European Metals Holdings Limited
Annual Report 2015

Plain-text annual report

EUROPEAN METALS HOLDINGS LIMITED ARBN 154 618 989 ANNUAL REPORT 30 JUNE 2015 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE DIRECTORY Non-Executive Director Chairman Managing Director and Chief Executive Officer Non-Executive Director Directors Mr David Reeves Mr Keith Coughlan Dr Pavel Reichl Company Secretary Ms Julia Beckett Registered Office in Australia Suite 12, Level 1 11 Ventnor Avenue West Perth WA 6005 Telephone +61 8 6141 3500 Facsimile +61 8 6141 3599 Email www.europeanmet.com Registered Address and Place of Incorporation Rawlinson & Hunter Woodbourne Hall PO Box 3162 Road Town Tortola VG1 110 British Virgin Islands Share Register Computershare Investor Services Limited Level 11 172 St Georges Terrace Perth WA 6000 Telephone 1300 850 505 (within Australia) Telephone +61 3 9415 4000 (outside Australia) Facsimile 1800 783 447 (within Australia) Facsimile +61 3 9473 2555 (outside Australia) Auditor Stantons International Audit and Consulting Pty Ltd Level 2, 1 Walker Avenue West Perth WA 6005 Telephone +61 8 9481 3188 Facsimile +61 8 9321 1204 Securities Exchange Listing Australian Securities Exchange Limited Level 40, Central Park 152-158 St Georges Terrace PERTH WA 6000 ASX Code: EMH 1 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CONTENTS Directors’ Report Auditor’s Independence Declaration 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 Financial Statements Directors’ Declaration Independent Audit Report to the members of European Metals Holdings Limited Corporate Governance Statement Additional Information Tenement Schedule 3 14 15 16 17 18 19 44 45 47 56 57 2 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT Your Directors’ present their report, together with the financial statements of the Group, being the Company and its controlled entities, for the year ended 30 June 2015. Directors The following persons were Directors of the Company and were in office for the entire year, and up to the date of this report, unless otherwise stated: Mr David Reeves Mr Keith Coughlan Dr Pavel Reichl Mr Robert Timmins Mr Colin Ikin Mr David Porter Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Chairman Non-Executive Director Non-Executive Director Appointed 6 March 2014 Appointed 6 September 2013 Appointed 6 March 2014 Appointed 24 November 2011, resigned 5 November 2014 Appointed 23 June 2011, resigned 5 November 2014 Appointed 8 January 2012, resigned 5 November 2014 Company Secretary The following person held the position of Company Secretary at the end of the financial year: Ms Julia Beckett holds a Certificate in Governance Practice and Administration and is a Certificated Member of Chartered Secretaries Australia. Julia is a Corporate Governance professional, having worked in corporate administration and compliance for the past 8 years. She has been involved in business acquisitions, mergers, initial public offerings, capital raisings as well as statutory and financial reporting. Julia is also Joint Company Secretary of Ensurance Limited. Principal Activities The Company is primarily involved in the development of a lithium and tin project in the Czech Republic. Review of Operations The 2015 Financial Year has been one of significant growth and development for the Company. The Company spent the first part of the year conducting a Scoping Study on the Cinovec Lithium and Tin Project. Consultants were appointed early in the year to advise on all aspects of the Study and this work continued into the first quarter of 2015. The Scoping Study demonstrates that Cinovec has the potential to be technically and financially viable. Mine design work carried out as part of the Study suggests Cinovec could be a bulk underground mining operation. It is envisaged that processing via a traditional gravity plant would produce tin and tungsten concentrates with the tails being fed to a lithium processing plant. Atmospheric leach would then be used to produce battery grade lithium carbonate. Cost estimates in the study were calculated by independent consultants and are based upon data from recent projects and industry standard estimating factors. Towards the end of the first half the Company entered into a strategic relationship with ASX listed Lithium Australia Limited (‘LIT’ formerly Cobre Montana) to test the commercial potential of the Cinovec lithium resource. It had been known for many years that the Cinovec project contained a very large low grade lithium deposit. The lithium was historically concentrated by magnetic means to produce a lithium concentrate which was then used to produce a lithium carbonate based on a sulphate processing route. The world’s first lithium carbonate was produced in this fashion with Cinovec lithium in 1923. Lithium Australia through its alliance with Perth based Strategic Metallurgy has the technical knowhow to extract lithium from the micas that occur in the mineralised zones at Cinovec with a reduced cost profile. The technology not only provides a low power cost process for lithium carbonate production, it also allows the recovery of potassium as potassium sulphate, a valuable component of fertilizers. It is also possible to recover rare metals from the mica. 3 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 Review of Operations (Continued) DIRECTORS’ REPORT LIT began test work early in 2015. The results of this work were excellent from both flotation and leach with 98% of lithium recovered to concentrate via flotation and 99.5% recovered via leaching from the concentrate. Significantly, LIT were able to produce battery grade lithium carbonate from the Cinovec ore sample with a grade of 99.56%. The conclusion of the lithium metallurgical test work is that Cinovec has the potential to be a very low cost producer of lithium carbonate, net of by -product credits. In February the Company announced a significant increase in resources at Cinovec. Of particular note was the very large increase in the inferred lithium resource to 5.5 mt LCE along with a significant additional exploration target. Given the size of the lithium deposit at Cinovec and the very low cost profile indicated by the metallurgical test work, Cinovec has become a globally significant lithium and tin deposit. We are very happy with this progress, particularly in light of the continued demand for lithium products globally, largely due to the expansion of the Electric Vehicle and Power Storage industries. European Metals is uniquely placed to take advantage of this increase in demand being the holder of the largest lithium resource in Europe. The strategic value of the Cinovec asset is becoming better recognised in the industry. In June the Company secured a capital raising from a number of key European based investors notably Rare Earth Minerals plc (‘REM’), an AIM listed company with a portfolio of investments in lithium companies and projects. REM’s most significant investment is in the Sonora Lithium Project in Mexico via a shareholding in fellow AIM Listed company, Bacanora Minerals and directly into the project. The major US electric vehicle and power storage company, Tesla Motors, has recently announced a conditional off take agreement with Bacanora for lithium from the Sonora Project. This is the first off take agreement that Tesla has entered into. The interest shown in European Metals from European investors has led the Company to the decision to dual list its securities on the AIM Market. This was announced to the ASX in June and is expected to be completed in November. Overall it has been a very productive and exciting year for the Company and the Cinovec Project and we look forward to bringing you further news regarding the development of the project. Results of Operations The consolidated loss for year ended 30 June 2015 amounted to $666,872 (2014 loss: $1,328,196). Financial Position The net assets of the Group have increased by $1,116,757 to $4,144,822 at 30 June 2015. Significant Changes in the State of Affairs The following significant changes in the state of affairs of the parent entity occurred during the financial year: The Oyabi license expired in July 2014. In light of the Company’s strong desire to focus its attention exclusively on the Czech projects – coupled with a significant decline in iron ore prices and unsatisfactory exploration results – no extension of the Oyabi license was sought. On 3 October 2014 the Company announced the award of a research grant under the FAME project, the project will last approximately 48 months and the Company may be eligible for up grant over this period of up to Euro 105,000. On 6 November 2014 the Company placed 21,943,023 CDIs at $0.05 to raise an additional $1,097,151 for working capital. 4 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT Significant Changes in the State of Affairs (Continued) The Company announced a substantial increase in resources at the Cinovec project, particularly with respect to the lithium resource. The lithium resource has increased in tonnage by 285% and in terms of contained lithium by 175%. The resource is currently 5.5Mt LCE, 514.8Mt @ 0.43% Li2O (0.1% Li cutoff). There is an additional Exploration Target of 3.4 – 5.3 Mt LCE, 350 – 450Mt @ 0.39 – 0.47% Li2O. On the 27 May 2015 Performance A CDIs issued to vendors for the acquisition of the European Metals, as approved by shareholders on 20 February 2014, were converted into 5,000,000 CDIs. The performance criteria of these CDIs were driven by the Net Present Value of the Cinovec project meeting the performance hurdles. On 30 June 2015 the Company placed 9,339,430 CDIs at $0.08 to raise an additional $747,154 for working capital. Dividends Paid or Recommended No dividends were declared or paid during the year and the Directors do not recommend the payment of a dividend. Information on Directors David Reeves Qualifications Experience Interest in CDIs and Options Non-Executive Chairman – Appointed 6 March 2014 Mining Engineer Mr Reeves is a qualified mining engineer with 25 years’ experience in Africa and Australia. Mr Reeves holds a First Class Honours Degree in Mining Engineering from the University of New South Wales, a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia and a First Class Mine Managers Certificate of Competency. 3,061,872 CDIs 1,658,372 Options 542,651 Class B Performance Shares Special Responsibilities Directorships held listed entities in other Member of all the Committees Managing Director of Ferrex Plc (AIM) Keith Coughlan Qualifications Experience Interest in CDIs and Options Special Responsibilities Directorships held listed entities in other Pavel Reichl Qualifications Experience Managing Director (CEO) – Appointed 6 September 2013 BA Keith has over 26 years’ experience in stockbroking and funds management. He has been largely involved in the funding and promoting of resource companies listed on ASX, AIM and TSX. He has advised various companies on the identification and acquisition of resource projects and was previously employed by one of Australia’s then largest funds management organizations. 4,500,000 CDIs 6,000,000 Options Member of all the Committees Non Executive Chairman of Talga Resources Limited Non-Executive Director – Appointed 6 March 2014 PhD from University of Montana Dr Reichl has over 15 years’ experience in precious, base and PGE metals exploration and production and has a PhD from University of Montana. He was formerly Business Unit Manager of a Canadian listed minerals exploration company responsible for Europe and Central Asia. Dr Reichl was the former head of the Newmont acquisition program in Eastern Europe and exploration manager for Kyrgyzstan and Uzbekistan. He is fluent in English, Czech and Russian. 