Great Southern Mining Limited Annual Report 2018

Plain-text annual report

NUAL REPORT AN Great Southern Mining Limited (Formerly “Forte Consolidated Limited”) 30th June 2018 CORPORATE INFORMATION GREAT SOUTHERN MINING LIMITED ABN 37 148 168 825 Directors John Terpu (Executive Chairman) Kathleen Bozanic (Non-executive Director) Andrew Caruso (Non-executive Director) Company Secretary Mark Petricevic Registered Office and Principal Place of Business Suite 4, 213 Balcatta Road Balcatta WA 6021 Telephone: (08) 9240 4111 Facsimile: (08) 9240 4054 Website: www.gsml.com.au Solicitors Gilbert & Tobin Level 16 Brookfield Place Tower 2 123 St Georges Tce PERTH WA 6000 Telephone: (08) 9413 8400 Facsimile: (08) 9413 8444 Auditors HLB Mann Judd (WA Partnership) Level 4, 130 Stirling Street Perth WA 6000 Telephone: (08) 9227 7500 Facsimile: (08) 9227 7533 Share Register Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Telephone: (within Australia): 1300 554 474 Telephone: (outside Australia): +61 (02) 8280 7761 Facsimile: (02) 9287 0303 Securities Exchange Listing and domicile Great Southern Mining Limited (formerly Forte Consolidated Limited) is an Australian Company limited by shares and listed on the Australian Securities Exchange (ASX: GSN) CONTENTS Operating and Financial Review Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement 2 10 18 19 Statement of Proﬁt or Loss & Other Comprehensive Income 20 21 22 23 24 52 53 57 Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information 1 Operating and Financial Review EXPLORATION STRATEGY The Company’s strategy has been to undertake efﬁcient and economical drilling campaigns utilising the available existing resources to improve the knowledge of each mineral deposit and identify future targets. Following the acquisition of the Mt Lucky Project (hereafter referred to as the “Mon Ami Gold Project” or “Mon Ami”) in WA in early 2018, a tailored and targeted drill campaign was undertaken which produced some exciting results. Exploration also continued in North Queensland to further our understanding of the resource proﬁle of the tenements. FY2018 HIGHLIGHTS • • • • Acquisition of Mon Ami Gold Project in WA; Completed RC drill program at Mon Ami; Application and grant of the Edinburgh Park Project in QLD; Commencement of ground exploration activities at Edinburgh Park. BLACK MOUNTAIN GOLD PROJECT Ownership: 100% GSN Status: Grassroots ExploraNon EDINBURGH PARK GOLD/ COPPER PROJECT Ownership: 100% GSN Status: Grassroots ExploraNon JOHNNYCAKE GOLD PROJECT Ownership: 100% GSN Status: Grassroots ExploraNon QLD NSW VIC VIC TAS TAS MON AMI GOLD PROJECT Ownership: 100% GSN Status: Advanced ExploraNon WA NT SA Great Southern Mining Project Great Southern Mining Project Great Southern Mining Project Great Southern Mining Project Por2olio Por2olio Por2olio 2 Operating and Financial Review MON AMI GOLD PROJECT Consolidated for In March 2018 Great Southern Mining Limited Limited) (formerly Forte the Mon acquired the Mining Lease Mon Ami Project in Western Australia. Ami comprises a Mining Lease M38/1256 granted in 2012 for a term of 21 years. The tenement lies within the Mt Margaret Mineral Field of the north-eastern Goldfields of Western Australia Belt), approximately 10 km east of the Granny Smith Mill and 18 km southeast of Laverton. Greenstone (Laverton There are several historic shafts along a regional shear which have extracted gold in the early 19th century (the most significant one being the Mon Ami shaft that produced 311 oz of gold from 128 tonnes of ore crushed at a (GSWA, 1906). The grade of ~48 g/t Au ‘modern’ tenement has been subjected to exploration since the late 1980s through a number of exploration companies including Placer (Granny Smith) Pty Ltd between 2001 and 2002. The project has accumulated a significant wealth of exploration data. This exploration has included prospect-scale geological mapping, soil and rock chip sampling, geophysical surveys, 2,950m of RAB drilling, 52 RC holes for 5,000 metres and two diamond cored holes for 280m. Forty (40) Reverse Circulation (RC) holes for a total of 5,821m were completed at the Mon Ami Gold Project during the June drilling campaign. Best results returned were: • • • • • • • 20m at 2.03 g/t Au from 26m (MLRC015) 4m at 10.03 g/t Au from 31m (MLRC018) 12m at 2.90 g/t Au from 44m (MLRC021) 14m at 5.41 g/t Au from 64m (MLRC024) 8m at 4.17 g/t Au from 136m (MLRC020) 8m at 3.20 g/t Au from 108m (MLRC038) 2m at 29.85 g/t Au from 173m (MLRC036) All holes successfully intersected shear hosted alteration and anomalous gold mineralization. Gold mineralisation at Mon Ami is hosted by quartz – sulphide veining within a sheared metasediment / carbonaceous contact zone within a regional north-south trending shear zone. The contact is marked by a 40-50 m wide deformation zone with intense shearing and alteration. Signiﬁcant intercepts from the drilling were reported in an ASX release dated 16 July 2018. Based on these early results, further drilling is planned in FY2019 to test the along strike and depth extensions to Mon Ami. Drilling at Mon Ami 3 Operating and Financial Review MON AMI GOLD PROJECT Assay intersections through modelled grade domains within the Barnicoat shearzone 4 Operating and Financial Review NORTH QUEENSLAND EXPLORATION EDINBURGH PARK GOLD-SILVER PROJECT The ‘Edinburgh Park’ project is a new acquisition for the Company in FY2018 and comprises two contiguous EPM’s (26527 & 26810) located at the northern margin of the Bowen Basin. EPM 26527 was granted in September 2017 for a period of ﬁve (5) years. EPM 26810 was applied for in March 2018 and was still pending grant at the end of FY 2018. The Project is a “grass roots stage” exploration project located in a region interpreted to represent a magmatic arc setting which is regarded as being prospective for porphyry copper-molybdenum deposits and epithermal gold-silver deposits. Desktop studies highlight strong similarities with the Mt Carlton district some 30 kilometres to the south. A program of detailed geological mapping and geochemical sampling within granted EPM 25196 commenced during the last quarter. The ﬁeld based programs are focused on detailed geological and structural mapping, validation of historic exploration results and drill collars and conﬁrmatory mapping and sampling of deﬁned prospects to gain an understanding of the nature of gold (± copper and silver) mineralization. As announced to the market on 19 July 2018, EPM 26810 has been granted. The exploration program has been extended to include EPM 26527 and EPM 26810 and is aimed to provide a more detailed understanding of the structures and further reﬁne future drilling targets on the Project. The program will extend into the next quarter. Mapping and sampling hydrothermal breccias at Edinburgh Park 5 Operating and Financial Review NORTH QUEENSLAND EXPLORATION JOHNNYCAKE GOLD-SILVER PROJECT BACKGROUND The ‘Johnnycake’ project comprises EPM 18986 and is located at the northern margin of the Bowen Basin. The Project is a “grass roots stage” exploration project located in a region interpreted to represent a magmatic arc setting which is regarded as being prospective epithermal gold-silver deposits. In order to advance the geological understanding of the Szarbs and Sledgehammer prospects, Great Southern Mining undertook a small targeted stratigraphic drilling program at each prospect to better understand the geology at depth. In October, 2017, Four holes were completed for a total of 1,559m, including 718m of diamond core. The exploration results relating to this drilling program were reported in an ASX release dated 11 October 2017. The extent and intensity of alteration observed in the holes conﬁrmed the presence of a signiﬁcant fossil hydrothermal system at both prospects and delineated a wide 15-20m zone of shear-hosted sulphide mineralization at the Szarbs prospect. The sulphide mineralization provides further evidence on the strong structural controls on hydrothermal ﬂuid ﬂow which overprint pervasive propylitic alteration halos. The zone was not geochemically anomalous, however the shear zone provides a good target to deﬁne lateral zones of metal concentrations in sulphide mineralization. Massive sulphides intersected at Szarbs drilling Drilling at Szarbs Prospect 6 Operating and Financial Review OTHER PROJECTS BACKGROUND EPM 25755, known as ‘Black Mountain’, was granted to Great Southern Mining Limited on the 8 April 2015 for a period of five years. is located The permit in north Queensland, approximately 100 kilometres northwest of Townsville, and some 50 km west of the city of Ingham. EPM 25755 is situated within the Camel Creek Sub-province which is composed of Ordovician to Early Devonian sedimentary rocks which have been deformed and have been intruded by granitoids of mid-Carboniferous to mid-Permian age. The primary exploration target is intrusion related porphyry and mesothermal gold (± Cu) systems associated with the intrusive phases and/or older slate-belt-style lode gold mineralisation within the metasedimentary host rock. During the reporting period, only limited desktop review was undertaken. MCAREA EPM 25196 is known as the ‘MCArea’ Project and was granted to Great Southern Mining Limited in March 2014 for a term of 6 years. tenure The epithermal-style gold-silver mineralisation. is considered prospective for CORPORATE During the year the Company achieved a number of major milestones to becoming Great Southern Mining Limited. The following significant matters and changes during the period have occurred: transformation its in Acquisition of the Mon Ami Gold Project: finalised the Company In March 2018 the acquisition of the Mon Ami Gold Project from a Director related entity. The acquisition was made to provide the Company with access to prospective gold tenements in Western Australia. The consideration for the acquisition included 15 million shares (subject to twelve months escrow period) and $250,000 cash. The Company also entered a royalty deed entitling the holder to a net smelter return of 2.75% on revenue produced from sales of ore extracted. The term of the Royalty is for the life of the mining lease on the Mon Ami Gold Project, subject to the availability of ore to be extracted. Issue of share capital: The Company undertook several capital raisings during the period to fund drilling campaigns in North Queensland and Western Australia. In November 2017, 35.4 million shares were issued generating $0.7 million (prior to costs) and a further placement was undertaken in April 2018 of 16.5 million shares providing the Company with $0.4 million (prior to costs) of working capital. During the reporting period, only limited desktop review was undertaken. Appointment of new board members and executives: In April 2018 the Company undertook a refresh of the Board and appointed two new non-executive directors as well as a new Company Secretary and Chief Financial Officer. In addition a Head of Exploration was engaged along with a Senior Advisor. Change of Name and Constitution: On 29 June 2018 the Company held a General Meeting of members to approve the change in Company name to Great Southern Mining Limited and adopt a new Company constitution. 