ANNUAL REPORT 2017
ABN 87 095 092 158
HAMMER METALS LIMITED (Hammer or The Company)
ABN 87 095 092 158
BOARD OF DIRECTORS
Russell Davis
Alex Hewlett
Executive Chairman
Executive Director / CEO
Simon Bodensteiner Non-executive Director
Nader El Sayed
Non-executive Director
COMPANY SECRETARY
Mark Pitts
PRINCIPAL AND REGISTERED OFFICE
Suite 1, 827 Beaufort Street
Mt Lawley, WA 6052
Telephone: +61 8 6369 1195
info@hammermetals.com.au
Email:
Website: www.hammermetals.com.au
POSTAL ADDRESS
PO Box 198
Mt Lawley WA 6929
Australia
AUDITORS
KPMG
235 St Georges Terrace
Perth WA 6000
Australia
Telephone: +61 8 9263 7171
Facsimile: +61 8 9263 7129
SHARE REGISTRY
Advanced Share Registry Ltd
110 Stirling Highway
Nedlands WA 6009
Australia
Telephone: +61 8 9389 8033
Facsimile: +61 8 9262 3723
STOCK EXCHANGE
ASX Limited
Level 40, Central Park,
152-158 St Georges Terrace
Perth WA 6000
ASX CODE
HMX
CONTENTS
Chairman’s Letter
Corporate Strategy
Operational Highlights
Corporate Activity
Mount Isa Project
Copper Gold Exploration
Mary Kathleen Structural Zone
Kalman
Pilgrim Fault VTEM
Kalman West and Hammertime
Mount Philp Breccia
Cobalt Exploration
Other Commodities
Target Generation and Tenement Aquisition
Other Projects
Competent Person’s Statements
Annual Mineral Resource Statements
Directors Report
Independence Declaration
Consolidated Statement of Financial Position
Consolidated Statement Of Profit Or Loss and Other Comprehensive Income
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Notes To The Consolidated Financial Statements
Directors Declaration
Independent Auditors Report
ASX Additional Information
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2 HAMMER METALS LIMITED CHAIRMAN’S LETTER
CHAIRMAN’S LETTER
THE COMPANY IS CONSTANTLY GENERATING NEW
EXPLORATION TARGETS AND ACQUIRING PROSPECTIVE
TENEMENTS THAT WE BELIEVE WILL ENHANCE AND ADD
VALUE TO THE MOUNT ISA PROJECT.
Dear Fellow Shareholders,
Hammer Metals has been operating in the Mount Isa Mineral Province in Northwest Queensland
now for four years, working towards the Company’s goal of making Australia’s next large copper-
gold discovery in this proven mining district.
Today Hammer has a commanding tenement position in the centre of the province with a
substantial 100%-owned resource inventory containing copper, gold, molybdenum, rhenium,
cobalt and iron, along with a range of grass roots to advanced exploration targets. Hammer also
has joint ventures with Newmont Exploration Pty Ltd and MIM Limited that Hammer operate,
and is currently finalising another joint venture with a Canadian cobalt explorer and developer
over the Millennium cobalt project near Cloncurry. The Hammer team will also undertake the
exploration programs on behalf of the Millennium joint venture.
The Company is constantly generating new exploration targets and acquiring prospective
tenements that we believe will enhance and add value to the Mount Isa project.
The Hammer team is a small dedicated group, confident of our exploration strategy and the
prospectivity of Hammer’s tenements. Favourable indicators for large copper-gold deposits
are present at multiple locations and the exploration team is working hard with the resources
available to progressively test these targets and achieve its discovery objective.
In the year ahead we will strive to maintain an active program of drilling at our priority targets.
We will also continue to seek new partners to assist Hammer with funding its programs -
enabling more holes to be drilled and increasing our chances of discovery.
I would like to thank the Hammer team for all their efforts this past year, and you our
shareholders for your continued support in this venture.
Sincerely
RUSSELL DAVIS
EXECUTIVE CHAIRMAN
CHAIRMAN’S LETTER ANNUAL REPORT 2017 3
CORPORATE
STRATEGY
• Discover a large copper-gold deposit in the globally significant Mount Isa mining
district through clever and focused exploration
• Develop a mining hub centred on hammer’s Kalman and Overlander deposits
• Continue to consolidate and improve the quality of Hammer’s tenement position in
the region
• Operate safely and effectively
• Deliver financial returns to shareholders
4 HAMMER METALS LIMITED CORPORATE STRATEGY
OPERATIONAL
HIGHLIGHTS
• Maiden Mineral Resource estimate announced for the Millennium
Cobalt – Copper Deposit;
• Terms of an Option (Farm-out and Joint Venture) agreement on Millennium
announced with North American company Global Energy Metals
Corporation (GEMC);
• Acquired the Mount Isa tenement interests of China Yunnan Copper Resources Ltd
(now AuKing Mining Limited) which includes the Elaine Dorothy copper-gold deposit
and a 51% interest in the Mt Frosty Joint Venture with Glencore;
• Renegotiated Mt Frosty Joint Venture terms over the prospective Mary Kathleen
structural zone, including a high grade copper-gold target at Jubilee and the
Koppany copper and rare earth element prospects;
• Collaborative Drilling Initiative (CDI) grant awarded by the Queensland Department
of Natural Resources for the drilling program at Dronfield;
• Diamond and RC drilling at Overlander and Dronfield (Newmont Farmin and JV)
intercepts extensive alteration and low-grade copper. New copper-gold target
identified at Tourist Zone west of Overlander;
• Airborne VTEM survey over Pilgrim Fault trend to north and south of Kalman
identifies several strong conductors associated with known alteration and
geochemical anomalism, including a significant gold anomaly at Serendipity and
Kalman West;
• Initial RC drill test at Kalman West intercepts high grade gold values up to
36.9g/t Au;
• Follow-up RC drilling and sampling at Revenue returns encouraging copper-gold
values with anomalous molybdenum-rhenium mineralisation;
• An “off-hole” Down-Hole EM (DHEM) conductor located above the Kalman South
parent diamond drill hole (K140) drilled to test the deep copper-gold zone;
• Mining lease pegged over the historic Trafalgar copper-gold mine located on the
Fountain Range Fault;
• Commenced the Mt Philp Breccia work program targeting large breccia hosted
IOCG deposits;
• Significant new graphite, potash (potassium feldspar) and rare earth element
prospects identified within Hammer’s tenements;
• Exploration Development and Incentive Scheme Credits were distributed to eligible
shareholders as a tax credit for the 2016-2017 tax year.
HIGHLIGHTS ANNUAL REPORT 2017 5
CORPORATE ACTIVITY
HAMMER’S CORPORATE ACTIVITIES ARE FOCUSSED ON
ENHANCING THE CAPACITY OF OUR EXPLORATION TEAM TO
MAKE DISCOVERIES THROUGH ADEQUATE FUNDING, AS WELL
AS SECURING TENEMENTS OR PROJECTS THAT IMPROVE THE
QUALITY AND POTENTIAL OF THE MOUNT ISA EXPLORATION
PROJECT TENEMENTS.
During the year Hammer purchased the Mount Isa region tenement interests of AuKing Mining
Ltd (formerly Chinalco Yunnan Copper Resources Ltd). The tenements acquired contained
the Elaine Dorothy copper-gold resource as well as a range of advanced copper-gold targets,
including the interest in the Mount Frosty Joint Venture with Glencore.
Hammer also reached agreement on terms to farm-out the Millennium cobalt-copper-gold
project to GEMC - a focussed North American cobalt explorer and developer. GEMC will sole-fund
the next phase(s) of exploration at Millennium.
Other joint venture partners are being sought to assist in expediting the exploration activity at
Mount Isa.
In the 2016-2017 financial year joint venture expenditure of approximately $1.22 million was
contributed by our farm-in and joint venture partner (Newmont Exploration Pty Ltd) on the Even
Steven, Overlander and Dronfield joint venture project areas. Hammer is managing the current
exploration programs in close co-operation with Newmont technical personnel.
Exploration tax credits were distributed to eligible shareholders through the Federal
Government’s Exploration Development Incentive Scheme (“EDI”).
A placement raising $1.24 million (at 3.5 cents per share) was completed on September 6th 2017
and a 1 for 7 shareholder entitlement issue to raise up to $1.2 million (at 3.5 cents per share) was
in progress at the time of this report.
At June 30th 2017 the Company had cash reserves of approximately $1.2 million plus $0.36 million
in advanced farm-in and joint venture exploration expenditure.
Hammer management actively interacts with the investment and exploration community and
keeps shareholders and potential investors informed with regular updates and conference
presentations. Our website provides additional project and corporate information and access to
previous announcements.
6 HAMMER METALS LIMITED CORPORATE ACTIVITY
CORPORATE ACTIVITY ANNUAL REPORT 2017 7
MOUNT ISA PROJECT
HAMMER METALS HOLDS A STRATEGIC TENEMENT POSITION
COVERING OVER 3,000KM2 WITHIN THE MOUNT ISA MINING
DISTRICT, WITH 100% INTERESTS IN THE KALMAN (CU-AU-MO-
RE) DEPOSIT, THE OVERLANDER NORTH AND OVERLANDER
SOUTH (CU-CO) DEPOSITS, THE MILLENNIUM (CU-CO-AU)
DEPOSIT AS WELL AS THE RECENTLY ACQUIRED
ELAINE-DOROTHY (CU-AU) DEPOSIT.
Hammer is an active mineral explorer, focused on discovering large copper-gold deposits of the
Ernest Henry style and has a range of prospective targets at various stages of testing.
Activity during the past year included multi-disciplinary exploration programs funded both
internally and by our joint venture partners. Project acquisition and target generation activities
were particularly successful in adding highly prospective tenements to the Hammer portfolio.
Excluding the 3533m of resource drilling at Millennium, 4157m of mostly diamond drilling were
drilled during the year on a range of copper-gold and gold targets.
Looking forward Hammer has an extensive pipeline of drilling targets to test. The Company will
continue to seek joint ventures with suitable parties to assist in the funding of this work, whilst
pursuing self-funded exploration on its own 100% owned targets.
8 HAMMER METALS LIMITED MOUNT ISA PROJECT
MOUNT ISA PROJECT LOCATIONS - HAMMER RESOURCES IN YELLOW
MOUNT ISA PROJECT ANNUAL REPORT 2017 9
EXPLORATION
COPPER-GOLD
OVERLANDER / DRONFIELD / EVEN STEVEN
DURING THE YEAR EXPLORATION WAS CARRIED OUT
UNDER THE FARM-IN AND JOINT VENTURE AGREEMENT
WITH NEWMONT EXPLORATION PTY LTD (“NEWMONT”)
COVERING THREE OF HAMMER’S COPPER-GOLD TARGETS
AT OVERLANDER, EVEN STEVEN AND DRONFIELD. THE JV
IS TARGETING LARGE IOCG DEPOSITS OF THE “ERNEST
HENRY STYLE” AND A COLLABORATIVE, MULTI-DISCIPLINARY
EXPLORATION PROGRAM OF MAPPING, SOIL AND ROCK CHIP
SAMPLING AND GROUND GEOPHYSICS WAS UNDERTAKEN,
CULMINATING IN DIAMOND AND RC DRILLING PROGRAMS AT
OVERLANDER AND DRONFIELD.
At Overlander low grade disseminated chalcopyrite was intercepted in association with favourable
alteration and trace element abundances in the two holes drilled into the Overlander gravity-
magnetic target adjacent to the Overlander North copper resource.
A new zone (the Tourist Zone) was identified 2km west of Overlander in a corresponding
geological position west of the Overlander granite. Drilling by a previous explorer returned results
including 20m at 1.37% Cu and 0.29g/t Au within altered and brecciated rocks and warrants
further drilling.
Two diamond holes were drilled into the western gravity-magnetic-IP target at Dronfield West
and one RC hole into the eastern target. Strongly magnetite veined and altered granodiorite with
disseminated sulphides, including chalcopyrite, were intercepted.
Both Overlander and Dronfield are large alteration zones displaying many characteristics of an
IOCG system. The joint venture is presently reviewing the alteration patterns and assay results
endeavouring to vector into higher grade mineralisation.
Hammer retains a 100% interest in the defined Inferred Mineral Resource at Overlander which
stands at a combined 1.77Mt at 1.2% Cu containing approximately 21,000 tonnes of copper metal.
10 HAMMER METALS LIMITED COPPER GOLD EXPLORATION
OVERLANDER AND TOURIST ZONE ON MAGNETIC IMAGE
DIAMOND DRILLING AT OVERLANDER
COPPER GOLD EXPLORATION ANNUAL REPORT 2017 11
MARY KATHLEEN
STRUCTURAL ZONE
HAMMER ACQUIRED THE MOUNT ISA TENEMENT INTERESTS
OF AUKING MINING LTD (FORMERLY CHINALCO YUNNAN
COPPER RESOURCES LTD) DURING THE YEAR. THE TENEMENTS
SECURE A NUMBER OF ADVANCED IOCG AND SHEAR HOSTED
COPPER-GOLD TARGETS (INCLUDING THE ELAINE-DOROTHY
COPPER-GOLD DEPOSIT) THAT SIGNIFICANTLY ENHANCE
HAMMER’S MOUNT ISA TENEMENT HOLDING.
One of the tenements that was purchased as part of the tenement package was a 51% interest in
EPM 14467 located adjacent to the Mary Kathleen uranium mine. A new joint venture agreement
was negotiated with Mount Isa Mines Ltd (MIM) which holds the remaining 49% interest in the
tenement. Each party is to contribute to approved programs and budgets as per its % interest.
Hammer now holds contiguous tenements that secure a 15km long section of the Mary Kathleen
structural zone as far south as the Tiny Boot prospect where the structure intersects the Fountain
Range and Pilgrim Faults. The Mary Kathleen structural corridor is highly mineralised and hosts
several copper-gold, uranium and REE prospects including Jubilee, Koppany, Chester, Blue
Caesar and Elaine Dorothy.
At Elaine-Dorothy the previous owners delineated an Inferred Mineral Resource estimate of
27 Mt at 0.5% Cu and 0.08g/t Au. Significant gold intercepts within the deposit of up to 9m at 3.6g/t
Au and 30m at 6.73g/t Au will be assessed for their potential for robust higher grade internal
lodes.
At the Jubilee copper-gold prospect previous wide-spaced RC drilling indicates there is very good
potential to delineate a resource with minimal infill drilling. RC drilling by the previous explorer
returned sulphide mineralisation of up to 10m at 3.37% Cu and 2.27g/t Au and 9m at 2.8% Cu and
1.44g/t Au.
The copper-in-soil anomaly and old workings also continue to the north of the drilled area,
suggesting good potential to extend the mineralised zone. Drilling will commence when the joint
venture partners have finalized an agreed program and budget for the joint venture area.
Data compilation for the recently acquired tenements is well advanced. A high-resolution
aeromagnetic and radiometric survey is to be conducted by the Queensland Geological Survey
over the Mary Kathleen area later in 2017. This survey as presently planned covers all Hammer’s
tenements that cover the Mary Kathleen structural zone. This dataset will be available at no cost
to Hammer.
12 HAMMER METALS LIMITED MARY KATHLEEN STRUCTURAL ZONE
MT FROSTY JOINT VENTURE COPPER SOIL GEOCHEMISTRY
MARY KATHLEEN STRUCTURAL ZONE ANNUAL REPORT 2017 13
KALMAN
ACTIVITY AT KALMAN WAS FOCUSED ON TESTING FOR
POTENTIAL EXTENSIONS OF THE HIGH GRADE COPPER-
GOLD MINERALISATION AT DEPTH AT KALMAN SOUTH.
HAMMER DRILLED ONE 904M DIAMOND DRILL HOLE (K140),
WHICH INTERCEPTED LOW GRADE DISSEMINATED COPPER
MINERALISATION, BUT NO MINERALISATION OF THE TENOR
SEEN IN K106 DRILLED TO THE NORTH.
A down-hole EM (DHEM) survey was subsequently undertaken which indicated the hole had
passed below the main conductive body. Testing of this target by drilling one or more wedge holes
from K140 is under consideration.
The Kalman deposit remains an important asset for Hammer and we are keen to generate value
from Kalman for shareholders. The Indicated and Inferred Mineral Resource at Kalman stands at
20Mt at 0.61% Cu, 0.14% Mo, 0.34g/t Au and 3.7g/t Re (1.8% CuEq). This equates to approximately
122,000 tonnes of contained copper, 28,000 tonnes of contained molybdenum, and 220,000 ounces
of gold and 2.4 million ounces of rhenium. The deposit remains open down plunge.