5 Information on Directors Interest in CDIs and Options Special Responsibilities Directorships held listed entities in other Robert Timmins Qualifications Experience EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT 2,778,672 CDIs 750,000 Options 793,906 Class B Performance Shares Member of all the Committees Nil Non-Executive Chairman – Appointed 24 November 2011, resigned 5 November 2014 Geophysicist Robert (Bob) Timmins has 40 years experience in mineral and oil exploration. Bob founded Timmins Geophysics Pty Ltd in 1978, a geophysical consulting and contracting company. With up to 35 employees this company was principally involved interpretation of electromagnetic, magnet (including polarization) and gravity data. Geophysics customers’ included iron explorers: CR, Hamersley Iron, BHP, CSR and others. Bob conducted and interpreted the initial geophysics and sited the drilling which led to the discovery of the Yandie iron ore deposit. in the acquisition and Timmins Geophysics (1988) merged with ASX listed Aerodata Holdings to form World Geoscience Corporation (“WGC”). WGC managed the conducting, reporting and presentation of the initial European Union sponsored airborne geophysical survey of Namibia and Botswana. Interest in CDIs and Options(1) Bob has consulted extensively in Australia, Africa (Namibia, Botswana, South Africa, Tanzania, Kenya and Central African Republic) and the Americas. Nil CDIs 500,000 Options (expired 19 July 2015) Special Responsibilities Directorships held listed entities in other Member of all the Committees Nil Colin Ikin Qualifications Experience Interest in CDIs and Options(1) Special Responsibilities Directorships held listed entities in other David Porter Qualifications Interest in CDIs and Options(1) Non-Executive Director - Appointed 23 June 2011, resigned 5 November 2014 Stockbroker Colin was a stockbroker for 17 years. He has extensive experience as CEO of several mining companies listed on the ASX and AIM. Colin has developed gold, copper, nickel and cobalt mines in Australia and Africa, including the Bulong pressure acid leach Nickel Cobalt mine and the Horseshoe polymetallic mine. Colin is a non- executive director of Cominco Resources Ltd, a company currently developing the Hinda phosphate and uranium project in the Republic of Congo. He has played a major role in property developments in Indonesia and Australia. 4,093,580 CDI’s and Nil options Member of all the Committees Current Executive Chairman of Namibian Copper NL. Non-Executive Director – Appointed 8 January 2012, resigned 5 November 2014 Geologist, BSc (Hons), MSc, FIMM 110,000 CDIs 500,000 Options (expired 19 July 2015) Special Responsibilities Directorships held in other Member of all the Committees Nil 6 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT Information on Directors listed entities (1) Number of CDIs and Options held on the date of resignation which was 5 November 2014. Director Meetings The number of Directors’ meetings and meetings of Committees of Directors held during the period and the number of meetings attended by each of the Directors of the Company during the year are: Name David Reeves Keith Coughlan Pavel Reichl Robert Timmins Colin Ikin David Porter Directors’ Meetings Number attended 3 3 3 1 1 1 Number eligible to attend 3 3 3 1 1 1 7 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 REMUNERATION REPORT (AUDITED) DIRECTORS’ REPORT This report details the nature and amount of remuneration for each Director of the Company, and Key Management Personnel. The directors are pleased to present the remuneration report which sets out the remuneration information for European Metals Holdings Limited’s non-executive directors, executive directors and other key management personnel. A. Principles used to determine the nature and amount of remuneration The remuneration policy of the Company has been designed to align Director and management objectives with shareholder and business objectives by providing a fixed remuneration component, and offering specific long-term incentives based on key performance areas affecting the Company’s financial results. The Board of the Company believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best management and Directors to run and manage the Company, as well as create goal congruence between Directors, Executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for Board members and Senior Executives of the Company is as follows: The remuneration policy, setting the terms and conditions for the Executive Directors and other Senior Executives, was developed by the Board. All Executives receive a base salary (which is based on factors such as length of service and experience), superannuation, options and performance incentives. The Board reviews Executive packages annually by reference to the Company’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. Executives are also entitled to participate in the employee share and option arrangements. All remuneration paid to Directors and Executives is valued at the cost to the Company and expensed. The Board policy is to remunerate Non-executive Directors at commercial market rates for comparable companies for time, commitment, and responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually based on market practice, duties, and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for Non- Executive Directors are not linked to the performance of the Company. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold CDIs in the Company. The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and Directors’ and Executives’ performance. Currently, this is facilitated through the issue of options to the majority of Directors and Executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. For details of Directors’ and Executives’ interests in CDIs and options at year end, refer to the remuneration report. B. Details of Remuneration Details of the nature and amount of each element of the emoluments of each of the KMP of the Company (the Directors) for the year ended 30 June 2014 and 30 June 2015 are set out in the following tables: 8 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) B. Details of Remuneration (Continued) 2015 Group Key Management Personnel Short-term benefits Post- employment benefits Long-term benefits Equity-settled share- based payments Total % of remuneration as share based payments Salary, fees Profit share Non- Other 1 Super- Other Equity Options and leave and bonuses monetary annuation Directors: $ $ $ $ David Reeves 24,000 Keith Coughlan 200,000 Pavel Reichl 83,000 Robert Timmins* Colin Ikin* David Porter* - - - 307,000 - - - - - - - - - - - - - - * Directors resigned on 5 November 2014 $ - 19,000 - - - - 40,000 - - - - - 40,000 19,000 $ $ $ $ - - - - - - - - - - - - - - - - - - - - - 64,000 219,000 83,000 - - - 366,000 - - - - - - 2014 Group Key Management Personnel Short-term benefits Post- employment benefits Long-term benefits Equity-settled share- based payments Total % of remuneration as share based payments Salary, fees Profit share Non- Other Super- Other Equity Options and leave and bonuses monetary annuation Directors: $ $ $ $ Robert Timmins 16,667 Keith Coughlan 100,000 Pavel Reichl 39,945 Colin Ikin David Reeves David Porter - - 14,583 171,195 C. Service Agreements - - - - - - - - - - - - - - $ - 9,250 - - - - 9,250 - - - - - - - $ $ $ $ - - - - - - - - 100,000 - - - - 100,000 - - - - - - - 16,667 209,250 39,945 - - 14,583 280,445 - 48% - - - - It was formally agreed at a meeting of the directors that the following remuneration be established, there are no formal notice periods leave accruals or termination benefits payable on termination: Mr Keith Coughlan to receive a salary of $200,000 per annum plus SGC of 9.5%. Mr Coughlan was paid at a rate of $100,000 per annum from 1 November 2013 and $200,000 from 1 March 2014. Mr Coughlan agreed to accrue half of the salary from 1 Consulting services of Company Non-Executive Director (David Reeves) and the Company which he controls. The amounts billed related to this consulting service amounted to $40,000 (2014: $Nil) based on normal market rates and the amount outstanding at reporting date was $30,000 (2014: $Nil) the amount outstanding was equity settled subsequent to balance date. 9 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) C. Service Agreements (Continued) 1 March 2014 until such time as the Company is successful at completing a capital raising, the Company completed a successful capital raising on 6 November 2014. D. Options issued as part of remuneration for the year ended 30 June 2015. No options were granted to directors as remuneration during the year ended 30 June 2015 (30 June 2014: Nil) and no options lapsed during the year. E. Equity instruments issued on exercise of remuneration options There were no equity instruments issued during the year to Directors or other KMP as a result of options exercised that had previously been granted as compensation. F. Loans to Directors and Executives No loans have been made to Directors or Executives of the Company during, or since, the year ended 30 June 2015 (2014: nil). G. Company performance, shareholder wealth and Directors’ and Executives’ remuneration The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and Directors’ and Executives’ performance. This will be facilitated through the issue of options to the majority of Directors and Executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. At commencement of mine production, performance based bonuses based on key performance indicators are expected to be introduced. H. Other information Options held by Key Management Personnel The number of options to acquire CDIs in the Company held during the 2015 reporting period by each of the Key Management Personnel of the Group; including their related parties are set out below. Balance at the start of the year Granted during the year Exercised during the year Other changes 2during the year Balance at the 3 end of the year Vested and exercisable Unvested 30 June 2015 David Reeves Keith Coughlan Pavel Reichl - - - Robert Timmins 500,000 Colin Ikin - David Porter 500,000 Total 1,000,000 - - - - - - - - - - - - - - 658,372 658,372 658,372 4,000,000 4,000,000 4,000,000 - - - - - - 500,000 500,000 - - 500,000 500,000 4,658,372 5,658,372 5,658,372 2 Participation in CDI placement, the offer comprised of four new CDIs for every seven held at an issue price of $0.05 cents per CDI. For every CDI taken up holders were provided one free attaching option with an exercise price of $0.10 expiring 30 June 2016. 3 Balance at resignation date of 5 November 2014, for those directors (Mr Ikin, Mr Porter and Mr Timmins) who retired during the year. - - - - - - - 10 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) H. Other information (Continued) 30 June 2014 Balance at the start of the year Granted during the year Exercised during the year Other changes during the year Balance at the end of the year Vested and exercisable Unvested Robert Timmins 500,000 Keith Coughlan Pavel Reichl David Reeves Colin Ikin - - - - David Porter 500,000 Total 1,000,000 - - - - - - - - - - - - - - - - - - - - - 500,000 500,000 - - - - - - - - 500,000 500,000 1,000,000 1,000,000 - - - - - - - Chess Depositary Interests (‘CDIs’) held by Key Management Personnel The number of ordinary CDIs in the Company during the 2015 reporting period held by each of the Key Management Personnel of the Group; including their related parties are set out below. 2015 Name David Reeves Indirect Keith Coughlan Indirect Pavel Reichl Robert Timmins Colin Ikin Indirect David Porter Indirect Total 2014 Name David Reeves Keith Coughlan Indirect Pavel Reichl Robert Timmins Colin Ikin Indirect David Porter Indirect Total Balance at Start of year Granted as remuneration during the year Issued on exercise of options Other Changes during the year 4 Balance at end of year5 1,364,124 500,000 1,984,766 - 225,000 3,868,580 110,000 8,052,470 Balance at Start of year Granted as remuneration during the year - - - - - - - - - - - - - - - 225,000 3,868,580 - 110,000 4,203,580 500,000 - - - - - - 500,000 - - - - - - - - 1,201,023 2,565,147 4,000,000 793,906 - - - - 4,500,000 2,778,672 - 225,000 3,868,580 110,000 5,994,929 14,047,399 Issued on exercise of options - - - - - - - - - - Other Changes during the year Balance at end of year 1,364,124 1,364,124 - - 1,984,766 - - - - - 3,348,890 - 500,000 1,984,766 - 225,000 3,868,580 - 110,000 8,052,470 4 Participation in CDI placement, the offer comprised of four new CDIs for every seven held at an issue price of $0.05 cents per CDI. For every CDI taken up holders were provided one free attaching option with an exercise price of $0.10 expiring 30 June 2016. Other changes included the conversion of Class A Performance Shares for Mr Reeves and Mr Reichl into CDIs according to the terms of Class A Performance Shares. 