7 Operating and Financial Review FINANCIAL POSITION AND PERFORMANCE The Company’s net assets increased 35% from the year ended 30 June 2017 predominately due to capital raising activities and the acquisition of the Mon Ami Gold Project. Following the successful capital raising activities during the year the Company raised $1.1 million with funds used to advance drilling campaigns in North Queensland and undertake the maiden drilling program at Mon Ami. The Company held $0.7 million as cash and cash equivalents at 30 June 2018. Exploration and evaluation assets increased signiﬁcantly during the period predominately due to the acquisition of the Mon Ami Gold Project with $480,000 relating to the issue of shares to a director related entity and $250,000 cash component which has been deferred and classiﬁed as a current liability. Operating cash outﬂows for the period totalled $0.6 million with cash outﬂows from investing activities totalling $0.6 million. We note the emphasis of matter paragraph regarding the going concern assumption included in the auditor’s report, refer to Note 1(w) for further disclosure. in a manner The Company has performed consistent with that of a junior exploration Company. The focus during the period was on undertaking drilling and exploration programs. The net loss for the period of $0.7 million is reﬂective of the corporate and overhead costs incurred in ensuring regulatory compliance is maintained. In addition, the loss is inclusive of Director’s fees ($0.09 million) and consultants fees ($0.08 million). The Company also employed a Chief Financial Ofﬁcer and Company Secretary in April 2018 along with additional corporate staff in June 2018 and therefore has incurred $0.03 million in wages and salaries expenses during the ﬁnancial year ended 30 June 2018. FUTURE PROSPECTS As discussed elsewhere in this report, with the capital raising undertaken in August 2018 the Company is looking to proceed with further drilling campaigns at Mon Ami and undertake additional exploration programs at North Queensland to further understand the potential of the projects. Further disclosure of information regarding likely developments in the operations of the Company in future ﬁnancial years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. Therefore, this information has not been presented in this report. BUSINESS RISKS The Company is subject to a number of risks that could potentially have an adverse impact on the performance of the Company. The Company has in place policies and procedures to monitor and manage these risks which can broadly be catergorised as: • • • • • commodity prices; currency risks; market risks; liquidity risks; and credit risks. As the Company is in early stage exploration programs and not a mineral producer the exposure to commodity risk and currency risk is minimal. The Company does hold investments in a ASX listed Company and is therefore subject to signiﬁcant movements in the underlying share price of the investment. Additionally, liquidity risk is a constant focus of the directors’ being mindful of the ability of the Company to raise additional capital to meet expenditure commitments and further drilling programs. Further disclosure of these risks can be found in Note 21 to the Annual Financial Report. 8 Operating and Financial Review COMPETENT PERSONS STATEMENT FORWARD LOOKING STATEMENTS Limited targets and exploration The information in this report that relates to exploration results on ML38/1256, EPM's 25196, 25755, 18986, 26527 and 26810 and is based on information compiled by Dr Bryce Healy. Dr Healy is an employee of Noventum Group Pty Ltd (ACN 624 875 323) and has been engaged by Great Southern Mining as Head of He has sufficient Exploration with GSN. experience of mineralisation and type of deposit under consideration. Dr Healy is a Member of the Australasian Institute of Geoscientists and as such, is a Competent Person for the Reporting of Exploration Results, Mineral Resources and Ore Reserves under the JORC Code (2012). Dr Healy consents to the inclusion in the report of the matters based on his information in the form and context in which they occur. relevant style the to from number to view on The information in this review of operations that has been information has contained extracted ASX of a announcements released during the year and up to the date of this report. All announcements are available the Company’s website. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. announcement. Forward- looking statements are only predictions and are not guaranteed. They are subject to known and unknown risks, uncertainties and assumptions, some of which are outside the control of the Company. Past performance is not necessarily a guide to future performance and no representation or warranty is made as to the likelihood of achievement or reasonableness of any forward looking statements or other forecast. The occurrence of events in the future are subject to risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to differ from those referred to in this announcement. Given these uncertainties, recipients are cautioned not to place reliance on forward looking statements. Any forward- looking statements in this announcement speak only at the date of issue of this announcement. Subject to any continuing obligations under applicable law and the ASX Listing Rules, the Company, its directors, ofﬁcers, employees and agents do not give any assurance or guarantee that the occurrence of the events referred to in this announcement will occur as contemplate. 9 Directors’ Report Your directors submit the annual financial report of Great Southern Mining Limited, (the Company), (formerly Forte Consolidated Limited), for the year ended 30 June 2018. DIRECTORS AND COMPANY SECRETARY The names of directors and the secretary who held office during or since the end of the year and until the date of this report are as follows. John Terpu – Executive Chairman (Appointed Non- executive Chairman 12 January 2011, appointed Executive Chairman 1 July 2013) Mr Terpu has over twenty years’ of commercial and management expertise gained in a broad range of business and investment activities. He has been involved in the mining and exploration industry through the acquisition and investment in a number of strategic exploration and mining projects. Mr Terpu has a wide range of contacts in investment Mr Terpu had no other public community. Company directorships in the previous three years. the exploration and mining Kathleen Bozanic B.Com, ACA, AICD – Non- executive Director (Appointed 26 April 2018) risk, commercial and Ms Bozanic is a chartered accountant with over twenty five years’ of experience in compliance, financial governance, management including leadership experience in strategic transformation and restructuring. Ms Bonzanic also has considerable experience as a Audit Partner, Chief Financial Officer and the General Manager of Finance in the mining and construction sector. Ms Bozanic had no other public Company directorships in the previous three years. Mr Andrew Caruso B.Eng (Mining)(Hons), – Non- executive Director (Appointed 26 April 2018) Mr Caruso has over twenty five years’ experience in the Australian and as a mining engineer international mining including significant corporate leadership roles. Mr Caruso has business development experience including operations and strategic planning including large scale capital projects and mine management. industries 10 Mr Caruso has been the director of Ascot Resources Ltd; a public Company, in the previous three years. Bruno Firriolo B.Bus (Acctg) – Non-executive Director (Appointed 12 January 2011) (Resigned as Non-Executive Director 26 April 2018, Resigned as Company Secretary 30 April 2018) Mr Firriolo is an accountant who has been a partner with the accounting ﬁrm Cleaver & Associates since April 1991 dealing with all aspects of accounting and taxation. Mr Firriolo’s experience in ﬁnancial and corporate matters is supplemented by a period of co-ownership in a national wholesale business. Mr Firriolo had no other public Company directorships in the previous three years. Joseph Radici CPA, B.Bus (Acctg) – Non-executive Director (Appointed 31 March 2015) (Resigned 26 April 2018) Mr Radici is a Certiﬁed Practising Accountant and Fellow of the Taxation Institute of Australia. Since 1995 Mr Radici has been on the board of a number of unlisted public companies as well as being a non-executive director of Conquest Mining Limited for a period of 4 years to May 2010. In addition to skills gained on serving on Company boards, Mr Radici has a wide network of entrepreneurial associations and is a respected member of Perth’s business community. Mr Radici had no other public Company directorships in the previous three years. COMPANY SECRETARY Mark Petricevic CA, B.Com (Acctg & C. Finance) (Appointed 30 April 2018) Mark is a chartered accountant with over ﬁfteen years’ experience in accounting, audit and corporate ﬁnance including the last four years as an Audit and Assurance Partner. Mark has had no public Company directorships in the previous three years. Directors’ Report DIRECTORS’ MEETINGS The number of meetings of the Company’s Board of Directors attended by each Director during the year ended 30 June 2018 was as follows: Number of Board Meetings Held Whilst in Ofﬁce Number of Board Meetings Attended J. Terpu B. Firriolo J. Radici K. Bozanic A. Caruso 12 10 10 2 2 12 10 10 2 2 INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE The following relevant interests in shares and options of the Company or a related body corporate were held by the directors as at the date of this report. Directors Number of fully paid ordinary shares The options were issued to a Senior Advisor upon entering the consulting arrangement with the Company. The options where not issued as consideration for services provided. These options do not entitle the holder to participate in any share issues of the Company. No shares have been issued as a result of the exercise of options during or since the end of the ﬁnancial year. DIVIDENDS No dividends were declared since the start of the ﬁnancial year and the directors do not recommend the payment of a dividend in respect of the ﬁnancial year. REVIEW OF OPERATIONS During the year, the Company carried out exploration on its tenements with the objective of identifying economic deposits of gold and other metals. The full review of operations immediately precedes this report. John Terpu K. Bozanic A. Caruso OPTIONS 105,567,717 1,200,000 1,200,000 Operating results for the year The net result of operations for the year was a loss after income tax of $725,433 (2017: $171,411). The Operating and Financial Review can be found in the in the “Review of Operations Section” in this Annual Report. Details of ordinary shares issued by the Company during or since the end of the ﬁnancial year as a result of the exercise of an option are: Nil. At the date of this report unissued ordinary shares of the Company under option are: Date options granted Expiry date Exercise price of shares ($) Number under option 14-May-18 31-Dec-19 $0.02 11,800,000 11 Directors’ Report PRINCIPAL ACTIVITIES The principal activity of the Company during the year was exploration for and evaluation of economic deposits for gold and other minerals in Western Australia and Queensland. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year, the following changes occurred: 1. 2. 3. Acquisition of the Mt Lucky (Mon Ami) Project: In March 2018 the Company ﬁnalised the acquisition of the Mon Ami Gold Project from a director related entity. The acquisition was made to provide the Company with access to prospective gold tenements in Western Australia. The consideration for the acquisition included 15 million shares (subject to twelve months escrow period) and $250,000 cash and is yet to be paid. Issue of share capital: The Company undertook several capital raisings during the period to fund drilling campaigns in North Queensland and Western Australia. In November 2017, 35.4 million shares were issued generating $0.7 million (prior to costs) and a further placement was undertaken in April 2018 of 16.4 million shares providing the Company with $0.4 million (prior to costs) of working capital. On 29 June 2018 the Company held a General Meeting of members to approve the change in Company name to Great Southern Mining Limited and adopt a new Company constitution. SIGNIFICANT EVENTS AFTER THE REPORTING DATE The Company completed a placement of 31,846,669 to fully paid ordinary sophisticated investors raising $1,115,429 net of costs. shares The Company entered an executive services agreement with John Terpu as Executive Chairman. The terms and conditions have been included in the Remuneration Report. 