14 HAMMER METALS LIMITED KALMAN
KALMAN DEPOSIT BLOCK MODEL (CUEQ)
DRILLING AT KALMAN (K104)
KALMAN ANNUAL REPORT 2017 15
PILGRIM FAULT VTEM
AN AIRBORNE VTEM MAX (VERSATILE TIME DOMAIN EM)
SURVEY WAS COMPLETED OVER THE KALMAN DEPOSIT AND A
23KM SECTION OF THE PILGRIM FAULT TREND EITHER SIDE OF
KALMAN FROM CHINA WALL IN THE NORTH TO PYTHON IN THE
SOUTH.
The objective was to find high-grade (conductive) bodies of copper-gold mineralisation similar to
that occurring at Kalman South elsewhere along the fault corridor. A number of VTEM conductors
were identified by the survey and classified by our consultants as significant and warranting
follow-up.
Several of the conductors are associated with known geochemically anomalous zones and known
mineralisation and others were associated with graphitic rocks. A systematic field based follow-up
is underway with drilling at two of the prioritised targets (Serendipity and Pharaoh East) planned
shortly.
PILGRIM FAULT VTEM IMAGE WITH TARGETS
16 HAMMER METALS LIMITED PILGRIM FAULT VTEM
FLYING VTEM OVER KALMAN
PILGRIM FAULT VTEM ANNUAL REPORT 2017 17
KALMAN WEST AND
HAMMERTIME
THE KALMAN WEST AND HAMMERTIME PROSPECTS ARE
SITUATED 1KM AND 2KM RESPECTIVELY WEST OF KALMAN ON
NESTED (FLOWER) FAULT STRUCTURES THAT SPLAY OFF AND
RE-JOIN THE PILGRIM FAULT TO THE NORTH AND SOUTH
OF KALMAN.
Both of these structures (as does the Kalman structure) show extensive base metal and gold
soil and rock chip anomalism and mineral occurrences along their length. The Ballara Fault
which forms the footwall to the Hammertime mineralized zone dips moderately to shallowly east
towards the Pilgrim Fault whilst the Kalman West structure appears to be dipping steeply to the
west, parallel to the Kalman Fault.
Two RC holes drilled at Kalman West in July intercepted a new gold zone at the quartz veined
contact between a graphite schist (with low grade zinc and lead values) and a calc-silcate rock.
Significant gold results include 1m at 36.9g/t Au and 1m at 3.93g/t Au.
At Hammertime four areas showing stronger brecciation and copper-gold mineralisation have
been selected for drill testing.
RC drilling is planned for both targets in the last quarter of 2017.
RC DRILLING AT KALMAN WEST
18 HAMMER METALS LIMITED KALMAN WEST AND HAMMERTIME
HAMMERTIME PROSPECT
KALMAN WEST AND HAMMERTIME ANNUAL REPORT 2017 19
MOUNT PHILP BRECCIA
THE MOUNT PHILP BRECCIA PROJECT COVERS A STRONGLY
ALTERED AND BRECCIATED SEQUENCE OF ROCKS COVERING
AN AREA APPROXIMATELY 10KM LONG AND 7KM WIDE
LOCATED BETWEEN THE REGIONAL SCALE FOUNTAIN RANGE
AND PILGRIM FAULTS. BOTH FAULTS ARE MORE THAN 200KM
IN LENGTH AND ARE MAJOR CRUSTAL FEATURES OF THE
CENTRAL PORTION OF THE MOUNT ISA INLIER.
Hammer’s 100%-owned Mt Philp haematite deposit is immediately adjacent to the breccia and is
considered to be of epigenetic rather than sedimentary origin. Previous drilling intercepted low
grade copper-gold mineralisation below the northern end of the deposit indicating the potential
for an untested IOCG system at Mt Philp.
Hammer has recently consolidated its tenure position over the breccia with the prime exploration
objective being for IOCG mineralisation. There are known occurrences of uranium, hematite (at
the Mount Philp Iron Deposit), magnetite, copper, gold, cobalt REE’s, scheelite and molybdenite
occurring in the project area. The large scale of the alteration and brecciation, the favourable
structural framework and extensive felsic and mafic intrusive activity are considered conducive to
the formation of an IOCG deposit.
Reconnaissance soil sampling has been initiated over the breccia complex and is approximately
25% complete. It is planned to extend the area covered by the Mary Kathleen high resolution
aeromagnetic and radiometric survey to the south over the Mount Philp area. This work will
provide the basic datasets to progress exploration over this large IOCG target.
MT PHILP BRECCIA OUTCROP
20 HAMMER METALS LIMITED MOUNT PHILP BRECCIA
MT PHILP BRECCIA ZONE ON MAGNETIC IMAGE
MT PHILP IRON DEPOSIT
MOUNT PHILP BRECCIA ANNUAL REPORT 2017 21
COBALT EXPLORATION
MILLENNIUM
IN DECEMBER 2016 HAMMER ANNOUNCED THE MAIDEN
MINERAL RESOURCE ESTIMATE FOR ITS 100%-OWNED
MILLENNIUM COPPER-COBALT-GOLD DEPOSIT, JUST SEVEN
MONTHS AFTER ACQUIRING THE PROJECT.
An Inferred Mineral Resource was estimated at 3.07Mt at 0.14% Co, 0.35% Cu and 0.12g/t Au
(1.29% Cu Eq). There is considered to be significant potential to increase the size of the deposit in
the untested, geochemically anomalous areas to the north of the deposit.
After receiving approaches from parties interested in advancing the cobalt potential of Millennium,
Hammer signed a term sheet with Global Energy Metals Corporation (GEMC) in May 2017. GEMC
can earn up to 75% interest in the five granted Millennium mining leases by spending up to CAD2.5
million on exploration over 36 months and CAD250,000 in staged cash payments. Hammer will
operate the joint venture until GEMC earns a 65% interest.
Farming out Millennium will allow Hammer to direct its financial resources into its copper-gold
exploration activities whilst retaining an active interest in the property.
MILLENNIUM COPPER-COBALT MINERALISATION
22 HAMMER METALS LIMITED COBALT EXPLORATION
MILLENNIUM DRILL SECTION
HAMMER’S MOUNT ISA TARGET PYRAMID
COBALT EXPLORATION ANNUAL REPORT 2017 23
OTHER COMMODITIES
IN THE COURSE OF HAMMER’S EXPLORATION ACTIVITIES THE
POTENTIAL FOR SEVERAL OTHER COMMODITIES WITHIN THE
TENEMENT HOLDING HAS BECOME APPARENT.
Potash – Regional K radiometric data had delineated a 5km by 2km zone of K2O enrichment
coinciding with a microcline-rich rhyoliteat Shire Bore. 31 rock chip samples collected by Hammer
from the unit averaged 9% K2O with a maximum of 12% K2O. The unit is located near Duchess
adjacent to the Mount Isa to Townsville railway line.
Graphite – High grade graphite was identified at Kalman West, Millennium and Pelican. The
Kalman West graphite is considered to be “Extra Large” or “Jumbo Flake” due to its coarse flake
size of up to 1.2mm.
Rare Earth Elements – Routine analysis of drill samples and rock chips for the rare earth element
(REE) suite has identified a number of areas with strongly elevated REE’s – particularly cerium and
lanthanum – two REE’s that are prevalent both at Mary Kathleen uranium mine and the Olympic
Dam copper-uranium-gold mine in South Australia. In addition, previous drilling adjacent to Mary
Kathleen at the Koppany prospect within the Mt Frosty Joint Venture returned very high grade
REE’s with values of up to 1.7% Ce, 1.2% La and 0.26% Nd over a one metre interval.
SHIRE BORE AREA
GRAPHITIC SHALE OUTCROP AT KALMAN WEST
24 HAMMER METALS LIMITED OTHER COMMODITIES
TARGET GENERATION
AND TENEMENT
ACQUISITION
ASIDE FROM THE ACQUISITION OF THE TENEMENTS
DISCUSSED PREVIOUSLY, HAMMER APPLIED FOR SEVERAL
NEW EXPLORATION PERMITS OVER TARGETS CONSIDERED TO
HOLD GOOD POTENTIAL FOR COPPER-GOLD MINERALISATION
THAT WERE IDENTIFIED BY A REGIONAL TARGETING EXERCISE.
A mining lease application was also submitted over the historic Trafalgar copper-gold mine.
This prospect is situated adjacent to the Fountain Range Fault zone surrounded by exploration
licenses held by Hammer and has had no previous drilling. A modest amount of oxidised copper
mineralised material has been stockpiled on surface by a previous operator. This material will be
assessed to determine whether it can be economically treated in the district.
TRAFALGAR MINE
OXIDE COPPER AT TRAFALGAR MINE
TARGET GENERATION AND TENEMENT ACQUISITION ANNUAL REPORT 2017 25
26 HAMMER METALS LIMITED OTHER PROJECTS & COMPETENT PERSON’S STATEMENTS
OTHER PROJECTS
PILBARA IRON ORE (WA) –
HAMMER 100%
The Pilbara iron ore resource is a channel iron deposit situated approximately 100km west of
Tom Price. The deposit is held under a retention license (E08/1997).
GOLDEN PEAKS PROJECT (QLD) –
HAMMER 0% (FARM-IN AGREEMENT WITH PERILYA LIMITED)
In late 2016 two diamond drill holes were drilled to test for the source of VTEM anomalies at the
Mt Dick North and Plummy’s prospects within EPM 15810. The drill hole at Mt Dick North
(239 m) intercepted zones of strongly altered volcanoclastics with sufficient disseminated
sulphide (pyrite) to have potentially caused the VTEM anomaly however no significant base metal
sulphides were recorded. The drill hole at Plummy’s (197.5 m) intersected a sequence of banded
volcanoclastic sediments and jasper containing minor disseminated pyrite.
The Farm-In Agreement period subsequently expired, with Hammer retaining no interest in
the project.
COMPETENT PERSON’S
STATEMENTS
EXPLORATION RESULTS
The information in this report as it relates to exploration results and geology was compiled by Mr.
Mark Whittle, who is a member of the AusIMM and a consultant to the company. Mr. Mark Whittle
has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as
defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Reserves. Mr. Whittle consents to the inclusion in the report of the matters based
on the information in the form and context in which it appears.
KALMAN, OVERLANDER AND MILLENNIUM RESOURCE
ESTIMATES
The information in this report as it relates to Mineral Resource Estimations at the Kalman,
Overlander and Millennium Deposits is based on information compiled by Ms Elizabeth Haren,
a Competent Person who is a Member and Chartered Professional of the Australasian Institute
of Mining and Metallurgy and a full-time employee of Haren Consulting Pty Ltd. Ms Haren has
sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which she has undertaken to qualify as a Competent Person as
defined in the 2012 Edition of the ‘Australasian Code for the Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Ms Haren consents to the inclusion in the report of the
matters based on her information in the form and context in which it appears.
OTHER PROJECTS & COMPETENT PERSON’S STATEMENTS ANNUAL REPORT 2017 27
ANNUAL MINERAL
RESOURCE STATEMENT
AS OF 30 JUNE 2017
The Company’s Mineral Resource Statement has been compiled in accordance with the Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserved (The JORC Code 2012 and 2004 Editions) and Chapter 5 of the ASX Listing Rules and ASX Guidance Note 31. The
Company has no Ore Reserve estimates.
The Company governs its activities in accordance with industry best-practice. The reported estimates for Overlander, Kalman and Millennium were
generated by a reputable, independent consulting firm – Haren Consulting Pty Ltd. The resource reports and supporting data were subjected to
internal analysis and peer-review before release.
In 2016, Hammer Metals commissioned Haren Consulting Pty Ltd to update the Kalman Resource based on new drilling and geological interpretation.
The resource was issued on the 27th of September 2016.
In November 2016, Haren Consulting was contracted by Hammer Metals Limited to complete a maiden mineral resource estimate for the Millennium
deposit. The estimate is based on good quality RC drilling data. The Mineral Resource was based on a series of 23 RC holes drilled by Hammer
Metals following its acquisition of the tenements in May 2016 and 17 RC holes drilled by the previous operator in 2013-2014.
Drilling extends to a maximum down hole depth of 322m and the mineralisation was modelled from surface to a depth of approximately 280m below
surface. The drill hole spacing is approximately 50 to 100m along strike.
There has been no material change to the Millennium resource estimate since its initial release to the ASX dated 6th December 2016.
CSA Global Pty Ltd conducted the Resource Estimate over the West Pilbara Iron Ore Deposit and this was reported to the ASX on the 26th of July 2010.
In 2014, the Resource was updated to adhere to the JORC Code 2012 Edition, however the Resource Estimate remained unchanged.
Cerro Resources Limited, the previous tenure holder over the Mt. Philp Hematite Deposit reported the Resource Estimate to the ASX on the 12th of
March 2012. The Mt Philp Resource Estimate adhered to the JORC Code 2004 edition.
In relation to the Overlander, West Pilbara and Mt Philp Resources, there have been no material changes to the Resource Estimates during the
reporting period.
RESOURCE PROJECT
Millennium
Kalman
Overlander
West Pilbara
Mt. Philp
MINERAL RESOURCE
COMPETENT PERSON
Ms. E. Haren
Ms. E. Haren
Ms. E. Haren
Mr. C. Allen
Mr. T. Leahey
ORGANIZATION
Haren Consulting
Haren Consulting
Haren Consulting
ASX REPORTING DATE
December 6th 2016
September 27th 2016
August 26th 2015
CSA Global Pty Ltd
July 26th 2010
Cerro Resource NL
September 28th 2012
KALMAN DEPOSIT JORC 2012 MINERAL RESOURCE ESTIMATE
(SEPTEMBER 27, 2016)
CLASSIFICATION
MINING
METHOD
CUEQ
CUT-OFF
TONNES
KT
CUEQ
%
Indicated
Inferred
Inferred
Total
Open Pit
Open Pit
Underground
0.75%
0.75%
1.40%
7,100
6,200
7,000
20,000
1.5
1.6
2.4
1.8
CU
%
0.48
0.44
0.89
0.61
MO
%
0.12
0.15
0.16
0.14
AU
PPM
0.27
0.24
0.5
0.34
AG
PPM
RE
PPM
1.4
1.5
2.9
1.9
2.9
3.9
4.5
3.7
Note: (1) The copper equivalent equation is: CuEq= Cu+(0.864268*Au)+(0.011063*Ag)+(4.741128*Mo)+(0.064516*Re)
Note: (2) Copper Equivalent Price assumptions are: Cu: US$4,650/t; Au: US$1,250/oz; Ag: US$16/oz; Mo: US$10/lb; and Re: US$3,000/kg.
The Kalman Molybdenum-Rhenium-Copper-Gold-Silver (Mo-Re-Cu-Au-Ag) deposit is situated 60km southeast of Mt Isa within the Mt Isa Inlier, and
forms part of the company’s Kalman Project.
Drilling extends to a maximum down hole depth of 998.3m and the mineralisation was modelled from surface to a depth of approximately 800m below
surface. The estimate is based on good quality RC and diamond core drilling data. The drill hole spacing is approximately 100m along strike with
some 50 metre-spaced infill drilling.
In September 2016, Haren Consulting was contracted by Hammer Metals Limited to complete an update of the Mineral Resource estimate for
the deposit. The estimate was reported to comply with the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’ by the Joint Ore Reserves Committee (JORC).
The Kalman Mineral Resource has been reported at two cut-off grades to reflect both open pit and underground mining scenarios. The Kalman
Mineral Resource estimate comprises a combined 20Mt at 1.8% copper equivalent (CuEq) at 0.61% copper, 0.34 g/t gold, 0.14% molybdenum and 3.7
g/t rhenium in the Indicated and Inferred categories at revised cut-off grades.
(Refer to the ASX release dated 27th September 2016).
28 HAMMER METALS LIMITED ANNUAL MINERAL RESOURCE STATEMENT
KALMAN DEPOSIT JORC 2012 MINERAL RESOURCE ESTIMATE (CONT’D)
The Kalman Mineral Resource Estimate disclosed as part of the 2015 review was last updated in March 2014 in accordance with the JORC Code (2012
Edition). The Resource estimate comprised a combined 30Mt at 1.3% copper equivalent (CuEq) at 0.54% Cu, 0.28% Au, 0.08% Mo and 2.2 g/t Re in the
Inferred category. (Refer to the ASX Release dated 19th March 2014 for full details of the Resource Estimate.)
Based on the testing completed and the current understanding of the material characteristics it has been assumed that the Kalman material can be
processed using a “typical” concentrator process flowsheet.
It is the company’s opinion that the metals used in the metal equivalent equation have a reasonable potential for recovery and sale based on
metallurgical recoveries in flotation test work undertaken to date. There are a number of well-established processing routes for copper-molybdenum
deposits and the sale of resulting copper and molybdenum concentrates.