5 Balance at resignation date of 5 November 2014, for those directors (Mr Ikin, Mr Porter and Mr Timmins) who retired during the year. 11 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) H. Other information (Continued) Loans to Key Management Personnel There were no loans to Key Management Personnel during the financial year. Other transactions with Key Management Personnel During 2015, the Group used the following services of the directors of the Company. • • • Sub-underwriting fee of 2% was paid to the Keith Coughlan $7,144 and David Reeves $799 for capital raising sub- underwriting. The amounts billed were based on normal market rates and the amount outstanding at reporting date was $Nil. During the year the Company converted 5,000,000 Performance A Shares into CDIs in accordance with the Term Sheet approved by Shareholders on the 20 February 2014. The conversion was dependent on the NPV of the Cinovec project. Mr David Reeves and Mr Pavel Reichl were vendors to the original Term Sheet and participated in the CDI conversion. The A Class Performance Shares were converted as follows: Mr David Reeves, conversion of 542,651 Class A Performance Shares to CDIs at a Grant Date Value of nil. Mr Pavel Reichl, conversion of 793,906 Class A Performance Shares to CDIs at a Grant Date Value of nil. During the year ended 30 June 2014, the Company sold its investment in securities in a TSX listed entity to a related entity of Mr Colin Ikin at an agreed price of $473,495 AUD. Total proceeds received was £251,017 (approximately $459,824 at date of receipt). There were no other transactions with Key Management Personnel during the financial year. End of Remuneration Report CDIs under option Unissued CDIs of European Metals Holdings Limited under option at the date of this report are as follows: Expiry date 30 June 2016 17 August 2020 Exercise Price 10 cents 16.6 cents Number under option 21,943,023 3,750,000 No option holder has any right under the options to participate in any other share issue of the Company or of any other entity. Environmental Regulations The Group’s operations are subject to the environmental risks inherent in the mining industry. Significant events after the reporting date On 31 July 2015 the Company held a General meeting, the following matters relating the issue of new equity instruments were approved for issue: • • • • Issue of 496,725 CDIs to Mr David Reeves (Non-Executive Chairman) in lieu of consulting fees for the year ended 30 June 20156. Issue of 2,000,000 options to Mr Keith Coughlan (Executive Director) exercisable at $0.16 cent on or before 17 August 2020. Issue of 1,000,000 options to Mr David Reeves (Non-Executive Chairman) exercisable at $0.16 cent on or before 17 August 2020. Issue of 750,000 options to Dr Pavel Reichl exercisable at $0.16 cent on or before 17 August 2020. 6 Fees were accrued for the year end 30 June 2015 12 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ REPORT Significant events after the reporting date (Continued) • On 31 July 2015 the Company held a General Meeting and received shareholder approval to place 9,410,578 CDIs at $0.08 to raise an additional $752,846 for working capital. • On 31 August 2015 Dr Pavel Reichl was appointed a Non-executive Director of the Company (previously Executive Director). Except for the matters noted above there have been no other significant events arising after the reporting date. Indemnifying officers or auditor During or since the end of the financial period the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: i. ii. The Company has entered into agreements to indemnify all Directors and provide access to documents, against any liability arising from a claim brought by a third party against the Company. The agreement provides for the Company to pay all damages and costs which may be awarded against the Directors. The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company, other than conduct involving a willful breach of duty in relation to the Company. Under the terms and conditions of the insurance contract, the nature of the liabilities insured against and the premium paid cannot be disclosed. iii. No indemnity has been paid to auditors. Proceedings on Behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-audit Services Stantons International has not provided any non-audit services during the year. Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2015 has been received and can be found on page 14 of the financial report. This report of the Directors incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors. Keith Coughlan Managing Director Dated at 30 September 2015 13  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Note 30 June 2015 30 June 2014 Revenue – interest income Other income Professional fees Audit fees Directors’ fees Share based payments Employees’ benefits Travel and accommodation Office rent Insurance expense Share registry expense Depreciation expense Impairment expense Other expenses Loss before income tax Income tax expense Loss for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss – exchange differences on translating foreign operations Other comprehensive (loss)/income for the year, net of tax Total comprehensive loss for the year Net Loss attributable to: members of the parent entity Total Comprehensive income attributable to: members of the parent entity 7 17 3 4 $ 6,917 21,516 $ 8,743 - (270,257) (120,004) (26,025) - - (23,127) (31,250) (100,000) (219,000) (114,071) (29,551) (16,396) (20,329) (51,114) (2,333) (39,233) (35,769) (12,776) (39,645) (17,436) - (673,968) (60,300) (129,660) (666,872) (1,328,196) - - (666,872) (1,328,196) (2,258) (2,258) 40,304 40,304 (669,130) (1,287,892) (666,872) (1,328,196) (666,872) (1,328,196) (669,130) (1,287,892) (669,130) (1,287,892) Basic and diluted loss per CDI (cents) 8 (1.25) (4.53) The above statement should be read in conjunction with the accompanying notes. 15 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 CURRENT ASSETS Cash and cash equivalents Other receivables Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Note 9 10 11 2015 $ 2014 $ 889,208 378,615 28,703 32,918 26,707 11,516 950,829 416,838 488 1,953 Exploration and evaluation expenditure 12 3,414,934 2,814,798 Intangible assets TOTAL NON-CURRENT ASSETS 3,398 4,229 3,418,820 2,820,980 TOTAL ASSETS 4,369,649 3,237,818 CURRENT LIABILITIES Trade and other payables Other liabilities TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY 13 14 15 16 201,536 23,291 224,827 186,495 23,258 209,753 224,827 209,753 4,144,822 3,028,065 6,788,183 5,002,296 222,761 225,019 (2,866,122) (2,199,250) 4,144,822 3,028,065 The above statement should be read in conjunction with the accompanying notes. 16  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Issued Capital Option Reserve Foreign Currency Translation Reserve Accumulated Losses $ $ $ $ Total $ Balance at 1 July 2013 2,402,296 97,560 87,155 (871,054) 1,715,957 Loss attributable to members of the Company Other comprehensive income Total comprehensive loss for the year Transactions with owners, recognised directly in equity CDIs issued during the year, net of costs - - - - Share based payments Balance at 30 June 2014 2,600,000 5,002,296 - - - - - - (1,328,196) (1,328,196) 40,304 40,304 - 40,304 (1,328,196) (1,287,892) - - - - - 2,600,000 97,560 127,459 (2,199,250) 3,028,065 Balance at 1 July 2014 5,002,296 97,560 127,459 (2,199,250) 3,028,065 Loss attributable to members of the Company Other comprehensive loss Total comprehensive loss for the year - - - Transactions with owners, recognised directly in equity CDIs issued during the year, net of costs 1,755,857 Share based payments Balance at 30 June 2015 30,030 - - - - - - (666,872) (666,872) (2,258) (2,258) - (2,258) (666,872) (669,130) - - - - 1,755,857 30,030 6,788,183 97,560 125,201 (2,866,122) 4,144,822 The above statement should be read in conjunction with the accompanying notes. 17 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received Receipts for services 30 June 2015 30 June 2014 Note $ $ (712,182) (478,795) 6,917 21,516 8,743 - Net cash (used in) operating activities 18 (683,749) (470,052) CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation expenditure Sale of investments in listed security Net cash (used in)/ from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of CDIs Capital raising costs paid Net cash from financing activities (567,136) (187,081) - (567,136) 459,824 272,743 1,844,307 (82,829) 1,761,478 - - - Net increase/ (decrease) in cash and cash equivalents 510,593 (197,309) Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of financial year 378,615 889,208 575,924 378,615 The above statement should be read in conjunction with the accompanying notes. 18  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation These consolidated financial statements and notes represent those of European Metals Holdings Limited (“the Company”) and Controlled Entities (the “Consolidated Group” or “Group”). The separate financial statements of the parent entity, European Metals Holdings Limited, have not been presented within this financial report as is permitted by Corporations Act 2001. The financial statements are general purpose financial statements, which have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Boards (AASB) and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The accounting policies detailed below have been adopted in the preparation of the financial report. Except for cash flow information, the financial statements have been prepared on an accrual basis and are based on historical cost, modified, where applicable, by the measurement at fair values of selected non-current assets, financial assets and financial liabilities. The Group is a listed public company, incorporated in the British Virgin Islands and registered in Australia. (i) Adoption of new and revised standards None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period, although it caused minor changes to the Group’s disclosures. (ii) Statement of Compliance The financial report was authorised for issue on 30 September 2015. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in the financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. (iii) Critical accounting estimates and judgements The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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 if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made. Recognition of deferred tax assets Deferred tax assets relating to temporary differences and unused tax losses have not been recognised as the Directors are of the opinion that it is not probable that future taxable profit will be available against which the benefits of the deferred tax assets can be utilised. 19  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (b) Income Tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (c) Impairment of assets At the end of each reporting period the Group assesses whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. 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. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is treated as a revaluation decrease). 20  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (c) Impairment of assets (continued) An assessment is also made at each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (d) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the Statement of Financial Position. (e) Revenue Interest Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. (f) Goods and Services Tax (GST) Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (g) Trade and other receivables Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within 30 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Group in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Group. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance. The amount of the impairment loss is recognised in the profit and loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the profit and loss. (h) Finance Income and Finance Costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. 21  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (i) Employee Benefits Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Other long-term employee benefits Provision is made for the liability due to employee benefits arising from services rendered by employees to the reporting date. Employee benefits expected to be settled within one year together with benefits arising out of wages and salaries, sick leave and annual leave which will be settled after one year, have been measured at their nominal amount. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Contributions made to defined employee superannuation funds are charged as expenses when incurred. (j) Exploration and Evaluation Assets Exploration and evaluation costs, including costs of acquiring licenses, are capitalised as exploration and evaluation assets on an area of interest basis. Costs of acquiring licences which are pending the approval of the relevant regulatory authorities as at the date of reporting are capitalised as exploration and evaluation cost if in the opinion of the Directors it is virtually certain the Group will be granted the licences. Exploration and evaluation assets are only recognised if the rights of tenure to the area of interest are current and either: (a) The expenditures are expected to be recouped through successful development and exploitation of the area of interest, or (b) Activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment when: (i) Sufficient data exists to determine technical feasibility and commercial viability, and (ii) Facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment accounting policy in Note 1(c). For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which 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 impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment. (k) Financial Instruments Initial recognition and measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Group becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. 22  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (k) Financial Instruments (Continued) Financial assets at fair value through profit and loss Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short term profit taking, derivatives not held for hedging purposes, or when the are designated as such to avoid an accounting mismatch or to enable performance evaluation where a Group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount being included in profit or loss. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. All other loans and receivables are classified as non-current assets. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments and it is the Group’s intention to hold these investments to maturity. Such assets are recognised initially at fair value plus any directly attributable transaction costs. They are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. All other investments are classified as current assets. If during the period the Group sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would be tainted and reclassified as available-for-sale. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit and loss. Available-for-sale financial assets are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. All other available-for-sale financial assets are classified as current assets. Financial liabilities Non-derivative financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest rate method. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. 23  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (k) Financial Instruments (Continued) Derecognition Financial assets are derecognised where the contractual rights to cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. (l) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. (m) Earnings Per CDI Basic earnings per CDI Basic earnings per CDI is determined by dividing the profit or loss attributable to ordinary shareholders of the Company, by the weighted average number of CDIs outstanding during the period, adjusted for bonus elements in CDIs issued during the period. Diluted earnings per CDI Diluted earnings per CDI adjusts the figure used in the determination of basic earnings per CDI to take into account the after income tax effect of interest and other financial costs associated with dilutive potential CDIs and the weighted average number of CDIs assumed to have been issued for no consideration in relation to dilutive potential CDIs, which comprise convertible notes and CDI options granted. (n) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in the period in which they are incurred. (o) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. (p) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segments’ results are reviewed by the Group’s Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. (q) CDI based payments The grant date fair value of CDI-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service and non-market performance conditions at the vesting date. For CDI-based payment awards with non-vesting conditions, the grant date fair value of the CDI-based payment is measured to reflect such conditions and there is no true-up for differences between 24  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (q) CDI based payments (Continued) expected and actual outcomes. (r) Issued capital CDIs are classified as equity. Incremental costs directly attributable to the issue of new CDIs or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new CDIs or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. (s) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent European Metals Holdings Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 21. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non controlling interests". The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non-controlling interests' proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. NOTE 2: DETERMINATION OF FAIR VALUES A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non- financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. CDI-based payment transactions The fair value of the employee CDI options and the share appreciation right is measured using the Black-Scholes formula. Measurement inputs include CDI price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 25  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 3: LOSS BEFORE INCOME TAX (a) Significant revenues and expenses The following significant revenue and (expense) items are relevant in explaining the financial performance: Impairment Expense • • • Exploration and expenditure Property plant and equipment Other assets NOTE 4: INCOME TAX (a) Income tax expense Current tax Deferred tax Deferred income tax expense included in income tax expense comprises: (Increase) in deferred tax assets Increase in deferred tax liabilities (b) Reconciliation of income tax expense to prima facie tax payable Net loss before tax Prima facie tax on operating loss at 30% (2014: 30%) Add / (Less): Non-deductible items -Impairments -Share-based payments -Other Current year tax loss not recognised Income tax attributable to operating loss The applicable weighted average effective tax rates are as follows: Balance of franking account at year end Deferred tax assets Tax losses Capital raising costs Unrecognised deferred tax asset 30 June 2015 30 June 2014 $ $ - - - - (602,435) (21,754) (49,779) (673,968) 30 June 2015 30 June 2014 $ $ - - - - - - - - - - - - (666,872) (1,328,196) (200,062) (398,459) - - 10,981 189,081 - Nil% Nil 140,677 12,127 152,804 202,190 30,000 55,254 111,015 - Nil% Nil 140,122 6,820 146,942 26  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 30 June 2015 30 June 2014 NOTE 4: INCOME TAX Set-off deferred tax liabilities Net deferred tax assets Deferred tax liabilities Exploration expenditure Set-off deferred tax assets Net deferred tax liabilities Tax losses $ $ - - 152,804 146,942 - - - - - - - - Unused tax losses for which no deferred tax asset has been recognised 468,923 467,072 The Company is registered in the British Virgin Islands (BVI) and the Company is a tax resident of Australia. The unused tax losses are representative of losses incurred in Australia. There are currently no withholding taxes or exchange control regulations in the BVI applicable to the Company. The Company is subject to the taxation regulations of the Czech Republic where it currently holds mining license via Geomet S.R.O, and also to UK taxation regulations in respect of European Metals (UK) Limited. NOTE 5: RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Other than transactions with Key Management Personnel and their related entities (refer Note 6), there were no other related party transactions during the year. 27  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2015. The totals of remuneration paid to KMP during the year are as follows: Short-term benefits Post employment benefits Equity settled Other payments 2015 $ 2014 $ 307,000 19,000 171,195 9,250 - 100,000 40,000 366,000 - 280,445 Loans to Key Management Personnel There were no loans to Key Management Personnel during the financial year (2014: Nil). Other transactions with Key Management Personnel During 2015, the Group used the following services of the directors of the Company. • • • Sub-underwriting fee of 2% was paid to the Keith Coughlan $7,144 and David Reeves $799 for capital raising sub- underwriting. The amounts billed were based on normal market rates and the amount outstanding at reporting date was $Nil. During the year the Company converted 5,000,000 Performance A Shares into CDIs in accordance with the Term Sheet approved by Shareholders on the 20 February 2014. The conversion was dependent on the NPV of the Cinovec project. Mr David Reeves and Mr Pavel Reichl were vendors to the original Term Sheet and participated in the CDI conversion. The A Class Performance Shares were converted as follows: Mr David Reeves, conversion of 542,651 Class A Performance Shares to CDIs at a Grant Date Value of nil. Mr Pavel Reichl, conversion of 793,906 Class A Performance Shares to CDIs at a Grant Date Value of nil. During the year ended 30 June 2014, the Company sold its investment in securities in a TSX listed entity to a related entity of Mr Colin Ikin at an agreed price of $473,495 AUD. Total proceeds received was £251,017 (approximately $459,824 at date of receipt). There were no other transactions with Key Management Personnel during the financial year. 28  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 7: AUDITOR’S REMUNERATION 2015 $ 2014 $ Details of the amounts paid to the auditor of the Group, Stantons International Audit and Consulting Pty Ltd for audit and non-audit services provided during the year are set out below: Remuneration of the auditor of the Group for: Auditor’s services Audit and review of financial report NOTE 8: BASIC AND DILUTED LOSS PER CDI Basic and diluted loss per CDI (cents) Loss attributable to members of European Metals Holdings Limited Weighted average number of CDI outstanding during the year 26,025 23,127 (1.25) (4.53) (666,872) (1,328,196) 53,143,446 29,328,577 The Group is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, CDI capital in respect of potential CDIs would lead to a diluted earnings per CDI that shows an inferior view of the earnings per CDI. For this reason, the diluted loss per CDI for the year ended 30 June 2015 are the same as basic loss per CDI. NOTE 9: CASH AND CASH EQUIVALENTS Cash at bank Total cash and cash equivalents in the Statement of Cash Flows NOTE 10: OTHER RECEIVABLES CURRENT GST and VAT Receivable Other receivable NOTE 11: OTHER ASSETS Current Prepayment – other 2015 $ 2014 $ 889,208 378,615 889,208 378,615 28,329 374 28,703 22,302 4,405 26,707 32,918 32,918 11,516 11,516 29  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE Exploration at cost Balance at the beginning of the year Acquisition of tenements Exploration of tenements Foreign exchange movement Write off of Oyabi Project NOTE 13: TRADE AND OTHER PAYABLES CURRENT Trade payables Accrued expenses Payables are normally due for payment within 30 days. NOTE 14: OTHER LIABILITIES CURRENT Loan from Cominco Resources 2015 $ 2014 $ 2,814,798 566,449 - 2,627,717 599,746 189,072 390 33,995 - (602,435) 3,414,934 2,814,798 180,975 20,561 201,536 81,918 104,577 186,495 23,291 23,291 23,258 23,258 European Metals Holdings has a loan agreement with Cominco Resources. The loan is for no fixed term, is interest free, unsecured and repayable by European Metals at call of Cominco. The funds were advanced in Euros and repayment is expected in Euros. At 30 June 2015 the amount in Euros was € 16,075. 