Freehill Mining Limited
ACN 091 608 0025
Annual Report - 30 June 2017
Freehill Mining Limited
Corporate directory
30 June 2017
Directors
Registered office
Principal place of business
Share register
Auditor
Stephen Chaplin
Paul Davies
Nicholas Kapes
Raymond Charles Mangion
88 Miller Street
West Melbourne VIC 3003
88 Miller Street
West Melbourne Vic 3003
Automic Registry Services
Level 12, Bourke Street
Melbourne, Victoria 3000
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne, Victoria, 3000
Stock exchange listing
Freehill Mining Limited shares are listed on the Australian Securities Exchange (ASX
code: FHS)
Website
www.freehillmining.com
Corporate Governance Statement
Refer to www.freehillmining.com
1
Corporate:
Chairman’s Report
Since the acquisition of Freehill Investments Pty Ltd and its mining assets in Chile “The Yerbas Buenas Project”, and the
Company’s listing in January, the Board and management of Freehill Mining Limited have been active both on the
Exploration and Development fronts.
The Board and management are reviewing the Company’s Exploration and are looking to achieve ongoing Commercial
Scale Production while currently commercial Sales are being achieved. The Board intends to continue to undertake all
reasonable steps to ensure that both the exploration and production at our Yerbas Buenas site takes place.
Highlights this Year:
1. Acquisition of Freehill Investments Pty Ltd, its Chilean subsidiaries and the associated Yerbas Buenas Project, as
part of the Company’s IPO fundraising was successfully completed with the relisting of the Company on the
Australian Securities Exchange.
2. Appointment of Chief Operating Officer, Mr Peter Hinner, in February.
3. Growing commercial Sales to “CAPS” (Compañia Minera del Pacifico S.A.) re-affirmed for 2017 its ongoing
commitment to take product from the Yerbas Buenas Project.
4. Ground Magnetics and Passive Seismic geophysical survey of the project commenced.
5. Establishment of demonstration plant for the production of hard rock magnetite, delivering commercial quantities of
product.
6. A mine plan for the exploitation of the hard rock resource has been developed and submitted to government
authorities for approval for expanded production.
7. The Company is continuing in its objective to establish a JORC compliant resource in the near term.
On behalf of the Board and myself, I wish to thank you for your ongoing support and look forward the continuing
development of our project in the year ahead.
Stephen Chaplin
Chairman
2
Freehill Mining Limited
Directors' report
30 June 2017
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Freehill Mining Limited (referred to hereafter as the 'company' or 'parent entity') and
the entities it controlled at the end of, or during, the year ended 30 June 2017.
Directors
The following persons were directors of Freehill Mining Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Stephen Chaplin
Paul Davies
Nicholas Kapes
Raymond Charles Mangion
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $1,522,205 (30 June 2016: $968,925).
Refer to the Chairman's Report that directly precedes this Directors' Report.
Significant changes in the state of affairs
The company has successfully completed an IPO fundraising of $4,023,925 before costs.
The company was re-admitted to the Australia Securities Exchange on 12 January 2017 (Stock Code : FHS).
The company completed the acquisition of Freehill Investments Pty Ltd.
The company issued 32,386,129 fully paid ordinary shares in order to settle borrowings totalling $2,378,961.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
On 12 September 2017, the company issued 17,043,068 fully paid ordinary shares raising $1,363,445. These funds reduced
existing debt including funds raised after balance date by some $1,027,445 and provided $336,000 funds to purchase plant
for the Chilean operations and contribute to working capital. In addition a further $495,000 was raised to meet the Company’s
obligations under the purchase agreement for the Yerbas Buenas tenements and further support plant acquisition and
working capital.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
Information on likely developments in the operations of the consolidated entity and the expected results of operations have
not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the
consolidated entity.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
3
Freehill Mining Limited
Directors' report
30 June 2017
Information on directors
Name:
Title:
Experience and expertise:
Stephen Chaplin
Chairman
Stephen Chaplin has been a company director with over 30 years’ experience in a
number of Australian companies including mining, manufacturing, commercial fishing
and property development. Stephen has participated in "Team Australia" which is a
government initiative inviting Australian small business to pitch directly to the USA
military procurement program, has extensive experience in international trade, and is
a member of the Australian Institute of Company Directors.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
2,118,671 fully paid ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Paul Davies
Director and Chief Financial Officer
Paul holds an Economics Degree from Monash University, has qualified as a Chartered
Accountant and is an alumnus of the Stanford Business School.
