Freehill Mining Limited
ACN 091 608 0025
Annual Report - 30 June 2018
Freehill Mining Limited
Corporate directory
30 June 2018
Directors
Raymond Charles Mangion
Paul Davies
Samuel Duddy
Peter Hinner
Company secretary
Frank Pirera
Registered office
Principal place of business
Share register
Auditor
88 Miller Street
West Melbourne VIC 3003
88 Miller Street
West Melbourne Vic 3003
Automic Registry Services
Level 12, 50 Holt Street
Surry Hills, NSW 2000
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
Freehill Mining Limited
Chairman's letter
30 June 2018
Dear Shareholders,
2018 was a year of significant achievement, change, and ultimately redirection for the company. Objectives outlined during
the 2017 Annual General Meeting for the year ahead were generally achieved. The board is disappointed with the share price
and does not believe it reflects the true value of the Company assets. Modification and expansion of the demonstration
processing plant was carried out as planned resulting in record levels of magnetite production and revenue in the March
quarter however significant falls in the iron ore price and the quality of plant equipment impacted our ability to achieve site
operating surpluses.
All payments under the purchase agreement with Sociedad A y F Muzard Mineria Limitada for the Yerbas Buenas 1-16
concession block have now been completed and the company now has full ownership of both the Arenas and Yerbas Buenas
mining concession blocks as well as associated surface rights.
Operations
Operation of the trial mining and demonstration processing plant have provided operational, geotechnical, and operating cost
insights that will be invaluable for future feasibility studies.
A strategic review of the companies objectives toward the end of 2017 highlighted that it would be difficult to satisfy both the
Compania Minera Del Pacifico “CMP” requirement for the continued supply of magnetite product and the Company’s
immediate objective of focussing all new capital toward exploration and the development of a JORC Resource without a major
change.
To this end the Company has been actively assessing and evaluating a number of mining operating models ranging from
partnering with mining services firms to outsourcing operations to allow capital to be deployed to exploration activities which
can derive greatest shareholder value in the short to medium term.
An outsourcing approach is favoured to minimise or remove the Company’s exposure to production costs and this is currently
being negotiated.
A conceptual Exploration Target for the Yerbas Buenas project was determined by Geos Mining based on the surface extent
of highly magnetic anomalous bodies identified by the high resolution geophysics, as well as the RC drilling and trial mining
records.
Board Renewal
Interim Chairman Mr Frank Terranova who brought extensive knowledge and experience in the mining sector, both
domestically and internationally, graciously agreed to join the company to carry out a strategic review involving the Board
assessing its own composition. As part of this process Mr Stephen Chaplin and Mr Nicholas Kapes believed it was in the
best interests of the Company to resign from the Board of Freehill and the Company thanks them for their contribution.
It is important that Freehill broadens its Board composition to fully reflect all attributes required in overseeing its Chilean
resource projects and has commenced the process in order to achieve this objective. The strategic review also looked at the
prioritisation and allocation of capital across its portfolio of assets in order to improve shareholder value.
2
Freehill Mining Limited
Chairman's letter
30 June 2018
2019 Priorities
Having commenced a restructuring of the board, the company is now focussed on restoring shareholder value by
completing a maiden drilling program, scheduled to commence fourth quarter 2018, that will deliver a JORC Resource
Estimate.
Finally we would like to close by thanking our shareholders, management team and other stakeholders for their patience
and contribution over the past year. The interest support and effort of these groups are vital to the future success of our
company.
…………………………………………………
Ray Mangion
Chairman
Melbourne, 27th September 2018
3
Freehill Mining Limited
Directors' report
30 June 2018
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 2018.
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:
Raymond Charles Mangion
Paul Davies
Samuel Duddy (appointed 9 July 2018)
Peter Hinner (appointed 31 July 2018)
Frank Terranova (appointed 18 December 2017 and resigned 12 July 2018)
Stephen Chaplin (resigned 5 January 2018)
Nicholas Kapes (resigned 5 January 2018)
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 $2,965,058 (30 June 2017: $1,522,205).
Refer to the Chairman's Report that directly precedes this Directors' Report.
Significant changes in the state of affairs
During the year the company issued 33,414,791 fully paid ordinary shares valued at $2,644,154 before costs. Of these
shares valued at $244,749 were issued to KMP to settle fees and expenses, shares valued at $336,000 were issued for cash
and shares valued at $2,063,405 were issued to settle debt and other amounts payable.
