A N N U A L R E P O R T FOR THE YEAR ENDED 31 DECEMBER 2015 2015 FINANCIAL REPORT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS 31 32 33 34 NOTES TO THE FINANCIAL STATEMENTS 35 - 65 CONTENTS LETTER FROM THE CHAIRMAN REVIEW OF OPERATIONS EXPLORATION ACTIVITIES CORPORATE / CORPORATE GOVERNANCE STATEMENT DIRECTORS REPORT REMUNERATION REPORT 1 2 3-12 13 14 - 19 20 -26 AUDITOR’S INDEPENDENCE DECLARATION UNDER 27 SECTION 307C OF THE CORPORATIONS ACT 2001 INDEPENDENT AUDITORS’ REPORT DIRECTORS’ DECLARATION 28 - 29 30 CORPORATE DIRECTORY GEOPACIFIC RESOURCES LIMITED (a public, listed Company incorporated in New South Wales in 1986) ACN 003 208 393 Directors in Office (as at the date of this Report) Milan Jerkovic, Non-Executive Chairman (Appointed 23 April 2013) Ron Heeks, Managing Director (Appointed 28 March 2013) Mark Bojanjac, Non-Executive Director (Appointed 28 March 2013) Registered Office Level 1, 278 Stirling Highway Claremont, WA 6010, Australia Postal Address P.O. Box 439, Claremont, WA 6910 Company Secretary Mr John Lewis Auditor Somes Cooke, Level 2, 35 Outram Street, West Perth, WA 6005, Australia Bankers ANZ Banking Group Ltd Cnr Hay and Outram St West Perth WA 2 2013 ANNUAL REPORT LETTER FROM THE CHAIRMAN Dear Shareholder, During 2015 Geopacific Resources Ltd (“Geopacific”) has completed a successful exploration program at the company’s Kou Sa project including approximately 25,000 meters of drilling. Geophysical Surveys undertaken in 2015 have provided drilling targets that allowed us to define new mineralisation associated with known projects and new areas with encouraging initial results. The drilling at Kou Sa has expanded our knowledge of the 150 Prospect and exposed a core of mineralisation at Prospect 160. Our maiden resource will be defined from these two prospects in mid 2016. We continue to explore our other prospects and in late 2015 drilling successfully defined new epithermal gold and silver mineralisation at prospect 190 (Gold). The increase in the gold price has also led the Company to undertake an independent review of its Fiji projects and assess strategies to unlock value for shareholders in 2016. The results of this review were very encouraging and highlighted the potential that several of the high grade, near surface zones of mineralization already drilled may now have with the current gold price. In what has been a very difficult and directionless 2015 in terms of commodity and financial markets, Geopacific has made significant steps forward in terms of the ability to raise the funds necessary to finance operations. During the year we have successfully raised in excess of $26 million through Placements to Institutional Investors and Rights Issue offerings to existing shareholders. While the capital markets around the world have shown poor investment interest in exploration companies, we have continued to be supported by dedicated current shareholders and significant new investors during recent funding raisings. I would like to thank all shareholders for their continued support and in particular, to acknowledge the ongoing significant support from our major shareholder Resource Capital Funds and our new significant shareholder Tembo Capital who made significant investments in the company this year. Support from our shareholders enabled Geopacific to meet its milestone payments with the vendor of the Kou Sa project in Cambodia and advance the exploration towards our initial resource. Geopacific has also successfully renegotiated the terms of the agreement with the vendors of the Kou Sa project. The milestone payment of US$6.3 million due in July 2016 has been cancelled and in exchange the Vendors have agreed to accept a payment US$1.575 at the financial completion of the BFS and a capped 2 % royalty on production. Our team, led by CEO Ron Heeks has done a magnificent job in progressing the exploration while raising sufficient capital in trying capital markets and I would like to acknowledge their efforts which I am sure is supported by all shareholders. Thank you for all your ongoing support which we are confident will be rewarded in the medium to long term given the impressive geological system that we have discovered at Kou Sa which continues to grow in stature with ongoing aggressive exploration being pursued by the company. Milan Jerkovic Chairman 1 2015 ANNUAL REPORT REVIEW OF OPERATIONS Geopacific is pleased to provide this summary of the exploration works undertaken during the past year at the Kou Sa Project in Cambodia and exploration licenses in Fiji. During the course of the year, Geopacific continued to systematically explore the Kou Sa Project with over 25,000 metres of drilling completed. The year commenced on a high note with several new zones of mineralisation being identified, including Prospects 128 and 100 West. The discovery of these zones was aided by the use of a variety of geochemical and geophysical datasets which were collected. At Prospect 150, drilling continued to expand the known mineralisation and simultaneously enabled an improved understanding of the geology of the prospect and wider project area. Drilling also continued to deliver results at Prospect 160 where a thick core of copper mineralisation was encountered that plunges around 200m to the north-west, highlighting the economic significance of that prospect. Gradient array geophysics has continued to provide accurate targets for drilling and assist with the identification of new prospects, including Prospects 128, 100 West and 117 West. Soil geochemistry has also been used effectively in the definition of drilling targets, identifying a gold anomaly in the centre of the license with broad, low-grade gold mineralisation at surface. This area recently named the Prospect 190 Gold zone has returned encouraging results from initial drilling. The Fijian projects hold potential for future development, which was confirmed in a recent review. These projects are at various stages of exploration from early to fairly advanced, with the presence of deeper mineralised systems being identified in areas. Exploration to date has provided evidence for porphyry, epithermal or both types of systems at all projects. There remains potential to expand the already identified gold mineralisation at Faddy’s, which is the most advanced prospect across all of the Fijian projects. HIGHLIGHTS > Kou Sa, Cambodia: Intensive 3 rig drill program commenced: • • geochemistry and geophysics continue to provide high-quality targets for drilling; thick core of copper mineralisation encountered at Prospect 160 with a plunge length of around 200m; • mineralisation at Prospect 150 extended to the west with a potential feeder zone identified to the north-west; • targets generated from IP geophysics encountered significant new copper mineralisation at Prospects 128 and 100 West; and Subsequent to year end: • High-grade gold and silver mineralisation from new gold encountered down plunge mineralisation at Prospect 190. • Similarities between Prospect 190 and Prospect 170 highlights further gold potential. 2 • > Fiji Projects: geological for epithermal gold and porphyry mineralisation at all projects; and review highlighted potential • majority of projects located within north-east- trending volcanic belt that hosts significant epithermal and porphyry mineralisation, including Vatukoula and Tuvatu. > Corporate • • recapitalised the Company, raising in excess of $25 million through a Placement and Rights Issues; renegotiated improved terms with the vendors of the Kou Sa project. 2015 ANNUAL REPORT EXPLORATION ACTIVITIES CAMBODIA EXPLORATION KOU SA PROJECT CAMBODIA Figure 1. Kou Sa Project location map During the course of the year, Geopacific continued to systematically explore the Kou Sa Project with over 25,000 metres of drilling completed. The year commenced on a high note with several new zones of mineralisation being identified, including Prospects 128 and 100 West. The discovery of these zones was aided by the use of a variety of geochemical and geophysical datasets which were collected. At Prospect 150, drilling continued to expand the known mineralisation and simultaneously enabled an improved understanding of the geology of the prospect and wider project area. Drilling also continued to deliver results at Prospect 160 where a thick core of copper mineralisation was encountered that plunges around 200m to the north- west, highlighting the economic significance of that prospect. Gradient array geophysics has continued to provide accurate targets for drilling and assist with the identification of new prospects, including Prospects 128, 100 West and 117 West. Soil geochemistry has also been used effectively in the definition of drilling targets, identifying a gold anomaly in the centre of the license with broad, low-grade gold mineralisation at surface. This area recently named the Prospect 190 Gold zone has returned encouraging results from initial drilling. 3 2015 ANNUAL REPORT EXPLORATION ACTIVITIES Figure 2. Prospect location map over gradient array surveys Background The Kou Sa Project is located in northern Cambodia’s Chep District, Phreah Vihear province and has excellent discovery potential for mineral deposits of economic grade and tonnage. Drill testing so far has produced zones of high grade mineralisation including; 5m at 128.64 g/t Gold and 4.01% Copper. The Kou Sa Project has only been explored by Geopacific since early 2013 and has continually shown excellent discovery potential for polymetallic deposit (s) of economic grade and tonnage. Modern exploration techniques including systematic geochemistry and geophysics have clearly outlined numerous mineral targets. Geophysical Surveys Geophysical techniques, such as gradient array, played an important role in the identification of further sulphide mineralisation. Gradient array surveys continued at Kou Sa, filling areas between original surveys and covering new areas like Prospect 170. This technique proved to be a “silver bullet” for exploration in 2015, with new mineralisation identified from this dataset including at Prospect 128 and the new area to the west of Prospect 117. Given the success of the gradient array surveys, deeper- looking induced polarisation (“IP”) surveys were conducted over a number of prospects. A down hole IP survey at Prospect 117 was instrumental in the new interpretation of the prospect’s mineralisation and assisted in the targeting of further drilling. Deep-looking IP surveys over Prospects 150 and 160 showed strong responses around the known mineralisation and a potential plunge in the mineralisation to the north-west at Prospect 150. LiDAR Survey During the 2015 reporting year, a LiDAR survey was flown over the license to provide a detailed digital terrain model (“DTM”) of the project area. This DTM provided detailed elevation data for use in interpreting the various exploration datasets collected over the project, including drilling and surface geochemistry. It has also been key in planning further drilling programs and interpreting the structural framework of the project. Drilling Diamond and RC drilling dominated the exploration program conducted in the 2015 reporting year. Diamond Drilling RC Drilling Combination RC/diamond holes No. drill holes No. metres drilled 111 133 15 13,507 10,016 2,713 4 2015 ANNUAL REPORT Drilling continued at the already established Prospects 150, 160, 128, 117, and 100, while ‘scout’ drilling targeted geochemical and geophysical anomalies around Prospect 117. The Pyramid below shows the status of development and process of advancement towards becoming a reserve for all identified prospects at Kou Sa. Figure 3. Development status of prospects EXPLORATION ACTIVITIES PROSPECT 150 Copper, Gold and Silver Drilling at Prospect 150 continued to define and extend the high-grade, polymetallic (Cu-Au-Ag) mineralisation along a strike length of 400m. The majority of the prospect has been drilled to a nominal 40m x 40m pattern. Mineralisation at this prospect is interpreted to be shallow dipping to the northwest within a package of volcaniclastic rocks. Infill drilling at Prospect 150 was successful in firming up the mineralised zones already identified and confirming the high-grade nature of the mineralisation. Extensional drilling to the west of the prospect targeted a potential feeder zone thought to be striking north north- west. RC drilling was designed to intercept this zone close to the surface and was successful in identifying significant zones of mineralisation including 17m at 12.38% Cu eq. from 19m (KRC145). This zone continued to the north-west as diamond drilling continued to encounter this zone further down plunge, with results including 5.3m at 3.52% Cu eq. from 83.7m (KDH142). Figure 4. Latest drilling results from Prospect 150 showing potential feeder zone 5 2015 ANNUAL REPORT EXPLORATION ACTIVITIES Figure 5. Plan map of Prospect 160 showing latest drilling results and interpretation Figure 6. Section through thickest zone of mineralisation at Prospect 160 6 2015 ANNUAL REPORT EXPLORATION ACTIVITIES PROSPECT 160 Copper, Gold and Silver Drilling at Prospect 160 was the highlight of the year with a thick “core” to the copper sulphide mineralisation identified from infill and extensional drilling. Results from this zone have confirmed the high-grade nature of the mineralisation at Prospect 160 and include intercepts such as 27m at 3.55% Cu eq. from 69m (KRC184) and 41m at 1.69% Cu eq. from 