12 In September 2018 the Company entered into a transaction to acquire several exploration licences from Central Australia Rare Earths Pty Ltd, a wholly owned subsidiary of Strategic Minerals plc, a AIM listed Company. Subject to the completion of due diligence and completion of the transaction the consideration will consist of $100,000 cash and 1 million shares in the Company. At the date of this report, the transaction is subject to completion conditions. Apart from the above, there has not been any other matter or circumstance that has arisen after the reporting date that has signiﬁcantly affected, or may signiﬁcantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in future ﬁnancial periods. LIKELY DEVELOPMENTS & EXPECTED RESULTS regarding information Disclosure of likely developments in the operations of the Company in future ﬁnancial years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. Therefore, this information has not been presented in this report. ENVIRONMENTAL LEGISLATION The Company’s exploration activities are subject to conditions and environmental regulations under the Western Australian and Queensland State Governments. So far, the Directors are aware all activities have been undertaken in compliance with relevant regulations. INDEMNIFICATION & DIRECTORS AND OFFICERS INSURANCE OF The Company has agreed to indemnify all the directors of the Company for any liabilities to another person (other than the Company or related body corporate) that may arise from their position as directors of the Company, except where the liability arises out of conduct involving a lack of good faith. Directors’ Report Remuneration philosophy The performance of the Company depends upon the quality of the directors and executives. The philosophy of the Company in determining remuneration levels is to: - - - set competitive remuneration packages to attract and retain high calibre employees; link executive rewards to shareholder value creation; and establish appropriate, demanding performance hurdles for variable executive remuneration Remuneration Committee Great Southern Mining Limited has not established a Remuneration Committee. The Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors and the executive team. assesses The Board of Directors the appropriateness of the nature and amount of remuneration of directors and executives on a periodic basis by reference to relevant employment market conditions with an overall objective of ensuring maximum stakeholder beneﬁt from the retention of a high quality Board and executive team. Remuneration Structure In accordance with best practice corporate the structure of non-executive governance, director and executive remuneration is separate and distinct. Non-executive director remuneration The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. During the ﬁnancial year the Company paid a premium in respect of a contract insuring the directors and ofﬁcers of the Company against any liability incurred in the course of their duties to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. REMUNERATION REPORT (AUDITED) the report outlines This remuneration arrangements in place for the key management personnel (“KMP”) of the Company for the ﬁnancial year ended 30 June 2018. KMP’s being deﬁned as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or including any director (whether executive or otherwise). The report also includes remuneration arrangements of the executives in the Company receiving the higher remuneration. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. indirectly, Key Management Personnel Directors J. Terpu (Executive Chairman appointed 1 July 2013, Non-executive Chairman appointed 12 January 2011). B. Firriolo (Non-executive Director and Company Secretary appointed 12 January 2011, resigned 26 April 2018 and 30 April 2018 respectively). J. Radici (Non-executive Director appointed 31 March 2015, resigned 26 April 2018). K. Bozanic (Non-executive Director appointed 26 April 2018). A. Caruso (Non-executive Director appointed 26 April 2018). Company Secretary and CFO M. Petricevic (Company Secretary and CFO, appointed 30 April 2018). 13 Directors’ Report REMUNERATION REPORT (CONTINUED) The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at a General Meeting, prior to the Company’s listing on ASX, held on 30 March 2011 when shareholders approved an aggregate remuneration of $300,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board refers to the fees paid to non-executive directors of comparable companies, when undertaking the annual review process. Each non-executive director receives a fee for being a director of the Company. Should the Company establish a Board committee, an additional fee would be paid for each committee on which a non- executive director sits. The payment of additional fees for serving on a committee recognises the additional time commitment required by non- executive directors who serve on one or more sub committees. During the financial year ended 30 June 2018 no such committees were in place. expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. Variable Remuneration During the year ended 30 June 2018 the Company did not have a performance-based remuneration component built into director and executive remuneration packages. A long-term incentive plan was adopted by shareholders of the Company at the general meeting of members held 29th June 2018. No components of variable remuneration were granted to any eligible persons during the ﬁnancial year. Service Agreements Remuneration and other terms of employment for the Executive Director and other Key Management Personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration are set out below: Employee Base salary ($) Term of agreement Notice period J Terpu* 50,000 2 years 3 months Senior Manager Remuneration and Executive Director M Petricevic 180,000 No ﬁxed term 3 months Remuneration consists of fixed remuneration and variable remuneration (comprising short-term and long-term incentive schemes). * Subsequent to 30 June 2018 a new service agreement was entered into with J Terpu. The terms of the agreement are as follow: Fixed Remuneration Fixed remuneration is reviewed annually by the Board of Directors. The process consists of a review of relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. The Board has access to external, independent advice where necessary. Senior managers and executive directors are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles and Employee Base salary ($) Term of agreement Notice period J Terpu 219,000 2 years 6 months During the mining downturn experienced in prior years the Company limited its activity and reduced the Executive Chairman’s salary below market rates in order to limit cash outﬂows. The increase in salary noted above is a result of improving market conditions and reinstatement of the Executive Chairman’s salary to market rates. 14 Directors’ Report REMUNERATION REPORT (CONTINUED) Remuneration of key management personnel Table 1: Remuneration of key management personnel for the years ended 30 June 2018 and 30 June 2017 Short-term employee benefits Post-em- ployment benefits Other $ Superan- nuation $ Directors Year Cash Salary & Fees $ Bonuses $ J Terpu Executive Chairman B Firriolo Non-Execu- tive Director J. Radici Non-Execu- tive Director K. Bozanic Non-Execu- tive Director A. Caruso Non-Execu- tive Director Total to Directors 2018 45,665 2017 45,664 2018 4,566 2017 2,283 2018 2017 - - 2018 6,217 2017 - 2018 6,217 2017 2018 2017 - 62,665 47,947 Other Key Management Personnel M Petricevic Company Secretary/ CFO Total to KMP 2018 28,557 2017 2018 2017 - 91,222 47,947 Non- Mon- etary Benefits $ 5,265 3,797 551 740 551 693 - - - - 6,367 5,230 551 - 6,918 5,230 - - - - - - - - - - - - - - - - Other long- term benefits Long- service Leave $ Equity Share Options $ 4,338 20,350 4,338 4,881 20,434 27,717 10,000 7,500 591 - 591 - - - - - - - - - - - - - - - - - - - Total $ 75,618 58,680 25,551 30,740 10,551 8,193 6,808 - 6,808 - 35,954 20,350 - 125,336 39,555 4,881 2,713 - 22 - 38,666 20,372 39,555 4,881 - - - 97,613 31,843 - - 157,178 - 97,613 Perfor- mance Related % - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - K Bozanic, A Caruso and M Petricevic commenced with the Company in April 2018 and were therefore not remunerated by the Company during the 2017 financial year. No performance related remuneration was paid to any director or Key Management Personnel during 2018 and 2017. 15 Directors’ Report REMUNERATION REPORT (CONTINUED) OPTION PLANS IN EXISTENCE DURING THE FINANCIAL YEAR: On 29 June 2018 the Shareholders of the Company approved the long-term incentive plan to be adopted. No options over ordinary shares in the Company were granted as remuneration to KMP during the ﬁnancial year and up to the date of this report. SHARE-BASED COMPENSATION TO DIRECTORS AND EXECUTIVES DURING THE YEAR: During the period the Company issued 15 million fully paid ordinary shares to entities associated with Mr John Terpu as consideration for the acquisition of the Mon Ami Gold Project, approved by shareholders at a General Meeting held 29 March 2018. The ordinary shares were not issued as part of the remuneration. OPTIONS GRANTED TO DIRECTORS AND EXERCISED OR LAPSED DURING THE YEAR: Nil Movements in KMP share and option holdings (Directors unless stated otherwise) Fully paid ordinary shares – directly and indirectly held 2018 J. Terpu B. Firriolo J.Radici K. Bozanic A. Caruso 2017 J. Terpu B. Firriolo J.Radici Opening Balance 1/7/2017 At time of commencing/ (ceasing) Bought Sold Closing Balance 30/06/2018 72,394,181 - 33,273,536 1,790,000 (1,790,000) 100,000 - - (100,000) 1,200,000 1,200,000 - - - - Opening Balance 1/7/2016 At time of commencing/ (ceasing) Bought Sold 71,840,312 1,790,000 100,000 - - - 553,869 - - - - - - - - - - 105,667,717 - - 1,200,000 1,200,000 Closing Balance 30/06/2017 72,394,181 1,790,000 100,000 The increase for J Terpu of 33,273,536 during 2018 includes the 15,000,000 shares issued relating to the acquisition of the Mon Ami Gold Project, subject to 12 months escrow, as announced on the ASX on 22 February 2018. No cash consideration was payable. All other shares were acquired on market. Transactions with Key Management Personnel The following comprises amounts paid or payable and received or receivable applicable to entities in which KMP have an interest. 16 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Great Southern Mining Limited (formerly “Forte Consolidated Limited”) for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 27 September 2018 D I Buckley Partner HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers 18 Corporate Governance Statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Great Southern Mining Limited (the “Company”) has adopted the third edition of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective for the ﬁnancial years beginning on or after 1 July 2014. The Company’s Corporate Governance Statement for the ﬁnancial year ended 30 June 2018 was approved by the Board on 27 September 2018. The Corporate Governance Statement is available on the Company’s website at www.gsml.com.au. 19 Great Southern Mining Limited Income for the year ended 30 June 2018 Revenue and other income Expenses Administration expenses Consulting fees Legal fees Director’s fees Depreciation expense Loss on sale of ﬁxed assets Total expenses Loss before income tax expense Income tax expense Net loss for the year Other comprehensive income, net of income tax Items that will not be reclassiﬁed to proﬁt or loss Available-for-sale assets disposed of during the year Items that may be reclassiﬁed to proﬁt or loss Change in the fair value of available-for-sale investments Income tax expense Total comprehensive (loss)/income for the year Notes 2 2 4 2018 $ 2017 $ 15,348 340,623 (510,357) (419,000) (85,000) (41,509) (98,619) (5,296) - (1,307) (85,771) (5.037) - (919) (740,781) (512,034) (725,433) (171,411) - - (725,433) (171,411) - (300,395) 42,000 38,815 - - (683,433) (432,991) Basic and diluted loss per share (cents per share) 5 (0.348) (0.096) The accompanying notes form part of these ﬁnancial statements. 20 Great Southern Mining Limited Statement of Financial Position As at 30 June 2018 CURRENT ASSETS Cash and cash equivalents Other receivables - current Other assets Total Current Assets NON-CURRENT ASSETS Other receivables - non current Available-for-sale listed securities Plant and equipment Exploration and evaluation expenditure Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Employee beneﬁts Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Notes 2018 $ 2017 $ 6 7 8 9 10 11 12 13 14 15 16 748,423 870,380 - 13,244 7,116 20,836 761,667 898,332 10,000 180,000 19,518 7,500 138,000 11,546 3,455,352 1,668,573 3,664,870 1,825,619 4,426,538 2,723,951 810,402 34,014 844,416 844,416 65,470 8,772 74,242 74,242 3,582,122 2,649,709 21,750,349 20,169,503 128,470 51,470 (18,296,697) (17,571,264) 3,582,122 2,649,709 The accompanying notes form part of these ﬁnancial statements. 21 Great Southern Mining Limited Statement of Cash Flows For the year ended 30 June 2018 CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees Interest received Notes 2018 $ 2017 $ (649,041) (501,281) 18,364 29,480 NET CASH USED IN OPERATING ACTIVITIES 17 (630,676) (471,801) CASH FLOWS FROM INVESTING ACTIVITIES Payments for plant and equipment Payments for exploration and evaluation expenditure Payments for purchase of available-for-sale investments Proceeds from sale of available-for-sale investments (7,972) - (584,154) (140,502) - - (36,185) 494,810 NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (592,127) 318,123 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of Shares (net of costs) NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Net decrease in cash held Cash at beginning of year CASH AT END OF YEAR The accompanying notes form part of these ﬁnancial statements. 