KALMAN DEPOSIT MINERAL RESOURCE ESTIMATE (2015)
(Reported at 0.3% CuEq cut-off above 100m RL and 1.0% CuEq cut-off below 100m RL)
CLASSIFICATION
Inferred
Inferred
Total
MINING
METHOD
Open Pit
Underground
TONNES
KT
22,000
8,300
30,000
CUEQ
%
1.1
1.9
1.3
CU
%
0.42
0.87
0.54
AU
PPM
0.22
0.42
0.28
AG
PPM
1.1
2.0
1.3
MO
%
0.07
0.11
0.08
RE
PPM
1.9
2.9
2.2
Note: (1) Numbers rounded to two significant figures
Note: (2) Totals may differ due to rounding
Note: (3) (CuEq = Cu + 0.594464Au + 0.010051Ag + 4.953866Mo + 0.074375Re)
The reasons for the update were:
• 8 holes (K131-K132 and K134-139) drilled by Hammer in 2014 were incorporated into the resource model. The drill holes intersected multiple,
relatively shallow high grade molybdenum and copper intersections which were considered to have the potential to enhance the existing mineral
resource model.
• The deposit was re-interpreted to improve mineralisation constraints.
The 2016 resource updated differed from the 2014 update in that the resulting total resource tonnage was reduced from 30,000kt to 20,000kt and
average metal grades increased, primarily due to the use of more elevated cut-off grades.
OVERLANDER NORTH AND SOUTH DEPOSITS JORC 2012 MINERAL RESOURCE ESTIMATES
(AUGUST 26, 2015)
(Reported at 0.7% Cu cut-off)
OVERLANDER NORTH MINERAL RESOURCE
CLASSIFICATION
Indicated
Inferred
Total
TONNES
253,000
870,000
1,123,000
CU
%
1.4
1.3
1.3
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
OVERLANDER SOUTH MINERAL RESOURCE
CLASSIFICATION
Indicated
Inferred
Total
TONNES
-
649,000
649,000
CU
%
-
1.0
1.0
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
OVERLANDER NORTH AND SOUTH COMBINED MINERAL RESOURCE
CLASSIFICATION
Indicated
Inferred
Total
TONNES
253,000
1,518,000
1,772,000
CU
%
1.4
1.2
1.2
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
CO
PPM
254
456
410
CO
PPM
-
500
500
CO
PPM
254
476
445
CU
TONNES
3,414
11,350
14,764
CU
TONNES
-
6,352
6,352
CU
TONNES
3,414
17,700
21,112
CO
TONNES
64
396
461
CO
TONNES
-
327
327
CO
TONNES
64
723
788
The 100%-owned Overlander Project is situated 60km to the southeast of the mining centre of Mount Isa in North West Queensland and 6km to the
west of Hammer’s Kalman copper-gold-molybdenum-rhenium deposit. It is a high-priority target area for both shear-hosted copper and IOCG copper
mineralisation. The Overlander North and South Copper Deposits are situated approximately one kilometre apart within a common shear zone.
ANNUAL MINERAL RESOURCE STATEMENT ANNUAL REPORT 2017 29
OVERLANDER NORTH AND SOUTH DEPOSITS JORC 2012 MINERAL RESOURCE ESTIMATES
(CONT’D)
Drilling in the Overlander North deposit extends to a vertical depth of approximately 430m and the mineralisation was modelled from surface to
a depth of approximately 420m below surface. Drilling in the Overlander South deposit extends to a vertical depth of approximately 215m and the
mineralisation was modelled from surface to a depth of approximately 180m below surface. The resource estimates are based on good quality RC
and diamond drilling data. Drill hole spacing is predominantly on a 40m by 20mspacing with additional drill holes between sections targeted at the
higher-grade cores of the deposits.
Following additional drilling in 2014 and 2015, the Mineral Resource Estimates for the Overlander North and South shear-hosted copper Deposits
were revised by Haren Consulting Pty Ltd and reported in accordance with the guidelines of the JORC Code (2012 Edition). They contain combined
resources of 1,772,000 tonnes at 1.2% copper in the indicated and inferred categories (Refer to the ASX release dated August 26 2015). There has
been no material change to the Overlander resource base during the financial year.
MT. PHILP DEPOSIT JORC 2004 MINERAL RESOURCE ESTIMATE
(MARCH 12, 2012)
CLASSIFICATION
Indicated
Inferred
Total
TONNES
19,110,000
11,400,000
30,510,000
FE
%
41
34
39
P
%
0.02
0.02
0.02
SIO2
%
38
48
42
AL2O3
%
1.3
2.0
1.6
TIO2
%
0.38
0.46
0.41
LOI
%
0.29
0.31
0.30
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
The Mount Philp Iron Ore deposit is located in north-western Queensland, 1,500km northwest of Brisbane. The Mineral Resource Estimate is based
on 48 diamond and reverse circulation (RC) drillholes completed in 2011 for a total of 3,801m. Drilling comprises fans located on a nominal 100m
pattern along the strike length of the ironstone. The Mineral Resource was estimated and reported in-house by Cerro
Resource NL.
The current resource totals 19.1Mt grading 41.4% iron and 37.9% silica in the Indicated category and 11.4Mts grading 33.8% iron and 47.4% silica in
the Inferred category.
This resource is open at depth.
A resource estimate was first completed and reported to ASX by previous owners on 28th September 2012 and there has been no material change
to the resource base during the financial year. A review of the resource estimate was completed for the purpose of compiling this statement and
the principles and methodology of the resource estimation procedure and the resource classification procedure have been reconciled with the CIM
Resource Reserve definitions and found to comply.
WEST PILBARA DEPOSIT JORC 2012 MINERAL RESOURCE ESTIMATE
(JULY 26, 2010)
CLASSIFICATION
MINING METHOD
FE
%
Indicated
Inferred
Total
Open Pit
11,500,000
-
-
Open Pit
11,500,000
P
%
53
-
53
SIO2
%
0.042
-
0.042
AL2O3
%
7.8
-
7.8
TIO2
%
5.6
-
5.6
LOI
%
9.9
-
9.9
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
The West Pilbara Channel Iron Deposit is situated in the West Pilbara region of Western Australia about 100 km west of Tom Price, adjoining Atlas
Iron’s Anthiby Well iron ore project.
The deposit has been drilled with 40 Reverse Circulation holes totalling 2010m sampled on 1m intervals, on east-west sections spaced 100m apart.
The drill holes are generally spaced 50m apart on section and drilled to between 42 and 60m depth.
Midas Resources Limited (now Hammer Metals Limited) commissioned CSA Global Pty Ltd (CSA) in July 2010 to estimate the Mineral Resource at its
West Pilbara iron ore prospect. The West Pilbara deposit contains an Indicated Mineral Resource of 11.5Mt at 53.1% Fe, 0.042% P, 7.75% SiO2, 5.57%
Al2O3 and 9.86% LOI. This is based on an interpreted mineralised envelope with a nominal Fe cut-off of 50%. (Refer to the ASX release dated July 26th
2010).
In 2014 Hammer Metals commissioned CSA to convert the existing JORC 2004 resource statement to comply with the new 2012 JORC code. The JORC
2012 conversion statement was issued by CSA on October 30th 2014. The resource estimate remained unchanged. There has been no material change
to the resource base of this project during the financial year.
30 HAMMER METALS LIMITED ANNUAL MINERAL RESOURCE STATEMENT
MILLENNIUM JORC 2012 MINERAL RESOURCE ESTIMATE
(DECEMBER 26, 2016)
(Reported at 0.7% CuEq cut-off)
CLASSIFICATION
Inferred
(Reported at 1.0% CuEq cut-off)
CLASSIFICATION
Inferred
TONNES
5,890,000
TONNES
3,070,000
CUEQ
%
1.1
CUEQ
%
1.3
CU
%
0.32
CU
%
0.35
CO
%
0.11
CO
%
0.14
AU
PPM
0.11
AU
PPM
0.12
Note: (1) Numbers rounded to two significant figures to reflect appropriate levels of confidence
Note: (2) Totals may differ due to rounding
The Copper Equivalent (CuEq) equation has been calculated to reflect current and forecast pricing.
CuEq grades were calculated using estimated block grades for Co, Cu, Au and Ag.
Metal prices used were:
• Cu: US$4,600/t;
• Co: US$27,000/t;
• Au: US$1,330/oz; and
• Ag: US$20/oz.
The copper equivalent equation is:
CuEq = Cu % + (Co % * 5.9) + (Au ppm * 0.9) + (Ag ppm * 0.01)
Cut-offs of 0.7% and 1.0% CuEq has been applied for reporting Mineral Resources.
Previous preliminary metallurgical test-work indicated that acceptable copper-cobalt sulphide concentrates could be produced via conventional
processing methods. Based on the test-work conducted, it is the company’s opinion that all metals used in the metal equivalent calculation have a
reasonable potential to be recovered.
The 100%-owned Millennium polymetallic deposit is situated on granted mining leases approximately 32km northwest of Cloncurry in North West
Queensland and 19km northwest of the operating Rocklands copper-gold-cobalt mine. The Millennium deposit lies within five Mining Leases; ML’s
2512, 2761, 2762, 7506 and 7507. Hammer currently has a 100% interest in all five Mining Leases. The tenements are in good standing and no known
impediments exist.
In November 2016, Haren Consulting was contracted by Hammer Metals Limited to complete a maiden mineral resource estimate for the deposit.
The estimate is based on good quality RC drilling data. The Mineral Resource was based on a series of 23 RC holes drilled by Hammer Metals
following its acquisition of the tenements in May 2016 and 17 RC holes drilled by the previous operator in 2013-2014. Drilling extends to a maximum
down hole depth of 322m and the mineralisation was modelled from surface to a depth of approximately 280m below surface. The drill hole spacing
is approximately 50 to 100m along strike.
There has been no material change to the Millennium resource estimate since its initial release to the ASX dated 6th December 2016.
GOVERNANCE AND INTERNAL CONTROLS – RESOURCE CALCULATIONS
The Company ensures good governance in relation to resource estimation through the use of third party resource consultants and internal review in
accordance with industry best practice. All reported resource estimates were generated by reputable, independent consulting firms. The resource
reports and supporting data were subjected to internal analysis and peer review before release. The Company is not aware of any additional
information, other than that reported, which would have a material effect on the estimates as reported.
Due to the nature, stage and size of the Company’s existing operations, the Board believes there would be no efficiencies gained by establishing a
separate mineral reserves and resources committee responsible for reviewing and monitoring the Company’s processes for calculating mineral
reserves and resources estimates and for ensuring that the appropriate controls are applied to such calculations.
The Company will report any future mineral reserves and resources estimates in accordance with the 2012 JORC Code.
RESOURCE BY COMMODITY
PRIMARY
COMMODITY PROJECT
LOWER
CUT-OFF
TONNES
KT
CUEQ
(1) %
CU
%
AU
PPM
AG
PPM
MO
%
RE
PPM
CO
PPM
FE
%
P
%
SIO2
%
AL2O3
%
TIO2
%
LOI
%
Kalman
Kalman
0.75% CuEq
(Open Pit)
1.4% CuEq
(Underground)
7,000
2.4
Overlander
0.7% Cu
1,772
Copper
Millennium
1% CuEq (2)
3,070
1.3
Mt. Philp
Iron Ore
West Pilbara
50% Fe
30,510
11,500
13,300
1.55
0.46
0.26
1.45
0.13
3.37
0.9
1.2
0.4
0.5
2.9
0.2
4.5
0.1
445
1400
39
53
0
0
42
7.8
1.6
5.6
0.41
0.3
9.9
(1) - CuEq = Cu + (0.864268 * Au) + (0.011063 * Ag) + (4.741128 * Mo) + (0.064516 * Re)
(2) - CuEq = Cu % + (Co % * 5.9)+(Au ppm * 0.9)+(Ag ppm * 0.01)
ANNUAL MINERAL RESOURCE STATEMENT ANNUAL REPORT 2017 31
COMPETENT PERSONS STATEMENT
The information in this Annual Mineral Resources Statement is based on, and fairly represents information and supporting documentation reviewed
by Mr Mark Whittle, a Competent Person who is a member of the AusIMM and a consultant to the company. Mr Whittle has sufficient experience
which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a
Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(2004 JORC Code) and the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(2012 JORC Code). Mr Whittle consents to the inclusion in the report of the matters based on this information in the form and context in which
it appears.
TENEMENT INTERESTS AT END OF SEPTEMBER 2017
PROJECT
TENEMENT
STATUS
INTEREST %
COMMENT
Converting to Retention Licence
Subject to 2% NSR
Pilbara Iron Ore - WA
Mt Isa Project - QLD
E08/1997
EPM 12205
EPM 13870
EPM 14019
EPM 14022
EPM 14232
EPM 14467
EPM 15972
EPM 16726
EPM 16987
EPM 17762
EPM 18084
EPM 18116
EPM 19783
EPM 19784
EPM 25145
EPM 25369
EPM 25425
EPM 25486
EPM 25523
EPM 25666
EPM 25686
EPM 25777
EPM 25866
EPM 25867
EPM 25892
EPM 25997
EPM 26126
EPM 26127
EPM 26128
EPM 26130
EPM 26172
EPM 26306
EPM 26392
EPM 26474
EPM 26511
EPM 26512
EPM 26628
ML 100125
ML 2512
ML 2761
ML 2762
ML 7506
ML 7507
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Application
Application
Application
Application
Application
Granted
Granted
Granted
Granted
Granted
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
32 HAMMER METALS LIMITED ANNUAL MINERAL RESOURCE STATEMENT
- THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK -
ANNUAL MINERAL RESOURCE STATEMENT ANNUAL REPORT 2017 33
DIRECTORS’ REPORT
1. DIRECTORS
THE DIRECTORS PRESENT THEIR REPORT TOGETHER WITH THE FINANCIAL REPORT OF
HAMMER METALS LIMITED (“THE COMPANY”, “HAMMER”) AND OF THE GROUP, BEING THE
COMPANY AND ITS SUBSIDIARIES, FOR THE YEAR ENDED 30 JUNE 2017 AND THE AUDITOR’S
REPORT THEREON.
RUSSELL DAVIS –
EXECUTIVE CHAIRMAN
Appointed 13 January 2014
BSc (Honours) MBA MAusIMM, MAICD
ALEXANDER HEWLETT –
EXECUTIVE DIRECTOR
Appointed 26 June 2013
BSc MAusIMM
Mr. Davis is a Geologist with over 30 years’ experience in the mineral
Alexander Hewlett is a Geologist graduating from the University of
resources business. He has worked on the exploration and development
Western Australia. Alex worked as a resource-modelling geologist
of a range of commodities for a number of international and Australian
for CSA Global, before accepting management positions in ASX listed
companies, holding senior technical and corporate positions including
explorers including Managing Director of US Nickel Ltd and Chairperson
Chief Mine Geologist, Exploration Manager and Managing Director.
of Groote Resources Ltd (now Northern Manganese Limited). Alex was
Mr Davis was a founding Director of Gold Road Resources Limited and
also Syndicated Metals Limited where he was Managing Director from
employed as a consultant for a New York resource fund working as
an analyst.
December 2007 to March 2012. Russell has been a Director of Hammer
Alex is highly skilled at project identification and acquisition and
Metals (Australia) Pty Ltd since its inception in 2012.
has a flair for company and investor communications. He has raised
significant funds for both domestic and international projects in the
mining and exploration sector. Alex has also acquired packaged and
vended project portfolio’s into ASX listed companies including – White
Star Resources, Groote Resources and Spitfire Resources as well as
identifying and acquiring projects for US Nickel (later Kalgoorlie
Mining Company).
Alex is a member of the Australasian Institute of Mining and Metallurgy,
and been a Director of Hammer Metals (Australia) Pty Ltd since its
inception in 2012.
34 HAMMER METALS LIMITED DIRECTORS’ REPORT
NADER EL SAYED –
INDEPENDENT NON-EXECUTIVE DIRECTOR
SIMON BODENSTEINER –
INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed 26 June 2013
B.Comm, MA, CA
Appointed 8 September 2015
MSc
Nader El Sayed holds a Bachelor of Commerce (Banking & Finance),
Simon is the Chief Mining Engineer for major shareholder Deutsche
Masters (Accounting) and is a member of the Australian Institute of
Rohstoff AG, a Germany based resource and investment company. He is
Chartered Accountants. Nader is currently the Chief Executive Officer
an experienced mining professional holding a Masters Degree in Mining
of Multiplant Holdings, a mining and civil services business based in
Engineering and has previously held operational and senior technical
Western Australia. Nader’s previous roles include holding a senior
positions at several Rio Tinto operations across Australia. Before joining
management position with KPMG providing assurance, capital markets
Deutsche Rohstoff, he worked as a consultant for The Boston Consulting
and other advisory services to key Australian and international resource
Group. Simon brings significant bulk and selective mining experience
companies. Nader brings a wealth of risk management, corporate
from underground and open pit operations to the Board.
governance, strategic and financial experience to the Board.