Paul Davies has extensive experience as CFO of both publicly traded and privately
held companies. Over the past 10 years he has been involved with many early stage
companies involving reporting, strategic planning, systems implementation and
fundraising. Prior to this Paul was Director in charge of Corporate and Institutional
Banking for Deutsche Bank Australia and a member of the Deutsche Bank Credit
Committee. He has been directly involved in over $20 billion worth of transactions
involving origination, advising, arranging, structuring, project finance, lead managing,
syndication, negotiation, risk management, including servicing many of Australia’s
major mining companies. Before Deutsche Bank Paul worked for a number of years
Bank.
with
Macquarie
Australia
Bankers
Trust
both
and
With his 20 plus years in the finance sector, Paul brings to the Company considerable
experience in both debt and equity markets in addition to significant understanding of
the mining sector.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
500,000 fully paid ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Nicholas Kapes
Non-Executive Director
Bachelor of Economics
Nicholas Kapes began his professional career in 1988, where he commenced merchant
banking after completing a Bachelor of Economics. He brings to the Board an array of
experience including trading on the world’s major exchanges on behalf of some of the
world’s premier banks, including Credit Suisse. Nicholas was a Director of Proprietary
years.
Trading
Suisse
Credit
two
for
at
In his time in merchant banking Nicholas became heavily involved in companies
evolving from venture capital stage to listing on the Australian Securities Exchange.
Since his return to Melbourne in 2005, Nicholas has actively engaged in originating
deal opportunities and implementing strategic business initiatives including mergers
and acquisitions, private and public equity capital raisings through initial public
offerings, private placements and rights issues.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
500,000 fully paid ordinary shares
4
Freehill Mining Limited
Directors' report
30 June 2017
Experience and expertise:
Name:
Title:
Qualifications:
Raymond Charles Mangion
Non-Executive Director
Associate Diploma of Business (Accounting) and an Associate Diploma in Financial
Planning.
Ray Mangion has performed the role of Managing Director of Morbak Investments Pty
Ltd for the past 18 years, having created the business as a start-up business. He has
approximately 30 years’ managerial experience.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
2,250,000 fully paid ordinary shares
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Joe Fekete holds a Bachelor of Business in Accounting. He is a member of both the CPA Australia and the Governance
Institute of Australia. His business management and accounting experience spans over 20 years in various industries
including mining, advertising, travel, wholesale retail distribution, construction and public practice.
Joe was previously a director, CFO and Company Secretary for Altius Mining Limited and CFO of Nagambie Mining Limited.
Other roles have included Finance Director of J Walter Thompson and Simon Richards Group, Director of Rail Plus
Australasia Pty Ltd and also CFO/Commercial Manager in managing various other businesses.
Joe is currently a director for WOW Travel Pty Ltd.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2017, and
the number of meetings attended by each director were:
Raymond Charles Mangion
Paul Davies
Nicholas Kapes
Stephen Chaplin
Full Board
Attended
Held
6
10
9
10
10
10
10
10
Held: represents the number of meetings held during the time the director held office.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
5
Freehill Mining Limited
Directors' report
30 June 2017
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the board') ensures that executive reward satisfies the following key criteria for good reward
governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy
is to attract, motivate and retain high performance and high quality personnel. The board have structured an executive
remuneration framework that is market competitive and complementary to the reward strategy of the consolidated entity.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors'
fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from independent
remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. The most recent determination, where the shareholders approved a maximum annual aggregate remuneration of
$200,000.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
Long-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board based on individual and business unit performance, the overall performance of the consolidated entity and comparable
market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the
executive.
6
Freehill Mining Limited
Directors' report
30 June 2017
The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles
of executives. STI payments are granted to executives based on specific annual targets and key performance indicators
('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product
management.
The long-term incentives ('LTI') include long service leave and share-based payments including performance rights issued
in accordance with the company's Equity Incentive Plan.
Use of remuneration consultants
During the financial year ended 30 June 2017, the consolidated entity did not engage remuneration consultants.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled *
$
Total
$
22,500
22,500
22,500
46,500
129,593
243,593
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
100,000
122,500
122,500
122,500
-
100,000
146,500
-
-
-
400,000
129,593
643,593
2017
Raymond Charles Mangion
Nicholas Kapes
Stephen Chaplin
Executive Directors:
Paul Davies
Other Key Management
Personnel:
Peter Hinner
*
Share based payments were issued before completion of the reverse acquisition therefore the expense is not included
in the Statement of Comprehensive Income.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
22,000
22,000
-
-
-
-
-
-
-
-
-
-
22,000
22,000
2016
Paul Davies
7
Freehill Mining Limited
Directors' report
30 June 2017
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Details:
Name:
Title:
Agreement commenced:
Details:
Name:
Title:
Agreement commenced:
Details:
Name:
Title:
Agreement commenced:
Details:
Name:
Title:
Agreement commenced:
Details:
Paul Davies
Executive Director and Chief Financial Officer
1 January 2017
Remuneration is set at $69,000 per annum inclusive of statutory superannuation.
