ANNUAL REPORT
30 JUNE 2021
ABN 44 103 423 981
Corporate Directory
Corporate Directory
DIRECTORS
Craig McGown
Independent Non-Executive Chairman
Timothy Spencer Managing Director
Paul Payne
Independent Non-Executive Director
Warren Hallam
Independent Non-Executive Director
COMPANY SECRETARY
Carl Travaglini
PRINCIPAL REGISTERED OFFICE
Level 3, 46 Ord Street, West Perth, Western Australia 6005
PO Box 1787, West Perth, Western Australia 6872
Telephone: +61 8 9322 6974
Email: info@essmetals.com.au
Website: essmetals.com.au
AUDITOR
Deloitte Touche Tohmatsu
Brookfield Place, Tower 2, 123 St Georges Terrace, Perth, Western Australia, 6000
SHARE REGISTRY
Automic Group
Level 2, 267 St Georges Terrace, Perth, Western Australia, 6000
Telephone: 1300 288 664 or +61 2 9698 5414
Email: hello@automic.com.au
SECURITIES EXCHANGE LISTING
The Company’s shares are quoted on the Australian Securities Exchange.
ASX CODE
ESS - ordinary shares
ESSO - listed share options
Essential Metals Limited – 2021 Annual Report
Our Vision
We are a Western Australian ASX listed exploration and mining company committed to
explore, develop and operate mineral projects within world class mineral provinces, with a
focus on our 100% owned Pioneer Dome Lithium Project located in Western Australia. We
are committed to the application of industry best practice in evaluating and developing
projects in order to maximise economic value whilst striving to maintain our high standard
environmental, social and governance footprint.
Our Commitment
We acknowledge that our people are our greatest asset and are therefore committed to
providing a safe work environment, promoting ethics, integrity and honesty.
We are committed to maximising returns for our shareholders while promoting the
ongoing care and protection of the environment within which we operate throughout the
life of a project, from exploration through to decommissioning.
Lithium is the key Ingredient in today's technology
This is the average lithium quantity of the following products for a sustainable future
40g
63kg
Laptop Batteries
Electric car
10kg
Tesla Powerwall
Sources: electrek.com, electrive.com
60g
Power Tools
Contents
SECTION
Managing Director’s Letter
Chairman’s Letter
ESG Overview
Operational & Financial Review
Directors’ Report
Auditor’s Independence Declaration
Financial Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
Mineral Resource Statement
Forward looking statements
Tenement Register
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Essential Metals Limited – 2021 Annual Report
Managing Director’s Letter
“
The rebound in lithium sentiment, driven by global climate change imperatives, has gathered
momentum during 2021. Your company is fortunate to be well positioned to benefit from this
renewed interest in lithium by having a quality lithium mineral resource on a large ground
package located in Western Australia’s premier lithium province in the Yilgarn Craton.
The Pioneer Dome Project (ESS: 100%) is located in the core of Western Australia’s lithium
corridor in the Eastern Goldfields, approximately 130km south of Kalgoorlie and 275km north of
the Port of Esperance. A lithium Mineral Resource of 11.2Mt @ 1.21% Li2O has been defined at
Dome North in the northern part of the Project area.
The southern Yilgarn area is recognised as being well endowed with spodumene deposits,
including the Bald Hill Mine, the Mt Marion Mine and the Buldania Project, all within 100km of
the Pioneer Dome Lithium Project. The world-class Earl Grey deposit and the Mt Cattlin Mine
are located further west and south of Pioneer Dome, respectively.
Our goal is to grow our lithium resources and become a new force in the lithium supply chain.
We are encouraged by the strong support of new and long standing shareholders in supporting
our equity together with the highly oversubscribed $5 million capital raising in August 2021
resulting in cash and liquid investments of just under $10 million as at the date of this report.
This has provided for a very strong balance sheet leading into 2021/22 and will enable us to
focus on delivering our strategy for all shareholders.
We also have exposure to gold and nickel via two 100% owned highly prospective gold projects,
four gold joint ventures with leading gold companies including Northern Star Resources, Novo
Resources Corp. and Black Cat Syndicate and two nickel joint ventures.
The Essential Metals team is excited and committed to advancing our projects, particularly our
lithium projects, to continue to create shareholder value.
Yours faithfully,
Timothy Spencer
Managing Director
1
”
Chairman’s Letter
“
The success of any business starts with its people, values, vision, and commitment to
executing that vision. We believe that the core of our Company’s vision is perfectly aligned
and well positioned to take advantage of the forecast growth of the lithium-ion battery sector
over the coming years.
We are in the enviable position of progressing our 100% owned Pioneer Dome Lithium Project
in Western Australia, a tier 1 international mining jurisdiction.
As the COVID-19 global pandemic continues to deliver uncertainty on a macro scale, we see a
great opportunity for our shareholders to participate in a new fore in Lithium.
With the ever increasing demands from regulators and to maintain our social license to
operate within the various local and foreign communities we see Essential Metals’ portfolio of
projects placing your company in a position to not just participate in but become a new force
in the global lithium supply chain.
Throughout the last financial year we underwent a restructure of the management and
technical teams, consolidated the Company’s capital structure and rebranded the Company’s
name and market recognition. This reinvigoration of our people and values have afforded
greater visibility in and recognition by the market with your Company’s share price seeing a
significant appreciation over the previous 12 months.
The team at Essential Metals is more unified and adaptable than ever before and I am
confident given the committed approach of that team there will be significant achievements in
the year to come.
I look forward to your continued support and keeping you updated on our progress.
Yours faithfully,
”
Craig McGown
Chairman of the Board of Directors
2
ESG At Essential Metals
Essential Metals has adopted its Environmental, Social and Governance (ESG) framework that
will effectively guide the company as it grows and develops. Essential Metals is well positioned
to contribute to a sustainable future through its focus on finding and producing essential
metals as the world shifts to a low carbon society and economy.
In addition, the company is committed to protecting and respecting the environment and
local communities within which it operates and looks forward to enhancing its positive
impact in these areas.
As Essential Metals advances its ESG strategy, it will be sharing its efforts and impact regularly,
in line with its annual reporting cycle.
Our ESG Framework
Essential Metals endorses the following global ESG reporting frameworks with which to
prepare an inaugural ESG report in 2022.
The Global Reporting Initiative (GRI) is the world's most widely used sustainability reporting
framework. GRI Standards represent global best practice for reporting publicly on a range of
economic, environmental and social impacts and are widely referenced by Australian mining
and exploration companies.
As a global list of key material topics for our planet, the Sustainable Development Goals (SDGs)
have become a global reference for sustainability reporting policy. The SDGs call for worldwide
action amongst governments, business and civil society. They present an opportunity for
business-led solutions and technologies to be developed and implemented to address the
world’s biggest sustainable development challenges. SDGs are also widely referenced by
Australian mining and exploration companies.
3
Stakeholder Engagement
Essential Metals understands that central to impactful ESG activities is a meaningful
stakeholder engagement process. Stakeholders are defined by GRI as entities or individuals
that can:
■
reasonably be expected to be significantly impacted by the reporting organisation's
activities, products and services, or
■ Whose actions can reasonably be expected to affect the ability of the organisation to
implement its strategies and achieve its objectives.
Essential Metals identifies the following groups of stakeholders in line with the GRI definition
Investors
-
- Media & Analysts
-
-
NGO’s
Suppliers & Contractors
-
-
-
-
-
Employees
Government & Regulators
Indigenous communities
Traditional owners
Industry bodies
Essential Metals is committed to
a stakeholder engagement
program in FY22 in order to
identify material topics. These
are defined by the GRI as: a topic
that reflects a reporting
organisation's significant
economic, environmental, and
social impacts; or that
substantively influences the
assessments and decisions of
stakeholders.
Following the discovery of
Essential Metals’ material topics,
a process of principled
prioritisation will occur in line
with the adjacent graph:
4
Essential Metals ESG Staged Approach
Stage 1
■
■
■
■
Finalization of an ESG framework
Allocation of resources for ESG activities
Commence an ESG Discovery Process for the ESS Board & Management to define
opportunities for value creation and risks to manage
ESG policies and procedures gap analysis
Stage 2
■
■
■
■
■
Stakeholder engagement program
Definition and baseline measurement of material topics
Outline Essential Metals ESG Strategy
Set goals for material topics
Preparation of an inaugural ESG report
Stage 3
■ Monitor, measure and manage progress on ESG goals
■
Begin adoption of Taskforce for Climate Related Disclosures (TCFD) reporting
recommendations
Review ESG opportunities and risks throughout our wider value-chain
■
5
OPERATIONAL AND
FINANCIAL REVIEW
ANNUAL REPORT
Operational & Financial Review
For the year ended 30 June 2021
PIONEER DOME LITHIUM PROJECT (ESS: 100%)
LOCATION, TENURE AND INFRASTRUCTURE
Essential Metals Limited’s (“Essential”, “Company”) flagship Pioneer Dome Project (ESS: 100%) is located in the core
of Western Australia’s lithium belt in the Eastern Goldfields. A Mineral Resource of 11.2Mt @ 1.21% Li2O has been
defined at Dome North in the northern area of the Project (Refer ASX announcement dated 29 September 2020).
The southern Yilgarn area is recognised as well endowed with spodumene deposits, including the Bald Hill Mine, the
Mt Marion Mine and the Buldania Project. The world-class Earl Grey deposit and the Mt Cattlin Mine are located
further west and south, respectively.
Pioneer Dome covers an area of 356km2 and includes eight exploration licences (six granted and two under
application), one granted mining lease and one granted miscellaneous licence.
The tenement package is centred ~150km south of Kalgoorlie and 275km north of the deep-water port of Esperance
with the Coolgardie-Esperance Highway adjacent to the eastern edge of the Project.
Pioneer Dome
11.2Mt @ 1.21% Li
O
2
Figure 1 - The lithium deposits of the Southern Yilgarn Ta-Sn-Li
Province in the context of pegmatite Li-Ta deposits of Western
Australia. Modified from Skirrow et al, 2013. Mineral Resources
quoted are sourced from Champion, 2018 (Mt Marion, Bald Hill, Mount
Cattlin and Greenbushes).
Figure 2: Pioneer Dome tenements, geology and targets
Essential Metals Limited – 2021 Annual Report
7
Operational & Financial Review
For the year ended 30 June 2021
GEOLOGY AND MINERALISATION
The core intrusive of the Pioneer Dome is a monzogranite - the eastern edge is marked by the 50 Mile Tank Gneiss,
an older unit that has been intruded by the granite, and which may represent an inlier of pre-greenstone basement.
Surrounding greenstone units include volcanics of the Kalgoorlie Group (including the Kambalda Komatiite), overlain
by volcaniclastics and sediments of the Black Flag Group.
Although Figure 2 shows a later granite directly abutting the southwestern edge of the Pioneer Monzogranite, work
completed by Essential has identified probable Black Flag units in the area, with this interpretation supported by the
magnetics signature in the area. This has important ramifications for lithium exploration, given that the pegmatites
are generally found in the units around and within 4 km of the dome (the “Goldilocks Zone” as shown in Figure 2).
The primary mineralisation style is pegmatite hosted lithium, with caesium also being present in the Sinclair area.
Pegmatites identified to date form a swarm over a strike length of 15 km within the sediments along the eastern
side of the Pioneer Monzogranite, with a second group (Dome North) at the northern end of the intrusive.
DOME NORTH PROJECT HISTORY
Essential commenced lithium exploration in early 2016, with this initially leading to the discovery of several
pegmatites along the eastern edge of the Pioneer Dome, including the 2016 discovery of the pollucite hosted
caesium mineralisation which was subsequently mined in 2018/2019.
Early work included soil sampling, geological mapping and drilling with subsequent work resulting in the discovery of
the Heller, Davy and Cade deposits in the north of the Project area.
The Dome North pegmatites were initially discovered in mid-2019 by geological mapping over geochemically
identified target areas, with drilling commencing soon after. The initial Mineral Resource Estimate (“MRE”), for the
Cade Deposit, of 8.2 Mt @ 1.23% Li2O was announced to the market on 25 November 2019.
Further work identified the Davy and Heller deposits, and following a second drill programme, an updated MRE, as
presented in Table 1, was reported to ASX on 29 September 2020.
DOME NORTH LITHIUM MINERAL RESOURCE ESTIMATE
The Dome North Lithium Project
Project area
Cade Deposit
Davy Deposit
Heller Deposit
Total
Table 1: Dome North MRE
Category
Indicated
Inferred
Inferred
Inferred
Tonnes
(Mt)
5.4
2.8
2.3
0.7
11.2
Grade
(Li2O %)
1.30
1.18
1.13
1.02
1.21
Tonnes Li2O
70,000
33,000
25,000
8,000
136,000
Essential Metals Limited – 2021 Annual Report
8
Operational & Financial Review
For the year ended 30 June 2021
The Cade Deposit represents around three quarters of the Mineral Resource and includes 5.4Mt @ 1.3% lithium
(Li2O) classified in the ‘Indicated’ category. The Cade Deposit averages over 20m in thickness with higher grade zones
as represented by intersections such as 33m @ 1.63% Li2O. The Heller and Davy Deposits are generally thinner
(averaging around 10m) and are hosted along sheared contacts between basalts and pyroxene dominant ultramafics
- these are smaller and of lower average grade than Cade.
Figure 3: Cade deposit cross section, looking north
Essential Metals Limited – 2021 Annual Report
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Operational & Financial Review
For the year ended 30 June 2021
LITHIUM METALLURGY
In December 2019 Essential engaged Primero Group Limited (ASX:PGX) to design and conduct an independent
Scoping Study level metallurgical testwork programme on two composites from five drill holes from the Cade
deposit intended to represent the mean grade and lithology of the deposit. Intersections from the five holes were
previously reported as follows (refer ASX announcement dated 4 February 2020):
31.6m @ 1.31% Li2O from 72 metres (PDRCD292)
27.4m @ 1.38% Li2O from 131 metres (PDRCD294)
27.2m @ 1.46% Li2O from 209 metres including 11m @ 1.79% Li2O (PDRCD295)
22.2m @ 1.72% Li2O from 128 metres (PDRCD318)
16.5m @ 0.86% Li2O from 166 metres (PDRCD293)
Two composite samples were prepared from the drill core. The tests conducted on the first composite included:
Head Assay and X-Ray Diffraction (XRD);
Crusher work index (CWi) and Abrasion Index (Ai) tests; and
Size by assay (SxA) and Heavy Liquid Separation (HLS) at a series of different crush sizes
The first composite was noted to include a portion of mineralisation containing petalite, a lithium-bearing mineral
that typically requires a different process flowsheet to spodumene. This material was situated towards the edge of
the Resource. A second composite was generated from the same drill holes as the first but excluded the 3.7m wide
petalite wall zone identified in hole PDRCD318.
The tests conducted on the second composite included:
Head Assay and X-Ray Diffraction (XRD);
Batch flotation test work on head and DMS mid samples. This work included de-sliming, magnetic
Size by assay (SxA) and Heavy Liquid Separation (HLS) at a series of different crush sizes; and
separation and mica pre-flotation steps.
The XRD scan showed that no petalite was detected in the second composite sample, providing evidence that
petalite occurrences outside the identified wall zone in hole PDRCD318 may be low. The lithium grades of the two
composites were 1.41% Li2O and 1.56% Li2O respectively. The second composite was then used for the dense
medium separation (DMS) and flotation test work.
A series of HLS tests was conducted, including one to investigate production of an upgraded direct-shipped ore
(DSO). This test, using a crush size of P100 6.3mm, showed that up to 81% Li2O can be recovered into approximately
42% of plant feed mass, producing an upgraded material containing 2.0% Li2O. These HLS results represent a
theoretical maximum recovery for this sample and variability testing with a DMS cyclone and larger sample mass is
recommended to verify any results.
In an improved lithium pricing environment, a lower CAPEX DSO style operation can be assessed against a more
capital intensive, value-adding operation involving DMS + flotation processing, provided that a market for DSO
product is available.
Under the DMS pilot test stage, a concentrate of 5.7% Li2O was achieved. The Secondary DMS floats were then
composited with -0.85mm material and used as feed to flotation test work, containing an assayed grade of 1.67%
Li2O.
The flotation test work based on the DMS feed included a series of tests with each one preceded by grinding the
feed to P80 150µm and de-sliming via screen or cyclone at a cut size of 20 µm before performing the batch flotation
tests.
Essential Metals Limited – 2021 Annual Report
10
Operational & Financial Review
For the year ended 30 June 2021
Concentrate
T12 Flot Con & DMS Con
T15 Flot Con & DMS Con
Table 2: Concentrate Summary
Grade (% Li2O)
5.66
5.65
Grade (% Fe2O3)
1.3
0.7
Global Recovery (%Li2O)
82%
74%
The T12 test (flotation + DMS) achieved a concentrate of 5.66% Li2O with very high recovery rate of 82% lithia,
however the iron content of 1.3% Fe2O3 is considered high in comparison to the ‘industry standard’ limit of 1%
Fe2O3. Test T15 included a ‘mica pre-flotation’ step to remove paramagnetic gangue minerals. This resulted in a
similar concentrate grade of 5.65% Li2O but a much lower iron content of 0.7% Fe2O3 with a reduction in the global
lithia recovery rate to 74%.
Ongoing test work should result in improvements to grades and recoveries, however the work completed to date
shows that there is the potential to produce a marketable concentrate.
WORK SUBSEQUENT TO REPORTING PERIOD
Subsequent to the end of the financial year in August 2021, a 5,934m drilling programme was completed. It was
designed to explore for further spodumene-bearing pegmatites with the aim of adding to the existing Mineral
Resource base.
The drilling programme focussed on testing for extensions of identified pegmatites and structural targets and follow-
up anomalism from the previous air-core programme (May 2020) as well as testing two partially exposed pegmatite
targets (DN6 and DN21) south-west of the Heller Deposit, see Figure 5.
The release of assay results is anticipated towards the end of September 2021. Continuation of field activities
including soil sampling and mapping will provide the basis for a follow-up drilling programme to be designed and
executed in the fourth quarter of 2021.
Figure 5: Completed drill holes (white lines), RTP magnetic image, tenement outline (black polygon), interpreted structures (yellow lines),
previous drilling and LCT targets (coloured and labelled polygons).
Essential Metals Limited – 2021 Annual Report
11
Operational & Financial Review
For the year ended 30 June 2021
JUGLAH DOME GOLD PROJECT (ESS: 100%)
LOCATION, TENURE AND INFRASTRUCTURE
Juglah Dome comprises of a single ~50 km2 tenement highly prospective for gold mineralisation located ~60 km ESE
of Kalgoorlie (Figure 6), is readily accessible from the Mt Monger haul road and the Trans-Australian Railway service
road. Exploration by previous owners identified multiple gold targets using soil geochemistry and drilling. The
Project lies in a similar geological setting to that which hosts the Majestic and Imperial Deposits located 10km to the
north-west and the Daisy Complex to the west, which forms part of Silver Lake Resources Limited’s Mt Monger
Operations (Figure 6).
Figure 6: Juglah Dome and Golden Ridge projects showing tenements and geology
GEOLOGY AND MINERALISATION
The project is located within the Kurnalpi Terrane and includes a lower sequence of chert, intermediate to felsic
volcanics and volcaniclastics, overlain by basalts. The sequence has been folded and intruded by the Juglah
Monzogranite, which forms the core of the NW-trending Bulong anticline, of which the project is at the southern
end (Figure 6).
Mineralisation is largely related to NNW to NW trending shear zones, and also NNE-NE cross structures. It is also
generally hosted within felsic porphyry dykes and felsic volcanics. The axis of the anticline is also a control on
mineralisation, with the Moonbaker, John West and Axe Patch prospects occurring along this NW trend.
In May 2021 Essential announced that a total of 24 air-core (AC) holes totalling 420m were drilled to the south-east
of the Gards target at Juglah Dome. The aim of this drilling was to define the location of the felsic porphyry and
extend the known mineralisation to the south-east of the southern-most RC intersection of 8m @ 2.18g/t Au
(20GDRC034) into an area of thin alluvial cover. The drilling successfully expanded the known extent of felsic
porphyry that hosts the gold mineralisation at Gards by over 700m, and it remains open to the south-east.
Essential Metals Limited – 2021 Annual Report
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Operational & Financial Review
For the year ended 30 June 2021
Results included (refer ASX release dated 17 May 2021):
4m @ 0.29g/t from 17m (to EOH) in 21GSAC003
4m @ 0.22g/t from 12m (to EOH) in 21GSAC004
2m @ 0.18g/t from 15m (to EOH) in 21GSAC016
1m @ 0.15g/t from 17m in 21GSAC024
•
•
•
•
With the trend of the mineralised porphyry now defined, follow-up RC drilling can now be planned to test the entire
thickness and strike extent of the intrusion which remains open and untested to the south. It is anticipated that
thicker and potentially higher grade intersections will be returned from testing the full thickness of the porphyry unit
(Figure 7).
Figure 7 – Cross-section through the northern line of Gards South AC drilling with the interpreted mineralised felsic porphyry.
The remainder of this page is intentionally left blank.
Essential Metals Limited – 2021 Annual Report
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Operational & Financial Review
For the year ended 30 June 2021
GOLDEN RIDGE GOLD PROJECT (ESS: 100%, EXCEPT NICKEL)
LOCATION, TENURE AND INFRASTRUCTURE
The Golden Ridge Project is located 20km southeast of Kalgoorlie and is highly prospective for gold and nickel
mineralisation. The project lies within the well-endowed Menzies-Boorara Shear Zone that hosts the New
Boddington, Paddington, Boorara and Golden Ridge Deposits (the latter two are owned by Horizon Minerals Limited
– ASX:HRZ). Exploration at the Project by previous owners had identified multiple highly prospective gold and nickel
targets. Golden Ridge comprises four MLs, three ELs and one L for a total area of 145 km2.
Figure 8 – Location of the Golden Ridge Gold Project
Essential Metals Limited – 2021 Annual Report
14
Operational & Financial Review
For the year ended 30 June 2021
GEOLOGY AND MINERALISATION
Golden Ridge straddles the Boorara Shear Zone (“BSZ”), as well as the Ockerburry Fault Zone, which forms the
boundary between the Kalgoorlie and Kurnalpi Terranes. The BSZ is an elongate NNW trending zone, that extends
from Menzies in the north to south of Golden Ridge, and is the host for several gold deposits, including Paddington/
Broad Arrow and Golden Ridge. The total in-situ resource at the 1985 commencement of mining at Paddington was
8.4 Mt @ 3.2 g/t Au for 860,000 oz of contained gold. The Paddington mill is still operating, treating material from
other deposits in the region.