DIRECTORS’ REPORT ANNUAL REPORT 2017 35
2. DIRECTORSHIPS OF OTHER LISTED COMPANIES
Directorships of other ASX listed companies held by Directors in the 3 years immediately before the end of the financial year are as follows:
COMPANY
PERIOD OF DIRECTORSHIP
Gold Road Resources Ltd
May 2004 – June 2016
Spectrum Rare Earths Limited
March 2017 – to date
None
None
-
-
NAME
Russell Davis
Alexander Hewlett
Nader El Sayed
Simon Bodensteiner
3. COMPANY SECRETARY
MARK PITTS –
COMPANY SECRETARY
(appointed 13 August 2010)
B.Bus, FCA
Mr Pitts is a Chartered Accountant with over 25 years’ experience in statutory reporting and business administration. He has been directly involved
with, and consulted to a number of public companies holding senior financial management positions. He is a Partner in the corporate advisory firm
Endeavour Corporate providing secretarial support, corporate and compliance advice to a number of ASX listed public companies.
4. DIRECTORS’ MEETINGS
The number of Directors’ meetings held and the number of meetings attended by each of the Directors of the Company during their term in office in
the financial year is as follows.
DIRECTOR
Mr R Davis
Mr A Hewlett
Mr N El Sayed
Mr S Bodensteiner
MEETINGS HELD
MEETINGS ATTENDED
7
7
7
7
7
7
7
7
The Company does not have any committees. Matters usually considered by an audit, remuneration or nomination committee were dealt with by the
whole Board during regular Board meetings.
5. PRINCIPAL ACTIVITY
The principal activity of the Group during the course of the financial year was mineral exploration in Australia.
6. OPERATING AND FINANCIAL REVIEW
The Group incurred an after-tax loss for the year of $528,328 (2016: loss $1,045,360).
Included in this amount is $275,699 of exploration expenditure written off (2016: $309,384).
CORPORATE
The following equity transactions were undertaken during the year:
• Hammer raised $2,257,500 (before costs) during the period by private placement of 32,250,002 shares.
• The convertible note held in 2016 was converted to equity by issue of 11,374,711 shares.
• Hammer issued 1,250,000 shares for the acquisition of tenements in the Mt. Isa district from AuKing Mining Limited (formerly Chinalco Yunnan
Copper Resources Limited (CYU)).
Subsequent to the year end, Hammer raised $1,242,500 (before costs) by private placement of 35,500,000 shares, and is undertaking a non-
renounceable entitlement offer to raise up to approximately $1.17 million on the bases of 1 share for every 7 shares held at the record date. The offer
is due to close on or around the 12th October 2017.
Hammer also completed the acquisition of 51% interest in the Mt. Frosty prospect by issue of 250,000 shares to AuKing Mining Limited (formerly
Chinalco Yunnan Copper Resources Limited (CYU)).
The following options expired during the period:
• 300,000 unlisted options with an exercise price of $0.30 expired on 11 September 2016
• 1,000,000 unlisted options with an exercise price of $0.20 expired on 26 May 2017
• 14,300,000 unlisted options with an exercise price of $0.20 expired on 30 June 2017.
The following options expired after 30 June 2017:
• 8,338,334 unlisted options with an exercise price of $0.10 expired on 30 July 2017
• 500,000 unlisted options with an exercise price of $0.10 expired on 6 August 2017
• 1,000,000 unlisted options with and exercise price of $0.20 expired on 11 September 2017
No options were granted or exercised during the financial year or up to the date of this report.
36 HAMMER METALS LIMITED DIRECTORS’ REPORT
EXPLORATION ACTIVITIES
Hammer Metals is exploring its Mount Isa project for large iron oxide copper-gold (IOCG) deposits of the Ernest Henry style (approximately 220Mt at
1.1% Cu and 0.5g/t Au). A systematic IOCG targeting exercise within the Mount Isa region is ongoing.
During the year programs of geological mapping, geochemical sampling, airborne and ground based geophysical surveys and RC and diamond
drilling were undertaken at several prospects. New resource estimates were calculated for the Kalman Cu-Au-Mo-Re deposit and the Millennium
Co-Cu-Au deposit and several new drill targets defined.
Hammer currently has 37 granted tenements and 6 applications lodged covering an area of approximately 3000km2.
Kalman Deposit
The Mineral Resource Estimate update for Kalman was completed during the period. The new estimate comprises a combined 20Mt at 1.8% CuEq2 at
0.61% copper, 0.34g/t gold. 0.14% molybdenum and 3.7g/t rhenium in the Indicated and Inferred categories at revised cut-off grades.
Kalman Mineral Resource - refer ASX release dated 27th September 2017
CLASSIFICATION
Indicated
Inferred
Inferred
Total
MINING
METHOD
Open Pit
Open Pit
Underground
1.4%
CuEq
CUT-OFF
TONNES
KT
CuEq
%
0.75%
0.75%
7,100
6,200
7,000
20,000
1.5
1.6
2.4
1.8
Cu
%
0.48
0.44
0.89
0.61
Mo
%
0.12
0.15
0.16
0.14
Au
PPM
0.27
0.24
0.50
0.34
Ag
PPM
1.4
1.5
2.9
1.9
Re
PPM
2.9
3.9
4.5
3.7
Note – Totals may differ due to rounding
The Company confirms that it is not aware of any information or data that materially affects the information included in the original market announcement and, in the case of estimated Mineral
Resources or Ore Reserves, all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.
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.
An airborne VTEM and magnetic survey was completed over 23km of strike to the north and south of the Kalman deposit in late 2016. Several EM
conductors were selected for further evaluation and follow up mapping and sampling programs were completed. A number of drill copper-gold and
gold drill targets have been defined.
Millennium
In May 2016, the Company acquired five granted Mining Leases over the Millennium copper-cobalt-gold project near Cloncurry. The acquisition
secures a prospective high-grade cobalt-copper-gold target that complements Hammer’s existing tenement portfolio in the region.
An infill and extensional RC drilling programs were completed during the year. The objective of the program was to provide an initial test of the
continuity of mineralisation in previous drilling. The lease area was geologically mapped in detail and together with drill data provided control for the
construction of a three-dimensional geological model.
The maiden Mineral Resource Estimate for Millennium was announced on 6th December 2016. The resource model can now be used as a basis for
mining and metallurgical studies. Petrological studies were undertaken on a range of the mineralised drill samples. There is significant potential to
increase the size of the deposit in untested, geochemically anomalous zones to the north with additional drilling.
Millennium November 2016 Mineral Resource - Inferred- refer ASX release dated 6th December 2016
CuEq
CUT-OFF
1.0%
0.7%
TONNES
3,070,000
5,890,000
CuEq
(%)
1.29
1.08
Cu
(%)
0.35
0.32
Co
(%)
0.14
0.11
Au
(PPM)
0.12
0.11
The Company confirms that it is not aware of any information or data that materially affects the information included in the original market announcement and, in the case of estimated Mineral
Resources or Ore Reserves, all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.
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.
As announced on May 2017, Hammer signed a term sheet with Global Energy Metals Corporation (GEMC) to earn an interest in Hammer’s Millennium
project. The agreement includes the five granted Mining Leases and provides for a staged earn-in with GEMC having the right to earn 75% by
spending CAD2,700,000 which includes CAD200,000 option fee payable to Hammer. GEMC have conducted their due diligence and the both parties
have now executed a Definitive Agreement.
Acquisition of tenements
Hammer acquired 100% of the tenement interests in the Mount Isa district of AuKing Mining Limited (formerly Chinalco Yunnan Copper Resources
Limited (CYU)).
The acquisition included a 100% interest in EPM’s 14019, 14022 and 12205 which cover the previously defined Elaine-Dorothy copper-gold inferred
mineral resource of 27 Mt at 0.53% Cu and 0.08g/t Au (CYU ASX release 18/10/2012), the GEM copper-gold resource (CYU ASX release 9/06/2010) and
the Elaine uranium prospect (CYU ASX release 24/03/2010) as well as a range of other copper-gold drill intersections at the Mt Dorothy, Pindora and
Prince of Wales prospects. The tenements also cover strike extensions of mineralised trends and favorable host rocks identified within Hammer’s
adjacent tenements.
DIRECTORS’ REPORT ANNUAL REPORT 2017 37
6. OPERATING AND FINANCIAL REVIEW (CONT’D)
Acquisition of tenements (cont’d)
A review of the near-surface gold potential of the Elaine deposit is underway. Drilling is planned to test the depth and lateral extent of the high grade
gold values intercepted in the previous drilling.Exploration activities (CONT’D)
The acquisition also includes CYU’s 51% interest in EPM 14467 (Mt Frosty), located adjacent to the Mary Kathleen uranium mine and which covers
the Blue Caesar, Jubilee and Koppany copper prospects. The acquisition of this tenement was completed in August 2017 with a new JV agreement
entered into with Mt. Isa Mines Limited (MIM). The key terms of the Joint Venture agreement are as follows
• Each party to the Joint Venture will contribute exploration expenditure according to their participating interest (Hammer-51%/ MIM-49%)
• Dilution provisions apply if a party elects not to contribute to a program. If a party’s participating interest falls below 10% their interest will convert
to a 3% Net Profits Royalty.
Regional Exploration
Exploration data compilation and targeting activity has been ongoing during the year, resulting in several new tenement acquisitions including
the Trafalgar mining lease application over the historic Trafalgar copper-gold mine. Ground follow up of the priority targets is progressively being
undertaken.
An RC drilling program has recently been completed on two prospects at Kalman West and Revenue (refer to ASX announcement on 28 August 2017).
Hammer is highly encouraged by the results of both programs with further drilling to follow up on the gold results at Kalman West a priority.
Prospects held by Hammer with potential for other commodities such as graphite, potassium (in potassium-rich rhyolite), and Rare Earth Elements
have also been reviewed and will be considered for potential farmout.
Newmont – Farm-in and JV
In December 2015, the Company executed a farm-in and JV agreement with Newmont Exploration Pty Ltd (Newmont), encompassing three of
Hammer’s IOCG prospects – Overlander, Even Steven and Dronfield - covering approximately 250km2 (<10%) of Hammer’s Mount Isa project. The JV
area includes 17 sub-blocks of EPM’s 14232, 18116 and 25369 held 100% by Hammer and all sub-blocks in EPM18084 (Dronfield) in which Hammer
can earn an 80% interest. The joint venture is targeting an Ernest Henry style IOCG copper- gold deposit. Hammer has been managing the initial
joint venture exploration activities utilising in-house technical support from Newmont. Hammer retains 100% ownership of the existing resources at
Kalman (Cu-Au-Mo-Re), Overlander (Cu) and Mt Philp (Fe).
Comprehensive programs of geological mapping, geochemical sampling and geophysics were undertaken during the year. A three hole diamond and
RC drilling program was completed at Dronfield in the first half of 2017 and two diamond drill holes were completed at Overlander in 2016. Reviews
and assessment of the results of these programs are in progress. Specifically, an assessment of the alteration and mineralisation will be completed
with a view to vectoring to stronger mineralisation within these large alteration zones. Newmont has met the expenditure required to enter into Stage
1 (35% earn-in) with the compilation reports in progress to be completed before the earn-in phase is completed.
Golden Peaks Project - Mt. Morgan
The Golden Peaks Project was a joint venture with Perilya Limited whereby Hammer could earn up to a 60% interest in EPM 15810. The farm-in
agreement expired in April 2017 and Hammer retains no interest in the project.
7. DIVIDENDS
No dividends were paid or declared by the Company during the financial year.
8. EVENTS SUBSEQUENT TO BALANCE DATE
On 18th August 2017, the Group (through its wholly owned subsidiary Mulga Minerals Pty Ltd (‘Mulga’)) completed the acquisition of a 51% interest
in the Mt. Frosty prospect and agreed terms for a new joint venture agreement with Mount Isa Mines Limited (‘MIM’) (a 100% owned subsidiary of
Glenore PLC).
On 12th September 2017, the Group completed a placement of 35,500,000 shares to sophisticated investors raising $1.2 million. As announced on 6th
September, the Company is also undertaking a non-renounceable entitlement offer to raise up to approximately $1.17 million on the bases of 1 share
for every 7 shares held at the record date. The offer is due to close on or around the 12th October 2017.
Other than the above, there has not been any other matter or circumstance that has arisen after balance date that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.
9. LIKELY DEVELOPMENTS
The Company will continue planning and executing exploration and development work on its existing projects in Australia as well as projects under
review in Australia to complement and expand on existing tenement holdings.
38 HAMMER METALS LIMITED DIRECTORS’ REPORT
10. DIRECTORS’ INTERESTS
The relevant interest of each Director in the shares and options of the Company as notified by the Directors to the Australian Securities Exchange in
accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
DIRECTOR
Mr R Davis
Mr A Hewlett
Mr N El Sayed
Mr S Bodensteiner
ORDINARY SHARES
OPTIONS OVER ORDINARY
SHARES
8,391,667
5,525,476
19,500
30,568
6,000,000
6,000,000
1,500,000
500,000
The above table includes indirect shareholdings held by related parties to the directors.
11. ENVIRONMENTAL REGULATIONS
In the course of its normal mining and exploration activities the Group adheres to environmental regulations imposed on it by the various regulatory
authorities, particularly those regulations relating to ground disturbance and the protection of rare and endangered flora and fauna. The Group has
complied with all material environmental requirements up to the date of this report. The Board believes that the Group has adequate systems in
place for the management of its environmental requirements and is not aware of any breach of these environmental requirements as they apply to
the Company.
12. REMUNERATION REPORT – AUDITED
12.1 PRINCIPLES OF COMPENSATION
Remuneration levels for key management personnel and other staff of the Group are competitively set to attract and retain appropriately qualified
and experienced personnel and therefore includes a combination of cash paid and the issuance of options and rights. Key management personnel
comprise the directors of the Company and senior executives for the Group. Staff remuneration is reviewed annually.
Consequences of performance on shareholder wealth
In establishing performance measures and benchmarks to ensure incentive plans are appropriately structured to align corporate behaviour with the
long term creation of shareholder wealth, the Board has regard for the stage of development of the Company’s business, share price, operational and
business development achievements (including results of exploration activities) that are of future benefit to the Company.
SERVICE CONTRACTS
Alexander Hewlett- Executive Director:
The Company has entered into a Consulting agreement with Mazza Resources Pty Ltd (an entity of which Mr Hewlett is the principal) on
22 September 2014. A Consulting fee of $220,000 per annum is payable with a 3-year term. The Company may terminate the agreement after twelve
months by giving six months’ notice or paying the executive an amount equal to six months of the consulting fee. The executive may, after twelve
months from the commencement of the agreement, terminate this agreement by giving three months’ notice to the Company. Currently the base
cash component of remuneration is not dependent on the satisfaction of any performance condition. In an effort to reduce operating costs, Mr
Hewlett has agreed to a 32% reduction of fees to $150,000. The original term of the Consulting agreement expired on 22 September 2017 and the
Company and Mr Hewlett have agreed to roll the agreement forward on a similar basis and for a term to be agreed.
Russell Davis – Executive Chairman:
The Company has entered into an Executive Service agreement with Mr Davis on 22 September 2014. An Executive service fee of $220,000 per annum
is payable with a 3-year term. The Company may terminate the engagement after twelve months by giving six months’ notice or paying the executive
an amount equal to six months of the executive fee. The executive may, after twelve months from the commencement of the agreement, terminate
this agreement by giving three months’ notice to the Company. Currently the base cash component of remuneration is not dependent on the
satisfaction of any performance condition. In an effort to reduce operating costs, the Mr Davis has agreed to a 32% reduction of fees to $150,000. The
original term of the Consulting agreement expired on 22 September 2017 and the Company and Mr Davis have agreed to roll the agreement forward
on a similar basis and for a term to be agreed.
Mark Pitts – Company Secretary
Mr Pitts is a Partner in the corporate advisory firm Endeavour Corporate providing secretarial support and corporate and compliance advice,
pursuant to a contract between Endeavour Corporate and the Company. The contract with Endeavour Corporate has no fixed term with the option of
termination by either party with two months’ written notice. Mr Pitts is not entitled to any termination payments other than for services rendered at
time of termination.
DIRECTORS’ REPORT ANNUAL REPORT 2017 39
12. REMUNERATION REPORT – AUDITED (CONT’D)
12.1 PRINCIPLES OF COMPENSATION (CONT’D)
NON-EXECUTIVE DIRECTORS
From 1 July 2013, all non-executive Directors receive a fixed Directors’ fee of $30,000 (plus superannuation benefits of 9.5%) per annum.
The maximum aggregate amount of non-executive Directors’ fees payable by the Company as approved by the shareholders at the 2011 annual
general meeting is $300,000 per annum.
There are no other items of contingent remuneration to Directors.
In December 2010, the Group introduced a share trading policy which sets out the circumstances in which directors, executives, employees and other
designated persons may deal with securities held by them in the Company. This includes any shares or any other securities issued by the Company
such as options. The policy includes restriction on key management personnel and other employees from entering into arrangements that limit their
exposure to losses that would result from share price decreases. Entering into such arrangements has been prohibited by law since 1 July 2011.