Raymond Charles Mangion
Non-Executive Director
1 January 2017
Remuneration is set at $45,000 per annum inclusive of statutory superannuation.
Nicholas Kapes
Non-Executive Director
1 January 2017
Remuneration is set at $45,000 per annum inclusive of statutory superannuation.
Stephen Chaplin
Non-Executive Director
1 January 2017
Remuneration is set at $45,000 per annum inclusive of statutory superannuation.
Peter Hinner
Chief Operating Officer
6 February 2017
Under the agreement Peter Hinner is entitled to $218,000 in his first year and $297,000
in his second year. He also received shares values at $50,000, and 1,250,000
performance rights which vest upon delivery of performance milestones.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2017.
Options
There were no options over ordinary shares issued to directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2017.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2017.
Performance rights
When appointed Peter Hinner on February 2017, was granted 1,250,000 performance rights which vest upon delivery of
certain milestones. None of these had been achieved at 30 June 2017, or at the time of signing.
Additional information
The earnings of the consolidated entity for the four years to 30 June 2017 are summarised below:
Revenue
Profit after income tax
2017
$
2016
$
2015
$
2014
$
172
(1,522,205)
-
(968,925)
-
(1,606,589)
-
(295,543)
8
Freehill Mining Limited
Directors' report
30 June 2017
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2017
0.10
(0.51)
(0.51)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at Received
as part of
the start of
the year
remuneration Additions
Ordinary shares
Raymond Charles Mangion
Paul Davies
Nicholas Kapes
Stephen Chaplin
-
-
-
-
-
500,000
500,000
500,000
500,000
2,000,000
Acquired at
IPO
Balance at
the end of
the year
-
-
-
-
-
1,750,000
-
-
1,618,671
3,368,671
2,250,000
500,000
500,000
2,118,671
5,368,671
Performance rights holding
The number of performance rights over ordinary shares in the company held during the financial year by each director and
other members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Performance rights over ordinary shares
Peter Hinner
Balance at
the start of
the year
Granted
Expired/
forfeited/
other
Balance at
the end of
the year
Vested
-
-
1,250,000
1,250,000
-
-
-
-
1,250,000
1,250,000
This concludes the remuneration report, which has been audited.
Shares under option
There were no unissued ordinary shares of Freehill Mining Limited under option outstanding at the date of this report.
Shares under performance rights
On 6 February 2017, the company issued 1,250,000 performance rights to Peter Hinner as part of his remuneration package.
These performance rights are in bundles of 250,000 contingent upon different performance targets being met.
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in
any share issue of the company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Freehill Mining Limited issued on the exercise of options during the year ended 30 June
2017 and up to the date of this report.
9
Freehill Mining Limited
Directors' report
30 June 2017
Shares issued on the exercise of performance rights
There were no ordinary shares of Freehill Mining Limited issued on the exercise of performance rights during the year ended
30 June 2017 and up to the date of this report.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
Non-audit services
There were no non-audit services provided during the financial year by the auditor.
Officers of the company who are former partners of RSM Australia Partners
There are no officers of the company who are former partners of RSM Australia Partners.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Paul Davies
6 October 2017
10
Freehill Mining Limited
Auditor's independence declaration
[This page has intentionally been left blank for the insertion of the auditor's independence declaration]
11
Freehill Mining Limited
Contents
30 June 2017
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Freehill Mining Limited
Shareholder information
General information
13
14
15
16
17
37
38
42
The financial statements cover Freehill Mining Limited as a consolidated entity consisting of Freehill Mining Limited and the
entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is
Freehill Mining Limited's functional and presentation currency.
Freehill Mining Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
88 Miller Street
West Melbourne VIC 3003
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 6 October 2017. The
directors have the power to amend and reissue the financial statements.