55m (KRC199). Prospect 160 was identified in late 2014 while following up on weak copper mineralisation in drill hole KDH001. Initial results included 14.8m at 3.18% copper from 29.2m (KDH008). Infill and extensional drilling completed during 2015 has further defined mineralisation along a strike length of about 400m with the zone exhibiting a shallow-dip to the north-west. Gradient array geophysics continued to prove effective at identifying further sulphide mineralisation on the license with drill testing of a large chargeability anomaly to the east of Prospect 160 successfully intercepting significant copper mineralisation. PROSPECT 100 Copper and Gold A strong chargeability anomaly to the west of Prospect 100 was identified with 3D IP geophysics. Results returned significant copper sulphide mineralisation within a package of volcanic rocks and limestone. Some of the highest copper grades drilled to date were intercepted in this prospect, including 13.6m at 3.82% Cu eq. from 39.5m (KDH048) and 7.4m at 6.89% Cu eq. from 65.3m (KDH056) as reported in the 2014 Annual Report. Subsequent drilling confirmed these initial results with intercepts of 4.6m at 6.43% Cu eq. from 20.5m (KDH071) and 8.3m at 1.44% Cu eq. from 82.8m (KDH069). The zone is thought to dip steeply to the south and has not yet been fully tested along strike and down-dip. Figure 7. Drill results over IP Chargeability at Prospect 100 7 2015 ANNUAL REPORT EXPLORATION ACTIVITIES PROSPECT 128 Copper, Gold and Silver PROSPECT 117 Copper, Gold and Silver Drilling at the recently-discovered Prospect 128 has identified several discrete zones of copper mineralisation with a main cohesive zone in the north. These cover an area of around 300m by 50m and a thickness of approximately 20m to 25m. Results from this area have been encouraging, with initial drilling returning intercepts such as 14.4m at 2.59% Cu eq. from 31.1m including 5m at 5.31% Cu eq. from 40.5m (KDH077). Subsequent infill RC and diamond drilling continued to target mineralisation with intercepts including 22m at 1.65% Cu eq. from 20m including 4m at 3.27% Cu eq. from 20m and 2m at 5.32% Cu eq. from 28m (KRC129). Further copper mineralisation, with occurrences of gold and silver, was identified to the south of the prospect, with results including 1.9g/t Au, 62g/t Ag, and 0.93% Cu over 4m in KRC140. This southern zone remains open to the south and west. A combination of the re-evaluation of previous work, down-hole geophysical techniques, with further infill and extensional drilling at Prospect 117 has advanced our understanding of the mineralisation in this area. A new interpretation suggests that the mineralisation can be joined together to form discrete, continuous zones with a shallow dip to the west – the true extent of which remains to be tested. Significantly deeper holes to the west have encountered stronger rock alteration and mineralogy including epidote, hematite, and magnetite suggesting proximity to a ‘hot’, deeper mineralising source. Results from drilling completed in early 2015, which included 17.1m at 1.49% Cu eq. from 70.4m (KDH022), highlighted the potential of the prospect to host significant mineralisation. Evaluation of the drilling and geophysical datasets led to an improved understanding of the prospect. Results from subsequent drilling, towards the end of the year, included 11.9m at 2.27% Cu eq. from 87m (KDH133). These results confirmed the interpretation and extended the known mineralisation down dip to the west. Potential remains to further extend this mineralisation down dip at Prospect 117. Figure 8. Latest drilling results from Prospect 128 8 2015 ANNUAL REPORT EXPLORATION ACTIVITIES Figure 9. Section through Prospect 117 showing the mineralised horizons PROSPECT 190 Copper, Gold and Silver Another significant success during the 2015 reporting year was that of Prospect 190. Prospect 190 at this stage is split over a number of locations close to one another and is characterised by a strong soil gold anomaly in the north and chargeability anomalies in the south Prospect 190 (South) Copper and Gold in the south Drilling of the chargeability anomalies encountered zones of copper sulphide mineralisation with the best results coming from Zone C, which included 4.95m at 3.01% Cu eq. from 31.2m (KDH110). Prospect 190 (Gold) Gold and Silver The results from the gold soil anomaly at Prospect 190 Gold identified a broad zone of gold and silver mineralisation from surface within favourable silica-sericite-pyrite alteration. Early drilling of the anomaly identified zones of moderate gold and silver mineralisation surrounded by broad zones of lower grade material with a moderate to steep dip southwards. Drilling in the latter half of the year highlighted a higher-grade core to the mineralisation with a potential plunge to the south-west. Results from this zone (See figure 9) include 1.6m at 7.36g/t Au and 11.9g/t Ag from 60.4m and 0.6m at 51.1g/t Au and 75.2g/t Ag from 64.8m (KDH122). Subsequent to the reporting year, epithermal gold and silver mineralisation was encountered for the first time at Kou Sa, enhancing the potential of Prospect 190 (Gold). High-grade gold and silver mineralisation, 7.4m at 10.93g/t Au and 121.7g/t Ag from 88.4m including 4.6m at 17.14g/t Au and 193.9g/t Ag from 91.2m (KDH178), was intercepted within a zone of strongly altered rocks that are also mineralised, confirming that the system improves with depth. 9 2015 ANNUAL REPORT EXPLORATION ACTIVITIES Figure 10. Prospect 190 plan map showing drilling intercepts over gold geochemical anomaly PROSPECT 117 Copper, Gold and Silver Exploratory drilling around Kou Sa continued to identify potential new prospects. A zone to the west of Prospect 117 was identified from gradient array geophysics and has some of the highest copper-in-soil results close by in the regional soil geochemistry data. An intercept of 4.9m at 2.21% Cu eq. from 5.6m (KDH118) was encountered on one of the chargeability anomalies along with an intercept of 7.9m at 1.15% Cu eq. from 8.7m (KDH129) on another chargeability anomaly some 200m to the south-west. These results represent a completely new area for the Kou Sa Project and have confirmed the effectiveness of the gradient array data to highlight further near-surface, copper-sulphide mineralisation. Ron Heeks, MD engaging with the community at the local primary school in Chep Villa 10 2015 ANNUAL REPORT EXPLORATION ACTIVITIES FIJIAN EXPLORATION Figure 11. Fiji projects location map The Fijian projects hold potential for future development, which was confirmed in a recent review. These projects are at various stages of exploration from early to fairly advanced, with the presence of deeper mineralised systems being identified in areas. Exploration to date has provided evidence for porphyry, epithermal or both types of systems at all projects. There remains potential to expand the already identified gold mineralisation at Faddy’s, which is the most advanced prospect across all of the Fijian projects. SABETO-VUDA PROJECT SPL1361 & 1368 [Sabeto & Vuda] 100% Geopacific Ltd [Subsidiary of GPR] Sabeto-Vuda occurs within a prospective north-east- trending structural corridor that plays host to significant, known porphyry and epithermal mineralisation, which includes Vatukoula and Tuvatu. The exploration target for testing at both Sabeto and Vuda is a deeper, alkalic porphyry copper-gold system, which are typically limited in lateral extent but tend to be higher grade than calc-alkalic porphyry systems and also occur in clusters. The Vuda Project is dominated by an extensive alteration system anomalous in gold, which is coincident with an annular magnetic low. Drilling within this system has shown that the alteration passes from advanced argillic at surface to phyllic alteration, and in some instances potassic alteration, with the phyllic alteration containing gold mineralisation. Numerous geophysical data sets (gravity, airmagnetics and ZTEM) indicate that there is likely to be an intrusive (porphyry) at depth that is feeding the epithermal gold mineralisation at surface. Sabeto is proximal to the Vuda alteration system and like Vuda is in a prospective metallogenic belt. Numerous exploration data sets have been collected over the licence including geophysics, geochemistry, and drilling. Copper- in a gold mineralisation Sanidine Feldspar Porphyry (SFP) at depth, with the best grades associated with potassic alteration and bornite mineralisation. Petrology has indicated that this porphyry phase is not the mineralising phase and a further review of the exploration data sets suggest that there is potential for a deeper mineralised system. in Sabeto occurs identified Sabeto and Vuda remain highly prospective licenses with the potential for both of them to play host to a deeper porphyry or epithermal system. 11 2015 ANNUAL REPORT EXPLORATION ACTIVITIES NABILA PROJECT SPL1216 & 1415 [Nabila & Kavukavu] 100% Millennium Mining (Fiji) Ltd [Subsidiary of GPR] The Nabila Project area is located in the same north-east- trending structural corridor of volcanic centres as Vuda/ Sabeto, Rakiraki, and the Vatukoula epithermal gold deposit. The project comprises two licenses; Nabila [SPL1216] and Kavukavu [SPL1415]. Nabila plays host to the Faddy’s epithermal gold deposit, which has an historic, non-JORC compliant resource of 920,000t at 4.9g/t gold (144,000 ounces of contained gold). Much of the historic exploration has been focussed on an arcuate north east trending structural zone of some 2.3km long, from the Mistry mine in the south to the Faddy deposits in the north. There remains several locations of interest both along and outside this structural zone with one such area to the south-east of the main Faddy’s mineralisation exhibiting malachite stained structures in fresh road cuttings. Kavukavu lies south of Nabila and comprises volcaniclastics, lavas, and limestones, intruded by a number of Colo-suite calc-alkalic intrusions. Mineralisation identified to date are associated with magnetite skarns around the village of Tau or hydrothermal breccias located over a potassium radiometric anomaly east of the village. A recent geological review of the data has suggested that these hydrothermal breccias could be related to porphyry / epithermal mineralisation at depth. RAKIRAKI PROJECT SPL1231, 1373 & 1436 [Rakiraki, Qalau & Tabuka] 50% Beta Ltd [Subsidiary of GPR] The Rakiraki Project area comprises three contiguous licenses located 35km north of the World class Vatukoula epithermal gold deposit. Rakiraki, like Vatukoula is hosted in a shoshonitic volcanic centre, with regional gravity suggesting an underlying magmatic heat source. The potential target for discovery at the Rakiraki Project is an underground low sulphidation epithermal gold style deposit. There are numerous prospects across the project area that display characteristics of low sulphidation epithermal mineralisation, with occurrences of high-grade (+15g/t) gold mineralisation displaying classic low temperature epithermal quartz textures (e.g. crustiform or colloform). Exploration drilling to date has been shallow and limited. The Tataiya vein system north-east of the town of Rakiraki presents as the best target for a significant epithermal gold system as it has considerable strike extent, has known high- grade gold in rock sampling, and has limited drill testing that has only tested to less than 50m below the surface. CAKAUDROVE PROJECT SPL1493 [Cakaudrove] 100% Geopacific Ltd [Subsidiary of GPR] The Cakaudrove Project comprises one license held over the Cakaudrove Peninsula on Fiji’s second main island of Vanua Levu. The project is considered underexplored with the majority of exploration in the past focussing on an area of gold mineralisation identified in quartz veins on a silicified ridge north of a small village called Dakuniba. Geopacific conducted a number of exploration programs over the license collecting geochemical, geological, and geophysical data with the aim of finding either extensions of the known mineralisation or further mineralisation in the relatively underexplored parts of the license. Exploration remains in the early stages with several geochemical and geophysical anomalies still to be tested. 