In addition, Horizon owns and operates the Boorara Gold Project immediately along strike to the NNW of the Golden
Ridge tenements, with this including the 448 koz Boorara deposit, with total resources of 19.02 Mt @ 1.66 g/t gold
for 1.02 Moz of contained gold.
Within the tenements, nickel is associated with rocks that are dominated by mafics and ultramafics (including
komatiitic lavas) of the Kalgoorlie Group; some areas of the Black Flag Group and the Kurnalpi Terrane volcanics are
also present in the north, along with units of the younger Panglo sedimentary basin.
Previous work by Essential (formally Pioneer Resources Limited) suggests that the area forms an ultramafic dome
(“Blair Dome”), with geological similarities to the Kambalda and Tramways Domes, both hosts to world-class nickel
mineralisation - in this work the Company also identified ~12 km of the ultramafic basal contact, the preferred
position for the komatiite channel associated nickel sulphide mineralisation as seen at the Blair nickel mine.
The gold occurrences are largely concentrated in what has been mapped as the younger volcanic and sedimentary
successions in the northern part of the tenement package and proximal to the Ockerburry Fault Zone, however the
area is marked by limited outcrop.
In July 2021 after the end of the current reporting period Essential announced that it had received all assays from a
92-hole/6,080m Air-Core drill programme across three prospects (Skandia, Maximus and AC75). The most significant
results from this drilling include (refer ASX release dated 8 July 2021):
Skandia (25 AC holes) results include:
-
-
8m @ 1.01 g/t Au from 96m including 3m @ 2.45g/t Au (hole GRA0454); and
12m @ 0.50 g/t Au from 60m (hole GRA0388)
Figure 9 – Cross-section through the middle line of Skandia AC drilling with the interpreted mineralised primary structures, supergene
dispersion and bedrock lithologies. Note: west of section is prospective untested sediment
Essential Metals Limited – 2021 Annual Report
15
Operational & Financial Review
For the year ended 30 June 2021
Results from the drilling programme are encouraging and suggest potential for significant gold mineralisation,
especially to the west and along the interpreted strike of mineralisation intersected in GRA0454. This area is 3km
south and along strike of the Golden Ridge Gold Deposit (ASX:HRZ) and coincident with a large >20ppb Au soil
anomaly with peak values to 174ppb Au.
Maximus (26 AC holes) results include:
-
-
-
3m @ 3.0 g/t Au from 30m including 1m @ 6.07g/t Au (hole GRA0375);
5m @ 0.75 g/t Au from 57m (hole GRA0369); and
3m @ 0.89g/t Au from 24m and 6m @ 0.17g/t Au from 33m (hole GRA0368)
Figure 10 - Location of Maximus AC drilling (blue pentagons), maximum Au (ppm) from drilling (coloured as per the legend) and area of >20ppb
Au-in-soil anomalism (yellow polygon), prospective area to the northeast of AC drilling (red dashed shape), interpreted northwest trending
structures (blue lines) and area of Maximus workings (black dashed outline).
The anomalous zones intersected correlate with intervals of massive or brecciated quartz veining hosted in siltstone
or adjacent ultramafic or within ferruginous upper saprolite. An interpreted north-west south-east trending
structure is coincident with anomalous intercepts and importantly there has been no previous drilling over the 1km
long strike length of this structure to the south-east.
Essential Metals Limited – 2021 Annual Report
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Operational & Financial Review
For the year ended 30 June 2021
AC75 (41 AC holes) results include:
-
-
12m @ 0.49 g/t Au from 51m including 3m @ 1.01 g/t Au (hole GRA0415); and
9m @ 0.26 g/t Au from 54m (hole GRA0451)
Figure 11 - Cross-section through the southern line of AC75 AC drilling with the interpreted mineralised primary structures, supergene
dispersion and bedrock lithologies
Drilling intersected basalt and ultramafic lithologies with minor bands of chert and shale. The mineralisation
intersected correlates with a roughly north-south oriented band of weakly brecciated shale and chert, interpreted as
a narrow interflow sedimentary unit. Further interpretive work is required to determine the future exploration
activities, if warranted.
BLAIR - GOLDEN RIDGE NICKEL PROJECT FARM-IN JOINT VENTURE
On 9 February 2021 Essential announced that it was farming out the nickel rights to the Crest Investment Group,
renamed Australian Nickel Company Limited (“ANC”), with ANC to earn 75% of the nickel rights through the
expenditure of A$4 million over four years, with a minimum annual spend of A$750,000. Essential will retain the
rights to all other minerals, will retain a 25% interest in nickel rights and is free-carried through to a Decision to
Mine.
The Blair – Golden Ridge Project is located approximately 25km southeast of Kalgoorlie. The Blair Nickel Mine was
developed by WMC Resources Limited and production commenced in 1990. There were three separate mining
periods, with the most recent concluding in December 2008 due to the Global Financial Crisis and the low nickel
price.
Multiple nickel prospects within the Project tenure have been identified and tested with the most recent work
conducted in early 2020, where the Leo Dam prospect was drilled tested and down-hole electromagnetic (DHEM)
surveys were conducted (refer ASX release dated 9 April 2020).
Essential Metals Limited – 2021 Annual Report
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Operational & Financial Review
For the year ended 30 June 2021
Figure 12: Location map of the Golden Ridge Nickel Project.
JOINT VENTURE INTERESTS
LITHIUM: The Company holds a 51% Project interest in the Mavis Lake Project, Ontario, Canada where drilling has
intersected spodumene.
Global travel restrictions have limited in-country activities during the current reporting period. The Project
tenements remain in good standing with available expenditure credits allowing Essential to focus on local lithium
opportunities while positioning non-core assets such as Mavis Lake for pipeline exploration activities.
GOLD: The Acra Project is near Kalgoorlie. Northern Star Resources Limited (“Northern Star”) (ASX:NST) has earned a
75% Project Interest and continues to fully fund exploration programmes until approval of a Mining Proposal by
DMIRS is received with Essential Metals holding a 25% interest.
GOLD: The Kangan Project is in the West Pilbara and part of a joint venture with Novo Resources Corp (“Novo”)
(TSX.NVO) and Sumitomo Corporation (“Sumitomo”) (TYO:8053), who will jointly fund 100% of gold exploration
programmes until a decision to mine is made, with Essential Metals holding a 30% interest.
Essential Metals Limited – 2021 Annual Report
18
Operational & Financial Review
For the year ended 30 June 2021
On 16 December 2020 Essential announced that Novo and Sumitomo had completed the farm-in obligations to form
the Kangan Gold Project Joint Venture. The Kangan Project forms part of Novo’s broader Egina Project, where
Sumitomo is earning up to a 40 % interest by spending up to US$30m over 3 years, commencing June 2019.
GOLD: The Balagundi Project is subject to a farmin & JV agreement where Black Cat Syndicate Limited (“Black Cat”)
(ASX:BC8) is earning a 75% interest in the Project located at Bulong, near Kalgoorlie. Black Cat will then fully fund
gold exploration programmes until a decision to mine is made, with Essential Metals retaining a 25% interest.
On 26 July 2021, after the end of the current reporting period, the Company announced that Black Cat had met the
initial commitment expenditure of $150,000 under the Balagundi Gold & Base Metals Project Farm-in & Joint
Venture and had elected to continue towards earning a 75% interest by spending a further $450,000 within the next
three years.
GOLD: The Company holds a 25% free-carried interest (20% for nickel rights) in the Larkinville Project near
Kambalda, WA, with Maximus Resources Ltd (“Maximus”) (ASX:MXR).
During the current reporting period Maximus conducted a 1,500m RC drill programme to test potential down-plunge
extensions of previously reported thick high-grade gold intersections as part of the resource extension and infill
programme to improve confidence of the mineral resource and to test areas of open mineralisation along strike and
down-dip.
Refer various ASX announcements released by Maximus (ASX:MXR) during the reporting period for more detailed
information on the above activities.
NICKEL: The nickel mineral rights on the Blair-Golden Ridge Project, which includes the suspended Blair Nickel
Sulphide Mine, are subject to a farmin/joint venture with Crest Investment Group (renamed Australian Nickel
Company Limited) (“ANC”), a nickel exploration specialist which is earning up to a 75% interest. The Company will
retain a 25% free-carried interest up to a decision to mine.
On 18 March 2021 the Company announced that ANC had exercised its option to enter into the Farmin stage of the
Joint Venture Agreement. Under the agreement ANC is required to spend $4 million over four years to earn a 75%
interest in the nickel rights with a minimum annual spend of $750,000.
NICKEL: The Company holds a 20% free-carried interest (nickel only) in the Wattle Dam Project near Kambalda, WA,
with Maximus Resources Ltd (ASX:MXR).
During the current reporting period Maximus reported conducting a 14.5 line-km Fixed Loop Electromagnetic (FLEM)
survey at the highly prospective Wattle Dam East Nickel target in January 2021. In March 2021, a drilling program
was conducted which intersected multiple zones of semi-massive sulphides while testing a strong late-time
conductor at the Wattle Dam East target. Towards the end of the current reporting period Maximus reported
identifying four high-priority Kambalda style komatiite-hosted nickel sulphide exploration targets through ongoing
geological reviews. Three of the four targets, namely Highway, Central and Andrews Shaft West, are located on
WDNJV ground with the fourth target, Hilditch, located a few hundred metres south but with the prospective
geology striking into a WDNJV tenement (M15/1770).
Refer to various ASX announcements released by Maximus (ASX:MXR) during the reporting period for more detailed
information on the above activities.
Essential Metals Limited – 2021 Annual Report
19
Operational & Financial Review
For the year ended 30 June 2021
CORPORATE
COVID-19
During the year, in response to the COVID-19 pandemic, Essential implemented a series of precautionary measures
to ensure that risk around COVID-19 was minimised for all employees and contractors. These measures included
restrictions on non-essential travel, as well as social distancing and increased awareness around hygiene.
With the exception of industry-wide delays with respect to drill rig availability and time taken for laboratories to
complete analysis drilling and other sample assays, Essential did not suffer any major operational delays during the
current reporting period.
Essential will continue to monitor the situation and government advice around the pandemic and will act in
accordance with this advice.
EXECUTIVE APPOINTMENTS
On 1 August 2020 highly regarded mining executive, Warren Hallam, was appointed as a Non-executive Director.
Effective 14 September 2020 experienced geologist, Andrew Dunn, joined the Essential team as Exploration
Manager.
SHARE CAPITAL CONSOLIDATION & COMPANY REBRANDING
At a General Meeting of Shareholders held on 7 July 2020 approval was received to change the company name to
Essential Metals Limited. Shareholders also approved a 10:1 capital consolidation.
CAPITAL RAISINGS
On 18 November 2020 the Company announced that it had completed a Placement to institutional and sophisticated
investors, for total Placement proceeds of $2.05 million before issue costs at an $0.085 issue price plus a 1 for 2 free
share option. The Company also announced on 16 December 2020 that it had completed a Share Purchase Plan
under the same terms as the Placement to raise a further $2.14 million.
LISTED INVESTMENTS
During the current reporting period the Company sold its remaining shareholding investments in Novo Resources
Corp (TSX: NVO) and Black Cat Syndicate Limited (ASX: BC8) for gross proceeds before costs of CAD$190,000 and
AUD$42,000 respectively.
In June 2021 the Company received 785,695 shares in Medallion Metals Limited (“Medallion”) (ASX: MM8) valued at
AUD$200,000 for the relinquishment of royalty rights held by Essential over tenements held by Medallion within
their Ravensthorpe Copper-Gold Project Located 340km SW of Kalgoorlie, WA
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
In line with its focus on cost control, on 27 April 2021 the Company announced that it had changed its registered
office and principal place of business to Level 3, 46 Ord Street, West Perth, Western Australia 6005.
Essential Metals Limited – 2021 Annual Report
20
DIRECTOR’S
REPORT
ANNUAL REPORT
Director’s Report
For the year ended 30 June 2021
Your directors present their report on Essential Metals Limited (“Company”) and the entities it controlled (“Group”)
at the end of and during the year ended 30 June 2021.
DIRECTORS
The following persons were directors of Essential Metals Limited during the whole of the financial year and up to the
date of this report unless otherwise stated.
Current Directors:
Director
Craig McGown
Qualifications
Position
Appointment date
Resignation date
Length of service
Biography
Current ASX listed
directorships
Former ASX listed
directorships in the
last three years
Timothy Spencer
Qualifications
Position
Appointment date
Resignation date
Length of service
Biography
Current ASX listed
directorships
Former ASX listed
directorships in the
last three years
Details
B.Comm
Independent Non-Executive Chairman
13 June 2008
N/A
13 years 3 months
Mr McGown is an investment banker with over 35 years of experience consulting to
companies in Australia and internationally, particularly in the natural resources sector. He
holds a Bachelor of Commerce degree, was a Fellow of the Institute of Chartered
Accountants and an Affiliate of the Financial Services Institute of Australasia. Mr McGown
is an executive director of the corporate advisory business New Holland Capital Pty Ltd and
prior to that appointment was the chairman of DJ Carmichael Pty Limited. Mr McGown also
chairs the Harry Perkins Institute for Respiratory Health, a not-for-profit organisation
focused on prevention and treatment of all forms of respiratory disease. Mr McGown
brings to the Board a comprehensive knowledge of equity and debt markets and financing
of resource projects.
Sipa Resources Limited - 11 March 2015 to present
QMetco Limited (formerly Realm Resources Limited) - 31 May 2018 to present.
Venturex Resources Limited – 8 February 2021 to 9 June 2021
B.Econ, CPA
Managing Director
31 March 2020
N/A
1 year 6 months (as Managing Director)
Mr Spencer has over 25 years’ experience in the resources sector and precious metals
markets, working in various executive, accounting, treasury and finance roles including
with three mining companies as an executive director and/or Chief Financial Officer and
Company Secretary as well as with a large gold refining and trading enterprise. Mr Spencer
joined the Company in October 2017, and prior to his appointment as Managing Director
has served in the roles of Chief Executive Officer, Chief Financial Officer and Company
Secretary.
None
None
Essential Metals Limited – 2021 Annual Report
22
Director’s Report
For the year ended 30 June 2021
Paul Payne
Qualifications
Position
Appointment date
Resignation date
Length of service
Biography
Current ASX listed
directorships
Former ASX listed
directorships in the
last three years
Warren Hallam
Qualifications
Position
Appointment date
Resignation date
Length of service
Biography
Current ASX listed
directorships
Former ASX listed
directorships in the
last three years
B App Sc (Geology) Grad Dip Min Ec
Independent Non-Executive Director
24 January 2020
N/A
1 year 9 months
Mr Payne is a Fellow of the Australasian Institute of Mining and Metallurgy and an
experienced geologist with a strong technical background as well as senior executive and
board experience across a range of commodities in both Australia and internationally. Mr
Payne’s experience includes the role of founding Managing Director of Dacian Gold Limited
where he was instrumental in the major initial gold discoveries at its Mount Morgans
project. Mr Payne is currently non-executive director of a number of ASX listed resource
companies and continues to provide expert technical services to the resources industry
through his consultancy PayneGeo.
Dreadnought Resources Limited – 21 December 2017 to present
Carnaby Resources Limited – 1 July 2016 to present
Auteco Resources Limited – 20 March 2018 to 18 January 2019
B. App Sci (Metallurgy), MSc Min. Econ
Independent Non-Executive Director
1 August 2020
N/A
1 year 2 months
Mr Hallam is a metallurgist, a mineral economist and holds a Graduate Diploma in
Business. He has over 35 years of technical and commercial experience across numerous
commodities and businesses within the resources industry including with top-tier mining
companies Western Mining Corporation, Metals X Limited, Westgold Resources Limited
and is currently Chairman of ASX listed Nelson Resources Limited and Kingfisher Mining
Limited.
Mr Hallam was a member of the senior leadership team at Metals X (both as Executive
Director and Managing Director) and played a critical role in the development of Metals X
as a leading global tin producer and top-10 gold producer. Mr Hallam also held a range of
senior operation, strategic and business development roles with diversified ASX-100
resource company Western Mining Corporation.
Nelson Resources Limited – 1 February 2019 to present
Kingfisher Mining Limited – 4 December 2018 to present
Metals X Limited – 1 March 2005 to 12 November 2018
Capricorn Metals Limited – 19 February 2019 to 6 March 2019
Millennium Minerals Limited – 27 August 2019 to 7 September 2020
Essential Metals Limited – 2021 Annual Report
23
Director’s Report
For the year ended 30 June 2021
DIRECTORS’ SHAREHOLDINGS
On 7 July 2020, shareholders of Essential Metals Limited approved a capital consolidation, where the number of
issued securities and unissued equity incentives decreased using a fixed ratio of 10:1. As at the date of this report,
the interests of the directors in the shares, options and performance rights of Essential Metals Limited on a post
consolidation basis were:
Director
C. McGown
T. Spencer
P. Payne
W. Hallam
Ordinary
Shares
Listed
Share Options
Unlisted
Share Options
2,000,561
1,112,941
754,099
200,000
176,470
176,470
176,470
-
1,000,002
1,500,000
600,000
600,000
Unlisted
Performance Rights
-
954,454
-
-
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Information about the remuneration of key management personnel is set out in the remuneration report section of
this directors’ report. The term ‘key management personnel’ refers to those persons having authority and
responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any
director (whether executive or otherwise) of the Group.
SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT
During and since the end of the financial year, the following options and performance rights were granted to the
following directors and senior management of the Company and its controlled entities as part of their remuneration
(on a post-share consolidation basis):
Name
T. Spencer
C. McGown
P. Payne
W. Hallam
C. Travaglini
A. Dunn
S. Kerr
Unlisted share
options
-
1,000,002
600,000
600,000
-
-
-
DIRECTORS’ MEETINGS
Unlisted
performance
rights
454,545
-
-
-
752,366
653,618
-
Issuing entity
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
-
Number of ordinary
shares under
option/right
454,545
1,000,002
600,000
600,000
752,366
653,618
-
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held
during the financial year and the number of meetings attended by each director (while they were a director or
committee member). Ten board meetings were held during the financial year. The remuneration and audit
committees were suspended on 31 March 2020 with the full board of directors assuming the responsibilities of
these committees from that date.
Board of Director’s
Meetings
Eligible
10
10
10
9
Attended
10
10
10
9
Director
C McGown
T Spencer
P Payne
W Hallam
Essential Metals Limited – 2021 Annual Report
24
Director’s Report
For the year ended 30 June 2021
COMPANY SECRETARY
Name
Carl Travaglini
Qualifications
Company Secretary
Appointment date
Resignation date
Length of service
Biography
PRINCIPAL ACTIVITIES
Details
CA, ACG (CS)
31 March 2020
N/A
1 year 6 months
Mr Travaglini was appointed Company Secretary on 31 March 2020 and also holds the
position of Chief Financial Officer (appointed 25 February 2020). Mr Travaglini is a
Chartered Accountant and Chartered Company Secretary. Before joining the Company Mr
Travaglini worked for a number of WA based lithium and gold producers and explorers.
Prior to that Mr Travaglini worked in assurance services for the mining resources sector
and has more than 13 years’ experience in financial reporting, corporate governance and
risk management.
The principal activities of the Group during the current reporting period consisted of mineral exploration in Western
Australia. The Group was unable to undertake substantive field work in Canada on its Mavis Lake lithium project due
to ongoing travel restrictions. The Project tenements remain in good standing with expenditure credits available to
be carried forward allowing the Group to focus on West Australian lithium opportunities while positioning non-core
assets such as Mavis Lake for pipeline exploration activities. For these reasons the Directors do not believe there are
any impairment indicators in relation to the carrying value of capitalised exploration expenditure at the current
reporting date.
There were no significant changes in the nature of the Group’s principal activities during the financial year.
RESULTS OF OPERATIONS
The consolidated net loss after income tax for the financial year was $1,383,000 (2020: $1,361,000 profit) which
included a gross profit of $105,000 (2020: $4,762,000) from sales and project exploration write-offs/write-downs of
$477,000 (2020: $518,000).
DIVIDENDS
The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a
dividend to the date of this report.
REVIEW OF OPERATIONS AND ACTIVITIES
During the financial year the Group incurred a total of $2,488,000 (2020: $3,890,000) on exploration and evaluation
expenditure. This includes $2,388,000 of exploration and evaluation expenditure capitalised to the Statement of
Financial Position (2020: $3,890,000) and $100,000 exploration expensed to the Statement of Profit and Loss and
Other Comprehensive Income (2020: $55,000) where the Group does not yet hold the rights to tenure. The Group’s
exploration and evaluation efforts were focussed during the reporting period on:
•
•
•
•
The Pioneer Dome Lithium Project in Western Australia.
The Blair-Golden Ridge Gold & Nickel Project in Western Australia.
The Juglah Dome Gold Project located in Western Australia.
Joint venture partners, Northern Star Resources Limited, Novo Resources Corp, Black Cat Syndicate Limited,
Maximus Resources Limited and Crest Investment Group 1 Limited, were active in the Acra, Kangan,
Balagundi, Wattle Dam-Larkinville and Blair-Golden Ridge joint ventures, respectively.
Essential Metals Limited – 2021 Annual Report
25
Director’s Report
For the year ended 30 June 2021
Exploration write-downs totalled $477,000 (2020: $518,000) which related to the write-down of capitalised costs on
tenements surrendered and tenements in application during the year.
$138,000 in JobKeeper government grants were recognised during the current reporting period (2020: $66,000).
$131,700 of JobKeeper payments was offset during the current reporting period against the capitalised exploration
expenditure to which it related with the balance classified as other income in line with the Group’s accounting
policies. The Group was eligible for JobKeeper 2.0 government grants extending to 31 March 2021. A cash boost
payment of $22,500 was received from the WA State Government during the current reporting period.
Refer to the Operational and Financial Review on page 7 for further details.
Corporate and financial position
As at 30 June 2021 the Group had cash reserves of $5,466,000 (2020: $4,391,000). The movement in cash is detailed
in the Statement of Cash Flows on page 46 of this report.
Future developments, business strategies and prospects for future financial years
The Group is advancing the following projects:
(i)
Exploration activities at the Pioneer Dome Lithium Project located approximately 50km north of Norseman,
WA;
(ii) Exploration activities at the Juglah Dome Project, prospective for gold and VHMS deposits, located
approximately 60km east-southeast of Kalgoorlie, WA;
(iii) Exploration activities at the Blair - Golden Ridge Project (gold) located approximately 20km south-east of
Kalgoorlie; and
(iv) Exploration activities at the Mavis Lake lithium project located in Canada will be dependent on international
travel restrictions in place from time to time.
The Group will seek to add value through exploration success, joint ventures and divestment and will continue to
evaluate new mineral opportunities, with particular focus on advanced projects with the potential to deliver early
cash flow opportunities.