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 6 July 2018, the company issued 37,765,166 fully paid ordinary shares. Of these shares 31,729,019 (valued at
$1,522,992) were issued on the conversion of convertible notes, 5,208,333 (valued at $250,000) fully paid ordinary shares
were issued in relation to amounts received before 30 June 2018, and 827,814 (valued at $50,000) fully paid ordinary shares
were issued to the company's COO as part of his remuneration.
On 13 July 2018, the company issued 353,847 fully paid (valued at $16,985) ordinary shares on the conversion of convertible
notes.
On 17 August 2018, the consolidated entity has settled all obligations in relation to the purchase agreement payable on
Yerbas Buenas tenement leases.
The consolidated entity is currently in negotiation to outsource production at the Yerbas Buenas project in return for a rental
stream based on product sold. This is intended to remove any capital demands for production while the company executes
its drilling program.
Since 30 June 2018, the consolidated entity has received additional debt funding of $1,080,000.
No other matter or circumstance has arisen since 30 June 2018 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.
4
Freehill Mining Limited
Directors' report
30 June 2018
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.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Raymond Charles Mangion
Non-Executive Director and Chairman since 9 July 2018)
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:
2,644,737 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
5
Freehill Mining Limited
Directors' report
30 June 2018
Name:
Title:
Qualifications:
Experience and expertise:
Peter Hinner
Chief Executive Officer (appointed 31 July 2018)
Bachelor of Science in Chemistry from the Queensland University of Technology with
post graduate qualifications in mining, metallurgy and business management
Mr Hinner was appointed COO of the Company in February 2017 and has over 35
years experience in the heavy minerals and gold industry both within Australia and
internationally.
Over the past several years he has worked predominantly internationally as a project
development consultant on a variety of projects in Africa, Korea, Indonesia, Malaysia
and South America. His previous roles have included senior management and
operational roles in several of the world’s largest mineral operations as well as mine
management roles with BP Minerals Indonesia, Operations Manager for the Tiwest
Joint Venture mine in Western Australia, Chief Operating Officer of an industrial
KPMG.
senior
minerals
consultant
company
and
for
He has significant mining, operating and project management experience in most
facets of the industry including exploration, dredging, processing, engineering design,
construction, commissioning and feasibility studies.
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
Interests in rights:
2,028,697 fully paid ordinary shares
1,250,000 performance shares
Experience and expertise:
Name:
Title:
Qualifications:
Samuel Duddy
Non-Executive Director (appointed 9 July 2018)
First Class Honours Degree Science, Master of Property Science and Master of
Business Administration (all from University of Queensland)
Mr Duddy is a substantial investor in Freehill and has previously visited the Yerbas
Buenas operations as part of his own due diligence process. Mr Duddy is currently a
board member and majority shareholder of a Civil Construction firm and brings to the
Board a wealth of knowledge and experience in business management, engineering
and finance.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
41,344,105 fully paid ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Frank Terranova
Non - Executive Director (appointed 18 December 2017 and resigned 12 July 2018)
Fellow of Institute of Chartered Accountants
Mr Frank Terranova has extensive experience as a Director and Executive with a wide
range of Australian and international publicly listed companies. He has held senior roles
in a number of organisations including, Normandy Mining Limited and Queensland
Cotton Limited. He was Chief Financial Officer and ultimately Managing Director of
Allied Gold PLC which was subsequently acquired by St Barbara Limited in 2012.
Mr Terranova was also Managing Director of Polymetals Mining Limited where he led
its transformation through a merger with Southern Cross Goldfields Limited in 2013 and
oversaw the combined group’s recapitalisation program. He has also served on the
Boards of a number of resource public companies overseeing a variety of successful
growth and restructuring initiatives. He is currently a Director of Mayur Resources PTE
Limited.
and
Resources
Chairman
Executive
AUSAG
of
Mr Terranova is a member of the Australian Institute of Company Directors and the
Finance and Treasury Association of Australia.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
Interests in rights:
N/A
N/A
6
Freehill Mining Limited
Directors' report
30 June 2018
Name:
Title:
Experience and expertise:
Stephen Chaplin
Chairman (resigned 5 January 2018)
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:
Former directorships (last 3 years): N/A
N/A
Special responsibilities:
N/A
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Nicholas Kapes
Non-Executive Director (resigned 5 January 2018)
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:
N/A
'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 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. He resigned with effect from 8 January 2018.
Frank Pirera was appointed company secretary on 8 January 2018. He has extensive company secretarial experience and
is a fellow of the Certified Practising Accountants.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2018, and
the number of meetings attended by each director were:
Raymond Charles Mangion
Paul Davies
Nicholas Kapes
Stephen Chaplin
Frank Terranova
7
Full Board
Attended
Held
6
9
6
6
3
9
9
6
6
3
Freehill Mining Limited
Directors' report
30 June 2018
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
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.
