ANNUAL REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Corporate Directory ............................................................................................................................................... 1
Directors’ Report ................................................................................................................................................... 3
Independence Declaration to the Directors of Hannans Ltd .......................................................................... 37
Directors’ Declaration ......................................................................................................................................... 38
Independent Audit Report to the Members of Hannans Ltd ......................................................................... 39
Consolidated Statement of Comprehensive Income ...................................................................................... 41
Consolidated Statement of Financial Position ................................................................................................. 42
Consolidated Statement of Changes in Equity ................................................................................................. 43
Consolidated Statement of Cash Flows ............................................................................................................ 45
Notes to the Consolidated Financial Statements ............................................................................................ 46
CORPORATE DIRECTORY
BOARD OF DIRECTORS
MANAGING DIRECTOR
Mr Damian Hicks
NON-EXECUTIVE DIRECTORS
Mr Jonathan Murray
Mr Markus Bachmann
Mr Olof Forslund
COMPANY SECRETARY
Mr Ian Gregory
PRINCIPAL OFFICE
6 Outram Street
SHARE REGISTRY
Computershare
West Perth, Western Australia 6005
Level 11, 172 St George’s Terrace
REGISTERED OFFICE
6 Outram Street
West Perth, Western Australia 6005
POSTAL ADDRESS
PO Box 1227
Perth, Western Australian 6000
Telephone
1300 787 272
Website www.computershare.com.au
AUDITORS
Ernst & Young
11 Mounts Bay Road
West Perth, Western Australia 6872
Perth, Western Australia 6000
ABN
52 099 862 129
Telephone
+61 (8) 9324 3388
Steinepreis Paganin
CONTACT DETAILS
LAWYERS
Facsimile
+61 (8) 9324 3366
Level 4, The Read Buildings
Email
admin@hannansreward.com
16 Milligan Street
Website
www.hannansreward.com
Perth, Western Australia 6000
SOCIAL NETWORK SITES
Twitter
@hannansreward
Facebook
Hannans Reward
LinkedIn
Hannans Reward
Instagram
HannansReward
H A N N A N S A N N U A L R E P O R T 2 0 1 6 1
DIRECTORS’ REPORT
The Directors of Hannans Ltd (Hannans or the Company) submit their annual financial report of the Group being the Company and its
controlled entities for the financial year ended 30 June 2016.
Dear Shareholders,
Hannans has an excellent technical team with nickel, gold and lithium exploration skills, a significant land position in the world class
Forrestania - Mt Holland nickel, gold, lithium district, a number of strategic major shareholders and a clean balance sheet, healthy cash
balance, no debt and minimal overheads. Hannans is in the best shape it has been for a long time!
Hannans completed an important strategic collaboration with ASX listed lithium mining company Neometals Ltd in March 2016. This
transaction has resulted in Hannans focusing its future exploration efforts in Western Australia and divesting its Swedish exploration
portfolio via an in-specie distribution to Shareholders.
For the foreseeable future Hannans will focus on nickel, gold and lithium exploration in the Forrestania – Mt Holland district of Western
Australia which hosts world class nickel mines, a number of high grade gold mines and more recently a number of significant lithium
discoveries.
Following extensive geochemical sampling programs and geophysical surveys undertaken by Neometals over the last two years, a three-
hole diamond drill program testing nickel sulphide targets at the Stormbreaker Prospect was undertaken in July 2016, approximately 10 km
north of the high grade Flying Fox nickel sulphide mine. Whilst a number of exploration campaigns have been conducted in this area by
previous explorers, only one diamond hole had been drilled into the highly prospective nickel tenure prior to this most recent drill program.
Hannans plans to continue diamond drill testing nickel targets at Stormbreaker during October / November 2016 after settlement of the
Neometals transaction. Nickel exploration is being managed by experienced geoscientists Gordon Kelly (geochemist) and Richard Stuart
(geophysicist) both of whom previously worked for Western Mining Corporation Ltd, Western Areas Ltd and Neometals Ltd.
Hannans has also initiated a review of gold targets within the Forrestania region and we have sought the expertise of geoscientists that
have a long history exploring for gold with the region including Mr Bryan Smith who is a consulting geologist having previously worked for
Western Mining Corporation Ltd, Forrestania Gold NL and Neometals Ltd. Hannans owns a 20% free-carried interest in the high grade Blue
Haze gold deposit and the Forrestania gold project.
The recent identification of high grade lithium mineralisation in significant widths by Kidman Resources Ltd at the Earl Grey, Van Uden North
and Tasman deposits adjacent to Hannans’ tenure has provided the encouragement to commence a review of Hannans’ tenure for
pegmatite rocks (coarse grained granites) hosting lithium mineralisation. We are guided in our efforts by our largest shareholder
Neometals, which owns 13.8% of a producing lithium mine (Mt Marion located near Kambalda) and 70% of a proprietary low cost lithium
processing technology (called the Eli process).
By the time you receive this report Hannans shareholders will have received an in-specie distribution of shares in a newly incorporated
Australian registered unlisted company, called Critical Metals Ltd, which now holds the Swedish exploration portfolio. Subject to funding,
Critical Metals plans to commence drill testing targets at Sweden’s well known Varuträsk lithium-caesium-tantalum project late in 2016
with a view to listing on a stock exchange as soon as practicable. Critical Metals also owns the high value Pahtohavare copper-gold project
and the strategic Rakkurijoki iron project in Sweden.
Hannans completed a number of capital raisings during the year via Placement and a Shareholder Share Purchase Plan. We welcome new
substantial shareholders and thank our existing shareholders for their continued financial support.
As announced previously Hannans and Kiruna Iron AB (a wholly owned subsidiary of Critical Metals Ltd) were parties to litigation brought by
Avalon Minerals Ltd concerning the sale and purchase of the Discovery Zone copper-gold deposit in northern Sweden. Hannans and Kiruna
Iron also filed a counter-claim against Avalon Minerals. I am pleased to report that all legal disputes and court actions between the
respective companies have recently been settled, without an admission of liability and this effectively brings this matter to an end.
I would like to take this opportunity to record our sincere thanks to Olof Forslund who is planning to retire as a Director of Hannans shortly.
Olof joined the Board in 2012 and has been absolutely rock solid in his support for Hannans, however with the Company having recently
divested its Swedish projects it’s the right time for Olof to retire. I would also like to thank Non-executive Directors Markus Bachmann and
Jonathan Murray, Exploration Manager Amanda Scott and Finance & Compliance Manager Mindy Ku for their professionalism, commitment
and support.
If you have any questions please don’t hesitate to visit www.hannansreward.com, follow us on Twitter (@hannansreward), visit us on
FaceBook (Hannans Reward), stay updated on LinkedIn (Hannans Reward), review our images on Instagram (HannansReward) or contact
me.
Best regards,
Damian Hicks
Managing Director
2 H A N N A N S A N N U A L R E P O R T 2 0 1 6
STRATEGIC PLAN
VISION
Our vision is to build a successful exploration and production company.
MISSION
Our mission is to develop a company that has a material interest in a portfolio of mineral projects
that are being rapidly progressed whether they are exploration, development or production assets.
We recognise that a professional, knowledgeable and ethical team of directors, employees and
consultants is the key to our business.
Our focus is to provide shareholders with excellent return on investment by managing our people,
projects and capital in an entrepreneurial and responsible manner.
GOALS
People
Projects
Capital
1.
2.
1.
2.
3.
4.
5.
1.
2.
To attract and retain a professional, knowledgeable and ethical
team of experts whilst empowering staff at all levels.
To continually build an understanding of our strategic partners’
needs and wants and thereafter conduct business in a fair,
transparent and ethical manner.
To access prospective natural resource exploration opportunities
in Australia.
To implement an effective acquisition program that secures
access to prospects with the potential to host significant natural
resource deposits.