12 2015 ANNUAL REPORT CORPORATE / CORPORATE GOVERNANCE STATEMENT CORPORATE Despite very difficult market conditions Geopacific has successfully recapitalised the company raising in excess of $26 million during the year as follows: • $3.0 million 1 for 6 Rights Issue at $0.057 per share completed in February 2015; • $9.0 million Placement to Institutional Investors at $0.06 per share in July; and • $14.0 million 10 for 21 Rights Issued at $0.057 per share in September 2015. than a marketable parcel of shares ($500) were sold on market and the proceeds distributed to shareholders. This process was completed in early 2016. During the year Mr Russell Fountain retired from the Board of Directors after 10 years of service. Mr Fountain is a former Chairman of the Company who continues to be available to advise the company where necessary. The Company also commence discussions with the Vendors of the Kou Sa project to negotiate improved terms for the projects acquisition. These funds enabled the Company to continue its aggressive exploration at Kou Sa project as well as undertake works at our Fiji licences. The Company commenced the process of reducing small shareholdings by undertaking an Unmarketable Parcel Facility where shareholders with holding that where less Ultimately the Company was able to negotiate the substitution of the US$6.3 million payment payable on 31 July 2016 with a payment of US$1.575 million payable upon the financial closure of the Bankable feasibility Study for the Kou Sa project and 2% Royalty on production at Kou Sa capped at US$8.425 million. Managing Director, Ron Heeks with the Cambodian Ministry of Mines and Energy at the International Mining and Resources Conference (IMARC) in Melbourne. From left to right: 1) Mr. Chhe Lidin, Director, Department of Cooperation and ASEAN Affairs 2) HE Yos Mony Rath, Director General, Department of Mineral Resources 3) HE Suy Dimanche, Director General, General Department of General Affairs 4) Ron Heeks, Managing Director, Geopacific Resources Limited 5) HE Suy Sem, Minister of Mines and Energy 6) HE Meng Saktheara, Secretary of State, Ministry of Mines and Energy CORPORATE GOVERNANCE STATEMENT Constitution The Company’s Corporate Governance Statement can be found on the Company’s website at www.geopacific.com.au under the ‘Corporate Governance’ tab. The following governance-related documents can also be found on the Company’s website. Charters • Board • Audit and Risk Committee • Nomination Committee • Remuneration Committee • Constitution of Geopacific Resources Limited Policy and Procedures • Code of Conduct • Continuous Disclosure Policy • Diversity Policy • Share Trading Policy • Shareholder Communication and Investor Relations Policy 13 2015 ANNUAL REPORT DIRECTORS’ REPORT The Directors present their report together with the financial report of the Geopacific Group, being Geopacific Resources Limited (“Geopacific”) (“the Company”) and its controlled entities for the financial year ended 31 December 2015, and the auditors’ report thereon. 1 DIRECTORS The Directors of the Company at any time during or since the end of the financial year are: Milan Jerkovic – Chairman (Appointed 23 April 2013) Mr Milan Jerkovic is a qualified geologist with postgraduate qualifications in Mining & Mineral Economics with over 30 years of experience in the mining industry involving resource evaluation, operations, financing, acquisition, project development and general management. Mr Jerkovic was most recently the Chief Executive Officer of Straits Resources Limited and has held positions with WMC, BHP, Nord Pacific, Hargraves, Tritton and Straits Asia. Mr Jerkovic was the founding Chairman of Straits Asia Resources and is currently Chairman of Blackham Resources Limited. Mr Jerkovic is a Fellow of the Australian Institute of Mining and Metallurgy and a member of the Australasian Institute of Company Directors and holds a B. App. Sc (Geology), Post Graduate Diploma (Mineral Economics), Post Graduate Diploma (Mining). Mr Jerkovic was appointed Chairman of the Company on 1 August 2013 and is also a member of the Audit Committee. Mr Jerkovic has the following interest in Shares in the Company as at the date of this report – 8,756,108 ordinary shares and 500,000 Performance Rights. Ron Stephen Heeks – Managing Director (Appointed 28 March 2013) With nearly 30 years mining industry experience, Mr Heeks was a founder of Exploration and Mining Consultants and has had previous experience with WMC, Newcrest, Newmont (US) and many years with RSG Consulting. Mr Heeks has held senior roles in both mine management and exploration and is a Former General Manager – Technical for Straits Asia Indonesian Operations and Chief Technical Officer for Adamus Resources Southern Ashanti Gold Operation. He has lived and worked in various countries around the world gaining extensive experience in South-East Asia and Indonesia in particular. Mr Heeks holds a B.App.Sc (Geol) and is a member of the Australian Institute of Mining & Metallurgy (MAusIMM). Mr Heeks was appointed Managing Director of the Company on 28 March 2013 after the Takeover of Worldwide Mining Projects Ltd. Mr Heeks has the following interest in Shares in the Company as at the date of this report – 5,523,757 ordinary shares and 2,000,000 Performance Rights. Mark Trevor Bojanjac, Executive Director (Appointed 28 March 2013) Mr Bojanjac is a Chartered Accountant with over 20 years’ experience in developing resource companies. Mr Bojanjac was a founding director of Gilt-Edged Mining Limited which discovered one of Australia’s highest grade gold mines and was managing director of a public company which successfully developed and financed a 2.4m oz gold resource in Mongolia. He also co-founded a 3million oz gold project in China. Mr Bojanjac was most recently Chief Executive Officer of Adamus Resources Limited and oversaw its advancement from an early stage exploration project through its definitive feasibility studies, and managed the debt and equity financing of its successful Ghanaian gold mine. Mr Bojanjac was appointed a Director of the Company on 28 March 2013 after the Takeover of Worldwide Mining Projects Ltd. Mr Bojanjac is the Chairman of the Audit Committee. He also serves as Non- Executive Chairman of Canadian explorer, Coventry Resources. Mr Bojanjac has the following interest in Shares in the Company as at the date of this report – 3,041,666 ordinary shares and 375,000 Performance Rights. 14 2015 ANNUAL REPORT DIRECTORS’ REPORT Russell John Fountain, BSc, PhD, FAIG, Non-executive Director (Resigned 18 August 2015) Dr Fountain was appointed a Director and Chairman of the Company on 23 September, 2005. Russell is a Sydney-based consulting geologist with 42 years of international experience in all aspects of mineral exploration, project feasibility and mine development. Previous positions include President, Phelps Dodge Exploration Corporation; Exploration Manager, Nord Pacific Ltd and Chief Geologist, CSR Minerals. Russell has had global responsibility for corporate exploration programs with portfolios targeting copper, gold, nickel and mineral sands. Russell has played a key role in the grassroots discovery of mines at Granny Smith (Au in WA), Osborne (Cu-Au in Qld) and Lerokis (Au-Cu in Indonesia) and the development of known prospects into mines at Girilambone (Cu in NSW) and Waihi (Au in NZ). Russell holds a PhD in Geology from the University of Sydney (1973), with a thesis based on his work at the Panguna Mine (Cu-Au in PNG). He worked as a project geologist on the Namosi porphyry copper deposit in Fiji from 1972 to 1976. Russell is a Fellow of the Australian Institute of Geoscientists, and Non-Executive Chairman of Finders Resources Ltd. Dr Fountain was Chairman of Finders Resources Limited until 27 August 2013, he held no other directorships of listed companies in the last 3 years. Dr Fountain resigned from the Board and all committees on 18 August 2015. COMPANY SECRETARY Mr John Lewis (Appointed 31 March 2013) Mr Lewis is a Chartered Accountant with over 20 years’ post qualification experience specialising in the mining industry for the last 10 years. Previously Mr Lewis worked in Corporate Advisory at Deloitte. Mr Lewis was formerly Chief Financial Officer of Nickelore Limited and Chief Financial Officer, Director and Company Secretary of Dragon Mountain Gold Limited. Mr Lewis has the following interest in Shares in the Company as at the date of this report – 5,048,814 ordinary shares and 1,500,000 Performance Rights. 2 PRINCIPAL ACTIVITY The principal activity of the Group is mineral exploration currently focussing on gold and copper deposits in Cambodia and Fiji. There were no other significant changes in the nature of this activity of the Group during the financial year 3 OPERATING RESULTS AND FINANCIAL REVIEW The loss for the Group for the year ended 31 December 2015 was $2,000,637 (2014: loss $1,636,029). Review of Operations Exploration during the year was again concentrated on the Kou Sa copper gold project in Cambodia where excellent results continued to generate new targets while expanding those prospects already investigated. Cambodian Project. It was an exciting year for Geopacific resources Limited (“Geopacific”) and particularly for the Kou Sa Copper-Gold Project in north-central Cambodia. The year commenced with the recognition that gradient array IP geophysics proved to be an excellent targeting tool. Combined with the existing geochemistry results, the IP geophysics allowed Geopacific to rapidly identify numerous potential sulphide targets across the entire southern half of the licence. The first of the IP geophysics targets drilled provided encouraging copper-sulphide results. As drilling progressed on these new target areas the potential of the Kou Sa licenses began to be revealed. 15 2015 ANNUAL REPORT DIRECTORS’ REPORT Based on the results from early drilling the company raised $ 5.5m in a placement to sophisticated and existing shareholders. Exploration continued at Kou Sa providing further results that paved the way for a subsequent and significant capital raise of $23m. This raise included a placement of $9m, offered at a 20% premium to the market, to well renowned resource industry funds – Resource Capital Funds (RCF) and new entrant, Tembo Capital. The balance of the capital was raised through a fully underwritten rights issue. The capital raises were strongly supported by the existing shareholders. Considering the difficult financial climate of 2015, the ability of Geopacific to raise such significant funds, particularly for exploration, is seen as a positive endorsement of the management team and the projects. The funds raised have enabled Geopacific to meet it’s ongoing purchase payment arrangements with the project vendors and mount an aggressive exploration program – expanding the exploration potential and targeting several zones for near- term production. For the second half of the year, one RC drill and two diamond rigs explored the Kou Sa license area. One diamond rig was tasked with the ongoing evaluation of geochemical and geophysical targets while the other diamond and the RC rig provided detailed assessments of several targets with the potential to provide an initial resource. In conjunction with the drilling, a scoping study on the economics of commencing a mining operation in Cambodia was initiated. This study included initial metallurgical test work, assessment of transport, mining and on-site operational costs and an assessment of the fiscal regime of Cambodia. The initial metallurgical test work revealed that the mineralisation at the Prospect 150 location provides impressive metallurgical recoveries. Test work concentrated on producing a copper concentrate via conventional flotation methods. Copper recoveries were in the high 90% range with gold recoveries in the mid-90% range and silver in the low 90%. No deleterious elements reported to the concentrate. These results are considered to be strong, with the gold recoveries much higher than in most copper-gold projects. It is expected that copper recoveries for other zones, which don’t contain gold, will also be this good. The ability to provide a high-quality, clean concentrate will enable Geopacific to supply a sought after product to smelters. Project economics were favourably enhanced when the government installed a high-voltage, hydro-electric power line through the Kou Sa license. The power line runs approximately 5 km from the expected mill location and is already being used to supply cost-effective power to the exploration office. The addition of the powerline, to the recently constructed bitumen highway has considerably improved operational logistics – all of which assists with the overall economics of the project. The ongoing success of the field program is largely credited to the dedication of Geopacific’s technical team. A high proportion of the in-country team are Indonesian Nationals who have worked with the Board internationally, for over a decade. Their technical experience and natural sensitivity to environmental and social aspects of the project and surrounding areas has greatly assisted the efficiency and local support for Geopacific’s operations. This team, assisted by the small but capable Perth-based support group have ensured that a productive and cost-effective exploration program has been maintained. An often-overlooked aspect that impacts overall project viability – the ‘social licence to operate’ – has been enhanced by the way this team interacts with local communities – particularly important in a remote area of a country, which has very little history of exploration. During the forthcoming year, Geopacific looks forward to continued exploration success at Kou Sa while progressing towards production with an early cash flow scenario. It is envisaged that the initial mining operation will be of a scale sufficient to test the systems of the country and determine the acceptance of mining, while simultaneously producing a revenue stream for the company. This will provide the basis for expansion and increase of the resource base with further exploration. FIJI PROJECT Work at the company’s Fiji projects has continued initially with desk top reviews of all projects. Subsequently Geopacific undertook a number of Environmental Impact Assessments for proposed exploration works on the Fiji Projects which were accepted by the Minerals & Resources Department in Fiji (“MRD”). As a result of these works the MRD granted 3 year extensions for 4 of the Groups licence areas. With all the licences for the Fiji projects renewed management expects that exploration will ramp up in 2016. In the later half of the 2015 year an assessment of geological structure and update of all the Fiji projects was commissioned. The report highlighted the potential of some of the near surface gold mineralisation and the prospectivity of the company’s epithermal gold deposits, most of are underexplored and are located near good infrastructure. 