30  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 Conversion of A Class Performance Shares 15(c) 27 May 2015 NOTE 15: ISSUED CAPITAL (a) Issued and paid up capital 75,144,459 (30 June 2014: 38,400,006 CDIs) Total issued capital (b) Movements in CDIs Balance at the beginning of the year Acquisition of EMH UK Share based payment Balance at the end of the year Balance at the beginning of the year Rights issue Share based payment CDI Placement Capital raising costs Balance at the end of the year (c) Movements A Class Performance Shares Balance at the beginning of the year Acquisition of EMH UK Balance at the end of the year Balance at the beginning of the year Conversion into CDIs Balance at the end of the year (d) Movements B Class Performance Shares Balance at the beginning of the year Acquisition of EMH UK Balance at the end of the year Balance at the beginning of the year Balance at the end of the year Number $ 75,144,459 6,788,183 6,788,183 Date Number $ 1 July 2013 12 March 2014 12 March 2014 25,400,006 12,500,000 500,000 2,402,296 2,500,000 100,000 30 June 2014 38,400,006 5,002,296 1 July 2014 6 November 2014 20 April 2015 30 June 2015 38,400,006 21,943,023 462,000 5,000,000 9,339,430 5,002,296 1,097,151 30,030 - 747,155 (88,449) 30 June 2015 75,144,459 6,788,183 Date Number $ 1 July 2013 12 March 2014 30 June 2014 1 July 2014 15(b) 27 May 2015 30 June 2015 - 5,000,000 5,000,000 5,000,000 (5,000,000) - - $ Date Number 1 July 2013 12 March 2014 30 June 2014 1 July 2014 30 June 2015 5,000,000 5,000,000 5,000,000 5,000,000 - - - - - - - - - - - CDIs entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of a CDI present at a meeting in person or by proxy, is entitled to one vote, and in a poll each share is entitled to one vote. European Metals Holdings limited is a company limited by shares incorporated in the British Virgin Islands with an authorised share capital, 200,000,000 no par value shares of a single class. Pursuant to the prospectus dated 26 April 2012, the company 31  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 15: ISSUED CAPITAL (CONTINUED) issued CDIs in July 2012. The holder of the CDIs has beneficial ownership in the underlying shares instead of legal title. Legal title and the underlying shares is held by Chess Depository Nominees Pty Ltd. Holders of CDIs have the same entitlement benefits of holding the underlying shares. Each Share in the Company confers upon the Shareholder: 1. 2. 3. the right to one vote at a meeting of the Shareholders of the Company or on any Resolution of Shareholders; the right to an equal share in any dividend paid by the Company; and the right to an equal share in the distribution of the surplus assets of the Company on its liquidation. The terms of the B Class Performance Shares are disclosed in Note 21. (c) Capital risk management The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it may continue to provide returns for shareholders and benefits for other stakeholders. The capital structure of the Group consists of equity comprising issued capital, reserves and accumulated losses. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is to maintain sufficient current working capital position to meet the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group at 30 June is as follows: Cash and cash equivalents Other receivables Other assets Trade and other payables The Group is not subject to any externally imposed capital requirements. NOTE 16: RESERVES Option Reserve Foreign Currency Translation Reserve Total Reserve Option Reserve The options reserve is used to recognise the fair value of all options on issue but not yet exercised. Balance at the beginning of the financial year Options issued / vested Balance at the end of the financial year 2015 $ 2014 $ 889,208 378,615 28,703 32,918 26,707 11,516 (224,827) (209,753) 726,002 207,085 97,560 125,201 222,761 97,560 127,459 225,019 97,560 97,560 - - 97,560 97,560 32  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 16: RESERVES (CONTINUED) At 30 June 2015 the following options are outstanding: • • 21,943,023 listed options exercisable at $0.10 on or before 30 June 2016 were issued as free attaching options pursuant to a CDI placement in November 2014. 1,200,000 unlisted options exercisable at $0.30 on or before 19 July 2015 were issued to key management personnel. Foreign Currency Translation Reserve The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries. Balance at the beginning of the financial year 127,459 87,155 Movement during the year Balance at the end of the financial year NOTE 17: SHARE BASED PAYMENTS (2,258) 125,201 40,304 127,459 The following share-based payment arrangements existed at 30 June 2015: On 1 December 2011, 1,200,000 share options were granted to employees and key management personnel for no consideration to acquire 1 CDI in the Company exercisable at $0.30 on or before the 3 year anniversary of the date of quotation on ASX being 19 July 2015. The options hold no dividend or voting rights and are not transferrable. Options granted to Key Management Personnel are as follow: Grant Date 1 December 2011 Number 1,200,000 These options vest from the grant date to the date of quotation of the company on the ASX being 19 July 2012. Further details of these options are provided in the directors’ report. The options hold no voting of dividend rights and are unlisted. A summary of the movements of all company options issued is as follows: Options outstanding as at 1 July 2013 Granted Forfeited Exercised Expired Options outstanding as at 30 June 2014 Options outstanding as at 1 July 2014 Granted Forfeited Exercised Expired Options outstanding as at 30 June 2015 Options exercisable as at 30 June 2014 Options exercisable as at 30 June 2015 Number Weighted Average Exercise Price 1,200,000 $0.30 - - - - 1,200,000 1,200,000 - - - - 1,200,000 1,200,000 1,200,000 - - - - $0.30 $0.30 - - - - $0.30 - - 33  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 17: SHARE BASED PAYMENTS (CONTINUED) Other share based payment details as follows i. ii. iii. On 12 March 2014, 12,500,000 fully paid ordinary CDIs at a market value of $0.20 per CDI were issued to acquire EMH UK Ltd. The fair value of this consideration was deemed to be the market value at the date of the asset acquisition (see Note 21). On 12 March 2014, 500,000 fully paid ordinary CDIs at a market value of $0.20 per CDI were issued to key management personnel for services rendered. Further details are provided in the Directors’ report. On 27 May 2015, 5,000,000 Class A Performance Shares were converted to CDIs, the conversion was per the terms of the Net Present Value of the Cinovec project not being less than US$ 140,000,000. iv. CDIs granted to Key Management Personnel are as follow: Grant Date 12 March 2014 Number 500,000 The weighted average fair value of those equity instruments, determined by reference to market price, was $0.20. The CDIs Included under Share Based Payments in the profit and loss is $100,000, which relates to equity settled transactions. NOTE 18: CASH FLOW INFORMATION (a) Reconciliation of cash flow from operating activities with the loss after tax Loss after income tax Adjustments for: Loss on disposal and asset write off Impairment Share based payment Unrealised foreign exchange loss/ (gain) Depreciation expense Changes in assets and liabilities Decrease/ (Increase) in other receivables (Increase)/ Decrease in other assets (Decrease)/ Increase in trade and other payables Cash flow (used in)/from operating activities 2015 $ 2014 $ (666,872) (1,328,196) - - - (2,970) 2,346 1,303 8,629 (26,185) 64,356 673,968 100,000 (2,221) 17,436 (8,677) 7,071 6,211 (683,749) (470,052) (b) Credit standby facilities The Company had no credit standby facilities as at 30 June 2015 and 2014 (c) Non-cash financing and investing activities On 12 March 2014, European Metals Holdings Limited acquired EMH UK Ltd (see Note 21). The consideration transferred included an equity payment of 12,500,000 at $0.20 per CDI totalling $2,500,000. The transaction is a non-cash transaction and excluded from the statement of cash flows. 34  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 19: OPERATING SEGMENTS The accounting policies used by the Group in reporting segments are in accordance with the measurement principles of Australian Accounting Standards. The Group has identified its operating segments based on the internal reports that are provided to the Board of Directors. According to AASB 8 Operating Segments, two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, and the segments are similar in each of the following respects: • • • • • The nature of the products and services; The nature of the production processes; The type or class of customer for their products and services; The methods used to distribute their products or provide their services; and If applicable, the nature of the regulatory environment, for example; banking, insurance and public utilities. The Group currently has one project which takes into account each of the above mentioned aspects. The principal activity for the project is exploration of tin and base metals. The project is likely to have the same methods to distribute the resources in future and the nature of the regulatory environment which is the Czech Republic. This is expected to be the same for future projects. Accordingly, management has identified one operating segment based on the location of the projects, that being the Czech Republic. Australia $ Congo $ Czech $ Total $ 30 June 2015 REVENUE Interest revenue Total segment revenue 6,917 6,917 - - - - Reconciliation to net loss: (534,121) 4,932 (41,536) Eliminate intercompany Loss before income tax Segment assets Segment liabilities 30 June 2014 REVENUE Interest revenue Total segment revenue Reconciliation to net loss: Eliminate intercompany Loss before income tax 6,917 6,971 (570,725) (96,147) (666,872) 3,426,872 4,369,649 40,564 224,827 - - 8,743 8,743 (1,755,728) 427,532 (1,328,196) 942,777 184,263 8,743 8,743 - - - - (980,865) (731,442) (43,421) Segment assets 368,973 1,025 2,867,820 3,237,818 Segment liabilities 92,799 - 116,954 209,753 35  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 20: FINANCIAL RISK MANAGEMENT The Group’s financial instruments consist mainly of deposits with banks, equity instruments and accounts receivable and payable. The main purpose of non-derivative financial instruments is to raise finance for Group’s operations. The Group does not speculate in the trading of derivative instruments. The Group holds the following financial instruments: Financial assets Cash and cash equivalents Other receivables Total financial assets Trade and other payables Other liabilities Total financial liabilities 2015 $ 2014 $ 889,208 378,615 28,703 26,707 917,911 405,322 201,536 186,495 23,291 23,258 224,827 209,753 The fair value of the Group’s financial assets and liabilities approximate their carrying value. Specific Financial Risk Exposures and Management The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk) credit risk and liquidity risk. (i) Market risk The Board meets on a regular basis to analyse currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments. Interest rate risk is not material to the Group as no interest bearing debt arrangements have been entered into. Price risk Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group is exposed to securities price risk on investments classified as available for sale. The investment in listed equities has been valued at the market price prevailing at reporting date. Management of this investment’s price risk is by ongoing monitoring of the value with respect to any impairment. Foreign exchange risk Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. 36  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 20: FINANCIAL RISK MANAGEMENT (CONTINUED) With instruments being held by overseas operations, fluctuations in foreign currencies may impact on the Group’s financial results. The Group’s exposure to foreign exchange risk is monitored by the Board. The majority of the Group’s funds are held in Australian dollars, British Stirling and Czech Koruna. The Group previously held small sums of money in the subsidiary bank account in Congolese Franc. At 30 June, the group has financial assets denominated in the foreign currencies detailed below: 2015 2014 Foreign Currency AUD Equivalent Foreign Currency AUD Equivalent 18,477 - - 984 - - 796,314 250,618 465,735 41,801 452,090 1,025 CZK GBP CFA A 5% movement in foreign exchange rates would not have a material increase or decrease on loss before tax (2014: $24,746). At 30 June 2015, the group has liabilities denominated in the foreign currencies detailed below: 2015 2014 Foreign Currency AUD Equivalent Foreign Currency AUD Equivalent Euro CZK GBP 16,075 645,905 3,024 23,291 34,319 6,207 63,817 16,075 1,096,021 32,940 23,257 57,667 59,421 140,345 A 5% movement in foreign exchange rates would increase or decrease loss before tax by approximately $3,191 (2014: $7,017). (ii) Credit risk Credit exposure represents the extent of credit related losses that the Group may be subject to on amounts to be received from financial assets. Credit risk arises principally from trade and other receivables. The objective of the Group is to minimise the risk of loss from credit risk. Although revenue from operations is minimal, the Group trades only with creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is insignificant. The Group’s maximum credit risk exposure is limited to the carrying value of its financial assets as indicated on the Statement of Financial Position and notes to the financial statements. The credit quality of the financial assets was high during the year. The table below details the credit quality of the financial assets at the end of the year: 37  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 20: FINANCIAL RISK MANAGEMENT (CONTINUED) Financial assets Credit Quality Cash and cash equivalents held at BGFI Bank Cash and cash equivalents held at Komercni Bank Cash and cash equivalents held at Westpac Bank • Interest-bearing deposit Other receivables and deposits Impairment losses There are no past due receivables for the Group. (iii) Liquidity risk High High High High 2015 $ 2014 $ - 984 1,025 41,801 888,224 335,789 28,703 26,707 917,911 405,322 Liquidity risk is the risk that the entity will not be able to meet its financial obligations as they fall due. The objective of the Group is to maintain sufficient liquidity to meet commitments under normal and stressed conditions. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities. Due to the lack of material revenue, the Group aims at maintaining flexibility in funding by maintaining adequate reserves of liquidity. The Group did not have access to any undrawn borrowing facilities at the reporting date. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting arrangements. As at 30 June 2015 Trade and other payables Loan payable to external party As at 30 June 2014 Trade and other payables Loan payable to external party Carrying Amount $ Contractual Cash flows $ 201,536 23,291 224,827 201,536 23,291 224,827 Carrying Amount $ Contractual Cash flows $ 186,495 23,258 209,753 186,495 23,258 209,753 <3 months $ 201,536 - 201,536 <3 months $ 186,495 - 186,495 3-6 months $ - - - 3-6 months $ - - - 6-24 months $ - 23,291 23,291 6-24 months $ - 23,258 23,258 (iv) Cash flow and fair value interest rate risk From time to time the Group has significant interest bearing assets, but they are as a result of the timing of equity raising and capital expenditure rather than a reliance on interest income. The interest rate risk arises on the rise and fall of interest rates. The Group’s income and operating cash flows are not expected to be materially exposed to changes in market interest rates in the future and the exposure to interest rates is limited to the cash and cash equivalents balances. 38  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 20: FINANCIAL RISK MANAGEMENT (CONTINUED) The Group’s 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 classes of financial assets and financial liabilities: Floating Interest Rate $ Non- interest bearing $ 2015 Total Floating Interest Rate $ $ Non- interest bearing $ 2014 Total $ Financial assets - Within one year Cash and cash equivalents Other receivables and deposits Total financial assets Weighted average interest rate 889,208 28,703 917,911 1.62% - - - 889,208 378,615 28,703 26,707 917,911 405,322 2.71% - - - - 378,615 26,707 405,322 - Financial Liabilities - Within one year Trade and other Payables Borrowings Total financial liabilities - - - 201,536 (201,536) 23,291 (23,291) 224,827 (224,827) - - - 186,495 (186,495) 23,258 (23,258) 209,753 (209,753) Net financial assets/ (liabilities) 917,911 (224,827) 693,084 405,322 (209,753) 195,569 Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in the interest rates at the reporting date would have increased or decreased the Group’s equity and profit or loss by $4,259 (2014: $3,786). (v) Net fair value of financial assets and liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary assets and financial liabilities approximates their carrying values. NOTE 21: CONTROLLED ENTITIES Subsidiaries of European Metals Holdings Limited Controlled entity Country of Incorporation Class of Shares Percentage Owned Equamineral Group Limited (EGL)* British Virgin Islands Equamineral SA (ESA Congo) Republic of Congo European Metals UK Limited ** United Kingdom Geomet S.R.O Czech Republic Ordinary Ordinary Ordinary Ordinary 2015 100% 100% 100% 100% 2014 100% 100% 100% 100% *EGL was incorporated on 8 December 2010 and domiciled in the British Virgin Islands. EGL is the parent company for Equamineral SA (ESA Congo) located in the Republic of Congo. EGL is the beneficial holder of 100% of the issued share capital in Equamineral SA. This company is currently in the process of being deregistered. **EMH UK Limited is the parent company for Geomet S.R.O 39  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: CONTROLLED ENTITIES (CONTINUED) Acquisition of EMH UK Ltd On 20 February 2014, the Company acquired European Metals UK Limited (“EMH UK”). EMH UK holds equity in Czech Republic incorporated entity Geomet S.R.O. Geomet S.R.O holds various granted mining tenements located in the Czech Republic. The consideration consisted of 12,500,000 CDIs at $0.20 per CDI and 5,000,000 A Class Performance shares convertible into CDIs and 5,000,000 B Class Performance shares convertible into CDIs. The terms of the performance shares are as follows: 1. 2. The 5,000,000 A Class Performance Shares will convert to between 3,000,000 and 5,000,000 CDI’s upon the net present value of the Permits (NPV) being independently determined to be not less than US$100,000,000, or, where the NPV is less than US$100,000,000 the directors of the Company who are not associates or related parties of European Metals nevertheless resolve to commission a definitive feasibility study in respect of the Permits (DFS) as contemplated in the milestone to the B Class Performance shares. This determination or resolution must occur on or before that date which is 1 year after the date of issue of the A Class Performance shares. The 5,000,000 B Class Performance Shares will convert to up to 25,000,000 CDI’s subject to completion of a DFS by an independent third party on or before that date which is 2 years after the date of issue of the B Class Performance CDI’s. The number of CDI’s issued on conversion will be calculated by reference to a total of $7,500,000 worth less the value of any A Class Performance shares converted using a deemed issue price of $0.30 per CDI. The conversion price will be calculated at the time the DFS is provided to the Company subject to being a minimum of $0.30. The B Class Performance shares will also be subject to early conversion in the event a change of control event occurs prior to satisfaction of the milestone. No value has been attributed to the Performance Shares. This acquisition has not been accounted for as a business combination under AASB 3: “Business Combination” as the assets of EMH UK were not considered a business. Accordingly, the EMH UK acquisition has been accounted for as an acquisition of assets, at cost based on the fair value of CDI’s used for the acquisition. The purchase price has been allocated to the identifiable assets and liabilities of the Consolidated Group of EMH UK as of the date of acquisition as follows: Exploration and evaluation assets Total value of assets acquired Deduct net liabilities assumed: Net assets acquired Acquisition date fair value of consideration: CDIs issued Note 2015 $ 2014 $ 2,627,717 2,627,717 (127,717) 2,500,000 2,500,000 - - - - - 40  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 22: PARENT ENTITY DISCLOSURE The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. Statement of Financial Position ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Profit or Loss and Other Comprehensive Income Total Loss Total comprehensive loss Guarantees 2015 $ 2014 $ 942,288 3,468,474 4,410,762 367,019 2,788,551 3,155,570 184,262 184,262 180,835 180,835 4,226,500 2,974,735 6,788,183 5,002,296 97,560 97,560 (2,659,243) (2,125,121) 4,226,500 2,974,735 (534,122) (980,865) (534,122) (980,865) There are no guarantees entered into by European Metals Holdings Limited for the debts of its subsidiary as at 30 June 2015. Contingent liabilities There are no contingent liabilities as at 30 June 2015. Other than as disclosed in Note 21 in respect of the B Class Performance Shares that may be issued in respect of the acquisition of European Metals (UK) Ltd. Commitments There were no commitments as at 30 June 2015. 41  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 23: CAPITAL COMMITMENTS Capital expenditure commitments: Capital expenditure commitments for: Mining concession commitments Payable: Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years 2015 $ - - - - - 2014 $ 115,731 115,731 - - 115,731 Commitments at 30 June 2015 relate to mining contracts for works to be performed were nil (2014: 2,199,592 CZK and equating to $115,731 AUD.) NOTE 24: CONTINGENT LIABILITIES There are no contingent liabilities as at 30 June 2015. Other than as disclosed in Note 21 in respect of the B Class Performance Shares that may be issued in respect of the acquisition of European Metals (UK) Ltd. NOTE 25: SIGNIFICANT EVENTS AFTER THE REPORTING DATE On 31 July 2015 the Company held a General meeting, the following matters relating the issue of new equity instruments were approved for issue: • • • Issue of 496,725 CDIs to Mr David Reeves (Non-Executive Chairman) in lieu of consulting fees for the year ended 30 June 20157. Issue of 2,000,000 options to Mr Keith Coughlan (Executive Director) exercisable at $0.16 cent on or before 17 August 2020. Issue of 1,000,000 options to Mr David Reeves (Non-Executive Chairman) exercisable at $0.16 cent on or before 17 August 2020. Issue of 750,000 options to Dr Pavel Reichl exercisable at $0.16 cent on or before 17 August 2020. • • On 31 July 2015 the Company held a General Meeting and received shareholder approval to place 9,410,578 CDIs at $0.08 to raise an additional $752,846 for working capital. • On 31 August 2015 Dr Pavel Reichl was appointed a Non-executive Director of the Company (previously Executive Director). Except for the matters noted above there have been no other significant events arising after the reporting date. 7 Fees were accrued for the year end 30 June 2015 42  EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL FINANCIAL REPORT 30 JUNE 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 26: NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. At the date of the authorisation of the financial statements, the standards and Interpretations listed below were in issue but not yet effective. AASB 9 Financial Instruments and associated Amending Standards (applicable for annual reporting period commencing 1 January 2018) The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. Key changes made to this standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments it is impractical at this stage to provide a reasonable estimate of such impact. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 43 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 DIRECTORS’ DECLARATION The Directors of the Company declare that: 1. The financial statements and notes, as set out on pages 15 to 43, are in accordance with the Corporations Act 2001 and: (a) (b) (c) comply with Accounting Standards; are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in Note 1 to the financial statements; and give a true and fair view of the financial position as at 30 June 2015 and of the performance for the year ended on that date of the Group. 2. the Chief Executive Officer and Chief Finance Officer have each declared that: (a) the financial records of the Group for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with the Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. in the Directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors by: Keith Coughlan Managing Director Dated at Perth on 30 September 2015. 