Risk management
The Board is responsible for the oversight of the Group’s risk management and control framework. Responsibility for
control and risk management is delegated to the appropriate level of management with the Managing Director and
Chief Financial Officer/Company Secretary having ultimate responsibility to the Board for the risk management and
control framework.
Areas of significant business risk to the Group are highlighted in the Business Plan and the Corporate Risk Register
presented to the Board for review by the Managing Director and Chief Financial Officer/Company Secretary at each
Board of Directors meeting.
Arrangements put in place by the Board to monitor risk management include monthly reporting to the Board in
respect of operations and the financial position of the Group and ad hoc reporting as required by events which
impact the Group’s business.
CORPORATE GOVERNANCE
The Board is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board
is responsible to its shareholders for the performance of the Company and seeks to communicate extensively with
shareholders. The Board believes that sound Corporate Governance practices will assist in the creation of
shareholder wealth and provide accountability. In accordance with ASX Listing Rule 4.10.3, the Company has elected
to disclose its Corporate Governance policies and its compliance with them on its website, rather than in the Annual
Report. Accordingly, information about the Company's Corporate Governance practices is set out on the Company's
website at https://www.essmetals.com.au/corporate-governance
Essential Metals Limited – 2021 Annual Report
26
Director’s Report
For the year ended 30 June 2021
EMPLOYEES
The Group employed five permanent employees as at 30 June 2021 (2020: five employees) and two casual
employees (2020: three casual employees).
ENVIRONMENTAL REGULATIONS
The Group holds various licences that regulate its activities in Australia and Canada. These licences include
conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration
activities. Rehabilitation costs relating to mining have been provided for in the accounts and are supported by an
independent third-party assessment. So far as the Directors are aware there have been no material breaches of the
Group’s licence conditions and all exploration activities comply with relevant environmental regulations.
CHANGES IN STATE OF AFFAIRS
The World Health Organisation declared the outbreak of a novel coronavirus (COVID-19) as a pandemic in March
2020. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19,
which has resulted in significant volatility in Australian and international markets. While the Group is not able to
estimate the length or severity of this pandemic, it currently anticipates only minimal ongoing disruptions to
exploration activities in relation to its projects in Western Australia. The Group continued to monitor all state and
federal Government assistance measures available to assist small and medium enterprises in Australia during the
emergency period and was deemed eligible to receive the cash flow boost and Job Keeper payments.
There was no other significant change in the state of affairs of the Group during the financial year.
SUBSEQUENT EVENTS
On 26 July 2021 the Company announced that Farm-in Joint Venture partner Black Cat Syndicate Limited (ASX: BC8)
had met the Initial Commitment expenditure of $150,000 under the Balagundi Gold & Base Metals Project Farm-in &
Joint Venture and had elected to continue towards earning a 75% interest by spending a further $450,000 within the
next three years.
On 26 July 2021 the Company announced the issue of 1,271,684 unlisted performance rights to employees under
the Company’s Equity Incentive Plan, expiring on 30 June 2025 at a total value of $163,000. The Company also
announced the cancellation of 507,768 unlisted performance rights due to cessation of employee employment with
the Company.
On 4 August 2021 the Company announced that it was completing a share placement to institutional and
sophisticated investors priced at 12.5c per ordinary share for total gross proceeds of $5,000,000. The Company
issued 36,780,000 ordinary shares on 11 August 2021 and the balance of 3,220,000 ordinary shares (including
1,200,000 ordinary shares issued to directors of the Company) plus 2,000,000 unlisted broker options to Taylor
Collison Limited, the lead brokers for the Placement, on 22 September 2021 who also received a brokerage fees of
$300,000, equal to 6% of gross proceeds from the placement. The options are exercisable at 20c and expire on 10
August 2023 and are valued at $260,000.
On 24 August 2021 the Company issued 22,674 ESS shares upon shareholders submitting exercise notices for 22,674
ESSO options. Net proceeds of $2,000 were received after share issue costs.
On 16 September 2021 the Company held a General Meeting of shareholders. The following resolutions were
approved:
Ratify the issue of 12,029,246 ESSO share options issued under the Company’s Share Purchase Plan in
January 2021;
Ratify the issue of 661,243 ESS shares to Milford Resources in January 2021;
Ratify the issue of 36,780,000 ESS shares under the shares placement announced in August 2021;
Obtain approval for Company directors Mr McGown, Mr Spencer, Mr Payne and Mr Hallam to participate in
the share placement as announced in August 2021. These shares were allotted on 22 September 2021.
Essential Metals Limited – 2021 Annual Report
27
Director’s Report
For the year ended 30 June 2021
Subsequent to the end of the current financial year the Company engaged in non-binding discussions concerning the
acquisition of mineral rights, divestment of mineral rights and divestment of mineral assets. The Company it is not
party to any binding agreements with respect to the aforementioned potential transactions as at the date of this
report and there can be no certainty that any binding agreement or agreements will be reached, or that any
concluding transactions will eventuate. At this stage of the negotiations an estimate of proceeds from the non-
binding agreements cannot be made, however, based on the negotiation to date, the Directors do not believe there
are any impairment implications in relation to the carrying value of associated areas of interest.
The Group recognises that COVID-19 is a rapidly evolving situation impacting us all. Whilst acknowledging the
disruption to global commerce, the Group finds itself well placed to continue to progress its projects and will
continue to monitor any impacts the pandemic may have on its projects. At this point in time the Group is
experiencing minor delays in project timelines as a result of the pandemic. These delays are not expected to be
significant.
Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the
financial year 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 future financial years.
CORPORATE STRUCTURE
Essential Metals Limited (ACN 103 423 981) is a company limited by shares, was incorporated on 17 January 2003
and is domiciled in Australia. The Company has prepared this consolidated financial report including the entities it
controlled during the financial year. The controlled entities were:
• Western Copper Pty Ltd (ACN 114 863 928) (Australia)
• Golden Ridge North Kambalda Pty Ltd (ACN 159 539 983) (Australia)
•
Pioneer Canada Lithium Corp. (BC1082452) (British Columbia, Canada).
CAPITAL STRUCTURE
Shares on issue
On 20 July 2020 the Company announced the completion of a capital consolidation on a basis that every 10 shares
be consolidated into 1 share, every 10 options be consolidated into 1 option and every 10 performance rights be
consolidated into 1 performance right, as approved at a General Meeting of shareholders held on 7 July 2020.
As at the date of this report, the Group had 240,839,974 fully paid ordinary shares on issue.
Shares under option or issued on exercise of options
Details of unissued shares or interests under option as at the date of this report are:
Issuing entity
Security type
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Listed Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Unlisted Share Option
Number
Class of
shares
24,587,624 Ordinary
Ordinary
894,446
894,446
Ordinary
2,000,000 Ordinary
Ordinary
500,000
Ordinary
500,000
Ordinary
500,000
Ordinary
533,334
Ordinary
533,334
Ordinary
533,334
Ordinary
200,000
Exercise
price of
option
$0.15
$0.35
$0.45
$0.20
$0.25
$0.35
$0.45
$0.25
$0.35
$0.25
$0.125
Expiry
date of
option/right
30-Nov-2022
30-Nov-2021
30-Nov-2022
10-Aug-2023
31-Jan-2024
31-Jan-2024
31-Jan-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Sep-2024
Essential Metals Limited – 2021 Annual Report
28
Director’s Report
For the year ended 30 June 2021
Issuing entity
Security type
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Unlisted Share Option
Unlisted Share Option
Unlisted Performance Right
Unlisted Performance Right
Unlisted Performance Right
Unlisted Performance Right
Number
Class of
shares
Ordinary
200,000
200,000
Ordinary
1,145,610 Ordinary
Ordinary
500,000
100,000
Ordinary
1,271,684 Ordinary
Exercise
price of
option
$0.175
$0.225
N/A
N/A
N/A
N/A
Expiry
date of
option/right
30-Sep-2024
30-Sep-2024
30-Jun-2024
31-Jan-2024
31-Dec-2023
30-Jun-2025
The holders of these share options and performance rights do not have the right, by virtue of the option or right, to
participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme.
Share options exercised
During the financial year ended 30 June 2021 no share options were exercised (2020: Nil).
Performance rights converted
During the financial year ended 30 June 2021 no performance rights were converted into ordinary shares (2020:
1,333,600 pre-consolidation performance rights).
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract insuring persons who held the
positions of director, company secretary, executive officer of any Group company and of any related body corporate
during the period against a liability incurred as such a director, secretary or executive officer to the extent permitted
by the Corporations Act. The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium.
During or since the end of the financial year the company has not indemnified or made a relevant agreement to
indemnify an auditor of the company or of any related body corporate against a liability incurred as such by an
auditor. In addition, the company has not paid, or agreed to pay, a premium in respect of a contract insuring against
a liability incurred by an auditor.
PROCEEDINGS OF BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of
taking responsibility on behalf of the Company for all or part of those proceedings.
AUDITOR’S INDEPENDENCE & NON-ASSURANCE SERVICES
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set
out on page 41. $nil was paid or payable to the Group’s auditors Deloitte Touche Tohmatsu, for non-assurance
services performed during the year ended 30 June 2021 (2020: $28,000). Refer to note 31 for further information.
ROUNDING OFF OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’
report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise stated.
Essential Metals Limited – 2021 Annual Report
29
Director’s Report
For the year ended 30 June 2021
AUDITED REMUNERATION REPORT
CONTENTS
Item
A.
B.
C.
D.
E.
F.
G.
H.
I.
Introduction
Remuneration governance
Remuneration framework
Non-executive director remuneration
Other KMP remuneration
Details of remuneration
Share-based compensation
Key terms of employment agreements with executive KMPs
Relationship between the remuneration policy and company performance
A.
Introduction
Page
30
30
31
32
33
36
38
39
40
This remuneration report, which forms part of the directors’ report and has been audited in accordance with section
300A of the Corporations Act 2001, sets out information about the remuneration of the Group’s key management
personnel (“KMP”) for the financial year ended 30 June 2021.
Key management personnel
The term ‘key management personnel’ refers to those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive
or otherwise) of the Group.
The directors and other KMP of the Group during or since the end of the financial year were:
Non-Executive Directors
Mr Craig McGown
Mr Paul Payne
Mr Warren Hallam
Independent Non-executive Chairman
Independent Non-executive director
Independent Non-executive director
Appointed 1 Aug 2020
Executive Directors
Mr Timothy Spencer Managing Director
Other KMP
Mr Carl Travaglini
Mr Andrew Dunn
Mr Stuart Kerr
Chief Financial Officer & Company Secretary
Exploration Manager
Exploration Manager
Appointed 14 September 2020
Resigned 28 September 2020
Except as noted, the named persons held their current position for the whole of the financial year and since the end
of the financial year.
B. Remuneration governance
The Company had previously established a Remuneration Committee under a formal charter which comprised a
majority of independent directors. The Remuneration Committee was suspended on 31 March 2020 and as at the
date of this report the board continues to assume the responsibilities of the Remuneration Committee with
executive and other directors excusing themselves from matters of personal interest as required. The Board will
continue to consider the need to re-establish the Remuneration Committee in line with the Company’s stage of
operations and level of complexity.
The Board of Directors responsibilities include reviewing the remuneration arrangements for the executive and non-
executive directors and KMP each year in accordance with the Company’s remuneration policy approved by the
Essential Metals Limited – 2021 Annual Report
30
Director’s Report
For the year ended 30 June 2021
Board. This includes an annual remuneration review and performance appraisal for the Managing Director and other
KMP, including their base salary, short-term and long-term incentives, superannuation, termination payments and
service contracts.
Further information relating to the role of the Board in relation to remuneration can be found within the Corporate
Governance Report provided on the Company’s website.
C. Remuneration framework
The Board recognises that the Company’s performance and ultimate success of operational delivery depends very
much on its ability to attract and retain highly skilled, qualified and motivated people in an increasingly competitive
remuneration market. At the same time, remuneration practices must be transparent to shareholders and be fair
and competitive taking into account the nature and size of the organisation and its current stage of development.
The approach to remuneration has been structured with the following objectives:
To attract and retain highly skilled KMP at a critical stage in the Company’s exploration for new and
development of existing project areas;
to link remuneration with performance, based on long-term objectives and shareholder return, as well as
critical short-term objectives which are aligned with the Company’s business strategy;
to set clear goals and reward for performance in a way which is sustainable, including in respect of health and
safety, environment and cost management objectives;
to be fair and competitive against the market;
to preserve cash where necessary for exploration and project development, by having the flexibility to
attract, reward or remunerate KMP with an appropriate mix of equity-based incentives; and
to have flexibility in the mix of remuneration, including offering a balance of conservative long-term incentive
instruments such as options and performance rights to ensure KMP are rewarded for their efforts, but also
share in the upside of the Company’s growth and are not adversely affected by tax consequences.
The remuneration framework provides a mix of fixed and variable “at risk” remuneration and a blend of short and
long-term incentives.
The remuneration for the Managing Director and other KMP has three components:
Remuneration
elements
Purpose
Category
Definition of pay category
Fixed
Remuneration
Pay for meeting role
requirements
Fixed Pay
Pay linked to the present value or
market rate of the role.
Short-Term
Incentive (STI)
Incentive for the
achievement of annual
objectives
Short-Term
Incentive Pay
Long-Term
Incentive (LTI)
Incentive for achievement
of sustained business
growth (non-market
measures)
Long-Term
Incentive Pay
Pay for delivering the annual
operational objectives for Essential
Metals. STI pay is linked to the
achievement of short-term
performance goals.
Pay for delivering long-term business
sustainability for Essential Metals. LTI
pay is linked to the achievement of
long-term performance goals.
Essential Metals Limited – 2021 Annual Report
31
Director’s Report
For the year ended 30 June 2021
To link KMP remuneration with the Company’s performance, the Company’s policy is to endeavour to provide an
appropriate portion of each KMP’s total remuneration as “at risk”. The following graph sets out the mix of
remuneration for all KMP between fixed, STIs and LTIs for the 2021 financial year.
Annual General Meeting voting results
As a result of feedback received from shareholders, the Company completed various changes to the board and
management team over the previous financial year with most changes finalised prior to the 2020 Annual General
Meeting. The restructured board reviewed the Company’s remuneration policy to ensure that management
remuneration is consistent with the expectations of shareholders and linked to the performance and strategy of the
Group. The main objective is to ensure that all remuneration is directly and transparently linked with strategy and
performance. This includes aligning short-term incentives (STIs) and long-term incentives (LTIs) with achievement of
the Company’s short-term and long-term strategic objectives and longer-term shareholder return.
The Board believes that as a result of these aforementioned changes the Company received strong support for its
2020 Remuneration Report as evidenced by voting results at the Company’s 2020 Annual General Meeting (AGM).
The Board assesses the appropriateness of the nature of the amount of remuneration of KMP on an annual basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder
benefit from the retention of a high quality board and management team and that each staff member’s
remuneration package properly reflects that person’s duties and responsibilities. The Board may, however, exercise
its discretion in relation to approving incentive bonuses, options and performance rights.
The Company did not employ the services of a remuneration consultant for the current financial year ended 30 June
2021 or previous financial year ended 30 June 2020.
D. Non-Executive Director remuneration
The Board policy is to remunerate non-executive directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their
remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of
fees that can be paid to non-executive directors is subject to approval by shareholders at a General Meeting. The
annual aggregate amount of remuneration paid to non-executive directors was approved by shareholders on 19
November 2009 and is not to exceed $400,000 per annum.
Actual remuneration paid to the Company’s non-executive directors is disclosed in Section F below.
Director fees for non-executive directors are not linked to the performance of the Group. However, to align
Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and are
entitled to receive unlisted share options which are presented as LTI remuneration in the Remuneration Report.
Non-executive directors are not entitled to termination payments.
Essential Metals Limited – 2021 Annual Report
32
Director’s Report
For the year ended 30 June 2021
E. Other KMP remuneration
The Company aims to reward KMP with a level of remuneration commensurate with their position and
responsibilities within the Company so as to:
• Reward KMP for Company and individual performance against targets set by reference to appropriate
benchmarks;
• Reward KMP in line with the strategic goals and performance of the Company; and
•
Ensure that total remuneration is competitive by market standards.
Remuneration packages contain the following key elements:
•
•
•
Fixed annual remuneration (including salary, leave entitlements, post-employment benefits, ancillary
benefits);
Short-term incentives (cash or equity based); and
Long-term incentives (equity based).
Fixed remuneration
KMP receive a fixed base cash salary and other associated benefits. KMP also receive superannuation at a rate
equivalent to the superannuation guarantee contribution required by Australian legislation, which was 9.5%
throughout the financial year ended 30 June 2021. No KMP receive any other retirement benefits.
Fixed remuneration of KMP will be set by the Board each year and is based on market relativity and individual
performance. In setting fixed remuneration for KMP, individual performance, skills, expertise and experience are
also taken into account to determine where the KMP’s remuneration should sit within the market range.
Fixed remuneration for KMP will be reviewed annually to ensure each KMP’s remuneration remains fair and
competitive. However, there is no guarantee that fixed remuneration will be increased in any service contracts for
KMP.
Short-term incentives
Under the Company’s remuneration policy, all employees, including the Managing Director and other KMP, were
eligible to earn short-term bonuses (in cash or equity) upon achievement of significant performance-based
outcomes aligned with the Company’s strategic objectives at that time. These performance-based outcomes are
considered to be an appropriate link between KMP remuneration and the potential for creation of shareholder
wealth.
The objective of the Short-Term Incentive (STI) Plan is to provide the opportunity to earn a cash or equity bonus by
rewarding those employees who successfully achieve, in the opinion of the Board, the critical short-term objectives
of the Company over a twelve month period. Those short-term objectives for each employee are pre-determined
and approved by the Board as being aligned with the Company’s stated strategy to derive shareholder return.
STI’s will generally consist of annual bonuses (cash or equity) paid on the following basis:
(i) Performance will be measured over a 12 month period each year;
(ii) a maximum threshold will apply for each employee expressed as a % of their fixed remuneration depending
on their role and seniority;
(iii) STIs will be paid at the discretion of the Board, but must be demonstrably linked to performance against
critical pre-determined short-term goals of the Company; and
(iv) a combination of group and individual goals may apply for each employee with weightings for each goal
approved by the Board - the number of short-term goals per participant will take into account the
employee’s role, responsibility and seniority - greater weighting is placed on more important goals.
Essential Metals Limited – 2021 Annual Report
33
Director’s Report
For the year ended 30 June 2021
For an employee who resigns or is terminated for cause before the end of the financial year, no STI is awarded for
that year. Similarly, any deferred STI awards are forfeited, unless otherwise determined by the Board.
If an employee ceases employment during the performance period by reason of redundancy, ill health, death, or
other circumstances approved by the Board, the employee will be entitled to a pro-rata cash payment based on
assessment of performance up to the date of ceasing employment for that year and any deferred STI awards will be
retained (subject to Board discretion).
At the end of the financial year the Board assesses the actual performance of the Group and individuals against the
key performance indicators (KPIs) previously set. Any awarded incentives require Board approval and, if a director is
a recipient of incentive equity securities such as options or performance rights, shareholder approval is also
required. During the current year, the following performance conditions were developed by the Board for its short-
term incentives:
A. STI awarded - hurdle met by 30 June 2021:
Successful execution of the Farm-in Agreement for the Blair-Golden Ridge Nickel Project signed with
Crest Investment Group 1 Limited as announced on 9 February 2021.
B. STIs forfeited - hurdles not met by 30 June 2021:
New project generation;
significant advancements to existing projects;
sale of a project generating a financial benefit for the Company; and
signing new and binding sales agreements and completing first commercial shipment.
KMP STIs
A – STIs awarded
B – STIs forfeited
Totals
Maximum
$10,925
$98,325
$109,250
Granted
$10,925
-
$10,925
%
100%
-
10%
Long-term incentives
Long-term incentives (LTIs) are issued under the Company’s Equity Incentive Plan (EIP) approved by shareholders at
the AGM held on 15 December 2020. The purpose of issuing LTIs is to reward the management team in a manner
which aligns this element of remuneration with the creation of shareholder wealth. As such LTIs are issued to
employees who are able to influence the generation of shareholder wealth and thus have an impact on the
Company’s performance. LTIs issued to employees are delivered in the form of performance rights. The terms of
LTIs issued under the Company’s EIP are as follows:
(i)
The value and resulting number of LTIs issued is based on a maximum threshold applied to each employee
expressed as a percentage of their fixed remuneration depending on their role and seniority within the
Company;
(ii) performance will be measured over a three year period from grant date; and
(iii) LTIs will be granted at the discretion of the Board, but must be demonstrably linked:
a. 50% of the granted performance rights will be subject to a vesting condition, whereby the
Absolute Total Shareholder Return (Absolute TSR) must exceed 25%.
b. 50% of the granted performance rights will be subject to a vesting condition based on Relative
Total Shareholder Return (Relative TSR), whereby the Company’s TSR must be greater than TSRs of
7 of the 10 peer group of companies over the performance period. This vesting condition can only
be met if the Company’s absolute TSR is positive.
If an employee resigns or is terminated for cause before the end of the financial year, no LTIs will vest for that year.
Similarly, any vested and unexercised LTI awards are forfeited, unless otherwise determined by the Board.
If an employee ceases employment during the performance period by reason of redundancy, ill health, death, or
other circumstances approved by the Board, the employee will be entitled to receive any vested but unexercised
LTIs as at the date of ceasing employment, subject to Board discretion.
Essential Metals Limited – 2021 Annual Report
34
Director’s Report
For the year ended 30 June 2021
The treatment of vested and unexercised awards in all other circumstances will be determined by the Board with
reference to the circumstances of cessation.
The Company prohibits directors or employees from entering into arrangements to protect the value of any
Company shares, options or performance rights that the director or employee has become entitled to as part of
his/her remuneration package. This includes entering into contracts to hedge their exposure.
The remainder of this page is intentionally left blank.
Essential Metals Limited – 2021 Annual Report
35
Director’s Report
For the year ended 30 June 2021
F. Details of remuneration
Base
salary
$
Fixed remuneration
Super-
annuation
$
Other
$
Variable remuneration
ETPs
$
STIs
Cash
$
LTIs
Non-cash
$
Total
$
Performance
based
2021
Current Disclosed KMP
Non-Executive Directors
C McGown¹
P Payne²
W Hallam³
Executive Director
T Spencer⁴
Other KMP
C Travaglini⁵
A Dunn⁶
Totals
Former Disclosed KMP
Other KMP
S Kerr⁷
82,500
54,794
50,228
3,996
3,996
3,996
-
5,205
4,772
250,000
5,493
24,225
215,000
142,912
795,434
13,407
15,638
46,526
20,731
13,833
68,766
-
-
-
-
-
-
-
-
-
-
(20,278)
30,000
23,600
66,218
93,995
82,596
5,000
13,732
298,450
3,225
2,700
10,925
13,536
5,676
66,266
265,899
180,759
987,917
44,011
1,153
4,181
15,739
-
(6,840)
58,244
Total Remuneration
839,445
47,680
72,947
15,739
10,925
59,426
1,046,161
0%
32%
29%
6%
6%
5%
8%
0%
7%
Notes:
1 -Mr McGown’s fees were paid to Resource Investment Capital Advisors Pty Ltd.