16 2015 ANNUAL REPORT DIRECTORS’ REPORT 4 FINANCIAL POSITION At the end of the financial year the Group had $12,589,002 (2014: $4,165,516) in cash and cash equivalent. Capitalised exploration and evaluation expenditure was $26,157,372 (2014: $18,951,894). Expenditure on exploration of tenements during the year was $7,205,477 (2014: $5,529,505). 5 DIVIDENDS The Directors do not recommend the payment of a dividend. No dividends have been paid or declared since the end of the previous year. 6 STATE OF AFFAIRS There were no significant changes in the state of affairs of the Group during the financial year except for the following: • Geopacific announced a $23 million funding packing in July 2015 consisting of: • The issue of 150 million shares via a placement to sophisticated investors at $0.06 per share to raise AUD$9 million • A fully underwritten 10:21 non-renounceable rights issue to raise approximately AUD$14 million was completed in August 2015. 7 EVENTS SUBSEQUENT TO REPORTING DATE Other than the following, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. On 8 February 2015 the Company announced it had successfully renegotiated the payment terms of the acquisition agreement with the Vendor of the Kou Sa copper gold project in Cambodia. The terms defer the final payment of US$6.4M, linking future payments to the achievement of two project development milestones being a payment of US$1.575 Million at Bankable Feasibility Study and 2% royalty capped at US$8.425 Million at Production. No further vendor payments are due on the Kou Sa Project until the project development milestones are reached, as the Company has made the January milestone payment of US$3.15 Million. 8 DIRECTORS’ INTERESTS AND BENEFITS The beneficial interest of each Director in the ordinary share capital of the Company as at the date of this report is: M Jerkovic M Bojanjac R Heeks Direct Indirect Shares Options Shares Options 500,000 541,666 2,000,000 Nil Nil Nil 8,256,108 2,500,000 3,523,757 Nil Nil Nil The beneficial interest of each Director in the Performance Rights of the Company as at the date of this report is: M Jerkovic M Bojanjac R Heeks Vesting 1 July 2016 500,000 375,000 2,000,000 17 2015 ANNUAL REPORT DIRECTORS’ REPORT 9 DIRECTORS’ MEETINGS During the year ended 31 December 2015 a total of six Directors’ Meetings and two Audit Committee Meetings were held. Directors’ attendance record is tabulated below. Director M Jerkovic M T Bojanjac R S Heeks R J Fountain Directors Meetings Audit Committee Meetings Attended * Eligible to Attend Attended * Eligible to Attend 5 4 5 4 5 5 5 4 2 2 2 1 2 2 2 1 *Either in person, or by electronic means. The Board of Directors takes ultimate responsibility for corporate governance including the functions of establishing compensation arrangements of the Executive Director and its senior executives and officers, appointment and retirement of non-executive Directors, appointment of auditors, areas of business risk, maintenance of ethical standards and Audit Committees. The Board seeks independent professional advice as necessary in carrying out its duties and responsibilities. 10 LIKELY DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The Group will continue to develop its existing exploration tenements and seek to increase its tenement holdings by acquiring further projects. 11 ENVIRONMENT REGULATIONS Entities in the Group are subject to normal environmental regulations in areas of operations both in Cambodia and in Fiji. There has been no breach of these regulations during the financial year, or in the period subsequent to the end of the financial year and up to the date of this report. 12 SHARE OPTIONS There were 2,688,768 options over unissued shares unexercised at 31 December 2015 (2014 – 4,688,768 Unlisted Options During the financial year the following unlisted options over unissued shares were cancelled as they either did not meet the vesting Conditions or they expired: Number of Options Issued Date of Issue Exercise Price 2,000,000 5 April 2012 $0.30 Expiry Date 5 April 2015 The Company did not issue shares during the financial year on the exercise of any unlisted options. Since the end of the financial year, no unlisted options have been exercised. As at the date of this report unlisted options over unissued shares in the Company are: Number of Options on Issue Exercise Price Expiry Date 800,000 200,000 1,688,768 $2.50 $5.00 $0.07452 (i) (ii) 5 July 2017 (i) The Options are exercisable in whole or in part, not later than five years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 200,000 ounces of contained gold. (ii) The Options are exercisable in whole or in part, not later than ten years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 1,000,000 ounces of contained gold. Option holders do not have any rights to participate in any issues of shares or other interest in the Company or any other entity. 18 2015 ANNUAL REPORT DIRECTORS’ REPORT 13 INSURANCE OF OFFICERS The Company has paid a premium to insure the Directors and Company Secretary of the Group in respect of certain legal liabilities, including costs and expenses in successfully defending legal proceedings, whilst they remain as Directors and for seven years thereafter. The insurance contract prohibits the disclosure of the total amount of the premiums and a summary of the nature of the liabilities. 14 PROCEEDINGS ON BEHALF OF 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. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 15 LEAD AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 31 December 2015 is set out on page 17. 16 AUDITOR During the year the following fees were paid or payable to the auditors of Company for services provided by the auditor of the Company, its related practices and non related audit firms: CONSOLIDATED 2015 $ 2014 $ Audit services Somes Cooke Audit and review of the financial report and other audit work under the Corporations Act 2001 28,500 30,000 17 NON-AUDIT SERVICES The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. No non-audit services were provided by the external auditors in respect of the current or preceding financial year. 19 2015 ANNUAL REPORT DIRECTORS’ REPORT 18 REMUNERATION REPORT (AUDITED) The remuneration report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration B Details of remuneration C Service agreements D Share based compensation A Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance, being the development of the Geopacific Resources exploration tenements. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. 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; and capital management. The Group has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation and is aligned to: • Shareholders’ interests: • has economic profit as a core component of plan design; • focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non financial drivers of value; and attracts and retains high calibre executives. • • Executive directors’ interests: • • • • rewards capability and experience; reflects competitive reward for contribution to growth in shareholder wealth; provides a clear structure for earning rewards; and provides recognition for contribution. The framework provides a mix of fixed and variable and a blend of short and long term incentives. Non executive Directors Fees and payments to non executive Directors reflect the demands, which are made on, and the responsibilities of, the Directors. The Board reviews Non executive Directors’ fees and payments annually. The Board may from time to time seek the advice of independent remuneration consultants to ensure non executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. Directors’ fees Non executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $400,000 per year in aggregate as agreed at the 2012 Annual General Meeting. A Director may also be paid fees or other amounts as the Directors determine, if a Director performs special duties or otherwise performs duties outside the scope of normal duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties. B Details of remuneration Details of the remuneration of the key management personnel (as defined in AASB 124 Related Party Disclosures) of Geopacific Resources and the Geopacific Resources Ltd Group are set out in the following tables. The key management personnel of Geopacific Resources and the Group comprises of the Directors, Company Secretary and the Exploration Manager. 20 2015 ANNUAL REPORT DIRECTORS’ REPORT Remuneration paid to key management personnel of Geopacific Resources and of the Group 2015 Short term benefits Post employment benefits Name Salaries and Fees $ Super- annuation $ Termination Payments $ Share based payments Rights Total $ $ Share based payments as % of remuneration Non executive Directors R J Fountain (i) M Jerkovic M T Bojanjac Sub total non executive Directors Executive Directors R S Heeks Sub-total directors Other Key Management Personnel J C Lewis S Whitehead Sub-total Other Key Management Personnel Totals 53,030 75,000 40,000 - 7,125 3,800 168,030 10,925 240,000 408,030 240,000 119,266 359,266 10,925 - 11,330 11,330 767,296 22,255 - - - - - - - - - - 17,850 23,800 17,850 70,880 105,925 61,650 59,500 238,455 95,200 335,200 154,700 573,655 71,400 17,850 311,400 148,446 89,250 459,846 243,950 1,033,501 25 22 29 28 23 12 (i) Resigned 18 August 2015 2014 Short term benefits Post employment benefits Name Salaries and Fees $ Super- annuation $ Termination Payments $ Non executive Directors R J Fountain (i) M Jerkovic M T Bojanjac Sub total non executive Directors Executive Directors R S Heeks Sub-total directors Other Key Management Personnel J C Lewis ) S Whitehead Sub-total Key Management Personnel Totals (i) Resigned 18 August 2015 56,667 75,000 98,915 - 7,031 3,750 230,582 10,781 240,000 470,582 - 10,781 240,000 119,266 359,266 - 11,181 11,181 829,848 21,962 - - - - - - - - - Share- based payments Shares/ Options $ Total $ Share based payments as % of remuneration 8,925 11,900 65,592 93,931 8,925 111,590 29,750 271,113 14% 13% 8% 47,600 287,600 17% 77,350 558,713 35,700 275,700 8,925 139,372 44,625 415,072 121,975 973,785 13% 6% 21 2015 ANNUAL REPORT DIRECTORS’ REPORT C Service agreements The Non-executive Directors of the Company have entered agreements with the Company regarding their appointment as follows: Milan Jerkovic • Fees $75,000 P.A. • Statutory Superannuation • LTI 1,000,00 Performance Rights – – 500,000 vesting after 12 months continuous service from 1 July 2014 500,000 vesting after 24 months continuous service from 1 July 2014 • No Notice Period. Mark Bojanjac • Fees $40,000 P.A. • Statutory Superannuation • LTI 750,00 Performance Rights – – 375,000 vesting after 12 months continuous service from 1 July 2014 375,000 vesting after 24 months continuous service from 1 July 2014 • No Notice Period D Share based compensation Geopacific Resources Limited Employee Performance Rights and Option Plans were approved by shareholders at the annual general meeting held on 31 May 2012. All employees are eligible to participate in the plan. Plan performance rights and options are granted under the plans for no consideration. Rights and options granted under the plan carry no dividend or voting rights. When exercisable, each right or option is convertible into one ordinary share. Options During the year, no options over ordinary shares in the Company were provided as remuneration to the directors of Geopacific Resources as set out below. Directors of Geopacific Resources Limited Name M Jerkovic M T Bojanjac R S Heeks R J Fountain C B Bass Other Key management Personnel J C Lewis S Whitehead Number of options granted during the year Number of options vested during the year 2015 2014 2015 2014 - - - - - - - - - - - - - - - - - - - - - - - - 333,334 - - The assessed fair value at grant date of options granted is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a 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. 22 2015 ANNUAL REPORT DIRECTORS’ REPORT Performance Rights During the year performance rights over ordinary shares in the Company were provided as remuneration to the directors of Geopacific Resources as set out below. Directors of Geopacific Resources Limited Number of performance rights granted during the year Number of performance rights vested during the year Name M Jerkovic M T Bojanjac R S Heeks R J Fountain Other Key management Personnel J C Lewis S Whitehead 2015 2014 - - - - - - 1,000,000 750,000 2015 500,000 375,000 4,000,000 2,000,000 750,000 375,000 3,000,000 1,500,000 375,000 375,000 2014 - - - - - - The assessed fair value at grant date of the performance rights granted is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the performance right, 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. The conditions that must be met in order for the Performance Rights to vest are as follows: • • 50% will vest upon the performance by the eligible employee of 12 months continuous service from 1 July 2014; and 50% will vest upon the performance by the eligible employee of 24 months continuous service from 1 July 2014. Shares provided on exercise of remuneration options No ordinary shares in the Company were provided as a result of the exercise of remuneration options to each director of Geopacific and other key management personnel of the Group. Shares issued on the exercise of options No ordinary shares of the Company were issued during the year ended 31 December 2015 on the exercise of options granted to key management personnel under the Employee Share Option Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares. 23 2015 ANNUAL REPORT DIRECTORS’ REPORT Equity instrument disclosures relating to key management personnel (i) Option holdings The number of options over ordinary shares in the Company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below. 