12
Freehill Mining Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Revenue
Other income
Expenses
Mine production costs
Corporate and administration expenses
Share of associate losses
Listing expenses
Finance costs
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to the owners of
Freehill Mining Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of Freehill
Mining Limited
Consolidated
Note
2017
$
2016
$
6
7
4
8
9
172
28,837
-
-
(83,149)
(545,322)
(8,189)
(822,757)
(91,797)
-
(18,519)
(929,779)
-
(20,627)
(1,522,205)
(968,925)
-
-
(1,522,205)
(968,925)
(125,353)
(125,353)
-
-
(1,647,558)
(968,925)
Cents
Cents
Basic earnings per share
Diluted earnings per share
30
30
(0.51)
(0.51)
(0.47)
(0.47)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
13
Freehill Mining Limited
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Investments accounted for using the equity method
Mining
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2017
$
2016
$
10
40,684
492,521
11,219
544,424
143
-
-
143
11
12
-
7,384,963
7,384,963
2,719,553
-
2,719,553
7,929,387
2,719,696
13
14
15
880,974
1,286,648
2,167,622
185,829
672,472
858,301
-
-
310,000
310,000
2,167,622
1,168,301
5,761,765
1,551,395
16
17
10,280,380
(125,353)
(4,393,262)
4,422,452
-
(2,871,057)
5,761,765
1,551,395
The above statement of financial position should be read in conjunction with the accompanying notes
14
Freehill Mining Limited
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Balance at 1 July 2015
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 16)
Issued
capital
$
Accumulated
losses
$
Total equity
$
3,963,352
(1,902,132)
2,061,220
-
-
-
(968,925)
-
(968,925)
-
(968,925)
(968,925)
459,100
-
459,100
Balance at 30 June 2016
4,422,452
(2,871,057)
1,551,395
Consolidated
Balance at 1 July 2016
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
4,422,452
-
(2,871,057)
1,551,395
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(125,353)
(1,522,205)
-
(1,522,205)
(125,353)
(125,353)
(1,522,205)
(1,647,558)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 16)
5,857,928
-
-
5,857,928
Balance at 30 June 2017
10,280,380
(125,353)
(4,393,262)
5,761,765
The above statement of changes in equity should be read in conjunction with the accompanying notes
15
Freehill Mining Limited
Statement of cash flows
For the year ended 30 June 2017
Cash flows from operating activities
Payments to suppliers (inclusive of GST)
Interest received
Interest and other finance costs paid
Consolidated
Note
2017
$
2016
$
(2,279,219)
172
(21,362)
(4,319)
-
-
Net cash used in operating activities
29
(2,300,409)
(4,319)
Cash flows from investing activities
Payments for exploration and evaluation
Contributions to joint ventures
Pre full scale receipts offset against mine assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Share issue transaction costs
Cash acquired from listing
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
(1,577,419)
(1,043,890)
192,784
-
(1,438,600)
-
(2,428,525)
(1,438,600)
4
3,822,729
1,286,548
(343,762)
3,960
459,100
982,472
-
-
4,769,475
1,441,572
40,541
143
(1,347)
1,490
40,684
143
The above statement of cash flows should be read in conjunction with the accompanying notes
16
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted for
the year ended 30 June 2017.
Going concern
These financial statements have been prepared on a going concern basis, which contemplates the continuity of normal
business activities and the realisation of assets and discharge of liabilities in the normal course of business.
As disclosed in the financial statements, the consolidated entity incurred a loss of $1,522,205 and had operating cash
outflows of $1,817,338 for the year ended 30 June 2017. As at that date, the consolidated entity had a net working capital
deficiency of $1,623,198.
These factors indicate a material uncertainty which may cast significant doubt as to whether the consolidated entity will
continue as a going concern and therefore whether it will realise assets and discharge liabilities in the normal course of
business and at the amounts shown in the financial report.
The directors believe that there are reasonable grounds to believe that the consolidated entity will be able to continue as a
going concern due to the following factors:
●
Since 30 June 2017, the company has received short term borrowings of $495,000 in order to provide additional working
capital;
On 12th September the company completed a placement, issuing 17,043,068 fully paid ordinary shares raising
$1,363,445. Of this amount $1,027,445 was used settle liabilities with the remaining $336,000 being contributed to
working capital;
Since 30 June 2017, the consolidated operations on Chile have continued to expand, with sales totalling $213,642 in
July and August;
The loss for the period includes a non-recurring listing expense of $822,757;
In August 2017, the company extended its arrangement for the Yerbas Buenas tenements with A y F Muzard Limitada
to enable further mining; and
The company continues to develop and expand production with mining on a larger scale expected to commence, with
the short term output target of 40,000 tonnes per month.
●
●
●
●
●
Accordingly, the directors believe that consolidated entity will be able to continue as a going concern and that it is appropriate
to adopt the going concern basis in the preparation of the financial report.
The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities
that might be necessary should the consolidated entity not continue as a going concern.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment
properties, certain classes of property, plant and equipment and derivative financial instruments.
17
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 25.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Freehill Mining Limited
('company' or 'parent entity') as at 30 June 2017 and the results of all subsidiaries for the year then ended. Freehill Mining
Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entit y
when the consolidated entity 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 to direct the activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation
of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Freehill Mining Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
18
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can
be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the
risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net
of sales returns and trade discounts.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
●
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within
12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
19
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Other receivables are recognised at amortised cost, less any provision for impairment.
Joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method,
the share of the profits or losses of the joint venture is recognised in profit or loss and the share of the movements in equity
is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of financial position
at cost plus post-acquisition changes in the consolidated entity's share of net assets of the joint venture. Goodwill relating to
the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for
impairment. Income earned from joint venture entities reduce the carrying amount of the investment.
Mining assets
Capitalised mining development costs include expenditures incurred to develop new ore bodies to define further
mineralisation in existing ore bodies, to expand the capacity of a mine and to maintain production. Mining development also
includes costs transferred from exploration and evaluation phase once production commences in the area of interest.
Amortisation of mining development is computed by the units of production basis over the estimated proved and probable
reserves. Proved and probable mineral reserves reflect estimated quantities of economically recoverable reserves which can
be recovered in the future from known mineral deposits. These reserves are amortised from the date on which production
commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage
of the recoverable measured, indicated and inferred resource. This percentage is reviewed annually.
Restoration costs expected to be incurred are provided for as part of development phase that give rise to the need for
restoration.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement
of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance
cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders
equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured
in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
20
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated
entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest
in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount
is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest
in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the
acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value
of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly
in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's
previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information
possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Freehill Mining Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
21
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial
recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income
('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own
credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting
requirements are intended to more closely align the accounting treatment with the risk management activities of the entity.
New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be
measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The
consolidated entity will adopt this standard from 1 January 2018 but the impact of its adoption is yet to be assessed by the
consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be
presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be
satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the
service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied
over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised
as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial
position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's
performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and
any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this
standard from 1 January 2018 but the impact of its adoption is yet to be assessed by the consolidated entity.
22
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 1. Significant accounting policies (continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable
future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and
leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists
whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability
corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received,
initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating
lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and
an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the
expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating
expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the
statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to
be assessed by the consolidated entity.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of
technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will
be written off or written down.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets are not being recognised at 30 June 2017, because their realisation is not yet considered probable.
Business combinations
As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact
on the assets and liabilities, depreciation and amortisation reported.
23
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 3. Reverse acquisition accounting
Acquisition of Freehill Investments
On 16 January 2017, Freehill Mining Limited (FM) obtained a 100% share interest in Freehill Investments Pty Ltd (FI) after
a reverse acquisition. The transaction did not meet the of a business combination in AASB 3 'Business Combinations' as
the net assets that existed in FM as at the date of acquisition did not represent a 'business' (as defined in AASB 3). The
transaction has therefore been accounted for in the consolidated financial statements by reference to the requirement of
AASB 2 'Share-Based Payments', and AASB 3, as a deemed issue of shares which is in effect, a share based transaction
whereby FI has gained the listing status of FM.
The following principles and guidance on the preparation and presentation of the consolidated financial statements in reverse
acquisition set out in AASB 3 have been applied:-
●
●
●
●
●
●
fair value adjustments arising at acquisition were made to FM, not those of FI;
retained earnings and other equity balances in the consolidated financial statements at acquisition date are those of FI;
an in-substance share-based payment transactions arise whereby FM is deemed to have issued shares in exchange
for the nets liabilities of FI. The listing status does not qualify for recognition as an intangible asset. The excess of the
value of the consideration deemed to have been paid over the value of the net liabilities acquired has therefore, been
expensed in profit of loss as a share based listing expense;
the equity structure in the consolidated financial statements (the number and type of equity instruments issued) at the
date of acquisition reflects the equity structure of FM, including the equity instruments issued by FM to effect the
acquisition.
the results for the 2017 financial year represent the results of FI for the entire financial year, together with the results of
FM from 16 January 2017; and
the comparative results represent the results of FI only.
Note 4. Acquisition share based payment expense
On 16 January 2107, FM acquired 100% of the share capital of FI. FM issued 268,000,000 fully paid ordinary shares to the
original shareholders of FI.
This transaction has been accounted as a share-based payment in accordance with AASB 2 'Share-Based Payments'.
The following table represents the assets and liabilities of FM that were acquired on its acquisition by FI :
Net assets acquired
Cash and cash equivalents
Trade and other receivables
Loan to related party
Trade and other payables
Short term loans
Convertible notes
Total listing expense recognised in Statement of Comprehensive Income
Note 5. Operating segments
Consolidated
2017
2016
3,960
57,369
1,358,985
(606,917)
(422,297)
(1,213,857)
(822,757)
-
-
-
-
-
-
-
Identification of reportable operating segments
The consolidated entity is organised into one operating segment: Chilean Mining. This operating segments are based on
the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision
Makers ('CODM')) in assessing performance and in determining the allocation of resources.