-Mr McGown’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
-Unlisted share options issued to Mr McGown in the financial year ended 30 June 2019 were cancelled in the current financial year resulting in
a negative LTI share based payment expense. A share based payment expense was also recognised in the current financial year for replacement
unlisted share options issued to Mr McGown on 7 July 2020 following shareholder approval.
2 -Mr Payne’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
3 -Mr Hallam was appointed on 1 August 2020.
-Mr Hallam’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
4 -Mr Spencer’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period, the cost of
working director insurance coverage, the cost of car parking at the Company’s premises and a provision for accrued annual leave entitlements.
-Mr Spencer accrued a cash bonus for the current financial year for successfully meeting KPIs as at 30 June 2021 as stated above.
-Unlisted share options issued to Mr Spencer in the financial year ended 30 June 2018 lapsed in the current financial year resulting in a
reduction to the LTI share based payment expense.
-Mr Spencer’s base salary increased to $260,000 per annum effective 1 July 2021.
5 -Mr Travaglini’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period, the cost of car
parking at the Company’s premises and a provision for accrued annual leave entitlements.
-Mr Travaglini’s base salary increased to from $200,000 to $215,000 per annum effective 25 August 2020 in line with the terms of his Executive
Services Agreement. Mr Travaglini’s base salary subsequently increased to $225,000 per annum effective 1 July 2021 as approved by the board
of directors.
6 -Mr Dunn became a KMP on 14 September 2020.
-Mr Dunn’s ‘other benefits’ relate to the cost of car parking at the Company’s premises and a provision for accrued annual leave entitlements.
-Mr Dunn accrued a cash bonus for the current financial year for successfully meeting KPIs as at 30 June 2021 as stated above.
-Mr Dunn’s base salary increased to $200,000 per annum effective 1 July 2021.
7 -Mr Kerr ceased to be a KMP on 28 September 2020.
-Mr Kerr’s ‘other benefits’ relate to the cost of car parking at the Company’s premises and a provision for accrued annual leave entitlements.
-Unlisted share options issued to Mr Kerr in the financial year ended 30 June 2018 both lapsed and cancelled upon cessation of employment in
the current financial year resulting in a negative LTI share based payment expense.
Essential Metals Limited – 2021 Annual Report
36
Director’s Report
For the year ended 30 June 2021
Fixed remuneration
Variable remuneration
Base
salary
$
Consulting
fees
$
Other
$
Super-
annuation
$
ETPs
$
STIs
Cash
$
LTIs
Non-cash
$
Total
$
Performance
based
2020
Current Disclosed KMP
Non-Executive Directors
C McGown¹
P Payne²
Executive Director
T Spencer³
Other KMP
C Travaglini⁴
S Kerr⁵
Totals
82,500
23,886
-
4,200
9,734
4,213
-
2,269
265,978
-
12,014
27,163
68,980
75,000
516,344
-
-
4,200
4,147
937
31,045
6,553
8,283
44,268
Former Disclosed KMP
Non-Executive Directors
A Trench⁶
W Spilsbury⁷
Executive Director
D Crook⁸
Totals
41,095
41,095
315,471
397,661
-
-
-
-
7,307
7,307
3,904
3,904
9,313
23,927
29,970
37,778
145,000
145,000
-
-
-
-
-
-
-
-
-
-
(21,389)
-
70,845
34,569
0%
0%
19,948
146,662
471,764
35%
-
12,188
32,136
2,244
14,318
141,835
81,924
110,726
769,828
-
-
-
-
(12,639)
(12,639)
39,667
39,667
(37,333)
(62,611)
462,421
541,755
3%
24%
23%
0%
0%
0%
0%
8%
Total Remuneration
914,005
4,200
54,972
82,046
145,000
32,136
79,224
1,311,583
Notes:
1 -Mr McGown’s fees were paid to Resource Investment Capital Advisors Pty Ltd.
-Mr McGown’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
-Unlisted share options issued to Mr McGown in the financial year ended 30 June 2019 were cancelled in the current financial year resulting in a negative
LTI share based payment expense.
2 -Mr Payne was appointed on 24 January 2020.
-Mr Payne’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
3 -Mr Spencer’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period and the cost of car
parking at the Company’s premises.
-Mr Spencer accrued a cash bonus for the current financial year for successfully meeting KPIs as at 30 June 2020 as stated above.
-Mr Spencer received non-cash LTI benefits in the form of vested share options and performance rights with attached vesting conditions upon his
appointment as Chief Executive Officer on 24 January 2020.
-Mr Spencer’s base salary includes the provision for accrued annual leave entitlements.
4 -Mr Travaglini commenced on 25 February 2020.
-Mr Travaglini’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period and the cost of car
parking at the Company’s premises.
-Mr Travaglini’s base salary includes the provision for accrued annual leave entitlements.
5 -Mr Kerr became a KMP on 1 February 2020.
-Mr Kerr’s ‘other benefits’ relate to the cost of car parking at the Company’s premises.
-Mr Kerr accrued a cash bonus for the current financial year for successfully meeting KPIs as at 30 June 2020 as stated above.
-Mr Kerr’s base salary includes the provision for accrued annual leave entitlements.
6 -Mr Trench resigned on 31 March 2020.
-Mr Trench’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
-Unlisted share options issued to Mr Trench in the financial year ended 30 June 2019 were cancelled in the current financial year resulting in a negative
LTI share based payment expense.
-Mr Trench was paid $6,850 on each of 25 June 2020 and 25 July 2020 for the provision of consultancy services to assist with the Group’s transition to a
new management team and board of directors.
7 -Mr Spilsbury resigned on 31 March 2020.
-Mr Spilsbury’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period.
-Unlisted share options issued to Mr Spilsbury in the financial year ended 30 June 2019 were cancelled in the current financial year resulting in a negative
LTI share based payment expense.
-Mr Spilsbury was paid $6,850 on each of 25 June 2020 and 25 July 2020 for the provision of consultancy services to assist with the Group’s transition to a
new management team and board of directors.
8 -Mr Crook’s employment ceased on 24 January 2020.
-Mr Crook’s ‘other benefits’ relate to an allocation of the cost of Director’s and Officer’s insurance coverage during the period, the cost of car parking at
the Company’s premises and a provision for accrued long service leave entitlements.
-Unlisted share options issued to Mr Crook in the financial year ended 30 June 2019 were cancelled in the current financial year resulting in a negative LTI
share based payment expense.
-Mr Crook’s base salary includes the provision for accrued annual leave entitlements.
Essential Metals Limited – 2021 Annual Report
37
Director’s Report
For the year ended 30 June 2021
G. Share-based compensation
The following table sets out the type and number (on a post-share consolidation basis) of LTIs granted to KMP during
the current financial year:
KMP
C McGown
C McGown
C McGown
P Payne
P Payne
P Payne
C Travaglini
A Dunn
T Spencer
W Hallam
W Hallam
W Hallam
Total
Class
Grant Date
Number
Share Options
Share Options
Share Options
Share Options
Share Options
Share Options
Unvested Performance Rights
Unvested Performance Rights
Unvested Performance Rights
Share Options
Share Options
Share Options
7-Jul-2020
7-Jul-2020
7-Jul-2020
7-Jul-2020
7-Jul-2020
7-Jul-2020
26-Oct-2020
26-Oct-2020
15-Dec-2020
15-Dec-2020
15-Dec-2020
15-Dec-2020
333,334
333,334
333,334
200,000
200,000
200,000
293,182
245,455
454,545
200,000
200,000
200,000
3,193,184
Exercise
Price
$0.25
$0.35
$0.45
$0.25
$0.35
$0.45
N/A
N/A
N/A
$0.125
$0.175
$0.225
Expiry Date
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
30-Sep-2024
30-Sep-2024
30-Sep-2024
Vested
during year
100%
100%
100%
100%
100%
100%
33%
33%
33%
100%
100%
100%
The movement in equity instruments over shares for KMP in the current year was as follows:
Share
Options
Balance at
1 July 2020
Granted as
compensation
Share
consolidation
Granted from
participation
in SPP²
Lapsed or
cancelled
Balance at
30 June
2021
Balance
vested &
exercisable at
30 June 2021
Vested
during
year
6,861,111
-
-
18,000,000
Current Disclosed KMP
C McGown
P Payne
W Hallam
T Spencer
Former Disclosed KMP
S Kerr1
Totals
1,500,000
26,361,111
10,000,000
6,000,000
600,000
-
(15,174,997)
(5,400,000)
-
(16,200,000)
176,470
176,470
-
176,470
(686,112)
-
-
(300,000)
1,176,472
776,470
600,000
1,676,470
1,176,472
776,470
600,000
1,676,470
-
16,600,000
(1,350,000)
(38,124,997)
-
529,410
(150,000)
(1,136,112)
-
4,229,412
-
4,229,412
100%
100%
100%
10%
-
65%
Notes:
1 Mr Kerr ceased to be a KMP on 28 September 2020.
2 SPP – Share Purchase Plan as announced on 18 November 2020.
Performance Rights
Balance at
1 July 2020
Granted as
compensation
Share
consolidation
Expired or
cancelled
Balance at
30 June 2021
Balance
vested at
30 June 2021
Vested
during
year
Current Disclosed KMP
T Spencer
C Travaglini
A Dunn¹
Former Disclosed KMP
S Kerr2
Totals
8,736,364
1,000,000
-
2,045,455
11,781,819
Notes:
1 Mr Dunn became a KMP on 14 September 2020.
² Mr Kerr ceased to be a KMP on 28 September 2020.
454,545
293,182
245,455
(7,862,726)
(900,000)
-
(373,638)
-
-
954,545
393,182
245,455
-
100,000
-
-
100,000
-
-
993,182
(1,840,909)
(10,603,635)
(204,546)
(578,184)
-
1,593,182
-
100,000
-
100,000
All share options and performance rights issued to KMP were made in accordance with the provisions of the Group’s
Equity Incentive Plan.
There were no unlisted share options exercised or unlisted performance rights converted during the current
reporting period.
Essential Metals Limited – 2021 Annual Report
38
Director’s Report
For the year ended 30 June 2021
Further details of the Group’s Equity Incentive Plan and of share option and performance rights granted during the
2021 and 2020 financial years are contained in note 21 to the financial statements.
The number of shares in the Company held during the current reporting period by each key management personnel,
including their related parties, are set out below:
Balance at
1 July 2020
Share
consolidation
Acquired
during the year⁴
Disposed
during the year
Balance at
30 June 2021
C McGown¹
P Payne²
T Spencer³
C Travaglini
Totals
12,476,189
2,011,575
3,600,000
200,000
18,287,764
(11,228,569)
(1,810,417)
(3,240,000)
(180,000)
(16,458,986)
352,941
352,941
352,941
176,470
1,235,293
-
-
-
-
-
1,600,561
554,099
712,941
196,470
3,064,071
Notes:
1 Mr McGown’s shares are held under the nominee account Ionikos Pty Ltd ATF . Mr McGown has a relevant interest in Ionikos
Pty Ltd and is a beneficiary of the McGown Super Fund A/C.
2 Mr Payne’s shares are held under the nominee account Payne Geological Services Pty Ltd ATF . Mr Payne has a relevant interest
in Payne Geological Services Pty Ltd and is a beneficiary of the Payne Super Fund A/C.
3 Mr Spencer’s shares are held under the nominee account . Mr Spencer is a beneficiary of the Spencer Investment A/C.
4 Shares purchased through participation in the Company’s Share Purchase Plan as announced on 18 November 2020. No shares were acquired upon the
exercise of share options or conversion of performance rights during the current reporting period.
H. Key terms of employment agreements with executive KMP
Element of remuneration
Fixed Remuneration
Summary of contractual terms
Refer to the above Remuneration table.
Contract duration
Indefinite subject to termination with or without cause
Notice by individual
Notice by Company
Managing Director – 3 months
Chief Financial Officer and Company Secretary – 2 months
Exploration Manager – 1 month
Managing Director:
With cause - immediate dismissal to 6 months depending on circumstances
Without cause - 6 months
Chief Financial Officer and Company Secretary:
With cause - immediate dismissal to 4 months depending on circumstances
Without cause - 4 months
Exploration Manager:
With cause - immediate dismissal to 1 month depending on circumstances
Without cause - 1 month
Termination of employment by
the Company (without cause)
STI entitlement and LTI forfeiture is assessed by the Board
Termination of employment by
the Company (with cause) or by
the individual
Any benefits due to the Managing Director, Chief Financial Officer /
Company Secretary and Exploration Manager under the Company’s STI and
LTI plans, subject to ASX Listing Rule 10.18 and the Corporations Act.
Essential Metals Limited – 2021 Annual Report
39
Director’s Report
For the year ended 30 June 2021
I. Relationship between the remuneration policy and company performance
The Company’s remuneration policy is designed to promote superior performance and long-term commitment to
the Company. The main principles of the policy when considering remuneration are as follows:
Management is motivated to pursue long-term growth and success of the Company within an appropriate
control framework;
interests of management are aligned with the long-term interests of the Company’s shareholders; and
there is a clear correlation between performance and remuneration.
The table below sets out summary information about the Company’s earnings and movements in shareholder
wealth for the 5 years to 30 June 2021 on a post 10:1 share consolidation basis:
2020
9,127
1,361
1,361
0.90
11
11
-
73%
Revenue ($’000)
Net profit/(loss) before tax ($’000)
Net profit/(loss) after tax ($’000)
Net earnings/(loss) after tax per share (cents per share)1
Share price at start of year (cents per share)
Share price at end of year (cents per share)
Absolute total shareholder return2
Relative total shareholder return2
2017
843
(2,523)
(2,523)
(2.4)
35
17
n/a
n/a
2021
106
(1,383)
(1,383)
(0.77)
11
9.5
(14%)
36%
2018
243
(3,528)
(3,528)
(2.7)
17
19
n/a
n/a
2019
10,528
273
273
0.18
19
11
n/a
n/a
Note:
1 Includes diluted earnings/(loss) after tax per share.
2 Absolute total shareholder return and relative total shareholder return were not relevant to LTI performance prior to 2020.
Other director related party transactions
There were no other transactions with related parties during or outstanding at the end of the current reporting
period.
There were no loans paid to or received from KMP during or outstanding at the end of the current or comparative
reporting periods.
During the prior reporting period:
Mr Payne, a non-executive director of Essential Metals Limited, held a relevant interest in Payne Geo
Consultancy Pty Ltd which received $4,200 from the Group for the provision of geological consultancy
services.
Payments totalling $14,000 were paid as employee expenses and superannuation for mining operational
assistance work undertaken by Managing Director Timothy Spencer’s son. Mr Spencer was Chief Financial
Officer and Company Secretary at the time the payments were made.
Terms and conditions
Transactions between related parties are on commercial terms and conditions, no more favourable than those
available to other parties unless otherwise stated.
END OF THE REMUNERATION REPORT
This report of the Directors incorporating the Remuneration Report is signed in accordance with a resolution of the
Board of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Craig McGown
Chairman of the Board
Perth, Western Australia, 24 September 2021
Essential Metals Limited – 2021 Annual Report
40
Auditor’s Independence Declaration
For the year ended 30 June 2021
For the year ended 30 June 2021
Essential Metals Limited – 2021 Annual Report
41
FINANCIAL
REPORT
ANNUAL REPORT
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2021
2021
CONTINUING OPERATIONS
Revenue from sale of goods
Cost of sales
GROSS PROFIT
Exploration expenditure
Selling costs
Other costs from sale of goods - indirect
Employee benefits expense (incl. director fees)
Compliance & regulatory expenses
Consultancy expenses
Business development & investor relations
Administration costs
Interest income
Other income
Interest expense
Depreciation – Right-of-use assets
Depreciation – Plant, equipment and motor vehicles
Loss on disposal of plant, equipment and motor vehicles
Exploration and evaluation expenditure written off
Foreign exchange differences
Share based payments
(LOSS)/PROFIT BEFORE TAX
Income tax
Notes
30 June 2021
$’000
30 June 2020
$’000
6
7
10
8
15
16
14
11
106
(1)
105
(100)
-
-
(738)
(166)
(93)
(106)
(133)
46
567
(17)
(84)
(23)
(35)
(477)
(22)
(107)
(1,383)
-
9,127
(4,365)
4,762
(55)
(732)
(322)
(1,296)
(152)
(106)
(164)
(104)
57
210
(31)
(72)
(20)
-
(518)
84
(180)
1,361
-
(LOSS)/PROFIT FOR THE PERIOD FOR CONTINUING OPERATIONS
(1,383)
1,361
OTHER COMPREHENSIVE (LOSS)/INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Items that will not be reclassified subsequently to profit or loss:
Changes in the fair value of financial assets
TOTAL OTHER COMPREHENSIVE (LOSS)/INCOME
13
17
(172)
(155)
(34)
219
185
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD, NET OF
INCOME TAX
(1,538)
1,546
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic and diluted net loss per share attributable to ordinary equity
holders
9
(0.77c)
0.90c
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
Essential Metals Limited – 2021 Annual Report
43
Consolidated Statement
of Financial Position
As at 30 June 2021
21
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Investments
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration and evaluation expenditure
Right-of-use assets
Plant, equipment and motor vehicles
Bank restricted deposits
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Lease Liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Notes
30 June 2021
$’000
30 June 2020
$’000
12
13
14
15
16
17
18
19
19
20
23
24
5,466
15
273
36
5,790
15,430
171
147
22
15,770
4,391
397
568
14
5,370
13,666
275
210
-
14,151
21,560
19,521
223
755
47
1,025
132
132
651
752
64
1,467
225
225
1,157
1,692
20,403
17,829
44,538
1,193
(25,328)
20,403
41,184
489
(23,844)
17,829
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Essential Metals Limited – 2021 Annual Report
44
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
Notes
Contributed
equity
Share-based
payment
reserve
Investment
revaluation
reserve
$’000
$’000
$’000
Foreign
exchange
translation
reserve
$’000
Accumulated
losses
Total
equity
$’000
$’000
BALANCE AT 1 JULY 2019
Profit for the year
OTHER COMPREHENSIVE INCOME/(LOSS):
Fair value adjustment of financial assets
Exchange differences on foreign operations
TOTAL COMPREHENSIVE INCOME/(LOSS)
Share options and performance rights issued to employees
Transfer of lapsed options to accumulated losses
BALANCE AT 30 JUNE 2020
BALANCE AT 1 JULY 2020
Loss for the year
OTHER COMPREHENSIVE INCOME/(LOSS):
Fair value adjustment of financial assets
Exchange differences on foreign operations
TOTAL COMPREHENSIVE INCOME/(LOSS)
Sale of financial assets
Share based payments
Shares issued for cash (net of transaction costs)
Shares not issued for cash (tenement consultancy costs)
Share placement option valuation
Share purchase plan option valuation
BALANCE AT 30 JUNE 2021
20
20
20
20
41,184
-
-
-
-
-
-
41,184
41,184
-
-
-
-
-
-
3,952
53
(337)
(314)
44,538
309
-
-
-
-
180
(84)
405
405
-
-
-
-
-
107
-
-
337
314
1,163
(209)
-
219
-
219
-
-
10
10
-
(172)
-
(172)
101
-
-
-
-
-
(61)
108
-
-
(34)
(34)
-
-
74
74
-
-
17
17
-
-
-
-
-
-
91
(25,288)
1,361
-
-
1,361
-
84
(23,843)
(23,843)
(1,383)
-
-
(1,383)
(101)
-
-
-
-
-
(25,328)
16,103
1,361
219
(34)
1,546
180
-
17,829
17,829
(1,383)
(172)
17
(1,538)
-
107
3,952
53
-
-
20,403
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Essential Metals Limited – 2021 Annual Report
45
Consolidated Statement
of Cash Flows
For the year ended 30 June 2021
For the year ended 30 June 2021
CASH FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Other income received
Exploration expensed
Government incentives received
NET CASH (USED IN)/FROM OPERATING ACTIVITIES
INVESTING ACTIVITIES
Payments for exploration and evaluation
Payments for plant and equipment
Receipts from sales of plant, equipment and motor vehicles
Proceeds from the relinquishment of tenement rights
Proceeds from the sale of listed investments
Payments for the purchase of royalty rights
Government incentives received
NET CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Repayment of lease liabilities
Proceeds from the issue of shares
Payments for share issue transaction costs
NET CASH FROM/(USED IN) FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Notes
30 June 2021
$’000
30 June 2020
$’000
12
369
(1,225)
22
21
(100)
36
(877)
(2,512)
(72)
35
325
322
(150)
131
(1,921)
(81)
4,190
(236)
3,873
1,075
4,391
-
5,466
8,956
(3,294)
48
-
-
-
5,710
(3,867)
(179)
-
-
-
-
102
(3,944)
(88)
-
-
(88)
1,678
2,713
-
4,391
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Effect of foreign exchange rate changes
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
12
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Essential Metals Limited – 2021 Annual Report
46
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
CONTENTS
Note
1
2
3
4
Item
General information
Application of new and revised Australian Accounting Standards
Critical accounting judgements and key sources of estimation uncertainty
Summary of significant accounting policies
Performance for the period
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Operating segments
Revenue
Cost of sales
Other income
Earnings per share
Employee benefits expense
Income tax expense
Notes to the statement of cash flows
Assets
Investments
Exploration and evaluation expenditure
Right-of-use assets
Plant, equipment and motor vehicles
Liabilities
Trade and other payables
Provisions
Lease liabilities
Equity
Contributed equity
Equity incentives
Share-based payments
Reserves
Accumulated losses
Financial Instruments
Group composition
Unrecognised items
Contingent liabilities
Commitments
Subsequent events
Other information
Related parties
Remuneration of auditors
Parent entity information
Essential Metals Limited – 2021 Annual Report
47
Page
48
49
51
52
66
67
67
67
68
68
69
70
71
71
72
73
75
75
76
76
78
79
81
82
82
86
87
87
87
88
89
90
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
1. GENERAL INFORMATION
Basis of preparation
The financial report covers the Group consisting of Essential Metals Limited and its subsidiaries.
The financial report consists of the financial statements, notes to the financial statements and the directors’
declaration.
The financial report is prepared and presented in Australian dollars.
Essential Metals Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business are:
Level 3, 46 Ord Street
West Perth, Western Australia 6005
A description of the nature of the Group’s operations and its principal activities is included in the directors’ report,
which is not part of the financial report.