40 HAMMER METALS LIMITED DIRECTORS’ REPORT
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DIRECTORS’ REPORT ANNUAL REPORT 2017 41
12. REMUNERATION REPORT – AUDITED (CONT’D)
12.3 VALUE OF OPTIONS TO EXECUTIVES
The value of options will only be realised if and when the market price of the Company shares, as quoted on the Australian Securities Exchange, rises
above the Exercise Price of the options. Further details of the options are contained in the section Share Options below.
12.4 OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION
No options were granted as compensation during the year; and no options previously granted as compensation have been exercised during the year
or to the date of this report.
12.5 ANALYSIS OF OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION
No options were granted as remuneration in the current year.
The table below details the vesting profiles of the options granted as remuneration to each key management person in the prior year.
NUMBER OF
GRANTED OPTIONS
DATE GRANTED
% VESTED
% FORFEITED /
LAPSED
FINANCIAL YEARS
IN WHICH GRANT
VESTED
R Davis
A Hewlett
N El Sayed
S Bodensteiner
M Pitts
4,000,000
4,000,000
500,000
500,000
500,000
10 June 2016
10 June 2016
10 June 2016
10 June 2016
27 June 2016
100%
100%
100%
100%
100%
-
-
-
-
-
30 June 2016
30 June 2016
30 June 2016
30 June 2016
30 June 2016
12.6 OPTION HOLDINGS
The movement during the reporting period in the number of options over ordinary shares in Hammer Metals Limited held, directly, indirectly or
beneficially, by each key management person, including their personally-related entities, is as follows:
YEAR ENDED
30 JUNE 2017
R Davis
A Hewlett
N El Sayed
S Bodensteiner
M Pitts
HELD AT
BEGINNING
OF PERIOD
10,225,000
8,266,667
2,500,000
500,000
1,500,000
GRANTED
PURCHASED
EXERCISED
LAPSED OR
EXPIRED
HELD AT END
OF PERIOD
VESTED AND
EXERCISABLE
AT END OF
PERIOD
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,600,000)
6,625,000*
6,625,000
(2,100,000)
6,166,667*
6,166,667
(1,000,000)
1,500,000
1,500,000
-
(1,000,000)
500,000
500,000
500,000
500,000
*Subsequent to the year end on 30 July 2017, 625,000 options held by Mr R Davis and 166,667 options held by Mr A Hewlett expired.
12.7 EQUITY HOLDINGS AND TRANSACTIONS
No shares were granted to key management personnel during the year as compensation (2016: Nil).
The movement during the reporting period in the number of ordinary shares in Hammer Metals Limited held directly, indirectly or beneficially, by
each key management person, including their personally-related entities (shown on a post-consolidation basis), is as follows:
YEAR ENDED
30 JUNE 2017
Mr R Davis
Mr A Hewlett
Mr N El Sayed
Mr S Bodensteiner
Mr M Pitts
HELD AT BEGINNING OF
PERIOD
PURCHASES /
ENTITLEMENT ISSUE
8,016,667
5,525,476
19,500
30,568
53,334
2,391,667
-
-
-
-
SALES
(2,016,667)
-
-
-
-
HELD AT END OF PERIOD
8,391,667
5,525,476
19,500
30,568
53,334
42 HAMMER METALS LIMITED DIRECTORS’ REPORT
12.8 KEY MANAGEMENT PERSONNEL TRANSACTIONS
The following table provides the total amount of transactions which have been entered into with related parties for the relevant financial year
exclusive of GST:
KEY MANAGEMENT
PERSON
TRANSACTION
Mark Pitts
Accounting services
TRANSACTION VALUE YEAR ENDED
BALANCE OUTSTANDING AS AT
30 JUNE 2017
30 JUNE 2016
30 JUNE 2017
30 JUNE 2016
$
33,261
$
47,032
$
3,657
$
7,315
The Company paid fees to Endeavour Corporate, a company associated with Mark Pitts, for accounting and financial reporting services provided to
the company.
- END OF REMUNERATION REPORT -
13. SHARE OPTIONS
Unissued shares under option
At the date of this report unissued ordinary shares of the Company under option are:
TRANSACTION
Directors’ Options
Employee / Contractor Options
Employee / Contractor Options
Directors’ Options
Attaching option
Employee / Contractor Options
Advisor options
EXPIRY DATE
EXERCISE PRICE
NUMBER OF SHARES
30 Nov 2017
30 Nov 2017
30 Nov 2017
30 June 2020
6 Feb 2018
30 June 2020
29 June 2019
$0.135
$0.135
$0.10
$0.06
$0.15
$0.06
$0.075
6,000,000
1,100,000
1,000,000
9,000,000
3,811,953
3,800,000
5,000,000
These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
Shares issued on exercise of options
The Company has not issued ordinary shares as a result of the exercise of options during this year or the previous financial year.
No shares have been issued since the year end to the date of this report as a result of the exercise of options.
14. CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviours and accountability, the Directors support and have adhered to the
principles of sound corporate governance. The Board recognises the recommendations of the ASX Corporate Governance Council and considers the
Company is in compliance with those guidelines which are of importance to the operations of the Company. Where a recommendation has not been
followed, that fact has been disclosed together with the reasons for the departure.
The Company’s Corporate Governance Statement and disclosures available on the Company’s website at www.hammermetals.com.au
15. INDEMNIFICATION OF OFFICERS AND AUDITORS
The Company has entered into Director and Officer Protection Deeds (Deed) with each Director and the Company Secretary (officers). Under the
Deed, the Company indemnifies the officers to the maximum extent permitted by law and the Constitution against legal proceedings, damage, loss,
liability, cost, charge, expense, outgoing or payment (including legal expenses on a solicitor/client basis) suffered, paid or incurred by the officers
in connection with the officers being an officer of the Company, the employment of the officer with the Company or a breach by the Company of its
obligations under the Deed.
Also pursuant to the Deed, the Company must insure the officers against liability and provide access to all board papers relevant to defending any
claim brought against the officers in their capacity as officers of the Company.
The Company has paid insurance premiums during the year in respect of liability for any past, present or future Directors, secretary, officers and
employees of the Company or related body corporate. The insurance policy does not contain details of the premium paid in respect of individual
officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the
insurance policy.
The Company has not provided any insurance or indemnification for the Auditor of the Company.
16. NON-AUDIT SERVICES
During the year, KPMG, the Company’s auditor provided taxation compliance services in addition to their statutory duties.
DIRECTORS’ REPORT ANNUAL REPORT 2017 43
17. LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001
The lead auditor’s independence declaration is set out on page 45 and forms part of the Directors’ report for the financial year ended 30 June 2017.
18. SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In the opinion of Directors, other than that disclosed elsewhere in this report, there were no other significant changes in the state of affairs of the
Group that occurred during the financial year under review.
This report is made with a resolution of the Directors:
A HEWLETT
MANAGING DIRECTOR
Perth
Dated 26th September 2017
44 HAMMER METALS LIMITED DIRECTORS’ REPORT
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Hammer Metals Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Hammer Metals Limited
for the financial year ended 30 June 2017 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
R Gambitta
Partner
Perth
26 September 2017
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
INDEPENDENCE DECLARATION ANNUAL REPORT 2017 45
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total current assets
NON-CURRENT ASSETS
Other financial assets
Plant and equipment
Exploration and evaluation expenditure
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Advanced cash call
Total current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Total equity
NOTE
30 JUNE 2017
$
30 JUNE 2016
$
11
12
13
13
14
15
16
17
18
838,027
335,161
359,954
1,533,142
86,250
3,755
9,377,823
9,467,828
11,000,970
132,142
359,954
492,096
492,096
1,892,094
57,509
535,433
2,485,036
97,500
5,964
7,055,058
7,158,522
9,643,558
155,387
510,561
665,948
665,948
10,508,874
8,977,610
42,655,110
1,230,127
(33,376,363)
39,800,503
3,152,521
(33,975,414)
10,508,874
8,977,610
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
46 HAMMER METALS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Other income
Marketing expenses
Administrative expenses
Share based payments
Occupancy expenses
Depreciation
Project evaluation and generation expenses
Exploration expenditure written off
Impairment of available for sale assets
Result from operating activities
Finance income
Net finance income / (expense)
Loss before income tax
Income tax benefit
Net loss for the year from continuing operations
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss
Net change in fair value of financial assets
Other comprehensive loss for the year, net of income tax
NOTE
4
5
15
7
9
30 JUNE 2017
$
30 JUNE 2016
$
139,940
(75,986)
(493,951)
-
(46,073)
(4,955)
-
(275,699)
-
(756,724)
28,784
28,784
(727,940)
199,612
(528,328)
(11,250)
(11,250)
39,922
(97,153)
(476,885)
(696,423)
(45,359)
(6,019)
(16,531)
(309,384)
(45,000)
(1,652,832)
7,472
7,472
(1,645,360)
600,000
(1,045,360)
-
-
Total Comprehensive loss for the year
(539,578)
(1,045,360)
LOSS FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company
TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company
(528,328)
(528,328)
(539,578)
(539,578)
(1,045,360)
(1,045,360)
(1,045,360)
(1,045,360)
LOSS PER SHARE:
Basic and diluted loss per share
10(a)
(0.28) cents
(0.91) cents
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ANNUAL REPORT 2017 47
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
SHARE
CAPITAL
SHARE
BASED
PAYMENT
RESERVE
FAIR VALUE
RESERVE
CONVERTIBLE
NOTE
RESERVE
ACCUMULATED
LOSSES
TOTAL
Balance at 1 July 2015
37,277,606
1,776,945
30,000
-
(32,330,054)
6,754,497
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
Loss for the year
Other comprehensive income / loss
Total comprehensive loss for the period
Shares issued for cash
Shares issued for asset acquisition
Issue of convertible note
-
-
-
2,628,600
20,000
-
Shares issued for convertible note interest
32,588
Share issue costs
Share based payments
Distribution to owners (Exploration
Development Incentive credits)
(158,291)
-
-
-
-
-
-
-
-
-
-
731,423
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
650,000
(35,847)
-
-
-
(1,045,360)
(1,045,360)
-
-
(1,045,360)
(1,045,360)
-
-
-
-
-
-
2,628,600
20,000
650,000
(3,259)
(158,291)
731,423
(600,000)
(600,000)
Balance at 30 June 2016
39,800,503
2,508,368
30,000
614,153
(33,975,414)
8,977,610
Balance at 1 July 2016
39,800,503
2,508,368
30,000
614,153
(33,975,414)
8,977,610
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
Loss for the year
Other comprehensive income / loss
Total comprehensive loss for the period
Shares issued for cash
Shares issued for asset acquisition
Conversion of convertible notes
Share issue costs
Options lapsed
Distribution to owners (Exploration
Development Incentive credits)
-
-
-
2,258,658
63,750
614,153
(81,954)
-
-
-
-
-
-
30,000
-
(1,326,991)
-
(11,250)
(11,250)
-
-
-
-
-
Balance at 30 June 2017
42,655,110
1,211,377
18,750
-
-
-
-
-
(614,153)
-
-
-
(528,328)
(528,328)
-
(11,250)
(528,328)
(539,578)
-
-
-
-
1,326,991
2,258,658
63,750
-
(51,954)
-
(199,612)
(199,612)
(33,376,363)
10,508,874
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
48 HAMMER METALS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT
OF CASH FLOWS
AS AT 30 JUNE 2017
NOTE
30 JUNE 2017
$
30 JUNE 2016
$
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Cash payments in the course of operations
Payments for evaluation of new projects
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Reimbursement of exploration and evaluation expenditure from farm-
in partner
Received as management fee from farm-in partners
Payments for acquisition of tenements
Sale of Royalty
Payments for purchase of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from issue of convertible note
Transaction costs from issue of shares
Net cash from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
*cash and cash equivalents include deposits held
23
4
4
14
11
28,784
(830,704)
-
(801,920)
(2,692,620)
96,575
109,940
-
30,000
(2,746)
7,472
(591,990)
(16,531)
(601,049)
(1,168,730)
128,675
39,922
(50,000)
-
(3,239)
(2,458,851)
(1,053,372)
2,251,158
-
(44,454)
2,206,704
(1,054,067)
1,892,094
838,027
2,628,600
650,000
(123,792)
3,154,808
1,500,387
391,707
1,892,094
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS ANNUAL REPORT 2017 49
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. REPORTING ENTITY
Hammer Metals Limited (the “Company”) is a company domiciled in Australia. The Company’s registered office is Suite 1, 827 Beaufort
Street, Mt. Lawley WA. The consolidated financial statements of the Company for the financial year ended 30 June 2017 comprises the
Company and its subsidiaries (together referred to as the “Group”).
The Group is a for profit entity and is primarily is involved in the exploration and extraction of mineral resources.
2. BASIS OF PREPARATION
(A) STATEMENT OF COMPLIANCE
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian
Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The
consolidated financial statements also comply with International Financial Reporting Standards (IFRS’s) adopted by the International
Accounting Standards Board (IASB).
The consolidated financial report was authorised for issue by the Directors on 26 September 2017.
(B) BASIS OF MEASUREMENT
The financial report is prepared on the historical cost basis except for share based payments and available for sale financial assets which are
measured at their fair value. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to
sell.
(C) FUNCTIONAL AND PRESENTATION CURRENCY
The financial report is presented in Australian dollars which is the functional and presentation currency of the Company and its subsidiaries.
(D) USE OF ESTIMATES AND JUDGEMENTS
Set out below is information about:
• critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial
statements; and
• assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year.
Critical judgements
(i)
Going concern
A key assumption underlying the preparation of the financial statements is that the Group will continue as a going concern. An entity
is a going concern when it is considered to be able to pay its debts as and when they are due, and to continue in operation without
any intention or necessity to liquidate or otherwise wind up its operations. A significant amount of judgement has been required in
assessing whether the Group is a going concern, as set out in note 2(f).
Estimates and assumptions
(ii)
Ore Reserves and Mineral Resources
Economically recoverable reserves represent the estimated quantity of product in an area of interest that can be expected to be
profitably extracted, processed and sold under current and foreseeable economic conditions. The Group determines and reports ore
reserves and mineral resources under the standards incorporated in the Australasian Code for Reporting Exploration Results, Mineral
Resources and Ore Reserves, 2012 edition (the JORC Code). The determination of ore reserves or mineral resources includes estimates
and assumptions about a range of geological, technical and economical factors, including: quantities, grades, production techniques,
recovery rates, production costs, transport costs, commodity demand, commodity prices and exchange rates. Changes in ore reserves
and mineral resources impact the assessment of recoverability of exploration and evaluation assets, provisions for site restoration and
the recognition of deferred tax assets, including tax losses.
50 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Estimates and assumptions (cont’d)
(iii)
Exploration and evaluation assets
Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Group’s accounting
policy (refer note 3(n)), requires estimates and assumptions as to future events and circumstances, in particular, whether successful
development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. Critical to this
assessment is estimates and assumptions as to ore reserves (refer note 2(d)(ii)), the timing of expected cash flows, exchange rates,
commodity prices and future capital requirements. Changes in these estimates and assumptions as new information about the
presence or recoverability of an ore reserve becomes available, may impact the assessment of the recoverable amount of exploration
and evaluation assets. If, after having capitalised the expenditure under accounting policy 3(n), a judgement is made that recovery
of the expenditure is unlikely, an impairment loss is recorded in the statement of profit and loss and other comprehensive income in
accordance with accounting policy 3(f). The carrying amounts of exploration and evaluation assets are set out in note 15.
(iv)
Impairment of assets
The recoverable amount of each non-financial asset is determined as the higher of the value-in-use and fair value less costs to sell, in
accordance with the Group’s accounting policy note 3(f). Determination of the recoverable amount of an asset based on a discounted
cash flow model, requires the use of estimates and assumptions, including: the appropriate rate at which to discount the cash flows,
the timing of the cash flow and the expected life of the relevant area of interest, exchange rates, commodity prices, ore reserves, future
capital requirements and future operation performance. Changes in these estimates and assumptions impact the recoverable amount
of the asset, and accordingly could result in an adjustment to the carrying amount of that asset.
(v)
Measurement of fair values
When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as price) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level that is
significant to the entire measurement.
(E) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
In the year ended 30 June 2017, the Group has 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 Group that there is no impact,
material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group
accounting policies.
A number of new standards, amendments to standards and interpretations are effective for annual reporting periods beginning after 1 July
2017, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the Group.
The Group does not plan to adopt any standards early and the extent of the impact has not been determined.
(F) GOING CONCERN
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the
realisation of assets and the settlement of liabilities in the normal course of business.