2015 Name Balance at the start of the year Granted during the year as compensation Other changes during the year Lapsed during the year Held at Resignation/ Termination Balance at the end of the year Vested and exercisable at the end of the year Directors of Geopacific Resources Limited R J Fountain M Jerkovic R S Heeks M T Bojanjac - - - - Other Key management Personnel J C Lewis S Whitehead - - - - - - - - - - - - - - - - - - - No options are vested and unexercisable at the end of the year. - - - - - - - - - - - - - - - - - - 2014 Name Balance at the start of the year Granted during the year as compensation Other changes during the year Lapsed during the year Held at Resignation/ Termination Balance at the end of the year Vested and exercisable at the end of the year Directors of Geopacific Resources Limited R J Fountain M Jerkovic R S Heeks M T Bojanjac - - - - Other Key management Personnel J C Lewis - S Whitehead 500,000 - - - - - - - - - - - - - - - - - 500,000 - - - - - - - - - - - - - - - - - - 24 2015 ANNUAL REPORT DIRECTORS’ REPORT (ii) Performance Rights The number of performance rights over ordinary shares in the Company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, are set out below. 2015 Name Balance at the start of the year Granted during the year Vested and Exercised during the year Balance at the end of the year Directors of Geopacific Resources Limited Milan Jerkovic Ron Heeks Mark Bojanjac R J Fountain 1,000,000 4,000,000 750,000 750,000 Other Key management Personnel J Lewis S Whitehead 3,000,000 750,000 - - - - - 500,000 500,000 2,000,000 2,000,000 375,000 375,000 375,000 375,000 1,500,000 1,500,000 375,000 375,000 2014 Name Balance at the start of the year Granted during the year Held at Resignation/ Termination Balance at the end of the year Directors of Geopacific Resources Limited Milan Jerkovic Ron Heeks Mark Bojanjac R J Fountain - - - - Other Key management Personnel J Lewis S Whitehead - - 1,000,000 4,000,000 750,000 750,000 3,000,000 750,000 - - - - - - 1,000,000 4,000,000 750,000 750,000 3,000,000 750,000 25 2015 ANNUAL REPORT DIRECTORS’ REPORT (iii) Share holdings The number of ordinary shares in the Company held during the financial year by each Director of the Company and other key management personnel of the Group, including their personally related parties, is set out below 2015 Name Balance at the start of the year Received during the year on the exercise of options Acquired during the year Held at Resignation/ Termination Balance at the end of the year Directors of Geopacific Resources Limited Milan Jerkovic Ron Heeks Mark Bojanjac R J Fountain 8,256,108 3,523,757 2,666,666 166,000 Other Key management Personnel J Lewis 3,030,633 S Whitehead - - - - - - - 500,000 2,000,000 375,000 375,000 1,518,181 375,000 - - - 8,756,108 5,523,757 3,041,666 541,000 - - - 4,548,814 375,000 2014 Name Balance at the start of the year Received during the year on the exercise of options Other changes during the year Held at Resignation/ Termination Balance at the end of the year Directors of Geopacific Resources Limited Milan Jerkovic Ron Heeks Mark Bojanjac R J Fountain 8,256,108 3,523,757 2,666,666 166,000 Other Key management Personnel J Lewis 2,833,442 S Whitehead - - - - - - - END OF REMUNERATION REPORT - - - 197,191 - - - - - - - 8,256,108 3,523,757 2,666,666 166,000 3,030,633 - The Directors Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors: Ron Heeks Managing Director Perth, Australia Dated: 31 March 2016 26 2015 ANNUAL REPORT LEAD AUDITOR’S INDEPENDENCE DECLARATION 27 2015 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT 28 2015 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT 29 2015 ANNUAL REPORT DIRECTORS’ DECLARATION The Directors of Geopacific Resources Limited declare that: a) the financial statements and notes, set out on pages 21 to 51 are in accordance with the Corporations Act 2001, including: i. complying with Australian Accounting Standards which as stated in accounting policy Note 1 to the financial statements constitutes compliance with International Reporting Standards (IFRS) ; and ii. giving a true and fair view of the financial position as at 31 December 2015 and of the performance for the year then ended of the Consolidated Group; and iii. the directors have been given the declarations required by S.295A of the Corporations Act 2001 from the Chief Executive Officer and the Chief Financial Officer. b) in the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Directors: RS Heeks Managing Director Perth, Australia Dated: 31 March 2016 30 2015 ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015 Revenue from continuing operations 5 50,502 69,853 CONSOLIDATED Note 2015 $ 2014 $ Administration expenses Consultancy expense Depreciation expense Employee benefits expense Occupancy expenses Loss before income tax Income tax (119,255) (649,568) (105,661) (1,035,988) (140,667) (219,667) (416,807) (79,158) (806,455) (183,795) (2,051,139) (1,705,882) 6 8 (2,000,637) (1,636,029) - - Loss for the year attributable to members of the parent company (2,000,637) (1,636,029) Other comprehensive income-items that may be reclassified to profit or loss: Exchange differences on translating foreign controlled entities 642,769 147,326 Other comprehensive income for the year, net of tax 642,769 147,326 Total comprehensive loss for the year attributable to members of the parent entity (1,357,868) (1,488,703) Basic loss per share (cents) Diluted loss per share (cents) 25 25 (0.25) (0.25) (0.67) (0.67) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 31 2015 ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 CURRENT ASSETS Cash and cash equivalents Trade and other receivables TOTAL CURRENT ASSETS NON-CURRENT ASSETS Exploration and evaluation expenditure Prepayment Plant and equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions Financial liabilities TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY CONSOLIDATED Note 2015 $ 2014 $ 9 10 12,589,002 754,788 4,165,516 290,482 13,343,790 4,455,998 11(a) 11(b) 13 26,157,372 18,951,894 8,581,940 150,846 - 209,681 34,890,158 19,161,575 48,233,948 23,617,573 1,072,935 14,881 2,453 762,230 63,635 13,391 1,090,269 839,256 1,090,269 839,256 47,143,679 22,778,317 60,099,072 34,686,214 1,085,287 401,522 (14,040,680) (12,309,419) 47,143,679 22,778,317 14 15 16 17 18 The above statement of financial position should be read in conjunction with the accompanying notes. 32 2015 ANNUAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015 Consolidated Issued Capital $ Share Based Payments Reserve $ Foreign Currency Translation Reserve $ Accumulated Losses $ Total Equity $ At 1 January 2015 34,686,214 602,469 (200,947) (12,309,419) 22,778,317 Transactions with owners in their capacity as owners Shares issued during the year 26,090,485 Share issue costs (677,627) Performance rights vested Options expired Other Comprehensive loss for the year - - - - - 310,372 (269,376) - - - - - - - 26,090,485 (677,627) 310,372 269,376 - - 642,769 (2,000,637) (1,357,868) At 31 December 2015 60,099,072 643,465 441,822 (14,040,680) 47,143,679 At 1 January 2014 27,302,822 389,811 (348,273) (10,673,390) 16,670,970 Transactions with owners in their capacity as owners Shares issued during the year Share issue costs Options issued Options expired Other Comprehensive loss for the year 7,844,193 (460,801) - - - - - 277,738 (65,080) - - - - - - - - 7,844,193 (460,801) 277,738 (65,080) - 147,326 (1,636,029) (1,488,703) At 31 December 2014 34,686,214 602,469 (200,947) (12,309,419) 22,778,317 The above statement of changes in equity should be read in conjunction with the accompanying notes. 33 2015 ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDING 31 DECEMBER 2015 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received CONSOLIDATED Note 2015 $ 2014 $ 19,474 130,789 (1,711,271) (1,066,048) 31,027 15,650 Net Cash used in Operating Activities 29(c) (1,660,770) (919,609) CASH FLOWS FROM INVESTING ACTIVITIES Payments for plant and equipment Proceed from disposal of plant and equipment Exploration expenditure Deposits paid for acquisition of Golden Resource Development (46,827) (44,069) - - (10,756,795) (5,529,505) (5,030,622) - Net Cash used in Investing Activities (15,834,244) (5,573,574) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue (net of cost) Finance lease payments Loans to a related party Net Cash from Financing Activities NET INCREASE IN CASH AND CASH EQUIVALENTS Effect of exchange rates on cash held in foreign currencies Cash and Cash Equivalents at the Beginning of the Financial Year 25,415,454 7,330,794 (24,587) (115,136) (9,071) (69,126) 25,275,731 7,252,597 759,414 642,769 4,165,516 2,328,335 147,326 3,258,776 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 12,589,002 4,165,516 The above statement of cash flows should be read in conjunction with the accompanying notes. 34 2015 ANNUAL REPORT CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2 FINANCIAL RISK MANAGEMENT 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 4 PARENT COMPANY INFORMATION 5 REVENUE 6 LOSS BEFORE INCOME TAX 7 REMUNERATION OF AUDITORS 8 INCOME TAX 9 CURRENT ASSETS CASH AND CASH EQUIVALENTS 10 CURRENT ASSETS TRADE AND OTHER RECEIVABLES 11 NON CURRENT ASSETS EXPLORATION EXPENDITURE 12 NON CURRENT ASSETS JOINT ARRANGEMENTS 13 NON CURRENT ASSETS PLANT AND EQUIPMENT 14 CURRENT LIABILITIES TRADE AND OTHER PAYABLES 15 PROVISIONS 16 FINANCIAL LIABILITIES 17 ISSUED CAPITAL 18 RESERVES 19 CONTINGENT LIABILITIES 20 COMMITMENTS 21 PARTICULARS RELATING TO CONTROLLED ENTITIES 22 KEY MANAGEMENT PERSONNEL DISCLOSURES 23 RELATED PARTY TRANSACTIONS 24 SHARE BASED PAYMENTS 25 LOSS PER SHARE 26 EVENTS OCCURRING AFTER THE YEAR END 27 OPERATING SEGMENTS 28 FINANCIAL INSTRUMENTS DISCLOSURES 29 NOTES TO THE STATEMENT OF CASH FLOWS PAGE 36 44 45 46 47 47 47 48 49 49 49 50 50 51 51 51 52 53 53 54 55 56 56 57 59 59 60 62 65 2015 ANNUAL REPORT 35 35 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Geopacific Resources Limited (‘the Company’) is a listed public company domiciled in Australia. The consolidated financial report of the Company for the financial year ended 31 December 2015 comprises the Company and its controlled entities (together referred to as the ‘Group’). The separate financial statements of the parent entity, Geopacific Resources Limited, have not been presented within this financial report as permitted by the Corporation Act 2001. The financial report was authorized for issue by the directors on 31 March 2016. Basis of preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and the notes thereto also comply with International Financial Reporting Standards. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Standards and Interpretations affecting amounts reported in the current period (and/or prior periods). The Group has adopted all applicable new and revised Standards and Interpretations in the current year and these standards have not significantly impacted the recognition, measurement and disclosure of the Group and its consolidated financial statements for the financial year ended 31 December 2015. New Accounting Standards for application in future periods. The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. These standards and interpretations will not materially impact on the Group’s financial statements. Significant accounting policies The following is a summary of the material accounting policies adopted by the Group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Cash and cash equivalents Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in hand. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (b) Share 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 from the proceeds. 36 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Employee benefits (i) Wages and salaries and annual leave Liabilities for wages and salaries, including non monetary benefits, and annual leave expected to be wholly settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. All other amounts are considered other long term benefits for measurement purposes and are measured at the present value of expected future payments to be made in respect to services provided by employees. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share based payments The fair value of options granted to Directors and employees is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a 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. The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each year end, the Company revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital. (d) Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately. 