8
Freehill Mining Limited
Directors' report
30 June 2018
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.
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 2018, the consolidated entity did not engage remuneration consultants.
Voting and comments made at the company's 23 November 2017 Annual General Meeting ('AGM')
At the 23 November 2017 AGM, 88.35% of the votes received supported the adoption of the remuneration report for the year
ended 30 June 2017. The company did not receive any specific feedback at the AGM regarding its remuneration practices.
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.
9
Freehill Mining Limited
Directors' report
30 June 2018
2018
Raymond Charles Mangion
Nicholas Kapes
Stephen Chaplin
Frank Terranova
Executive Directors:
Paul Davies
Other Key Management
Personnel:
Peter Hinner
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
$
45,000
22,500
22,500
22,500
69,000
174,567
356,067
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,500
45,000
22,500
22,500
63,000
-
69,000
100,000
140,500
274,567
496,567
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2017
Raymond Charles Mangion
Nicholas Kapes
Stephen Chaplin
Executive Directors:
Paul Davies
Other Key Management
Personnel:
Peter Hinner
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
*
Share based payments were issued before completion of the reverse acquisition therefore the expense is not included
in the Statement of Comprehensive Income.
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:
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
Chairman
1 January 2017
Remuneration is set at $45,000 per annum inclusive of statutory superannuation.
10
Freehill Mining Limited
Directors' report
30 June 2018
Name:
Title:
Agreement commenced:
Details:
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 valued at $100,000.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation during the year ended
30 June 2018 are set out below:
Name
Peter Hinner
Peter Hinner
Date
7 August 2017
7 February 2018
Shares
Issue price
$
548,705
642,178
$0.0910
$0.0780
50,000
50,000
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 2018.
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 2018.
Performance rights
On 5 May 2018, Frank Terranova was issued 500,000 performance rights which vest in six months from issue provided that
he is still working for the company. An expense of $40,500 has been recognised in relation to these performance rights.
When appointed Peter Hinner in 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 2018, or at the time of signing.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
2018
$
2017
$
2016
$
2015
$
2014
$
Revenue
Loss after income tax
61
(2,965,089)
172
(1,522,205)
-
(968,925)
-
(1,606,589)
-
(295,543)
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)
2018
2017
0.06
(0.84)
(0.84)
0.10
(0.51)
(0.51)
11
Freehill Mining Limited
Directors' report
30 June 2018
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:
Ordinary shares
Raymond Charles Mangion
Paul Davies
Nicholas Kapes
Stephen Chaplin
Peter Hinner
Balance at
Received
the start of
the year
as part of
remuneration Additions
Disposals /
held
when
resigned
Balance at
the end of
the year
2,250,000
500,000
500,000
2,118,671
-
5,368,671
-
-
-
-
1,190,883
1,190,883
394,737
-
-
-
-
394,737
-
-
(500,000)
(2,118,671)
-
(2,618,671)
2,644,737
500,000
-
-
1,190,883
4,335,620
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
Frank Terranova
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
-
500,000
500,000
-
-
-
-
-
-
1,250,000
500,000
1,750,000
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
2018 and up to the date of this report.
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 2018 and up to the date of this report.
12
Freehill Mining Limited
Directors' report
30 June 2018
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
The directors are of the opinion that the services as disclosed in note 22 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
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
___________________________
Ray Mangion
Chairman
27 September 2018
13
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Freehilll Mining Limited for the year ended 30 June 2018, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
P A RANSOM
Partner
Dated: 27 September 2018
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
14
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
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Freehill Mining Limited
Contents
30 June 2018
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
16
17
18
19
20
44
45
48
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 27 September 2018. The
directors have the power to amend and reissue the financial statements.