To add value by identifying, accessing and exploring prospects
that have potential to host significant deposits and then seek
partners to diversify project risk.
To retain a financial interest in prospects but not necessarily an
operational responsibility.
To conduct our affairs in a responsible manner taking into
account various stakeholder rights and beliefs.
To create shareholder wealth as measured by the potential of
our prospects, the strength of our balance sheet and share
price.
To maintain sufficient funding and working capital to implement
exploration programs through the peaks and troughs in
exploration sentiment and commodity prices fluctuations.
Ultimately, Hannans is aiming to identify a world-class gold, copper, nickel or iron deposit.
Successful implementation of the strategic plan would see Hannans develop a portfolio of projects
in which it is sole funding exploration, contributing funding to maintain a joint venture interest,
holding a free carried interest, royalty interest and or an equity interest in the company that owns
the project.
The ability to implement the strategic plan is determined by Hannans ability to access funding.
Hannans needs to continually fund the development of its project pipeline through equity raisings,
project sales, joint venture expenditure and royalties.
DIRECTORS’ REPORT
H A N N A N S A N N U A L R E P O R T 2 0 1 6 3
DIRECTORS’ REPORT
OPERATIONAL AND FINANCIAL REVIEW
Board of Directors & Executive Management
The Board of the parent company remained unchanged during the financial year ended 30 June 2016.
Subsequent to the end of the year Magnus Arnqvist resigned as a director of Swedish subsidiary Kiruna Iron AB and Olof
Forslund was appointed a director of Kiruna Iron AB.
The Executive Management Team remained unchanged and comprises Damian Hicks (Managing Director), Amanda Scott
(Exploration Manager) and Mindy Ku (Finance & Compliance Manager). The team is supported by Pernilla Renberg (Office
Administrator in Sweden).
Projects – Generation, Exploration and Divestment
The following is a chronological summary of the main Generation, Exploration and Divestment1 events that occurred during
the 2015/2016 financial year:
2 July 2015
• Sale of Exploration Database
Hannans sold its West Australian exploration database in consideration for 20% interest in tenements,
free-carried through to Decision to Mine The transaction enabled Hannans to remain exposed to
exploration activities in Western Australia without any requirement to fund exploration.
6 July 2015
• Pahtohavare Cu- Au Project - Drilling Copper-Gold Target
Drilling of shallow high grade copper-gold targets recommenced at Pahtohavare, Sweden. Diamond
drilling tested the continuity of the Central oxide copper-gold JORC resource and collected additional
material for the 3rd phase of metallurgical test work. Exploration costs were funded by Swedish mining
company Lovisagruvan AB – Hannans’ interest is free-carried.
13 July 2015
• Lapland Project - Permits Granted
All permits were granted (17 permits covering ~300km2). Reconnaissance mapping and sampling
commenced in August 2015 and a search continued for a joint venture partner. A first-pass reconnaissance
field trip collecting outcrop and boulder samples for assay and petrographical analysis was initiated.
July - August 2015
• Queen Victoria Rocks Project - Exploration Drilling for Nickel
Joint Venture partner Neometals Ltd advised that they attempted to ‘clean out’ a historic diamond drill
hole with the aim of taking photographs of the mineralised zones. Unfortunately, the hole was unable to
be re-entered to the required depth and therefore a ‘twin’ hole was drilled in an effort to replicate the
historic results.
27 August 2015
• Pahtohavare Cu-Au Project - High Grade Copper
Bonanza grade copper assay results were received from diamond drilling at the Central deposit. Assay
highlights for PADH15005 included: 14.2m @ 9.60% Cu, 2.43g/t Au, 16.98g/t Ag from 40.0m Inc. 4m @
23.26% Cu, 3.62g/t Au, 43.03g/t Ag from 47.5m; 14m @ 2.03% Cu, 0.53g/t Au, 4.07g/t Ag from 7.2m
Inc. 3m @ 3.58% Cu, 1.02g/t Au, 8.47g/t Ag from 10.8m. Highest grade 1m interval from within
PADH15005 was: 31.5% Cu, 5.89 g/t Au and 63.1 g/t Ag from 50.5m. Note that all widths are downhole
as true widths are not currently known. Diamond drilling programme was completed (8 holes for 760m).
4 | H A N N A N S A N N U A L R E P O R T 2 0 1 6
1 Refer to ASX release made on the relevant date indicated in the table
DIRECTORS’ REPORT
Projects – Generation, Exploration and Divestment (cont’d)
30 September 2015
• Pahtohavare Cu-Au Project - High Grade Copper
Further wide, high-grade copper-gold-silver assays from the Central deposit at the Pahtohavare Cu-Au
Project were reported including the following intercept from PADH15006: o 12.3m @ 2.99% Cu, 0.87g/t
Au, 1.66g/t Ag from 29.2m (1% Cu lower-cut, 0m internal dilution).
16 November 2015
• Forrestania Project - Exploration
Joint venture partner Neometals Ltd approved a greenfields nickel sulphide exploration program at the
Forrestania Nickel Project incorporating leading edge technology developed by consultants Richard Stuart
(geophysicist) and Gordon Kelly (geochemist) to confirm potential for Flying Fox-style mines within
Stormbreaker prospect. Stormbreaker prospect located ~7km along strike to the north of the Flying Fox
nickel mine and is hosted within the same favourable western ultramafic komatiite unit.
24 November 2015
• Pahtohavare Au-Cu Project - Positive Joint Venture Decision
Swedish mining company Lovisagruvan announced it was ready to proceed to Stage 2 of Pahtohavare Cu-
Au joint venture. Hannans to retain a 25% interest free carried to a Decision to Mine.
17 February 2016
• Lithium in Sweden
An application for an exploration permit was lodged over the historic Varuträsk lithium-cesium-tantalum
mine in Sweden. Seven applications in total lodged over tenure prospective for lithium.
27 July 2016
• Forrestania Project - Drilling at Forrestania
Core drilling of nickel sulphide targets started at the Forrestania Nickel Project. Nickel targets are 10km
north of high grade Spotted Quoll and Flying Fox nickel sulphide mines hosted in the Western Ultramafic
Belt. Drilling was designed to test geophysical conductors down-dip of a strong geochemical anomaly
within the same Western Ultramafic Belt.
Exploration Expenditure
In line with the Group’s accounting policy, Hannans expensed $29,998 on mineral exploration activities in 2016 (2015: $387,160) relating
to its non-JORC compliant mineral projects and capitalised $97,599 (2015: $161,630) of expenditure in connection with the JORC compliant
mineral resources at the Rakkuri Iron Project and Pahtohavare Copper-Gold Project. These amounts exclude all administration and
transaction costs. Due to the surrender of permits during the year Hannans resolved to write off $123,945 of capitalised Exploration &
Evaluation expenditure in 2016 (2015: $28,275,372).
Project
Australia
Sweden
TOTAL MINERAL
EXPLORATION ACTIVITIES
–) Capitalised expenses
Total expensed
Exploration
activities
$
(3,531)
131,128
127,597
(97,599)
29,998
%
(12)
112
100
Mineral Exploration Activities in 2016
Geological activities
Geochemical activities
Field supplies
Field camp and travel
Feasibility studies
Annual tenement rent
Annual tenement rates
Tenement administration
Tenement application fees
TOTAL MINERAL
EXPLORATION ACTIVITIES
–) Capitalised expenses
Total expensed
%
120
11
28
3
1
(73)
(3)
4
9
100
$
153,371
13,890
36,146
3,762
1,241
(92,818)
(3,957)
5,097
10,865
127,597
(97,599)
29,998
H A N N A N S A N N U A L R E P O R T 2 0 1 6 5
DIRECTORS’ REPORT
Corporate
On 4 March 2016 Hannans announced a strategic
collaboration with Neometals Ltd (ASX:NMT).
