EUROPEAN METALS HOLDINGS LIMITED
ARBN 154 618 989
ANNUAL REPORT
30 JUNE 2019
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE DIRECTORY
Directors
Mr David Reeves
Mr Keith Coughlan
Mr Richard Pavlik
Mr Kiran Morzaria
Company Secretary
Ms Julia Beckett
Registered Office in Australia
Suite 12, Level 1
11 Ventnor Avenue
WEST PERTH WA 6005
Telephone 08 6245 2050
Facsimile 08 6245 2055
Email www.europeanmet.com
Registered Office in Czech Republic
Jaselska 193/10, Veveri
602 00 Brno
Czech Republic
Tel: +420 732 671 666
Share Register - Australia
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
Facsimile +61 3 9473 2555 (outside Australia)
1800 783 447 (within 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
Non-Executive Chairman
Managing Director and Chief Executive Officer
Executive Director
Non-Executive Director
Nominated Advisor & Broker
Beaumont Cornish Limited
10th Floor
30 Crown Place
LONDON EC2A 4EB
UNITED KINGDOM
Registered Address and Place of Incorporation – BVI
Rawlinson & Hunter
Woodbourne Hall
PO Box 3162
Road Town
Tortola VG1 110
British Virgin Islands
UK Depository
Computershare Investor Services plc
The Pavilions
Bridgewater Road
BRISTOL BS99 6ZZ
UNITED KINGDOM
Reporting Accountants (UK)
Chapman Davis LLP
2 Chapel Court
LONDON SE1 1HH
UNITED KINGDOM
Securities Exchange Listing - Australia
ASX Limited
Level 40, Central Park
152-158 St Georges Terrace
PERTH WA 6000
ASX Code: EMH
Securities Exchange Listing – United Kingdom
London Stock Exchange plc
10 Paternoster Square
LONDON EC4M 7LS
UNITED KINGDOM
AIM Code: EMH
1
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CONTENTS
Chairman’s Letter Report
Project Review
Directors Report
Remuneration 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 Statements
Additional Information
Tenement Schedule
3
4
8
13
22
23
24
25
26
27
54
55
59
73
74
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CHAIRMANS LETTER
Dear Shareholders
Welcome to the 2019 Annual Report for European Metals Holdings limited (“European Metals” or “the Company”).
On behalf of the Board of Directors, I am pleased to report on what has been a busy and transformational year for your
Company as we continue to advance our strategy to become a Czech based lithium and tin producer.
The year was marked by the completion of the updated Preliminary Feasibility Study (PFS) that through process optimisations
and the production of lithium hydroxide saw an increase in NPV to in excess of USD 1 billion dollars. Most importantly, it
shows a globally competitive cost of $3,435/t per tonne of lithium hydroxide. The process improvements not only see
improved recoveries, lower reagent consumption and reduced roast times, they also result in a simpler flowsheet which will
assist greatly in the physical operation of the circuit.
There has been recent upheaval in the spodumene concentrate market which we believe supports our strategy of becoming
an integrated producer of lithium carbonate and/or lithium hydroxide supplying directly into the European market. This
strategy eliminates counter party risk and delivers European product into the rapidly expanding European EV and battery
storage markets.
The deposit is uniquely located, being in the centre of the Czech and European car industry and only 90km from the first VW
EV factory located in Zwickau, Germany which is due to commence production in November of this year. VW have also
recently announced the construction of a 16GWh battery cell factory with Northvolt to service this rapidly growing aspect of
their business which will require a steady state of battery materials to satisfy demand.
Subsequent to the year end, we were delighted to announce the potential partnership with CEZ Group (CEZ) one of Central
and Eastern Europe’s largest power utilities that is 70% owned by the Czech Government. Due diligence and partnership
negotiations have continued since the announcement and we look forward to updating the market in the near term on the
outcome of these discussions.
The Company is now entering into detailed engineering, permitting and offtake discussions as it moves towards development
on Europe’s largest lithium resource for the benefit of all stakeholders.
Finally, I would like to take this opportunity to thank all staff, advisors, contractors and our shareholders who have supported
us over the past year.
I look forward to updating you throughout the new financial year as we continue to advance the Cinovec Lithium/Tin Project.
David Reeves
CHAIRMAN
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
PROJECT REVIEW
European Metals, through its wholly owned subsidiary, Geomet s.r.o., controls the mineral exploration licenses awarded by
the Czech State over the Cinovec Lithium/Tin Project. Cinovec hosts a globally significant hard rock lithium deposit with a
total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral Resource of 323.5Mt at
0.39% Li2O and 0.04% Sn containing a combined 7.18 million tonnes Lithium Carbonate Equivalent and 263kt of tin reported
28 November 2017. An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported 4 July 2017 has been
declared to cover the first 20 years mining at an output of 22,500tpa of lithium carbonate reported 11 July 2018.
This makes Cinovec the largest lithium deposit in Europe, the fourth largest non-brine deposit in the world and a globally
significant tin resource.
The deposit has previously had over 400,000 tonnes of ore mined as a trial sub-level open stope underground mining
operation.
In June 2019 EMH completed an updated Preliminary Feasibility Study, conducted by specialist independent consultants,
which indicated a return post tax NPV of USD1.108B and an IRR of 28.8% and confirmed that the Cinovec Project is a potential
low operating cost, producer of battery grade lithium hydroxide or battery grade lithium carbonate as markets demand. It
confirmed the deposit is amenable to bulk underground mining. Metallurgical test-work has produced both battery grade
lithium hydroxide and battery grade lithium carbonate in addition to high-grade tin concentrate at excellent recoveries.
Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the
deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the
historic mine. As the deposit lies in an active mining region, it has strong community support.
The economic viability of Cinovec has been enhanced by the recent strong increase in demand for lithium globally, and within
Europe specifically.
There are no other material changes to the original information and all the material assumptions continue to apply to the
forecasts.
Project Development
It has been a significant year for the Company from the perspective of Project Development. The updated Preliminary
Feasibility Study (“PFS”) demonstrates significant improvements in the economics of the project. These improvements stem
from the successful completion of optimisation work throughout the year improving recoveries and the economics of the
roast process. The successful production of battery grade lithium hydroxide is also a very significant development, from both
an economic and market perspective.
The Company announced early in the year the increase in modelled production of battery grade lithium carbonate which was
a result of the prior optimisation work. Improved recoveries in the leach circuit, lower cost reagent usage and reduced roast
times all contributed to the modelled increase which is likely to improve cash margins by approximately 10%.
Lithium hydroxide test work began following this optimisation with the Company announcing the successful production of
battery grade lithium hydroxide earlier this year. This is an important step in the development of the project as it allows the
Company to produce either of the main lithium compounds required by the battery industry and therefore deliver whichever
product potential off takers will require.
This work culminated in the release of the Company’s updated PFS in June 2019. The updated PFS demonstrates very robust
economic parameters for the project as outlined below (all $ figures are US Dollars and increases refer to the 2017 PFS Lithium
Carbonate study):
• Net estimated overall cost of production post credits: $3,435 / tonne LiOH.H2O;
• Project Net Present Value (“NPV”) increases 105% to: $1.108B (post tax, 8%);
•
Internal Rate of Return (“IRR”) increased 37% to 28.8% (post tax);
• Total Capital Cost: $482.6M;
• Annual production of Battery Grade Lithium Hydroxide: 25,267 tonnes;
• Studies are based on only 9.3% of reported Indicated Mineral Resource and a mine life of 21 years processing an
average of 1.68 Mtpa ore; and
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
PROJECT REVIEW
• The process used to produce lithium hydroxide allows for the staging of lithium carbonate and then lithium
hydroxide production to minimize capital and startup risk and enables the production of either battery grade lithium
hydroxide or carbonate as markets demand.
Drill Programme
The Company conducted further drilling during the year following the granting of permits for both geotechnical and Definitive
Feasibility Study (“DFS”) level drilling as announced in September 2018.
Geotechnical drilling began in that month focused on confirming the location of the portal and decline for the planned
underground operations. Resource drilling for the DFS began in November 2018 and the Company subsequently released
the results of this drilling. The highlights of the drill programme were:
• Hole CIS-11 returned 129.3m averaging 0.51% Li2O, incl. 2m @ 0.93% Li2O, 2m @0.93% Li2O; 5m @ 0.56% Sn and
0.11% W, 5m @ 0.21% Sn, and 7m @ 0.11% Sn;
• Hole CIS-13 returned 108m averaging 0.45% Li2O and 0.11% Sn, incl. 4m @ 0.99% Li2O; 6m @ 0.29% Sn, 5m @ 0.34%
Sn, 3m @ 0.77% Sn and 0.12% W, and 2m @ 1.03% Sn, incl. 1m @ 1.92% Sn;
• Hole CIS-10 returned 89m averaging 0.47% Li2O, incl. 6m @ 1.02% Li2O and 6m @ 0.91% Li2O; 5m @ 0.26% Sn, 5m
@ 0.14% Sn, and 7m @ 0.077% W;
• Hole CIS-12 returned 93m averaging 0.48% Li2O, incl. 2m @ 1.32% Li2O, 2.4m @ 1.17% Li2O and 3m @ 1.08% Li2O;
8m @ 0.83% Li2O and 0.18% Sn, 4m @ 0.13% Sn, and 5m @ 0.16% W; and
• Hole CIS-14 returned 67m averaging 0.43% Li2O (incl. 3m @ 0.99% Li2O and 0.18% Sn); 8m @ 0.67% Li2O and 0.20%
Sn (incl. 4.15m @ 1.00% Li2O and 0.35% Sn); 8m @ 0.21% Sn, 4m @ 0.39% Sn; and 3m @ 0.20% Sn.
Developments Post 30 June 2019
On 16 July 2019 the Company was very pleased to announce a potential strategic partnership with CEZ Group (CEZ), one of
Central and Eastern Europe’s largest power utilities. CEZ is currently conducting due diligence on the Company and Project.
The successful outcome of the due diligence process could see CEZ become the largest shareholder and co-development
partner for the Cinovec Lithium/Tin Project.
Progress of Mining Licence
On 5 August 2019 the Company announced the granting of an extension of the Cinovec Exploration Licence that was due to
expire in July 2019. The licence has now been extended until 31 December 2020. Exploration licence covers the two granted
Preliminary Mining Permits (PMP) that convey the sole and exclusive rights upon the Company to apply for a Final Mining
Permit.
Corporate
The Company announced in November 2018 that it had raised gross proceeds of £1,035,500 (~$1.82 M) via a share placing to
Australian and UK investors to advance the Company’s corporate strategy including:
•
•
•
•
•
To progress drilling programme and upgrade the resource model to include measured resources and facilitate an
estimation of proven reserves;
Begin the engineering process for a Definitive Feasibility Study;
Progress Environmental Impact Assessments for mining and processing;
Operate a pilot plant for production of samples for marketing; and
Progress discussions with potential strategic partners.
Corporate – Post Period
The successful capital raising of £750,000 via a share placing to UK investors was completed on 30 August 2019 to further this
strategy.
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
PROJECT REVIEW
Mineral Resource and Ore Reserve Statement
Based upon the Preliminary Feasibility Study undertaken for the Cinovec Project, the Company declares a maiden Probable
Ore Reserve of 34.5 Mt @ 0.65% Li2O, as detailed below. The Probable Reserves have been declared solely from the Indicated
Mineral Resource category and are classified based on a PFS level of study and category of Mineral Resource.
Category
Proven Ore Reserves
Probable Ore Reserves
CINOVEC ORE RESERVES SUMMARY
Tonnes
(Millions)
0
34.5
Li
%
0
0.30
Li20
%
0
0.64
Sn
%
0
W
%
0
0.09
0.03
Total Ore Reserves
Notes to Reserve Table:
1. Probable Ore Reserves have been prepared by Bara International in accordance with the guidelines of the JORC Code (2012).
2. The effective date of the Probable Ore Reserve is June 2017
3. All figures are rounded to reflect the relative accuracy of the estimate
4. The operator of the project is Geomet S.R.O a wholly-owned subsidiary of EMH. Gross and Net Attributable Probable Ore Reserve are the
0.64
0.30
0.09
34.5
0.03
same.
5. Any apparent inconsistencies are due to rounding errors
The Ore Reserve is based on the Mineral Resource for the Cinovec deposit prepared by Widenbar and Associates and issued
in February 2017. The Mineral Resource is reported in the report Cinovec Resource Estimation published by Widenbar and
Associates and is reported in accordance with the JORC 2012 guidelines. The table below summarises the Mineral Resource
declared.
Indicated
Inferred
CINOVEC NOVEMBER 2017 RESOURCE
Cutoff
Tonnes
%
0.1%
0.1%
(Millions)
372.4
323.5
Li
%
0.206
0.183
Li20
%
0.44
0.39
Sn
%
0.04
0.04
W
%
0.016
0.013
Total
Notes:
1. Mineral Resources are not Reserves until they have demonstrated economic viability based on a feasibility study or prefeasibility study.
2. Mineral Resources are reported inclusive of any reserves and are prepared by Widenbar in accordance with the guidelines of the JORC Code
695.9
0.195
0.014
0.1%
0.43
0.04
(2012).
3. The effective date of the Mineral Resource is November 22, 2017.
4. All figures are rounded to reflect the relative accuracy of the estimate.
5. The operator of the project is Geomet s.r.o., a wholly-owned subsidiary of EMH. Gross and Net Attributable resources are the same.
6. Any apparent inconsistencies are due to rounding errors.
7. LCE is Lithium Carbonate Equivalent and is equivalent to Li2CO3
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
PROJECT REVIEW
COMPETENT PERSON
Information that relates to exploration results is based on information compiled by Dr Pavel Reichl. Dr Reichl is a Certified
Professional Geologist (certified by the American Institute of Professional Geologists), a member of the American Institute of
Professional Geologists, a Fellow of the Society of Economic Geologists and is a Competent Person as defined in the 2012
edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and a Qualified
Person for the purposes of the AIM Guidance Note on Mining and Oil & Gas Companies dated June 2009. Dr Reichl consents
to the inclusion in the release of the matters based on his information in the form and context in which it appears. Dr Reichl
holds CDIs in European Metals.
The information in this release that relates to Mineral Reserves is based on, and fairly represents, information and supporting
documentation prepared by Mr Jim Pooley. Mr Pooley, who is a Fellow of the Southern African Institute of Mining and
Metallurgy, is a full-time employee of Bara International Ltd and produced the estimate based on the Mineral Resource
supplied by European Metals. Mr Pooley has sufficient experience that is relevant to the style of mineralisation and type of
deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the JORC
Code 2012 Edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves. Mr
Pooley consents to the inclusion in this report of the matters based on his information in the form and context that the
information appears.