The financial statements and notes have been prepared on the basis of historical costs and do not take into account
changing money values except for investments which are carried at fair value through the fair value reserve and
other comprehensive income, or, except where stated, current valuations of non-current assets.
The financial report was authorised for issue, in accordance with a resolution of directors, on 24 September 2021.
The directors have the power to amend and reissue the financial report.
Statement of compliance
These financial statements are general purpose financial statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and other authoritative pronouncements issued by the Australian
Accounting Standards Board (AASB) and comply with other requirements of the law. The consolidated financial
statements of the Group also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing
the consolidated financial statements, the Company is a for-profit entity.
Basis of consolidation
Controlled entity
The consolidated financial statements comprise the financial statements of Essential Metals Limited and its
subsidiaries as at 30 June each year.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies.
Control is achieved when the Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
Essential Metals Limited – 2021 Annual Report
48
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
The Company reassesses whether it controls an investee by the facts and circumstances indicating if there are
changes to one or more of the three elements of control listed above.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and
expenses and profit and losses resulting from intra-group transactions have been eliminated in full. The subsidiaries
are fully consolidated from the date on which control is transferred to the Group and ceases to be consolidated from
the date on which control is transferred out of the Group.
The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of
accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the
liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial
statements include the results of any new subsidiaries for the period from their acquisition.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect
the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in
equity and attributed to the owners of the Company.
When the Group loses control of a subsidiary, the gain or loss on disposal recognised in profit or loss is calculated as
the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any
retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the
subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in
relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities
of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as required/permitted
by applicable IFRS Standards). The fair value of any investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 when
applicable, or the cost on initial recognition of an investment in an associate or a joint venture.
Presentation and functional currency and rounding
The functional and presentation currencies of these financial statements are both Australian Dollars ($). Foreign
operations are included in accordance with the policies set out in note 4.
The Company is a company of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016 and, in accordance with that Corporations Instrument, amounts in the
financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.
2. APPLICATION OF NEW AND REVISED AUSTRALIAN ACCOUNTING STANDARDS
2.1 New and amended Accounting Standards that are effective for the current year
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (AASB) that are relevant to its operations and effective for an accounting period that begins on or
after 1 July 2020.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are
relevant to the Group include:
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS
Standards Not Yet Issued in Australia.
AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions.
None of the new standards and interpretations had a material impact on the Group.
Essential Metals Limited – 2021 Annual Report
49
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
2.2 New and revised Australian Accounting Standards and Interpretations on issue but not yet effective
At the date of authorisation of the financial statements, the Group has not applied the following new and revied
Australian Accounting Standards, Interpretations and Amendments that have been issued but are not yet effective:
Standard/amendment
AASB 17 Insurance Contracts and AASB 2020-5 Amendments to Australian
Accounting Standards – Insurance Contracts
AASB 2014-10 Amendments to Australian Accounting Standards – Sale or
Contribution of Assets between an Investor and its Associate or Joint Venture, AASB
2015-10 Amendments to Australian Accounting Standards – Effective Date of
Amendments to AASB 10 and AASB 128 and AASB 2017-5 Amendments to
Australian Accounting Standards – Effective Date of Amendments to AASB 10 and
AASB 128 and Editorial Corrections
AASB 2020-1 Amendments to Australian Accounting Standards – Classification of
Liabilities as Current or Non-Current and AASB 2020-6 Amendments to Australian
Accounting Standards – Classification of Liabilities as Current or Non-current –
Deferral of Effective Date
AASB 2020-3 Amendments to Australian Accounting Standards – Annual
Improvements 2018-2020 and Other Amendments
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12
AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate
Benchmark Reform – Phase 2
AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of
Accounting Policies and Definition of Accounting Estimates
AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related
Rent Concessions beyond 30 June 2021
Effective for annual
reporting periods
beginning on or after
1 January 2023
1 January 2022
(Editorial corrections in
AASB 2017-5 applied from
1 January 2018)
1 January 2022
1 January 2022
1 January 2023
1 January 2021
1 January 2023
1 April 2021
In addition, at the date of authorisation of the financial statements the following IASB Standards and IFRS
Interpretations Committee Interpretations were on issue but not yet effective, but for which Australian equivalent
Standards and Interpretations have not yet been issued:
Standard/amendment
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12
Effective for annual
reporting periods
beginning on or after
1 January 2023
Management and the Directors have reviewed the above and don’t believe that there will be a material impact on
the Group when initially adopted in future reporting periods.
2.3 Other changes in accounting policies
Software-as-a-Service (SaaS) arrangements
During the year, the Company revised its accounting policy in relation to upfront configuration and customisation
costs incurred in implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its
interpretation of how current accounting standards apply to these types of arrangements. The new accounting
policy is presented below.
Essential Metals Limited – 2021 Annual Report
50
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Historical financial information has not been restated due to the immaterial impact of the change on the Company’s
financial statements.
SaaS arrangements are service contracts providing the Company with the right to access the cloud provider’s
application software over the contract period. Costs incurred to configure or customise, and the ongoing fees to
obtain access to the cloud provider's application software, are recognised as operating expenses when the services
are received.
Where these costs incurred are for the development of software code that enhances or modifies, or creates
additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an
intangible asset. These costs are recognised as intangible software assets and amortised over the useful life of the
software on a straight-line basis. The useful lives of these assets are reviewed at least at the end of each financial
year, and any change accounted for prospectively as a change in accounting estimate.
3.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of a financial report in conformity with Australian Accounting Standards requires management or
directors to make judgements, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is
revised. These accounting policies have been consistently applied by each entity in the Group.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amount recognised in the financial statements are
described in the following notes:
Capitalised Mineral Exploration
The accounting policy for exploration and evaluation expenditure is set out in accounting policy Note 4.7. The
application of this policy necessarily requires management to make certain estimates and assumptions as to future
events and circumstances, in particular, the assessment of whether economic quantities of reserves have been
identified. Any such estimates and assumptions may change as new information becomes available. If, after having
capitalised expenditure under this policy, it is concluded that the Group is unlikely to recover the expenditure by
future exploitation or sale, then the relevant capitalised amount will be written off to profit and loss.
Mine rehabilitation and site restoration process
The Group assesses its mine rehabilitation and site restoration provision at each reporting date in accordance with
accounting policy Note 4.13. Significant judgement is required in determining the provision for mine rehabilitation
and site restoration as there are many transactions and other factors that will affect the ultimate liability payable to
rehabilitate and restore the mine sites and related assets. Factors that will affect this liability include changes in
technology, price increases and changes in interest rates. When these factors change or become known in the
future, such differences will impact the site restoration provision in the period in which they change or become
known.
Share-based payment transactions
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments
at the date at which they are granted. In the current year, the fair value was determined by the Company using a
Black-Scholes model or other appropriate valuation methods, using the assumptions detailed in Note 22. Any
fluctuations in volatility, interest rates and market measures will impact on the Company’s share-based payment
expense in the statement of profit or loss in the period that the fluctuation occurs.
Essential Metals Limited – 2021 Annual Report
51
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Right-of-use assets and lease liabilities
Lease liabilities are discounted using an incremental borrowing rate. The incremental borrowing rate varies
depending on the nature of the leased asset. Lease liabilities have been calculated over the life of the lease term,
contractual extension options are considered and are included in the calculation of the lease term unless or until the
Company decides that an option to extend a contract will not be exercised resulting in a revaluation of the present
value of the associated remaining lease payments impacting on ROU assets and depreciation, lease liabilities and
interest expenditure in the period the reassessment occurs.
Use of estimates
The Directors have considered a number of factors in regard to any forward-looking estimates. The use of estimates
is inherently uncertain and requires a significant level of judgement. Forward looking estimates have been used in
the preparation of the financial report in respect of the impairment of exploration assets and the preparation of the
financial report on a going concern basis.
Management and the Directors have concluded that appropriate assessments have been made with respect to the
use of forecasts in the preparation of the financial report.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Income tax
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on
the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused
tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when
the assets are recovered or liabilities are settled, based on those tax rates which are enacted. The relevant tax rates
are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax
asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an
asset or a liability. No deferred asset or liability is recognised in relation to those temporary differences if they arose
in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Current and future tax balances attributable to amounts recognised directly in equity are also recognised directly in
equity.
4.1.1 Australian Tax consolidation legislation
The Company and its wholly owned Australian controlled entities implemented the tax consolidation legislation as of
1 July 2014.
The head entity, Essential Metals Limited and the controlled entities in the tax consolidated group continue to
account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in
determining the appropriate amount of current taxed and deferred taxes to allocate to the members of the tax
consolidated group.
In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Essential Metals Limited – 2021 Annual Report
52
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
4.2 Revenue from contracts with customers
The Group recognises revenue from sales to customers. For all sales, revenue is recognised when control has
transferred, being on delivery to the customer.
Costs directly attributable to the recognition of revenue are recognised within cost of sales in the corresponding
reporting period to which the related revenue is recognised.
All revenue is stated net of the amount of goods and services tax (GST).
4.3 Interest income
Interest income is recognised on a time proportionate basis that takes into account the effective yield on the
financial asset.
4.4 Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise of cash at bank and on hand and short-
term deposits with an original maturity of 90 days or less.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as
defined above, which are readily convertible to cash on hand and which are used in the cash management function
on a day-to-day basis.
4.5 Property, plant and equipment – recognition and measurement
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation
and impairment losses.
Depreciation methods and useful lives are reviewed at each reporting date and adjusted if appropriate.
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. 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. For an asset that does not generate largely independent cash
flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such
indication exists where the carrying values exceed the estimated recoverable amount, the assets or cash generating
units are written down to their recoverable amount.
Depreciation and amortisation
Depreciable non-current assets are depreciated over their expected economic life using the straight-line method.
Profits and losses on disposal of non-current assets are taken into account in determining the operating loss for the
year. The depreciation rate used for each class of assets is as follows:
Plant and equipment
•
• Motor vehicles
Software
•
20 - 33%
22.5%
40%
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.
4.6 Right-of-use (ROU) assets
An ROU asset is recognised at the commencement date of a lease. The ROU asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before
the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where
included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
ROU assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the
Essential Metals Limited – 2021 Annual Report
53
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
end of the lease term, the depreciation is over its estimated useful life. ROU assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise ROU assets and corresponding lease liabilities for short-term leases with
terms of twelve months or less and leases of low value assets. Lease payments on these assets are expensed to the
profit or loss as incurred.
4.7 Exploration and evaluation expenditure
Mineral exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of
interest and is subject to impairment testing. These costs are carried forward only if they relate to an area of
interest for which rights of tenure are current and in respect of which:
•
•
such costs are expected to be recouped through the successful development and exploitation of the area of
interest, or alternatively by its sale; or
exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves and active or significant
operations in, or in relation to, the area of interest and those exploration and/or evaluation activities are
continuing.
Exploration and evaluation expenditure that is capitalised may include costs of licence acquisitions, technical
services and studies and exploration drilling and testing. Any costs incurred prior to the acquisition of the legal rights
to explore an area are expensed as incurred.
In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced
value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular
review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs
in relation to that area of interest.
Where a mineral resource has been identified and where it is expected that future expenditures will be recovered by
future exploitation or sale, the impairment of the exploration and evaluation is written back the extent that it can be
recovered and transferred to development costs. Once production commences, the accumulated costs for the
relevant area of interest are amortised over the life of the area according to the rate of depletion of the
economically recoverable reserves.
Costs of site restoration and rehabilitation are recognised when the Group has a present obligation, the future
sacrifice of economic benefits is probable, and the amount of the provision can be reliably estimated.
Exploration and evaluation assets are assessed for impairment if:
i.
ii.
iii.
iv.
the period for which the entity has the right to explore in a specific area has expired during the period or
will expire in the near future, and is not expected to be renewed; or
substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is
neither budgeted nor planned; or
exploration for and evaluation of mineral resources in a specific area have not led to the discovery of
commercially viable quantities of mineral resources and the Group has decided to discontinue such
activities in that specific area; or
sufficient data exists to indicate that, although development of a specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale (refer impairment accounting policy Note 4.9).
For the purpose of impairment testing, exploration and evaluation assets are allocated to cash-generating units to
which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest
are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for
Essential Metals Limited – 2021 Annual Report
54
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
impairment and then re-classified from intangible assets to mining property and development assets within
property, plant and equipment.
Exploration related government grants
Government grants (such as a Research and Development Government grant) are not recognised until there is
reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will
be received. Government grants that are receivable as compensation for expenses or losses already incurred or for
the purpose of giving immediate financial support to the Company with no future related costs are recognised in
profit or loss in the period in which they become receivable. This is offset against exploration expenditure incurred
and capitalised. Refer Note 4.20 for further information on Government Grants.
Any grants approved by the Government of Western Australian under the Exploration Incentive Scheme (“EIS”) Co-
Funded Industry Drilling Program are offset against exploration drilling expenditure incurred at the Group’s
approved designated project.
Farm-outs – exploration and evaluation phase
The Group accounts for the treatment of farm-out arrangements under AASB 6 Evaluation of Mineral Resources
under these arrangements:
The farmor will not capitalise any expenditure settled by the farmee;
•
• Any proceeds received that are not attributable to future expenditure are initially credited against the
•
carrying amount of any existing E&E asset; and
To the extent that the proceeds received from the farmee exceed the carrying amount of any E&E asset
that has already been capitalised by the farmor this excess is recognised as a gain in profit or loss.
4.8 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value,
depending on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
the financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other
comprehensive income (FVTOCI):
Essential Metals Limited – 2021 Annual Report
55
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
the financial asset is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling the financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a
financial asset:
the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other
comprehensive income if certain criteria are met (see (ii) below); and
the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as
measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (see (iii) below).
(i) Amortised costs and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period.
For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-
impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash
receipts (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of
the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument
on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective
interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the
amortised cost of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition
minus the principal repayments, plus the cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying
amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest method for debt instruments measured subsequently at
amortised cost and at FVTOCI. For financial assets other than purchased or originated credit-impaired financial
assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets
that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate
to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired
financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised
by applying the effective interest rate to the gross carrying amount of the financial asset.
For purchased or originated credit-impaired financial assets, the Group recognises interest income by applying the
credit-adjusted effective interest rate to the amortised cost of the financial asset from initial recognition. The
calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently improves so
that the financial asset is no longer credit-impaired.
Interest income is recognised in profit or loss and is included in the 'finance income’ line item.
(ii) Equity instruments designated as at FVTOCI
On initial recognition, the Group may make an irrevocable election (on an instrument-by-instrument basis) to
designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity
investment is held for trading or if it is contingent consideration recognised by an acquirer in a business
combination.
Essential Metals Limited – 2021 Annual Report
56
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
A financial asset is held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has evidence of a recent actual pattern of short-term profit-taking; or
it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective
hedging instrument).
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
they are measured at fair value with gains and losses arising from changes in fair value recognised in other
comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss is not
reclassified to profit or loss on disposal of the equity investments, instead, it is transferred to retained earnings.
Dividends on these investments in equity instruments are recognised in profit or loss in accordance with IFRS 9,
unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends are included in the
‘finance income’ line item in profit or loss.
The Group designated all investments in equity instruments that are not held for trading as at FVTOCI on initial
recognition (see note 13).
(iii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI (see (i) to (ii) above)
are measured at FVTPL. Specifically:
Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity
investment that is neither held for trading nor a contingent consideration arising from a business
combination as at FVTOCI on initial recognition (see (ii) above).
Debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria (see (i) and (ii) above)
are classified as at FVTPL. In addition, debt instruments that meet either the amortised cost criteria or the
FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or
significantly reduces a measurement or recognition inconsistency (so called ‘accounting mismatch’) that
would arise from measuring assets or liabilities or recognising the gains and losses on them on different
bases. The Group has not designated any debt instruments as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or
losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest
earned on the financial asset and is included in the ‘other gains and losses’ line item. Fair value is determined in the
manner described in note 25.
Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign
currency and translated at the spot rate at the end of each reporting period. Specifically:
for financial assets measured at amortised cost that are not part of a designated hedging relationship,
exchange differences are recognised in profit or loss in the ‘other gains and losses’ line item;
for debt instruments measured at FVTOCI that are not part of a designated hedging relationship, exchange
differences on the amortised cost of the debt instrument are recognised in profit or loss. Other exchange
differences are recognised in other comprehensive income in the investments revaluation reserve;
for financial assets measured at FVTPL that are not part of a designated hedging relationship, exchange
differences are recognised in profit or loss; and
for equity instruments measured at FVTOCI, exchange differences are recognised in other comprehensive
income in the investments revaluation reserve.
Essential Metals Limited – 2021 Annual Report
57
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are
measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on
financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect
changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL (expected credit losses) for trade receivables, contract assets and lease
receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the
Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting
date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in
credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased
significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an
amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected
life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to
result from default events on a financial instrument that are possible within 12 months after the reporting date.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding
adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments
that are measured at FVTOCI, for which the loss allowance is recognised in other comprehensive income and
accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset
in the statement of financial position.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing
for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss. In addition, on
derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss previously
accumulated in the investments revaluation reserve is reclassified to profit or loss.
In contrast, on derecognition of an investment in an equity instrument which the Group has elected on initial
recognition to measure at FVTOCI, the cumulative gain or loss previously accumulated in the investments
revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Essential Metals Limited – 2021 Annual Report
58
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue
costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or
when the continuing involvement approach applies, and financial guarantee contracts issued by the Group, are
measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer
in a business combination, (ii) held for trading or (iii) designated as at FVTPL.
A financial liability is classified as held for trading if:
it has been acquired principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a
business combination may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk
management or investment strategy, and information about the grouping is provided internally on that basis;
or
it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire
combined contract to be designated as at FVTPL.
Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value
recognised in profit or loss to the extent that they are not part of a designated hedging relationship. The net gain or
loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the profit or
loss.
However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the
financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive
income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income
would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value
of liability is recognised in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are
recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are
transferred to retained earnings upon derecognition of the financial liability.
Gains or losses on financial guarantee contracts issued by the Group that are designated by the Group as at FVTPL
are recognised in profit or loss.
Essential Metals Limited – 2021 Annual Report
59
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Fair value is determined in the manner described in Note 25.
Financial liabilities measured subsequently at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held for
trading, or (iii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest
method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,
or (where appropriate) a shorter period, to the amortised cost of a financial liability.
Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of
each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the
instruments. These foreign exchange gains and losses are recognised in the profit or loss for financial liabilities that
are not part of a designated hedging relationship. For those which are designated as a hedging instrument for a
hedge of foreign currency risk, foreign exchange gains and losses are recognised in other comprehensive income and
accumulated in a separate component of equity.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and
translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL,
the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss for
financial liabilities that are not part of a designated hedging relationship.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or have expired. The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
When the Group exchanges with the existing lender one debt instrument into another one with the substantially
different terms, such exchange is accounted for as an extinguishment of the original financial liability and the
recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an
existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new
liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows
under the new terms, including any fees paid net of any fees received and discounted using the original effective
rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original
financial liability. If the modification is not substantial, the difference between: (i) the carrying amount of the liability
before the modification; and (ii) the present value of the cash flows after modification is recognised in profit or loss
as the modification gain or loss within other gains and losses.
Derivative financial instruments
The Group may enter into a variety of derivative financial instruments to manage its exposure to interest rate and
foreign exchange rate risks, including foreign exchange forward contracts, options and interest rate swaps.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of
the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value
is recognised as a financial liability. Derivatives are not offset in the financial statements unless the Group has both a
legally enforceable right and intention to offset. A derivative is presented as a non-current asset or a non-current
Essential Metals Limited – 2021 Annual Report
60
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled
within 12 months. Other derivatives are presented as current assets or current liabilities.
Embedded derivatives
An embedded derivative is a component of a hybrid contract that also includes a non-derivative host – with the
effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset host within the scope of IFRS 9 are not separated.
The entire hybrid contract is classified and subsequently measured as either amortised cost or fair value as
appropriate.
Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of IFRS 9 (e.g.
financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and
characteristics are not closely related to those of the host contracts and the host contracts are not measured at
FVTPL.
If the hybrid contract is a quoted financial liability, instead of separating the embedded derivative, the Group
generally designates the whole hybrid contract at FVTPL.
An embedded derivative is presented as a non-current asset or non-current liability if the remaining maturity of the
hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be
realised or settled within 12 months.
4.9 Impairment of assets (other than exploration and evaluation assets)
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the
asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into
the smallest group of assets that generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the “cash-generating unit” or “CGU”).
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset
may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated to the carrying amounts of the assets in the unit (group of units) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
4.10 Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where
the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Essential Metals Limited – 2021 Annual Report
61
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Receivables and payables are stated with the amount of GST included. GST incurred is claimed from the taxation
authority when a valid tax invoice is provided. The net amount of GST recoverable from, or payable to, the ATO is
included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising
from investing and financing activities which are recoverable from, or payable to, the taxation authority are
classified as operating cash flows.
4.11 Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
4.12 Employee entitlements
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick
leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid
in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the
benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the
estimated future cash outflows expected to be made by the Group in respect of services provided by employees up
to the reporting date.
4.13 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
Provision for site restoration and rehabilitation
In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site
restoration and rehabilitation in respect of disturbed land is recognised when the land is disturbed.
The provision is the best estimate of the present value of the expenditure required to settle the restoration and
rehabilitation obligation at the reporting date, based on current legal requirements and technology. Future
restoration and rehabilitation costs are reviewed at least annually and any changes are reflected in the present value
of the restoration and rehabilitation provision at the end of the reporting period. The unwinding of the effect of
discounting on the provision is recognised as a finance cost.
4.14 Contributed equity
Issued capital is recognised as the fair value of the consideration received by the Company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds
received.
4.15 Leases
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right-of-use (ROU) 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 as 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.
Essential Metals Limited – 2021 Annual Report
62
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
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 lessee 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 presented as a separate line in the consolidated statement of financial position.
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 lease 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 ROU 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 recognised 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.
ROU assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the ROU asset reflects that the Group expects to exercise a
purchase option, the related ROU asset is depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The ROU assets are presented as a separate line in the consolidated statement of financial position.
The Group applies IAS 36 to determine whether an ROU asset is impaired and accounts for any identified
impairment loss as described in the ‘Plant, equipment and motor vehicles’ policy.
Essential Metals Limited – 2021 Annual Report
63
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and
the ROU 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 ‘Other expenses’ in profit or loss.
As a practical expedient, IFRS 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. The Group has not used this practical
expedient. For contracts that contain a lease component and one or more additional lease or non-lease
components, the Group allocates the consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease
components.