1,100,846 1,100,846 - - (121,957) (153,678) 870,380 1,024,058 6 748,423 870,380 22 Great Southern Mining Limited Statement of Changes in Equity For the year ended 30 June 2018 Notes Issued Capital $ Accumulated Losses $ Financial Asset Reserve $ Share Option Reserve $ Total $ Company Balance at 1 July 2016 20,169,503 (17,399,853) 313,050 Total comprehensive income : - (171,411) - - 3,082,700 (171,411) Loss for the year Available-for-sale assets disposed of during the year Change in the fair value of available for sale investments - - - (300,395) - (300,395) - 38,815 - 38,815 Balance at 30 June 2017 20,169,503 (17,571,264) 51,470 - 2,649,709 Company Balance at 1 July 2017 20,169,503 (17,571,264) 51,470 - 2,649,709 Options Issued During the Period Issue of Share Capital Capital Raising costs Issue of Shares under share-based payment - 1,118,416 (17,570) 480,000 15 15 15 - - - - - - - - 35,000 35,000 - 1,118,416 (17,570) - - 480,000 Loss for the year Change in the fair value of available for sale investments 21,750,349 (17,571,264) 51,470 35,000 4,265,555 - - (725,433) - - 42,000 - - (725,433) 42,000 Balance at 30 June 2018 21,750,349 (18,296,697) 93,470 35,000 3,582,122 The accompanying notes form part of these ﬁnancial statements. 23 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting entity Your directors present their report on the Company for the ﬁnancial year ended 30 June 2018. The Company is a listed public Company in Australia. The principal activities are the exploration for and evaluation of economic deposits for gold and other minerals in North Queensland and Western Australia. registered The address of the Company’s registered ofﬁce is Suite 4, 213 Balcatta Rd, Balcatta WA 6021. (b) Basis of preparation and statement of compliance and The general-purpose ﬁnancial statements of the Company have been prepared in accordance with the requirements of the Corporations Act 2001, Australian other Accounting Standards authoritative pronouncements of the Australian Accounting Standards Board (AASB). Compliance with Australian Accounting Standards full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Great Southern Mining Limited is a for-proﬁt entity for the purpose of preparing the ﬁnancial statements. results in The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated. The ﬁnancial report is presented in Australian dollars. The ﬁnancial statements for the year ended 30 June 2018 were approved and authorised for issue by the Board of Directors on 27 September 2018. (c) Adoption of new and revised standards Changes in accounting policies on initial application of Accounting Standards 24 A number of new and revised standards became effective for the current reporting period. Information on the more signiﬁcant standard(s) is presented below. AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses AASB 2016-1 amends AASB 112 Income Taxes to clarify how to account for deferred tax assets related to debt instruments measured at fair value, particularly where changes in the market interest rate decrease the fair value of a debt instrument below cost. AASB 2016-1 is applicable to annual reporting periods beginning on or after 1 January 2017. AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 AASB 2016-2 amends AASB 107 Statement of Cash Flows to require entities preparing ﬁnancial statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of ﬁnancial statements to evaluate changes in liabilities arising from ﬁnancing activities, including both changes arising from cash ﬂows and non-cash changes. is applicable to annual AASB 2016-2 reporting periods beginning on or after 1 January 2017. The directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has been determined by the directors that there is no impact, material or otherwise, of the new and revised Standards and its business and, Interpretations on therefore, no change is necessary to Company accounting policies. Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Adoption of new and revised standards (continued) Changes in accounting policies on initial application of Accounting Standards The directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2018. A summary of the impact is contained in the table below: New /revised Pronouncement Superseded Pronouncement AASB 9 Financial Instruments (December 2014) AASB 139 Financial Instruments: Recognition and Measurement Effective Date Likely impact on initial application 01-Jan-18 When this standard is ﬁrst adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the ﬁnancial statements. The Company has simple investments held in ASX listed companies which can be traded at quoted market prices. Should such investments be held at 30 June 2019 it is likely that the accounting treatment will be similar to the current treatment and any gains or losses on fair value will be taken to the other comprehensive income statement. Nature of Change AASB 9 introduces new requirements for the classiﬁcation and measurement of ﬁnancial assets and liabilities and includes a forward- looking ‘expected loss’ impairment model and a substantially-changed approach to hedge accounting. These requirements improve and simplify the approach for classiﬁcation and measurement of ﬁnancial assets compared with the requirements of AASB 139. The main changes are: a) Financial assets that are debt instruments will be classiﬁed based on: (i) the objective of the entity’s business model for managing the ﬁnancial assets; and (ii) the characteristics of the contractual cash ﬂows. b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in proﬁt or loss). Dividends in respect of these investments that are a return on investment can be recognised in proﬁt or loss and there is no impairment or recycling on disposal of the instrument. Introduces a ‘fair value through other c) comprehensive income’ measurement category for particular simple debt instruments. d) Financial assets can be designated and measured at fair value through proﬁt or loss at initial recognition if doing so eliminates or signiﬁcantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. e) Where the fair value option is used for ﬁnancial liabilities the change in fair value is to be accounted for as follows: - - the change attributable to changes in credit risk are presented in Other Comprehensive Income (OCI) the remaining change is presented in proﬁt or loss If this approach creates or enlarges an accounting mismatch in the proﬁt or loss, the effect of the changes in credit risk are also presented in proﬁt or loss. 25 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Adoption of new and revised standards (continued) Changes in accounting policies on initial application of Accounting Standards New /revised Pronouncement Superseded Pronouncement Nature of Change Effective Date Likely impact on initial application Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9: - - classiﬁcation and measurement of ﬁnancial liabilities; and derecognition requirements for ﬁnancial assets and liabilities. requirements AASB 9 regarding hedge accounting represent a substantial overhaul of hedge accounting that enable entities to better reﬂect their risk management activities in the ﬁnancial statements. AASB 16: a. b. c. d. e. replaces AASB 117 Leases and some lease-related Interpretations requires all leases to be accounted for ‘on- balance sheet’ by lessees, other than short-term and low value asset leases provides new guidance on the application of the deﬁnition of lease and on sale and lease back accounting largely retains the existing lessor accounting requirements in AASB 117 requires new and different disclosures about leases. AASB 16 Leases AASB 117 Leases, Int. 4 Determining whether an Arrangement contains a Lease, Int. 115 Operating Leases—Lease Incentives, Int. 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease 26 01-Jan-19 Based on the entity’s assessment, it is expected that the ﬁrst-time adoption of AASB 16 for the year ending 30 June 2020 will have a material impact on the transactions and balances recognised in the ﬁnancial statements, in particular: - At the time of the assessment the Company is a junior exploration Company. As exploration leases are excluded from AASB 16 the only material lease which may impact the ﬁnancial statements is the lease over the premises. - lease assets and ﬁnancial liabilities on the balance sheet will increase by approximately $0.16 million respectively (based on the facts at the date of the assessment). there will be a reduction in the - reported equity as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities. EBIT in the statement of proﬁt - or loss and other comprehensive income will be higher as the implicit interest in lease payments for former off-balance sheet leases will be presented as part of ﬁnance costs rather than being included in operating expenses. - operating cash outﬂows will be lower and ﬁnancing cash ﬂows will be higher in the statement of cash ﬂows as principal repayments on all lease liabilities will now be included in ﬁnancing activities rather than operating activities. Interest can also be included within ﬁnancing activities. Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Adoption of new and revised standards (continued) Changes in accounting policies on initial application of Accounting Standards New /revised Pronouncement Superseded Pronouncement Nature of Change Effective Date Likely impact on initial application None AASB 2016- 5 Amendments to Australian Accounting Standards – Classiﬁcation and Measurement of Share- based Payment Transactions This Standard amends AASB 2 Share-based Payment to address: a) the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; 01-Jan-18 Whilst a formal assessment has not yet been undertaken the Company does not anticipate a material impact for the year ending 30 June 2019. b) the classiﬁcation of share-based payment transactions with a net settlement feature for withholding tax obligations; and the accounting for a modiﬁcation to the c) terms and conditions of a share-based payment that changes the classiﬁcation of the transaction from cash-settled to equity-settled. 27 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Critical accounting estimates and judgements The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Exploration and evaluation expenditure carried forward In accordance with accounting policy Note 1 (t), management determines when an area of interest should be abandoned. When a decision is made that an area of interest is not commercially viable, all costs that have been capitalised in respect of that area of interest are written off. In determining this, assumptions including the maintenance of title, ongoing expenditure and prospectivity are made. During the year, nil exploration expenditure was written off. See Note 12 for disclosure of carrying values. Recovery of deferred tax assets Deferred tax assets are currently not recognised in the ﬁnancial statements. The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised. Given the current stage of the Company’s exploration and development cycle, the likelihood and timeline of future proﬁts cannot be reliably estimated. Refer Note 4. 28 Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain software and IT equipment. Fair value of ﬁnancial instruments Management uses valuation techniques to determine the fair value of ﬁnancial instruments (where active market quotes are not available) and non-ﬁnancial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. its assumptions on Management bases observable data as far as possible, but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date (see Note 21). Share based payments The Company measures the cost of equity- settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. For security instruments issued to consultants, consideration of the fair value of services received (if available) or fair value of the equity instruments granted as consideration is used. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share- based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact proﬁt or loss and equity. (Refer to Note 24). Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Segment reporting reported in Operating segments are a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identiﬁed as the Board of Great Southern Mining Limited. The Company’s activities included the exploration and evaluation of projects in North Queensland and Western Australia. The Western Australian tenements were acquired during the current ﬁnancial year and hence are deemed to be a new segment. In addition, corporate assets which are not directly attributable to the business activities of the operating segment are not allocated to a segment. In the ﬁnancial periods under audit, this primarily applies to the Company’s registered ofﬁce and administrative duties. There have been no changes from prior periods in the measurement methods used to determine reported segment proﬁt or loss. (f) Revenue recognition received or Revenue is measured at fair value of the receivable. consideration Revenue is recognised to the extent that it is probable that the economic beneﬁts will ﬂow to the Company and the revenue can be reliably measured. The following speciﬁc recognition criteria must also be met before revenue is recognised: Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the ﬁnancial asset. (g) Income tax The income tax expense or beneﬁt for the period is the tax payable on the current period’s taxable income based on 29 the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for ﬁnancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: the deferred • when income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting proﬁt nor taxable proﬁt or loss; or taxable the is temporary • when difference associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Notes to the Financial Statements For the year ended 30 June 2018 liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in proﬁt or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of ﬁnancial position. Cash ﬂows are included in the statement of cash ﬂows on a gross basis and the GST component of cash ﬂows arising from investing and ﬁnancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁed as operating cash ﬂows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Income tax (continued) Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable proﬁt will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: relating • when the deferred income tax the deductible asset to temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁt nor taxable proﬁt or loss; or is • when the deductible temporary difference associated with investments in associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable proﬁt will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufﬁcient taxable proﬁt will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable proﬁt will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised, or the 30 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inﬂows that are largely independent of those from other assets or groups of assets and the asset’s value-in-use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash- generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in proﬁt or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. (j) Cash and cash equivalents Cash comprises 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. Bank overdrafts are shown within borrowings in current liabilities in the statement of ﬁnancial position. For the purposes of the statement of cash ﬂows, cash and cash equivalents consist of cash and cash equivalents as deﬁned above, net of outstanding bank overdrafts. (k) Trade and other receivables Trade initial receivables are measured on recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within periods ranging from 15 days to 30 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Company will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Company in making this determination include known signiﬁcant ﬁnancial difﬁculties of the debtor, review of ﬁnancial information and signiﬁcant delinquency in making contractual payments to the Company. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash ﬂows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance. 31 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) Trade and other receivables (continued) The amount of the impairment loss is recognised in the statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income. (l) Financial assets Recognition, initial measurement and derecognition Financial assets and ﬁnancial liabilities are recognised when the Group becomes a party to the contractual provisions of the ﬁnancial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through proﬁt or loss, which are measured initially at fair value. Subsequent measurement of ﬁnancial assets and ﬁnancial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash ﬂows from the ﬁnancial asset expire, or when the ﬁnancial asset and all substantial risks and rewards are transferred. A ﬁnancial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classiﬁcation and subsequent measurement of ﬁnancial assets For the purpose of subsequent measurement, ﬁnancial assets other than those designated and effective as hedging instruments are classiﬁed into the following categories upon initial recognition: loans and receivables ﬁnancial assets at fair value through proﬁt or loss (FVTPL) Held-to-maturity (HTM) investments; or Available-for-sale (AFS) ﬁnancial assets 32 All ﬁnancial assets except for those at fair value through proﬁt or loss (FVTPL) are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a ﬁnancial asset or a group of ﬁnancial assets is impaired. Different criteria to determine impairment are applied for each category of ﬁnancial assets, which are described below. All income and expenses relating to ﬁnancial assets that are recognised in proﬁt or loss are presented within ﬁnance costs, ﬁnance income or other ﬁnancial items, except for impairment of trade receivables which is presented within other expenses. Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s trade and most other receivables fall into this category of ﬁnancial instruments. Individually signiﬁcant receivables are considered for impairment when they are past due or when other objective evidence is received that a speciﬁc counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identiﬁed group. Available-for-sale (AFS) ﬁnancial assets Available-for-sale (AFS) ﬁnancial assets are non-derivative ﬁnancial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of ﬁnancial assets. The Company’s AFS ﬁnancial assets includes listed securities. Notes to the Financial Statements For the year ended 30 June 2018 • • • the rights to receive cash ﬂows from the asset have expired; the Company retains the right to receive cash ﬂows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass- through’ arrangement; or the Company has transferred its rights to receive cash ﬂows from the asset and either: (a) (b) has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. When the Company has transferred its rights to receive cash ﬂows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Company could be required to repay. (ii) Financial liabilities A ﬁnancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing ﬁnancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modiﬁed, such an exchange or modiﬁcation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in proﬁt or loss. NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Financial assets (continued) in other comprehensive All Available-for-sale (AFS) ﬁnancial assets are measured at fair value. Gains and losses are income recognised and reported within the AFS reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in proﬁt or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other comprehensive income is reclassiﬁed from the equity reserve to proﬁt or loss and presented as a reclassiﬁcation adjustment within other comprehensive income. For AFS equity investments, impairment reversals are not recognised in proﬁt or loss and any subsequent increase in fair value is recognised in other comprehensive income. Classiﬁcation and subsequent measurement of ﬁnancial liabilities The Company’s ﬁnancial borrowings, trade and other payables. liabilities include Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for ﬁnancial liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognised in proﬁt or loss. All derivative ﬁnancial instruments that are not designated and effective as hedging instruments are accounted for at FVTPL. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in proﬁt or loss are included within ﬁnance costs or ﬁnance income. (m) Derecognition of ﬁnancial assets and ﬁnancial liabilities (i) Financial assets A ﬁnancial asset (or, where applicable, a part of a ﬁnancial asset or part of a group of similar ﬁnancial assets) is derecognised when: 33 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Impairment of ﬁnancial assets The Company assesses at each reporting date whether a ﬁnancial asset or group of ﬁnancial assets is impaired. (i) Financial assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash ﬂows (excluding future credit losses that have not been incurred) discounted at the ﬁnancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in proﬁt or loss. The Company ﬁrst assesses whether objective evidence of impairment exists individually for ﬁnancial assets that are individually signiﬁcant, and individually or collectively for ﬁnancial assets that are not individually signiﬁcant. If it is determined that no objective evidence of impairment exists individually assessed ﬁnancial asset, for an whether signiﬁcant or not, the asset is included in a group of ﬁnancial assets with similar credit risk characteristics and that group of ﬁnancial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in proﬁt or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (ii) Financial assets carried at cost If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash ﬂows, discounted at the current market rate of return for a similar ﬁnancial asset. (iii) Available-for-sale investments If there is objective evidence that an available-for- sale investment is impaired, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognised in proﬁt or loss, is transferred from equity to the statement of comprehensive income. Reversals of impairment losses for equity instruments classiﬁed as available-for-sale are not recognised in proﬁt. (o) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Plant and equipment – over 3 to 5 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each ﬁnancial year end. (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. 34 Notes to the Financial Statements For the year ended 30 June 2018 (q) Employee leave beneﬁts Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non- monetary beneﬁts, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables or in employee beneﬁts, in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Other long-term employee beneﬁts The Company’s liabilities for annual leave and long service leave are included in other long-term beneﬁts as they are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are measured at the present value of the expected future payments to be made to employees. The expected future payments incorporate anticipated future wage and salary levels, experience of employee departures and periods of service, and are discounted at rates determined by reference to market yields at the end of the reporting period on high quality corporate bonds that have maturity dates that approximate the timing of the estimated future cash outﬂows. Any re-measurements arising from experience adjustments and changes in assumptions are recognised in proﬁt or loss in the periods in which the changes occur. The Company presents employee beneﬁt obligations as current liabilities in the statement of ﬁnancial position if the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period, irrespective of when the actual settlement is expected to take place. NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) Plant and equipment (continued) The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset. For an asset that does not generate largely independent cash inﬂows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to approximate fair value. An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the statement of comprehensive income in a separate line item. (ii) Derecognition and disposal An item of plant and equipment is derecognised upon disposal or when no further future economic beneﬁts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in proﬁt or loss in the year the asset is derecognised. (p) Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Company prior to the end of the ﬁnancial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. 