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
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 2019.
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
Non-Executive Chairman
Appointed 6 March 2014
Mr Keith Coughlan
Managing Director
Appointed 6 September 2013
Mr Richard Pavlik
Executive Director
Appointed 27 June 2017
Mr Kiran Morzaria
Non-Executive Director
Appointed 10 December 2015
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 an Affiliated Member of the Governance
Institute of Australia. Julia is a Corporate Governance professional, having worked in corporate administration and
compliance for the past 12 years. She has been involved in business acquisitions, mergers, initial public offerings, capital
raisings as well as statutory and financial reporting. Julia is also Company Secretary of Calidus Resources Limited (ASX: CAI)
Ragnar Metals Limited (ASX: RAG), Doriemus Plc (Joint) (ASX: DOR) and Metminco Limited (Joint) (ASX: MNC) and a number
of non-listed companies. Julia has held non-executive director rules for a number of ASX listed companies.
Principal Activities
The Company is primarily involved in the development of a lithium and tin project in the Czech Republic.
Review of Operations
The 2019 Financial Year has been one of significant growth and development for the Company. For further information refer
to the Project Review section of this report.
Results of Operations
The consolidated loss for year ended 30 June 2019 amounted to $3,252,815 (2018 loss: $4,655,209).
Financial Position
The net assets of the Group have increased by $59,967 to $12,459,065 at 30 June 2019.
Significant Changes in the State of Affairs
The successful capital raising of £750,000 via a share placing (Placing) to UK investors was completed on 30 August 2019. The
net proceeds of the Placing will be used to continue to advance EMH’s corporate strategy including to progress the
development of the Cinovec Project and the progress discussions with CEZ Group and potential off take partners.
Dividends Paid or Recommended
No dividends were declared or paid during the year and the Directors do not recommend the payment of a dividend.
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
Information on Directors
David Reeves
Qualifications
Experience
Non-Executive Chairman – Appointed 6 March 2014
Mining Engineer
Mr Reeves is a qualified mining engineer with 30 years’ experience globally. 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.
Interest in CDIs and Options
Mr Reeves has 300,000 CDIs direct interest and 3,720,244 CDI indirect interest held
by Eleanor Jean Reeves , Mr Reeves’ spouse.
1,000,000 Options, 16.6 cents, expire 17 August 2020
542,651 Class A Performance Shares
542,651 Class B Performance Shares
Special Responsibilities
Member of all the Committees
Directorships held
listed entities
in other
Director of Keras Resources Plc (AIM)
Managing Director of Calidus Resources Limited (ASX)
Keith Coughlan
Qualifications
Experience
Interest in CDIs and Options
Managing Director (CEO) – Appointed 6 September 2013
BA
Mr Coughlan has almost 30 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.
Mr Coughlan has 850,000 CDIs direct interest and 8,500,000 indirect interest held
by Inswinger Holdings Pty Ltd, an entity of which Mr Coughlan is a director and a
shareholder.
2,000,000 Options, 16.6 cents, expire 17 August 2020
Special Responsibilities
Member of Audit and Risk Committee
Directorships held
listed entities
Member of Nomination Committee
in other
Non-Executive Chairman of Doriemus plc
Non-Executive Director of Calidus Resources Limited
Non-Executive Director of Southern Hemisphere Mining Limited
Mr Coughlan previously held the position of Non-Executive Chairman of Talga
Resources Limited from 17 September 2013 to 8 February 2017.
9
Richard Pavlik
Qualifications
Experience
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
Executive Director – Appointed 27 June 2017
Masters Degree in Mining Engineer
Mr Pavlik is the General Manager of Geomet sro, the Company’s wholly owned
Czech subsidiary, and is a highly experienced Czech mining executive. Mr Pavlik
holds a Masters Degree in Mining Engineer from the Technical University of Ostrava
in Czech Republic. He is the former Chief Project Manager and Advisor to the Chief
Executive Officer at OKD. OKD has been a major coal producer in the Czech Republic.
He has almost 30 years of relevant industry experience in the Czech Republic. Mr
Pavlik also has experience as a Project Analyst at Normandy Capital in Sydney as part
of a postgraduate program from Swinburne University. Mr Pavlik has held previous
senior positions within OKD and New World Resources as Chief Engineer, and as
Head of Surveying and Geology. He has also served as the Head of the Supervisory
Board of NWR Karbonia, a Polish subsidiary of New World Resources (UK) Limited.
He has an intimate knowledge of mining in the Czech Republic.
Interest in CDIs and Options
300,000 CDIs
400,000 Options, 58 cents, expire 3 January 2020
Special Responsibilities
Directorships held
listed entities
in other
Nil
Nil
Kiran Morzaria
Qualifications
Experience
Interest in CDIs and Options
Non-Executive Director – Appointed 10 December 2015
Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines
and an MBA (Finance) from CASS Business School
Mr Morzaria has extensive experience in the mineral resource industry working in
both operational and management roles. He spent the first four years of his career
in exploration, mining and civil engineering before obtaining his MBA. Mr Morzaria
has served as a director of a number of public companies in both an executive and
non-executive capacity.
Mr Morzaria has 200,000 direct interest in CDIs. Mr Morzaria is a director and chief
executive of Cadence Minerals Plc which owns 27,896,470 CDIs. Mr Morzaria has
no control on the acquisition or sale of the shares held by Cadence Minerals plc
Special Responsibilities
Member of Audit and Risk Committee
Member of Remuneration Committee
Directorships held
listed entities
in other
Chief Executive Officer and Director of Cadence Minerals plc and Director of UK Oil
& Gas plc. Mr Morzaria was previously a Director of Bacanora Minerals plc.
Director Meetings
The number of Directors’ meetings and meetings of Committees of Directors held during the year and the number of meetings
attended by each of the Directors of the Company during the year is:
Name
David Reeves
Keith Coughlan
Richard Pavlik
Kiran Morzaria
Directors’ Meetings
Number attended
Number eligible to attend
5
5
5
5
5
5
5
5
10
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
Indemnifying officers or auditor
During or since the end of the financial year 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.
iii.
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.
No indemnity has been paid to auditors.
CDIs under option
Unissued CDIs of European Metals Holdings Limited under option and warrant at the date of this report is as follows:
Expiry date
Exercise Price
Number under option
17 August 2020
3 January 2020
1 January 2021
1 June 2021
22 November 2021
16.6 cents
58.0 cents
35.0 cents
40.18 cents
31.5 cents
3,750,000
400,000
200,000
100,000
116,875
During and since the end of the reporting year, the following options and warrants were issued:
On the 22 November 2018, 116,875 warrants were granted to brokers as a cost of capital raising. The warrants have an
exercise of 20 pence (31.5 cents) in line with the capital raise on the 20 November 2018.
On 19 July 2019, the Company issued 200,000 options exercisable at $0.35 on or before 1 January 2021 and 100,000 options
exercisable at $0.4018 on or before 1 June 2021 to independent consultants in accordance with their consultancy
agreements.
No person entitled to exercise the option or warrant has or has any right by virtue of the option or warrant to participate in
any share issue of any other body corporate. No options or warrants were exercised during the year or to the date of this
report (2018: nil).
Performance Shares
Performance shares on issue at the date of this report is as follows:
Issue date
Expiry date
Number on issue
A Class
B Class
18 Dec 2018
18 Dec 2021
24 Nov 2016
24 Nov 2019
5,000,000
5,000,000
As at the date of this report, 5,000,000 A Class and 5,000,000 B Class Performance Shares were issued to the original vendors
of the Cinovec Project. During the financial year, it had become apparent that the B Class Performance Shares approved at
the 2016 AGM only represented half the value contemplated by the Original Performance Shares, as a result of the conversion
mechanism provided for under the B Class Terms. As an incentive to the vendors, the company issued 5,000,000 A Class
Performance Shares on the same terms and conditions as the B Class Performance shares. Refer Note 14(d) for details.
11
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
CDIs Issued Under Employee Securities Incentive Plan (ESIP)
CDIs issued under ESIP as at the date of this report is as follows:
Number on issue
Issue date
1,650,000
1,500,000
14 Dec 2017
6 Jun 2018
During the financial year, no CDIs were issued under ESIP.
Environmental Regulations
The Group’s operations are subject to the environmental risks inherent in the mining industry.
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.
Significant events after the reporting date
•
•
•
•
•
On 16 July 2019 the Company was very pleased to announce a potential strategic partnership with CEZ Group (CEZ),
one of Central and Eastern Europe’s largest power utilities. CEZ is currently conducting due diligence on the Company
and Project. The successful outcome of the due diligence process could see CEZ become the largest shareholder and
co-development partner for the Cinovec Lithium/Tin Project.
On 19 July 2019, the Company issued 200,000 options exercisable at $0.35 on or before 1 January 2021 and 100,000
options exercisable at $0.4018 on or before 1 June 2021 to independent consultants in accordance with their
consultancy agreements.
On 5 August 2019, the Company announced it has been granted an extension to the Cinovec Exploration Licence.
On 14 August 2019, the Company completed a share placement issuing 4,166,666 new fully paid ordinary shares raising
GBP 750,000 to existing investors.
The successful capital raising of £750,000 via a share placing (Placing) to UK investors was completed on 30 August
2019. The net proceeds of the Placing will be used to continue to advance EMH’s corporate strategy including to
progress the development of the Cinovec Project and the progress discussions with CEC Group and potential off take
partners.
Except for the matters noted above there have been no other significant events arising after the reporting date.
Auditor’s Independence Declaration
The auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found on page 22 of
the financial report.
12
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
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 Group 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 Group 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 Group,
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
Group 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 Group’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 Group 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
Group. 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, options
and performance shares 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 2019 are set out in the following tables:
The maximum amount of remuneration for non-executive directors is $300,000 as approved by shareholders.
During the financial period, the Company did not engage any remuneration consultants.
13
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
2019
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
and leave
Profit
share and
bonuses
Non-
monetary
Other1
Super-
annuation
Other
Equity 2 Options 3
Directors
$
$
$
-
$
-
$
$
-
- 34,571
26,084
-
-
-
-
-
-
-
3,810
- 38,381
-
-
1,610
17,779
45,473
$
86,824
-
-
-
-
260,148
$
$
-
-
-
122,824
300,655
24,000
71%
-
-
59,117
224,995
26%
-
-
19,841
465,070
-
56%
346,972
59,117 1,157,385
-
-
-
-
-
-
-
-
-
-
-
-
-
-
David Reeves
36,000
Keith Coughlan
240,000
Kiran Morzaria
24,000
Richard Pavlik
165,878
Key Management
Personnel
James Carter(i)
18,231
Neil Meadows(ii)
183,333
667,442
Notes:
(i) Resigned 21 Sept 2018.
(ii) Resigned 10 June 2019.
2018
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
and leave
Profit
share and
bonuses
Non-
monetary
Other 1
Super-
annuation
Other
Equity 2 Options 3
Directors
$
$
$
$
$
$
$
$
$
David Reeves
36,000
Keith Coughlan
240,000
Kiran Morzaria
24,000
Richard Pavlik
159,542
Key Management
Personnel
James Carter
Neil Meadows
30,125
76,083
565,750
-
-
-
-
-
-
-
- 17,000
-
-
-
-
-
-
-
22,800
-
-
- 19,833
-
-
2,862
7,228
-
-
-
-
-
-
209,028
592,245
139,352
-
-
-
262,028
855,045
163,352
209,028
58,388
426,958
-
6,228
-
-
52,820
89,539
- 36,833
32,890
- 1,155,881
58,388 1,849,742
80%
69%
85%
63%
-
17%
1. During the year ended 30 June 2019, Mr Coughlan and Mr Meadows received payouts of $34,571 and $3,810, respectively, representing unused annual
leave.
In the prior period, consulting services of Company Non-Executive Director (David Reeves) and the Company which he controls, Wilgus Investments Pty Ltd.
The amounts billed related to this consulting service amounted to nil (2018: $17,000) based on normal market rates and the amount outstanding at reporting
date was nil (2018: nil).
In the prior period, consulting services of Mr Carter and the Company which he controls Stillwater Resources Group Pty Ltd (Stillwater) to provide Chief
Financial Officer services to the Company. The amounts billed related to his consulting service amounted to $nil (2018: $19,833) based on normal market
rates and the amount outstanding at reporting date was nil (2018: nil)
2. Loan CDIs are treated similar to options and value is an estimate calculated using an appropriate mathematical formula based on Black-Scholes option pricing
model. The amount disclosed as part of remuneration for the financial year is the amount expensed over the vesting period.
3. The value of the options granted to key management personnel as part of their remuneration is calculated as at the grant date using the Black and Scholes.
The amount disclosed as part of remuneration for the financial year is the amount expensed over the vesting period.
14
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
C. Service Agreements
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, Managing Director, to receive a salary of $240,000 per annum plus SGC of 9.5% from 1 April 2017.
Mr James Carter, Chief Financial Officer, to receive a salary of $72,300 per annum plus SGC of 9.5% from 1 February 2018.
(Resigned 21 September 2018).
Mr Neil Meadows, Chief Operating Officer, to receive a salary of $220,000 per annum plus SGC of 9.5% from 20 February
2018. (Resigned 10 June 2019)
D. Share-based compensation
During the financial year, nil CDIs were issued to KMP under the Employee Securities Incentive Plan (ESIP) (2018: 3,050,000).
CDIs on issue to KMP under the ESIP are as follows:
30 June 2019
Loan CDIs Grant Details
Exercised
Lapsed/Cancelled
Balance at End of Year
Grant Date
No.
Value
No.
Value
No.
Value
No.
No.
Value
$
$
$
Vested Not Vested
$
Group KMP
David Reeves
Keith Coughlan
Richard Pavlik
Kiran Morzaria
30 Nov 2017
300,000
209,028
30 Nov 2017
850,000
592,245
30 Nov 2017
300,000
209,028
30 Nov 2017
200,000
139,352
James Carter(i, iii)
Neil Meadows(ii, iv)
6 June 2018
400,000
106,550
6 June 2018
1,000,000
266,376
3,050,000 1,522,579
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
850,000
300,000
200,000
-
-
-
-
209,028
592,245
209,028
139,352
-
400,000
106,550
1,000,000
-
266,376
2,650,000
400,000
1,522,579
30 June 2018
Loan CDIs Grant Details
Exercised
Lapsed
Balance at End of Year
Grant Date
No.
Value
No.
Value
No.
Value
No
No.