Hannans agreed to acquire Neometals subsidiary
company Reed Exploration Pty Ltd (REX) which owns
the Forrestania, Lake Johnston and Queen Victoria
Rocks precious and base metals portfolio and at
settlement will have up to $1 million cash at bank
and no debts. This cash balance will be adjusted
down by up to $250,000 to cover the costs of the
diamond drilling campaign completed at Forrestania
in August 2016. The transaction resulted in
Neometals becoming the controlling shareholder of
Hannans holding approximately 42.24% of the fully
paid ordinary capital in Hannans.
The addition of Neometals to the Hannans register
increased the profile of Hannans and attracted more
capital to the Company. During the period March
through to May 2016 Hannans raised approximately
$1.6 million (before costs) through a combination of
placements to sophisticated investors and issues to
existing shareholders. Hannans welcomed two new
substantial shareholders to the register being
Neometals Ltd and MCA Nominees Pty Ltd.
During April 2016 Hannans entered into a five-year
preferred contractor agreement with Australian
Contract Mining Pty Ltd (ACM) whereby ACM will
provide Hannans with mining services on terms that
Hannans considers competitive with reference to
prevailing market conditions at the time. ACM in a
West Australian based mining services company that
provides project management services, underground
mining services, diamond drilling services and raise
boring services.
In September 2016 Hannans completed an in-
specie distribution of shares to its shareholders in
the unlisted wholly owned subsidiary company
Critical Metals Ltd, the registered owner of the
Swedish companies holding the Swedish copper-
gold (Pahtohavare), iron (Rakkurijoki and
Paljasjärvi) and lithium (Varuträsk) projects. The
directors of Critical Metals will need to access
additional capital to advance these prospects and
will seek to have the company listed on a securities
exchange as soon as practicable to ensure Hannans
shareholders have access to tradeable equity.
In September 2016 Hannans shareholders approved
the issue of shares and options to Hannans
directors and management in satisfaction of fees
that had been outstanding for a number of years
which removed this liability from the Company’s
financial statements. Shareholders also approved
the forgiveness of the outstanding loan to the
Managing Director.
As announced previously Hannans and Kiruna Iron
AB (a wholly owned subsidiary of Critical Metals
Ltd) were parties to litigation in the Supreme Court
of Western Australia brought by Avalon Minerals
Ltd concerning the sale and purchase of the
Discovery Zone copper-gold deposit in northern
Sweden. Hannans and Kiruna Iron also filed a
counter-claim again Avalon Minerals. On 28
September 2016 the parties executed a Deed of
Termination, Settlement and Release meaning that
all legal disputes and court actions between the
respective companies have been settled, without
an admission of liability by either party and this
matter is now resolved.
On 12 March 2015 Hannans advised ASX that its
gold rights on the North Ironcap deposit has been
sold to a private company, Mine Builder Pty Ltd, for
$800,000. Unfortunately, MineBuilder failed to
make payment in accordance with the agreement.
The sole director, company secretary and
shareholder provided Hannans with a personal
guarantee for the debt. Hannans will commence
action to recover the debt due in the Supreme
Court of Western Australia in October 2016.
6 | H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
Compliance
The following is a chronological list of compliance lodgements made during the 2015/2016 financial year:
26/08/2015
Trading Halt
30/09/2015
2015 Annual Report
30/09/2015
Appendix 4G
17/03/2016
Cleansing Notice
14/04/2016
Notice of General Meeting
29/04/2016
3rd Quarter Cashflow & Activities Report
16/10/2015
Notice of Annual General Meeting
19/05/2016
Voting results from General Meeting
30/10/2015
1st Quarter Cashflow & Activities Report
26/05/2016
Updated Capital Structure
24/11/2015
2015 Annual General Meeting Results
07/06/2016
Updated Capital Structure
10/12/2015
Updated Capital Structure
09/06/2016
Response to ASX Price Query
29/01/2016
2nd Quarter Cashflow & Activities Report
10/06/2016
Change in substantial holding - ERI
03/03/2016
Trading Halt
10/06/2016
Becoming a substantial holder
11/03/2016
Becoming a substantial holder from NMT
10/06/2016
Change in substantial holding - NMT
11/03/2016
Change in substantial holding
17/06/2016
Change in substantial holding
15/03/2016
Half-Year Financial Report
24/06/2016
Exercise of options
Subsequent to the end of the financial year the following compliance document were lodged:
08/07/2016
15/07/2016
19/07/2016
20/07/2016
22/07/2016
01/08/2016
12/08/2016
15/08/2016
15/09/2016
29/09/2016
Becoming a substantial holder
Exercise of options
Response to ASX Price Query
Exercise of options
Change in substantial holding
4th Quarter Cashflow & Activities Report
Notice of General Meeting
Updated Capital Structure
Voting results from General Meeting
Updated Capital Structure – Acquisition of Reed Exploration Pty Ltd
H A N N A N S A N N U A L R E P O R T 2 0 1 6 7
DIRECTORS’ REPORT
Goals 2016 – Scorecard
At Hannans’ Annual General Meeting held on 24 November 2015 the Company identified its Goals for 2016. The table below highlights
the Company’s achievements relative to those stated Goals:
Item
Stated Goal AGM 2015
Outcome to Date
Shareholder Returns
Implement a strategy giving
shareholders the opportunity to recover
their investment
Monitor joint venture partners’
activities.
Joint Venture Projects
including
Pahtohavare,
Forrestania, Lake
Johnston and Queen
Victoria Rocks
Assist joint venture partners to unlock
the value of these high potential
projects.
Secure joint venture partners
Sole funded projects
included Lapland,
Rakkurijoki,
Lannavaara and
Sarksjön
Corporate
Protect rights and finalise outcomes
on Discovery Zone and North Ironcap
transactions
Hannans decision in March 2016 to refocus on Western Australia
gold, nickel and lithium and divest Swedish copper-gold, iron and
lithium has enabled the Company to refinance its balance sheet,
attract new major shareholders, recommence exploration drilling
and focus on the future.
Due to both an improvement in sentiment towards exploration
companies with gold and lithium projects and the positive reaction
to the strategic collaboration with Neometals Ltd, the Hannans
share price has risen from 0.3 cents on 24 November 15 to 1.7
cents as at 27 September 2016. The Hannans share price reached
2.7 cents on 20 July 2016.
Joint venture partner Lovisagruvan was sufficiently encouraged
from the results of its exploration activities at the Pahtohavare
copper-gold project in Sweden to proceed to the next stage of the
joint venture which will see lodgement of an exploitation
concession application over the Central copper deposit prior to the
end of 2016.
During 2015 Neometals Ltd was seeking to divest its 80% interest
in its non-core Forrestania, Lake Johnston and Queen Victoria Rocks
nickel and gold projects to third parties. At the time Hannans was
holding the remaining 20% free-carried interest in these projects
free-carried to a Decision to Mine. Hannans and Neometals elected
to consolidate the ownership of this strategic gold and nickel
portfolio which resulted in execution of the strategic collaboration
agreement.
Hannans will always maintain an open mind to joint venturing its
copper, gold, nickel, iron and lithium projects to share the risks and
rewards of exploration.
Hannans will continue working towards protecting the value of
Pahtohavare, Discovery Zone and Rakkurijoki via exploration
drilling and the lodgement of an exploitation concession
applications. Successful implementation of these activities will
increase the value of the projects and the likelihood of attracting a
joint venture partner.
Due to the extremely difficult environment for junior exploration
companies and the depressed precious and base metals prices
Hannans made the decision to relinquish its large conceptual
Lapland Ni-Cu-PGE Project and Sarksjön gold project.
On 28 September 2016 the parties to the Discovery Zone
transaction executed a Deed of Termination, Settlement and
Release meaning that all legal disputes and court actions between
the respective companies have been settled, without an admission
of liability by either party and this matter is now resolved.
During September 2016 Hannans instructed lawyers to commence
proceedings in the Supreme Court of Western Australia to enforce
its rights against the purchaser of the North Ironcap gold deposit.