44   EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT This Corporate Governance summary discloses the extent to which the Company will follow the recommendations set by the ASX Corporate Governance Council in its publication ‘Corporate Governance Principles and Recommendations (3rd Edition)’ (Recommendations). The Recommendations are not mandatory, however, the Recommendations that will not be followed have been identified and reasons have been provided for not following them. The Company’s Corporate Governance Plan has been posted on the Company’s website at www.europeanmet.com. PRINCIPLES AND RECOMMENDATIONS COMPLY (YES/NO) EXPLANATION Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 The Company has adopted a Board Charter. A listed entity should have and disclose a charter which: YES (a) (b) the sets out roles and responsibilities of the board, the chair and management; and respective includes a description of those matters expressly reserved to the board and those delegated to management. Recommendation 1.2 A listed entity should: YES (a) undertake appropriate before appointing a person, or putting forward to security holders a candidate for election, as a director; and checks (b) provide security holders with all material information relevant to a decision on whether or not to elect or re-elect a director. Recommendation 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. YES the sets out The Board Charter specific responsibilities of the Board, requirements as to the Boards composition, the roles and responsibilities of the the Chairman and Company establishment, operation and management of Board Committees, Directors access to company records and information, details of the Board’s relationship with management, Board’s details performance review and details of the Board’s disclosure policy. Secretary, the of A copy of the Company’s Board Charter is stated in Schedule 1 of the Corporate Governance Plan which is available on the Company’s website. (a) The Company has detailed guidelines for the appointment and selection of the Board. The Company’s Corporate Governance Plan requires the Board to undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director. (b) Material information relevant to any decision on whether or not to elect or re-elect a Director will be provided to security holders in the notice of meeting holding the resolution to elect or re- elect the Director. The Company’s Corporate Governance Plan requires the Board to ensure that each Director and senior executive is a party to a written agreement with the Company which sets out the terms of that Director’s or senior executive’s appointment. Recommendation 1.4 The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board. YES The Board Charter outlines the roles, responsibility and accountability of the Company Secretary. The Company Secretary is accountable directly to the Board, through the chair, on all matters to do with the proper functioning of the Board. 47 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT Recommendation 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board: (i) set measurable objectives to achieving gender diversity; and for (ii) to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary or it; and (c) disclose as at the end of each reporting period: (i) the measurable objectives for achieving gender diversity set by the board in accordance with the entity’s diversity policy and its progress towards achieving them; and (ii) either: (A) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or (B) “Gender Equality the entity’s Indicators”, as defined the Workplace Gender Equality Act 2012. in (a) The Company has adopted a Diversity Policy. YES (i) The Diversity Policy provides a framework for the Company to achieve a list of 6 measurable objectives that encompass gender equality. for (ii) The Diversity Policy provides the monitoring and evaluation of the scope and currency of the Diversity Policy. The company is responsible for implementing, monitoring the measurable objectives. reporting and on (b) The Diversity Policy is stated in Schedule 9 of the Corporate Governance Plan which is available on the company website. (c) included (i) The measurable objectives set by the Board the annual key in will be performance indicators for the CEO, MD and senior executives. In addition the Board will review progress against the objectives in its annual performance assessment. (ii) The Company currently has no employees and utilizes external consultants and contractors as and when required. The Board will review this position on an annual implement measurable objectives as and when they deem the Company to require them. and will basis Recommendation 1.6 A listed entity should: YES (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in in accordance with that process. reporting period the the Board and (a) The Board is responsible for evaluating the performance of individual directors on an annual basis. It may do so with the aid of an independent advisor. The process for this can be found in Schedule 6 of the Company’s Corporate Governance Plan. (b) The Company’s Corporate Governance Plan requires the Board to disclosure whether or not performance evaluations were conducted during the relevant reporting period. Due to the size of the Board and the nature of the business, it has not been deemed necessary to institute a formal documented performance review program of individuals. However, the Chairman intends to conduct formal reviews each financial year whereby the performance of the Board as a whole and the individual contributions of each director are disclosed. The Board considers that at this stage of the Company’s development an informal process is appropriate. 48 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT The review will assist to indicate if the Board’s performance is appropriate and efficient with respect to the Board Charter. remains appropriate legal and The Board regularly reviews its skill base and whether the it for financial Company’s operational, requirements. New Directors are obliged to participate in the Company’s induction process, which provides a comprehensive understanding of the Company, its objectives and the market in which the Company operates. Directors are encourages to avail themselves of resources required to fulfil the performance of their duties. YES (a) The Board is responsible for evaluating the performance of senior executives. The Board is to arrange an annual performance evaluation of the senior executives. to the Board (b) The Company’s Corporate Governance Plan requires annual performance of the senior executives. Schedule 6 ‘Performance Evaluation’ requires the Board to disclose whether performance or evaluations were conducted during the relevant reporting period. conduct not Recommendation 1.7 A listed entity should: (a) have and disclose a process for periodically its senior evaluating the performance of executives; and (b) disclose in relation to each reporting period, whether a performance evaluation was undertaken in in accordance with that process. reporting period the During the financial year an evaluation of performance of the individuals was not formally carried out. However, a general review of the individuals occurs on an on-going basis to ensure that structures suitable to the Company’s status as a listed entity are in place. Principle 2: Structure the board to add value Recommendation 2.1 The board of a listed entity should: YES (a) have a nomination committee which: (a) The Nomination Committee was formed on 26 August 2015, with all directors appointed as members of the Committee, being Mr Reeves (Chairman), Mr Coughlan and Dr Reichl. (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) (iv) (v) the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, The role and responsibilities of the Nomination Committee in Nomination outlined Committee Charter available online on the Company’s website. are The Board devotes time at board meetings to discuss board succession issues. All members of the Board are in the Company’s nomination process, to the maximum extent permitted under the Corporations Act and ASX Listing Rules. involved The Board regularly updates the Company’s (in accordance with board recommendation 2.2) to assess the appropriate skills matrix 49 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, experience, independence and knowledge of the entity to its duties and to discharge enable responsibilities effectively. it Recommendation 2.2 A listed entity should have and disclose a board skill matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership. balance of skills, experience, independence and knowledge of the entity. YES Board Skills Matrix Number of Directors that Meet the Skill Executive & Non- Executive experience Industry experience & knowledge Leadership Corporate governance & risk management Strategic thinking Desired behavioural competencies Geographic experience Capital Markets experience Subject matter expertise: - accounting - capital management - corporate financing - industry taxation 1 - risk management - legal - IT expertise 2 3 3 3 3 3 3 3 3 2 3 2 0 3 3 0 Recommendation 2.3 A listed entity should disclose: (a) the names of the directors considered by the YES board to be independent directors; (b) interest, position, if a director has an association or relationship of type described in Box 2.3 of the ASX Corporate the (1) Skill gap noticed however an external taxation taxation is employed to maintain firm requirements. (2) Skill gap noticed however an external IT firm is employed on an adhoc basis to maintain IT requirements. (a) The Board Charter provides for the disclosure of the names of Directors considered by the Board to be independent. These details are provided in the Annual Reports and Company website. (b) The Board Charter requires Directors to disclose their interest, positions, associations and relationships the requires independence of Directors is regularly assessed that and 50 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT it does Governance Principles and Recommendation (3rd Edition), but the board is of the opinion that the not independence of the director, the nature of the association or relationship in question and an explanation of why the board is of that opinion; and interest, position, compromise (c) the length of service of each director Recommendation 2.4 A majority of the board of a listed entity should be independent directors. Recommendation 2.5 The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. Recommendation 2.6 directors providing A listed entity should have a program for inducting appropriate new and for professional development opportunities continuing directors to develop and maintain the skills and knowledge needed to perform their role as a director effectively. by the Board in light of the interests disclosed by interests, Directors. Details of the Directors positions associations and relationships are provided in the Annual Reports and Company website. (c) The for Board Charter provides the determination of the Directors’ terms and requires the length of service of each Director to be disclosed. The length of service of each Director is provided in the Annual Reports and Company website. YES YES YES The Board Charter requires that where practical the majority of the Board will be independent. Details of each Director’s independence are provided in the Annual Reports and Company website. The Board Charter provides that where practical, the Chairman of the Board will be a non-executive director. If the Chairman ceases to be independent then the Board will consider appointing a lead independent Director. The Board Charter states that a specific responsibility of the Board is to procure appropriate professional development opportunities for Directors. The Board is responsible for the approval and review of induction and continuing professional development programs and procedures for Directors to ensure that they can effectively discharge their responsibilities. Principle 3: Act ethically and responsibly Recommendation 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. YES (a) The Corporate Code of Conduct applies to the Company’s directors, senior executives and employees. (b) The Company’s Corporate Code of Conduct is in Schedule 2 of the Corporate Governance Plan which is on the Company’s website. Principle 4: Safeguard integrity in financial reporting Recommendation 4.1 The board of a listed entity should: YES (a) have an audit committee which: (i) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (ii) is chaired by an independent director, who is not the chair of the board, and disclose: (b) The Audit and Risk Committee was formed on 26 August 2015, with all directors appointed as members of the Committee, being Dr Reichl (Chairman), Mr Reeves and Mr Coughlan. The role and responsibilities of the Audit and Risk Committee are outlined in Audit and Risk Committee Charter available online on the Company’s website. The Board devote time at annual board meetings to responsibilities associated with