Value
$
$
$
Vested
Not Vested
$
Group KMP
David Reeves
Keith Coughlan
Richard Pavlik
Kiran Morzaria
James Carter
Neil Meadows
30 Nov 2017
300,000
209,028
30 Nov 2017
850,000
592,245
30 Nov 2017
300,000
209,028
30 Nov 2017
200,000
139,352
6 June 2018
400,000
106,550
6 June 2018
1,000,000
266,376
3,050,000
1,522,579
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
850,000
300,000
200,000
-
-
-
-
209,028
592,245
209,028
139,352
-
-
400,000
106,550
1,000,000
266,376
- 1,650,000
1,400,000 1,522,579
Notes:
(i)
(ii)
(iii)
(iv)
Resigned 21 Sept 2018.
Resigned 10 June 2019.
At 30 June 2019, the Board was in the process of cancelling Mr Carter’s CDIs .
At 30 June 2019, the Board agreed to not cancel Mr Meadows CDIs upon his resignation and they had fully vested.
15
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
Employee Securities Incentive Plan
Key quality employees of European Metals were issued 3,050,000 CDIs under the Employee Securities Incentive Plan in the
year ended 30 June 2018. The terms of the employee securities were as follows:
•
•
•
•
•
$0.725 per CDI for 1,650,000 CDIs
$0.4848 per share for 1,400,000 CDIs
Employee securities had the following issue price:
o
o
The employee must remain employed by a member of the Group for one year after the date the employee
securities are issued
1,650,000 of the employee securities are held in a voluntary holding lock for a period of 12 months from the
date of issue, until 14 December 2018
1,400,000 of the employee securities are held in a voluntary holding lock until 26 February 2019
An interest free loan for the full amount to purchase the employee securities will be made available to the
employee. The terms of the loan were as follows:
o
The Company agrees to lend the amount equal to the issue price multiplied by the number of employee
securities
The employee can repay the balance outstanding on the loan at any time
The loan is interest free
The outstanding amount of the loan will become payable on the earliest of:
The repayment date for 1,650,000 CDIs - 15 years after the date of loan advance
The repayment date for 1,400,000 CDIs – 7 years after the date of loan advice
The employee securities being sold
The employee becoming insolvent
The employee ceasing to be an employee
The employee securities being acquired by a third party by way of an amalgamation, arrangement or
formal takeover bid
o
o
o
o
The employee may not repay the balance outstanding on the loan in respect of the employee securities
which are in voluntary holding lock.
E. Options issued as part of remuneration for the year ended 30 June 2019
No options were issued as part of the remuneration for the year ended 30 June 2019 (2018: nil).
F. Options on issue as part of remuneration
30 June 2019
Options Grant Details
Exercised
Lapsed
Balance at End of Year
Grant Date
No.
Value 1
No.
Value
No.
Value
No.
Value
$
$
$
$
Group KMP
David Reeves
Keith Coughlan
-
-
-
-
-
-
Richard Pavlik
3 January 2017
400,000
177,352
Kiran Morzaria
James Carter(i)
Neil Meadows(ii)
-
-
-
(i)
(ii)
Resigned 21 September 2018
Resigned 10 June 2019
-
-
-
-
-
-
400,000
177,352
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400,000
177,352
-
-
-
-
-
-
400,000
177,352
Notes:
1. The value of the options granted to key management personnel as part of their remuneration is calculated as at the grant date using the Black
and Scholes. 250,000 of the options issued will vest at completion of the Definitive Feasibility Study and the balance will vest 12 months
thereafter. The value of the options have been prorated over the vesting period, therefore, the value has been included in Section B of the
remuneration report as at 30 June 2019.
16
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
G. 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.
H. Loans to Directors and Key Management Personnel
Apart from Loan CDIs issued to Directors and Key Management Personnel during the year ended 30 June 2018, there were
no other loans to Key Management Personnel during the financial year. The deemed value of the Loan on issue to directors
was $1,198,250 based on an issue price of $0.725 per Loan CDI and the deemed value of the loans issued to other key
management personnel was $678,720 based on the issue price of $0.4848 per Loan CDI.
I. 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.
J. Other information
Options held by Key Management Personnel
The number of options to acquire CDIs in the Company held during the 2019 and 2018 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
30 June 2019
Exercised during
the year
Other changes
during the year
Balance at the
end of the year
Vested and
exercisable
Unvested
David Reeves
1,000,000
Keith Coughlan
2,000,000
Kiran Morzaria
Richard Pavlik
James Carter(i)
Neil Meadows(ii)
-
400,000
-
-
Total
3,400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
2,000,000
2,000,000
-
400,000
-
-
-
-
-
-
-
-
-
400,000
-
-
3,400,000
3,000,000
400,000
Balance at the
start of the
year
Granted
during the
year
30 June 2018
Exercised during
the year
Other changes
during the year
Balance at the
end of the year
Vested and
exercisable
Unvested
David Reeves
1,000,000
Keith Coughlan
2,000,000
Kiran Morzaria
-
Richard Pavlik
400,000
James Carter
Neil Meadows
-
-
Total
3,400,000
Notes:
(i)
(ii)
Resigned 21 Sept 2018.
Resigned 10 June 2019.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
2,000,000
2,000,000
-
400,000
-
-
-
-
-
-
-
-
-
400,000
-
-
3,400,000
3,000,000
400,000
17
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
Chess Depositary Interests (‘CDIs’) held by Key Management Personnel
The number of ordinary CDIs held in the Company during the 2019 and 2018 reporting period held by each of the Key
Management Personnel of the Group; including their related parties are set out below.
The CDIs held directly have been obtained through the Employee Securities Incentive Plan.
2019
Name
David Reeves
Indirect1
Keith Coughlan
Indirect2
Kiran Morzaria
Indirect3
Richard Pavlik
James Carter(i)
Neil Meadows(ii)
Total
2018
Name
David Reeves
Indirect
Keith Coughlan
Indirect
Kiran Morzaria
Indirect 2
Richard Pavlik
James Carter
Neil Meadows
Total
Balance at
Start of year
Granted as
remuneration
during the year 1
Issued on
exercise of
options
Other
Changes
during the
year
300,000
3,720,244
850,000
8,500,000
200,000
27,846,470
300,000
400,000
1,000,000
43,116,714
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
end of year
300,000
3,720,244
850,000
8,500,000
200,000
-
-
-
-
-
50,000
27,896,470
-
-
-
300,000
400,000
1,000,000
50,000
43,166,714
Notes:
1. Mr Reeves has 300,000 CDIs direct interest and 3,720,244 CDI indirect interest held by Eleanor Jean Reeves , Mr Reeves’
spouse.
2. Mr Coughlan has 850,000 CDIs direct interest and 8,500,000 indirect interest held by Inswinger Holdings Pty Ltd, an entity of which Mr
Coughlan is a director and a shareholder.
3. Mr Morzaria has 27,846,470 indirect interest held by Cadence Minerals Plc, an entity of which Mr Morzaria is a director and chief
executive.
Resigned 21 September 2018. The balance at end of year represents balance at date of resignation.
Resigned 10 June 2019. The balance at end of year represents balance at date of resignation.
(i)
(ii)
Balance at
Start of year
Granted as
remuneration
during the year 1
Issued on
exercise of
options
Other
Changes
during the
year
-
300,000
3,720,244
-
-
850,000
8,500,000
-
-
200,000
26,860,756
-
-
-
39,081,000
-
300,000
400,000
1,000,000
3,050,000
-
-
-
-
-
-
-
-
-
-
Balance at
end of year
300,000
3,720,244
850,000
8,500,000
200,000
-
-
-
-
-
985,714
27,846,470
-
-
-
300,000
400,000
1,000,000
985,714
43,116,714
Issue of Loan CDIs through the Employee Securities Incentive Plan.
Notes:
1.
2. Mr Morzaria is a director and chief executive of Cadence Minerals Plc. On 24 November 2016, Cadence Minerals Plc acquired a further
5,000,000 CDIs as part of a CDI placement to raise $2,600,000. On 17 October 2016, Cadence Minerals Plc exercised 2,000,000 listed
options at 20 cents. On 20 December 2017, Cadence Minerals Plc acquired a further 985,714 CDIs as part of a CDI placement to raise
approximately $4,000,000.
18
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
Performance Shares granted to Key Management Personnel
The number of Performance shares held in the Company during the 2019 reporting period held by each of the Key
Management Personnel of the Group:
30 June 2019
Grant Details
Exercised
Lapsed/cancelled Balance at End of Year
Grant Date
No.
Value
No.
Value
No.
Value
No.
Value
$
$
$
Unvested
$
Group KMP
David Reeves
David Reeves
Keith Coughlan
Richard Pavlik
Kiran Morzaria
James Carter(i)
Neil Meadows(ii)
A Class 18 Dec 2018
542,651
86,824
B Class 24 Nov 2016
542,651
289,932
-
-
-
-
-
-
-
-
-
B Class 24 Nov 2016
514,650
274,971
-
-
-
1,599,952
651,727
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
542,651
86,824
542,651
289,932
-
-
-
-
-
-
514,650
274,971
-
-
- 1,599,952
651,727
(i)
(ii)
Resigned 21 September 2018. The balance at end of year represents balance at date of resignation.
Resigned 10 June 2019
30 June 2018
Grant Details
Exercised
Lapsed
Balance at End of Year
Grant Date
No.
Value
No.
Value
No.
Value
No.
Value
$
$
$
Unvested
$
Group KMP
David Reeves
Keith Coughlan
Richard Pavlik
Kiran Morzaria
James Carter
Neil Meadows
24 Nov 2016
542,651
289,932
-
-
-
-
-
-
-
-
-
24 Nov 2016
514,650
274,971
-
-
-
1,057,301
564,903
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
542,651
289,932
-
-
-
-
-
-
514,650
274,971
-
-
- 1,057,301
564,903
Description of Performance Shares
During the financial year, it had become apparent that the B Class Performance Shares approved at the 2016 AGM only
represented half the value contemplated by the Original Performance Shares, as a result of the conversion mechanism
provided for under the B Class Terms. As an incentive to the vendors the company issued 5,000,000 A Class Performance
Shares on the same terms and conditions as the B Class Performance shares.
The terms of the Performance Shares are as follows:
The 5,000,000 B Class Performance Shares and 5,000,000 A Class Performance Shares will convert in accordance with the
below:
(i)
1,000,000 B Class and 1,000,000 A Class Performance Shares will convert into Shares and an equivalent number of
CDIs upon the Company’s Mineral Resource at Cinovec South and Cinovec Main being entered in the State Balance.
The Performance Shares shall convert into the number of Shares and equivalent number of CDIs equal to 1,000,000
and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a
decimal of $1.00) as calculated over the 5 ASX trading days prior to the date the Mineral Resource is entered.
19
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
(Explanatory Note: Under Czech law a mineral resource must be registered and henceforth treated as a resource by
the Czech Government before mining licenses can be granted. A mineral resource has to be calculated according to the
Czech regulations, and defended in front of a committee of state certified experts);
1,000,000 B Class and 1,000,000 A Class Performance Shares will convert into Shares and an equivalent number of
CDIs upon the issuance of the preliminary mining licenses relating to the Cinovec Project. The Performance Shares
shall convert into the number of Shares and equivalent number of CDIs equal to 1,000,000 and divided by the greater
of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal of $1.00) as
calculated over the 5 ASX trading days prior to the date the final preliminary mining license is issued; and
3,000,000 B Class and 3,000,000 A Class Performance Shares will convert into Shares and an equivalent number of
CDIs upon the completing of a definitive feasibility study (DFS). For clarity, the DFS must be: (i) of a standard suitable
to be submitted to a financial institution as the basis for lending of funds for the development and operation of mining
activities contemplated in the study; (ii) capable of supporting a decision to mine on the Permits; and (iii) completed
to an accuracy of +/- 15% with respect to operating and capital costs and display a pre-tax net present value of not
less than US$250,000,000. The Performance Shares shall convert into the number of Shares and equivalent number
of CDIs equal to 3,000,000 and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average
price of CDIs (expressed as a decimal of $1.00) as calculated over the 5 ASX trading days prior to date of receipt of the
completed DFS,
(together the Milestones and each a Milestone). For the avoidance of doubt, the number of Shares and equivalent
number of CDIs which will be issued on conversion of the B Class Performance Shares will not exceed a ratio of 1 for
1.
If the Milestone is not achieved or the Change of Control Event does not occur by the required date, then each
Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within
10 ASX trading days of non-satisfaction of the Milestone.
(ii)
(iii)
(iv)
Other transactions with Key Management Personnel
Purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. The Group
acquired the following services from entities that are controlled by members of the Group’s KMP:
Some Directors or former Directors of the Group hold or have held positions in other companies, where it is considered they
control or significantly influence the financial or operating policies of those entities. During the year, the following entities
provided corporate services and rental to the Group. Transactions between related parties are on normal commercial terms
and conditions no more favourable than those available to other parties unless otherwise stated.
Entity
Nature of
transactions
Key
Management
Personnel
Total Transactions
Payable Balance
2019
$
2018
$
2019
$
2018
$
Wilgus Investments Pty Ltd
Rental
David Reeves
40,200
59,000
-
6,270
There were no other transactions with Key Management Personnel during the financial year.
End of Remuneration Report
Signed in accordance with a resolution of the Board of Directors.
Keith Coughlan
MANAGING DIRECTOR
Dated at 27 September 2019
20
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
27 September 2019
Board of Directors
European Metals Holdings Limited
Suite 12, Level 1
11 Ventnor Avenue
WEST PERTH WA 6005
Dear Directors
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
RE:
EUROPEAN METALS HOLDINGS LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of European Metals Holdings Limited.
As the Audit Director for the audit of the financial statements of European Metals Holdings Limited for
the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Samir R Tirodkar
Director
Liability limited by a scheme approved
under Professional Standards Legislation
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue – interest income
Other income
Professional fees
Audit fees
Directors’ fees
Share based payments
Advertising and Promotion
Employees’ benefits
Travel and accommodation
Office and rent expense
Insurance expense
Impairment expense
Share registry expense
Depreciation expense
Other expenses
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income
Note
30 June 2019
$
30 June 2018
$
6
16
1,461
424,643
1,599
645,554
(1,187,270)
(944,334)
(40,000)
(60,000)
(33,175)
(60,000)
(1,179,090)
(1,216,018)
(94,879)
(640,291)
(173,619)
(64,032)
(10,764)
(94,951)
(580,751)
(187,683)
(83,470)
(46,777)
-
(1,880,742)
(97,211)
(154,844)
(4,180)
(127,583)
(1,945)
(17,672)
(3,252,815)
(4,655,209)
3
-
-
(3,252,815)
(4,655,209)
Items that may be reclassified subsequently to profit or loss – exchange
differences on translating foreign operations
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive loss for the year attributable to members of the
Company
443,780
443,780
517,841
517,841
(2,809,035)
(4,137,368)
Basic and diluted loss per CDI (cents)
7
(2.25)
(3.43)
The above statement should be read in conjunction with the accompanying notes.