37 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Financial Instruments (continued) Derecognition Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred. Financial liabilities are derecognised when the related obligations are either transferred, discharged or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and subsequent measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Financial assets are categorised as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Designation is re-evaluated at each financial year end, but there are restrictions on reclassifying to other categories. (i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gain or losses are recognized in profit or loss through the amortisation process and when the financial asset is derecognised. (ii) Financial liabilities Non derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest method. (iii) Convertible Notes The component parts of compound instruments (convertible notes) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion options that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity instrument. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to issued capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to accumulated losses within equity. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option. 38 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Financial Instruments (continued) Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible notes using the effective interest method. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. (e) Foreign currency transactions and balances (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Geopacific Resources Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit and loss and other comprehensive income. (iii) Group companies The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows: — — — assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; income and expenses are translated at average exchange rates for the period; and retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the statement of changes in equity. These differences are recognised in the statement of profit and loss and other comprehensive income in the period in which the operation is disposed of. 39 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Goods and Services Tax (GST)/Value Added Tax (VAT) Revenues, expenses and assets are recognised net of the amount of associated GST/VAT, unless the GST/VAT incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST/VAT receivable or payable. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST/VAT components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (g) Impairment of assets Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (h) Interests in Joint Arrangements Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required. Separate joint venture entities providing joint venturers with an interest to net assets are classified as a joint venture and accounted for using the equity method. Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The consolidated group’s interests in the assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the consolidated financial statements. Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the consolidated group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party. (i) Income tax The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 40 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Loss per share (i) Basic loss per share Basic loss per share is calculated by dividing the result attributable to equity holders of the Company, 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 year. (ii) Diluted loss per share Diluted loss per share adjusts the figures used in the determination of basic loss 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. (k) Mineral Tenements and Deferred Mineral Exploration Expenditure Mineral exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which: • • such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively by its sale; or exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in relation to, the area of interest are continuing. In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value, accumulated costs carried forward are written off or impaired in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the discounting on the provision is recorded as a finance cost in the statement of profit and loss and other comprehensive income. (l) Plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the financial year in which they are incurred. Depreciation on assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: – Plant and equipment 5% to 37.5% – Computer software – Motor vehicles 25% 25% – Furniture and fittings 7% to 20% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each year end. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(g)). 41 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Plant and equipment (continued) Gains and losses on disposals are determined by comparing proceeds with carrying amount. These gain and losses are included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. (m) Principles of consolidation Basis of consolidation The consolidated financial statements comprise the financial statements of Geopacific Resources Limited and its subsidiaries as at and for the year ended 31 December each year (the Group). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values. When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within entity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing acquisition date. All transaction costs incurred in relation to business combinations are recognised as expenses in profit or loss when incurred. The difference between the above items and the fair value of the consideration (including the fair value of any pre- existing investment in the acquiree) is goodwill or a discount on acquisition. A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction. A list of controlled entities is contained in note 21. (i) Business combinations Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do not affect the carrying values of goodwill. 42 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Revenue recognition (i) Sale of Goods and Disposal of Assets Revenue from the sale of goods and disposal of other assets is recognised when the Group has passed the risks and rewards of ownership to the buyer. (ii) Interest Income Interest income is recognised using the effective interest method. (iii) Rental Income Rental Income is recognised on a straight-line basis over the lease term. (o) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of profit or loss and other comprehensive income on a straight line basis over the period of the lease. (q) Provisions Provisions are recognised when the Group has legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. 43 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 2 FINANCIAL RISK MANAGEMENT The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information about the Group’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the risk management framework. (a) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from transactions with customers and investments. Trade and other receivables The Group has no investments and the current nature of the business activity does not result in trading receivables. The receivables that the Group recognises through its normal course of business are short term in nature and the most significant (in quantity) is the receivable from security deposits for tenements. The risk of non-recovery of receivables from this source is considered to be negligible. Cash deposits The Group’s primary banker is the ANZ Banking Group. At balance date all operating accounts and funds held on deposit are with this bank except in parts of Indonesia where these banks do not have branch offices. Except for operating bank accounts in other jurisdictions, the Group currently has no significant concentrations of credit risk. (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid finance resources to finance the Group’s current and future operations, and consideration is given to the liquid assets available to the Group before commitment is made to future expenditure or investment. (c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising any return. Foreign exchange risk The Group and the parent entity operated in Fiji and Cambodia and are exposed to foreign exchange risks arising from the fluctuations between the exchange rates of the Australian, United States and Fijian Dollar. The Group has no further material foreign currency dealings other than the above. Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group’s functional currency. The Group has not formalised a foreign currency risk management policy however, it monitors its foreign currency expenditure in light of exchange rate movements. Interest rate risk As the Group has significant interest bearing assets, the Group’s income and operating cash flows are materially exposed to changes in market interest rates. The assets are short term interest bearing deposits, and no financial instruments are employed to mitigate risk (Note 28 – Financial Instruments). 44 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 2 FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Capital management The Board’s policy is to maintain a sound capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors capital expenditure and cash flows as mentioned in (b). The Group’s objectives when managing capital is to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities. There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting. Neither the Company nor any of its controlled entities are subject to externally imposed capital requirements. 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Key judgments Exploration and evaluation expenditure The Company’s accounting policy is stated at Note 1(k). There is some subjectivity involved in the carrying forward as capitalised or writing off to the income statement exploration and evaluation expenditure, however the Board and management give due consideration to areas of interest on a regular basis and are confident that decisions to either write off or carry forward such expenditure reflect fairly the prevailing situation. In the year ended 31 December 2015 an amount of $Nil has been written off (2014: $Nil). Key Estimates Share based payments The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model. Refer Note 24 for details of estimates and assumptions used. 45 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 4 PARENT COMPANY INFORMATION The following information has been extracted from the books and records of the parent and has been prepared in accordance with Accounting Standards. STATEMENT OF FINANCIAL POSITION ASSETS Current assets Non current assets TOTAL ASSETS LIABILITIES Current liabilities TOTAL LIABILITIES EQUITY Issued capital Share based payments reserve Accumulated losses TOTAL EQUITY STATEMENT OF COMPREHENSIVE INCOME Total loss TOTAL COMPREHENSIVE LOSS Guarantees 2015 $ 2014 $ 11,444,245 4,065,195 36,271,249 20,362,973 47,715,494 24,428,168 292,895 292,895 267,366 267,366 60,166,622 34,686,214 429,547 602,468 (13,173,571) (11,127,880) 47,422,598 24,160,802 (2,315,067) (2,315,067) (7,872) (7,872) Geopacific Resources Limited has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its subsidiaries. Contingent liabilities At 31 December 2015, Geopacific Resources Limited had no contingent liabilities. (2014: Nil) Contractual commitments At 31 December 2015, Geopacific Resources Limited had not entered into any contractual commitments for the acquisition of property, plant and equipment. (2014: Nil) 46 2015 ANNUAL REPORT 5 REVENUE Rental income Interest income – financial institutions Other income 6 LOSS BEFORE INCOME TAX NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 CONSOLIDATED 2015 $ 2014 $ 17,041 19,907 13,554 50,502 52,750 15,650 1,453 69,853 CONSOLIDATED 2015 $ 2014 $ Loss before income tax includes the following specific expenses: Contributions to defined superannuation funds 23,655 17,564 7 REMUNERATION OF AUDITORS CONSOLIDATED 2015 $ 2014 $ Amounts received or receivable by Somes Cooke 28,500 30,000 47 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 8 INCOME TAX CONSOLIDATED 2015 $ 2014 $ (a) Reconciliation of income tax to prima facie tax payable Loss before income tax (2,000,637) (1,636,029) Tax at the Australian rate of 30% (2014 – 30%) (600,191) (490,809) Tax effect of: Non-deductible share based payment Exploration costs during the year Exploration assets from business combination Capital raising costs Other non-deductible expenses Deferred tax assets not brought to account Income tax expense Deferred Tax Liabilities Capitalised Exploration and Evaluation expenditure Less: Deferred Tax Assets Accrued expenses Employee entitlements Deductible equity raising costs Losses available to offset against future income Net Deferred tax assets not recognised 89,597 43,232 (4,770,625) (1,658,851) - (85,125) 49,863 - (55,617) 30,447 5,316,481 2,131,598 - - (7,847,212) (5,685,568) (7,847,212) (5,685,568) - (4,464) 203,262 6,920,300 7,119,098 (728,114) (19,091) (19,090) 156,434 4,290,714 4,408,967 (1,276,601) The deferred tax assets associated with tax losses not brought to account will only be obtained if: (i) the company and the consolidated entity derive further assessable income of a nature and of an amount sufficient to enable the benefit from the deductions to be realised; (ii) the company and the consolidated entity continue to comply with the conditions for deductibility imposed by the law; and (iv) no changes in tax legislation adversely affect the company’s and the consolidated entity’s ability in realising the benefit from the deductions. 