For the year ended 30 June 2017, the Group has incurred a consolidated loss before tax of $727,940 and net operating cash outflows of
$801,920 and net investing cash outflows of $2,458,851. As at 30 June 2017 the Group had $838,027 in cash and cash equivalents and net
current assets of $1,041,046
As announced on the 12th September 2017, the Company completed a private placement of 35,500,000 shares raising $1,242,500. The
Company is also undertaking a non-renounceable entitlement offer to raise approximately $1.17 million. The offer is due to close on or
around the 12th October 2017.
Whilst not immediately required, the Group may need to raise additional funds to meet its ongoing obligations and subject to the results of its
ongoing exploration activities, expand or accelerate its work programs.
The Group’s capacity to raise additional funds will be impacted by the success of the ongoing exploration activities and market conditions.
Additional sources of funding available to the Group include a capital raising via preferential issues to existing shareholders, placements to
new and existing investors or through farm in or similar arrangements.
If necessary the Group can delay exploration expenditure and the directors can also institute cost saving measures to further reduce
corporate and administrative costs.
The Directors have reviewed the Group’s overall financial position and are of the opinion that the use of the going concern basis of accounting
is appropriate as they believe the Group has sufficient funds available for at least the next 12 months and when required will be able to raise
further funding via the methods set out above.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 51
3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The Group has consistently applied the accounting policies set out in note 3 to all periods presented in these consolidated financial
statements.
(A) BASIS OF CONSOLIDATION
(i)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the
date on which control ceases.
(ii)
Investments in associates
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 percent and 50 percent of the voting
power of another entity.
Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investments
includes transaction costs.
The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity
accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence
commences until the date that significant influence ceases.
When the Group’s share of losses exceed its interest in an equity accounted investee, the carrying amount of the investment, including
any long-term interest that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the
extent that the Group has an obligation or has made payments on behalf of the investee.
(iii)
Joint arrangements
The Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group’s rights to
the assets and obligation for the liabilities of the arrangements. When making this assessment, the Group considers the structure
of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and
circumstances.
(iv)
Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated
in preparing the consolidated financial statements.
(v)
Business combinations
Business combinations are accounted for by applying the acquisition method.
For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other
combining entities or businesses. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. The acquisition date is the date
on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether
control is transferred from one party to another.
(vi) Measuring goodwill
The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling
interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed,
all measured as of the acquisition date.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners
of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent
consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination.
(vii) Contingent liabilities
A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and
arises from a past event, and its fair value can be measured reliably.
(viii) Non-controlling interest
The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree.
52 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(B) FOREIGN CURRENCY
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on translation are recognised in the statement of profit and loss and other comprehensive
income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to Australian dollars
at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian
dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on
retranslation are recognised directly in a separate component of equity.
(C) PLANT AND EQUIPMENT
Items of plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy 3(f)).
Depreciation is charged to the statement of profit and loss and other comprehensive income on a straight-line basis over their estimated
useful lives. The estimated useful lives in the current and comparative periods are as follows:
(i)
office equipment
3 to 4 years
The residual value, if significant, is reassessed annually.
(D) FINANCIAL INSTRUMENTS
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in
this category or not classified in any of the other categories. They are included in current assets unless management intends to hold the
investment for greater than twelve months from the balance sheet date.
Purchases and sales of investments are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and
the Group has transferred substantially all the risks and rewards of ownership.
Available-for-sale financial assets are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value
of non-monetary securities classified as available-for-sale are recognised in equity in the fair value reserve. When securities classified as
available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the statement of profit and loss and other
comprehensive income as gains and losses from investment securities.
The fair values of quoted investments are based on quoted bid prices at reporting date.
(E) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts
that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
(F)
IMPAIRMENT
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial
asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future
cash flows of that asset. For an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective
evidence of impairment. The Group considers a decline of 20% to be significant and a period of nine months to be prolonged.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount,
and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an
available-for-sale financial asset is calculated by reference to its fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised
previously in equity is transferred to profit or loss, calculated as the difference between the acquisition cost and the current fair value, less
any impairment loss recognised previously in profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For
financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in
profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised in equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 53
3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(F)
IMPAIRMENT (CONT’D)
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than deferred tax assets (see accounting policy 3(k)) are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount
is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is
estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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 the purpose of impairment testing, assets are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows
of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of
impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units)
on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are
assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(G) SHARE CAPITAL
Ordinary shares
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.
Preference shares
Non-redeemable preference shares are classified as equity, because they bear dividends, do not contain any obligations to deliver cash or
other financial assets and do not require settlement in a variable number of the Group’s equity instruments. Discretionary dividends thereon
are recognised as equity distributions on approval by the Company’s shareholders.
(H)
INTEREST BEARING BORROWINGS
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of
profit and loss and other comprehensive income over the period of the borrowings on an effective interest basis.
(I) EMPLOYEE BENEFITS
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit and loss and other
comprehensive income as incurred.
Share based payment transactions
The share option programme allows Company and Group employees to acquire shares of the Company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the
options. The fair value of the options granted is measured using the Black Scholes option pricing model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.
Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’
services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects
to pay as at reporting date including related on-costs, such as, workers compensation insurance and payroll tax.
54 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(J) FINANCE INCOME AND EXPENSES
Net finance income
Net finance income comprise interest payable on borrowings calculated using the effective interest method, interest receivable on funds
invested and realised foreign exchange gains and losses. Interest income is recognised in the statement of profit and loss and other
comprehensive income as it accrues, using the effective interest method.
(K)
INCOME TAX
Income tax on the statement of profit and loss and other comprehensive income for the periods presented comprises current and deferred
tax. Income tax is recognised in the statement of profit and loss and other comprehensive income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences
are not provided for: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss and differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can
be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
The Company and its Australian resident wholly owned subsidiaries adopted the tax consolidation legislation with effect from 1 July 2014 and
are therefore taxed as a single entity from that date. Hammer Metals Ltd is the head entity within the tax-consolidated group. Any current
tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the tax-
consolidated group.
(L) PROVISIONS
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when
appropriate, the risks specific to the liability.
A provision for site restoration in respect of contaminated and disturbed land, and the related expense, is recognised when the land
is contaminated or disturbed. Such activities include dismantling infrastructure, removal and treatment of waste material, and land
rehabilitation, including restoring, topsoiling and revegetation of the disturbed area.
(M)
SEGMENT REPORTING
Operating segments are reported in 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 Directors of the Company.
(N) EXPLORATION AND EVALUATION EXPENDITURE
Exploration for and evaluation of mineral resources is the search for mineral resources after the Group has obtained legal rights to explore
in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resources.
Accordingly, exploration and evaluation expenditures are those expenditures incurred by the Group in connection with the exploration for and
evaluation of minerals resources before the technical feasibility and commercial viability of extracting mineral resources are demonstrable.
Accounting for exploration and evaluation expenditure is assessed separately for each area of interest. An area of interest is an individual
geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been proved to
contain such a deposit.
Expenditure incurred on activities that precede exploration and evaluation of mineral resources, including all expenditure incurred prior to
securing legal rights to explore an area, is expensed as incurred. For each area of interest the expenditure is recognised as an exploration
and evaluation asset where the following conditions are satisfied:
a)
b)
The rights to tenure of the area of interest are current; and
At least one of the following conditions is also met:
i.
The expenditure is expected to be recouped through successful development and commercial exploitation of an area of interest,
or alternatively by its sale; and
ii.
Exploration and evaluation activities in the area of interest have not, at reporting date, reached a stage which permits a
reasonable assessment of the existence or otherwise ‘economically recoverable reserves’ and active and significant operations
in, or in relation to, the area of interest are continuing. Economically recoverable reserves are the estimated quantity of
product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable
conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 55
3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(N) EXPLORATION AND EVALUATION EXPENDITURE (CONT’D)
Exploration and evaluation assets include
• Acquisition of rights to explore;
• Topographical, geological, geochemical and geophysical studies;
• Exploratory drilling, trenching, and sampling and
• Activities in relation to evaluating the technical feasibility and commercial viability of extracting the mineral resource.
General and administrative costs are allocated to, and included in, the cost of exploration and evaluation assets only to the extent that those
costs can be related directly to the operational activities in the area of interest to which the exploration and evaluation assets relate. In all
other instances, these costs are expensed as incurred.
Exploration and evaluation assets are transferred to Development Assets once technical feasibility and commercial viability of an area of
interest is demonstrable. Exploration and evaluation assets are assessed for impairment, and any impairment loss is recognised prior to
being reclassified.
The carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or
alternatively, sale of the respective area of interest.
Impairment testing of exploration and evaluation assets
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial
viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist:
• The term of exploration licence in the specific area of interest has expired during the reporting period or will expire in the near future, and
is not expected to be renewed;
• Substantive expenditure on further exploitation for and evaluation of mineral resources in the specific area are not budgeted or planned;
• Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercial viable quantities of
mineral resources and the decision was made to discontinue such activities in the specified are; or
• Sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development of by sale.
Where a potential impairment is indicated, an assessment is performed for each cash generating unit which is no larger than the area of
interest. The Group performs impairment testing in accordance with accounting policy 3(f).
Farm-in arrangements (in the exploration and evaluation phase)
For exploration and evaluation asset acquisitions (farm-in arrangements) in which the Group has made arrangements to fund a portion of the
selling partner’s (farmor’s) exploration and/or future development expenditures (carried interests), these expenditures are reflected in the
financial statements as and when the exploration work progresses.
Farm-out arrangements (in the exploration and evaluation phase)
The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its exploration
and evaluation farm-out arrangements but redesignates any costs previously capitalised in relation to the whole interest as relating to the
partial interest retained.
Monies received pursuant to farm-in agreements are treated as a liability (advanced cash call) on receipt and until such time as the relevant
expenditure is incurred.
(O) NON-CURRENT ASSETS HELD FOR SALE OR DISTRIBUTION
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or
distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held
for sale or distribution, the assets or components of a disposal group, are remeasured in accordance with the Groups’ accounting policies.
Thereafter, generally the assets, or disposal group, are measured at the lower of their carrying value amount and fair value less cost to
sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis,
except that no loss is allocated to inventories, financial assets, deferred tax assets which continue to be measured in accordance with the
Group’s accounting policy. Impairment losses on initial classification as held for sale or distribution and subsequent gains or losses on re-
measurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
(P) DISCONTINUED OPERATIONS
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale or
distribution (see note 3(o)), if earlier.
56 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Q) GOVERNMENT GRANTS
The Group recognises the refundable research and development tax incentive (received under the tax legislation passed in 2011) as a
government grant. This incentive is refundable to the Group regardless of whether the Group is in a tax payable position and is presented by
deducting the grant from the carrying amount of the related exploration asset. Government grants are recognised when there is reasonable
assurance that (a) the Group will comply with the conditions attaching to them; and (b) the grants will be received; they are then recognised in
profit or loss on a systematic basis over the useful life of the asset.
4. OTHER INCOME
Management fee from farm-in partners
Sale of Royalty
30 JUNE 2017
$
30 JUNE 2016
$
109,940
30,000
139,940
39,922
(97,153)
(476,885)
5. RESULT FROM OPERATING ACTIVITIES
Net loss for the year before tax has been arrived at after the charging the
following expenses:
Depreciation of plant and equipment
4,955
6,019
6. EMPLOYMENT COSTS
Salary and wages
Contributions to defined contribution plans
Equity settled share based payment transactions
Other employment costs
Total employee costs in loss before tax
7. FINANCE INCOME AND FINANCE COSTS
Recognised in loss for the year:
Interest income
Net finance income
8. AUDITORS’ REMUNERATION
Auditors of the Company:
Audit services:
KPMG:
Audit and review of financial reports
Taxation compliance services
60,000
5,700
-
9,088
74,788
28,784
28,784
38,341
17,750
56,091
68,697
5,253
680,940
7,675
762,565
7,472
7,472
37,620
-
37,620
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 57
30 JUNE 2017
$
30 JUNE 2016
$
9.
INCOME TAX
(A) INCOME TAX BENEFIT
Current tax
Deferred tax
Total income tax benefit
Numerical reconciliation of income tax benefit to pre-tax accounting loss:
Loss before income tax
Income tax benefit using the Company’s domestic tax rate of 30% (2016: 30%)
Adjusted for:
Non-deductible expenses
Temporary differences and tax losses not recognised
Prior year tax losses recognised for exploration development incentive credits
distributed to shareholders
Income tax benefit
(B) UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised in respect of the following items:
Temporary timing differences related to:
Prepayments
Investments
Property, plant and equipment
Accrued expenses and provisions
Capital raising costs
Income tax losses
(C) RECOGNISED DEFERRED TAX ASSETS & LIABILITIES
Temporary timing differences related to:
Other financial assets
Exploration and evaluation expenditure
Income tax losses
199,612
-
199,612
(727,940)
(218,382)
1,258
217,124
199,612
199,612
5,915
7,875
3,252
7,998
70,309
7,723,344
7,818,693
(2,813,347)
2,813,347
-
600,000
-
600,000
(1,645,360)
(493,608)
205,485
288,123
600,000
600,000
5,458
4,500
4,837
6,573
102,535
7,235,712
7,359,615
-
(2,116,517)
2,116,517
-
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise
the benefits from.
The Group participated in the Federal Government’s Exploration Development Incentive Scheme (“EDI”) which entitled the Group to distribute
EDI exploration credits to eligible shareholders. EDI credits totalling $199,612 were distributed on 28th June 2017 and the Group’s carried
forward losses reduced accordingly.
58 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(D) MOVEMENT OF TEMPORARY DIFFERENCES RECOGNISED DURING THE YEAR ENDED 30 JUNE 2017:
BALANCE 1 JULY
2016
PROFIT OR LOSS
OTHER
COMPREHENSIVE
INCOME
EQUITY
BALANCE 30
JUNE 2016
Other financial assets
Exploration and evaluations
expenditure
Tax loss carry-forwards
(2,116,517)
2,116,517
-
(696,830)
696,830
-
-
-
-
-
-
-
(E) MOVEMENT OF TEMPORARY DIFFERENCES RECOGNISED DURING THE YEAR ENDED 30 JUNE 2016:
Other financial assets
(9,000)
Exploration and evaluations
expenditure
Tax loss carry-forwards
(1,893,738)
1,902,738
-
(222,779)
222,779
-
9,000
-
(9,000)
-
-
-
-
-
(2,813,347)
2,813,347
-
-
(2,116,517)
2,116,517
-
10. LOSS PER SHARE
30 JUNE 2017
$
30 JUNE 2016
$
(a) Basic and dilutive loss per share calculated using the weighted average
number of fully paid ordinary shares on issue at the reporting date.
(0.28) cents
(0.91 ) cents
Options disclosed in Note 17(b) are potential ordinary shares which are
considered anti-dilutive, therefore diluted earnings per share are the same as
basic earnings per share.
(b) Weighted average number of shares used in calculation of basic and dilutive
earnings per share
190,148,769
114,287,334
11. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
838,027
1,892,094
The Group’s exposure to interest rate risk and sensitivity analysis for Financial assets and financial liabilities are disclosed in Note 25.
12. TRADE AND OTHER RECEIVABLES
CURRENT
GST receivable
Security deposit
Other receivables
20,658
46,808
267,695
335,161
18,183
39,308
18
57,509
Trade and other receivables are non-interest bearing.
The Group’s exposure to credit and currency risk and impairment losses related to trade and other receivables is disclosed in Note 25.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 59
30 JUNE 2017
$
30 JUNE 2016
$
13. OTHER FINANCIAL ASSETS
CURRENT
Advanced contributions from Farm-in partner (note 22)
359,954
535,433
NON - CURRENT
Investments in other entities
Listed shares
The Group’s exposure to equity price risk and sensitivity analysis in disclosed in Note 25.
86,250
97,500
14. PLANT AND EQUIPMENT
Office equipment and fittings at cost
Accumulated depreciation
Net book value
Reconciliation of office equipment is as follows:
Opening carrying value
Additions
Depreciation
Closing carrying value
15. EXPLORATION AND EVALUATION EXPENDITURE
Balance at 1 July
Exploration and evaluation expenditure incurred
Exploration and evaluation assets acquired
Exploration and evaluation expenditure impaired
Reimbursement of costs on exploration and evaluation
Balance at 30 June
252,906
(249,151)
3,755
5,964
2,746
(4,955)
3,755
7,055,058
2,631,288
63,750
(275,699)
(96,574)
9,377,823
250,161
(244,197)
5,964
8,744
3,239
(6,019)
5,964
6,312,460
1,130,657
50,000
(309,384)
(128,675)
7,055,058
The ultimate recovery of costs carried forward for exploration and evaluation phases is dependent on the successful development and
commercial exploitation or sale of the respective areas of interest at an amount greater than or equal to carrying value. Refer note 3 (n).