22
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019
CURRENT ASSETS
Cash and cash equivalents
Other receivables
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Exploration and evaluation expenditure
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions – employee entitlements
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
2019
$
2018
$
8
9
10
11
12
426,178
2,223,109
92,180
23,587
32,640
11,982
541,945
2,267,731
385,158
372,997
11,684,072
10,169,177
-
6,056
12,069,230
10,548,230
12,611,175
12,815,961
13a
13b
128,977
23,133
152,110
342,214
74,649
416,863
152,110
416,863
12,459,065
12,399,098
14
15
22,074,314
20,413,074
6,798,846
5,147,304
(16,414,095)
(13,161,280)
12,459,065
12,399,098
The above statement should be read in conjunction with the accompanying notes.
23
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019
Issued Capital
Share Based
Payment Reserve
Foreign Currency
Translation
Reserve
Accumulated
Losses
$
$
$
$
Total
$
Balance at 1 July 2017
15,587,656
3,087,801
325,644
(8,506,071)
10,495,030
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
4,825,418
-
-
-
-
Equity based payments
CDI’s issued pursuant to loan plan
-
-
58,386
1,157,632
-
(4,655,209)
(4,655,209)
517,841
-
517,841
517,841
(4,655,209)
(4,137,368)
-
-
-
-
-
-
4,825,418
58,386
1,157,632
Balance at 30 June 2018
20,413,074
4,303,819
843,485
(13,161,280)
12,399,098
Balance at 1 July 2018
20,413,074
4,303,819
843,485
(13,161,280)
12,399,098
Loss attributable to members of the
Company
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners, recognised
directly in equity
-
-
-
-
-
-
-
(3,252,815)
(3,252,815)
443,780
-
443,780
443,780
(3,252,815)
(2,809,035)
CDIs issued during the year, net of costs
1,661,240
28,672
-
1,179,090
-
-
-
-
1,689,912
1,179,090
Equity based payments
Balance at 30 June 2019
22,074,314
5,511,681
1,287,265
(16,414,095)
12,459,065
The above statement should be read in conjunction with the accompanying notes.
24
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
R&D Rebate
Note
30 June 2019
$
30 June 2018
$
(2,714,709)
(1,658,465)
1,461
355,745
1,599
820,647
Net cash (used in) operating activities
17
(2,357,503)
(836,219)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation expenditure
Payments for property, plant and equipment
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of CDIs
Proceeds from related party
Repayment of related party
Capital raising costs paid
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Change in foreign currency held
Cash and cash equivalents at the end of financial year
(1,165,022)
(2,190,590)
-
(4,436)
(1,165,022)
(2,195,026)
1,817,303
5,018,667
-
-
(127,391)
200,000
(200,000)
(212,674)
1,689,912
4,805,993
(1,832,613)
1,774,748
2,223,109
35,682
446,112
2,249
426,178
2,223,109
The above statement should be read in conjunction with the accompanying notes.
25
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT 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 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)
Accounting policies
The Group has consistently applied the following accounting policies to all periods presented in the financial statements.
The Group has considered the implications of new and amended Accounting Standards applicable for annual reporting
periods beginning after 1 January 2018 but determined that their application to the financial statements is either not
relevant or not material.
(ii)
Statement of Compliance
The financial report was authorised for issue on 27 September 2019.
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)
Going Concern
The directors have prepared the financial statements on going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and extinguishment of liabilities in the ordinary course of business.
At 30 June 2019, the consolidated entity comprising the Company and its subsidiaries has incurred a loss for the year
amounting to $3,252,815. The Consolidated entity has a net working capital of $389,835, current liabilities of $152,110 and
cash and cash equivalents of $426,178.
The directors consider these funds, combined with the convertible loan arrangement entered into with CEZ Group and the
additional funds from any capital raising to be sufficient for planned expenditure on the mineral project for the ensuing 12
months as well as for corporate and administrative overhead costs.
The Company currently has no intention of drawing down the convertible loan, and the option to do so lies entirely with
the Company. Although the decision to convert the convertible loan would stay with the lender, the directors believe that
the convertible loan will be converted, not requiring the return of the funds received. The directors will review this
assessment closer to the maturity date of the loan, should the loan be drawn down.
The directors also believe that they have the capacity to raise additional capital should that become necessary.
For these reasons, the directors believe the going concern basis of preparation is appropriate.
(iv)
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 estimated fair value of the
equity instruments at the date at which they are granted. These are expensed over the estimated vesting periods.
26
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(iv) Critical accounting estimates and judgements (continued)
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.
(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.
27
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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
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.
28
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
(i) Government Grants
An unconditional government grant is recognised in profit or loss as other income when the grant becomes receivable.
Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic
basis in the same period in which the expenses are recognised.
Research and development tax incentives are recognised in the statement of profit or loss when received or when the
amount to be received can be reliably estimated.
(j)
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.
29
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) 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:
The expenditures are expected to be recouped through successful development and exploitation of the area of interest, or
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:
Sufficient data exists to determine technical feasibility and commercial viability, and
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.
(l)
Financial Instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument. Financial instruments (except for trade receivables) are measured initially at fair value adjusted by
transaction costs, except for those carried at ‘fair value through profit or loss’, in which case transaction costs are expensed
to profit or loss. Where available, quoted prices in an active market are used to determine the fair value. In other
circumstances, valuation techniques are adopted. Subsequent measurement of financial assets and financial liabilities are
described below.
Trade receivables are initially measured at the transaction price if the receivables do not contain a significant financing
component in accordance with AASB 15.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expired.
Classification and measurement
Financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging
instruments are classified into the following categories upon initial recognition:
•
•
•
amortised cost;
fair value through other comprehensive income (FVOCI); and
fair value through profit or loss (FVPL).
Classifications are determined by both:
•
•
the contractual cash flow characteristics of the financial assets; and
the Group’s business model for managing the financial asset.
30
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet with the following conditions (and are not
designated as FVPL);
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash
flows; and
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other
receivables fall into this category of financial instruments.
Financial assets at fair value through other comprehensive income
The Group measures debt instruments at fair value through OCI if both of the following conditions are met:
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding; and
the financial asset is held within a business model with the objective of both holding to collect contractual cash flows
and selling the financial asset.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses
or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets
measured at amortised cost. The remaining fair value changes are recognised in OCI.
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments:
Presentation and are not held for trading.
Financial assets at fair value through profit or loss (FVPL)
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated
upon initial recognition at fair value through profit or loss or financial assets mandatorily required to be measured at
fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or
repurchasing in the near term.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless
the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for
derivatives and financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses
recognised in profit or loss.
All interest-related charges and, if applicable, gains and losses arising on changes in fair value are recognised in profit
or loss.
31
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment
From 1 July 2018, the Group assesses on a forward-looking basis the expected credit loss associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach
permitted by AASB, which requires expected lifetime losses to be recognised from initial recognition of the
receivables.
Comparative information
The Group has applied AASB 9 Financial Instruments retrospectively, but has elected not to restate comparative
information. As a result, the comparative information provided continues to be accounted for in accordance with the
Group’s previous accounting policy.
Classification
Until 30 June 2018, the Group classified its financial assets in the following categories:
financial assets at fair value through profit or loss;
loans and receivables;
held-to-maturity investments; and
available for sale financial assets.
The classification depended on the purpose for which the investments were acquired. Management determined the
classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-
evaluated this designation at the end of each reporting period.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
(q)
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.
32
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r)
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 expected and actual
outcomes.
Loan CDIs are treated similar to options and value is an estimate calculated using an appropriate mathematical formula
based on Black-Scholes option pricing model. The choice of models and the resultant Loan CDI value require assumptions
to be made in relation to the likelihood and timing of the vesting of the Loan CDIs and the value and volatility of the price
of the underlying shares.
(s)
Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic
environment in which that entity operates. The consolidated financial statements are presented in Australian dollars
which is the parent entity’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of
the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items
measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary
items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in Profit or Loss, except where deferred
in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-
monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in other
comprehensive income; otherwise the exchange difference is recognised in Profit or Loss.
Group companies
The financial results and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:
Assets and liabilities are translated at year end exchange rates prevailing at the end of the reporting period;
Income and expenses are translated at average exchange rates for the period; and
Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations recognised in the other comprehensive income and
included in the foreign currency translation reserve in the Statement of Financial Position. These differences are
reclassified into Profit or Loss in the period in which the operation is disposed.
(t)
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.
33
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) 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 20.
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.
34
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 3: 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% (2018: 27.5%)
Add / (Less): Non-deductible items
-Impairments
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
Accruals
Capital raising costs
Provisions
Unrecognised deferred tax asset
Set-off deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Exploration expenditure
Property, plant and equipment
Set-off deferred tax assets
Net deferred tax liabilities
Tax losses
30 June 2019
30 June 2018
$
$
-
-
-
-
-
-
-
-
-
-
-
-
(3,252,815)
(4,655,209)
(975,845)
(1,280,182)
439,967
535,878
-
Nil%
Nil
947,825
332,357
-
Nil%
Nil
1,234,662
706,261
12,750
30,574
13,123
1,291,109
(1,068)
1,290,041
4,950
-
20,529
731,740
(36,274)
695,466
-
(35,295)
(1,068)
(1,068)
1,068
-
(979)
(36,274)
36,274
-
Unused tax losses for which no deferred tax asset has been recognised
4,115,539
2,568,222
35
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 3: INCOME TAX (CONTINUED)
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 4: RELATED PARTY TRANSCTIONS
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 5), there were no other related
party transactions during the year.
NOTE 5: 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 2019 and 30 June 2018.
The totals of remuneration paid to KMP during the year are as follows:
Short-term benefits
Post-employment benefits
Equity settled
Other payments
Loans to Key Management Personnel
2019
$
667,442
45,473
2018
$
565,750
32,890
406,089
1,214,269
38,381
36,833
1,157,385
1,849,742
Apart from Loan CDIs issued to Directors and Key Management Personnel during the year ended 30 June 2018, there were no
other loans to Key Management Personnel during the financial year. The deemed value of the Loan on issue to directors was
$1,198,250 based on an issue price of $0.725 per Loan CDI and the deemed value of the loans issued to other key management
personnel was $678,720 based on the issue price of $0.4848 per Loan CDI.
Other transactions with Key Management Personnel
Purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. The Group
acquired the following services from entities that are controlled by members of the Group’s KMP:
Some Directors or former Directors of the Group hold or have held positions in other companies, where it is considered they
control or significantly influence the financial or operating policies of those entities. During the year, the following entities
provided corporate services and rental to the Group. Transactions between related parties are on normal commercial terms
and conditions no more favourable than those available to other parties unless otherwise stated.
36
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION (continued)
Entity
Nature of transactions Key
Wilgus Investments Pty
Ltd
Rental
Management
Personnel
David Reeves
Total Transactions
2018
2019
$
$
Payable Balance
2018
2019
$
$
40,200
59,000
-
6,270
There were no other transactions with Key Management Personnel during the financial year.
NOTE 6: AUDITOR’S REMUNERATION
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:
Auditor’s services
Audit and review of financial report
NOTE 7: 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
2019
$
2018
$
40,000
33,175
2019
2018
(2.25)
(3.43)
(3,252,815)
(4,655,209)
144,514,487
135,979,290
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 diluted earnings per CDI that shows an inferior view of the earnings per CDI. For this reason, the
diluted losses per CDI for the year ended 30 June 2019 are the same as basic loss per CDI.
NOTE 8: CASH AND CASH EQUIVALENTS
Cash at bank
Total cash and cash equivalents in the Statement of Cash Flows
NOTE 9: OTHER RECEIVABLES
CURRENT
GST and VAT Receivable
Other receivables
2019
$
2018
$
426,278
2,223,109
426,278
2,223,109
2019
$
2018
$
33,526
58,654
92,180
34,526
(1,886)
32,640
Current trade receivables are non-interest bearing and are normally settled on 60-day terms. This balance is current receivables
incurred on a day to day operational basis and considered unimpaired.
NOTE 10: OTHER ASSETS
Current
Prepayments
2019
$
2018
$
23,587
23,587
11,982
11,982
37
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 11: PROPERTY, PLANT AND EQUIPMENT
Land at cost
Buildings at cost
Less accumulated depreciation
Plant and equipment at cost
Less accumulated depreciation
Total Property, Plant and Equipment at cost
Less accumulated Depreciation
Total Property, Plant and Equipment
Reconciliation
Reconciliation of the carrying amounts set out below.
2019
$
2018
$
371,458
352,660
6,160
(767)
5,393
14,388
(6,081)
8,307
392,006
(6,848)
385,158
5,848
(427)
5,421
18,641
(3,725)
14,916
377,149
(4,152)
372,997
Opening Property, Plant and Equipment
372,997
349,024
Additions
Disposals
Depreciation
Foreign currency differences
Carrying amount at the end of the year
NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE
Exploration at cost
Balance at the beginning of the year
Exploration of tenements
Impairment of exploration assets
Foreign exchange movement
NOTE 13: TRADE AND OTHER PAYABLES
a) CURRENT
Trade payables
Accrued expenses and other liabilities
Payables are normally due for payment within 30 days.
b) PROVISIONS
Employee entitlements
-
-
(4,180)
16,341
385,158
5,444
(1,411)
(4,152)
24,092
372,997
2019
$
2018
$
10,169,177
9,752,757
1,086,353
1,772,258
-
(1,880,742)
428,542
524,904
11,684,072
10,169,177
2019
$
2018
$
53,763
75,214
128,977
263,409
78,805
342,214
23,133
23,133
74,649
74,649
38
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 14: ISSUED CAPITAL
(a) Issued and paid up capital
146,642,227 (30 June 2018: 141,464,727 CDIs)
Total issued capital
(b) Movements in CDIs
Balance at the beginning of the year
CDI issue under the Funding Facility Agreement @ $0.7061 per CDI
CDI issue under the Funding Facility Agreement @ $0.7327 per CDI
CDI issue under the Funding Facility Agreement @ $0.685 per CDI
CDI issued under the Funding Facility Agreement @ $0.693 per CDI
CDI issue to Directors under the Employee Securities Incentive
Plan @ $0.725 per CDI
CDI capital raising @ $0.615 per CDI
CDIs issued under the Employee Securities Incentive Plan @0.4848
per CDI
Capital raising cost
Balance at the end of the year
Balance at the beginning of the year
CDI issue under Placement @ $0.351 per CDI
Capital raising cost
Balance at the end of the year
(c) Loan CDIs Reserve
Balance at the beginning of the year
Number
$
146,642,227
22,074,314
146,642,227
22,074,314
Date
Number
$
1 July 2017
130,333,909
15,587,656
1 August 2017
10 August 2017
1 September 2017
10 October 2017
364,679
351,448
375,905
371,644
257,500
257,505
257,495
257,550
14 December 2017
20 December 2017
1,650,000
6,517,142
6 June 2018
1,500,000
-
-
4,008,042
-
(212,674)
30 June 2018
141,464,727
20,413,074
Date
Number
$
1 July 2018
141,464,727
20,413,074
27 November 2018
5,177,500
-
1,817,303
(156,063)
30 June 2019
146,642,227
22,074,314
Date
1 Jul 2017
Number
-
Unit Value $
-
Total $
Amount
Expensed
-
-
Loan CDIs Employee Securities Incentive Plan
14 Dec 2017
1,650,000
Loan CDIs Employee Securities Incentive Plan
6 Jun 2018
1,500,000
$0.69676
$0.26638
1,149,653
1,149,653
399,564
7,979
Balance at end of the year
30 June 2018
3,150,000
Balance at beginning of the year
1 July 2018
3,150,000
CDI movement during the year
-
Balance at end of the year
30 June 2019
3,150,000
-
-
-
-
-
-
-
-
1,157,632
1,157,632
285,034
1,444,666
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 of 200,000,000 no par value shares of a single class. Pursuant to the prospectus dated 26 April 2012, the Company
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.