35 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (r) Issued capital Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. (s) Earnings per share Basic earnings per share is calculated as net proﬁt/ loss adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net proﬁt/loss adjusted for: • • • costs of servicing equity (other than dividends) and preference share dividends; the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (t) Exploration and evaluation expenditure Exploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisﬁed: (i) (ii) the rights to tenure of the area of interest are current; and at least one of the following conditions is also met: (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; or (b) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and signiﬁcant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest. that Exploration and evaluation assets are assessed for impairment when facts and circumstances the carrying amount of an suggest exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years. Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassiﬁed to development. 36 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (u) Share Based payments The Company operates equity-settled share- based remuneration plans for its employees. None of the Company’s plans feature any options for a cash settlement. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example proﬁtability and sales growth targets and performance conditions). remuneration All share-based is ultimately recognised as an expense in proﬁt or loss with a corresponding credit to share option reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs are allocated to share capital. (v) Provisions, contingent liabilities and contingent assets Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outﬂow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outﬂow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outﬂow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outﬂow of economic resources as a result of present obligation is not probable. Such situations are disclosed as contingent liabilities, unless the outﬂow of resources is remote in which case no liability is recognised. (w) Going Concern Notwithstanding the working capital deﬁciency of $82,748 (2017: surplus $824,091), the ﬁnancial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. During the year the Company incurred a net loss of $725,433 (2017: loss of $171,411). Cash outﬂows from operating and investing activities was $1,222,803 (2017: cash outﬂows of $153,678). 37 Notes to the Financial Statements For the year ended 30 June 2018 of business and at the amounts stated in the ﬁnancial statements. The ﬁnancial statements do not include any adjustments relating to the recoverability and classiﬁcation of recorded asset amounts nor to the amounts and classiﬁcation of liabilities that might be necessary should the Company not continue as a going concern. NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (w) Going Concern (continued) Whilst the Company has achieved exploration success with its mineral projects, the directors recognise that the Company will have to seek additional funding to continue to explore in line with planned exploration programs at the West Australian and North Queensland Projects. The ability of the Company to continue to pay its debts as and when they fall due is dependent upon: • • • Continued cash management according to exploration success. Future exploration expenditure is generally discretionary in nature and exploration activities may be slowed or suspended as part of the Company’s cash management strategy; The Company has historically been able to raise capital via equity placements and rights issues to shareholders. Given the strong support of shareholders and the prospectivity of the Company’s current projects the directors are conﬁdent that any future capital raisings will be successful. The Company has also raised $1.1 million subsequent to reporting date, refer Note 22; and The Company has received a letter of support from a director related entity, Valleybrook Investments Pty Ltd, to not call the $250,000 in cash consideration following the acquisition of the Mon Ami Gold Project (refer Note 13) until such time that the Company has sufﬁcient cash reserves to make the payment. The directors believe that the above funding strategies will be achieved and the going concern basis is appropriate. Should the Company be unable to obtain sufﬁcient funding, there is uncertainty which may cast signiﬁcant doubt as to whether or not the Company will be able to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course 38 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 2: LOSS BEFORE INCOME TAX EXPENSE 2018 $ 2017 $ The following revenue and expense items are relevant in explaining the financial performance for the year. Revenue - Interest income – other parties Other Income 15,348 26,893 - Profit on sale of available-for-sale listed securities - 313,730 Expense - Administration services fees - Employee benefits expense - Share based payment expense (Note 24). 318,768 34,295 35,000 350,222 - - The administration service fee is paid to a related party, (refer Note 18). Employee remuneration expenses for the year to 30 June 2018 totalled $31,320 (2017: $nil). $2,975 was paid in superannuation (2017: $nil). NOTE 3: AUDITOR’S REMUNERATION The auditor of Great Southern Mining Limited is HLB Mann Judd. Amounts received or due and receivable by HLB Mann Judd for: Audit and review of financial reports Other non-assurance services NOTE 4: INCOME TAX EXPENSE (a) Recognised in the statement of comprehensive income Current income tax expense on net loss for the year Deferred tax expense relating to the origination and reversal of temporary differences Total income tax benefit (b) Reconciliation between income tax expense and pre-tax profit/(loss) Loss before tax Income tax using the domestic small business corporation tax rate of 30% (2017: 27.5%). Tax effect of: Non-deductible expenses Unused tax losses and temporary differences not recognised as deferred tax assets Income tax expense on pre-tax loss 2018 $ 2017 $ 21,500 26,500 2018 $ - - - - 2017 $ - - - - (725,433) (171,411) (217,325) (47,138) 2,763 214,561 - 968 46,170 - 39 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 4: INCOME TAX EXPENSE (continued) (c) Tax expense/(beneﬁt) relating to items of other comprehensive income. Revaluation of available-for-sale investments Disposal available-for-sale investments Income tax applicable thereto (d) Unrecognised deferred tax balances Deferred tax assets and (liabilities) calculated at 30% (2017: 27.5%) have not been recognised in respect of the following: Income tax losses Temporary differences 2018 $ 2017 $ - - - 38,815 (300,395) - 2,045,053 (815,217) 1,229,836 1,479,970 (470,411) 1,009,559 Deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets (and deferred tax liabilities relating to (i) capitalised exploration expenditure for which immediate tax write- off is available and (ii) revaluation of available-for-sale investments) have not been recognised in the ﬁnancial statements. Refer Note 1(d). The previously calculated values of unrecognised deferred tax balances brought forward have increased as the Company no longer qualiﬁes for the small business Corporation tax rate of 27.5%. NOTE 5: (LOSS) PER SHARE Basic and diluted loss per share Weighted average number of ordinary shares used in calculation of loss per share 2018 Cents per share 2017 Cents per share (0.35) (0.10) 208,661,685 179,078,187 Loss used in calculation of basic and diluted (loss) per share (725,433) (171,411) Given the Company is in a loss position for the year ended 30 June 2018 the options that have been issued during the period are anti-dilutive in nature and therefore do not impact the earnings per share calculation. NOTE 6: CASH AND CASH EQUIVALENTS Cash on hand and at bank Short-term deposits 2018 $ 2017 $ 748,423 - 748,423 295,380 575,000 870,380 Cash at bank earns interest at ﬂoating rates on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and six months depending on the immediate cash requirements of the Company and earn interest at the respective short-term deposit rates. NOTE 7: OTHER RECEIVABLES – CURRENT Other receivables No receivables are past due. NOTE 8: OTHER ASSETS Prepaid expenses 40 2018 $ 2017 $ - 7,116 2018 $ 2017 $ 13,244 20,836 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 9: OTHER RECEIVABLES – NON-CURRENT Exploration tenement guarantees NOTE 10: AVAILABLE-FOR-SALE LISTED SECURITIES Available-for-sale financial assets Listed securities (a) Total available-for-sale listed securities 2018 $ 2017 $ 10,000 7,500 2018 $ 2017 $ 180,000 180,000 138,000 138,000 (a) During the prior period the Company disposed of a portion of its listed shares for a gain of $313,730. The market value of the disposed shares as recorded at 30 June 2016 was $407,522. During the year ended 2017, the Company also purchased listed securities for $36,185. Fair value of the listed securities held at 30 June 2017 was $138,000. No disposals of listed securities occurred during the 2018 financial year. The cost base for securities held at the reporting date was $198,000. Fair values for the listed securities (Level 1) are determined by reference to quoted ASX market prices and therefore there are no unobservable inputs in fair value. NOTE 11: PLANT AND EQUIPMENT Plant and equipment at cost Less: Accumulated depreciation Movement schedule for plant and equipment Opening written down value Additions Sale Depreciation Loss on sale Loss on write-off Closing written down value NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE Cost brought forward in respect of areas of interest in the exploration and evaluation stage Expenditure incurred during the year Acquisition of Mon Ami Gold Project (a) Cost carried forward 2018 $ 2017 $ 93,236 79,967 (73,718) (68,421) 19,518 11,546 11,546 17,501 13,268 - (5,296) - - 19,518 - - (5,036) - (919) 11,546 2018 $ 2017 $ 1,668,573 1,545,416 1,056,779 730,000 123,157 - 3,455,352 1,668,573 (a) The Company acquired the Mon Ami Gold Project in March 2018. The acquisition was deemed to be an asset acquisition. The consideration payable for the transaction and the relevant market values have been determined as follows: Cash Consideration payable Value of 15 million Ordinary Shares in the Company issued as consideration Consideration payable 250,000 480,000 730,000 (b) (c) 41 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE (continued) (b) The cash consideration is to be paid to a company related to John Terpu (Executive Chairman). This was approved by shareholders at the General Meeting held 29 March 2018. At balance date the Company has not yet paid the consideration and has entered an agreement (under commercial terms) to defer the consideration payable until such time that the Company has sufficient cash reserves or undertakes a significant capital raising. In the absence of a definitive repayment date, the amount payable has been classified as a current liability. Refer Note 13. (c) The value of the Ordinary Shares issued was determined by reference to the Fair Value of the Equity Instruments granted as consideration at the date of the shares were issued and control of the project passed to the Company. The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on successful development and commercial exploitation or sale of respective areas. NOTE 13: TRADE AND OTHER PAYABLES Trade and other payables (a) Related party payables (Note 18) Deferred Consideration - Mon Ami Gold Project (b) 2018 $ 2017 $ 535,921 24,481 250,000 810,402 36,498 28,972 - 65,470 (a) All trade and other payables are non-interest bearing and are normally settled on 30 day terms. All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable approximation of fair value. (b) Deferred consideration is payable to an entity related to the Executive Chairman. The amount is considered to be current given there is no set repayment date. An offsetting amount has been capitalised to Exploration and Evaluation Expenditure as part of the acquisition costs of the Mon Ami Gold Project, refer to Note 12. NOTE 14: EMPLOYEE BENEFITS Current employee entitlements Annual Leave Long-Service Leave 2018 $ 2017 $ 8,759 25,255 34,014 3,891 4,881 8,772 42 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 15: ISSUED CAPITAL 2018 2017 No. $ No. $ Issued capital comprises Fully Paid Ordinary Shares 245,899,003 21,750,349 179,078,187 20,169,503 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in issued shares for the year 2018 2017 No. $ No. $ Balance at beginning of the financial year 179,078,187 20,169,503 179,078,187 20,169,503 Issued for cash - 7 November 2017 - 19 April 2018 Acquisition of Mon Ami Gold Project - 5 April 2018 (a) Costs associated with the issue of shares - ASX listing fees- prior period issue 35,420,816 16,400,000 708,416 410,000 15,000,000 - - 480,000 (17,570) - - - - - - - - - - - Balance at end of the financial year 245,899,003 21,750,349 179,078,187 20,169,503 (a) The 15,000,000 shares issued as part of the acquisition of the Mon Ami Gold Project are subject to escrow. The amount has been capitalised as exploration and evaluation expenditure as part of the acquisition costs of the project – refer Note 12. NOTE 16: RESERVES Financial Asset Reserve Share Option Reserve Balance at end of the financial year 2018 $ 2017 $ 93,470 35,000 128,470 51,470 - 51,470 Reconciliation of Movements: Financial Asset Reserve Share Option Reserve 2018 $ 2017 $ 2018 $ 2017 $ Balance at beginning of the financial year 51,470 313,050 - Change during the period Balance at end of the financial year 42,000 (261,580) 35,000 93,470 51,470 35,000 - - - The financial assets reserve records the revaluation of available-for-sale investments. The share-based payments reserve records the value of options issued and vested during the period. 