24
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 6. Revenue
Interest
Note 7. Other income
Net foreign exchange gain
Note 8. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Mine assets
Finance costs
Interest and finance charges paid/payable
Note 9. Income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.5% (2016: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Non-deductible items
Temporary differences and losses not bought to account
Income tax expense
25
Consolidated
2017
$
2016
$
172
-
Consolidated
2017
$
2016
$
28,837
-
Consolidated
2017
$
2016
$
14,506
-
91,797
20,627
Consolidated
2017
$
2016
$
(1,522,205)
(968,925)
(418,606)
(290,678)
226,258
10,132
(192,348)
192,348
(280,546)
280,546
-
-
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 10. Current assets - trade and other receivables
Other receivables
Indirect taxes receivable
Note 11. Non-current assets - investments accounted for using the equity method
Investment in Chilean joint venture
Investment in Chilean joint venture
Opening balance
Contributions to joint venture
Share of joint venture losses
Transfer on acquiring control of Chilean assets
Consolidated
2017
$
2016
$
2,990
489,531
492,521
-
-
-
Consolidated
2017
$
2016
$
-
2,719,553
Consolidated
2017
$
2016
$
2,719,553
1,043,890
(8,189)
(3,755,254)
2,210,732
1,438,600
(929,779)
-
-
2,719,553
On 16 January 2017, the consolidated entity acquired 100% of the Chilean assets. The amounts previously accounted for
using equity accounting formed part of the consideration when accounting for this business combination.
Note 12. Non-current assets - mining
Mining assets - at cost
Tenement assets - at cost
Mining plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2017
$
2016
$
5,675,169
1,496,130
228,170
(14,506)
213,664
7,384,963
-
-
-
-
-
-
26
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 12. Non-current assets - mining (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2015
Mining plant Tenement
& equipment
$
assets
$
Mining
assets
$
Total
$
-
-
-
-
Balance at 30 June 2016
Additions
Additions through business combinations (note 26)
Mining receipts offset against the carrying value of the assets
Exchange differences
Depreciation expense
-
-
236,362
-
(8,192)
(14,506)
-
-
1,616,168
-
(120,038)
-
-
1,577,298
4,497,915
(192,784)
(207,260)
-
-
1,577,298
6,350,445
(192,784)
(335,490)
(14,506)
Balance at 30 June 2017
213,664
1,496,130
5,675,169
7,384,963
The mine in Chile is yet to reach steady state production, and for this reason mining receipts have been offset against the
carrying value of the mining assets and there has been no amortisation charges against the mining assets and tenement
assets.
Note 13. Current liabilities - trade and other payables
Trade payables
Purchase agreement payable *
Interest payable
Other payables
Consolidated
2017
$
2016
$
35,000
521,427
1,919
322,628
-
-
20,627
165,202
880,974
185,829
Refer to note 19 for further information on financial instruments.
* In August 2017, the company extended its arrangement for the Yerbas Buenas tenements with A y F Muzard Limitada.
Note 14. Current liabilities - borrowings
Convertible notes payable
Short term loans
Consolidated
2017
$
2016
$
-
1,286,648
672,472
-
1,286,648
672,472
Refer to note 19 for further information on financial instruments.
The short term loans are repayable at 12 months from the date of issue and interest has been accrued at 15% per annum
27
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 15. Non-current liabilities - borrowings
Loan from controlling entity
Note 16. Equity - issued capital
Consolidated
2017
$
2016
$
-
310,000
Ordinary shares - fully paid
331,786,900 268,000,000 10,280,380
4,422,452
Movements in ordinary share capital
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
Details
Balance
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Balance
Issue of IPO share
Recognition of Freehill Mining's number of shares at
listing
Share issued to settle convertible notes and FI
liabilities
Cost of capital raising
Date
Shares
Issue price
$
1 July 2015
20 August 2016
17 September 2016
29 September 2016
16 October 2016
19 October 2016
23 October 2016
14 December 2016
130,350,000
150,000
250,000
1,250,000
500,000
500,000
500,000
134,500,000
$0.1000
$0.1000
$0.1000
$0.1000
$0.1000
$0.1000
$0.0001
30 June 2016
16 January 2017
268,000,000
20,119,623
$0.2000
4,094,002
15,000
25,000
125,000
50,000
50,000
50,000
13,450
4,422,452
4,023,925
16 January 2017
11,281,148
$0.0000
-
16 January 2017
32,386,129
-
$0.0700
$0.0000
2,378,961
(544,958)
Balance
30 June 2017
331,786,900
10,280,380
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
28
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 16. Equity - issued capital (continued)
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company's share price at the time of the investment. The consolidated entity is not actively
pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to
maximise synergies.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements during the financial
year.