39
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 14: ISSUED CAPITAL (continued)
(d) Movements Performance Shares
Balance at the beginning of the year
Balance at the end of the year
Balance at the beginning of the year
Issue of A Class Performance Shares
Balance at the end of the year
Date
Number
$
1 July 2017
30 June 2018
5,000,000
2,671,444
5,000,000
2,671,444
1 July 2018
18 Dec 2018
5,000,000
5,000,000
2,671,444
800,000
30 June 2019
10,000,000
3,471,444
During the financial year, it had become apparent that the B Class Performance Shares approved at the 2016 AGM only
represented half the value contemplated by the Original Performance Shares, as a result of the conversion mechanism
provided for under the B Class Terms. As an incentive to the vendors the company issued 5,000,000 A Class Performance
Shares on the same terms and conditions as the B Class Performance shares issued in the 2017 period.
The terms of the Performance Shares are as follows:
The 5,000,000 B Class Performance Shares and 5,000,000 A Class Performance Shares will convert in accordance with the
below:
(i)
1,000,000 B Class and 1,000,000 A Class Performance Shares will convert into Shares and an equivalent number of CDIs
upon the Company’s Mineral Resource at Cinovec South and Cinovec Main being entered in the State Balance. The
Performance Shares shall convert into the number of Shares and equivalent number of CDIs equal to 1,000,000 and
divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal
of $1.00) as calculated over the 5 ASX trading days prior to the date the Mineral Resource is entered. (Explanatory
Note: Under Czech law a mineral resource must be registered and henceforth treated as a resource by the Czech
Government before mining licenses can be granted. A mineral resource has to be calculated according to the Czech
regulations, and defended in front of a committee of state certified experts);
1,000,000 B Class and 1,000,000 A Class Performance Shares will convert into Shares and an equivalent number of CDIs
upon the issuance of the preliminary mining licenses relating to the Cinovec Project. The Performance Shares shall
convert into the number of Shares and equivalent number of CDIs equal to 1,000,000 and divided by the greater of:
(A) $0.50 per CDI; and (B) the volume weighted average price of CDIs (expressed as a decimal of $1.00) as calculated
over the 5 ASX trading days prior to the date the final preliminary mining license is issued; and
3,000,000 B Class and 3,000,000 A Class Performance Shares will convert into Shares and an equivalent number of CDIs
upon the completing of a definitive feasibility study (DFS). For clarity, the DFS must be: (i) of a standard suitable to be
submitted to a financial institution as the basis for lending of funds for the development and operation of mining
activities contemplated in the study; (ii) capable of supporting a decision to mine on the Permits; and (iii) completed
to an accuracy of +/- 15% with respect to operating and capital costs and display a pre-tax net present value of not less
than US$250,000,000. The Performance Shares shall convert into the number of Shares and equivalent number of CDIs
equal to 3,000,000 and divided by the greater of: (A) $0.50 per CDI; and (B) the volume weighted average price of CDIs
(expressed as a decimal of $1.00) as calculated over the 5 ASX trading days prior to date of receipt of the completed
DFS,
(together the Milestones and each a Milestone). For the avoidance of doubt, the number of Shares and equivalent
number of CDIs which will be issued on conversion of the B Class Performance Shares and A Class Performance Shares
will not exceed a ratio of 1 for 1.
If the Milestone is not achieved or the Change of Control Event does not occur by the required date, then each
Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within
10 ASX trading days of non-satisfaction of the Milestone.$2,671,444 has been attributed to the Performance Shares.
(ii)
(iii)
(iv)
During the current financial year, $800,000 was expensed in relation to the issue of the A Class Performance Shares.
(e) 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 programs 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.
40
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 14: ISSUED CAPITAL (continued)
The working capital position of the Group at 30 June is as follows:
Cash and cash equivalents
Other receivables
Trade and other payables
Employee entitlements
The Group is not subject to any externally imposed capital requirements.
NOTE 15: RESERVES
Option and Warrant Reserve
Performance Shares Reserve
CDIs Reserve
Foreign Currency Translation Reserve
Total Reserves
Option and Warrant Reserve
Balance at the beginning of the financial year
Equity based payment expense
Equity based payment as capital raising cost
Balance at the end of the financial year
2019
$
2018
$
426,178
2,223,109
92,180
32,640
(128,977)
(342,214)
(23,133)
74,649
366,248
1,988,184
2019
$
2018
$
597,470
474,743
3,471,444
2,671,444
1,442,667
1,157,632
1,287,265
843,485
6,798,846
5,147,304
2019
$
474,743
94,055
28,672
2018
$
416,357
58,386
-
597,470
474,743
The options and warrant reserve is used to recognise the fair value of all options and warrants on issue but not yet exercised.
At 30 June 2019 the following options are outstanding:
•
•
•
•
•
3,750,000 unlisted options exercisable at 16.6 cents on or before 17 August 2020 were issued to key management
personnel.
400,000 unlisted options were issued on 3 January 2017 to Richard Pavlik a director of the Company with an exercise
price of 58 cents and expiry date of 3 January 2020. 250,000 of these options will vest at the completion of the
Definitive Feasibility Study and the balance will vest 12 months thereafter.
200,000 unlisted options exercisable at 35 cents on or before 1 January 2021 were issued to key management
personnel post 30 June 2019. $23,136 has been included in the share-based expenses for the year.
100,000 unlisted options exercisable at 40.18 cents on or before 1 June 2021 were issued to key management
personnel post 30 June 2019. $11,802 has been included in share-based expenses for the year.
116,875 warrants exercisable at 20 pence (AUD 31.5 cents) on or before 22 November 2021 were granted to brokers
as a cost of capital raising.
Performance Share Reserve
The Performance Share reserve records the fair value of the Performance Shares issued.
Balance at the beginning of the financial year
Equity based payment
Balance at the end of the financial year
2019
$
2018
$
2,671,444
2,671,444
800,000
-
3,471,444
2,671,444
41
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 15: RESERVES (continued)
Loan CDIs Reserve
The CDIs reserve records the fair value of the Loan CDIs issued.
Balance at the beginning of the financial year
Loan CDIs issued to directors – equity based expense
Loan CDIs issued to employees - equity based expense
Balance at the end of the financial year
2019
$
2018
$
1,157,632
-
-
1,149,653
285,035
7,979
1,442,667
1,157,632
Employee securities incentive plan
During the year remuneration in the form of Employee Securities Incentive Plan were issued to the Directors and employees
to attract, motivate and retain such persons and to provide them with an incentive to deliver growth and value to shareholders.
The Loan CDIs represent an option arrangement. Loan CDIs vested immediately. The key terms of the Employee Share Plan
and of each limited recourse loan provided under the Plan are as follows:
i.
ii.
iii.
The total loan equal to issue price multiplied by the number of Plan CDIs applied for (“Advance”), which shall
be deemed to have been draw down at Settlement upon issued of the Loan Shares.
The Loan shall be interest free. However, if the advance is not repaid on or before the Repayment date, the
Advance will accrue interest at the rate disclosed in the Plan from the Business Day after the Repayment Date
until the date the Advance is repaid in full.
All or part of the loan may be repaid prior to the Advance repayment Date.
Repayment date
iv.
v.
Notwithstanding paragraph iii. above, (“the borrower”) may repay all or part of the Advance at any time before
the repayment date i.e. The repayment date for 1,650,000 Director CDIs - 15 years after the date of loan advance
and the repayment date for 1,500,000 Employee CDIs – 7 years after the date of loan advice.
The Loan is repayable on the earlier of:
(a) The repayment date;
(b) The plan CDIs being sold;
(c) The borrower becoming insolvent;
(d) The borrower ceasing to be employed by the Company; and
(e) The plan CDIs being acquired by a third party by way of an amalgamation, arrangement or formal takeover
bid for not less than all the outstanding CDIs.
Loan Forgiveness
vi.
vii.
The Board may, in its sole discretion, waive the right to repayment of all or any part of the outstanding balance
of an Advance where:
(i) The borrower dies or becomes permanently disabled; or
(ii) The Board otherwise determines that such waiver is appropriate
Where the Board waives repayment of the Advance in accordance with clause 6(a), the Advance is deemed to
have been repaid in full for the purposes of the Plan in this agreement.
Sale of loan CDIs
i.
In accordance with the terms of the Plan and the Invitation, the Loan CDIs cannot be sold, transferred, assigned,
charged or otherwise encumbered with the Plan CDIs except in accordance with the Plan.
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
Movement during the year
Balance at the end of the financial year
2019
$
843,485
443,780
1,287,265
2018
$
325,644
517,841
843,485
42
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 16: SHARE BASED PAYMENT EXPENSE
No options issued as share-based payments during the current period.
The Company issued 300,000 options post 30 June 2019, which were granted during the period and 116,875 warrants were
granted during the year and are yet to be issued.
Options outstanding as at 30 June 2017
Options outstanding as at 30 June 2018
Options Outstanding as at 1 July 2018
Warrants granted during the period (i)
Options granted during the period (ii)
Options outstanding as at 30 June 2019
Number
Weighted
Average
Exercise Price
4,150,000
4,150,000
4,150,000
28,672
388,203
4,566,875
$0.206
$0.206
$0.206
$0.315
$0.264
$0.219
The following option share-based payment arrangements existed 30 June 2019 and 30 June 2018:
On 17 August 2015 3,750,000 options with an exercise price of 16.6 cents and exercisable on or before 17 August 2020 were granted
to directors. These remain outstanding as at 30 June 2019 and 30 June 2018.
On 3 January 2017, 400,000 options with an exercise price of 58 cents and exercisable on or before the 3 January 2020 were granted
to a Director of the Company. 250,000 of these options will vest at the completion of the Definitive Feasibility Study and the balance
will vest 12 months thereafter. The options were valued under the Black and Scholes at $177,352. The value of the options has been
pro-rated over the vesting period. A fair value adjustment of $59,117 (2018: 58,386) was recognised as a share based payment in the
profit and loss in 2019.
(i) Warrants granted but not yet issued
On the 22 November 2018, 116,875 warrants were granted to brokers as a cost of capital raising. The warrants have an exercise
of 20 pence (31.5 cents) in line with the capital raise on the 20 November 2018. Warrants are exercisable on or before 22
November 2021. The warrants were valued under the Black and Scholes at $28,672 with the share based payment recognised as
a capital raising cost. The key inputs to the models used were as follows.
3 Years
$0.39
$0.315
3 Years
$0.27
$0.35
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
22 November 2018
Expected life of warrants (years)
Nil
Underlying share price ($)
91.27%
2.115%
Warrant exercise price ($)
Value of warrant ($)
$0.24532
(ii) Options granted but not yet issued
On 12 July 2019, 200,000 unlisted options exercisable at 35 cents on or before 1 January 2021 were issued to a consultant post
30 June 2019. The options were valued under the Black and Scholes at $23,136 with the share based payment recognised in the
Statement of Profit or Loss in 2019. The key inputs to the models used were as follows.
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
1 January 2019
Expected life of options (years)
Nil
Underlying share price ($)
Option exercise price ($)
92.16%
1.85%
Value of option ($)
$0.11568
On 12 July 2019, 100,000 unlisted options exercisable at 40.18 cents on or before 1 June 2021 were issued to a consultant post
30 June 2019. The options were valued under the Black and Scholes at $11,802 with the share based payment recognised in the
Statement of Profit or Loss in 2019. The key inputs to the models used were as follows.
Grant date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
1 January 2019
Expected life of options (years)
Nil
Underlying share price ($)
92.16%
1.01%
Option exercise price ($)
Value of option ($)
3 Years
$0.27
$0.4018
$0.11802
43
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 16: SHARE BASED PAYMENT EXPENSE (continued)
The following performance share-based payment arrangements existed at 30 June 2019 and 30 June 2018:
Instruments granted are as follows:
Performance Shares granted are as follows:
2019
2018
Grant Date
Number
$
Number
$
B Class - 18 November 2016 (related parties)
1,057,301
564,903
1,057,301
564,903
B Class - 18 November 2016 (non-related parties)
3,942,699
2,106,541
3,942,699
2,106,541
A Class- 18 December 2018 (related parties)
A Class- 18 December 2018 (non-related parties)
1,057,301
3,942,699
169,168
630,832
-
-
-
-
10,000,000
3,471,444
5,000,000
2,671,444
$800,000 has been attributed to the Performance Shares in the current reporting period (2018: $2,671,444).
Fair value of Loan CDIs in existence at 30 June 2019 and 30 June 2018
The fair value of Loan CDIs granted have been valued using a Black Scholes Methodology, taking into account the terms and
conditions upon which the Loan CDIs were granted. The exercise price of the Loan CDI’s is equal to the market price of the
underlying shares being the VWAP of shares traded on the ASX over the 5 trading days immediately preceding the date of
grant.
The following Loan CDIs share-based payment arrangements existed at 30 June 2019 and 30 June 2018
Director Loan CDIs
Employee Securities Incentive Plan Loan CDIs 1
Note:
1.
These Loan CDIs are being expensed over the vesting period.