15
Freehill Mining Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Other income
Expenses
Mine production costs
Corporate and administration expenses
Share of associate losses
Listing expenses
Other 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
2018
$
2017
$
6
4
8
61
172
-
28,837
-
(1,421,763)
-
-
(87,843)
(1,455,513)
(83,149)
(545,322)
(8,189)
(822,757)
-
(91,797)
(2,965,058)
(1,522,205)
-
-
(2,965,058)
(1,522,205)
935,388
(125,353)
935,388
(125,353)
(2,029,670)
(1,647,558)
Cents
Cents
Basic earnings per share
Diluted earnings per share
31
31
(0.84)
(0.84)
(0.51)
(0.51)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
16
Freehill Mining Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Exploration and evaluation asset
Mining
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Other
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
2018
$
2017
$
9
165,846
999,015
1,481
1,166,342
40,684
492,521
11,219
544,424
10
11
12,666,803
-
12,666,803
7,171,299
213,664
7,384,963
13,833,145
7,929,387
12
13
14
2,534,980
2,690,072
250,000
5,475,052
880,974
1,286,648
-
2,167,622
15
1,847,500
1,847,500
-
-
7,322,552
2,167,622
6,510,593
5,761,765
16
17
12,912,366 10,280,380
(125,353)
(4,393,262)
956,547
(7,358,320)
6,510,593
5,761,765
The above statement of financial position should be read in conjunction with the accompanying notes
17
Freehill Mining Limited
Statement of changes in equity
For the year ended 30 June 2018
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
Consolidated
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2017
10,280,380
(125,353)
(4,393,262)
5,761,765
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)
Share-based payments
Equity portion of convertible notes
-
-
-
-
935,388
(2,965,058)
-
(2,965,058)
935,388
935,388
(2,965,058)
(2,029,670)
2,631,986
-
-
-
40,500
106,012
-
-
-
2,631,986
40,500
106,012
Balance at 30 June 2018
12,912,366
956,547
(7,358,320)
6,510,593
The above statement of changes in equity should be read in conjunction with the accompanying notes
18
Freehill Mining Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Consolidated
Note
2018
$
2017
$
(940,338)
61
(284,938)
(2,279,219)
172
(21,362)
Net cash used in operating activities
30
(1,225,215)
(2,300,409)
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 received ahead of the issue of shares
Proceeds from borrowings
Proceeds from convertible notes
Share issue transaction costs
Repayment of borrowings
Cash acquired from listing
Net cash from financing activities
Net increase 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
(5,567,826)
-
1,706,610
(1,577,419)
(1,043,890)
192,784
(3,861,216)
(2,428,525)
336,000
250,000
660,271
4,192,490
(12,168)
(215,000)
-
3,822,729
-
1,286,548
-
(343,762)
-
3,960
5,211,593
4,769,475
125,162
40,684
40,541
143
165,846
40,684
4
The above statement of cash flows should be read in conjunction with the accompanying notes
19
Freehill Mining Limited
Notes to the financial statements
30 June 2018
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 2018.
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 $2,965,058 (2017: $1,522,205) and had
operating cash outflows of $1,225,215 (2017: $2,300,409). As at that date, the consolidated entity had a net working capital
deficiency of $4,308,710 (2017: $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 2018, the company has received funds of $1,080,000 from current shareholders which are currently
classified as borrowings. One of the shareholders has communicated their intention to receive share capital in return
for $840,000 of this amount. The entity is under negotiation to issue convertible notes for the remaining $240,000;
Other current liabilities included $250,000 of funds received in advance of issuing shares. Since 30 June 2018, these
shares have been issued and the liability extinguished;
The consolidated entity is currently in negotiation to outsource production at the Yerbas Buenas project in return for a
rental stream based on product sold. This is intended to remove any capital demands for production while the Company
executes its drilling program;
Since 30 June 2018, there have been conversions of convertible notes resulting in an overall reduction of liabilities of
$1,539,977. Of this amount $114,298 were included as current liabilities with the remainder being non-current; and
The company is in active discussions with parties regarding further fundraisings with both current shareholders and new
investors. This funding will be used to fully fund our drilling program and the establishment of JORC compliant resource,
as well as meeting the ongoing working capital requirement of the consolidated entity.
●
●
●
●
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.
20
Freehill Mining Limited
Notes to the financial statements
30 June 2018
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 26.
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 2018 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.
21
Freehill Mining Limited
Notes to the financial statements
30 June 2018
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.
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.
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.
22
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Exploration and evaluation assets
Exploration and evaluation expenditure in relation to separate areas of interest for which rights of tenure are current is carried
forward as an asset in the statement of financial position where it is expected that the expenditure will be recovered through
the successful development and exploitation of an area of interest, or by its sale; or exploration activities are continuing in
an area and activities have not reached a stage which permits a reasonable estimate of the existence or otherwise of
economically recoverable reserves. Where a project or an area of interest has been abandoned, the expenditure incurred
thereon is written off in the year in which the decision is made.
Pre-production mine sales are off-set against the carrying value of the exploration assets.
Rehabilitation costs
Restoration costs expected to be incurred are provided for during the development phase which is expected to 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.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
23
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Employee benefits
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash
is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of
any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
Fair value measurement
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers
between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value
measurement.
24
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
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.
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.
25
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
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.
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 2018. 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 July 2018 but the impact of its adoption is not expected to be material.
26
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
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 July 2018 but the impact of its adoption is not expected to be material.