4.16 Earnings per share
Basic earnings per share (“EPS”) are calculated based upon the net loss divided by the weighted average number of
shares. Diluted EPS are calculated as the net loss divided by the weighted average number of shares and dilutive
potential shares.
4.17 Share-based payment transactions
The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares (“Equity–settled
transactions”).
The Group has in place an Equity Incentive Plan to provide these benefits to KMP and employees.
The cost of these equity-settled transactions is measured by reference to fair value at the date at which they are
granted. For share options the fair value is determined by using the Black-Scholes pricing model. For performance
rights the fair value is determined with reference to the close price of the Company’s securities on the date the
rights are granted.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions
linked to the price of the shares of Essential Metals Limited and a peer group of companies (“market conditions”).
The cost of equity settled securities is recognised, together with a corresponding increase in equity, over the period
in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (“vesting date”). At the end of each period, the entity revises its estimate of the number of
options that are expected to vest based on the non-vesting market and service conditions. It recognises the impact
of the revision to original estimates, if any, in the profit or loss and comprehensive income statement with a
corresponding adjustment to equity.
Where the Group acquires some form of interest in an exploration tenement or an exploration area of interest and
the consideration comprises share-based payment transactions, the fair value of the equity instruments granted is
measured at grant date. The cost of equity securities is recognised within capitalised mineral exploration and
evaluation expenditure, together with a corresponding increase in equity.
4.18 Foreign currencies
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.
Essential Metals Limited – 2021 Annual Report
64
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
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.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing on the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any,
are recognised in other comprehensive income and accumulated in a foreign exchange translation reserve
(attributed to non-controlling interests as appropriate).
4.19 Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome
of future events.
4.20 Government grants
Government grants (such as JobKeeper and Cash Boost) are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government
grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current
assets (including property, plant and equipment and exploration and evaluation assets) are recognised as deferred
income in the consolidated statement of financial position and transferred to profit or loss on a systematic and
rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for
expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no
future related costs are recognised in profit or loss in the period in which they become receivable.
Exploration related government grants are offset against exploration expenditure incurred and capitalised.
4.21 Interest in joint arrangements
Joint arrangements are those arrangements in which the Group has joint control, established by contractual
agreement and requiring unanimous consent for strategic, financial and operating decisions. Joint arrangements are
classified as either joint operations or a joint venture, based on the contractual rights and obligations between the
parties to the arrangement.
Joint operations: In a joint operation the Group has rights to the assets and obligations for the liabilities relating to
the arrangement. This includes situations in which the parties benefit from the joint activity through the sharing of
output, rather than by receiving a share of results of trading. Interests in joint operations are reported in the
Financial Statements by including the Group’s proportionate share of assets employed in the arrangement, the share
of liabilities incurred in relation to the arrangement and the share of any revenue or expenses earned or incurred.
Joint ventures: A joint venture is a joint arrangement in which the parties that share joint control have rights to the
net assets of the arrangement. A separate vehicle, not the parties, will have the rights to the assets and obligations
to the liabilities relating to the arrangement. More than an insignificant amount of output is sold to third parties,
Essential Metals Limited – 2021 Annual Report
65
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
which indicates the joint venture is not dependent on the parties to the arrangement for funding. Joint ventures are
accounted for using the equity accounting method.
Details relating to the Group’s interests in mineral exploration projects which are subject to joint arrangements are
detailed in Note 26(b).
5. OPERATING SEGMENTS
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the chief operating decision
maker that are used to make strategic decisions. For the purposes of segment reporting the chief operating decision
maker has been determined as the Board of Directors.
Based upon the operations of the Group during the current financial period, the Board has identified three operating
segments; being operations, exploration in Australia and Canada and corporate and unallocated expenditure. Assets
are allocated to a segment based on the operations of the segment and the physical location of the asset. During the
period the Australian and Canadian exploration segments reported in the prior year were combined for internal
reporting to the chief operating decision maker and accordingly are now presented as one segment.
(b) Measurement of segment information
All information presented above is measured in a matter consistent with that in the financial statements.
(c) Segment information provided to the Board of Directors
The segment information provided to the Board of Directors for the reportable segments is as follows:
Year ended 30 June 2021
Revenue
Profit/(loss) before tax
Income tax
Profit/(loss) after tax
Segment assets
Segment liabilities
Operations¹
Exploration
Corporate
$’000
$’000
$’000
Total
$’000
1062
104
-
104
-
696
-
(584)
-
(584)
15,589
141
-
106
(903)
(1,383)
-
(903)
5,971
320
Year ended 30 June 2020
$’000
$’000
$’000
Operations
Exploration
Corporate
Revenue
Profit/(loss) before tax
Income tax
Profit/(loss) after tax
Segment assets
Segment liabilities
9,127
3,731
-
3,731
297
696
-
-
(508)
(1,862)
-
(508)
14,151
550
-
(1,862)
5,072
444
Notes:
1 - Operations was not a separately reported segment during the current reporting period and has been included to align with the comparative
period disclosure.
2 – Revenue relates to the sale of alluvial gold provided to the Company from third party prospecting activities.
The revenue reported above represents revenue generated from external customers. There was no inter-segment
revenue during the year.
Essential Metals Limited – 2021 Annual Report
66
-
(1,383)
21,560
1,157
Total
$’000
9,127
1,361
-
1,361
19,520
1,690
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
6. REVENUE
The Group derived its revenue in the prior year from the sale of pollucite ore at a point in time. This is
consistent with the revenue information that is disclosed for each reportable segment under AASB 8 (see
note 5).
Revenue from contracts with customers – High-grade pollucite ore
Other revenue from contracts with customers – Low-grade pollucite ore1
Other revenue – Sale of alluvial gold2
Total revenue
2021
$’000
2020
$’000
-
-
106
106
7,940
1,187
-
9,127
Note:
1 - Sales of low-grade pollucite ore have been classified as ‘other revenue’ as all incurred cost of sales were previously allocated to and expensed
with the mining and sale of high grade pollucite ore recognised as revenue from contracts with customers shown above.
2 – Sale of alluvial gold provided to the Company from third party prospecting activities.
7. COST OF SALES
Amortisation of mine development and rehabilitation asset
Change in inventory
Other cost of sales
Total cost of sales
8. OTHER INCOME
Government grants1
Income received for the cancellation of tenement applications²
Listed shares received as consideration for royalty sale
Golden Ridge Joint Venture exclusivity and option exercise fees
Other income
Reallocation of JobKeeper government grants to capitalised exploration expenditure
Total other income
2021
$’000
2020
$’000
-
-
1
1
70
4,295
-
4,365
2021
$’000
167
200
200
125
7
(132)
567
2020
$’000
210
-
-
-
-
210
Notes:
1 $138,000 in JobKeeper government grants were recognised during the current reporting period (2020: $66,000). $131,700 of JobKeeper
payments was offset during the current reporting period against the capitalised exploration expenditure to which it related with the balance
classified as other income in line with the Group’s accounting policies. The Group was eligible for JobKeeper 2.0 government grants extending to
31 March 2021. A cash boost payment of $22,500 was received from the WA State Government during the current reporting period.
2 Received as compensation for withdrawing contested tenement applications.
Essential Metals Limited – 2021 Annual Report
67
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
9. EARNINGS PER SHARE
On 20 July 2020 the Company announced completion of the consolidation of the Company’s issued capital on the
basis that every ten shares be consolidated into one share, every ten options be consolidated into one option and
every ten performance rights be consolidated into one performance right, as approved at the General Meeting of
shareholders held on 7 July 2020.
The following reflects the earnings and share data used in the calculations of basic and diluted earnings per share on
a post-consolidation basis for current and comparative reporting periods:
Earnings used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares used in calculating basic earnings
per share
2021
$’000
2020
$’000
(1,383)
1,361
179,237,995
150,867,084
Basic earnings per share – cents per share
(0.77c)
0.90c
Effect of dilutive securities
Options and performance rights1
Adjusted weighted average number of ordinary shares used in calculating
diluted earnings per share
-
-
1,419,546
151,684,891
Diluted earnings per share – cents per share
(0.77c)
0.90c
Note:
1 For the comparative period 4,570,000 post-consolidation options which represent potential ordinary shares were not dilutive as the weighted
average exercise price of the options were higher than the weighted average share price for the year.
10. EMPLOYEE BENEFITS EXPENSE
Salaries, wages and superannuation
Salaries and wages capitalised to E&E asset
Director fees and charges1
Termination benefits
Total employee benefits expense
Note:
1 – Refer Note 30 for details of KMP remuneration.
2021
$’000
2020
$’000
1,176
(663)
197
28
738
1,609
(636)
178
145
1,296
Essential Metals Limited – 2021 Annual Report
68
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
11.
INCOME TAX EXPENSE
No income tax is payable by the Group as it has incurred losses for income tax purposes for the year, so current tax,
deferred tax and tax expense is nil (2020 - Nil). Further deferred tax assets and liabilities will be settled net wherever
possible and are therefore offset.
INCOME TAX EXPENSE
(a) Tax expense
Current tax expense
Deferred tax expense
Total income tax expense per profit or loss and other comprehensive income
(b) Numerical reconciliation between tax expense and pre-tax net profit
Net (loss)/profit before tax
Tax (benefit)/expense at the applicable corporate tax rate of 26% (2020: 27.5%)
Increase in income tax due to tax effect of:
Share based payment expense
Non-deductible expenditure
Current year tax losses not recognised
Decrease in income tax expense due to:
Non-assessable income
Unused tax losses and temp differences recognised
Deductible capital raising costs
Income tax expense attributable to entity
DEFERRED TAX ASSETS AND LIABILITIES
(c) Recognised deferred tax assets and liabilities at 26% (2020: 27.5%)
Deferred tax assets
Employee provisions
Other provisions and accruals
Rehabilitation assets and liabilities
Plant and equipment
ROU assets
Tax losses
Set-off of deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Exploration and mine properties
Unearned income
Other deferred tax liabilities
Gross deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
(d) Unused tax losses and temporary differences for which no deferred tax asset has been
recognised at 26% (2020: 26%)
Deductible temporary differences
Tax revenue losses
Tax capital losses
Total unrecognised deferred tax assets
Essential Metals Limited – 2021 Annual Report
69
2021
$’000
2020
$’000
-
-
-
(1,383)
(360)
28
3
366
(13)
-
(24)
-
15
11
174
(37)
2
3,103
3,268
(3,268)
-
-
-
-
1,361
374
50
3
-
(49)
(349)
(29)
-
15
11
191
-
4
2,690
2,912
(2,912)
-
(3,268)
(2,887)
-
-
(3,268)
3,268
-
67
8,093
595
8,755
(3)
(22)
(2,912)
2,912
-
29
8,151
579
8,759
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
12. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents
Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in
the statement of financial position as follows:
Cash on hand and at bank
Term deposits
Total cash and cash equivalents
2021
$’000
2020
$’000
2,466
3,000
5,466
391
4,000
4,391
(b) Reconciliation of the (loss)/profit from ordinary activities after income tax to the net cash flows used in
operating activities
(Loss)/profit from ordinary activities after income tax
Non-cash items:
Depreciation
Unrealised foreign exchange (gain)/loss
Exploration written off
Share-based payments expense
Net gain on Balagundi Project farm out agreement
Other income (Government SME cash boost incentive)
Other non-cash transactions
Change in operating assets and liabilities:
Decrease/(increase) in prepayments
Decrease/(increase) in inventory
Decrease/(increase) in receivables
(Decrease)/increase in current payables
(Decrease)/increase in provisions
Net cash (outflows) used in/inflows received from operating activities
(c) Reconciliation of liabilities arising from financing activities
Opening lease liabilities
Financing cash flows
Non-cash changes1
Balance at 30 June 2021
Note:
1 Non-cash changes relate to the termination of previous eases and take up of new leases. Refer Note 19.
Essential Metals Limited – 2021 Annual Report
70
2021
$’000
2020
$’000
(1,383)
1,361
106
23
477
107
-
-
(140)
(23)
-
381
(428)
3
(877)
92
(84)
518
180
(41)
50
-
102
4,295
(323)
(449)
9
5,710
2021
$’000
2020
$’000
289
(81)
(29)
179
-
(88)
377
289
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
(d) Stand-by credit facilities
As at the current reporting date the Group had a business credit card facility available totalling $30,000 (2020:
$30,000) of which $12,000 (2020: $3,000) was utilised.
13.
INVESTMENTS
(a) Classification of financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (FVOCI) comprise of equity securities which are
not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category.
These are strategic investments and the Group considers this classification to be more relevant.
The following table shows the movement in equity instruments at FVOCI during the current and previous reporting
periods:
(b) Equity Investments at fair value through other comprehensive income
Opening balance
Acquisition of equity investments1
Disposal of equity investments
Changes in fair values recognised in other comprehensive income
Current investments – Equity instruments
2021
$’000
2020
$’000
568
200
(323)
(172)
273
-
349
-
219
568
Note:
1 - During the year ended 30 June 2021, the Group executed a Royalty Termination and Release Deed with Medallion Metals Limited (ASX: MM8)
to terminate a mineral rights royalty. The consideration for executing the Deed was 785,695 fully paid common shares in MM8, valued at $0.255
per share or $200,000. As at 30 June 2021 the share price for MM8 was $0.245 per share valuing the investment at $193,000.
14. EXPLORATION AND EVALUATION EXPENDITURE
Non-current – In the exploration and evaluation phase
Opening balance
Expenditure for the period1
R&D incentives received during the period
Foreign currency translation – Mavis Lake
Farmin arrangement for Balagundi JV – carrying value transferred to profit/(loss)
Exploration expenditure written off
Closing balance at 30 June
Note:
1 – Includes capitalised plant, equipment and motor vehicle depreciation expense.
2021
$’000
2020
$’000
13,666
2,231
-
10
-
(477)
15,430
10,393
3,890
(34)
(25)
(40)
(518)
13,666
The ongoing carrying value of the Group’s interest in exploration and evaluation expenditure is dependent upon the
continuance of the Group’s rights to tenure of the areas of interest and the results of future exploration and the
recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by
their sale.
Essential Metals Limited – 2021 Annual Report
71
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
The Group’s exploration properties may be subjected to claim(s) under native title, or contain sacred sites, or sites of
significance to indigenous people. As a result, exploration properties or areas within the tenements may be subject
to exploration restrictions, mining restrictions and/or claims for compensation. At this time, it is not possible to
quantify whether such claims exist, or the quantum of such claims. Exploration write-downs totalled $477,000
(2020: $518,000) which related primarily to the write-down of costs pertaining to tenements surrendered during the
year.
15. RIGHT-OF-USE (ROU) ASSETS
Non-current
Cost
Opening balance
Reassessment of ROU asset life
Additions
Disposals
Closing balance
Accumulated depreciation
Opening balance
Depreciation charge for the period
Disposals
Closing balance
Carrying amount – opening balance
Carrying amount – closing balance
2021
$’000
2020
$’000
347
(198)
178
(149)
178
(72)
(84)
149
(7)
275
171
347
-
-
-
347
-
(72)
-
(72)
-
275
The Group has a non-cancellable office operating lease for a three-year period up to 30 April 2024, including an
option to extend the lease for an additional two years to 30 April 2026. The Group has recognised this lease based
on the application of AASB 16. A maturity analysis in respect to this lease is included under the lease liability note 19.
Further to the above-mentioned lease the Group has two separate month-to-month rolling leases, equating to
$4,500, in respect of houses located close to the Group’s projects. These leases contain clauses where either the
Company or the lessor can terminate the lease agreements on short notice and these leases are treated as short-
term leases. The lease expenditure on these two leases are included as capitalised exploration expenditure in the
statement of financial position.
Interest expenditure incurred in the current reporting period totalled $17,000 (2020: $31,000). A reassessment of
the lease term of the Company’s head office lease during the current reporting period resulted in a $32,000 credit to
interest expenditure. Short-term lease expenditure incurred in the current reporting period totalled $85,000 (2020:
$66,000). There was no low-value lease expenditure incurred in the current reporting period.
As at the previous reporting date the Company held a non-cancellable office lease for a three-year period up to 30
April 2021, including an option to extend the lease for an additional three year period to 30 April 2024. It was
previously estimated that the Company would make the election to extend the lease term for the additional 3 year
period but during the current reporting period the Company decided against extending the lease term. As such the
lease term expired on 30 April 2021 resulting in a $198,000 remeasurement of the associated ROU lease asset and
liability and $149,000 ROU asset disposal during the current reporting period.
Essential Metals Limited – 2021 Annual Report
72
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
16. PLANT, EQUIPMENT AND MOTOR VEHICLES
Reconciliations of the written down values at the beginning and end of the current reporting are set out below:
Cost or valuation
At 30 June 2020
Additions
Disposals
Write-offs/Adjustments
At 30 June 2021
Accumulated depreciation and impairment
At 30 June 2020
Depreciation charge – P&L
Depreciation charge – E&E
Disposals
Write-offs/Adjustments
At 30 June 2021
Net book value
At 30 June 2020
At 30 June 2021
Plant & office
equipment
$’000
Computer
equipment
$’000
Software
Motor vehicles
$’000
$’000
Leasehold
improvements
$’000
Total
$’000
198
1
(112)
-
87
(170)
(1)
(16)
112
13
(62)
28
25
214
6
(169)
-
51
(196)
(9)
(3)
169
3
(36)
18
15
83
-
-
(17)
66
(47)
(6)
(18)
-
5
(66)
36
-
262
40
(157)
-
145
(164)
-
(23)
145
(5)
(47)
98
98
38
9
(38)
-
9
(6)
(7)
-
12
1
-
32
9
795
56
(476)
(17)
358
(583)
(23)
(60)
438
17
(211)
210
147
Essential Metals Limited – 2021 Annual Report
73
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Reconciliations of the written down values at the beginning and end of the previous reporting period are set out below:
Cost or valuation
At 30 June 2019
Additions
Disposals
At 30 June 2020
Accumulated depreciation and impairment
At 30 June 2019
Depreciation charge – P&L
Depreciation charge – E&E
Write-offs/Adjustments
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
Plant & office
equipment
$’000
Computer
equipment
$’000
Software
Motor vehicles
$’000
$’000
Leasehold
improvements
$’000
Total
$’000
188
9
-
198
(158)
(3)
(9)
-
(170)
30
28
194
20
-
214
(182)
(11)
(3)
-
(196)
12
18
68
15
-
83
(21)
-
(26)
-
(47)
47
36
160
102
-
262
(137)
-
(27)
-
(164)
23
98
-
38
-
38
-
(6)
-
-
(6)
-
32
610
183
-
793
(498)
(20)
(65)
-
(583)
112
210
Essential Metals Limited – 2021 Annual Report
74
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
17. TRADE AND OTHER PAYABLES
Current (Unsecured)
Trade creditors
Other creditors and accruals
Total trade and other payables
2021
$’000
2020
$’000
83
140
223
365
286
651
Amounts shown as current are expected to be settled within 12 months.
Average payment terms are 30 days from invoice date. There was no interest charged from the late payment of
trade and other payables in the current or prior reporting periods.
18. PROVISIONS
Current
Employee entitlements1
Rehabilitation provision2
Total current provisions
Notes:
2021
$’000
2020
$’000
59
696
755
56
696
752
1 - The current provision for long service leave includes all unconditional entitlements where employees have completed the required period
of service and also those where employees are entitled to pro-rata payments in certain circumstances. As the related employee has
completed the required period of service the entire amount is presented as a current provision.
2 - The provision for rehabilitation of the Sinclair Mine Site is an estimation of work to be carried out such as earthmoving, removal of facilities
and restoring of affected areas. The provision represents the best estimate of the present value of the expenditure required to settle the
restoration obligation at the reporting date. Future restoration costs will be reviewed annually and any changes in the estimate are reflected
in the present value of the restoration provision at each reporting date. The provision for rehabilitation remains current and has not materially
changed in value from the prior reporting period due to the Sinclair Mine remaining in care and maintenance under a Mine Closure Plan that is
due to be reviewed in June 2022.
Essential Metals Limited – 2021 Annual Report
75
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
19. LEASE LIABILITIES
The Group’s head office in Western Australia is recognised as a Right-of-use (“ROU”) asset.
Maturity Analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less unearned interest
Analysed as:
Current
Non-current
Total lease liabilities
2021
$’000
2020
$’000
62
60
56
52
48
-
278
(99)
179
47
132
179
114
107
100
76
-
-
397
(108)
289
64
225
289
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are measured as
part of the Group’s financial risk management.
Current period lease liabilities relate to the Company’s registered office premises in Perth, Western Australia. The
Perth office lease is for a prescribed period expiring on 30 April 2024 including an option to extend the lease period
for a further 2 years. During the term of the operating lease the rent is reviewed annually on each successive
anniversary date. The annual lease expense is currently $76,000.
Refer to Note 15 for further information regarding movements in associated ROU assets during the current reporting
period.
20. CONTRIBUTED EQUITY
(a) Ordinary shares on issue – fully paid
Total contributed equity
200,817,300
1,508,758,765
44,538
2021
Shares
2020
Shares
2021
$’000
2020
$’000
41,184
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of 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 shares held. Changes to the then Corporations Law abolished the authorised capital and par value concept in
relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised
capital and issued shares do not have a par value. Ordinary shares have no par value and entitle their holder to one
vote per share, either in person or by proxy, at a meeting of the Company.
Essential Metals Limited – 2021 Annual Report
76
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
On 20 July 2020 the Company announced completion of the consolidation of the Company’s issued capital on the
basis that every ten shares be consolidated into one share, every ten options be consolidated into one option and
every ten performance rights be consolidated into one performance right, as approved at the General Meeting of
shareholders held on 7 July 2020.
On 18 November 2020 the Company announced a $2,048,779 placement of new fully paid ordinary shares to
sophisticated and professional investors through the issue of 24,103,288 new fully paid ordinary shares at an issue
price of $0.085 per new share. Participants in the placement also received one free quoted option exercisable at
$0.15 on or before 30 November 2022 for every two placement shares subscribed for and issued, resulting in
12,051,639 options being issued.
On 16 December 2020, in conjunction with the placement, the Company also completed a Securities Purchase Plan
(SPP) also priced at $0.085 per new share with the SPP subscribers also receiving one free quoted option exercisable
at $0.15 on or before 30 November 2022 for every two SPP shares subscribed for and issued. The SPP raised a total
of $2,140,000 before costs resulting in 25,176,342 shares being issued on 16 December 2020 and 12,558,659 free
options being issued to SPP participants on 14 January 2021.
Equity incentives
Information relating to equity incentives including details of equity incentives exercised and lapsed during the
financial year and equity incentives outstanding at the end of the financial year, is set out in note 21.