8 | H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
KEY PROJECTS
Figure 1. Location Map: Hannans’ Forrestania, Lake Johnston and Queen Victoria Rocks Precious & Base Metals Projects
This short report will focus on the Forrestania and Queen Victoria Rock Projects. For information on the Lake Johnston Project please refer to
www.hannansreward.com.
Forrestania Nickel, Gold and Lithium Project
The Forrestania project is located 120km south of Southern Cross and 80km east of Hyden in Western Australia (Figure 1). The Forrestania
project is approximately 7km north of Western Areas Limited’s Flying Fox Mine.
There is significant supporting infrastructure in the Forrestania project area, with good road access. There is an existing electricity network
primarily due to present and past mining operations. Located to the south of the project area is Western Area Ltd’s Cosmic Boy nickel
concentrator, which can process 600,000 tonnes per annum of ore, with the potential to expand to 1,000,000 tonnes per annum.
The Forrestania project consists of five granted exploration licences and two prospecting licences. All the tenements are held 100% by Reed
Exploration Pty Ltd (Reed) a wholly owned subsidiary of Hannans. The two prospecting licences cover the historic Blue Haze gold mine, where
Sons of Gwalia in early 2003 mined approximately 96,000t at 8.81g/t Au for 27,200oz.
Hannans owns a 20% free-carried interest in the gold rights in Forrestania project.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 9
DIRECTORS’ REPORT
Forrestania Nickel, Gold and Lithium Project (cont’d)
EXPLORATION HISTORY
The drilling has confirmed that the stratigraphy over the western ultramafic corridor is complex, and includes
multiple ultramafic units, intercalated with BIF units above a mafic footwall. The intense magnetic signature
of associated BIF units within the ultramafic sequence have complicated the detection of possible
mineralised zones using geophysical methods. It is also thought that granitic intrusives could be
masking greenstone lithologies and potential nickel sulphides at depth. Recent exploration has
been limited to surface geochemistry and IP geophysics in the Stormbreaker area testing the
extrapolated ultramafics to the north of Western Areas Limited’s Flying Fox mine.
EXPLORATION POTENTIAL
These Stormbreaker tenements are
potentially very prospective for nickel
mineralisation as they contain the
interpreted continuation of the geological
sequence that hosts the Flying Fox and
Spotted Quoll nickel mines of Western
Areas Limited.
The Stormbreaker North tenements are
at an early exploration stage for nickel and
contains geology prospective for both gold
and nickel mineralisation.
The Blue Haze tenements cover the
historic Blue Haze gold mine, where
Sons of Gwalia in early 2003 mined
approximately 96,000t at 8.81g/t Au
for 27,200oz. They are considered
prospective for gold mineralisation.
Hannans owns a 20% free-
carried interest in the gold
rights at Forrestania.
Figure 2.
Forrestania Project Geology
and Tenement Location Plan
10 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
PROJECT GEOLOGY
The Stormbreaker and Lucy Rocks areas lie within the Archaean Forrestania
greenstone belt which trends north to northwest. Regional mapping has identified
two distinct lithostratigraphic units within the greenstone belt, a mafic-ultramafic
metavolcanic suite and a sequence of immature clastic sediments which overlie the
older mafic-ultramafic sequence. These units are folded into a regional northerly plunging
synform, with the sedimentary rocks forming the core of the synform. The mafic-ultramafic
rocks to the east of the sediments are steeply west dipping while those to the west of the
sediments are shallowly east dipping. The two sequences differ somewhat in their composition.
The greenstones are predominantly altered mafic and ultramafic flows with intercalated BIF, cherts
and at stratigraphically higher levels, fine grained clastic sediments.
The western ultramafic belt consists predominantly of high-magnesium basalts with variolitic texture
(detailed below). The basaltic sequence is overlain to the east by a BIF unit, which is in turn overlain by
the main pelitic sediment sequence. The younger sediments are dominantly pelitic and psammitic schists,
with minor iron rich garnetiferous units, thin BIF lenses and bands of graphitic schist.
The western ultramafic belts hosts the Flying Fox deposit and has been interpreted as an east younging succession
of four distinct lithological packages. Zone 1 comprises of quartzo-feldspathic sedimentary rocks intercalated with minor
basaltic rocks. These footwall sedimentary rocks are directly overlain by a cumulate-rich compound komatiite flow sequence
(Zone 2). The cumulate komatiites host an irregular halo of disseminated sulphides that directly overlies massive sulphides. Zone
3 comprises of a komatiite basalt thin flow sequence, where non-cumulate komatiites and high magnesium basalts dominate. Zone 4
comprises of hanging wall sedimentary rocks. This lithostratigraphic sequence is interpreted to continue to the north beneath a granite
sill based on aeromagnetic interpretation.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 11
DIRECTORS’ REPORT
QUEEN VICTORIA ROCKS PROJECT, WESTERN AUSTRALIA
The Queen Victoria Rocks (QVR) project is located approximately 50km to the southwest of Coolgardie in Western
Australia. Access to the southern portion of the project is via the unsealed Victoria Rock road, which passes
through the tenement. There is significant supporting infrastructure in the Queen Victoria Rocks project
area, with good road access due to its close proximity to the town of Coolgardie and the numerous
current and historic mining operations of the Coolgardie district. The Queen Victoria Lakes project
consists of one granted Exploration Licence. The tenement is held 100% by Reed a wholly
owned subsidiary of Hannans.
RECENT EXPLORATION ACTIVITIES AND EXPLORATION POTENTIAL
Recent Exploration endeavored to gain a better understanding of the geological
setting and also extend the grass roots exploration activities to the north and
along strike of the Spargos prospect using surface geochemistry, targeted
EM surveys and field reconnaissance to validate both geochemical and
EM anomalies. DHEM has been completed on four holes out of a total
of 11 holes which have intersected the basal contact at Spargos.
Within the Spargos prospect the basal footwall contact (i.e. on
the southeast side) between the ultramafics units and felsic
volcanics, which remains largely untested is an area of
good potential for classical contact nickel sulphide
accumulations.
12 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
Figure 3: Queen Victoria Rocks Project Spargos Prospect Interpreted Geology
GEOLOGICAL SETTING
The QVR project is located over Archaean greenstone lithologies, forming part of the southern
portion of the Bullabulling Domain, which forms the western-most domain of the Kalgoorlie Terrane.
These lithologies occur within a relatively narrow belt of greenstone, which lie adjacent to the regionally
extensive Ida Fault which passes through the project area. Approximately 9.5km to the south of the Prince of
Wales workings, aeromagnetic data suggests that the Ida Fault splays in to two separate structures; one trending
southwest and the other to the southeast within Hannans tenure. Proterozoic dykes cut the Archaean stratigraphy in
several areas.
Within the project area the greenstone lithologies consist of mafic and ultramafic rocks, interbedded with meta-sedimentary
units, which are likely to represent interflow sediments. Sulphide-rich shales, which have a ferruginous surface expression, have
been previously mapped and interpreted as BIF units. In the western parts of the greenstone sequence, a much thicker sediment
package occurs and is predominantly made up of medium to coarse grained quartz-rich meta-sediments, in particular quartz-biotite
schists, along with numerous shale units. To the west, the greenstone belt is flanked by the Woolgangie Monzogranite, while to the
east, the regionally extensive Burra Monzogranite dominates.
Using the 2011 geophysical data and previous drilling at the Spargos prospect, a new geological interpretation was developed, which is
illustrated in Figure 3 above.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 13
DIRECTORS’ REPORT
ANNUAL RESOURCE STATEMENTS
All the following JORC resources and exploration targets are owned by Scandinavian Resources AB and Kiruna Iron AB which are wholly
owned subsidiaries of Critical Metals Ltd (CMS). CMS was in-specie distributed to Hannans shareholders on 27 September 2016.