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 still
being assessed by management.
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.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant
to fair value and therefore which category the asset or liability is placed in can be subjective.
27
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 2. Critical accounting judgements, estimates and assumptions (continued)
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
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 2018, 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.
Pre-production mine receipts
Pre-production mine sales are being offset against the carrying value of the exploration asset because the current mine and
processing plant have been purposely designated as a trial mine and demonstration process plant and not a full operational
commercial mining pit or production plant.
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 recognition criteria 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 wherby 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 2017, 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 :
28
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 4. Acquisition share based payment expense (continued)
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 Profit or Loss
Note 5. Operating segments
Consolidated
2018
2017
-
-
-
-
-
-
-
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 segment is 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.
Note 6. Other income
Net foreign exchange gain
Note 7. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Mine assets
Consolidated
2018
$
2017
$
-
28,837
Consolidated
2018
$
2017
$
30,730
14,506
29
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 8. 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%
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
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 27.5%
Consolidated
2018
$
2017
$
(2,965,058)
(1,522,205)
(815,391)
(418,606)
-
226,258
(815,391)
815,391
(192,348)
192,348
-
-
Consolidated
2018
$
2017
$
3,414,335
2,269,557
938,942
624,128
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses
can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed.
Note 9. Current assets - trade and other receivables
Trade receivables
Other receivables
Indirect taxes receivable
Note 10. Non-current assets - exploration and evaluation asset
Consolidated
2018
$
2017
$
189,280
148,180
661,555
-
2,990
489,531
999,015
492,521
Consolidated
2018
$
2017
$
Exploration and evaluation - at cost
12,666,803
7,171,299
30
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 10. Non-current assets - exploration and evaluation asset (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 2016
Additions
Additions through business combinations (note 27)
Mining sales offset against the carrying value of the assets
Exchange differences
Balance at 30 June 2017
Additions
Exchange differences
Mining receipts offset against the carrying value of the assets
Balance at 30 June 2018
Note 11. Non-current assets - mining
Mining plant and equipment - at cost
Less: Accumulated depreciation
Exploration &
evaluation
$
-
1,577,298
6,114,083
(192,784)
(327,298)
7,171,299
6,913,307
478,087
(1,895,890)
12,666,803
Consolidated
2018
$
2017
$
-
-
-
-
228,170
(14,506)
213,664
213,664
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 2016
Additions through business combinations (note 27)
Exchange differences
Depreciation expense
Balance at 30 June 2017
Disposals
Depreciation expense
Balance at 30 June 2018
31
Mining plant
& equipment
$
Total
$
-
236,362
(8,192)
(14,506)
-
236,362
(8,192)
(14,506)
213,664
(182,934)
(30,730)
213,664
(182,934)
(30,730)
-
-
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 12. Current liabilities - trade and other payables
Trade payables
Purchase agreement payable *
Interest payable
Other payables
Refer to note 19 for further information on financial instruments.
* Since 30 June 2018, this amount has been paid in full.
Note 13. Current liabilities - borrowings
Convertible notes payable
Short term loans
Consolidated
2018
$
2017
$
1,696,148
219,250
455,914
163,668
35,000
521,427
1,919
322,628
2,534,980
880,974
Consolidated
2018
$
2017
$
1,965,150
724,922
-
1,286,648
2,690,072
1,286,648
Refer to note 19 for further information on financial instruments.
Convertible notes includes notes with a value of $1,235,476 with a conversion price of $.048, an interest rate of 12.5% and
which expire in December 2018. The company is currently in negotiations to extend these notes for a further 12 months.
Convertible notes include $729,674 with a value of $729,674 with a variable conversion price, an interest rate of $12.5% and
which expire in December 2018. These notes are denominated in USD.
The short term loans are repayable at 12 months from the date of issue and interest has been accrued at 15% per annum.
Note 14. Current liabilities - other
Funds received in advance of issuing shares
The shares in relation to these funds received in advance were issued on 6 July 2018.
Note 15. Non-current liabilities - borrowings
Convertible notes payable
32
Consolidated
2018
$
2017
$
250,000
-
Consolidated
2018
$
2017
$
1,847,500
-
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 15. Non-current liabilities - borrowings (continued)
Refer to note 19 for further information on financial instruments.
Convertible notes include $487,500 of notes which have a conversion price of $.048, an interest rate of 12.5% and expire in
March 2020.