Issue price
$’000
-
-
41,184
-
41,184
-
2,049
(166)
(337)
2,140
(71)
(314)
53
44,538
(b) Share movements during the current and prior reporting periods
Opening Balance 1 July 2019
Date
Number of
shares
1,507,425,165
Share issue upon conversion of rights
25 Jul 2019
1,333,600
Closing balance at 30 June 2020
1,508,758,765
10:1 Share Consolidation
Placement share issue
Placement share issue costs
Placement option valuation
17 Jul 2020
(1,357,882,338)
23 Nov 2020
24,103,288
$0.085
-
-
-
-
Share Purchase Plan share issue
16 Dec 2020
25,176,342
$0.085
Share Purchase Plan share issue costs
Share Purchase Plan option valuation
-
-
Contractor share issue
14 Jan 2021
661,243
Closing balance at 30 June 2021
200,817,300
-
-
-
Essential Metals Limited – 2021 Annual Report
77
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
21. EQUITY INCENTIVES
Set out below are movements in equity incentives on a post-consolidation basis in the current and prior reporting
periods:
Opening
balance
Granted
Exercised/
converted
Expired/
cancelled
Closing
balance
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(223,334)
(223,334)
(223,334)
(305,556)
(305,556)
-
-
-
-
-
-
-
-
-
-
-
-
-
894,446
894,446
500,000
500,000
500,000
533,334
533,334
533,334
200,000
200,000
200,000
24,610,298
(1,281,114)
30,099,192
(819,548)
-
-
-
-
500,000
100,000
1,653,378
(819,548)
2,253,378
(2,100,662)
32,352,570
2021
Unlisted options
Exercisable at 26 cents on or before 27/10/20
Exercisable at 50 cents on or before 27/10/20
Exercisable at 75 cents on or before 27/10/20
Exercisable at 35 cents on or before 30/11/21
Exercisable at 45 cents on or before 30/11/22
Exercisable at 25 cents on or before 31/01/24
Exercisable at 35 cents on or before 31/01/24
Exercisable at 45 cents on or before 31/01/24
Exercisable at 25 cents on or before 30/06/24
Exercisable at 35 cents on or before 30/06/24
Exercisable at 45 cents on or before 30/06/24
Exercisable at 12.5 cents on or before 30/09/24
Exercisable at 17.5 cents on or before 30/09/24
Exercisable at 22.5 cents on or before 30/09/24
Listed options
Exercisable at 15 cents on or before 30/11/22
223,334
223,334
223,334
1,200,002
1,200,002
500,000
500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
533,334
533,334
533,334
200,000
200,000
200,000
24,610,298
Total options
4,570,006
26,810,300
Performance rights
Exercisable on or before 25/09/24 (unvested)
Exercisable on or before 31/01/24 (unvested)
Exercisable on or before 31/12/23 (vested)
819,548
500,000
100,000
-
-
-
Exercisable on or before 30/06/24 (unvested)
-
1,653,378
Total performance rights
1,419,548
1,653,378
Total equity instruments
5,989,554
28,463,678
Essential Metals Limited – 2021 Annual Report
78
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
2020
Unlisted share options
Exercisable at 26 cents on or before 27/10/20
Exercisable at 5 cents on or before 27/10/20
Exercisable at 75 cents on or before 27/10/20
Exercisable at 25 cents on or before 30/05/20
Exercisable at 35 cents on or before 30/11/21
Exercisable at 45 cents on or before 30/11/22
Exercisable at 25 cents on or before 31/01/24
Exercisable at 35 cents on or before 31/01/24
Exercisable at 45 cents on or before 31/01/24
Opening
balance
223,334
223,334
223,334
1,200,002
1,200,002
1,200,002
-
-
-
-
-
-
-
-
-
500,000
500,000
500,000
Total unlisted share options
4,270,008
1,500,000
Granted
Exercised
Expired/
cancelled
Closing
balance
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,200,002)
-
-
-
-
-
223,334
223,334
223,334
-
1,200,002
1,200,002
500,000
500,000
500,000
(1,200,002)
4,570,006
Unlisted performance rights
Exercisable on or before 30/06/19 (unvested)
Exercisable on or before 14/10/24 (unvested)
Exercisable on or before 31/01/24 (unvested)
Exercisable on or before 31/12/23 (unvested)
133,360
-
-
-
-
(133,360)
819,548
500,000
100,000
-
-
-
Total unlisted performance rights
133,360
1,419,548
(133,360)
-
-
-
-
-
-
819,548
500,000
100,000
1,419,548
Total equity incentives
4,403,368
2,919,548
(133,360)
(1,200,002)
5,989,554
22. SHARE-BASED PAYMENTS
(a) Equity Incentive Plan
The establishment of the Group’s Equity Incentive Plan (“the Plan”) was approved by ordinary resolution at the
Annual General Meeting of shareholders of the Company held on 29 November 2011. All eligible Directors, executive
officers, employees and consultants of the Group who have been continuously employed by the Group are eligible
to participate in the Plan. The Plan was last approved by Shareholders on 15 December 2020.
Options
The Plan allows the Company to issue options for no consideration to eligible persons. The options can be granted
free of charge and are exercisable at a fixed price calculated in accordance with the Plan. Options issued under the
Plan may have a vesting period prior to exercise, except under certain circumstances whereby options may be
capable of exercise prior to the expiry of the vesting period. All options refer to options over ordinary shares of
Essential Metals Limited, which are exercisable on a one for one basis.
Performance Rights
Performance rights are granted for no consideration and the term of the performance rights are determined by the
Board in its absolute discretion but will ordinarily have a three-year term up to a maximum of five years.
Performance rights are subject to lapsing if performance conditions are not met by the relevant measurement date
or expiry date (if no other measurement date is specified) or if employment is terminated. There is no ability to re-
test performance under the LTIP after the performance period. The fair value of performance rights has been
calculated at the grant date and allocated to each reporting period evenly over the period from grant date to vesting
date. The value disclosed is the portion of fair value of the rights allocated to this reporting period.
Essential Metals Limited – 2021 Annual Report
79
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
(b) Unlisted share options over unissued shares
The following table illustrates the number and weighted average exercise prices of and movements in unlisted share
options (on a post-consolidation basis) during the current and prior financial years:
2021
2020
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired/cancelled during the year
Outstanding at the end of the year
Number
4,570,006
26,810,300
-
(1,281,114)
30,099,192
Vested and exercisable at the end of the year
30,099,192
Weighted
average
exercise price
$0.40
$0.16
-
$0.45
$0.19
$0.19
Number
4,270,006
1,500,000
-
(1,200,000)
4,570,006
4,570,006
Weighted
average
exercise price
$0.37
$0.35
-
$0.25
$0.40
$0.40
The range of exercise prices for options outstanding at the end of the current financial year was 12.5 cents and 75
cents (2020: 25 cents and 75 cents).
The fair value of unlisted options issued has been determined using a Black-Scholes option pricing model that takes
into account the exercise price, the term of the options, the impact of dilution, the non-tradeable nature of the
options, the share price at grant date and expected price volatility of the underlying shares, the expected dividend
yield and the risk-free interest rate for the term of the options.
The fair value of options granted during the year ended 30 June 2021 was $725,012 (2020: $112,000). The following
table illustrates the inputs used to calculate the fair value of options issued during the current financial year and
their resulting valuations on a post-consolidation basis:
Item
Options
Options
Options
Options
Options
Options
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
Unlisted
$0.110
$0.250
$0.110
$0.350
$0.110
$0.450
$0.080
$0.125
$0.080
$0.175
$0.080
$0.225
7-Jul-20
7-Jul-20
7-Jul-20
15-Dec-20
15-Dec-20
15-Dec-20
23-Nov-20
15-Dec-20
30-Jun-24
30-Jun-24
30-Jun-24
30-Sep-24
30-Sep-24
30-Sep-24
30-Sep-22
30-Sep-22
1,454
1,454
1,454
1,385
1,385
1,385
676
654
Listed
Options
$0.085
$0.150
Listed
Options
$0.080
$0.150
Number of options issued
333,334
333,334
333,334
200,000
200,000
200,000
12,051,639
12,558,659
Valuation per option class
$20,000
$16,667
$13,333
94.22%
94.22%
94.22%
93.06%
93.06%
93.06%
0.27%
$0.060
0.27%
$0.050
0.27%
$0.040
0.11%
$0.044
$8,800
0.11%
$0.039
$7,800
0.11%
$0.035
$7,000
94.34%
0.11%
$0.028
93.92%
0.11%
$0.025
$337,446
$313,966
Underlying security share price
Exercise price
Grant date
Expiry date
Days to expiry
Volatility
Risk-free interest rate
Valuation per option
(c) Unlisted Performance Rights
Refer to note 21 for movements in performance rights issued during the current and prior reporting periods.
Performance rights are exercisable for nil consideration. The fair value of performance rights granted during the year
ended 30 June 2021 was $107,637 (2020: $155,000). The fair value of performance rights expensed to the statement
of profit or loss and other comprehensive income during the year ended 30 June 2021 totalled $59,362 (2020:
$61,593).
Essential Metals Limited – 2021 Annual Report
80
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
The terms of performance rights issued to eligible employees during the current year include:
(i)
The value and resulting number of rights issued is based on a maximum threshold applied to each employee
expressed as a percentage of their fixed remuneration depending on their role and seniority within the
Company;
(ii) performance will be measured over a three year period from grant date; and
(iii) Rights will be granted at the discretion of the Board, but must be demonstrably linked to:
a. 50% of the granted performance rights will be subject to a vesting condition, whereby the
Absolute Total Shareholder Return (Absolute TSR) must exceed 25%.
b. 50% of the granted performance rights will be subject to a vesting condition based on Relative
Total Shareholder Return (Relative TSR), whereby the Company’s TSR must be greater than TSRs of
7 of the 10 peer group of companies over the performance period. This vesting condition can only
be met if the Company’s absolute TSR is positive.
23. RESERVES
Equity incentive reserve
Financial asset revaluation reserve
Foreign exchange reserve
Total reserves
2021
$’000
2020
$’000
1,163
(61)
91
1,193
405
10
74
489
Changes in the fair value and exchange differences arising on translation of investments, including financial assets
held at fair value through equity are recognised in other comprehensive income as described in note 4.8 and
accumulated in a separate reserve in equity. Amounts are reclassified to retained earnings when the associated
assets are sold or impaired.
The foreign exchange reserve records exchange difference arising on translation of the Company’s foreign
controlled subsidiaries. Amounts are recorded in other comprehensive income and are accumulated in a separate
reserve within equity. Upon disposal of the foreign controlled operation the cumulative amount within the
reserve is reclassified to profit or loss.
Equity incentive reserve
Opening balance
Equity incentives issued during the year
Reversal of lapsed options
Valuation of share placement and SPP option issue
Closing balance
2021
$’000
2020
$’000
405
219
(112)
651
1,163
309
180
(84)
-
405
The equity incentive reserve records items recognised on valuation of director, employee and contractor equity
incentives. Information relating to the Group’s Equity Incentive Plan, including details of equity incentives issued,
exercised and lapsed during the current reporting period and equity incentives outstanding at the end of the
current reporting period, is set out in note 21.
Essential Metals Limited – 2021 Annual Report
81
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
24. ACCUMULATED LOSSES
Accumulated losses at the beginning of the year
Net (loss)/profit attributable to members
Transfer of lapsed options re accumulated losses
Transfer from financial asset revaluation reserve – derecognition of investment
2021
$’000
(23,844)
(1,383)
-
(101)
2020
$’000
(25,289)
1,361
84
-
Accumulated losses at the end of the year
(25,328)
(23,844)
25. FINANCIAL INSTRUMENTS
The Group’s activities expose it to a variety of financial risks and market risks. The Group’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
financial performance of the Group.
Financial Risk Management
Exposure to key financial risks is managed in accordance with the Group’s risk management policy with the objective
to ensure that the financial risks inherent in exploration activities are identified and then managed and kept as low
as reasonably practicable. The main financial risks that arise in the normal course of business are market risk
(primarily interest rate risk and equity market risk), credit risk and liquidity risk. Different methods are used to
measure and manage these risk exposures. Liquidity risk is monitored through the ongoing review of available cash
and future commitments for exploration expenditure. Exposure to liquidity risk is limited by anticipating liquidity
shortages and ensures capital can be raised in advance of shortages. It is the Board's policy that no speculative
trading in financial instruments be undertaken so as to limit exposure to price risk.
Primary responsibility for identification and control of financial risks rests with the Managing Director and the Chief
Financial Officer, under the authority of the Board. The Board is appraised of these risks from time to time and
agrees any policies that may be undertaken to manage any of the risks identified.
Details of the significant accounting policies and methods adopted, including criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each financial instrument
are disclosed in Note 4 to the financial statements. The carrying values less the impairment allowance for
receivables and payables are assumed to approximate fair values due to their short-term nature. Cash and cash
equivalents are subject to variable interest rates.
Categories of Financial Instruments
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Investments in equity instruments designated as at FVOCI
Investments
Total financial assets
Financial liabilities at amortised cost
Trade and other payables
Total financial liabilities
2021
$’000
2020
$’000
5,466
15
273
5,754
223
223
4,391
397
568
5,356
651
651
Essential Metals Limited – 2021 Annual Report
82
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments
that are recognised and measured at fair value in the financial statements. To provide an indication about the
reliability of the inputs used in determining fair value, the Group has classified its financial instruments into the
three levels prescribed under the Accounting Standards. An explanation of each level follows underneath the table.
Recurring fair value measurements
At 30 June 2021
Financial assets
Financial assets at fair value through other comprehensive income
Level 1
Level 2
$’000
$’000
Total
$’000
Australian listed equity securities
Canadian listed equity securities
Total financial assets
Recurring fair value measurements at 30 June 2020
Financial assets
Financial assets at fair value through other comprehensive income
Australian listed equity securities
Canadian listed equity securities
Total financial assets
193
80
273
100
468
568
-
-
-
-
-
-
193
80
273
100
468
568
There were no transfers between levels 1 and 2 for recurring value measurements during the current or prior
reporting periods.
Level 1 – The fair value of financial instruments traded in active markets is based on quoted market prices at the end
of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price.
These instruments are included in level 1.
Level 2 – The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques which maximise the use of observable data and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Valuation
inputs include underlying spot prices, implied volatility, discount curves and time until expiration, expressed as a
percent of a year.
Specific financial risk exposures and management
(a) Market Risk – Interest rate risk management
The Group’s cash-flow interest rate risk primarily arises from cash at bank and deposits subject to market bank rates.
At reporting date, the Group does not have any borrowings. The Group does not enter into hedges.
The Group has exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a
result of changes in market, interest rates and the effective weighted average interest rates on those financial
assets.
(b) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise
meeting its obligations related to financial liabilities.
Prudent liquidity risk management implies maintaining sufficient cash reserves to meet the ongoing operational
requirements of the business. It is the Group’s policy to maintain sufficient funds in cash and cash equivalents.
Essential Metals Limited – 2021 Annual Report
83
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
Furthermore, the Group monitors its ongoing exploration cash requirements and raises equity funding as and when
appropriate to meet such planned requirements. The Group has no undrawn financing facilities other than unused
balances on company credit cards. Refer Note 12(c) for further details. Trade and other payables, the only financial
liability of the Group, are due within 3 months.
At the present state of the Group’s operations it has limited liquidity risk due to the level of payables and cash
reserves held. The Group’s objective is to maintain a balance between continuity of exploration funding and
flexibility through the use of available cash reserves.
Liquidity and interest risk table
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial assets and
liabilities and have been prepared on the following basis:
Financial assets – based on the undiscounted contractual maturities including interest that will be earned
on those assets except where the Group anticipates that the cash flow will occur in a different period; and
Financial liabilities – based on undiscounted cash flows on the earliest date on which the Group can be
required to pay, including both interest and principal cash flows.
2021
Weighted
average
interest rate
Less than
1 month
$’000
1-3
months
$’000
3 months-
>5 years
$’000
No fixed
term
$’000
Total
$’000
-
0.01%
0.40%
Financial assets
Financial assets at amortised cost
Non-interest bearing
Variable interest rate
Fixed interest rate
Investments in equity instruments designated as at FVOCI
Investments
Total financial assets
Financial liabilities at amortised cost
Non-interest bearing
Variable interest rate
Fixed interest rate
Total financial liabilities
-
0.22%
-
-
-
-
15
2,466
-
-
2,481
223
-
-
223
-
-
3,000
-
3,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273
273
-
-
-
-
15
2,466
3,000
273
5,754
223
-
-
223
2020
Weighted
average
interest rate
Less than
1 month
$’000
1-3
months
$’000
3 months-
>5 years
$’000
No fixed
term
$’000
Total
$’000
-
0.02%
0.80%
Financial assets
Financial assets at amortised cost
Non-interest bearing
Variable interest rate
Fixed interest rate
Investments in equity instruments designated as at FVOCI
Investments
Total financial assets
Financial liabilities at amortised cost
Non-interest bearing
Variable interest rate
Fixed interest rate
Total financial liabilities
0.67%
-
-
-
-
397
391
-
-
788
1,402
-
-
1,402
-
-
4,000
-
4,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
568
568
-
-
-
-
397
391
4,000
568
5,356
1,402
-
-
1,402
(c) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient
collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group does not
have any significant credit risk exposure to any single counterparty or any group of counterparties having similar
characteristics.
Essential Metals Limited – 2021 Annual Report
84
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
With respect to credit risk arising from financial assets, which comprise cash and cash equivalents and receivables,
the exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying
amount of these instruments. The credit risk on liquid funds is limited because the counterparties are Australian
banks with a minimum A Credit Rating.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date, is the
carrying amount of the financial assets, net of any expected credit losses, as disclosed in the statement of financial
position and in the notes to the financial statements.
(d) Commodity price risk
During and at the end of the prior reporting period the Group was potentially subject to commodity price risk for the
sale of its pollucite ore. However, the risk was mitigated by the offtake agreement containing a fixed price scale in
US dollars based on the product’s caesium oxide grade. All sales revenue in relation the Group’s caesium offtake
arrangements were recorded in the prior reporting period with receipt of final sales proceeds arriving in the current
reporting period. There was no such commodity risk during and at the end of the current reporting period.
(e) Foreign exchange risk
The Group includes a wholly owned Canadian subsidiary. This Canadian subsidiary has a limited number of suppliers
that invoice in foreign currencies and therefore foreign exchange risk is minimal. On 20 June 2018, the Group
entered into an offtake and loan facility agreement. The offtake agreement resulted in sales denominated in U.S.
dollars. During the financial year ended 30 June 2020 cash receipt sales were received in U.S. dollars and converted
into Australian dollars, removing the exchange risk, with the exception of US$194,000 in customer sales receipts
receivable at the end of the prior reporting period. This was subsequently received in the current reporting period
on 1 July 2020.
The capitalised exploration and evaluation balance of $15,430,000 at the end of the current reporting period
includes expenditure denominated in Canadian dollars. This portion of the capitalised expenditure is revalued at the
end of each reporting period and is impacted by fluctuations in the movements of the Canadian dollar against the
Group’s reporting currency of Australian dollars.
The Group is also exposed to foreign exchange risk arising from equity investments listed on the Toronto Stock
Exchange (TSXV), although given the size of these investments the directors to not anticipate that significant
fluctuations in related foreign currencies would result in a material change to the valuation of these assets at the
end of the current reporting period.
(f) Price risk on investments
The Group is exposed to equity price risks arising from equity investments. The Group’s investments are listed on
the Australian Securities Exchange (ASX) and Toronto Stock Exchange (TSXV).
The financial asset revaluation reserve component of equity would increase/decrease as a result of gains/losses on
equity securities classified as FVOCI.
Essential Metals Limited – 2021 Annual Report
85
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
(g) Capital risk management
The Group’s objectives when managing capital are to:
safeguard its ability to continue as a going concern, so that it can continue to provide returns for
Shareholders and benefits for other stakeholders, and
maintain an optimal capital structure to reduce the cost of capital and maximise returns to Shareholders
and benefits for other stakeholders.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
Shareholders, return capital to Shareholders or issue new Shares. No dividends were paid or provided for during the
financial period (2020: Nil).
Total capital is equity, as shown in the Consolidated Statement of Financial Position. The Group is not subject to any
externally imposed capital requirements. There were no changes in the Group’s approach to capital management
during the year.
26. GROUP COMPOSITION
(a) List of subsidiaries
Golden Ridge North Kambalda Pty Ltd
Western Copper Pty Ltd
Pioneer Canada Lithium Corp.
Ownership percentage
Place of
incorporation
Principal
activities
Australia
Australia
Canada
Exploration
Exploration
Exploration
2021
100%
100%
100%
2020
100%
100%
100%
(b) Third party interests
The Group's interests in farm-ins and unincorporated joint ventures are listed below.
Project
Acra
(Gold)
Kangan
(Gold)
Balagundi
(Gold)
Larkinville
(Gold/Nickel)
Wattle Dam
(Gold/Nickel)
Maggie Hays Hill
(Nickel)
Ravensthorpe
(Royalty)
Third party partner or
third party holder
Northern Star Limited (“NST”)
Novo Resources Corp. (“NOV”) and
Sumitomo Corporation (“SUM”)
Interest held
Third party participating equity
At 30 June 2021
30 June
2021
30 June
2020
NST hold a 75% interest. Ardea
Resources Limited retains 100% of
the nickel laterite rights on E27/278,
E27/520, E28/1746.
NOV and SUM may earn a 70%
interest in gold and precious metals
rights.
25%
25%
100%
100%
Black Cat Syndicate Limited (“BCS”)
BCS may earn a 75% interest.
100%
100%
Maximus Resources Limited (“MXR”)
Maximus Resources Limited (“MXR”)
75% on gold minerals and 80% on
nickel minerals
100% on gold minerals and 80% on
nickel minerals. Ardea Resources
Limited has a pre-emptive right to
nickel laterite ore.
25%/20
%
20%
(nickel)
25%/20
%
20%
(nickel)
Poseidon Nickel Ltd (“POS”)
80% all minerals
20%
20%
Galaxy Lithium Australia Limited ("GXY")
Medallion Metals Limited (“MM8”)
GXY 100% lithium & tantalum. MM8
all other minerals. Group retains a
royalty on lithium and tantalum.
-
-
Note: There are no assets owned by the third-party partner or holders and the Group’s expenditure in respect of its participation is brought to
account initially as capitalised exploration and evaluation expenditure under the Group’s accounting policy in Note 4.7. There were no capital
commitments or contingent liabilities arising out of the Group’s third-party interest activities as at 30 June 2021 (2020: Nil).
Essential Metals Limited – 2021 Annual Report
86
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
UNRECOGNISED ITEMS
27. CONTINGENT LIABILITIES
There were no material contingent liabilities as at 30 June 2021 (2020: Nil).