Note 17. Equity - reserves
Foreign currency reserve
Consolidated
2017
$
2016
$
(125,353)
-
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2015
Balance at 30 June 2016
Foreign currency translation
Balance at 30 June 2017
Note 18. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Foreign
currency
$
-
-
(125,353)
(125,353)
29
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 19. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of
the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks,
ageing analysis for credit risk.
Risk management is carried out by the Board of Directors ('the Board'). These policies include identification and analysis of
the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. The Board identifies,
evaluates and hedges financial risks within the consolidated entity's operating units.
Market risk
Foreign currency risk
The consolidated entity is exposed to foreign exchange risk in relation to its operation in Chile, and liabilities denominated in
US dollars.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
Consolidated
US dollars
Chilean pesos
Assets
2017
$
2016
$
Liabilities
2017
$
2016
$
-
483,071
483,071
-
-
-
521,427
534,085
1,055,512
AUD weakened
Effect on
-
-
-
AUD strengthened
Effect on
Consolidated - 2017
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
US Dollar
Chilean pesos
20%
20%
(104,285)
(10,203)
(104,285)
(10,203)
20%
20%
104,285
10,203
104,285
10,203
(114,488)
(114,488)
114,488
114,488
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity is not exposed to any interest rate risk.
Credit risk
The consolidated entity is not exposed to significant credit risk.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
30
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 19. Financial instruments (continued)
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade other payables
Interest-bearing - fixed rate
Short term loans
Total non-derivatives
Consolidated - 2016
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing - fixed rate
Convertible notes payable
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
880,974
15.00%
1,268,648
2,149,622
-
-
-
-
-
-
-
-
-
880,974
1,268,648
2,149,622
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
185,829
10.00%
672,472
858,301
-
-
-
-
-
-
-
-
-
185,829
672,472
858,301
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 20. Key management personnel disclosures
Directors
The following persons were directors of Freehill Mining Limited during the financial year:
Raymond Charles Mangion
Paul Davies
Nicholas Kapes
Stephen Chaplin
Peter Hinner
31
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 20. Key management personnel disclosures (continued)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity
is set out below:
Short-term employee benefits
Share-based payments
Consolidated
2017
$
2016
$
243,593
400,000
22,000
-
643,593
22,000
The share based payments were issued before the reverse acquisition therefore are not included in the statement of
comprehensive income.
Note 21. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor
of the company, and its network firms:
Consolidated
2017
$
2016
$
25,000
19,572
-
-
Audit services - RSM Australia Partners
Audit or review of the financial statements
Other services - network firms
Audit of Chilean subsidiaries
Note 22. Contingent liabilities
The consolidated entity had no contingent liabilities at 30 June 2017 and 30 June 2016.
Note 23. Commitments
The consolidated entity had no commitments at 30 June 2017 and 30 June 2016.
Note 24. Related party transactions
Parent entity
Freehill Mining Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 20 and the remuneration report included in the
directors' report.
32
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 24. Related party transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2017
$
2016
$
Payment for other expenses:
Interest accrued to on short terms loans payable to Ray Mangion and his wife
1,558
-
Other transactions:
Payments for mining development expenditure were made to mine project contractor Lacerta
Finance and Mining SpA ("Lacerta"). Yerbas Buenas SpA director Juan Dagach, is the
general manager of Lacerta.
2,621,188
1,438,600
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current borrowings:
Loan from Ray Mangion (director) and his wife
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 25. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Consolidated
2017
$
2016
$
201,558
-
Parent
2017
$
2016
$
(575,309)
(507,888)
(575,309)
(507,888)
33
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 25. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Foreign currency reserve
Accumulated losses
Total equity/(deficiency)
Parent
2017
$
2016
$
54,784
55,548
6,093,399
365,548
1,633,537
177,221
1,633,537
769,277
23,536,325 16,821,001
320,681
-
(17,545,411)
(19,076,463)
4,459,862
(403,729)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2017 and 30 June 2016.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017 and 30 June 2016.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 and 30 June 2016.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except
for the following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 26. Business combinations
Acquisition of Yerbas Buenas and San Patricio Mineria
On 16 January 2017, after completion of the IPO, Freehill Investments Pty Ltd acquired the remaining 50% of the issued
capital of Yerbas Buenas SpA and San Particio Mineria. Prior to this, the company owned a 50% joint venture interest in
these companies. There was no further consideration payable by Freehill Investments Pty Ltd. The consideration for the
transaction was the pre-acquistion contributions the joint venture.