Convertible notes also includes notes with a value of $1,360,000 with a variable conversion price an interest rate of 3% per
month compounding, which expire in August 2019.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Convertible notes
Assets pledged as security
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Consolidated
2018
$
2017
$
3,812,650
-
Consolidated
2018
$
2017
$
Exploration and evaluation assets
12,447,465
-
Note 16. Equity - issued capital
Ordinary shares - fully paid
365,201,691 331,786,900 12,912,366 10,280,380
Consolidated
2018
Shares
2017
Shares
2018
$
2017
$
33
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 16. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
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
1 July 2016
16 January 2017
268,000,000
20,119,623
$0.2000
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
Shares issued to KMP
Shares issued
Share issued to extinguish short term debt
Shares issued to pay trade creditors
Loan establishment fee paid with shares
Conversion of convertible notes
Conversion of convertible notes
Shares issued to KMP
Conversion of convertible notes
Conversion of convertible notes
Shares issued to KMP to pay fees and expenses
Conversion of convertible notes
Conversion of convertible notes
Cost of capital raising
30 June 2017
7 August 2017
12 September 2017
12 September 2017
8 November 2017
19 December 2017
21 December 2017
4 January 2018
7 February 2018
8 February 2018
16 February 2018
5 March 2018
14 March 2018
13 April 2018
331,786,900
548,705
4,200,000
12,843,068
825,000
7,475,000
193,019
643,178
642,178
970,855
1,208,484
1,523,684
1,097,542
1,244,078
-
$0.0910
$0.0800
$0.0800
$0.0800
$0.0800
$0.0760
$0.0770
$0.0780
$0.0650
$0.0650
$0.0950
$0.0720
$0.0700
$0.0000
10,280,380
50,000
336,000
1,027,446
66,000
598,000
14,669
49,525
50,000
63,106
78,551
144,749
79,023
87,085
(12,168)
Balance
30 June 2018
365,201,691
12,912,366
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.
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.
34
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 16. Equity - issued capital (continued)
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
Share-based payments reserve
Convertible notes reserve
Consolidated
2018
$
2017
$
810,035
40,500
106,012
(125,353)
-
-
956,547
(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.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Convertible note reserve
The reserve is used to recognise the value of the equity portion of convertible notes.
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 2016
Foreign currency translation
Balance at 30 June 2017
Foreign currency translation
Movement in convertible notes
Share based payments
Balance at 30 June 2018
Note 18. Equity - dividends
Convertible Share based
notes
$
payments
$
Foreign
currency
$
-
-
-
-
-
(125,353)
-
-
106,012
-
-
-
-
40,500
(125,353)
935,388
-
-
106,012
40,500
810,035
There were no dividends paid, recommended or declared during the current or previous financial year.
35
Freehill Mining Limited
Notes to the financial statements
30 June 2018
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 net 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
2018
$
2017
$
Liabilities
2018
$
2017
$
-
896,646
-
483,071
729,674
1,590,378
521,427
534,085
896,646
483,071
2,320,052
1,055,512
Consolidated - 2018
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
US Dollar
Chilean pesos
20%
20%
145,934
-
145,934
138,746
20%
20%
(145,934)
-
(145,934)
(138,746)
145,934
284,680
(145,934)
(284,680)
Consolidated - 2017
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
US Dollar
Chilean pesos
20%
20%
104,285
-
104,285
10,203
20%
20%
(104,285)
-
(104,285)
(10,203)
104,285
114,488
(104,285)
(114,488)
Price risk
The consolidated entity is not exposed to any significant price risk.
36
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 19. Financial instruments (continued)
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.
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 - 2018
Non-derivatives
Non-interest bearing
Trade other payables
Interest-bearing - fixed rate
Convertible notes
Short term loans
Total non-derivatives
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade other payables
Interest-bearing - fixed rate
Short term loans
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
$
-
2,602,664
-
21.05%
15.00%
1,965,150
724,922
5,292,736
1,847,500
-
1,847,500
-
-
-
-
-
2,602,664
-
-
-
3,812,650
724,922
7,140,236
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
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.
37
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 20. Fair value measurement
Fair value hierarchy
The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2018
Liabilities
Convertible notes
Total liabilities
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
-
-
3,812,650
3,812,650
3,812,650
3,812,650
There were no transfers between levels during the financial year.
Note 21. 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
Frank Terranova
Other key management personnel
The following person also had the authority and responsibility for planning, directing and controlling the major activities of the
consolidated entity, directly or indirectly, during the financial year:
Peter Hinner
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
2018
$
2017
$
356,067
140,500
243,593
400,000
496,567
643,593
The share based payments were issued before the reverse acquisition therefore are not included in the statement of profit
or loss during the year ended 30 June 2017.