Number
1,650,000
1,500,000
Value recognised
2019
Value recognised
2018
-
1,149,653
285,035
7,979
Value to be
recognised in
future years
-
-
A summary of the inputs used in the valuation of the loan CDIs issued to directors are as follows:
Loan CDIs
Issue price
Share price at date of issue
Keith Coughlan
David Reeves
Richard Pavlik
Kiran Morzaria
$0.725
$0.70
$0.725
$0.70
$0.725
$0.70
$0.725
$0.70
Grant date
Expected volatility
Expiry date
Expected dividends
Risk free interest rate
Value per loan CDI
Number of loan CDIs
Total value
30 November 2017
30 November 2017
30 November 2017
30 November 2017
143.41%
143.41%
143.41%
143.41%
30 November 2032
30 November 2032
30 November 2032
30 November 2032
Nil
2.47%
$0.69676
850,000
$592,245
Nil
2.47%
$0.69676
300,000
$209,028
Nil
2.47%
$0.69676
300,000
$209,028
Nil
2.47%
$0.69676
200,000
$139,352
44
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 16: SHARE BASED PAYMENT EXPENSE (continued)
A summary of the inputs used in valuation of the loan CDIs issued to employees in the prior year.
Loan CDIs
Exercise price
Share price at date of issue
Tranche 1
Tranche 2 1
Tranche 3 2
Tranche 4 3
Tranche 5 4
$0.4848
$0.365
$0.4848
$0.365
$0.4848
$0.365
$0.4848
$0.365
$0.4848
$0.365
Grant date
6 June 2018
6 June 2018
6 June 2018
6 June 2018
6 June 2018
Expected volatility
85.9%
85.9%
85.9%
85.9%
85.9%
Expiry date
6 June 2025
6 June 2025
6 June 2025
6 June 2025
6 June 2025
Expected dividends
Risk free interest rate
Value per loan CDI
Number of loan CDIs
Total value
Nil
2.42%
$0.2664
550,000
$146,507
Nil
2.42%
$0.2664
250,000
$66,594
Nil
2.42%
$0.2664
250,000
$66,594
Nil
2.42%
$0.2664
200,000
$53,275
Nil
2.42%
$0.2664
250,000
$66,594
Notes:
1. Tranche 2 escrowed until company announcing completion of the definitive feasibility study
2. Tranche 3 escrowed until company announcing construction has commenced at the Cinovec Project
3. Tranche 4 escrowed until the completion of project finance for the Cinovec Project
4. Tranche 5 escrowed until the practical completion of the Cinovec Project
NOTE 17: CASH FLOW INFORMATION
(a) Reconciliation of cash flow from operating activities with the loss after tax
Loss after income tax
Adjustments for:
Exploration costs expensed
Impairment of exploration
Share based payments
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
(Decrease)/ Increase in provisions
Cash flow (used in)/from operating activities
(b) Credit standby facilities
The Company had no credit standby facilities as at 30 June 2019 and 2018.
(c) Investing and Financing Activities – Non-Cash
There were no non-cash movements during the year.
2019
$
2018
$
(3,252,815)
(4,655,209)
-
-
442,029
1,880,742
1,179,090
1,216,018
(37,814)
(35,442)
4,180
1,945
(59,540)
(11,605)
(127,483)
(51,516)
203,463
25,623
9,963
74,649
(2,357,503)
(836,219)
45
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 18: 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 Lithium. This is expected to be the same for future projects. Accordingly, management has
identified one operating segment based on the location of the project, that being the Czech Republic and two geographical
segments.
30 June 2019
REVENUE
Interest revenue
Other revenue
Total segment revenue
Net expenditure
Loss before income tax
Segment assets
Segment liabilities
30 June 2018
REVENUE
Interest revenue
Other Revenue
Total segment revenue
Net expenditure
Loss before income tax
Segment assets
Segment liabilities
Australia
$
Czech
$
Total
$
1,461
355,745
357,206
(3,322,556)
(2,965,350)
-
68,898
68,898
(356,363)
(287,465)
1,461
424,643
426,104
(3,678,919)
(3,252,815)
437,644
12,173,531
12,611,175
124,042
28,068
152,110
Australia
$
Czech
$
Total
$
1,599
645,554
647,153
-
-
-
1,599
645,554
647,153
(3,193,197)
(2,546,044)
(2,109,165)
(2,109,165)
(5,302,362)
(4,655,209)
2,240,188
10,575,773
12,815,961
339,820
77,043
416,863
46
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: 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
Total financial liabilities
2019
$
2018
$
426,178
2,223,109
92,180
32,640
518,358
2,255,749
128,977
128,977
342,214
342,214
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.
Market risk
(i)
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 not exposed to securities price risk as it does not hold any investments.
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.
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.
47
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: FINANCIAL RISK MANAGEMENT (continued)
At 30 June 2019, the Group has financial assets and liabilities denominated in the foreign currencies detailed below:
Amount in AUD
Amount in
CZK
Cash and cash equivalents
in EMHL
Intercompany payables to
EMHL by subsidiaries
5% effect in foreign
exchange rates
Amount
in CZK
-
-
-
-
2019
Amount
in GBP
111,156
-
11,143,599
111,156
11,143,599
5,558
557,180
2018
Amount
in GBP
823,600
24,608
848,208
Amount in AUD
-
4,225,696
4,225,696
42,410
211,285
-
-
-
-
Other than intercompany balances there were no financial assets and liabilities denominated in foreign currencies for EMH UK
or Geomet s.r.o..
Credit risk
(ii)
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:
Financial assets
Credit Quality
Cash and cash equivalents held at Komercni Bank
Cash and cash equivalents held at Westpac Bank
•
Interest-bearing deposits
Cash and cash equivalents held at ANZ bank
Other receivables and deposits
High
High
High
High
2019
$
2018
$
22,715
10,924
240,107
735,960
163,356
1,476,225
92,180
32,640
518,358
2,255,749
48
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
(iii)
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 following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting arrangements.
As at 30 June 2019
Trade and other payables
As at 30 June 2018
Trade and other payables
Carrying Amount
$
Contractual Cash
flows
$
128,977
128,977
128,977
128,977
Carrying Amount
$
Contractual Cash
flows
$
342,214
342,214
342,214
342,214
<3 months
$
128,977
128,977
<3 months
$
342,214
342,214
3-6 months
$
6-24
months
$
-
-
3-6 months
$
6-24
months
$
-
-
-
-
-
-
(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.
49
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: 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
2019
Total
Floating
Interest
Rate
$
$
$
$
Non-
interest
bearing
$
2018
Total
$
Financial assets
- Within one year
Cash and cash equivalents
Other receivables
Total financial assets
Weighted average interest rate
Financial Liabilities
- Within one year
Trade and other Payables
Total financial liabilities
426,178
-
426,178
0.11%
-
426,178
2,223,109
-
2,223,109
92,180
92,180
92,180
518,358
-
32,640
32,640
2,223,109
32,640
2,255,749
0.10%
-
-
(128,977)
(128,977)
(128,977)
(128,977)
-
-
(342,214)
(342,214)
(342,214)
(342,214)
Net financial assets/ (liabilities)
426,178
(36,797)
389,381
2,223,109
(309,574)
1,913,535
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 $13,509 (2018: loss $16,642).
Net fair value of financial assets and liabilities
(v)
The net fair value of cash and cash equivalents and non-interest bearing monetary assets and financial liabilities approximates
their carrying values.
NOTE 20: CONTROLLED ENTITIES
Subsidiaries of European Metals Holdings Limited
Controlled entity
Country of Incorporation
Class of Shares
Percentage Owned
Equamineral Group Limited (EGL)*
Equamineral SA (ESA Congo)
European Metals UK Limited **
Geomet S.R.O
British Virgin Islands
Republic of Congo
United Kingdom
Czech Republic
Ordinary
Ordinary
Ordinary
Ordinary
2019
100%
100%
100%
100%
2018
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
50
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 21: 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
Loss for the year
Total comprehensive loss
Guarantees
2019
$
2018
$
435,430
2,214
437,644
2,236,630
3,512
2,240,142
124,043
124,043
339,820
339,820
313,601
1,900,322
2019
2018
$
22,074,314
$
20,413,074
5,511,581
4,303,818
(27,272,294)
(22,816,570)
313,601
1,900,322
(4,455,724)
(4,455,724)
(4,674,841)
(4,674,841)
There are no guarantees entered into by European Metals Holdings Limited for the debts of its subsidiaries as at 30 June 2019.
Contingent liabilities
There are no contingent liabilities as at 30 June 2019.
Commitments
There were no commitments as at 30 June 2019.
51
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 22: CAPITAL COMMITMENTS
There are no capital commitments as at 30 June 2019.
NOTE 23: CONTINGENT LIABILITIES
There are no contingent liabilities as at 30 June 2019.
NOTE 24: SIGNIFICANT EVENTS AFTER THE REPORTING DATE
•
•
•
•
•
On 16 July 2019 the Company was very pleased to announce a potential strategic partnership with CEZ Group (CEZ), one
of Central and Eastern Europe’s largest power utilities. CEZ is currently conducting due diligence on the Company and
Project. The successful outcome of the due diligence process could see CEZ become the largest shareholder and co-
development partner for the Cinovec Lithium/Tin Project.
On 19 July 2019, the Company issued 200,000 options exercisable at $0.35 on or before 1 January 2021 and 100,000
options exercisable at $0.4018 on or before 1 June 2021 to independent consultants in accordance with their consultancy
agreements.
On 5 August 2019, the Company announced it has been granted an extension to the Cinovec Exploration Licence.
On 14 August 2019, the Company completed a share placement issuing 4,166,666 new fully paid ordinary shares raising
GBP 750,000 to existing investors.
The successful capital raising of £750,000 via a share placing (Placing) to UK investors was completed on 30 August 2019.
The net proceeds of the Placing will be used to continue to advance EMH’s corporate strategy including to progress the
development of the Cinovec Project and the progress discussions with CEC Group and potential off take partners.
Except for the matters noted above there have been no other significant events arising after the reporting date.
NOTE 25: ACCOUNTING POLICIES
(a) New and Revised Accounting Standards Adopted by the Group
The Group has adopted AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments which
became effective for financial reporting periods commencing on or after 1 January 2018
AASB 15 Revenue from contracts with customers
AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations.
AASB 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that
revenue to be recognised at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer.
The Group has applied the new Standard effective from 1 July 2018 using the modified retrospective approach. Under
this method, the cumulative effect of initial application is recognised as an adjustment to the opening balance of retained
earnings at 1 July 2018 and comparatives are not restated.
The adoption of AASB 15 does not have a significant impact on the Group as the Group does not currently have any
revenue from customers, other than grant income.
AASB 9 Financial Instruments
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods
beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments:
classification and measurement, impairment, and hedge accounting.
As a result of adopting AASB 9 Financial Instruments, the Group has amended its financial instruments accounting
policies to align with AASB 9. AASB 9 makes major changes to the previous guidance on the classification and
measurement of financial assets and introduces an ‘expected credit loss’ model for impairment of financial assets.
There were no financial instruments which the Group designated at fair value through profit or loss under AASB 139 that
were subject to reclassification. The Board assessed the Group’s financial assets and determined the application of AASB
9 does not result in a change in the classification of the Group’s financial instruments.
The adoption of AASB 9 does not have a significant impact on the financial report.
52
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL FINANCIAL REPORT 30 JUNE 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019
NOTE 25: ACCOUNTING POLICIES (continued)
(b) New and revised Accounting Standards for Application in Future Periods
AASB 16: Leases applies to annual reporting periods beginning on or after 1 January 2019.
Interpretation 4 Determining whether an Arrangement contains
This Standard supersedes AASB 117 Leases,
a Lease, AASB intrpretation 115 Operating Leases-Incentives and AASB intrpretation 127 Evaluating the Substance of
Transactions
Involving the Legal Form of lease. AASB 16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model
similar to the accounting for finance leases under AASB 117.
The key features of AASB 16 are as follows:
-
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless
the underlying asset is of low value.
- A lessee measures right-of-use assets similarly to other non-financial assets and lease
liabilities similarly to
other financial liabilities.
- Assets and Liabilities arising from the lease are initially measured on a present value basis. The measurement
includes non-cancellable
inflation-linked payments), and also includes payments
to be mad in optional periods if the lessee is reasonably certain to exercise an option to extend to lease, or
not to exercise an option to terminate the lease.
lease payments (including
- AASB 16 contains disclosure requirements for leases.
Lessor accounting
- AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor
continues to classify its leases as operating leases or finance leases, and to account for those two types of leases
differently.
- AASB 16 also requires enhanced disclosures to be provided by lessors that will improve
information disclosed
about a lessor’s risk exposure, particularly to residual value risk.
The Group has elected to not early adopt AASB 16, however and has conducted an assessment of the impact of the new
standard and have determined that based on the current lease agreements and intentions, there is no quantifiable impact of
the application of the standard.
Other standards not yet applicable
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.
53
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1.
the financial statements, notes and the additional disclosures are in accordance with the Corporations Act 2001
including :
(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 2019 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
s286 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 Company 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 27 September 2019
54
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
EUROPEAN METALS HOLDINGS LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of European Metals Holdings Limited (the Company), and its subsidiaries (the
Group), which comprises the statement of the consolidated financial position as at 30 June 2019, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial
statements, including a summary of significant accounting policies, and the directors' declaration
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Company in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110: Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
We have determined the matters described below to be key audit matters to be communicated in the report.
We have defined the matters described below to be key audit matters to be communicated in our report. Key audit
matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Liability limited by a scheme approved
under Professional Standards Legislation
Key Audit Matters
How the matter was addressed in the audit
Carrying Value of Exploration and Evaluation
Expenditure
The Group has capitalised exploration and
evaluation expenditure totalling $11,684,072 (refer
to Note 12) in terms of the application of the Group’s
accounting policy for exploration and evaluation
expenditure, as set out in Note 1(k).
The carrying value of Capitalised Exploration and
Evaluation expenditure is a key audit matter due to:
The significance of the total balance (92% of
total assets);
to assess management’s
The necessity
the
requirements of
the
application of
accounting standard Exploration
for and
Evaluation of Mineral Resources (“AASB 6”),
in light of any indicators of impairment that may
be present;
The assessment of significant judgements
made by management in relation to the
Capitalised Exploration and Evaluation
Expenditure.
Valuation of Share Based Payments
to consultants of
The Company issued a number of share options and
warrants
the Company,
performance shares to related and unrelated parties
and expensed the value attributed to the CDIs
issued through the non-recourse loans to the
employees in the prior period.