34
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 26. Business combinations (continued)
Details of the acquisition are as follows:
Cash and cash equivalents
Other current assets
Mine assets
Other liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Pre-acquisition contributions to Chilean joint venture
Note 27. Interests in subsidiaries
Fair value
$
4,048
2,824
6,350,445
(669,293)
5,688,024
-
5,688,024
5,688,024
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1:
Name
Freehill Investments Pty Ltd
Yerbas Buenas SpA
San Patricio Mineria
Note 28. Events after the reporting period
Principal place of business /
Country of incorporation
Australia
Chile
Chile
Ownership interest
2016
2017
%
%
100.00%
100.00%
100.00%
-
-
-
On 12 September 2017, the company issued 17,043,068 fully paid ordinary shares raising $1,363,445. These funds reduced
existing debt including funds raised after balance date by some $1,027,445 and provided $336,000 funds to purchase plant
for the Chilean operations and contribute to working capital. In addition a further $495,000 was raised to meet the Company’s
obligations under the purchase agreement for the Yerbas Buenas tenements and further support plant acquisition and
working capital.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
35
Freehill Mining Limited
Notes to the financial statements
30 June 2017
Note 29. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
(1,522,205)
(968,925)
Consolidated
2017
$
2016
$
Adjustments for:
Depreciation and amortisation
Share of loss - joint ventures
Accrued interest
Gain on foreign exchange
Listing expense
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in other operating assets
Decrease in trade and other payables
Net cash used in operating activities
Note 30. Earnings per share
14,506
-
70,435
(28,837)
822,757
-
929,779
20,627
-
-
(435,152)
(11,219)
(1,210,694)
14,200
-
-
(2,300,409)
(4,319)
Consolidated
2017
$
2016
$
Loss after income tax attributable to the owners of Freehill Mining Limited
(1,522,205)
(968,925)
Weighted average number of ordinary shares used in calculating basic earnings per share
296,835,174 205,994,520
Weighted average number of ordinary shares used in calculating diluted earnings per share 296,835,174 205,994,520
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(0.51)
(0.51)
(0.47)
(0.47)
36
Freehill Mining Limited
Directors' declaration
30 June 2017
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2017 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Paul Davies
6 October 2017
37
Freehill Mining Limited
Independent auditor's report to the members of Freehill Mining Limited
[This page has intentionally been left blank for the insertion of page one of the independent auditor's report]
38
Freehill Mining Limited
Independent auditor's report to the members of Freehill Mining Limited
[This page has intentionally been left blank for the insertion of page two of the independent auditor's report]
39
Freehill Mining Limited
Independent auditor's report to the members of Freehill Mining Limited
[This page has intentionally been left blank for the insertion of page three of the independent auditor's report]
40
Freehill Mining Limited
Independent auditor's report to the members of Freehill Mining Limited
[This page has intentionally been left blank for the insertion of page four of the independent auditor's report]
41
Freehill Mining Limited
Shareholder information
30 June 2017
The shareholder information set out below was applicable as at 14 September 2017.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number
of holders
of ordinary
shares
821
87
200
210
303
1,621
893
Ordinary shares
% of total
shares
issued
Number held
94,500,000
12,667,000
10,166,000
10,008,082
8,923,000
5,875,000
5,205,000
5,133,221
4,800,000
4,567,500
4,303,837
3,800,000
3,750,000
3,400,000
3,164,816
3,000,000
2,822,000
2,650,000
2,600,000
2,500,000
27.09
3.63
2.91
2.87
2.56
1.68
1.49
1.47
1.38
1.31
1.23
1.09
1.08
0.97
0.91
0.86
0.81
0.76
0.75
0.72
193,835,456
55.57
Smart Investment Chile LLC
G&T Holdings Limited
L A L Global Limited
Datapulse International Pty Ltd
Origami Equities Pty Ltd
La Serena Holdings Pty Ltd
Odel Investments Pty Ltd
La Serena Holdings Pty Ltd
Mr John Mavrias
Mr Leo Radiotis
DG Freehold Pty Ltd
South Beach Super Pty Ltd
Ms Joan Grainger
Glacier Blue Pty Ltd
Mr Leo Radiotis
Origami Equities Pty Ltd
Mr John Mavrias
AKM Marlborough Pty Ltd
AKM Marlborough Pty Ltd
Craig Charter Investments Pty Ltd
Unquoted equity securities
There are no unquoted equity securities.
42
Freehill Mining Limited
Shareholder information
30 June 2017
Substantial holders
Substantial holders in the company are set out below:
Smart Investment Chile LLC
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
94,500,000
27.09
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
43