38
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 22. 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:
Audit services - RSM Australia Partners
Audit or review of the financial statements
Other services - RSM Australia Partners
Taxation services
Other services - network firms
Audit of Chilean subsidiaries
Note 23. Contingent liabilities
Consolidated
2018
$
2017
$
63,290
32,700
9,300
-
72,590
32,700
20,820
19,572
The consolidated entity had no contingent liabilities at 30 June 2018 and 30 June 2017.
Note 24. Commitments
The consolidated entity had no commitments at 30 June 2018 and 30 June 2017.
Note 25. Related party transactions
Parent entity
Freehill Mining Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 21 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2018
$
2017
$
Payment for other expenses:
Interest paid and accrued on short terms loans payable to Ray Mangion and his wife
27,963
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.
3,902,610
2,621,188
39
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 25. Related party transactions (continued)
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables:
Trade payables to Electrum Pty Ltd - an entity related to Peter Hinner
Trade payables and accrued expenses to directors in relation to unpaid fees and expenses
170,924
77,389
67,196
53,625
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Consolidated
2018
$
2017
$
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 26. 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
2018
$
2017
$
195,000
201,558
Parent
2018
$
2017
$
(2,660,621)
(575,309)
(2,660,621)
(575,309)
40
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 26. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Convertible notes reserve
Accumulated losses
Total equity
Parent
2018
$
2017
$
149,284
54,784
10,310,001
6,093,399
3,884,673
1,633,537
5,732,173
1,633,537
26,168,311 23,536,325
-
-
(19,076,463)
40,500
1,113,304
(22,744,287)
4,577,828
4,459,862
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 2018 and 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
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 27. Business combinations
Acquisition of Yerbas Buenas SpA and San Patricio Mineria SpA
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 Particia Mineria SpA. 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-acquisition contributions the joint venture.
41
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 27. Business combinations (continued)
Details of the acquisition are as follows:
Cash and cash equivalents
Other current assets
Exploration and evaluation 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 28. 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 SpA
Note 29. Events after the reporting period
Principal place of business /
Country of incorporation
Australia
Chile
Chile
Ownership interest
2017
2018
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
On 6 July 2018, the company issued 37,765,166 fully paid ordinary shares. Of these shares 31,729,019 (valued at
$1,522,992) were issued on the conversion of convertible notes, 5,208,333 (valued at $250,000) fully paid ordinary shares
were issued in relation to amounts received before 30 June 2018, and 827,814 (valued at $50,000) fully paid ordinary shares
were issued to the company's COO as part of his remuneration.
On 13 July 2018, the company issued 353,847 fully paid (valued at $16,985) ordinary shares on the conversion of convertible
notes.
On 17 August 2018, the consolidated entity has settled all obligations in relation to the purchase agreement payable on
Yerbas Buenas tenement leases.
The consolidated entity is currently in negotiation to outsource production at the Yerbas Buenas project in return for a rental
stream based on product sold. This is intended to remove any capital demands for production while the company executes
its drilling program.
Since 30 June 2018, the consolidated entity has received additional debt funding of $1,080,000.
No other matter or circumstance has arisen since 30 June 2018 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.
42
Freehill Mining Limited
Notes to the financial statements
30 June 2018
Note 30. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
(2,965,058)
(1,522,205)
Consolidated
2018
$
2017
$
Adjustments for:
Depreciation and amortisation
Share-based payments
Accrued finance costs and finance costs settled via issue of shares
Gain on foreign exchange
Listing expense
Operating expenses settled via the issue of shares
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Note 31. Earnings per share
30,730
40,500
1,170,575
-
-
310,749
14,506
-
70,435
(28,837)
822,757
-
(29,198)
9,738
206,749
(435,152)
(11,219)
(1,210,694)
(1,225,215)
(2,300,409)
Consolidated
2018
$
2017
$
Loss after income tax attributable to the owners of Freehill Mining Limited
(2,965,058)
(1,522,205)
Weighted average number of ordinary shares used in calculating basic earnings per share
352,912,562 296,835,174
Weighted average number of ordinary shares used in calculating diluted earnings per share 352,912,562 296,835,174
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(0.84)
(0.84)
(0.51)
(0.51)
43
Freehill Mining Limited
Directors' declaration
30 June 2018
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 2018 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
___________________________
Ray Mangion
Chairman
27 September 2018
44
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Freehill Mining Limited
Opinion
We have audited the financial report of Freehill Mining Limited (the Company) and its controlled entities (the
consolidated entity), which comprises the statement of financial position as at 30 June 2018, the statement of
profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash
flows for the year then ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors' declaration.