The Golden Peaks Project was a joint venture with Perilya Limited whereby Hammer could earn up to a 60% interest in EPM 15810. The farm-
in agreement expired in April 2017 and Hammer retains no interest in the project. Exploration and evaluation expenditure in relation to this
project was expensed to profit and loss and included in the exploration and evaluation expenditure impaired amount above.
The Company acquired 4 tenements on 27 March 2017, the consideration paid was 1,250,000 shares issued on completion. The market value
of shares issued on completion was $63,750.
60 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. TRADE AND OTHER PAYABLES
Trade creditors and accruals
132,142
155,387
All trade and other payables are non-interest bearing and payable on normal commercial terms.
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 25.
30 JUNE 2017
$
30 JUNE 2016
$
17. ISSUED CAPITAL
(A) SHARE CAPITAL
ORDINARY SHARES
On issue at 1 July
30 JUNE 2017
NO.
30 JUNE 2016
NO.
30 JUNE 2017
$
30 JUNE 2016
$
153,434,961
101,825,411
39,800,503
37,277,606
Shares issued for cash at $0.07 per share
Conversion of convertible note to ordinary shares
32,250,002
11,374,711
Shares issued for acquisition of asset at $0.051 per share
1,250,000
-
-
-
2,258,658
614,153
63,750
Shares issued for cash at $0.06 per share
Shares issued for cash at $0.05 per share
Shares issued in lieu of convertible note interest at $0.06
per share
Shares issued for cash at $0.04 per share
Shares issued for acquisition of asset at $0.04 per share
Shares issued for cash at $0.065 per share
Share issue costs
-
-
-
-
-
-
-
5,843,334
1,600,000
543,141
24,200,000
500,000
18,923,075
-
-
-
-
-
-
-
(81,954)
-
-
-
350,600
80,000
32,588
968,000
20,000
1,230,000
(158,291)
On issue at 30 June – fully paid
198,309,674
153,434,961
42,655,110
39,800,503
TERMS AND CONDITIONS
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ meetings. The company does not have authorised capital or par value in respect of its issued shares.
In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any
proceeds of liquidation.
DIVIDENDS
No dividends were paid or declared for the year (2016: NIL).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 61
17. ISSUED CAPITAL(CONT’D)
(B) OPTIONS OUTSTANDING OVER ORDINARY SHARES
30 JUNE 2017
$
30 JUNE 2016
$
Unlisted options exercisable at $0.10 expiring 30 July 2017
8,338,334
8,338,334
Unlisted options issued for professional services exercisable at $0.10 expiring 6
August 2017
500,000
500,000
Unlisted Options issued for professional services exercisable at $0.20 expiring
11 September 2017
Director unlisted options exercisable at $0.135 expiring 30 November 2017
Consultant and contractor unlisted options exercisable at $0.135 expiring 30
1,000,000
6,000,000
1,000,000
6,000,000
November 2017
1,100,000
1,100,000
Consultant and contractor unlisted options exercisable at $0.10 expiring 30
November 2017
Unlisted options exercisable at $0.15 expiring 6 February 2018
Consultant and contractor unlisted options exercisable at $0.075 expiring 29
1,000,000
3,811,953
1,000,000
3,811,953
June 2019
5,000,000
5,000,000
Directors and employee unlisted options exercisable at $0.06 expiring 30 June
2020
12,800,000
12,800,000
Unlisted Options issued for acquisition of assets and related services
exercisable at $0.20 expiring 30 June 2017
Director unlisted options exercisable at $0.20 expiring 30 June 2017
Employee unlisted options exercisable at $0.20 expiring 26 May 2017
Unlisted Options issued for professional services exercisable at $0.30 expiring
11 September 2016
-
-
-
-
39,550,287
12,300,000
2,000,000
1,000,000
300,000
55,150,287
All options were granted for no cash consideration.
No unlisted options were granted to directors or employees/contractors during the year. (2016: 19,300,000).
No unlisted options were exercised during the period.
15,600,000 unlisted options expired during the period.
Options carry no voting rights until converted to fully paid ordinary shares.
62 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. RESERVES
Share based payment reserve (1)
Balance at beginning of period
Options issued to Directors and executives
Options issued to Employees and contractors
Options issued for professional services
Adjustment to valuation of options issued due to vesting conditions not met
Employee share options lapsed / forfeited
Fair value reserve(2)
Balance at beginning of period
Net increase/(decrease) in the market value of listed shares available for sale
Convertible note reserve(3)
Balance at beginning of period
Issue of convertible note
Conversion to equity
30 JUNE 2017
$
30 JUNE 2016
$
2,508,368
-
-
-
30,000
(1,326,991)
1,211,377
30,000
(11,250)
18,750
614,153
-
(614,153)
-
1,776,945
521,055
159,885
50,483
-
-
2,508,368
30,000
-
30,000
-
650,000
(35,847)
614,153
1,230,127
3,152,521
(1) The share based payment reserve is used to record the fair value of options issued to Directors and employees under various share based
payment schemes and options issued for the acquisition of assets.
(2) The fair value reserve is used to record changes in the fair value of available for sale investments until the investments are derecognised
or impaired.
(3) The convertible note reserve is used to record the face value of convertible notes issued that are accounted for as equity instruments. On 7
September 2016, the Company issued shares for the conversion of the convertible note and related charges.
19. COMMITMENTS
A) OPERATING LEASE COMMITMENTS
The operating lease over the Company’s head office is currently on a month to month basis. There are no other operating leases.
B) EXPLORATION EXPENDITURE COMMITMENTS
In order to maintain current rights of tenure to exploration tenements the Company is required to perform minimum exploration work to
meet the minimum expenditure requirements specified by various State Governments within Australia. These obligations may be reset when
application for a mining lease is made and at other times.
The Group has a minimum expenditure commitment on tenure under its control.
The Company can apply for exemption from compliance with the minimum exploration expenditure requirements. Due to the nature and scale
of the Company’s exploration activities the Company is unable to estimate its likely tenement holdings and therefore minimum expenditure
requirements more than 1 year ahead.
These obligations are not provided for in the financial report and are payable:
Minimum exploration expenditure not later than 1 year
2,163,643
913,821
-
-
CONSOLIDATED
THE COMPANY
30 JUNE 2017
NO.
30 JUNE 2016
NO.
30 JUNE 2017
$
30 JUNE 2016
$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 63
20. SHARE BASED PAYMENTS
INCENTIVE OPTION PLAN
The Hammer Metals Incentive Option Plan was approved by shareholders on 10 June 2016. The key features of this plan are:
a)
b)
c)
d)
The plan will be available to directors, employees and other permitted persons of the Company and its subsidiaries.
Options are granted for no consideration.
The options are issued at an exercise price as determined by the Board from time to time.
The number of shares the subject of options issued under this plan and other similar plans will not exceed 5% of the Company’s issued
capital from time to time.
e)
If a holder ceases to be an eligible participant of the plan during the exercise period of a vested option, the holder may exercise the
options within 30 days of ceasing to be an eligible participant and thereafter the options will lapse.
f)
g)
The options issued under this plan shall not be quoted on ASX.
The options’ terms are at the discretion of the Directors.
No options granted as incentive or for services have lapsed, expired or were exercised during the year.
The number and weighted average exercise price of share options on issue is as follows:
Outstanding at 1 July
Granted during the period
Expired / lapsed or exercised during the period
Outstanding at 30 June
Exercisable at 30 June
NO OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
55,150,287
-
(15,600,000)
39,550,287
34,550,287
$0.13
-
($0.20)
$0.10
The options outstanding at year end have exercise prices ranging from $0.06 to $0.20 an weighted average remaining contractual life of 17
months.
21. RELATED PARTIES
KEY MANAGEMENT PERSONNEL COMPENSATION:
The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key
management personnel for the entire period:
Executive Directors
Mr R Davis (Chairman)
Mr A Hewlett
Non-executive Directors
Mr N El Sayed
Mr S Bodensteiner
Executives
Mr M Pitts (Company Secretary)
Short-term employee benefits
Post-employment benefits
Share- based payments
30 JUNE 2017
$
30 JUNE 2016
$
410,000
5,700
-
415,700
371,564
5,253
539,278
916,095
Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and executives.
Remuneration packages include a mix of fixed remuneration and equity-based remuneration.
Information regarding individual Directors and executive’s compensation and some equity instruments disclosures as permitted by
Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the remuneration report section of the Directors’ report.
64 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Certain key management personnel, or their related parties, hold positions in other entities that result in them having control or significant
influence over the financial or operating policies of those entities. One of these entities (as detailed below) transacted with the Group during
the reporting period. The terms and conditions of the transaction were no more favourable than those available, or which might be reasonably
be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.
The aggregate value of transactions and outstanding balances relating to this entity were as follows:
KEY MANAGEMENT
PERSON
TRANSACTION
30 JUNE 2017
NO.
30 JUNE 2016
NO.
30 JUNE 2017
$
30 JUNE 2016
$
Mark Pitts
Accounting services
33,261
47,032
3,657
7,315
TRANSACTION VALUE YEAR ENDED
BALANCE OUTSTANDING AS AT
The Company paid fees to Endeavour Corporate, a company associated with Mark Pitts, for accounting and financial reporting services
provided to the company.
Convertible Note
On 26 July 2015, the Company entered into a two-year convertible note for $650,000 from one of its largest shareholder Deutsche Rohstoff
A.G. The term of the convertible note was 24 months with interest accruing at 10% per annum. The conversion price was set at 6 cents and
convertible by either party at any time during the term subject to the share price being above 6 cents and subject to a minimum of 12 months
interest being paid.
On 7 September 2016, the Company issued 11,374,711 shares for the conversion of the convertible note of $650,000 and settlement of the
related interest.
Equity instruments
All options refer to options over ordinary shares of Hammer Metals Limited, which are exercisable on a one for one basis.
No options were issued to directors in this financial year (2016: 9,000,000)
No options were issued to executives in regard to their employment or provision of services during this financial year (2016: 500,000).
No shares were granted to key management personnel during the year as compensation (2016: Nil).
Other related party disclosure
The Company has a related party relationship with its controlled entities.
Transactions between the Company and its controlled entities consisted of:
a)
b)
c)
Loans advanced by Hammer Metals Limited. The loans are interest free, unsecured and repayable at call. During the financial year
ended 30 June 2016, loans to subsidiaries totalled $8,831,482 (2016: $6,864,666). These loans have been impaired by $3,013,273 at
30 June 2017 (2016: $2,335,736).
Expenses incurred by Hammer Metals Limited are on-charged to controlled entities at cost.
Administrative services are provided at no cost to the controlled entities.
22. INTEREST IN OTHER ENTITIES
NAME
COUNTRY OF INCORPORATION
PARENT AND ULTIMATE CONTROLLING ENTITY
PERCENTAGE HELD
2017
PERCENTAGE HELD
2016
Hammer Metals Limited
SUBSIDIARIES
Hammer Metals Australia Pty Ltd
Mt. Dockerell Mining Pty Ltd
Mulga Minerals Pty Ltd
Element Minerals Australia Pty Ltd
Hammer Bulk Commodities Pty Ltd (i)
Midas Metals Asia Pty Ltd (i)
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
85%
100%
100%
100%
100%
100%
85%
(i)
These subsidiaries are dormant and have not traded during the year.
The investments held in controlled entities are included in the financial statements of the parent at cost.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 65
22. INTEREST IN OTHER ENTITIES (CONT’D)
Joint arrangements
The Group has the following farm-in / farm-out arrangements:
Dronfield
The Group has a farm-in agreement in relation to one tenement held in the Mt. Isa region. The Group can earn in up to an 80%
interest in the project. The Group interest in the above arrangement includes capitalised exploration phase expenditure totalling
$187,376 at 30 June 2017 and is included in exploration and evaluation assets (note 15).
Mt Isa – Newmont
The Group has a farm-out agreement with Newmont Exploration Pty Ltd (Newmont) in relation to three of the Group’s IOCG prospects;
Overlander, Even Steven and Dronfield; covering approximately 250km2 of the Groups Mt. Isa Project and encompasses sub-blocks
of 4 tenements in which the Group has an interest. Newmont can earn up to 75% of the Group’s interest in the area by spending
US$10,500,000 as follows:
• US$75,000 reimbursed to the Group on commencement for project consolidation costs
• Newmont can earn 35% interest in the Farm-in area by spending a total of US$1,450,000 within two years of commencement date
(Stage 1) including a minimum of US$500,000 expenditure within 9 months before it can withdraw
• Newmont can then elect to earn up to a 65% interest by spending an additional US$3,050,000 within two years of earning the 35%
interest (Stage 2)
•
If the Group does not elect to contribute to further expenditure at this point Newmont can elect to earn up to a 75% interest by
funding additional expenditure of US$6,000,000 or by completing a pre-feasibility study (Stage 3).
At the Group’s option Newmont can earn up to an 80% interest by financing Hammer’s share of future expenditure until production
commences (Stage 4).
Hammer will manage the exploration for the Farm-in / Joint Venture until Newmont has completed Stage 2 expenditure and has earned
a 65% interest.
The Group receives advanced cash calls from its farm-in/joint venture partner which is classified as a current asset. A corresponding
current liability is recognised as it is the Manager of exploration activities and is required to spend amounts advanced on behalf of
Newmont.
Newmont has met the expenditure required to enter into Stage 1 (35% earn-in) with the compilation reports in progress to be completed
before the earn-in phase is completed.
Mt Frosty – Mt Isa Mines (Glencore)
Subsequent to the year end, as announced on 18th August 2017, the Group (through its wholly owned subsidiary Mulga Minerals Pty Ltd
(‘Mulga’)) completed the acquisition of a 51% interest in the Mt. Frosty prospect and agreed terms for a new joint venture agreement with
Mount Isa Mines Limited (‘MIM’) (a 100% owned subsidiary of Glenore PLC).
Each party to the joint venture will contribute exploration expenditure according to their participating interest (Hammer – 51% and MIM –
49%).
Dilution provisions apply if a party elects not to contribute to a programme. If a party’s participating interest falls below 10% their
interest will convert to a 3% Net Profits Royalty.
Mulga will act as the initial manager of the joint venture.
66 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
30 JUNE 2017
$
30 JUNE 2016
$
Loss for the year
Adjustments for:
Depreciation
Share based payments
Exploration expenditure written off
Assets available for sale impaired
Distribution of exploration development incentive credits
Management fee from farm-in partners
Proceeds from sale of Royalty
Add/(less):
Decrease / (increase) in trade and other receivables
Increase / (decrease) in trade and other payables
(528,328)
(1,045,360)
4,955
-
275,699
-
(199,612)
(109,940)
(30,000)
(94,673)
(120,021)
6,019
696,923
309,384
45,000
(600,000)
(39,922)
-
(14,573)
41,480
Net cash used in operating activities
(801,920)
(601,049)
24. SEGMENT INFORMATION
The Group has one reportable segment being Copper-Gold exploration, other segments were inactive during the current and prior year.
The Group’s operating segments have been determined with reference to the monthly management accounts, program budgets and cash flow
forecasts used by the chief operating decision maker to make decisions regarding the Group’s operations and allocation of working capital.
FOR THE YEAR ENDED 30 JUNE 2017
External revenues
Reportable segment loss after tax
COPPER - GOLD
$
TOTAL SEGMENTS
$
139,940
(135,759)
139,940
(135,759)
Reportable segment assets
10,005,472
10,005,472
Capital expenditure (incl. acquisitions)
2,699,429
2,699,429
Reportable segment liabilities
(446,229)
(446,229)
External revenues
Reportable segment loss after tax
39,922
(269,462)
39,922
(269,462)
Reportable segment assets
7,055,058
7,055,058
Capital expenditure (incl. acquisitions)
1,180,657
1,180,657
Reportable segment liabilities
(598,947)
(598,947)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 67
24. SEGMENT INFORMATION(CONT’D)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items
30 JUNE 2017
$
30 JUNE 2016
$
OTHER INCOME
Total other income for reportable segments
Other income
Consolidated other income
LOSS AFTER TAX
Total loss for reportable segments
Unallocated amounts: corporate expenses
Consolidated loss after tax
ASSETS
Total assets for reportable segments
Other assets
Consolidated total assets
LIABILITIES
Total liabilities for reportable segments
Other liabilities
Consolidated total liabilities
CAPITAL EXPENDITURE
Total capital expenditure for reportable segments
Other capital expenditure
Consolidated total capital expenditure
139,940
-
139,940
(135,759)
(392,569)
(528,328)
10,005,472
995,498
11,000,970
446,229
45,867
492,096
2,635,679
2,745
2,638,424
39,922
-
39,922
(269,462)
(775,898)
(1,045,360)
7,055,058
2,588,500
9,643,558
598,947
67,001
665,948
1,180,657
3,239
1,183,896
25. FINANCIAL INSTRUMENTS DISCLOSURES
Overview
The Company and Group have exposure to the following risks from their use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring
and managing risk, and the management of capital.
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 Group through regular reviews of the risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and investment securities.