The Company prepared the valuation of the options,
warrants and performance shares and continued the
amortisation of the value attributed to the CDIs
in
issued
the non-recourse
through
loans
Inter alia, our audit procedures
following:
included
the
i. Assessing the Group’s right to tenure over
exploration assets by corroborating the
ownership of
for
the relevant
mineral resources to government registries
and relevant third party documentation;
licences
ii. Reviewing the directors’ assessment of the
the exploration and
carrying value of
evaluation expenditure, ensuring
the
veracity of the data presented and that
management has considered the effect of
potential impairment indicators, commodity
prices and the stage of the Group’s projects
against AASB 6;
intentions
iii. Evaluation of Group documents
for
for
consistency with
the
the
continuing of exploration and evaluation
activities in certain areas of interest, and
corroborated with enquiries of management.
Inter alia, the documents we evaluated
included:
Minutes of meetings of the board and
management;
Announcements made by the Group to
the Australian Securities Exchange;
Reassessed the discount rate, resource
tonnage, current commodity prices in
global markets, applied to the pre-
existing NPV model of the Cinovec
Project and compared with the updated
PFS announced on the ASX; and
Cash forecasts;
iv. Consideration of
requirements of
the
accounting standard AASB 6. We assessed
the financial statements in relation to AASB
6 to ensure appropriate disclosures are
made.
Inter alia, our audit procedures
following:
included
the
i. We reviewed the inputs used in the models; the
underlying assumptions used and discussed
with management the justification for inputs;
ii. We assessed the accounting treatment and its
application in accordance with AASB 2; and
accordance to its accounting policy and accounting
standard Share-based Payment AASB 2 (“AASB
2”).
iii. We assessed whether the Group’s disclosures
met the requirements of various accounting
standards.
The valuation of these instruments is a key audit
matter as it involved judgement in assessing their
fair value and the accounting for them.
Other Information
The directors are responsible for the other information. The other information comprises the information included in
the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form
of assurance opinion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true and
fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the
Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional skepticism throughout the audit. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor's judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Group's preparation of the financial report that gives a true and fair view in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.
We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in Internal control that we identify during our audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in
the audit of the financial report of the current period and are therefore key audit matters. We describe these matters
in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 20 of the directors’ report for the year ended 30
June 2019. The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards
Opinion on the Remuneration Report
In our opinion, the Remuneration Report of European Metals Holdings Limited for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Samir Tirodkar
Director
West Perth, Western Australia
27 September 2019
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
ASX 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
EXPLANATION
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1
Complying
The Company has adopted a Board Charter.
A listed entity should have and disclose a charter
which:
(a)
(b)
the
respective
sets out
roles and
responsibilities of the board, the chair and
management; and
includes a description of those matters
expressly reserved to the board and those
delegated to management.
Recommendation 1.2
A listed entity should:
Complying
(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
Complying
A listed entity should have a written agreement
with each director and senior executive setting out
the terms of their appointment.
the
sets out
The Board Charter
specific
responsibilities of the Board, requirements as to the
Boards composition, the roles and responsibilities of
the Chairman and Company Secretary,
the
establishment, operation and management of Board
Committees, Directors access to company records
and information, details of the Board’s relationship
with management, details of
the Board’s
performance review and details of the Board’s
disclosure policy.
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
Complying
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.
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.
59
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
Recommendation 1.5
A listed entity should:
(a) have a diversity policy which
requirements for the board:
includes
(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
towards
policy and
achieving them; and
its progress
(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)
the entity’s “Gender Equality
Indicators”, as defined
in the
Workplace Gender Equality Act
2012.
Complying
(a) The Company has adopted a Diversity Policy.
(i) The Diversity Policy provides a framework
for the Company to achieve a list of 6
measurable objectives that encompass
gender equality.
(ii) The Diversity Policy provides for 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 10 of
is
the Corporate Governance Plan which
available on the company website.
(c)
included
(i) The measurable objectives set by the Board
in the annual key
will be
performance indicators for the CEO, MD
and senior executives. In addition, the
Board will review progress against the
its annual performance
objectives
assessment.
in
(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:
Complying
(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
accordance with that process.
in the reporting period
(a) The Board is responsible for evaluating the
performance of the Board and
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.
60
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
The review will assist to indicate if the Board’s
performance is appropriate and efficient with
respect to the Board Charter.
for
remains appropriate
The Board regularly reviews its skill base and
whether
the
it
legal and 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 encouraged to avail themselves of
resources required to fulfil the performance of
their duties.
Complying
(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
conduct annual
performance of the senior executives. Schedule
6 ‘Performance Evaluation’ requires the Board
to disclose whether or not performance
evaluations were conducted during the relevant
reporting period.
Recommendation 1.7
A listed entity should:
(a) have and disclose a process for periodically
evaluating the performance of its senior
executives; and
(b) disclose in relation to each reporting period,
whether a performance evaluation was
undertaken
in
accordance with that process.
in the reporting period
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:
Part -
Complying
(a) have a nomination 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)
the charter of the committee;
(iv)
the members of the committee; and
(v)
as at the end of each reporting period,
the number of times the committee
met throughout the period and the
the
of
attendances
individual
members at those meetings; or
(b)
if it does not have a nomination committee,
disclose that fact and the processes
it
employs to address board succession issues
(a) The Nomination Committee was formed on 26
August 2015. There are currently two members
of the Committee being Mr Reeves (Chairman)
and Mr Coughlan. Given the Company’s present
size and scope of the Company’s operations, no
efficiencies or benefits would be gained by
having a third member. The Board intends to re-
evaluate the requirement for another member
as the Company’s operations increase in size and
scale.
The role and responsibilities of the Nomination
Committee are outlined
in Nomination
Committee Charter available online on the
Company’s website.
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
61
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
and to ensure that the board has the
appropriate balance of skills, experience,
independence and knowledge of the entity to
enable
its duties and
it to discharge
responsibilities effectively.
The Board regularly updates the Company’s
(in accordance with
board skills matrix
recommendation 2.2) to assess the appropriate
balance of skills, experience, independence and
knowledge of the entity.
Recommendation 2.2
Complying
Board Skills Matrix
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.
Recommendation 2.3
Complying
A listed entity should disclose:
(a) the names of the directors considered by the
board to be independent directors;
(b)
if a director has an
interest, position,
association or relationship of the type
described in Box 2.3 of the ASX Corporate
Governance Principles and Recommendation
(3rd Edition), but the board is of the opinion
that
the
independence of the director, the nature of
it does not
compromise
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
- legal2
- IT expertise 2
4
4
4
4
4
4
4
4
3
4
4
0
4
0
1
(1) Skill gap noticed however an external taxation
taxation
is employed
to maintain
firm
requirements.
(2) Skill gap noticed however an legal 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. None of the directors are
independent directors. The details of the
directors are disclosed in the Annual Report and
Company website.
(b) The Board Charter requires Directors to disclose
interest, positions, associations and
their
relationships
the
requires
independence of Directors is regularly assessed
by the Board in light of the interests disclosed by
Directors. Details of the Directors interests,
that
and
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EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
the
interest, position, association or
relationship in question and an explanation
of why the board is of that opinion; and
(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.
positions associations and relationships are
provided in the Annual Reports and Company
website.
(c) The Board Charter
for
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.
Not-
complying
The Board Charter requires that where practical the
majority of the Board will be independent.
Given the Company’s present size and scope it is
currently not Company policy to have a majority of
Independent Directors.
Details of each Director’s independence are provided
in the Annual Reports and Company website.
Not-
complying
The Board Charter provides that where practical, the
Chairman of the Board will be a non-executive
director.
Mr David Reeves is the Chairman of the Board and is
not an independent director.
Keith Coughlan is the Managing Director of the
Company and is not an independent director.
If the Chairman resigns 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.
Recommendation 2.6
Complying
A listed entity should have a program for inducting
new directors and providing appropriate
professional development opportunities
for
continuing directors to develop and maintain the
skills and knowledge needed to perform their role
as a director effectively.
Principle 3: Act ethically and responsibly
Recommendation 3.1
A listed entity should:
Complying
(a) The Corporate Code of Conduct applies to the
Company’s directors, senior executives and
employees.
(a) have a code of conduct for its directors,
senior executives and employees; and
(b) disclose that code or a summary of it.
(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:
(a) have an audit committee which:
Part-
Complying
(i)
has at least three members, all of
whom are non-executive directors and
(a) The Audit and Risk Committee was formed on 26
August 2015, with directors appointed as
members of the Committee, being Mr Kiran
Morzaria (Chairman), Mr Reeves and Mr
Coughlan. Given the Company’s present size and
scope of
the Company’s operations, no
efficiencies or benefits would be gained by
having a third non-executive director member.
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EUROPEAN METALS HOLDINGS LIMITED
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CORPORATE GOVERNANCE
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:
(iii)
the charter of the committee;
(iv)
(v)
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
the
of
attendances
individual
members at those meetings; or
(b)
if it does not have an audit committee,
disclose that fact and the processes
it
independently verify and
employs that
safeguard the
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
Recommendation 4.2
Complying
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.
The Board
intends
the
for another member as the
requirement
Company’s operations increase in size and scale.
re-evaluate
to
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.
to
the
roles
internal
fulfilling
The Board devote time at annual board
and
meetings
responsibilities associated with maintaining the
Company’s
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.
audit
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.
Recommendation 4.3
Complying
A listed entity that has an AGM should ensure that
its external auditor attends its AGM and is
available to answer questions from security
holders relevant to the audit.
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:
Complying
(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
disclosure
requirements as required by the ASX Listing
Rules and other relevant legislation.
Company’s
details
the
(b) The Board Charter and Schedule 7 of the
Corporate Governance Plan are available on the
Company website.
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CORPORATE GOVERNANCE
Principle 6: Respect the rights of security holders
Recommendation 6.1
Complying
A listed entity should provide information about
itself and its governance to investors via its
website.
Recommendation 6.2
Complying
A listed entity should design and implement an
investor relations program to facilitate effective
two-way communication with investors.
Recommendation 6.3
Complying
A listed entity should disclose the policies and
processes
in place to facilitate and
encourage participation at meetings of security
holders.
it has
Recommendation 6.4
Complying
A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security
registry electronically.
Information about the Company and its governance
is available in the Corporate Governance Plan which
can be found on the Company’s website.
The Company has adopted a
Shareholder
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.
The Shareholder Communications Strategy can be
found in Schedule 11 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.
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
Complying
The board of a listed entity should:
(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;
(a) The Audit and Risk Committee was formed on 26
August 2015, with directors appointed as
members of the Committee, being Mr Kiran
Morzaria, Mr Reeves and Mr Coughlan.
The role and responsibilities of the Audit and
Risk Committee are outlined in Schedule 3 of the
Company’s
Plan
available online on the Company’s website.
Corporate Governance
The Board devote time at annual board meeting
fulfilling the roles and responsibilities
to
associated with overseeing risk and maintaining
the entity’s risk management framework and
65
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
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CORPORATE GOVERNANCE
(iv)
the members of the committee; and
(v)
as at the end of each reporting period,
the number of times the committee
met throughout the period and the
individual
the
of
attendances
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
Complying
(a)
The board or a committee of the board should:
(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
Complying
A listed entity should disclose:
(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
Complying
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.
associated
procedures.
internal compliance and control
internal
includes
The Company process for risk management
a
compliance
and
requirement to identify and measure risk,
monitor the environment for emerging factors
and trends that affect these risks, formulate
risk 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
internal compliance and
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 internal compliance and
control procedures.
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EUROPEAN METALS HOLDINGS LIMITED
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CORPORATE GOVERNANCE
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1
The board of a listed entity should:
Part -
Complying
(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)
the charter of the committee;
(iv)
the members of the committee; and
(v)
as at the end of each reporting period,
the number of times the committee
met throughout the period and the
individual
the
of
attendances
members at those meetings; or
(b)
if
it does not have a
remuneration
fact and the
committee, disclose that
processes it employs for setting the level and
composition of remuneration for directors
and senior executives and ensuring that such
is appropriate and not
remuneration
excessive.
Recommendation 8.2
Complying
A listed entity should separately disclose its
policies and practices regarding the remuneration
of non-executive directors and the remuneration
of executive directors and other senior executives
and ensure
roles and
directors
responsibilities
compared to executive directors and other senior
executives are reflected
level and
composition of their remuneration.
the different
non-executive
that
of
the
in
Recommendation 8.3
Complying
listed entity which has an equity-based
A
remuneration scheme should:
to enter
(a) have a policy on whether participants are
permitted
transactions
(whether through the use of derivatives or
otherwise) which limit the economic risk of
participating in the scheme; and
into
(b) disclose that policy or a summary of it.
The Remuneration Committee was formed on 26
August 2015, with directors appointed as members
of the Committee, being Mr Reeves (Chairman) and
Mr Morzaria. Given the Company’s present size and
scope of the Company’s operations, no efficiencies or
benefits would be gained by having a third member.
The Board intends to re-evaluate the requirement for
another member as the Company’s operations
increase in size and scale.
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.
The Company’s Corporate Governance Plan requires
the Board to disclose its policies and practices
the remuneration of non-executive,
regarding
executive and other senior directors.
(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
transactions (whether through the use of
derivatives or otherwise) which
limit the
economic risk of participating in the scheme.
The Board must review and approve any equity
based plans.
to enter
(b) A copy of the Company’s Corporate Governance
Plan is available on the Company’s website.
67
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
QCA CORPORATE GOVERNANCE REPORT
The following sets out the Company’s Corporate Governance Report in accordance with the AIM Rules for Companies, a copy
of which is also available from the Company’s website at:
https://www.europeanmet.com/wp-content/uploads/2018/09/Corporate-Governance-Website-Disclosure-EMH-
Sept-2018-Final.pdf
INTRODUCTION
In April 2018, the Quoted Companies Alliance (QCA) published an updated version of its Code which provides UK small and
mid-sized companies such as European Metals Limited with a corporate governance framework that is appropriate for a
Company of our size and nature. The Board considers the principles and recommendations contained in the QCA Code are
appropriate and have therefore chosen to apply the QCA Code.
The updated 2018 QCA Code has 10 principles that should be applied. Each principle is listed below together with an
explanation of how the Company applies or otherwise departs from each of the principles.
PRINCIPLE ONE
Business Model and Strategy
The Company is a minerals exploration and development company and has a clear and definitive vision of the Company’s
purpose, business model and strategy, being to develop the Cinovec lithium-tin project. The Company is currently preparing
a definitive feasibility study.
European Metals owns 100% of the Cinovec lithium-tin project in the Czech Republic, through its wholly owned subsidiary
Geomet s.r.o.. Cinovec is an historic mine incorporating a significant undeveloped lithium-tin resource with by-product
potential including tungsten, rubidium, scandium, niobium and tantalum and potash. Cinovec hosts a globally significant hard
rock lithium deposit with a total Indicated Mineral Resource of 348Mt @ 0.45% Li20 and 0.04% Sn and an Inferred Mineral
Resource of 309Mt @ 0.39 Li20 and 0.04% Sn containing a combined 7.0 million tonnes Lithium Carbonate Equivalent and
263kt of tin.