In our opinion the accompanying financial report of the consolidated entity is in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2018 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 consolidated entity 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial report, which indicates that the consolidated entity incurred a net loss
of $2,965,058 and had net cash outflows from operating activities amounting to $1,225,215, during the year ended
30 June 2018. In addition, as at 30 June 2018, the consolidated entity’s current liabilities exceeded its current
assets by $4,308,710. As stated in Note 1, these events or conditions, along with other matters as set forth in
Note 1, indicate that a material uncertainty exists that may cast significant doubt on the consolidated entity’s ability
to continue as a going concern. Our opinion is not modified in respect of this matter.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
45
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report
Key Audit Matter
Carrying value of Exploration & Evaluation assets
Refer to Note 10 in the consolidated financial statements
As at 30 June 2018, the consolidated entity’s statement
of financial position reflects Exploration and Evaluation
assets relating to the Yerbas Buenas project amounting
to $12,666,803 which represented 91% of the total
assets of the consolidated entity as at that date.
We considered the carrying value of the capitalised
Exploration and Evaluation assets as a key audit matter
because of its significance, because there is a level of
judgement required by management to assess which
costs should be capitalised, and because of the
judgement involved in determining whether the carrying
amount of the Exploration and Evaluation assets
exceeds its recoverable amount.
How our audit addressed this matter
Our audit procedures in relation to the carrying value
of Exploration and Evaluation assets included:
• Critically
evaluating
management’s assessment that no indicators of
impairment existed;
assessing
and
• Obtaining confirmation from the mine operator
as to the work performed during the year;
• Reviewing a sample of costs
that were
capitalised to determine whether the costs were
appropriate to capitalise in accordance with the
the
Australian Accounting Standards and
consolidated entity’s accounting policy; and
• Discussions with management and a review of
the Group’s ASX announcements and other
assess
relevant
management’s determination that exploration
activities have not yet progressed to the point
where
the existence or otherwise of an
economically recoverable mineral resource may
be determined.
documentation,
to
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the consolidated entity's annual report for the year ended 30 June 2018, but does not include the financial report
and the auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of 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.
46
Responsibilities of the Directors for the Financial Report (Continued.)
In preparing the financial report, the directors are responsible for assessing the ability of the consolidated entity
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 consolidated entity or to cease
operations, or have 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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description
forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Freehill Mining Limited for the year ended 30 June 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
P A RANSOM
Partner
Dated: 27 September 2018
Melbourne, Victoria
47
Freehill Mining Limited
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 17 September 2018.
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
84
194
226
315
1,640
1,156
Ordinary shares
% of total
shares
issued
Number held
94,500,000
24,373,105
12,700,000
12,667,000
10,166,000
9,304,734
8,923,000
5,875,000
5,205,000
4,915,221
4,800,000
4,576,753
4,567,500
4,510,000
3,850,162
3,800,000
3,750,000
3,400,000
3,139,817
3,000,000
23.19
5.98
3.12
3.11
2.49
2.28
2.19
1.44
1.28
1.21
1.18
1.12
1.12
1.11
0.94
0.93
0.92
0.83
0.77
0.74
228,023,292
55.95
SMART INVESTMENT CHILE LLC
DUDDY INVESTMENT PTY LTD (DUDDY INVESTMENT A/C)
MR SAMUEL WILLIAM DUDDY
G&T HOLDINGS LIMITED
L A L GLOBAL LIMITED
DG FREEHOLD PTY LTD (DG FREEHOLD A/C)
ORIGAMI EQUITIES PTY LTD
LA SERENA HOLDINGS PTY LTD
ODEL INVESTMENTS PTY LTD
LA SERENA HOLDINGS PTY LTD
MR JOHN MAVRIAS (JOHN MAVRIAS FAMILY A/C)
MR NIGEL KENNETH PHILLIPS
MR LEO ILIAS RADIOTIS (L A RADIOTIS FAMILY A/C)
CAM NOMINEES PTY LTD (ROBERT FINKELSTEIN A/C)
SOUTH BEACH SUPER PTY LTD (SOUTH BEACH SUPERFUND A/C)
MS JOAN CHRISTINE GRAINGER
GLACIER BLUE PTY LTD (MARIC FAMILY A/C)
MR LEO ILIAS RADIOTIS (L A RADIOTIS FAMILY A/C)
ORIGAMI EQUITIES PTY LTD
Unquoted equity securities
There are no unquoted equity securities.
48
Freehill Mining Limited
Shareholder information
30 June 2018
Substantial holders
Substantial holders in the company are set out below:
SMART INVESTMENT CHILE LLC
DUDDY INVESTMENT PTY LTD
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
94,500,000
24,373,105
23.19
5.98
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.
49