maintaining the Company’s roles and fulfilling the 51 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT (iii) (iv) (v) the charter of the committee; relevant the and experience of the members of the committee; and qualifications in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or internal audit function and arrangements with external auditors. All members of the Board are involved in the Company’s audit function to ensure the proper maintenance of the entity and the integrity of all financial reporting. (b) that the if it does not have an audit committee, disclose that fact and the processes it independently verify and employs safeguard financial integrity of reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. its YES Recommendation 4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Recommendation 4.3 A listed entity that has an AGM should ensure that its external auditor attends is from security available to answer questions holders relevant to the audit. its AGM and YES The Company’s Corporate Governance Plan states that a duty and responsibility of the Board is to ensure that before approving the entity’s financial statements for a financial period, the CEO and CFO have declared that in their opinion the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. The Company’s Corporate Governance Plan provides that the Board must ensure the Company’s external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure Recommendation 5.1 A listed entity should: YES (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. (a) The Board Charter provides details of the Company’s disclosure policy. In addition, Schedule 7 of the Corporate Governance Plan is entitled ‘Disclosure – Continuous Disclosure’ and details the Company’s disclosure requirements as required by the ASX Listing Rules and other relevant legislation. (b) The Board Charter and Schedule 7 of the Corporate Governance Plan are available on the Company website. Principle 6: Respect the rights of security holders Recommendation 6.1 A listed entity should provide information about Information about the Company and its governance is available in the Corporate Governance Plan which can 52 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT itself and website. its governance to investors via its YES be found on the Company’s website. Information about the Company and its governance is available in the Corporate Governance Plan which can be found on the Company website. Recommendation 6.2 A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors. YES a has adopted Shareholder The Company Communications Strategy which aims to promote and facilitate effective two-way communication with investors. The Shareholder Communications Strategy outlines a range of ways in which information is communicated to shareholders. Recommendation 6.3 A listed entity should disclose the policies and facilitate and processes encourage participation at meetings of security holders. in place to it has YES The Shareholder Communications Strategy can be found in Schedule 10 of the Board Charter which is available on the Company website. The Shareholder Communications Strategy states that as a part of the Company’s developing investor relations program, Shareholders can register with the Company Secretary to receive email notifications of when an announcement is made by the Company to the ASX, including the release of the Annual Report, half yearly reports and quarterly reports. Links are made available to the Company’s website on which all information provided to the ASX is immediately posted. Shareholders are encouraged to participate at all EGMs and AGMs of the Company. Upon the despatch of any notice of meeting to Shareholders, the Company Secretary shall send out material with that notice of meeting stating that all Shareholders are encouraged to participate at the meeting. Recommendation 6.4 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. YES Security holders can register with the Company to receive email notifications when an announcement is made by the Company to the ASX. Shareholders queries should be referred to the Company Secretary at first instance. Principle 7: Recognise and manage risk Recommendation 7.1 The board of a listed entity should: YES (a) have a committee or committees to oversee risk, each of which: (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) the charter of the committee; (iv) the members of the committee; and (b) Due to the size and nature of the existing Board and the magnitude of the Company’s operations the Company currently has no Audit and Risk Committee. Pursuant to Clause 4(h) of the Company’s Board Charter, full Board currently carries out the duties that would ordinarily be assigned to the Audit and Risk Committee under the written terms of reference for that committee. the The role and responsibilities of the Audit and Risk Committee are outlined in Schedule 3 of the Company’s Corporate Governance Plan available online on the Company’s website. The Board devote time at annual board meeting 53 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the process it employs for overseeing the entity’s risk management framework. Recommendation 7.2 (a) The board or a committee of the board should: YES (a) review the entity’s risk management framework with management at least annually to satisfy itself that it continues to be sound, to determine whether there have been any changes in the material business risks the entity faces and to ensure that they remain within the risk appetite set by the board; and (b) disclose in relation to each reporting period, whether such a review has taken place. Recommendation 7.3 A listed entity should disclose: YES (a) (b) if it has an internal audit function, how the function it performs; or is structured and what role if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. Recommendation 7.4 A listed entity should disclose whether, and if so how, it has regard to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks. YES the fulfilling roles and to responsibilities associated with overseeing risk and maintaining the entity’s risk management framework and associated internal compliance and control procedures. risks, these risk, monitor The Company process for risk management and internal compliance includes a requirement to identify and measure the environment for emerging factors and trends risk that affect formulate management strategies and monitor the performance of risk management systems. Schedule 8 of the Corporate Governance Plan is entitled ‘Disclosure – Risk Management’ and details the Company’s disclosure requirements with respect to the risk management review procedure and compliance and internal controls. (b) The Board Charter requires the Board to disclose the number of times the Board met throughout the relevant reporting period, and the individual attendances of the members at those meetings. Details of the meetings will be provided in the Company’s Annual Report. Schedule 3 of the Company’s Corporate Plan provides for the internal audit function of the Company. The Board Charter outlines the monitoring, review and assessment of a range of internal audit functions and procedures. Schedule 3 of the Company’s Corporate Plan details the Company’s risk management systems which assist in identifying and managing potential or apparent business, economic, environmental and social sustainability risks (if appropriate). Review of the Company’s risk management framework is conducted at least annually and reports are continually created by management on the efficiency and effectiveness of the Company’s risk management framework and associated control procedures. compliance internal and 54 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 CORPORATE GOVERNANCE STATEMENT Principle 8: Remunerate fairly and responsibly Recommendation 8.1 The board of a listed entity should: YES (a) have a remuneration committee which: (i) has at least three members, a majority of whom are independent directors; and (ii) is chaired by an independent director, and disclose: (iii) (iv) (v) the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or The Remuneration Committee was formed on 26 August 2015, with all directors appointed as members of the Committee, being Mr Reeves (Chairman), Mr Coughlan and Dr Reichl. The role and responsibilities of the Remuneration Committee are outlined in Remuneration Committee Charter available online on the Company’s website. The Board devote time at annual board meetings to fulfilling the roles and responsibilities associated with setting the level and composition of remuneration for Directors and senior executives and ensuring that such remuneration is appropriate and not excessive. (b) that fact and it does not have a remuneration if the committee, disclose processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration and not excessive. appropriate is Recommendation 8.2 its listed entity should separately disclose A policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives roles and and ensure directors responsibilities compared to executive directors and other senior executives are level and composition of their remuneration. the different non-executive that of reflected the in YES The Company’s Corporate Governance Plan requires the Board to disclose its policies and practices remuneration of non-executive, regarding executive and other senior directors. the YES Recommendation 8.3 listed entity which has an equity-based A remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. (a) Company’s Corporate Governance Plan states that the Board is required to review, manage and disclose the policy (if any) on whether participants are permitted into (whether through the use of transactions derivatives or otherwise) which the economic risk of participating in the scheme. The Board must review and approve any equity based plans. to enter limit (b) A copy of the Company’s Corporate Governance Plan is available on the Company’s website. 55 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only. 1 Shareholding as at 23 September 2015 (a) Distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Number of Shareholders 19 51 144 212 78 504 (b) The number of shareholdings held in less than marketable parcels is 55. (c) Voting Rights The voting rights attached to each class of equity security are as follows: CDIs - Each CDI is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. (d) 20 Largest Shareholders — CDIs as at 23 September 2015 Name 1. HSBC Custody Nominees (Australia) Limited 2. R & H Trust Co (Guernsey) Limited 3. NS Hong Investment (BVI) Ltd 4. Inswinger Holdings Pty Ltd 5. Nefco Nominees Pty Ltd 6. Armco Barriers Pty Ltd 7. Mrs Eleanor Jean Reeves 8. WB Nominees Limited 9. Vynben Pty Ltd 10. Merrill Lynch (Australia) Nominees Pty Limited 11. Hana Vanova 12. Citicorp Nominees Pty Limited 13. Ms Olga Bubnikova 14. Mr Oto Janout 15. Rodinia Geological Services Pty Ltd 16. Hereford Group Limited 17. Mr Jamie John Carter + Mrs Kristin Carter 18. Mr Brian Michael Moritz 19. Beaufort Securities Ltd 20. Andolin Holdings Pty Ltd Number of CDIs Held 8,419,709 % Held of Issued Ordinary Capital 9.90 7,191,414 4,700,000 4,500,000 4,027,000 3,700,000 3,061,872 2,834,411 2,805,750 2,778,672 2,778,672 2,598,264 2,158,055 2,158,055 1,599,776 1,571,429 1,479,776 1,113,554 911,012 750,000 8.46 5.53 5.29 4.73 4.35 3.60 3.33 3.30 3.27 3.27 3.05 2.54 2.54 1.88 1.85 1.74 1.31 1.07 0.88 61,137,421 78.88 56 EUROPEAN METALS HOLDINGS LIMITED ABRN 154 618 989 ANNUAL REPORT 30 JUNE 2015 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES 2 3 The name of the Company Secretary is Ms Julia Beckett. The address of the principal registered office in Australia is Suite 12, Level 1, 11 Ventnor Avenue, West Perth WA 6005. Telephone +61 8 6141-3500. 4 Registers of securities are held at the following addresses Computershare Investor Services Limited Level 11 172 St Georges Terrace Perth, Western Australia 6000 5 Securities Exchange Listing Quotation has been granted for all the CDIs of the Company on all Member Exchanges of the Australian Securities Exchange Limited. 6 Unquoted Securities Options over Unissued Shares A total of 1,200,000 options over unissued CDIs are on issue. 7 Use of Funds The Company has used its funds in accordance with its initial business objectives. TENEMENT SCHEDULE Project Location Project Cinovec Cinovec 2 Czech Republic Czech Republic 57 

Continue reading text version or see original annual report in PDF format above