An initial Probable Ore Reserve of 34.5Mt @ 0.65% Li20 and 0.09% Sn has been declared to cover the first 20 years mining at
an output of 20,800tpa of lithium carbonate. This makes Cinovec the largest lithium deposit in Europe, the fourth largest non-
brine deposit in the world and a globally significant tin resource.
PRINCIPLE TWO
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The
Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the
opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company's Annual General Meeting. Investors also have access to current information on the
Company though its website, www.europeanmet.com, and via Keith Coughlan, Managing Director, who is available to answer
investor relations enquiries.
The Company has adopted a Shareholder 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.
The Shareholder Communications Strategy can be found in Schedule 11 of the Board Charter which is available on the
Company website, www.europeanmet.com/corporate-governance.
PRINCIPLE THREE
Considering wider stakeholder and social responsibilities
The Board recognises that the long term success of the Company is reliant upon the efforts of the employees of the
Company and its contractors, suppliers, regulators and other stakeholders.
The Company has close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity
to raise issues and provide feedback to the Company.
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CORPORATE GOVERNANCE
PRINCIPLE FOUR
Risk Management
The Audit and Risk Committee was formed on 26 August 2015, with directors appointed as members of the Committee, being
Mr Kiran Morzaria, Mr Reeves and Mr Coughlan. 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,
www.europeanmet.com/corporate-governance.
The Board devotes time at board meetings to fulfilling the roles and responsibilities associated with overseeing risk and
maintaining the entity’s risk management framework and associated internal compliance and control procedures.
The Company process for risk management and internal compliance includes a requirement to identify and measure risk,
monitor the environment for emerging factors and trends that affect these risks, formulate risk 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 internal compliance and controls.
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.
PRINCIPLE FIVE
A Well Functioning Board of Directors
The Board currently comprises of 4 members: 2 Executive members (the Managing Director, Keith Coughlan and Executive
Director, Richard Pavlik) and 2 Non-Executive members (the Chairman, Dave Reeves and Non-executive Director, Kiran
Morzaria). Biographical details of the current Directors are set out within Principle Six below. Pursuant to Article 8.5 of the
Company’s Articles of Association, at each annual general meeting one third of the directors (or, if their number is not a
multiple of three, the number nearest to but nor more than one-third shall retire from office by rotation. A retiring director
shall be eligible for re-election. All the Executive Directors are full time and the Non-Executive Directors are considered to be
part time but are expected to provide as much time to the Company as is required.
All letters of appointment of Directors are available for inspection at the Company's registered office during normal business
hours. The Board elects a Chairman to chair every meeting.
All letters of appointment of Directors are available for inspection at the Company's registered office during normal business
hours. The Board elects a Chairman to chair every meeting.
The Board holds formal meetings periodically as issues arise and require more details. The Directors are in contact and discuss
all necessary issues on a regular basis and to ensure that the Non-Executive Directors while not involved in the day to day
running of the Company are still kept up to date on a regular basis.
The Company has established Audit, Remuneration, and Nomination committees, particulars of which are set out in Principle
Nine below.
The QCA recommends a balance between executive and non-executive Directors and recommends that there be two
independent non-executives. The Board Charter provides for the disclosure of the names of Directors considered by the Board
to be independent.
Mr Morzaria is a Board nominee of Cadence Minerals Plc (previously named Rare Earth Minerals Plc), which owns 26,860,756
CDIs in the Company. Mr Morzaria is also a director and chief executive of Cadence Minerals Plc. On this basis, Mr Morzaria
is not an independent Non-executive Director. Mr Reeves is interested in CDIs, options and Class B Performance Shares, and
on this basis is also not an independent Non-executive Director. However, the Board believes that both Mr Reeves and
Morzaria are relevant qualified professionals and with an understanding of what is expected of a Non-Executive Director and
discharge their duties as Non-Executive Directors in an effective and appropriate manner on behalf of shareholders as a
whole.
Given the Company’s present size and scope of the Company’s operations, no efficiencies or benefits would be gained
appointing a Senior Independent Director (“SID”). The Board intends to re-evaluate the requirement for a SID as the
Company’s operations increase in size and scale.
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EUROPEAN METALS HOLDINGS LIMITED
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CORPORATE GOVERNANCE
The details of the directors are disclosed in the Annual Report and Company website, www.europeanmet.com/directors-and-
senior-management.
The Board Charter requires Directors to disclose their interest, positions, associations and relationships and requires that the
independence of Directors is regularly assessed by the Board in light of the interests disclosed by Directors. Details of the
Directors interests, positions associations and relationships are provided in the Annual Reports and Company website,
www.europeanmet.com/directors-and-senior-management.
The Board Charter provides for 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,
www.europeanmet.com/directors-and-senior-management. The Corporate Code of Conduct, which applies to the
Company’s directors, senior executives and employees. is in Schedule 2 of the Corporate Governance Plan which is on the
Company’s website, www.europeanmet.com/corporate-governance.
PRINCIPLE SIX
Appropriate Skills and Experience of the Directors
The Company believes the current balance of skills in the Board as a whole, reflects a very broad range of commercial and
professional skills across geographies and industries and each of the Director’s has experience in public markets. An
assessment of the Board’s skills and expertise is also set out in the Corporate Governance Report included in the Company’s
Annual
website,
which
https://www.europeanmet.com/shareholdercentre-reports.
Company’s
Accounts,
available
Report
and
and
the
on
is
The Board shall review annually the appropriateness and opportunity for continuing professional development whether
formal or informal.
Profiles of the Directors are set out below:
Mr David Reeves – Non-executive Chairman
Mr Reeves is a qualified mining engineer with 25 years’ experience globally. 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. Mr Reeves is the Managing
Director of Calidus Resources Limited (ASX). Mr Reeves is currently a member of the Remuneration Committee, Audit and
Risk Committee and Nomination Committee.
Mr Keith Coughlan – Managing Director
Mr Coughlan has almost 30 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. Mr Coughlan is currently Non-executive Director of Calidus Resources Limited (ASX), Doriemus
Limited (ASX) and Southern Hemisphere Mining Limited (ASX). He previously held the position of Non-executive Chairman of
Talga Resources Limited (ASX) from 17 September 2013 to 8 February 2017. Mr Coughlan is currently a member of the Audit
and Risk Committee and Nomination Committee.
Mr Richard Pavlik – Executive Director
Mr Pavlik is the General Manager of Geomet s.r.o., the Company’s wholly owned Czech subsidiary, and is a highly experienced
Czech mining executive. Mr Pavlik holds a Masters Degree in Mining Engineer from the Technical University of Ostrava in
Czech Republic. He is the former Chief Project Manager and Advisor to the Chief Executive Officer at OKD. OKD has been a
major coal producer in the Czech Republic. He has almost 30 years of relevant industry experience in the Czech Republic. Mr
Pavlik also has experience as a Project Analyst at Normandy Capital in Sydney as part of a postgraduate program from
Swinburne University. Mr Pavlik has held previous senior positions within OKD and New World Resources as Chief Engineer,
and as Head of Surveying and Geology. He has also served as the Head of the Supervisory Board of NWR Karbonia, a Polish
subsidiary of New World Resources (UK) Limited. He has an intimate knowledge of mining in the Czech Republic
Mr Kiran Morzaria – Non-executive Director
Mr Morzaria has a Bachelor of Engineering (Industrial Geology) and an MBA (Finance). He has extensive experience in the
mineral resource industry working in both operational and management roles. He spent the first four years of his career in
exploration, mining and civil engineering before obtaining his MBA. Mr Morzaria has served as a director of a number of
public companies in both an executive and non-executive capacity. Mr Morzaria is a Director and Chief Executive of Cadence
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EUROPEAN METALS HOLDINGS LIMITED
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CORPORATE GOVERNANCE
Minerals plc (AIM) and a director of UK Oil & Gas plc (AIM). He was previously a Director of Bacanora Minerals plc (AIM). Mr
Morzaria is currently a member of the Remuneration Committee and the Audit and Risk Committee.
The CFO is not currently a member of the Board, which the Company believes is acceptable given the current focus of the
Company on preparation of a definitive feasibility on the Cinovec deposit. As the scale and complexity of the Group develops,
the Board will consider any further appointments to the Board as appropriate. The Company’s Chief Financial Officer, James
Carter, is a CPA and Chartered Company Secretary with 20 years’ international experience in the mining industry and he is
currently the Chief Financial Officer (CFO) of Keras Resources Plc (AIM).
PRINCIPLE SEVEN
Evaluation of Board Performance
The Board is responsible for evaluating the performance of the Board and 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 which requires the Board to disclose 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.
The review will assist to indicate if the Board’s performance is appropriate and efficient with respect to the Board Charter.
The Board regularly reviews its skill base and whether it remains appropriate for the Company’s operational, legal and
financial 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 encouraged to avail themselves of resources required to fulfil the performance of their duties.
PRINCIPLE EIGHT
Corporate Culture
The Corporate Code of Conduct applies to the Company’s directors, senior executives and employees.
The purpose of the Corporate Code of Conduct is to provide a framework for decisions and actions in relation to ethical
conduct in employment. It underpins the Company’s commitment to integrity and fair dealing in its business affairs and to a
duty of care to all employees, clients and stakeholders. The document sets out the principles covering appropriate conduct
in a variety of contexts and outlines the minimum standard of behaviour expected from employees.
The directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback
and enabling positive and constructive challenge. The Company has adopted, with effect from the date on which its shares
were admitted to AIM, a code for Directors' and employees' dealings in securities which is appropriate for a company whose
securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into
effect in 2016.
PRINCIPLE NINE
Maintenance of Governance Structures and Processes
The QCA Code recommends that the Company maintains governance structures and processes in line with its culture and
appropriate to its size and complexity.
Ultimate authority for all aspects of the Company's activities rests with the Board, the respective responsibilities of the
Chairman and Chief Executive Officer arising as a consequence of delegation by the Board. The Board has adopted appropriate
delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for the
effectiveness of the Board, while management of the Company's business and primary contact with shareholders has been
delegated by the Board to the Managing Director.
The Board has established the following committees.
71
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
CORPORATE GOVERNANCE
Audit and Risk Committee
The Audit and Risk Committee was formed on 26 August 2015, with directors appointed as members of the Committee, being
Mr Kiran Morzaria, Mr Reeves and Mr Coughlan. 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,
www.europeanmet.com/corporate-governance.
This committee has primary responsibility for monitoring the Financial Reporting function and internal controls in order to
ensure that the financial performance of the Company is properly measured and reported. The committee receives the
financial reports from the executive management and auditors relating to the interim and annual accounts and the accounting
and internal control systems in use throughout the Company. The Audit Committee shall meet not less than twice in each
financial year and it has unrestricted access to the Company's auditors.
Remuneration Committee
The Remuneration Committee was formed on 26 August 2015, with directors appointed as members of the Committee, being
Mr Kiran Morzaria, Mr Reeves. The role and responsibilities of the Remuneration Committee are outlined in Schedule 3 of
the Company’s Corporate Governance Plan available online on the Company’s website, www.europeanmet.com/corporate-
governance.
The Remuneration Committee reviews the performance of the executive directors and employees and makes
recommendations to the Board on matters relating to their remuneration and terms of employment. The Remuneration
Committee also considers and approves the granting of share options pursuant to the share option plan and the award of
shares in lieu of bonuses pursuant to the Company's Remuneration Policy.
Nominations Committee
The Nominations Committee was formed on 26 August 2015, with directors appointed as members of the Committee, being
Mr Reeves and Mr Coughlan. The role and responsibilities of the Nominations Committee are outlined in Schedule 3 of the
Company’s Corporate Governance Plan available online on the Company’s website, www.europeanmet.com/corporate-
governance.
PRINCIPLE TEN
Shareholder Communication
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The
Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the
opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are
encouraged to attend the Company's Annual General Meeting.
Investors also have access to current information on the Company though its website, www.europeanmet.com, and via Keith
Coughlan, Managing Director, who is available to answer investor relations enquiries.
The Company shall include, when relevant, in its annual report, any matters of note arising from the audit or remuneration
committees.
72
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
ADDITIONAL INFORMATION
The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies
only.
1
Shareholding as at 18 September 2019
(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
104
234
155
280
127
900
(b) The number of shareholdings held in less than marketable parcels is 159.
(c) Voting Rights
The voting rights attached to each class of equity security are as follows:
146,642,227 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 18 September 2019
Rank
Shareholder
Number of CDIs
% Held
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
Armco Barriers Pty Ltd
Inswinger Holdings Pty Ltd
Jim Nominees Limited
Mrs Eleanor Jean Reeves
Barclays Direct Investing Nominees Limited < Client1>
Vidacos Nominees Limited
Hargreaves Lansdown (Nominees) Limited <15942>
Hargreaves Lansdown (Nominees) Limited
Lawshare Nominees Limited
Interactive Investor Services Nominees Limited
Hsdl Nominees Limited
Hsbc Global Custody Nominee (Uk) Limited <777329>
Mr Neil Thacker Maclachlan
Cgwl Nominees Limited
Share Nominees Ltd
Interactive Investor Services Nominees Limited
Hsdl Nominees Limited
Lichter Services Pty Ltd
22,472,298
17,034,002
13,000,000
8,500,000
5,675,013
3,720,244
3,332,013
3,258,471
2,807,235
2,623,713
2,375,411
2,372,818
1,993,312
1,910,000
1,707,483
1,703,433
1,553,785
1,529,579
1,401,481
1,388,000
14.90
11.30
8.62
5.64
3.76
2.47
2.21
2.16
1.86
1.74
1.58
1.57
1.32
1.27
1.13
1.13
1.03
1.01
0.93
0.92
Total Top 20 Shareholders
100,358,291
66.55
73
EUROPEAN METALS HOLDINGS LIMITED
ABRN 154 618 989
ANNUAL REPORT 30 JUNE 2019
ADDITIONAL INFORMATION
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 6245 2050.
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
A total of 4,450,000 options over unissued CDIs are on issue.
A total of 5,000,000 A Class Performance Shares
A total of 5,000,000 B Class Performance Shares
7
Use of Funds
The Company has used its funds in accordance with its initial business objectives.
TENEMENT SCHEDULE
Permit
Code
Deposit
Interest at
beginning of
Quarter
Acquired /
Disposed
Interest at end
of Quarter
Exploration Area
Cinovec
Cinovec II
Cinovec III
Cinovec IV
N/A
Preliminary
Mining Permit
Cinovec I
Cinovec East
Cinovec II
Cinovec South
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
74