accordance with AASB 6 Exploration and
Evaluation of Mineral Resources and therefor
considered a key audit matter.
Our procedures included, amongst others:
Obtain schedules of the areas of interest held by
the Group and assessing whether the rights to
tenure remain current at balance date;
Considering whether any such areas of interest
had reached a stage where a reasonable
assessment of economically recoverable reserves
existed;
Review the Company’s capitalisation of
exploration expenditure in the current year,
ensuring that it is consistent with the criteria as
stated under AASB 6. This included discussion
with management, reviewing Group exploration
budgets, ASX announcements and directors’
minutes;
Review and considered whether any facts or
circumstances existed that suggest impairment
was required;
We tested a sample of additions of capital
exploration expenditure to supporting
documentation;
Assessing the adequacy of the related disclosures
in Note 10 to the financial report.
Other information
The Directors are responsible for the other information. The other information comprises the information
in Speciality Metals International Limited’s annual report for the year ended 30 June 2020, but does not
include the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the
other information we are required to report that fact. We have nothing to report in this regard.
Speciality Metals International Limited Annual Report 2020
67
Auditor’s responsibility for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at The
Australian Auditing and Assurance Standards Board website at:
www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report.
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, actions taken to eliminate
threats or safeguards applied.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 31 of the Directors’ Report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Speciality Metals International 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.
Nexia Melbourne Audit Pty Ltd
Melbourne
Dated this 28th day of September 2020
Geoff S. Parker
Director
68 Speciality Metals International Limited Annual Report 2020
Shareholder Information
SHAREHOLDER INFORMATION
Information relating to shareholders at 14 September 2020 (per ASX Listing Rule 4.10)
The Company has received the following notices of substantial shareholding:
Hilux Resources Pty Ltd
Whitfords Holding Investments Ltd
Distribution of Shareholders as at 14 September 2020
Number of Ordinary Shares Held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Shareholding
70,000,000
64,919,810
Ordinary
Shares
13,491
169,730
972,585
28,525,069
1,080,548,756
1,110,229,631
Number
of Holders
77
50
109
656
575
1,467
At the closing market price of $0.028 per share, there were 350 shareholders with less than a marketable parcel of $500.
Unquoted Securities
The number of options that are on issue and the number of holders as at 14 September 2020:
Unlisted Options
Exercise Price @ $0.04
Exercise Price @ $0.06
TOTAL
Number of Holders
2
2
4
Number of Options
4,000,000
6,000,000
10,000,000
Top 20 Shareholders of Ordinary Shares as at 14 September 2020
1.
HILUX RESOURCES PTY LTD
2. WHITFORDS HOLDING INVESTMENTS LTD
3.
4.
5.
6.
7.
8.
9.
ARCHER PACIFIC HOLDING LIMITED
CITICORP NOMINEES PTY LIMITED
LYNEWOOD HOLDINGS LTD
BODIE INVESTMENTS PTY LTD
COVENANT HOLDINGS (WA) PTY LTD
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