JULY 2015 – JUNE 2016
Kiruna Iron Project
The global resource estimate for the Kiruna Iron Project currently stands at 203Mt @ 43.1% Fe; this is a decrease from the figure reported in
2015 due to the expiry of the Puoltsa permit.
JORC Compliant Indicated Mineral Resource Table
Prospect
Ekströmsberg
TOTAL
Mt
30.4
30.4
JORC Compliant Inferred Mineral Resource Table
Prospect
Rakkurijoki
Vieto
Renhagen
Harrejaure
Ekströmsberg
TOTAL
TOTAL
Indicated & Inferred
Mt
74.5
14.0
26.3
16.2
41.6
172.6
Fe (%)
52.0
52.0
Fe (%)
39.7
35.7
32.1
43.4
52.0
41.5
Mt
203.0
P (%)
Unavailable
–
P (%)
0.28
0.14
0.21
0.04
Unavailable
–
S (%)
Unavailable
–
S (%)
0.89
1.46
0.03
0.01
Unavailable
–
Fe (%)
43.1
The global Exploration Target for both the Kiruna Hub and Lannavaara Hub stands at 59-98Mt @ 33.6-42.5% Fe. This is a decrease from the
figure reported in 2015 due to the expiry of Altavaara permits.
JORC Compliant Exploration Target2 Tables
Hub 1 – Kiruna Hub
Prospect
Laukkujärvi
Tjåorika
Total Hub 1
Hub 2 – Lannavaara Hub
Prospect
Paljasjärvi
Total Hub 2
TOTAL
Hub 1 & 2
Tonnage Range (Mt)
4-8
15-30
19-38
Tonnage Range (Mt)
40-60
40-60
Mt
59-98
Grade Range (Fe%)
30-35
45-55
37.5-45
Grade Range (Fe%)
30-40
30-40
Fe (%)
33.6-42.5
2 The JORC Exploration Targets have been subjected to diamond drill testing, ground geophysics and interpretation by the Geological Survey of Sweden, reviewed by Mr Thomas
Lindholm, of GeoVista AB. The potential quantity and grade of the exploration targets is conceptual in nature, there has been insufficient interpretation to define a JORC Mineral Resource
and it is uncertain if further interpretation will result in the determination of a JORC Mineral Resource.
14 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
Pahtohavare Cooper-Gold Project
The Pahtohavare Inferred Mineral Resource and Exploration Target Estimate figures are the same as those reported in 2015.
Area
Central
Southeast
South
COMBINED
Resource
Category
Inferred
Inferred
Inferred
Inferred
Mt
1.4
0.8
0.1
2.3
Cu (%)
Au (g/t)
Cu Eq (%)
Mining Scenario
Material
1.8
1.7
1.3
1.7
0.6
0.5
0.6
0.6
2.4
2.1
1.9
2.3
Open Cut
Open Cut + Underground
Underground
Oxide
Sulphide
Sulphide
Table 1. JORC Inferred Resource-Pahtohavare Project. (Open pit resources calculated using a Whittle optimised cut-off grade of 0.56% CuEq3 for oxide material and 0.43%
CuEq3 for sulphide material. Underground resources calculated using a 1.48% CuEq3).
JORC Compliant Exploration Target Tables
Area
Eastern
Category
JORC Exploration Target
Table 2: JORC Exploration Target for Eastern Zone, Pahtohavare
JULY 2014 – JUNE 2015
Kiruna Iron Project
Mt
2-4
Cu (%)
0.3-0.7
The global resource estimate for the Kiruna Iron Project currently stands at 291.7Mt @ 38.8% Fe; this is a decrease from the figure reported in
2014 due to the surrender of the Sautusvaara and Tjårrojåkka deposits.
JORC Compliant Indicated Mineral Resource Table
Prospect
Ekströmsberg
TOTAL
Mt
30.4
30.4
JORC Compliant Inferred Mineral Resource Table
Prospect
Rakkurijärvi
Rakkurijoki
Vieto
Puoltsa
Renhagen
Harrejaure
Ekströmsberg
TOTAL
TOTAL
Indicated & Inferred
Mt
69.6
74.5
14.0
19.1
26.3
16.2
41.6
261.3
Fe (%)
52.0
52.0
Fe (%)
28.5
39.7
35.7
30.2
32.1
43.4
52.0
37.2
Mt
291.7
P (%)
Unavailable
–
P (%)
0.07
0.28
0.14
Unavailable
0.21
0.04
Unavailable
–
S (%)
Unavailable
–
S (%)
0.93
0.89
1.46
Unavailable
0.03
0.01
Unavailable
–
Fe (%)
38.8
3 Copper equivalent (CuEq) has been calculated using metal selling prices of USD3.56 / lb for Cu and USD1,510 / Oz for Au, along with metal recoveries of 90% for Au and 65% for Cu in
sulphide material and 80% for Au and 50% of Cu in oxide material. The following equations were used:
Oxide: CuEq = (1.12 x Au (ppm) grade) + (0.98 x Cu% grade)
Sulphide: CuEq = (0.97 x Au (ppm) grade) + (0.99 x Cu% grade)
H A N N A N S A N N U A L R E P O R T 2 0 1 5 15
DIRECTORS’ REPORT
Kiruna Iron Project (cont’d)
The global Exploration Target for both the Kiruna Hub and Lannavaara Hub stands at 188-250Mt @ 32.8-40.4% Fe; this is the same figure
reported in 2014.
JORC Compliant Exploration Target4 Tables
Hub 1 – Kiruna Hub
Prospect
Altavaara
Laukkujärvi
Tjåorika
Total Hub 1
Hub 2 – Lannavaara Hub
Prospect
Kevus
Paljasjärvi
Teltaja
Total Hub 2
TOTAL
Hub 1 & 2
Tonnage Range (Mt)
55-60
4-8
15-30
74-98
Tonnage Range (Mt)
35-45
40-60
39-47
114-152
Mt
188-250
Grade Range (Fe%)
26-29
30-35
45-55
33.6-39.6
Grade Range (Fe%)
28-35
30-40
40-48
32-41
Fe (%)
32.8-40.3
Pahtohavare Cooper-Gold Project
The Pahtohavare Inferred Mineral Resource and Exploration Target Estimate figures are the same as those reported in 2014. Please refer to
the ASX Announcement dated 31 January 2014, titled “Re-Release of Maiden JORC Resource for Pahtohavare” for a comprehensive
summary of the estimates and technical information including Table 1 (2012 JORC Code-Sections 18 & 19).
Area
Central
Southeast
South
COMBINED
Resource
Category
Inferred
Inferred
Inferred
Inferred
Mt
1.4
0.8
0.1
2.3
Cu (%)
Au (g/t)
Cu Eq (%)
Mining Scenario
Material
1.8
1.7
1.3
1.7
0.6
0.5
0.6
0.6
2.4
2.1
1.9
2.3
Open Cut
Open Cut + Underground
Underground
Oxide
Sulphide
Sulphide
Table 1. JORC Inferred Resource-Pahtohavare Project. (Open pit resources calculated using a Whittle optimised cut-off grade of 0.56% CuEq5 for oxide material and 0.43%
CuEq3 for sulphide material. Underground resources calculated using a 1.48% CuEq3).
JORC Compliant Exploration Target Tables
Area
Eastern
Category
JORC Exploration Target
Table 2: JORC Exploration Target for Eastern Zone, Pahtohavare
Mt
2-4
Cu (%)
0.3-0.7
4 The JORC Exploration Targets have been subjected to diamond drill testing, ground geophysics and interpretation by the Geological Survey of Sweden, reviewed by Mr Thomas
Lindholm, of GeoVista AB. The potential quantity and grade of the exploration targets is conceptual in nature, there has been insufficient interpretation to define a JORC Mineral Resource
and it is uncertain if further interpretation will result in the determination of a JORC Mineral Resource.