48 2015 ANNUAL REPORT 9 CASH AND CASH EQUIVALENTS Current Cash at bank 10 TRADE AND OTHER RECEIVABLES Current Security deposits Sundry debtors Other receivable GST receivable 11 EXPLORATION EXPENDITURE NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 CONSOLIDATED 2015 $ 2014 $ 12,589,002 4,165,516 CONSOLIDATED 2015 $ 2014 $ 123,862 3,891 238,742 388,293 754,788 120,433 19,840 122,872 27,337 290,482 CONSOLIDATED 2015 $ 2014 $ (a) Non-Current Capitalised exploration expenditure carried forward 26,157,372 18,951,894 Movement during year Carrying value – beginning of year Additions Carrying value – end of year 18,951,895 13,422,389 7,205,477 5,529,505 26,157,372 18,951,894 During the year the Company did not expense any previously capitalized exploration expenditure (2013: nil). (b) Non-Current Prepayment 8,581,940 - In January 2015, the Company’subsidiary Royal Australia Resources Ltd entered into an agreement to acquire 100% of the Issued Capital of Golden Resource Development Co Ltd for principle payments of $US14.0 million plus interest payment of US$1,275,750. Under the terms of the agreement payments of principle and interest will be made over time until 31 July 2016. The First payment of US$1.4 million was made on 31 January 2015. The second principle payment of US$3,150,000 was due and was paid on 31 July 2015. 49 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 12 JOINT ARRANGEMENTS Interest in Joint Operations RakiRaki (Fiji) Joint Venture Geopacific Resources Limited has a 50% interest in Joint Venture with Peninsula Energy Limited. NON-CURRENT ASSETS Exploration and evaluation expenditure 13 PLANT AND EQUIPMENT Non-Current Plant, vehicles and equipment At Cost Less: Accumulated depreciation Total plant and equipment CONSOLIDATED 2015 $ 2014 $ 567,331 561,705 CONSOLIDATED 2015 $ 2014 $ 397,172 (246,326) 150,846 509,344 (299,662) 209,682 Movement - 2015 Plant & Equipment $ Computer software $ Motor Vehicle $ Lease Vehicle $ Furniture & Fittings $ Total $ Balance at 1 January 2015 Additions Disposals Depreciation 141,929 8,193 (46,496) 27,414 9,991 - - 8,515 31,824 209,682 30,619 (2,569) - - - 58,803 (3,849) (52,913) (50,428) (20,120) (20,810) (8,515) (5,789) (105,662) Foreign exchange difference Balance at 31 December 2015 31,877 95,075 2,078 19,363 11,365 18,606 - - (4,384) 17,802 40,936 150,846 50 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 13 PLANT AND EQUIPMENT (CONTINUED) Movement - 2014 Plant & Equipment $ Computer software $ Motor Vehicle $ Lease Vehicle $ Furniture & Fittings $ Total $ Balance at 1 January 2014 Additions Disposals Depreciation 149,425 38,512 - 37,224 5,558 - 2,002 18,721 37,398 244,770 - - - - - - 44,070 - (46,008) (15,368) (2,002) (10,206) (5,574) (79,158) Balance at 31 December 2014 141,929 27,414 - 8,515 31,824 209,682 At 31 December 2014, a motor vehicle with a carrying amount of $ 8,515 (2013: $18,721) is secured under a finance lease arrangement. 14 TRADE AND OTHER PAYABLES Current Sundry creditors and accruals 15 PROVISIONS Current Provisions 16 FINANCIAL LIABILITIES CURRENT Lease liabilities CONSOLIDATED 2015 $ 2014 $ 1,072,935 762,230 CONSOLIDATED 2015 $ 2014 $ 14,881 63,635 CONSOLIDATED 2015 $ 2014 $ 2,453 13,391 51 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 17 ISSUED CAPITAL CONSOLIDATED 2015 $ 2014 $ Issued Capital 60,099,072 34,686,214 Reconciliation of movements during the period: 2015 No. of Shares $ No. of Shares 2014 $ Balance as at 1 January 334,410,848 34,686,214 193,670,521 27,302,822 Shares issued pursuant to Rights Issue 52,631,579 3,000,000 Shares issued pursuant to a placement at 6 cents 150,000,000 9,000,000 Shares issued pursuant to Rights Issue - Institutional component 137,665,015 7,571,576 118,069,475 6,493,821 - - - - - - - - - - - - 1,120,000 56,000 95,989,889 5,279,443 12,130,438 697,500 31,500,000 1,811,250 416,667 6,400,000 - - - - - 25,000 - - - - - (677,539) (460,801) 799,593,584 60,099,072 334,410,848 34,686,214 Shares issued pursuant to Rights issue - retail component Shares issued to consultants in lieu of cash Shares issued at conversion of Performance Rights Shares issued on conversion of Convertible Notes Shares issued pursuant to a placement at 5.5 cents Shares issued pursuant to a placement at 5.75 cents Shares issued pursuant to a placement at 5.75 cents Less share issue costs Balance as at 31 December 52 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 CONSOLIDATED 2015 $ 2014 $ 441,822 643,465 1,085,287 (200,947) 602,469 401,522 602,469 310,372 (269,376) 643,465 (200,947) 642,769 441,822 1,085,287 389,811 277,738 (65,080) 602,469 (348,273) 147,326 (200,947) 401,522 18 RESERVES (a) Reserves Foreign currency translation reserve Share based payments reserve (b) Movements Share based payments reserve Balance 1 January Rights/Option expense Options expired Balance 31 December Foreign currency translation reserve Balance 1 January Exchange gains during year Balance 31 December Total reserves (c) Nature and purpose of reserves Share based payments reserve The share-based payments reserve records the value of unexercised options issued to employees and Directors which have been taken to expenses, the value of options issued on acquisition of Millennium Mining (Fiji) Ltd, the value of unexercised options granted pursuant to the Employee Share Option, and the value of Performance Rights which have vested. Foreign currency translation reserve The foreign currency translation reserve records unrealised exchange gains and losses on translation of controlled entities accounts during the year. 19 CONTINGENT LIABILITIES The Group does not have any contingent liabilities at the end of the reporting period. 53 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 20 COMMITMENTS (a) Tenement Commitments Entities in the Group are required to spend certain amounts to retain their interest in areas over which Special Prospecting Licenses are held. All requirements have been complied with and all reports and lodgements have been made. The Group is currently waiting on the reissue of certain licences by the Mineral and Resource Department of Fiji. The following expenditure for 2015 is required. Tenement Tenement Renewed to Annual Expenditure $FJD SPL1216 21 January 2017 SPL 1231/1373 29 November 2018 200,000 75,000 SPL 1436 29 November 2018 50,000 SPL 1361 9 December 2016 300,000 SPL 1368 9 December 2016 500,000 SPL 1415 6 November 2016 75,000 Comments Annual expenditure is budgeted amount lodged. 50% to be met by JV partner Imperial Mining (Fiji) Ltd. Annual expenditure is budgeted amount lodged. 50% to be met by JV partner Imperial Mining (Fiji) Ltd. Annual expenditure is budgeted amount. Licence renewed for 3 years, final year expenditure of FJD$500,000 Licence renewed for 3 years, final year expenditure of FJD$800,000 Licence renewed for 3 years, final year expenditure of FJD$150,000 SPL 1493 29 November 2018 50,000 Annual expenditure is budgeted amount. (b) Finance lease commitments Payable – minimum lease payments: Payable not later than one year Payable later than one year, but not later than five years Minimum lease payments Less future finance charge Present value of minimum lease payments (c) Operating lease commitments Payable not later than one year Payable later than one year, but not later than five years CONSOLIDATED 2015 $ 2014 $ 2,453 - 2,453 (106) 2,347 13,742 - 13,742 (351) 13,391 CONSOLIDATED 2015 $ 2014 $ 130,311 238,904 369,215 140,035 256,731 396,766 Geopacific’s wholly owned subsidiary Worldwide has a lease over office premises at Level 1 278 Stirling Highway Claremont which expires on 31 October 2017. 54 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 21 PARTICULARS RELATING TO CONTROLLED ENTITIES Worldwide Mining Projects Pty Ltd Eastkal Pte Ltd PT IAR Indonesia Ltd Beta Limited Royal Australia Resources Ltd Geopacific Limited Millennium Mining (Fiji) Limited Class of Share Holding Company 2015 2014 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary % 100 100 100 100 85 100 100 % 100 100 100 100 85 100 100 Worldwide Mining Projects Pty Ltd is a company incorporated and carrying on business in Australia. Eastkal Pte Ltd is a company incorporated and carrying on business in Singapore. PT IAR Indonesia is a company incorporated and carrying on business in Indonesia. Royal Australia Resources Ltd is a company incorporated and carrying on business in Cambodia. Petrochemicals (Cambodia) Refinery Ltd holds a 15% minority interest in Royal Australia Resources Ltd. Worldwide Mining Projects Pty Ltd and Petrochemicals (Cambodia) Refinery Ltd entered into a shareholders agreement in December 2012 to explore, develop and hold the Kou Sa project. Petrochemicals (Cambodia) Refinery Ltd will be a free carried joint venture partner until a decision to mine on the area which is subject to the Kou Sa project is made, following which Petrochemicals (Cambodia) Refinery Ltd will: a) Be granted an option to purchase further shares in Royal Australia Resources Ltd at fair market value to increase its percentage shareholding to 20%; and b) Contribute to all costs, expenses and liabilities incurred or sustained in proportion to its shareholding interest in Royal Australia Resources Ltd. Geopacific Limited, Beta Limited and Millennium Mining (Fiji) Limited are companies incorporated and carrying on business in Fiji. 55 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 22 KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Directors The names of each person holding the position of Director of Geopacific Resources Ltd during the financial year were: M Jerkovic R S Heeks M T Bojanjac R J Fountain (retired 18 August 2015) (b) Other key management personnel All Directors are identified as key management personnel under AASB 124 “Related Party Disclosures”. The Company Secretary, JC Lewis and Exploration Manager, S Whitehead, also meet the definition of key management personnel. (c) Key management personnel compensation Short term employee benefits Post employment benefits Share based payments Total Key Management Personnel compensation CONSOLIDATED 2015 $ 2014 $ 767,296 22,255 243,950 1,033,501 829,848 21,962 121,975 973,785 Refer to the remuneration report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 31 December 2015. 23 RELATED PARTY TRANSACTIONS All transactions with related parties are on normal commercial terms and conditions. CONSOLIDATED 2015 $ 2014 $ Transactions with directors and associates of directors Xavier Group Pty Ltd, a Company in which Mr Jerkovic is a Director and shareholder, is utilised to provide services in relation to Geopacific Resources Limited: Consulting Services 493,103 68,423 56 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 24 SHARE-BASED PAYMENTS (a) Employee Option Plan Geopacific Resources Limited Employee Option Plan was approved by shareholders at the annual general meeting held on 31 May 2012. All employees are eligible to participate in the plan. Plan options are granted under the plan for no consideration. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. No options have been granted under the plan. (b) Services During the year the Company issued 416,667 shares as payment for services. (c) Unlisted options issued During the financial year no options over unissued shares were granted or exercised (2014 Nil). During the year the following options were cancelled or lapsed unexpired (2014: 750,000). Number of Options Issued Date of Issue Exercise Price 2,000,000 5 April 2012 $0.30 Expiry Date 5 April 2015 Schedule of Issued Unlisted Option Movements During the 2015 Year Issue Date Expiry Date Exercise Price 05.04.2012 05.04.2015 06.06.2009 06.06.2009 (a) (b) $0.30 $2.50 $5.00 Number on issue 1 January 2015 2,000,000 800,000 200,000 05.08.2014 05.08.2017 $0.07452 1,688,768 4,688,768 Granted during year Lapsed during year Number on issue 31 December 2015 - - - - - (2,000,000) - - - (2,000,000) 800,000 200,000 1,688,768 2,688,768 (a) The Options are exercisable in whole or in part, not later than five years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 200,000 ounces of contained gold. (b) The Options are exercisable in whole or in part, not later than ten years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 1,000,000 ounces of contained gold. 57 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 24 SHARE-BASED PAYMENTS (CONTINUED) (c) Unlisted options issued (continued) Schedule of Issued Unlisted Option Movements During the 2014 Year Issue Date Expiry Date Exercise Price 30.09.2011 30.09.2014 05.04.2012 30.09.2014 05.04.2012 05.04.2015 06.06.2009 06.06.2009 (a) (b) $0.30 $0.30 $0.30 $2.50 $5.00 Number on issue 1 January 2014 500,000 250,000 2,000,000 800,000 200,000 Granted during year Lapsed during year Number on issue 31 December 2014 - - - - - (500,000) (250,000) - - - - - - 2,000,000 800,000 200,000 1,688,768 4,688,768 05.08.2014 05.08.2017 $0.07452 - 1,688,768 3,750,000 1,688,768 (750,000) (d) Performance rights issued During the financial year, 6,400,000 performance rights issued in the prior year vested on completion of the vesting conditions. At the year end date, 6,150,000 performance rights had not yet vested. The conditions that must be met in order for the Performance Rights to vest are as follows: • 50% will vest upon the performance by the eligible employee of 12 months continuous service from 1 July 2014; and • 50% will vest upon the performance by the eligible employee of 24 months continuous service from 1 July 2014. Schedule of Performance Rights Movements During the 2015 Year Issue Date Exercise Price Number on issue 1 January 2015 Granted during year Lapsed/ exercised during year Number on issue 31 December 2015 1 July 2014 Nil 12,550,000 - (6,400,000) 6,150,000 Schedule of Performance Rights Movements During the 2014 Year Issue Date Exercise Price Number on issue 1 January 2014 Granted during year Lapsed/ exercised during year Number on issue 31 December 2014 1 July 2014 Nil - 12,550,000 - 12,550,000 58 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 25 LOSS PER SHARE (a) Basic and diluted loss per share CONSOLIDATED 2015 Cents 2014 Cents Basic loss attributable to the ordinary equity holders of the Company Diluted loss attributable to the ordinary equity holders of the Company (0.25) (0.25) (0.67) (0.67) (b) Reconciliation of loss used in calculating loss per share 2015 $ 2014 $ Basic and diluted loss per share Loss attributable to the ordinary equity holders of the Company used in calculating basic and diluted loss per share (2,000,637) (1,636,029) (c) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share. 