Trade and other receivables
As the Company operates in the mining exploration sector it does not have significant trade receivables and is therefore not exposed to credit
risk in relation to trade receivables. The Group receives advanced cash calls from its farm-in / joint venture partner which are classified
as other receivables. The cash call amounts are reduced as and when expenditure in terms of the farm-in/ joint venture agreement are
incurred.
The Group has established an allowance for impairment that represents their estimate of incurred losses in respect of other receivables and
investments. The main components of this allowance are a specific loss component that relates to individually significant exposures. The
management does not expect any other counterparty to fail to meet its obligations. No allowance for impairment has been made.
Presently, the Group undertakes exploration and evaluation activities in Australia. At the balance sheet date there were no significant
concentrations of credit risk.
68 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk
at the reporting date was:
CONSOLIDATED
Cash and cash equivalents
Trade and other receivables
Advanced contributions from Farm-in partner
Impairment losses
CARRYING AMOUNT
NOTE
11
12
13
30 JUNE 2017
$
838,027
335,161
359,954
30 JUNE 2016
$
1,892,094
57,509
535,433
None of the Group’s trade and other receivables are past due and impaired (2016: Nil).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due (refer Note 2(f)). The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.
Typically the Group ensures it has sufficient cash on demand to meet expected operational expenses for a period of 90 days, this excludes the
potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
All financial liabilities are due and payable on terms of no more than 30 days. All financial liabilities are generally settled within stated
payment terms.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
Currency risk
The Group has no exposure to currency risk on investments and transactions that are denominated in a currency other than the respective
functional currencies of Group entities.
The Group has not entered into any derivative financial instruments to hedge such transactions and anticipated future receipts or payments
that are denominated in a foreign currency.
Interest rate risk
The Group is not exposed to interest rate risk on borrowings as it has no borrowings subject to variable interest. The Group is exposed to
interest rate risk on its cash balances.
Profile
At the reporting date the interest rate profile of the Company’s and the Group’s interest bearing financial instruments was:
CONSOLIDATED
Fixed rate instruments
Cash and cash equivalents
Weighted average interest rates
Variable rate instruments
Cash and cash equivalents
Weighted average interest rates
CARRYING AMOUNT
30 JUNE 2017
$
30 JUNE 2016
$
20,480
2.18%
817,547
0.66%
20,000
2%
1,872,094
0.92%
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest
rates at the reporting date would not affect profit or loss or equity (2016: Nil)
Cash flow sensitivity analysis for variable rate instruments
A sensitivity of 50 basis points has been used and considered reasonable given current interest rates. A 0.5% movement in interest rates at
the reporting date would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables
remain constant. The analysis for 2016 was performed on the same basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 69
25. FINANCIAL INSTRUMENTS DISCLOSURES (CONT’D)
CONSOLIDATED
30 JUNE 2017
LOSS
EQUITY
100BP
INCREASE
100BP
DECREASE
100BP
INCREASE
100BP
DECREASE
Variable rate instruments
4,087
(4,087)
4,087
(4,087)
30 JUNE 2016
Variable rate instruments
9,360
(9,360)
9,360
(9,360)
Carrying amounts versus fair values
The fair values of financial assets and liabilities are as per the carrying amounts shown in the statement of financial position.
FINANCIAL ASSETS CARRIED AT FAIR VALUE
Equity securities – listed on ASX at quoted prices
FINANCIAL ASSETS CARRIED AT AMORTISED COSTS
Cash and cash equivalents
Trade and other receivables
Advanced contributions from Farm-in partner
FINANCIAL LIABILITIES CARRIED AT AMORTISED COSTS
Trade and other payables
Advanced cash call
Other Market Price Risk
30 JUNE 2017
$
30 JUNE 2016
$
83,250
838,027
335,161
359,954
(132,142)
(359,954)
97,500
1,892,094
57,509
535,433
(155,387)
(510,561)
Other Equity price risk is the risk that the value of the instrument will fluctuate as a result of changes in market prices (other than those
arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors
affecting all instruments traded in the market.
Investments are managed on an individual basis and material buy and sell decisions are approved by the Board of Directors. The primary goal
of the Group’s investment strategy is to maximise investment returns.
Commodity Price Risk
The Group operates primarily in the exploration and evaluation phase and accordingly the Group’s financial assets and liabilities are subject to
minimal commodity price risk at this stage.
Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong
capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the
Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds
through equity to fund exploration and evaluation activities.
There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are
established with regular monitoring and reporting.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
70 HAMMER METALS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. PARENT ENTITY DISCLOSURES
FINANCIAL POSITION
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Accumulated losses
Reserves
Total equity
FINANCIAL PERFORMANCE
Loss for the year
Other comprehensive income
Total Comprehensive income
COMPANY
30 JUNE 2017
$
30 JUNE 2016
$
7,865,208
3,135,762
11,000,970
492,096
492,096
6,956,913
3,085,223
10,042,136
665,948
665,948
10,508,874
9,376,188
42,655,110
(33,376,363)
1,230,127
10,508,874
(1,126,517)
(11,250)
(1,137,767)
39,800,503
(33,576,836)
3,152,521
9,376,188
(1,305,529)
-
(1,305,529)
CONTINGENT LIABILITIES OF THE PARENT ENTITY
There are no contingent liabilities at 30 June 2017 (2016: None)
COMMITMENTS OF THE PARENT ENTITY
For details on commitments, see note 19.
27. EVENTS SUBSEQUENT TO BALANCE DATE
On 18th August 2017, the Group (through its wholly owned subsidiary Mulga Minerals Pty Ltd (‘Mulga’)) completed the acquisition of a 51%
interest in the Mt. Frosty prospect and agreed terms for a new joint venture agreement with Mount Isa Mines Limited (‘MIM’) (a 100% owned
subsidiary of Glenore PLC).
On 12th September 2017, the Group completed a placement of 35,500,000 shares to sophisticated investors raising $1.2 million. As announced
on 6th September, the Company is also undertaking a non-renounceable entitlement offer to raise up to approximately $1.17 million on the
bases of 1 share for every 7 shares held at the record date. The offer is due to close on or around the 12th October 2017.
Other than the above, there has not been any other matter or circumstance that has arisen after balance date that has significantly affected,
or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial
periods.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2017 71
DIRECTORS DECLARATION
1.
In the opinion of the Directors of Hammer Metals Limited (“the Company”):
a)
the consolidated financial statements and notes and the remuneration report in the Directors’ report, are in accordance with the
Corporatons Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the financial year
ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001;
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2.
The Directors have been given the declarations by the managing director and company secretary for the financial year ended 30 June 2017
pursuant to Section 295A of the Corporation Act 2001.
3.
The Directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
A HEWLETT
MANAGING DIRECTOR
Perth
Dated 26th September 2017
72 HAMMER METALS LIMITED DIRECTORS’ DECLARATION
Independent Auditor’s Report
To the shareholders of Hammer Metals Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Hammer Metals Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
• giving a true and fair view of the Group's
financial position as at 30 June 2017 and of its
financial performance for the year ended on
that date; and
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as at
30 June 2017
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement
of changes in equity, and Consolidated statement
of cash flows for the year then ended
• Notes including a summary of significant
accounting policies
• Directors' Declaration.
The Group consists of the Company and the
entities it controlled at the year end or from time to
time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 Group in accordance with 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 fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Capitalised exploration and evaluation ("E&E")
assets; and
• Going Concern basis of accounting
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.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
INDEPENDENT AUDITORS REPORT ANNUAL REPORT 2017 73
Capitalised exploration and evaluation ("E&E") assets ($9,377,823)
Refer to Note 15 ‘Exploration and Evaluation expenditure’
The key audit matter
How the matter was addressed in our audit
Exploration and evaluation expenditure capitalised
(E&E) is a key audit matter due to:
•
•
the significance of the activity to the Group’s
business and the balance (being 86% of total
assets); and
the greater level of audit effort to evaluate the
Group’s application of the requirements of the
industry specific accounting standard AASB 6
Exploration for and Evaluation of Mineral
Resources, in particular the conditions allowing
capitalisation of relevant expenditure and
presence of impairment indicators. The
presence of impairment indicators would
necessitate a detailed analysis by the Group of
the value of E&E, therefore given the criticality
of this to the scope and depth of our work, we
involved senior team members to challenge the
Group’s determination that no such indicators
existed.
In assessing the presence of impairment indicators,
we focused on those that may draw into question
the commercial continuation of E&E activities for the
Mt Isa, Golden Peaks and Millennium areas where
significant capitalised E&E exists. In addition to the
assessments above, and given volatile base metal
prices/financial position of the Group we paid
particular attention to:
• Documentation available regarding rights to
tenure, via licensing, and compliance with
relevant conditions, to maintain current rights to
an area of interest and the Group’s intention and
capacity to continue the relevant E&E activities;
• The ability of the Group to fund the continuation
of activities; and
• Results from latest activities regarding the
existence or otherwise of economically
recoverable reserves/commercially viable
quantity of reserves.
Our audit procedures included:
• Evaluating the Group’s accounting policy to
recognise exploration and evaluation assets
using the criteria in the accounting standard;
• We assessed the Group’s determination of
its areas of interest for consistency with the
definition in the accounting standard. This
involved analysing the licenses in which the
Group holds an interest and the exploration
programmes planned for those for
consistency with documentation such as
joint venture agreements and planned work
programmes;
• For each area of interest, we assessed the
Group’s current rights to tenure by
corroborating the ownership of the relevant
license to government registries and
evaluating agreements in place with other
parties. We also tested for compliance with
conditions, such as minimum expenditure
requirements, on a sample of licenses;
• We tested the Group’s additions to E&E for
the year by evaluating a statistical sample of
recorded expenditure for consistency to
underlying records, the capitalisation
requirements of the Group’s accounting
policy and the requirements of the
accounting standard;
• We evaluated Group documents, such as
minutes of Board meetings, for consistency
with their stated intentions for continuing
E&E in certain areas. We corroborated this
through interviews with key operational and
finance personnel.
• We analysed the Group’s determination of
recoupment through successful
development and exploitation of the area by
evaluating the Group’s documentation of
planned future/continuing activities including
work programmes and project and corporate
budgets.
74 HAMMER METALS LIMITED INDEPENDENT AUDITORS REPORT
Going concern basis of accounting
Refer to Note 2(f) to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group’s use of the going concern basis of
accounting and the associated extent of
uncertainty is a key audit matter due to the high
level of judgement required by us in evaluating the
Group’s assessment of going concern and the
events or conditions that may cast significant
doubt on their ability to continue as a going
concern. These are outlined in Note 2(f).
The Directors have determined that the use of the
going concern basis of accounting is appropriate in
preparing the financial report. Their assessment of
going concern was based on cash flow
projections. The preparation of these projections
incorporated a number of assumptions and
significant judgements, and the Directors have
concluded that the range of possible outcomes
considered in arriving at these judgements does
not give rise to a material uncertainty casting
significant doubt on the Group’s ability to continue
as a going concern.
We critically assessed the levels of uncertainty, as
it related to the Group’s ability to continue as a
going concern, within these assumptions and
judgements, focusing on the following:
•
The Group’s planned levels of operational
and exploration expenditures, and the
ability of the Group to manage cash
outflows within available funding, and
• The Group’s ability to raise additional
funds from shareholders or other parties
and the projected timing thereof. This
included source of funds, availability of
fund type, feasibility and status/progress
of securing those funds.
In assessing this key audit matter, we involved
senior audit team members who understand the
Group’s business, industry and the economic
environment it operates in.
Our procedures included:
• We analysed the cash flow projections by:
• Evaluating the underlying data used to
generate the projections. We specifically
looked for their consistency with those
used by the Directors, and tested by us,
as set out in the capitalised exploration
and evaluation key audit matter, their
consistency with the Group’s intentions,
as outlined in Directors minutes, ASX
announcements and funding documents,
and their comparability to past practices;
• Analysing the impact of reasonably
possible changes in projected cash flows
and their timing, to the projected periodic
cash positions. Assessing the resultant
impact to the ability of the Group to pay
debts as and when they fall due and
continue as a going concern. The specific
area we focused on related to the timing
and extent of forecast cash inflows from
capital raisings and/or funding; and
• Assessing the planned levels of operating
and exploration expenditures for
consistency of relationships and trends to
the Group’s historical results and our
understanding of the business, industry
and economic conditions of the Group
• We evaluated the Group’s going concern
disclosures in the financial report by comparing
them to our understanding of the matter, the
events or conditions incorporated into the cash
flow projection assessment, the Group’s plans
to address those events or conditions, and
accounting standard requirements.
INDEPENDENT AUDITORS REPORT ANNUAL REPORT 2017 75
Other Information
Other Information is financial and non-financial information in Hammer Metals Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors' report. The
Chairman's Letter to Shareholders, Corporate Strategy, Highlights, Corporate, Exploration, Future
Activities, Competent Person's Statement, Annual Mineral Resource Statement, Tenement Schedule and
ASX Additional Information are expected to be made available to us after the date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
• implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error
• assessing the Group and Company's ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Group and 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 objective is:
• 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. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our Auditor’s Report.
76 HAMMER METALS LIMITED INDEPENDENT AUDITORS REPORT
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Hammer Metals Limited for
the year ended 30 June 2017,
complies with Section 300A of the
Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in section
12 of the Directors’ report for the year ended 30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
R Gambitta
Partner
Perth
26 September 2017
INDEPENDENT AUDITORS REPORT ANNUAL REPORT 2017 77
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Listing Rules and not disclosed elsewhere in this report is set out below.
Information regarding share and option holdings is current as at 3 October 2017.
(A)
ORDINARY SHAREHOLDERS
TWENTY LARGEST HOLDERS OF ORDINARY SHARES
NUMBER OF SHARES
Merrill Lynch (Australia) Nominees Pty Ltd
Deutsche Rohstoff AG
BNP Paribas Nominees Pty Ltd
JP Morgan Nominees Australia Ltd
Mr Russell John Davis & Mrs Susan Valerie Davis
Zenith Pacific Limited
Two Tops Pty Ltd
Mr Zbigniew Waldemar Lubieniecki
HSBC Custody Nominees (Australia) Limited
Elefantino Pty Ltd
Citicorp Nominees Pty Limited
Central Mutual (Inv) Pty Ltd
Jetosea Pty Ltd
Samlisa Nominiees Pty Ltd
Sauron Capital Pty Ltd
Bernard Owen Stephens and Erin Josephine Stephens
Mr Zbigniew Waldemar Lubieniecki
Dr Dianmin Chen
Auking Mining Limited
Bedel & Sowa Corp Pty Ltd
SIGNIFICANT SHAREHOLDERS ARE:
SHAREHOLDER
Deutsche Rohstoff AG*
Resource Capital Fund VI L.P*
*includes shares held by related entities.
28,239,300
22,658,439
22,334,661
11,004,244
8,391,667
7,000,000
6,035,715
5,871,160
4,155,513
4,150,000
4,128,937
3,733,333
3,571,429
3,000,000
2,700,000
2,500,000
2,461,540
2,050,000
2,000,000
2,000,000
% HELD
12.07%
9.68%
9.54%
4.70%
3.59%
2.99%
2.58%
2.51%
1.78%
1.77%
1.76%
1.60%
1.53%
1.28%
1.15%
1.07%
1.05%
0.88%
0.85%
0.85%
147,985,938
63.23%
NUMBER OF SHARES
35,158,439
25,000,000
Each fully paid ordinary share entitles the holder to one vote at general meetings of shareholders and is entitled to dividends when declared.
The total number of shares on issue is 234,059,674
The number of shareholders holding less than a marketable parcel is 328.
There is no current on market buy back.
The Company has 2,000,000 ordinary shares which are subject to voluntary escrow, the escrow period expires on 17 November 2017.
78 HAMMER METALS LIMITED ADDITIONAL ASX INFORMATION
DISTRIBUTION OF ORDINARY SHAREHOLDERS
CATEGORY OF SHAREHOLDING
NUMBER OF SHAREHOLDERS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
(B) OPTIONS HOLDERS OF LISTED OPTIONS
There are currently no listed options on issue.
(C) UNQUOTED SECURITIES
The Company has the following unquoted securities on issue.
CATEGORY OF SECURITY
Options expiring 30 November 2017 exercisable at $0.135
Options expiring 6 February 2018 exercisable at $0.15
Options expiring 30 November 2017 exercisable at $0.10
Options expiring 30 June 2020 exercisable at $0.06
Options expiring 29 June 2019 exercisable at $0.075
119
82
84
275
187
747
NUMBER
7,100,000
3,811,953
1,000,000
12,800,000
5,000,000
NUMBER OF HOLDERS
7
2
1
10
1
ADDITIONAL ASX INFORMATION ANNUAL REPORT 2017 79
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80 HAMMER METALS LIMITED ADDITIONAL ASX INFORMATION
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