5 Copper equivalent (CuEq) has been calculated using metal selling prices of USD3.56 / lb for Cu and USD1,510 / Oz for Au, along with metal recoveries of 90% for Au and 65% for Cu in
sulphide material and 80% for Au and 50% of Cu in oxide material. The following equations were used:
Oxide: CuEq = (1.12 x Au (ppm) grade) + (0.98 x Cu% grade)
Sulphide: CuEq = (0.97 x Au (ppm) grade) + (0.99 x Cu% grade)
16 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
Competent Person’s Statements – Kiruna Iron Project
The mineral resource estimate for Rakkurijoki and Rakkurijärvi is effective from 13 January 2012 and has been prepared by Mr Thomas Lindholm, MSc
of GeoVista AB, Luleå, Sweden acting as an independent “Competent Person”. Mr Lindholm is a Fellow of the Australasian Institute of Mining and
Metallurgy (Membership No. 230476). Mineral resources for Rakkurijoki and Rakkurijärvi have been prepared and categorised for reporting purposes
by Mr Lindholm, following the guidelines of the JORC Code. Mr Lindholm is qualified to be a Competent Person as defined by the JORC Code on the
basis of training and experience in the exploration, mining and estimation of mineral resources of gold, base metal and iron deposits. Mr Lindholm
consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.
The mineral resource estimate for Puoltsa is effective from 13 January 2012 and has been prepared by Mr Thomas Lindholm, MSc of GeoVista AB,
Luleå, Sweden acting as an independent “Competent Person”. Mr Lindholm is a Fellow of the Australasian Institute of Mining and Metallurgy
(Membership No. 230476). The mineral resource of Puoltsa has been prepared and categorised for reporting purposes by Mr Lindholm, following the
guidelines of the JORC Code. Mr Lindholm is qualified to be a Competent Person as defined by the JORC Code on the basis of training and experience in
the exploration, mining and estimation of mineral resources of gold, base metal and iron deposits. Mr Lindholm consents to the inclusion in the report
of the matters based on the information in the form and context in which it appears.
The mineral resource estimate for Ekströmsberg is effective from 22 July 2011 and has been prepared by Dr Christopher Wheatley of Behre Dolbear
International Ltd, UK, acting as an independent “Competent Person”. Dr Wheatley is a member of the Institute of Materials Minerals and Mining
(Membership No. 450553). The mineral resource of Ekströmsberg has been prepared and categorised for reporting purposes by Dr Wheatley, following
the guidelines of the JORC Code. Dr Wheatley is qualified to be a Competent Person as defined by the JORC Code on the basis of training and
experience in the exploration, mining and estimation of mineral resources of gold, base metal and iron deposits. Dr Wheatley consents to the inclusion
in the report of the matters based on the information in the form and context in which it appears.
The mineral resource estimate for Vieto is effective from 26 July 2011 and has been prepared by Mr Geoffrey Reed of Minarco-MineConsult acting as
an independent “Competent Person”. Mr Geoffrey Reed is a Member of the Australasian Institute of Mining and Metallurgy (CP) (Membership No.
205422). The mineral resource of Vieto has been prepared and categorised for reporting purposes by Mr Reed, following the guidelines of the JORC
Code. Mr Reed is qualified to be a Competent Person as defined by the JORC Code on the basis of training and experience in the exploration, mining
and estimation of mineral resources of gold, base metal and iron deposits. Mr Reed consents to the inclusion in the report of the matters based on the
information in the form and context in which it appears.
The mineral resource estimate for Renhagen and Harrejaure is effective from 13 January 2012 and has been prepared by Mr Geoffrey Reed of
Minarco-MineConsult acting as an independent “Competent Person”. Mr Geoffrey Reed is a Member of the Australasian Institute of Mining and
Metallurgy (CP) (Membership No. 205422). Mineral resources of Renhagen and Harrejaure have been prepared and categorised for reporting purposes
by Mr Reed, following the guidelines of the JORC Code. Mr Reed is qualified to be a Competent Person as defined by the JORC Code on the basis of
training and experience in the exploration, mining and estimation of mineral resources of gold, base metal and iron deposits. Mr Reed consents to the
inclusion in the report of the matters based on the information in the form and context in which it appears.
The information in this document that relates to JORC Exploration Targets is based on information reviewed by Mr Thomas Lindholm of GeoVista AB,
Luleå, Sweden acting as an independent “Competent Person”. Mr Lindholm is a member of the Australasian Institute of Mining and Metallurgy
(Membership No. 230476). Mr Lindholm is qualified to be a Competent Person as defined by the JORC Code on the basis of training and experience in
the exploration, mining and estimation of mineral resources of gold, base metal and iron deposits. Mr Lindholm consents to the inclusion in the report
of the matters based on the information in the form and context in which it appears.
The information in this document that relates to exploration results for the Rakkuri Iron Project is based on information compiled by Ms Amanda Scott,
a Competent Person who is a Member of the Australian Institute of Mining and Metallurgy (Membership No. 990895). Ms Amanda Scott is a full-time
employee of Hannans Ltd. Ms Amanda Scott has sufficient experience, which is relevant to the style of mineralisation and types of deposits under
consideration and to the activity which has been undertaken to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Ms Amanda Scott consents to the inclusion in the report of the
matters based on her information in the form and context in which it appears.
Note all Kiruna Iron Project Resource Estimates and Exploration Target Estimates have been prepared and reported under the 2004 JORC Code. The
company confirms that all material assumptions and technical parameters underpinning the estimates 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 announcements.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 17
DIRECTORS’ REPORT
Accompanying Statements: JORC Inferred Resource – Pahtohavare
1.
2.
3.
4.
5.
6.
7.
8.
The effective date of the Mineral Resource is 12 July 2013.
Mineral Resources are reported in relation to a conceptual pit shell. Mineral Resources are not Ore Reserves and do not have demonstrated economic
viability. All figures are rounded to reflect the relative accuracy of the estimate.
The quantity and grade of reported Inferred Mineral Resources in this estimation are uncertain in nature and there has been insufficient exploration to
define these Inferred Mineral Resources as an Indicated or Measured Mineral Resource; and it is uncertain if further exploration will result in upgrading
them to an Indicated or Measured Mineral Resource category.
Copper equivalent (CuEq) grades were calculated using metal prices of USD3.56 per pound of copper (Cu), and USD1,510 per troy ounce of gold (Au),
along with metal recoveries of 90% for Au and 65% for Cu in sulphide material and 80% for Au and 50% of Cu in oxide material.
Open pit Mineral Resources are reported above the Whittle pit shell and above a cut-off grade of 0.56% CuEq for oxide material and 0.43% CuEq for
sulphide material.
Underground Mineral Resources are reported below the Whittle pit shell, and above a cut-off grade of 1.48% CuEq for sulphide material.
Mineral Resources for the Pahtohavare project has been classified according to the JORC Code (2012) by Ben Parsons (MAusIMM (CP)), an independent
Competent Person as defined by JORC.
The Mineral Resource estimate has not been affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing, or other
relevant issues.
Accompanying Statement JORC Exploration Target – Pahtohavare
1.
2.
3.
4.
The Eastern area of Pahtohavare has not been classified as a Mineral Resource, but is considered by SRK Consulting to be an Exploration Target. This is
a result of the historic drilling being on a sparse and variable grid, and due to lack of historic drill core re-assaying.
SRK Consulting estimated grades and tonnages to provide an analysis of the potential. As a result, SRK Consulting has delineated an Exploration Target
of between 2–4 Mt of material grading between 0.3–0.7% Cu (with negligible Au grades) for the Eastern area, based on blocks within the digitised
mineralisation wireframes, but not reported above a cut-off grade.
The potential quantity and grade is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource and it is uncertain
if further exploration will result in the estimation of a Mineral Resource.
Based on the copper equivalent cut-off grades used to report the Resources in the Resource statement, only a minor portion of the currently outlined
Eastern area would be above the cut-off grade used for Resource reporting. However, this material may have elevated Zn and Pb grades, which were
not taken into account during the Resource estimation process.