2015 Number 2014 Number 792,776,917 242,855,979 All options on issue are considered anti-dilutive and thus have not been included in the calculation of diluted loss per share. These options could potentially dilute earnings per share in the future. 26 EVENTS OCCURRING AFTER THE YEAR END Other than the following, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years. On 8 February 2015 the Company announced it had successfully renegotiated the payment terms of the acquisition agreement with the Vendor of the Kou Sa copper gold project in Cambodia. The terms defer the final payment of US$6.4M, linking future payments to the achievement of two project development milestones being a payment of US$1.575 Million at Bankable Feasibility Study and 2% royalty capped at US$8.425 Million at Production. No further vendor payments are due on the Kou Sa Project until the project development milestones are reached, as the Company has made the January milestone payment of US$3.15 Million. 59 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 27 OPERATING SEGMENTS The Group has identified its operating segments based on the internal reports that are reviewed by the Board in assessing performance and determining the appropriate allocation of the Group’s resources. The Group also has had regard to the qualitative thresholds for the determination of operating segments. For management purposes the Group is organised into two operating segments based on geographical locations, which involves mineral exploration and development in Cambodia and Fiji. All other corporate expenses are disclosed as “Others” within this segment report. The Group’s principal activities are interrelated and the Group has no revenue from operations. All significant operating decisions are based on analysis of the Group as two segments. The financial results of these segments are equivalent to the financial statements of the Company as a whole. The accounting policies applied for internal reporting purposes are consistent with those applied in preparation of the financial statements. Revenue by geographical region The Group has not generated revenue from operations, other than other revenue as below. Cambodia Fiji Others Total Other Revenue The Group’s segment net loss before tax is as follows: Cambodia Fiji Others Total net loss before tax 2015 $ 2014 $ 38,754 107 11,641 50,502 - - 69,853 69,853 2015 $ 2014 $ (84,910) (116,989) (87,902) (119,144) (1,798,738) (1,428,983) (2,000,637) (1,636,029) 60 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 27 OPERATING SEGMENTS (CONTINUED) Assets by geographical region The location of segment assets is disclosed below by geographical location of the assets. Cambodia Fiji Others Total Assets 2015 $ 2014 $ 27,908,164 11,487,404 7,714,890 12,610,894 7,621,593 4,508,576 48,233,948 23,617,573 The location of segment liabilities is disclosed below by geographical location of the liabilities. Cambodia Fiji Others Total Liabilities 2015 $ 2014 $ 770,364 990 318,915 1,090,269 462,719 14,283 362,254 839,256 61 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 28 FINANCIAL INSTRUMENTS DISCLOSURES Credit risk The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made. Refer to Note 2(a). Impairment losses The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the reporting period. Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements. Refer to Note 2(b): Carrying amount $ Contractual cash flows $ 6 months or less $ 6-12 months $ 1-2 years $ Consolidated 2015 Financial assets – cash flows realisable Cash and cash equivalents Trade and other receivables 12,589,002 12,589,002 12,589,002 754,788 754,788 754,788 Total anticipated inflows 13,343,790 13,343,790 13,343,790 Carrying amount $ Contractual cash flows $ 6 months or less $ 6-12 months $ Trade and other payables 1,072,935 1,072,935 1,072,935 Other financial liabilities 2,453 2,453 2,453 Total expected outflows 1,075,388 1,075,388 1,075,388 Net inflow/(outflow) on financial instruments 12,268,402 12,268,402 12,268,402 - - - - - - - - - - - - - - 1-2 years $ 62 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 28 FINANCIAL INSTRUMENTS DISCLOSURES (CONTINUED) Carrying amount $ Contractual cash flows $ 6 months or less $ 6-12 months $ 1-2 years $ 2014 Financial assets – cash flows realisable Cash and cash equivalents Trade and other receivables 4,165,516 4,165,516 4,165,516 290,482 290,482 290,482 Total anticipated inflows 4,455,998 4,455,998 4,455,998 Financial liabilities due for payment Trade and other payables Other financial liabilities Total expected outflows Net inflow/(outflow) on financial instruments 762,230 13,391 775,621 762,230 13,391 775,621 762,230 13,391 775,621 3,680,377 3,680,377 3,680,377 The weighted average interest rate for the interest bearing liabilities is 12% (2014:12%). - - - - - - - - - - - - - - 63 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 28 FINANCIAL INSTRUMENTS DISCLOSURES (CONTINUED) Currency risk The Group is exposed to foreign currency on expenditures that are dominated in a currency other than Australian Dollars. The currency’s giving rise to this risk is primarily United States and Fiji Dollars. Interest rate risk At the reporting date the interest profile of the Group’s interest-bearing financial instruments were: Fixed rate instruments: Financial liabilities Variable rate instruments: Financial assets CONSOLIDATED 2015 $ 2014 $ 2,453 2,453 13,391 13,391 12,589,002 12,589,002 4,165,516 4,165,516 Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased/ (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. Profit and Loss Equity 100bp increase $ 100bp decrease $ 100bp increase $ 100bp decrease $ 2015 Variable rate instruments 125,890 (125,890) 125,890 (125,890) 2014 Variable rate instruments Fair values Fair values versus carrying amounts 41,655 (41,655) 41,655 (41,655) The carrying amounts of financial assets and liabilities as described in the consolidated statement of financial position represent their estimated net fair value. 64 2015 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 29 NOTES TO THE STATEMENT OF CASH FLOWS (a) For the purpose of the Statement of Cash Flows, cash and cash equivalents includes cash at bank. Cash and cash equivalents at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: CONSOLIDATED 2015 $ 2014 $ Cash at Bank 12,589,002 4,165,516 (b) Non Cash Financing CONSOLIDATED 2015 $ 2014 $ Share based payments (Note 24.d) 310,372 145,107 (c) Reconciliation of Cash Flows from Operating Activities Loss for the year Non-cash items: Depreciation Share based payments Options expense Interest on financial liability Changes in Assets and Liabilities, net of the effects of purchase of subsidiaries: Decrease/(Increase) in trade and other receivables Increase/(Decrease) in trade and other payables Increase in provisions CONSOLIDATED 2015 $ 2014 $ (2,000,637) (1,636,029) 105,663 310,372 - - (300,416) 273,002 (48,754) 79,158 145,107 67,551 1,209 76,586 319,974 26,835 Net Cash used in Operating Activities (1,660,770) (919,609) 65 2015 ANNUAL REPORT ASX INFORMATION The shareholder information set out below was applicable as at 31 March 2016. A. Distribution of equity securities – ordinary shares Analysis of numbers of equity security holders by size of holding: 1 – 1000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Class of equity security Ordinary shares Number Shares 22 21 35 291 239 608 4,981 64,233 316,127 12,093,736 787,114,507 799,593,584 There were 78 holders of less than a marketable parcel of 10,000 ordinary shares. B. Equity security holders – ordinary shares The names of the twenty largest holders of quoted equity securities - ordinary shares are listed below: Ordinary shares Number held Percentage of issued shares 354,912,172 197,760,104 27,751,427 16,622,124 8,843,053 7,135,753 7,053,381 6,606,414 6,352,942 5,541,176 4,669,123 4,089,918 3,700,000 3,525,000 3,476,364 2,739,131 2,666,667 2,666,667 2,572,888 2,500,000 2,500,000 44.387 24.733 3.471 2.079 1.106 0.892 0.882 0.826 0.795 0.693 0.584 0.511 0.463 0.441 0.435 0.343 0.334 0.334 0.322 0.313 0.313 673,684,304 125,909,280 799,593,584 84.25% 15.75% 100.00% MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED NDOVU CAPITAL IV B.V. HOME IDEAS SHOW PTY LTDHSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED LAGUNA BAY CAPITAL PTY LTD METECH SUPER PTY LTD < METECH NO2 SUPER FUND A/C J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED MR M JERKOVIC & MRS G J JERKOVIC M J & G J J SUPER FUND A/C IDZAN PTY LTD SPRINGTIDE CAPITAL PTY LTD MR WILLIAM EDWARD ALASTAIR MORRISON MS ANITA CUNNINGHAM RASK PTY LTD METECH SUPER PTY LTD MR NICHOLAS JOHN RICHARD DACRES-MANNINGS MS LISA LEWIS MS MELISSA NARBEY MR KEVIN JOHN CAIRNS < CAIRNS FAMILY A/c> BLT OFFSHORE PTE LTD MS DENISE WORTHINGTON Top 20 Shareholders Other Shareholders Total Ordinary Shareholders 66 2015 ANNUAL REPORT ASX INFORMATION C. Substantial holders Substantial holders in the Company are set out below: Substantial Shareholder (extracts from Substantial Shareholder Register) Ordinary shares MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED NDOVU CAPITAL IV B.V. Shareholding Number held Percentage 354,912,172 197,760,104 44.387 24.733 D. Voting rights The voting rights attaching to each class of equity securities are set out below: (a) Fully paid 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. (b) Options – listed and unlisted There are no voting rights attaching to options. E. Summary of unlisted options issued Options expiring not later than five years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 200,000 ounces of contained gold with an exercise price of $2.50 Option holders with more than 20% of class Exploration Drilling Services (Fiji) Ltd L Anderson Investments Pty Ltd Sheila Anderson Investments Pty Ltd Options expiring not later than ten years after the defining on Faddy’s Gold Deposit of a JORC compliant ore reserve of over 1,000,000 ounces of contained gold with an exercise price of $5.00 Option holders with more than 20% of class Exploration Drilling Services (Fiji) Ltd L Anderson Investments Pty Ltd Sheila Anderson Investments Pty Ltd Options expiring expiring 5 August 2017 with an exercise price of $0.07425. Option holders with more than 20% of class BBY Ltd No of options 800,000 No of holders 5 Options held % Options Issued 320,000 220,000 180,000 40.00% 27.50% 22.50% 200,000 5 1,688,768 1 80,000 55,000 45,000 40.00% 27.50% 22.50% 1,688,768 100.00% 67 2015 ANNUAL REPORT TENEMENT SCHEDULE Tenement SPL 1231 RAKI RAKI 50% Beta 50% Peninsula Minerals Location Area Status Raki Raki NE Viti Levu Approx. 3,330 ha Granted on 6 November 1985 to Beta. Peninsula Minerals has earned 50.0%. Renewed for three years on 29 November 2016. SPL 1373 QALAU Raki Raki NE Viti Levu Approx. 1,843 ha Granted on 6 July 1995 to Beta. Peninsula Minerals has earned 50.0%. 50% Beta 50% Peninsula Minerals Renewed for three years on 29 November 2016. SPL 1436 TABUKA Raki Raki NE Viti Levu Approx. 2,500 ha Granted on 17th March 2005 to Beta. Peninsula Minerals has 50% interest. 2008 Renewed for three years on 29 November 2016. 50% Beta 50% Peninsula Minerals 3,210 ha Granted on 18 October 1994. Renewal for 3 years granted on 10 December 2013. Approx. 41,900 ha Granted on 31st January 2012. Renewed for three years on 29 November 2016. 15 km NNE of Nadi, Viti Levu Cakaudrove 55km ENE Savusavu, Vanua Levu 16 km NE of Nadi, Viti Levu 1,800ha Granted on 6 October 1993. Renewal for 3 years was granted on 10 December 2013. 20km SW Nadi, Viti Levu 2,830 ha Granted on 1st April 1984. Renewal for 3 years was granted on 22 January 2014. SPL 1368 VUDA 100% GPL SPL 1493 CAKAUDROVE 100% GPL SPL 1361 SABETO 100 GPL SPL 1216 NABILA GPR purchased (100%) of Millennium Mining (Fiji) Ltd SPL 1415 KAVUKAVU 28km SSW of Nadi, Viti Levu 5,400 ha Granted on 17th March 2000. Renewal for 3 years was granted on 8 November 2013. GPR completed purchase (100%) of Millennium Mining (Fiji) Ltd which owns SPL1216 on 3 June 2008 68 2015 ANNUAL REPORT 3 2013 ANNUAL REPORT www.geopacific.com.au