28. COMMITMENTS
(a) Exploration
The Group has certain obligations to perform minimum exploration work on mineral leases held. As at the end of the
current financial year, total exploration expenditure commitments on tenements held by the Group have not been
provided for in the financial statements and those which cover the following twelve month period amount to
$297,000 (2020: $760,000). This commitment does not include the expenditure commitments which are the
responsibility of the joint venture partners, amounting to $1,936,000 (2020: $1,633,000).
These obligations are subject to variations by farm-out arrangements or sale of the relevant tenements or
expenditure exemptions as permitted under the Mining Act 1978 (amended 2006), and as such the Group does not
report exploration expenditure commitments beyond the 12 month period following the current reporting date.
(b) Capital commitments
There were no ongoing capital commitments as at 30 June 2021 (2020: Nil).
29. SUBSEQUENT EVENTS
On 26 July 2021 the Company announced that Farm-in Joint Venture partner Black Cat Syndicate Limited (ASX: BC8)
had met the Initial Commitment expenditure of $150,000 under the Balagundi Gold & Base Metals Project Farm-in &
Joint Venture and had elected to continue towards earning a 75% interest by spending a further $450,000 within the
next three years.
On 26 July 2021 the Company announced the issue of 1,271,684 unlisted performance rights to employees under
the Company’s Equity Incentive Plan, expiring on 30 June 2025 at a total value of $163,000. The Company also
announced the cancellation of 507,768 unlisted performance rights due to cessation of employee employment with
the Company.
On 4 August 2021 the Company announced that it was completing a share placement to institutional and
sophisticated investors priced at 12.5c per ordinary share for total gross proceeds of $5,000,000. The Company
issued 36,780,000 ordinary shares on 11 August 2021 and the balance of 3,220,000 ordinary shares (including
1,200,000 ordinary shares issued to directors of the Company) plus 2,000,000 unlisted broker options to Taylor
Collison Limited, the lead brokers for the Placement, on 22 September 2021 who also received a brokerage fees of
$300,000, equal to 6% of gross proceeds from the placement. The options are exercisable at 20c and expire on 10
August 2023 and are valued at $260,000.
On 24 August 2021 the Company issued 22,674 ESS shares upon shareholders submitting exercise notices for 22,674
ESSO options. Net proceeds of $2,000 were received after share issue costs.
On 16 September 2021 the Company held a General Meeting of shareholders. The following resolutions were
approved:
Ratify the issue of 12,029,246 ESSO share options issued under the Company’s Share Purchase Plan in
January 2021;
Ratify the issue of 661,243 ESS shares to Milford Resources in January 2021;
Ratify the issue of 36,780,000 ESS shares under the shares placement announced in August 2021;
Obtain approval for Company directors Mr McGown, Mr Spencer, Mr Payne and Mr Hallam to participate in
the share placement as announced in August 2021. These shares were allotted on 22 September 2021.
Subsequent to the end of the current financial year the Company engaged in non-binding discussions concerning the
acquisition of mineral rights, divestment of mineral rights and divestment of mineral assets. The Company it is not
Essential Metals Limited – 2021 Annual Report
87
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
party to any binding agreements with respect to the aforementioned potential transactions as at the date of this
report and there can be no certainty that any binding agreement or agreements will be reached, or that any
concluding transactions will eventuate. At this stage of the negotiations an estimate of proceeds from the non
binding agreements cannot be made , however, based on the negotiation to date, the Directors do not believe there
are any impairment implications in relation to the carrying value of associated areas of interest.
The Group recognises that COVID-19 is a rapidly evolving situation impacting us all. Whilst acknowledging the
disruption to global commerce, the Group finds itself well placed to continue to progress its projects and will
continue to monitor any impacts the pandemic may have on its projects. At this point in time the Group is
experiencing minor delays in project timelines as a result of the pandemic. These delays are not expected to be
significant.
Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the
financial year 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 future financial years.
OTHER INFORMATION
This section of the notes includes other information that must be disclosed to comply with the accounting standards
and other pronouncements, but that is not immediately related to line items in the financial statements.
30. RELATED PARTIES
Parent entity and subsidiaries
The ultimate parent entity of the Group is Essential Metals Limited. Interests in other entities are set out in note 26.
Key management personnel
Key management personnel compensation comprised the following:
Current disclosed KMP
Short-term employee benefits
Post-employment benefits
Share-based payments
Former disclosed KMP
Short-term employee benefits
Post-employment benefits
Share-based payments
Employment termination payments
2021
$’000
2020
$’000
853
69
66
988
45
4
(7)
16
58
584
44
142
770
422
38
(63)
145
542
Total key management personnel compensation
1,046
1,312
Other director related party transactions
There were no other transactions with related parties during or outstanding at the end of the current reporting
period.
Essential Metals Limited – 2021 Annual Report
88
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
During the prior reporting period:
Mr Payne, a non-executive director of Essential Metals Limited, held a relevant interest in Payne Geo
Consultancy Pty Ltd which received $4,200 from the Group for the provision of geological consultancy
services received during the prior reporting period.
During the prior reporting period payments totalling $14,000 were paid as employee expenses and
superannuation for mining operational assistance work undertaken by Managing Director Timothy
Spencer’s son. Mr Spencer was Chief Financial Officer and Company Secretary at the time the payments
were made.
Terms and conditions
Transactions between related parties are on commercial terms and conditions, no more favourable than those
available to other parties unless otherwise stated.
31. REMUNERATION OF AUDITORS
Deloitte and related network firms
Audit services
Audit or review of Group financial reports
Other services
Taxation compliance services
Total
The auditor of the Group is Deloitte Touche Tohmatsu.
2021
$’000
2020
$’000
57
-
57
54
28
82
Essential Metals Limited – 2021 Annual Report
89
Notes to the Consolidated
Financial Statements
For the year ended 30 June 2021
32. PARENT ENTITY INFORMATION
Current assets
Total assets
Current liabilities
Total liabilities
Contributed equity
Accumulated losses
Equity incentive reserve
Financial asset revaluation reserve
Loss for the period
Total comprehensive loss for the period
2021
$’000
2020
$’000
5,782
14,474
1,018
1,150
5,362
13,584
1,459
1,684
44,538
41,184
(32,316)
(29,699)
1,163
(61)
405
10
(2,516)
(2,671)
(4,691)
(4,423)
Other information
The parent entity did not enter into any guarantees in relation to the debts of its subsidiaries in the current or
previous financial years. The parent entity did not have contingent liabilities at the end of the current or prior
financial year other than disclosed at Note 27. The parent entity did not have contractual commitments at the end
of the current or prior financial year other than disclosed in Note 28.
END OF THE FINANCIAL REPORT
Essential Metals Limited – 2021 Annual Report
90
Directors’ Declaration
For the year ended 30 June 2021
In accordance with a resolution of the directors of Essential Metals Limited, I state that:
In the opinion of the directors:
(a)
The financial report and notes of Essential Metals Limited for the financial year ending 30 June 2021 are in
accordance with the Corporations Act 2001, including:
(i)
(ii)
(iii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;
giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance
for the financial year ended on that date; and
The attached financial statements are in compliance with International Financial Reporting Standards
as stated in note 1 to the financial statements.
(b)
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by s295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Board of Directors
Timothy Spencer
Managing Director
24 September 2021
Essential Metals Limited – 2021 Annual Report
91
Independent Auditor’s Report
For the year ended 30 June 2021
Essential Metals Limited – 2021 Annual Report
92
Independent Auditor’s Report
For the year ended 30 June 2021
Essential Metals Limited – 2021 Annual Report
93
Independent Auditor’s Report
For the year ended 30 June 2021
Essential Metals Limited – 2021 Annual Report
94
Independent Auditor’s Report
For the year ended 30 June 2021
Essential Metals Limited – 2021 Annual Report
95
Additional Shareholder Information
As at 22 September 2021
The following additional information is required by the Australian Securities Exchange. The information was current
as at 22 September 2021.
(a) Top 20 quoted shareholders
On 7 July 2020 shareholders of Essential Metals Limited approved a share consolidation, where the number of issued
securities and unissued equity incentives decreased using a fixed ratio of 10:1. The following table of quoted
securities reflects the top 20 quoted shareholders on a post share consolidation basis:
Rank
Holder name
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
BNP PARIBAS NOMINEES PTY LTD
IONIKOS PTY LTD 1
%
Number of
shares
4.57%
10,999,996
3.21%
2.82%
1.54%
0.84%
0.74%
7,738,053
6,784,436
3,698,967
2,015,634
1,793,894
MR THOMAS WAYNE SPILSBURY & MRS MARCEY EVA SPILSBURY
0.72%
1,729,524
MR MARK KEVIN PROCTOR
NASDAQ SECURITIES AUSTRALIA PTY LTD
MR CHRISTOPHER ALLAN EAGLESHAM
NO LIMIT HOLDINGS PTY LTD
CS FOURTH NOMINEES PTY LIMITED
SAILORS OF SAMUI PTY LTD
RAFE PTY LTD
KOBALA INVESTMENTS PTY LTD
MS MIN WANG
FRANCIS HOLDINGS (WA) PTY LTD
COMSEC NOMINEES PTY LIMITED
MR HONG MENG PEPSI ONG
MR TIMOTHY GERARD SPENCER
MR CEDRIC DESMOND PARKER
0.67%
0.66%
0.65%
0.64%
0.64%
0.60%
0.58%
0.59%
0.57%
0.56%
0.56%
0.55%
0.46%
0.46%
1,620,483
1,600,000
1,555,555
1,539,113
1,537,110
1,455,000
1,400,000
1,400,000
1,380,000
1,359,941
1,344,269
1,328,888
1,112,941
1,100,000
22.63%
54,493,804
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14
15
16
17
18
19
20
Note:
1 - Beneficial owner is Non-Executive Chairman of the Company, Craig McGown, who has a total shareholding of 2,000,561 ordinary shares.
(b) Distribution of quoted ordinary shares
Size of parcel
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 +
Total
Number of
share holders
Number of
shares
% Issued
share capital
480
1,039
743
1,771
446
4,479
170,177
3,154,048
5,970,843
63,565,757
167,979,149
240,839,974
0.07%
1.31%
2.48%
26.39%
69.75%
100.00%
Essential Metals Limited – 2021 Annual Report
96
Additional Shareholder Information
As at 22 September 2021
(c) Number of holders with less than a marketable parcel of ordinary shares
The number of shareholders holding less than a marketable parcel of fully paid ordinary shares as at 22 September
2021 was 840 (holding 789,286 shares).
(d) Substantial shareholders
No substantial shareholding notices have been provided to Essential Metals Limited.
(e) Voting rights
Fully paid ordinary shares carry one vote per ordinary share without restriction. No other securities have voting
rights.
(f) Unquoted equity securities
Equity security type
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Performance Rights
Performance Rights
Performance Rights
Performance Rights
Performance Rights
Performance Rights
Issued to
Directors
Directors
Broker
Directors
Directors
Directors
Directors
Directors
Directors
Directors
Directors
Directors
Employees
Directors
Directors
Employees
Employees
Directors
Number on issue
Exercise price
Expiry date
894,446
894,446
2,000,000
500,000
500,000
500,000
533,334
533,334
533,334
200,000
200,000
200,000
100,000
500,000
454,545
691,065
445,911
373,638
10,054,053
$0.35
$0.45
$0.20
$0.25
$0.35
$0.45
$0.25
$0.35
$0.45
$0.125
$0.175
$0.225
N/A
N/A
N/A
N/A
N/A
N/A
30-Nov-2021
30-Nov-2022
10-Aug-2023
31-Jan-2024
31-Jan-2024
31-Jan-2024
30-Jun-2024
30-Jun-2024
30-Jun-2024
20-Sept-2024
20-Sept-2024
20-Sept-2024
31-Dec-2023
31-Jan-2024
30-Jun-2024
30-Jun-2024
14-Oct-2024
14-Oct-2024
Essential Metals Limited – 2021 Annual Report
97
Mineral Resource Statement
As at 30 June 2021
Category
Indicated
Inferred
Inferred
Inferred
Category
Indicated
Inferred
The Dome North Lithium Project
Project area
Cade Deposit
Davy Deposit
Heller Deposit
Total
Blair – Golden Ridge Project
Project area
Blair Nickel Mine
Total
Glossary
Li2O – Lithium Oxide
Ni – Nickel Sulphide
Competent Person Statements
Tonnes
(Mt)
Grade
(Li2O %)
Tonnes Li2O
5.4
2.8
2.3
0.7
11.2
Tonnes
(t)
75,560
147,150
222,710
1.30
1.18
1.13
1.02
1.21
Grade
(Ni %)
4.37
2.18
2.92
70,000
33,000
25,000
8,000
136,000
Ni metal
(t)
3,300
3,210
6,510
Cade Lithium Deposit: The information in this Annual Report that relates to Mineral Resources for the Dome North Lithium
Project is based on and fairly represents information compiled by Competent Persons Mr Stuart Kerr and Mr Lauritz Barnes and
was reported to ASX on 29 September 2020 (JORC 2012) entitled: “Dome North Lithium Project – Resource upgrade”. The
Company confirms that it is not aware of any new information or data that materially affects the information included in the
aforementioned announcement and that all material assumptions and technical parameters underpinning the estimates in the
aforementioned announcement continue to apply and have not materially changed. The Company also confirms that the form
and context in which the Competent Persons’ findings are presented have not been materially modified.
Blair Nickel Mine: The information in this Annual Report that relates to Mineral Resources for the Blair Nickel Mine was based on
information supplied to and compiled by the Competent Persons Mr David Crook, Mr Don Huntly and Mr Lauritz Barnes. This
information was originally reported to ASX on 28 November 2013 (JORC 2012) entitled: “Mineral Resource estimate completed for
the Blair Nickel Mine”. The Company confirms that it is not aware of any new information or data that materially affects the
information included in the aforementioned announcement and that all material assumptions and technical parameters
underpinning the estimates continue to apply and have not materially changed. The Company also confirms that the form and
context in which the Competent Persons’ findings are presented have not been materially modified.
Exploration Results: The information in this Annual Report that relates to Exploration Results for Essential Metals Limited was
based on information supplied to and compiled by the Competent Person Mr Andrew Dunn (MAIG), Exploration Manager who is
employed full-time by Essential Metals Limited. Mr Dunn is a member of the Australian Institute of Geoscientists and has
sufficient experience that is relevant to this style of mineralization and type of deposit under consideration and to the activity
that is being reported on to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves”. Mr Dunn consents to the inclusion in the report of the matters in
the form and context in which it appears.
Reference to previous market announcements: The Company confirms that it is not aware of any new information or data that
materially affects the information included in the original market announcements and that all material assumptions and technical
parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially
changed. The company confirms that the form and context in which Exploration Results or Competent Person’s findings are
presented have not been materially modified from the original market announcements.
Essential Metals Limited – 2021 Annual Report
98
Forward Looking Statements
This document may contain “forward-looking statements” and other forward-looking information based on the
Group’s expectations, estimates and projections as of the date on which the statements were made. This forward-
looking information includes, among other things, statements with respect to the Group’s business strategy, plan,
development, objectives, performance, outlook, growth, cash flow, projections, targets and expectations, Mineral
Resources and results of exploration. Generally, this forward-looking information can be identified by the use of
forward-looking terminology such as ‘outlook’, ‘anticipate’, ‘project’, ‘target’, ‘likely’,’ believe’, ’estimate’, ‘expect’,
’intend’, ’may’, ’would’, ’could’,’ should’, ’scheduled’, ’will’, ’plan’, ’forecast’, ’evolve’ and similar expressions.
Persons reading this document are cautioned that such statements are only predictions, and that the Group’s actual
future results or performance may be materially different. Forward-looking information is subject to known and
unknown risks, uncertainties and other factors that may cause the Group’s actual results, level of activity,
performance or achievements to be materially different from those expressed or implied by such forward-looking
information. Forward-looking information is developed based on assumptions about such risks, uncertainties and
other factors, including but not limited to general business, economic, competitive, political and social uncertainties;
the actual results of current exploration activities; conclusions of economic evaluations; changes in project
parameters as plans continue to be refined; future commodity prices; possible variations of ore grade or recovery
rates; failure of plant, equipment or processes to operate as anticipated; accident, labour disputes and other risks of
the mining industry; and delays in obtaining governmental approvals or financing or in the completion of
development or construction activities. This list is not exhaustive of the factors that may affect our forward-looking
information. These and other factors should be considered carefully and readers should not place reliance on such
forward-looking information. Recipients of this document must make their own investigations and inquiries
regarding all assumptions, risks, uncertainties and contingencies which may affect the future operations of the
Group and the Group’s securities. The Group disclaims any intent or obligations to or revise any forward-looking
statements whether as a result of new information, estimates, or options, future events or results or otherwise,
unless required to do so by law.
The remainder of this page is intentionally left blank.
Essential Metals Limited – 2021 Annual Report
99
Tenement Register
As at 30 June 2021
Tenement Register (Consolidated Basis)
Tenement
Holder
Notes
Status
Pioneer Dome Project Located 133km SSE of Kalgoorlie, WA
Essential Metals Limited
E15/1515
Essential Metals Limited
E15/1522
Essential Metals Limited
E15/1725
Essential Metals Limited
E63/1669
Essential Metals Limited
E63/1782
Essential Metals Limited
E63/1783
Essential Metals Limited
E63/1785
Essential Metals Limited
E63/1825
Essential Metals Limited
E63/2118
Essential Metals Limited
L63/77
M63/665
Essential Metals Limited
Golden Ridge Nickel Project Located 30km SE of Kalgoorlie, WA
Golden Ridge North Kambalda Pty Ltd
E26/186
Golden Ridge North Kambalda Pty Ltd
E26/211
Golden Ridge North Kambalda Pty Ltd
E26/212
Golden Ridge North Kambalda Pty Ltd
M26/220
Golden Ridge North Kambalda Pty Ltd
M26/222
Golden Ridge North Kambalda Pty Ltd
M26/284
Golden Ridge North Kambalda Pty Ltd
M26/285
L26/272
Golden Ridge North Kambalda Pty Ltd
Juglah Dome Project Located 60km ESE of Kalgoorlie, WA
E25/585
Regional Projects, Located in WA
E15/1710
Kangan Lithium Project Located 80km S of Port Hedland, (Wodgina) WA
E45/4948
E47/3318-I
E47/3321-I
E47/3945
Balagundi Gold & Base Metals Project Located 25km NE of Kalgoorlie, WA
E27/558
Essential Metals Limited
Mavis Lake Project, Located 10km East of Dryden, Ontario, Canada
6 Mining Leases
with Surface Rights
189 Unpatented
Mining Claims
Acra Gold Project Located 60km NE of Kalgoorlie, WA
E27/278
E27/438
E27/491
E27/520
E27/548
E27/579
E28/1746
E28/2483
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Essential Metals Limited / Northern Star Resources Limited
Pioneer Canada Lithium Corp 51%
International Lithium Corporation 49%
Pioneer Canada Lithium Corp 51%
International Lithium Corporation 49%
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Essential Metals Limited
Western Copper Pty Ltd
Granted
Granted
Under application
Granted
Granted
Granted
Granted
Granted
Under application
Granted
Granted
1, 2
1, 2
1, 2
1, 2
1, 2
1, 2
1, 2
1, 2
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
3
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
5
4, 5
4, 5
5
6
7
7
8, 9
8, 9
9
8, 9
9
8, 9
8, 9
9
Essential Metals Limited – 2021 Annual Report
100
Tenement Register
As at 30 June 2021
Tenement
Holder
Notes
Status
Wattle Dam Nickel Project Located 65km S of Kalgoorlie, WA
Maximus Resources Limited
M15/1101
Maximus Resources Limited
M15/1263
Maximus Resources Limited
M15/1264
Maximus Resources Limited
M15/1323
Maximus Resources Limited
M15/1338
Maximus Resources Limited
M15/1769
Maximus Resources Limited
M15/1770
Maximus Resources Limited
M15/1771
Maximus Resources Limited
M15/1772
M15/1773
Maximus Resources Limited
Larkinville Lithium, Nickel Project Located 75km S of Kalgoorlie, WA
M15/1449
P15/5912
Maggie Hays Hill JV, Located 140km SE of Southern Cross
Essential Metals Limited / Maximus Resources Limited
Essential Metals Limited / Maximus Resources Limited
E63/1784
Katanning Gold Project Located 275km SE of Perth, WA
Essential Metals Limited / Poseidon Nickel Limited
E70/5040
E70/5042
E70/5043
E70/5044
Ausgold Exploration Pty Ltd
Ausgold Exploration Pty Ltd
Ausgold Exploration Pty Ltd
Ausgold Exploration Pty Ltd
10, 11
10, 11
10, 11
10, 11
10, 11
10, 11
10, 11
10, 11
10, 11
10, 11
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
12, 13
12, 13
Granted
Granted
14
15
15
15
15
Granted
Granted
Granted
Granted
Granted
Note
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Golden Ridge North Kambalda Pty Ltd is a wholly owned subsidiary of Essential Metals Limited.
Nickel sulphides rights are subject to the Australian Nickel Company Ltd Farmin/Joint venture.
Western Copper Pty Ltd is a 100% owned subsidiary of Essential Metals Limited.
FMG Pilbara Pty Ltd 1.5% NSR royalty.
Kangan Farmin Agreement: Novo Resources Corp. may earn a 70% Project Interest (excluding lithium and
related minerals).
Balagundi Farmin Agreement: Black Cat Syndicate Limited may earn a 75% Project interest.
Subject to an earn-in Joint Venture with International Lithium Corp. a 100% owned subsidiary of Essential
Metals Limited.
Heron Resources Limited retains nickel laterite ore rights.
Acra JV Agreement Northern Star Resources Limited 75% interest. Essential Metals Limited 25% free
carried interest.
Heron Resources Limited retains pre-emptive right to purchase nickel laterite ore.
Wattle Dam JV Agreement: Title, Mineral Rights held by Maximus Resources Limited, except nickel.
Essential Metals Limited 20% free carried interest in nickel sulphide minerals.
Larkinville JV Agreement: Maximus Resources Limited 75%, Essential Metals Limited 25% free carried
interest.
Larkinville JV Agreement: Maximus has an 80% interest in nickel rights, Essential Metals Limited 20% free
carried interest in nickel rights.
Maggie Hays Lake JV Agreement: Poseidon Nickel Limited 80%, Essential Metals Limited 20% & free
carried interest to commencement of mining.
Katanning Gold Project: Essential Metals Limited 1.5% NSR.
Essential Metals Limited – 2021 Annual Report
101
Essential Metals Limited
Level 3, 46 Ord Street
West Perth, Western Australia 6005
Phone | +61 (0)8 9322 6974
info@essmetals.com.au
Essmetals.com.au
ABN 44 103 423 981