Competent Person’s Statements – Pahtohavare
The information in this document that relates to exploration results for the Pahtohavare Project is based on information compiled by Ms Amanda Scott,
a Competent Person who is a Member of the Australian Institute of Mining and Metallurgy (Membership No. 990895). Amanda Scott is a full-time
employee of Hannans Ltd. Ms Amanda Scott has sufficient experience, which is relevant to the style of mineralisation and types of deposits under
consideration and to the activity which has been undertaken to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Ms Amanda Scott consents to the inclusion in the report of the
matters based on her information in the form and context in which it appears.
The information in this document that relates to the Pahtohavare Mineral Resource and Exploration Target is based on information compiled by Mr
Benjamin Parsons, a Competent Person who is a Member and Chartered Professional of the Australasian Institute of Mining and Metallurgy
(Membership No. 222568). Mr Benjamin Parsons is a full time employee of SRK Consulting, and has no interest in, and is entirely independent of
Hannans Ltd. Mr Benjamin Parsons 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 JORC 2012. Mr Benjamin Parsons consents to the inclusion
in the report of the matters based on his information in the form and context in which it appears.
The information in this document that relates to the Pahtohavare Mineral Resource and Exploration Target is based on information compiled by Mr
Johan Bradley, a Competent Person who is a Chartered Geologist with the Geological Society of London (Membership No. 1014008), and a European
Geologist (EurGeol). Mr Johan Bradley is a full time employee of SRK Consulting, and has no interest in, and is entirely independent of Hannans Ltd. Mr
Johan Bradley 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 JORC 2012. Mr Johan Bradley consents to the inclusion in the report of the
matters based on his information in the form and context in which it appears.
Note all Resource Estimates, Exploration Target Estimates and Exploration Results within this report pertaining to the Pahtohavare Project have been
prepared and reported under the 2012 JORC Code. The company confirms that all material assumptions and technical parameters underpinning the
estimates 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 announcements.
Governance Arrangements and Internal Controls – Mineral Resources
Hannans Ltd has ensured that the mineral resource estimates quoted above are subject to governance arrangements and internal controls. The resource
estimates have all been externally derived by various independent consulting organisations whose staff have exposure to best practice in modelling and
estimation techniques. In 2011 the iron resource estimates were reviewed by an independent consulting organisation who reviewed the quality and suitability
of the data underlying the mineral resource estimates, including a site visit. The Pahtohavare resource estimate was similarly completed and reviewed by the
same independent consulting organisation that completed the 2011 review of iron resources. These reviews have not identified any material issues. In turn,
Hannans’ management has carried out numerous internal reviews of the underlying data and mineral resource estimates to ensure that they have been
classified and reported in accordance with the JORC Code; the 2004 Edition for the iron resources and the 2012 Edition for the Pahtohavare resource. Hannans
reports its mineral resources on an annual basis in accordance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves’ (the JORC Code) 2012 Edition. Competent Persons named by Hannans are Members or Fellows of the Australasian Institute of Mining and Metallurgy
and/or the Australian Institute of Geoscientists, and qualify as Competent Persons as defined in the JORC Code.
18 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
DIRECTORS
The names and particulars of the Directors of the Company during the financial year and until the date of the report are:
Mr Damian Hicks, Managing Director
(Appointed 11 March 2002)
Mr Markus Bachmann, Non-Executive Director
(Appointed 2 August 2012)
Mr Hicks was a founding Director of
Hannans Ltd and appointed to the position
of Managing Director on 5 April 2007. He
formerly held the position of Executive
Director and Company Secretary. Mr Hicks
is also Managing Director of the Group’s
subsidiary companies.
Mr Hicks holds a Bachelor of Commerce
(Accounting and
the
University of Western Australia, is admitted
as a Barrister and Solicitor of the Supreme Court of Western
Australia, holds a Graduate Diploma in Applied Finance &
Investment from FINSIA, a Graduate Diploma in Company
Secretarial Practice from Chartered Secretaries Australia and is a
Graduate of the Australian Institute of Company Directors course.
Finance)
from
Mr Hicks is a Non-Executive Director of funds management
company, Growth Equities Pty Ltd. During the past 3 years.
Mr Hicks was a Director of Scandinavian Resources Ltd from 19
April 2010 to the date the company ceased to be a listed public
company on 12 June 2013.
Mr Bachmann graduated with Honours
(“cum laude”) from the University of
Berne, Switzerland and began his
corporate finance career in 1993.
In 2001, Mr Bachmann was Senior
Portfolio Manager with Coronation Fund
Managers in Cape Town when it was
awarded the Standard & Poor’s Award for
Manager of the Best Performing Large
Cap Equity Unit Trust in South Africa.
In 2003, Mr Bachmann was founding partner of Craton Capital
and is the Chief Executive Officer. Craton Capital was awarded
Fund Manager of the Year at the Mining Journal’s “Outstanding
Achievement Awards” announced in London during December
2010 for the Craton Capital Precious Metal Fund. The award is the
most prestigious fund award in the mining industry. Craton
Capital has offices in Johannesburg, South Africa and in Zurich,
Switzerland.
During the past 3 years Mr Bachmann was a Director of
Scandinavian Resources Ltd from 19 January 2011 to the date the
company ceased to be a listed public company on 12 June 2013.
Mr Jonathan Murray, Non-Executive Director
(Appointed 22 January 2010)
Mr Olof Forslund, Non-Executive Director
(Appointed 2 August 2012)
Mr Murray is a partner at law firm
in Perth,
Steinepreis Paganin, based
Western Australia. Since joining the firm
in 1997, he has gained significant
experience in advising on initial public
offers and secondary market capital
commercial
forms of
raisings,
acquisitions
and
providing general corporate and strategic
advice.
divestments
and
all
Mr Murray graduated
from Murdoch
University in 1996 with a Bachelor of Laws and Commerce
(majoring in Accounting). He is also a member of FINSIA
(formerly the Securities Institute of Australia).
During the past 3 years Mr Murray has also served as a director of
the following other listed companies:
* Denotes current directorship
Vietnam Industrial Investments Limited*
(appointed 19 January 2016)
Peak Resources Limited* (appointed 22 February 2011)
Lemur Resources Limited
(appointed 6 November 2013; resigned 29 May 2014)
Highfield Resources Ltd
(appointed 25 October 2011; resigned 14 August 2013)
Mr Forslund is a geophysicist and has
extensive international experience in the
mineral exploration industry, particularly
in the development and application of
radar
geophysical
instruments
technology. His
have
covered activities in Sweden, Japan, South
Korea, Germany, Belgium, Italy, France,
Canada and the USA.
and
assignments
Mr Forslund commenced with SGU in
1966 and during the period 2003 – 2007
Mr Forslund was Regional Manager of the Geological Survey of
Sweden’s Mineral Resources Information Office in Mala, Sweden
(www.sgu.se). SGU’s branch office Mala serves as a ‘one-stop’
information office for all those conducting exploration in Sweden.
Mr Forslund was a founding shareholder and President of MALÅ
GeoScience (www.malags.com) between 1994 and 1998. MALÅ
is currently the global leader in the design and manufacture of
Ground Penetrating Radar (GPR) systems.
From 1999-2003 Mr Forslund was also project manager for Georange
(www.georange.se), a non-profit organization whose main task is to
expand the concept of "development" in the mining and minerals
industry in Sweden.
During the past 3 years Mr Forslund was a Director of Scandinavian
Resources Ltd from 19 April 2010 to the date the company ceased to
be a listed public company on 12 June 2013.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 19
DIRECTORS’ REPORT
DIRECTORS (cont’d)
Director’s Relevant Interest in Shares and Options
At the date of this report the following table sets out the current Directors’ relevant interests in shares and options of Hannans Ltd and the
changes since 30 June 2016.