43 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 17: STATEMENT OF CASH FLOWS 2018 $ 2017 $ Reconciliation of operating loss after income tax to net cash used in operating activities Loss after income tax Non-operating income Add: Non-cash items Depreciation - PPE Share based Payment expense Loss on assets written off Change in assets and liabilities (Increase)/decrease in other current assets (Increase)/decrease in other current operating receivables Increase/(decrease) in operating payables Increase/(decrease) in employee entitlements Net cash used in operating activities NOTE 18: RELATED PARTY DISCLOSURES Transactions with key management personnel (725,433) - (166,530) (313,730) 5,296 35,000 - 10,608 4,100 14,511 25,242 (630,676) 5,036 - 919 2,332 3,753 (3,932) 5,232 (471,801) 2018 $ 2017 $ The following comprises amounts paid or payable and received or receivable applicable to entities in which key management personnel (KMP) have an interest. Paid/payable to: J Terpu (as Director of Chellingtons Pty Ltd atf Red Star Trust) for administration services) 318,768 350,222 Share based payment paid to Valleybrook Investments Pty Ltd (a) 480,000 - Amounts owing to related parties at balance date: J Terpu (as Director of Chellingtons Pty Ltd atf Red Star Trust) for administration services) 23,630 28,972 Mon Ami Gold Project Acquisition (a) 250,000 (a) As disclosed in Note 12 consideration for the acquisition of the Mon Ami Gold Project consisted of: Cash Consideration payable Value of 15 million Ordinary Shares in the Company issued as consideration 250,000 480,000 730,000 - - - The cash consideration is to be paid to a Company related to John Terpu (Executive Chairman). This was approved by shareholders at the General Meeting held 29 March 2018. At balance date the Company has not yet paid the consideration and has entered an agreement (under commercial terms) to defer the consideration payable until such time that the Company has sufficient cash reserves or undertakes a significant capital raising. In the absence of a definitive repayment date, the amount payable has been classified as a current liability, refer Note 13. The value of the 15 million Ordinary Shares issued as consideration was determined by reference to the Fair Value of the equity instruments granted at the date the shares were issued and control of the project passed to the Company. The shares are subject to twelve months escrow from the date of issue. Refer Note 12 and Note 15. 44 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 18: RELATED PARTY DISCLOSURES (Continued) 2018 $ 2017 $ As part of the acquisition of the Mon Ami Gold Project during 2018 the Company has entered a Royalty Deed with Valleybrook Investments Pty Ltd (“Valleybrook”), being a Company related to J Terpu. The royalty entitles Valleybrook to a net smelter return of 2.75% on revenue produced from sales of ore extracted. The term of the Royalty is for the life of the mining lease on the Mon Ami Gold Project, subject to the availability of ore to be extracted. At the date of this report the Company is not in a position to reliably estimate the amount, if any, that would be paid to Valleybrook as a result of successful economic extraction of Ore from the project given its exploration stage and as such this amount has not been recognised in the accounts of the Company at balance date. The totals of remuneration paid to KMP of the Company during the year are as follows: Short-term benefits Post-employment benefits Total KMP compensation 98,140 59,038 157,178 53,177 44,436 97,613 NOTE 19: COMMITMENTS AND CONTINGENT LIABILITIES (a) Exploration Expenditure Commitments The Company has certain obligations to perform exploration work and expend minimum amounts of money on such works on mineral exploration tenements. These obligations will vary from time to time, subject to statutory approval and capital management. The terms of the granted licences and those subject to relinquishment will alter the expenditure commitments of the Com- pany as will change to areas subject to licence. (b) Native Title Native title claims have been made with respect to areas which include tenements in which the Company has interests. The Company is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the Company or its projects. (c) Administrative Services Agreement On 1 March 2016 Mr Terpu as Sole Director of Chellingtons Pty Ltd atf Red Star Trust signed and commenced a two-year term in relation to a new Administration Service Agreement. An amount $192,000 was paid to the entity under this agreement in 2017. At 30 June 2018 the Company has elected to terminate the agreement with Chellingtons. The Company has entered a lease agreement with Ruby Lane Pty Ltd, a Company related to Mr Terpu, refer to Note 23. (d) Contingencies Apart from the Royalty Deed entered during the year ended 30 June 2018 (refer Note 18), the Company has no other contingent liabilities or assets at 30 June 2018. NOTE 20: SEGMENT INFORMATION The Company undertakes mineral exploration and evaluation work on a number of tenements located in Western Australia and North Queensland. Management currently identifies the Company’s assets in each location as separate operating segments. These operating segments are monitored by the Company’s chief operating decision maker and strategic decisions are made on the basis of available cash reserves and exploration results. The items included in the statement of profit or loss and other comprehensive income equate to the Corporate Segment. Segment assets and liabilities are disclosed in the table below: 45 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 20: SEGMENT INFORMATION (continued) Western Australia Queensland Corporate Total 2018 $ 2017 $ 2018 $ 2017 $ 2018 $ 2017 $ 2018 $ 2017 $ Assets Exploration and Evaluation Expenditure Cash and Cash Equivalents Financial Instruments Other assets Group assets Liabilities 1,227,874 - - - - - - - 2,227,477 1,668,573 - - 3,455,351 1,668,573 - - - - - 748,423 870,380 748,423 870,380 180,000 138,000 180,000 138,000 7,500 42,762 39,498 42,763 46,998 1,227,874 724,898 - 2,227,477 1,676,073 971,186 1,047,879 4,426,538 2,723,952 - - 47,180 119,519 27,062 844,417 74,242 The Group’s corporate assets, consisting of its corporate office headquarters are not allocated to any exploration segment’s assets. NOTE 21: FINANCIAL RISK MANAGEMENT Overview This note presents information about the Company’s exposure to credit, liquidity and market risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. The Company does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Company through regular reviews of the risks. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers and investment securities. Given the Company is not generating sales nor has significant receivable balances apart from GST payments to be received from the ATO, at the reporting date there were no significant concentrations of credit risk. (i) Cash and cash equivalents The Company limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating. The Company has limited its risk to only holding bank accounts with two Australian financial institutions. (ii) Trade and other receivables As the Company operates primarily in exploration activities, it does not have trade receivables and therefore is not exposed to credit risk in relation to trade receivables. The Company where necessary establishes an allowance for impairment that represents its estimate of incurred losses in respect of other receivables and investments. Management does not expect any counterparty to fail to meet its obligations. 46 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 21: FINANCIAL RISK MANAGEMENT (continued) (iii) Exposure to credit risk The carrying amount of the Company’s ﬁnancial assets represents the maximum credit exposure. The Company’s maximum exposure to credit risk at the reporting date was: Carrying Amount Cash and cash equivalents Other receivables (iv) Impairment Losses 2018 $ 748,423 10,000 2017 $ 870,380 14,616 None of the Company’s other receivables are past due (2017: nil). Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its ﬁnancial obligations as they fall due. The Company’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 Company’s reputation. The Company manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash ﬂows. The Company does not have any external borrowings. The following are the Company’s contractual maturities of ﬁnancial liabilities, including estimated interest payments and excluding the impact of netting agreements: 30 June 2018 ($) Carrying amount Contractual cash ﬂows 6 mths or less 6-12 mths 1-2 years 2-5 years Non-interest bearing 810,403 810,403 534,921 274,482 30 June 2017 ($) Carrying amount Contractual cash ﬂows 6 mths or less 6-12 mths 1-2 years Non-interest bearing Market Risk 69,361 69,361 65,470 3,891 - - 2-5 years - - Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’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 the return. The Company holds investments in listed securities. Currency Risk The Company is not exposed to currency risk and at the reporting date the Company holds no ﬁnancial assets or liabilities which are exposed to foreign currency risk. Commodity Price Risk The Company operates primarily in the exploration and evaluation phase of gold projects and accordingly the Company’s ﬁnancial assets and liabilities are subject to minimal commodity price risk. 47 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 21: FINANCIAL RISK MANAGEMENT (continued) Interest Rate Risk The Company is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a ﬁnancial instrument’s value will ﬂuctuate as a result of changes in the market interest rates on interest-bearing ﬁnancial instruments. The Company does not use derivatives to mitigate these exposures. At balance date the Company did not have any cash held in term deposits. During the prior period, excess cash and cash equivalents were held in short term deposit at interest rates maturing over 90 day rolling periods. (i) Fair value sensitivity analysis for ﬁxed rate instruments The Company does not account for any ﬁxed rate ﬁnancial assets and liabilities at fair value through proﬁt or loss or through equity, therefore a change in interest rates at the reporting date would not affect proﬁt or loss or equity. (ii) 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. The analysis is performed on the same basis for 2017. Proﬁt or loss Equity 100bp increase $ 100bp decrease $ 100bp increase $ 100bp decrease $ 30 June 2018 Variable rate instruments 30 June 2017 Variable rate instruments Fair Values 7,384 (7,384) 7,384 (7,384) 2,852 (2,801) 2,854 (2,801) Fair values versus carrying amounts The fair values of ﬁnancial assets and liabilities, together with the carrying amounts shown in the statement of ﬁnancial position are as follows: 30-Jun-18 30-Jun-17 Carrying amount $ Fair value $ Carrying amount $ Fair value $ 748,423 748,423 10,000 10,000 870,380 14,616 870,380 14,616 180,000 180,000 138,000 138,000 (810,402) (810,402) (65,470) (65,470) Cash and cash equivalents Other receivables Available-for-sale listed securities Trade and other payables Employee beneﬁts (34,014) (34,014) 94,007 94,007 (3,891) 953,635 (3,891) 953,635 48 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 21: FINANCIAL RISK MANAGEMENT (continued) Fair value measurement of financial instruments Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows: - - - Level 1: quoted prices (unadjusted) in active markets for identical assets or liability. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 June 2018 and 30 June 2017: 30 June 2018 Financial assets Level 1 $ Level 2 $ Level 3 $ Total $ Listed securities and debentures Net Fair Value 30 June 2017 Financial assets Listed securities and debentures Net Fair Value 180,000 180,000 Level 1 $ Level 2 $ 138,000 138,000 - - - - Measurement of fair value of financial instruments Level 3 $ - - - - 180,000 180,000 Total $ 138,000 138,000 The Company performs valuations of financial items for financial reporting purposes. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. Valuation processes and fair value changes are discussed regularly at Board meetings. As the Company holds an investment in a ASX listed Company the fair value of the investment is subject to movements in the share price. A summary of a movement in the share price of the listed investment is below: Profit or loss Equity 200bp increase $ 200bp decrease $ 200bp increase $ 200bp decrease $ 36,000 (36,000) 36,000 (36,000) 200bp increase $ 200bp decrease $ 200bp increase $ 200bp decrease $ 27,600 (27,600) 27,600 (27,600) 30 June 2018 Listed securities and debentures 30 June 2017 Listed securities and debentures Capital Management Capital is defined as the equity of the Company. The Company’s objectives when managing capital are to safeguard the Company’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. Refer to Note 1(w) for additional commentary. The Company’s focus has been to raise sufficient funds through equity to fund exploration and evaluation activities. The Company monitors capital requirements regularly and there are no external borrowings as at reporting date and is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the year. The Board considers capital management at each Board meeting and mitigates risks when identified. 49 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 22: EVENTS AFTER REPORTING DATE The Company completed a placement of 31,846,669 fully paid ordinary shares to sophisticated investors raising $1,115,429 net of costs. The Company entered an executive services agreement with John Terpu as Executive Chairman. The terms and conditions have been included in the Remuneration Report. In September 2018 the Company entered into a transaction to acquire several exploration licences from Central Australia Rare Earths Pty Ltd, a wholly owned subsidiary of Strategic Minerals plc, a AIM listed Company. Subject to the completion of due diligence and completion of the transaction the consideration will consist of $100,000 cash and 1 million shares in the Company. At the date of this report, the transaction is subject to completion. Apart from the above, there has not been any other matter or circumstance that has arisen after the reporting date that has signiﬁcantly affected, or may signiﬁcantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in future ﬁnancial periods. NOTE 23: LEASES Operating leases as lessee As Per Note 19, the Company has entered a lease agreement to lease an ofﬁce building. The lease has been assessed to be an operating lease. The future minimum lease payments are as follows: Minimum lease payments due Within 1 year $ 1-5 years $ After 5 years $ Total $ 30-Jun-18 30-Jun-17 66,924 247,929 - 314,853 - - - - No lease expense payments where incurred during the year. The new rental contract has a non-cancellable term of 3 years. NOTE 24: SHARE BASED PAYMENTS During the period, options were issued to the Senior Advisor upon entering the consulting arrangement with the Company. The options where not issued as consideration for services provided. Share options and weighted average exercise prices are as follows for the reporting periods presented: Weighted average exercise price ($) Option Fair Value $ Outstanding at 30 June 2017 Granted Forfeited / Exercised Outstanding at 30 June 2018 Exercisable at 30 June 2017 Exercisable at 30 June 2018 - 11,800,000 - 11,800,000 - 11,800,000 - 35,000 - 35,000 - 35,000 50 Notes to the Financial Statements For the year ended 30 June 2018 NOTE 24: SHARE BASED PAYMENTS (continued) No options were on issue at 30 June 2017. No options were exercised in 2018. The $35,000 is included in consulting fees in the statement of proﬁt or loss and other comprehensive income. The fair values of options granted were determined using the Black-Scholes option pricing model. There was no performance based, nor vesting conditions attached to the Options. The following principal assumptions were used in the valuation: Valuation assumptions Grant date Share price at date of grant Volatility Expiry date Dividend yield Risk free investment rate Fair value at grant date Exercise price at date of grant Exercisable from Weighted average remaining contractual life 14-May-18 $ 0.025 74% 31-Dec-19 0 1.50% 0.011 $ 0.020 14-May-18 1.5 yrs The underlying expected volatility was determined by reference to historical data of the Company’s shares over a period of time. No special features inherent to the options granted were incorporated into measurement of fair value. 51 Directors’ Declaration Independent Auditor’s Report To the Members of Great Southern Mining Limited (formerly “Forte Consolidated Limited”) REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Great Southern Mining Limited (“the Company”) which comprises the statement of financial position as at 30 June 2018, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates the existence of a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers 53 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter How our audit addressed the key audit matter Carrying value of exploration and evaluation expenditure (Note 12) The Company has capitalised exploration and evaluation expenditure of $3,455,352 as at 30 June 2018 in relation to its Queensland and Western Australia projects. Our audit procedures determined that the carrying value of exploration and evaluation expenditure was a key audit matter as it was an area which required the most audit effort, required the most communication with those charged with governance and was determined to be of key importance to the users of the financial statements. Our procedures included but were not limited to the following:  We obtained an understanding of the key processes associated with management’s review of the carrying value of exploration and evaluation expenditure;  We considered the Directors’ assessment of potential indicators of impairment;  We obtained evidence that the Company has current rights to tenure of its areas of interest;  We substantiated a sample of additions to exploration expenditure during the year; announcements  We enquired with management and and reviewed ASX minutes of Directors’ meetings to ensure that the Company had not decided to discontinue exploration and evaluation at its areas of interest; and  We examined the disclosures made in the financial report. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. 54 If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. 55  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Great Southern Mining Limited for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Chartered Accountants Perth, Western Australia 27 September 2018 D I Buckley Partner 56 ASX Additional Information Additional information as required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. 1. 1.1 Shareholder Information As at 25 September 2018 the Company had: 259 holders of Ordinary Fully Paid Shares. 1 holder of unlised options. Voting Rights Subject to any rights or restrictions for the time being attached to any class or classes (at present there are none) at general meetings of shareholders or classes of shareholders: (a) (b) (c) each shareholder entitled to vote, may vote in person or by proxy, attorney or representative; on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each Fully Paid Share held, or in respect of which he/she has appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid Shares shall have a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price for the Share. 1.2 Distribution of Shares (as at 25 September 2018) The number of shareholders holding less than a marketable parcel is 68 based on the closing market price at 25 September 2018. No. 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-over Total Fully Paid Shares ** Options * 1,649 16,854 503,262 3,145,509 273,808,398 277,745,672 0 0 0 0 11,800,000 11,800,000 * The listed options issued at the date of this report are unquoted securities. Mr Mark Barnaba holds 100% of these securities. ** The amount includes 15,000,000 fully paid ordinary shares subject to escrow for twelve months. 100% of the class of these securities is held by Valleybrook Investments Pty Ltd. The escrow period ends 5 April 2019. 1.3 Substantial Shareholders The following shareholders are recorded as substantial shareholders: Name Fully Paid Shares Number VALLEYBROOK INVESTMENTS PTY LTD & OTHERS * DANNY TAK TIM CHAN & OTHERS HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED Total 105,667,717 64,020,490 15,454,188 185,142,395 * The amount includes 15,000,000 fully paid ordinary shares subject to escrow noted above. % 38.04 23.05 5.56 57 ASX Additional Information 1.4 Twenty Largest Holders of Listed Shares (as at 25 September 2018) VALLEYROSE PTY LTD DANNY TAK TIM CHAN Name VALLEYBROOK INVESTMENTS PTY LTD * HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD ANYSHA PTY LTD GETMEOUTOFHERE PTY LTD NAUTICAL HOLDINGS WA PTY LTD MR MARK BARNABA SUNSET CAPITAL MANAGEMENT PTY LTD BNP PARIBAS NOMINEES PTY LTD MR ROBERT ANTHONY MARTIN KIWI BATTLER PTY LTD MRS CARMELA FIRRIOLO KAY BAY SUPER PTY LTD ORBIT DRILLING PTY LTD MR STACEY HUBERT CARTER SUNSHORE HOLDINGS PTY LTD MR PETER LESLIE CLARK KATHLEEN BOZANIC ANDREW JAMES PAUL CARUSO COOLTRAS PTY LTD MR KEVIN DANIEL LEARY & MRS HELEN PATRICIA LEARY P&E QUADE PTY LTD TOTAL Fully Paid Ordinary Shares Number Percentage % 55,459,902 50,672,990 35,207,815 15,454,188 13,347,500 12,500,105 4,550,000 4,427,030 4,375,000 4,000,000 3,746,562 2,666,667 2,452,089 2,212,500 2,000,000 1,817,226 1,333,333 1,333,333 1,200,000 1,200,000 1,200,000 1,010,068 1,000,000 1,000,000 21.11 19.29 13.40 5.88 5.08 4.76 1.73 1.68 1.67 1.52 1.44 1.01 0.93 0.84 0.76 0.69 0.51 0.51 0.46 0.46 0.46 0.38 0.38 0.38 224,216,308 85.34 * Holder also has 15,000,000 unquoted fully paid ordinary shares subject to escrow. Total holding including escrowed shares is 105,667,717 or 38.04%. 1.5 Share Buy-Backs There is no current on-market buy-back scheme. 1.6 Securities Purchased On-market On 29 June 2018 the Shareholders of the Company approved the long term incentive plan to be adopted. No options over ordinary shares in the Company were or have since been granted under this program up to the date of this report. No securities have been purchased on-market (including any related to an employee incentive scheme). 2. Other Information Great Southern Mining Limited, incorporated and domiciled in Australia, is a public listed Company limited by Shares. 58 ASX Additional Information 3. Tenement Schedule Tenement No. Registered Holder Forte Equity Area Application/ Grant Date Expiry Date Queensland EPM 18986 EPM 25196 EPM 25755 EPM 26527 EPM 26810 Western Australia Great Southern Mining Limited 100% 47 blocks 13 Dec 2012 12 Dec 2022 Great Southern Mining Limited 100% 3 blocks 3 Mar 2014 Great Southern Mining Limited 100% 24 blocks 8 Apr 2015 Great Southern Mining Limited 100% 28 blocks 23 Aug 2017 Great Southern Mining Limited 100% 58 blocks 17 July 2018 2 Mar 2020 7 Apr 2020 22 Aug 2022 16 July 2023 ML 38/1256 Great Southern Mining Limited 100% 1 block 3 Sep 2012 2 September 2033 4. Other Additional Information Corporate Governance: The Company’s Corporate Governance Statement for 30 June 2018 as approved by the Board can be viewed as www.gsml.com.au Company Secretary: The name of the Company Secretary is Mark Petricevic. Address and telephone details of the Company’s Registered Ofﬁce: Suite 4, 213 Balcatta Rd Balcatta WA 6021 T: 08 9240 4111 Share Register: Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Telephone: (within Australia): 1300 554 474 Telephone: (outside Australia): +61 (02) 8280 7761 Facsimile: (02) 9287 0303 Review of Operations: A review of operations is contained in the Directors Report. 59 ABN 37 148 168 825 Great Southern Mining Limited (Formerly “Forte Consolidated Limited)

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