Director
Ordinary Shares
Options over Ordinary Shares
Current
Holding
Net Increase/
(decrease)
Current
Holding
Net Increase/
(decrease)
Damian Hicks
Jonathan Murray
6,416,667
6,499,129
Markus Bachmann (i)
61,082,353
Olof Forslund
–
–
–
–
–
–
1,500,000
1,500,000
1,500,000
–
–
–
–
(i)
These shares are held by Craton Capital Funds of which Mr Bachmann is a founding partner and Chief Executive Officer.
During the year no options were granted to the Directors and Key Management Personnel. On 15 September 2016 Hannans held a General
Meeting and shareholders approved the issue of shares in lieu of the Managing Director and Non-Executive Directors’ outstanding salary and
fees together with one free attaching option for each ordinary shares issued. The ordinary shares will be deemed to have an issue price equal
to the volume weighted average sale price of shares sold for the 40 trading days after the date of the General Meeting. The issue of shares
and the attaching options are anticipated to be completed by 11 November 2016.
COMPANY SECRETARY
KEY MANAGEMENT PERSONNEL
Mr Ian Gregory
(Appointed 5 April 2007)
Ms Amanda Scott
(Appointed 29 March 2014)
Mr Gregory holds a Bachelor of Business
from Curtin University. Prior to founding his
own business in 2005 Mr Gregory was the
Company Secretary of Iluka Resources Ltd
(6 years), IBJ Australia Bank Ltd Group (12
years) and the Griffin Group of Companies
(4 years). Mr Gregory currently consults on
company
secretarial and governance
matters to a number of listed and unlisted
companies and is a past Chairman of the
Western Australian Branch Council of
Governance Institute of Australia.
Ms Scott was appointed a director of
Scandinavian Resources AB, Kiruna Iron AB
and Scandinavian Iron AB in 2014 and has
been the Exploration Manager for Hannans
Ltd and its subsidiary companies since
2008. Ms Scott played an integral role in
the development of the Company’s nickel,
gold, iron and manganese portfolio and is
credited with the discovery of high grade
iron mineralisation at the Jigalong Project
in the East Pilbara region on Western
Australia. Ms Scott was also a key person
responsible for developing the Rakkuri Iron
Project and advancing the Pahtohavare
Copper-Gold Project in Sweden. Ms Scott
holds a Bachelor of Science (Geology)
from Victoria University of Wellington, and
is a Member of the Australian Institute of
Mining & Metallurgy.
20 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
The remuneration report is set out under the following main headings:
A.
B.
C.
D.
E.
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share–based compensation
Additional information
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
A.
Principles used to determine the nature and amount of remuneration
The whole Board forms the Remuneration Committee. The remuneration policy has been designed to align director and executive
objectives with shareholder and business objectives by providing a fixed remuneration component with the flexibility to offer specific long
term incentives based on key performance areas affecting the Group’s financial results. The Board believes the remuneration policy to be
appropriate and effective in its ability to attract and retain the best directors and executives to manage the Group.
The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives is as follows:
The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by
the Board. All executives receive a base salary (which is based on factors such as length of service and experience) and
superannuation. The Board reviews executive packages annually and determines policy recommendations by reference to executive
performance and comparable information from industry sectors and other listed companies in similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and
retain the highest calibre of executives and reward them for performance that results in long term growth in shareholder wealth.
The Managing Director and executives receive a superannuation guarantee contribution required by the government, which is
currently 9.5% of base salary and do not receive any other retirement benefits.
All remuneration paid to directors and executives is valued at the cost to the Group and expensed. Options are valued using the
Black–Scholes and Monte-Carlo methodologies where relevant.
The Board policy is to remunerate non–executive directors at market rates for comparable companies for time, commitment and
responsibilities. The Board determines payments to the non–executive directors and reviews the remuneration annually, based on
market practice, duties and accountability. Independent external advice is sought when required, no independent external advise
was sought during the year. The maximum aggregate amount of fees that can be paid to Non–Executive Directors is subject to
approval by shareholders at the Annual General Meeting. The approved maximum aggregate amount that may be paid to Non-
Executive Directors as remuneration for each financial year is set at $250,000 which may be divided among the Non-Executive
Directors in the manner determined by the Board and Company from time to time. Fees for Non–Executive Directors are not linked
to the performance of the Company. The 2015 remuneration report was approved at the last Annual General Meeting held on
24 November 2015.
The remuneration policy has been tailored to increase the direct positive relationship between shareholders investment objectives and
directors and executive performance. The Company facilitates this through the issue of options from time to time to the directors and
executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in
increasing shareholder wealth. The Company currently has no performance based remuneration component built into director and executive
remuneration packages.
The Board does not consider earnings during the current and previous financial years when determining, and in relation to, the nature and
amount of directors’ remuneration. Refer below for a summary of the Group’s earnings and the Company’s market performance for the past
5 years.
Summary of 5 Years earnings and market performance as at 30 June
Profit/(Loss) ($)
Share price (c)
Market capitalisation
(Undiluted) ($)
2016
2015
2014
2013
2012
(964,387)
(29,120,403)
(1,015,324)
(2,544,386)
(627,640)
1.6
0.2
0.5
1.5
3.8
15,531,324
1,443,932
3,609,831
10,604,492
18,231,367
H A N N A N S A N N U A L R E P O R T 2 0 1 6 21
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (cont’d)
B. Details of remuneration
Details of remuneration of the Directors and key management personnel (as defined in AASB 124 Related Party Disclosures) of Hannans are
set out in the table below.
The key management personnel of Hannans and the Group are the Directors and a Director of subsidiaries as listed on page 19 and 20.
Given the size and nature of operations of Hannans, there are no other employees who are required to have their remuneration disclosed in
accordance with the Corporations Act 2001.
Short Term
Post-employment
Equity
Salary
& fees
$
Other
benefits
(i)
$
D&O
insurance
(ii)
$
Superan-
nuation
$
Other
benefits
(iii)
$
Options
(iv)
$
Long
term
benefits
(v)
$
Other
benefits
$
Total
$
Value
options as
proportion of
remuneration
%
2016
Directors
Damian Hicks (vi)
120,000
10,470
2,166
11,400
Jonathan Murray (vii)
Markus Bachmann (vii)
Olof Forslund (vii)
Executives
12,000
12,000
12,000
Amanda Scott (viii)
(Director of subsidiaries)
115,489
–
–
–
–
2,165
2,165
2,165
–
–
–
2,166
16,529
26,192
11,272
11,272
925
–
–
–
–
1,780
1,780
1,780
–
–
–
–
–
–
–
–
–
–
156,233
15,945
15,945
15,945
171,648
375,716
271,489
10,470
10,827
27,929
26,192
27,884
925
Total
2015
Directors
Damian Hicks (vi)
258,648
(2,983)
2,395
24,572
27,022
19,864
4,721
(8,979) 325,260
Jonathan Murray (vii)
Markus Bachmann (vii)
Olof Forslund (vii)
Executives
Amanda Scott (viii)
(Director of subsidiaries)
38,850
38,850
38,850
–
–
–
2,395
2,395
2,395
–
–
–
–
–
–
3,136
3,136
3,136
134,417
3,646
2,396
24,097
38,303
19,864
–
–
–
–
–
–
–
44,381
44,381
44,381
(274) 222,449
Total
509,615
663
11,976
48,669
65,325
49,136
4,721
(9,253) 680,852
7.2%
11.2%
11.2%
11.2%
6.6%
7.4%
6.1%
7.1%
7.1%
7.1%
8.9%
7.2%
(i)
(ii)
Short Term Other benefits include annual leave taken during the
year of $10,470 (2015: $14,107) for Damian Hicks and nil (2015:
$3,646) for Amanda Scott. Mr Hicks returned to Perth on 1 April
2015 and no additional benefits were provided to him during the
year (2015: $11,124). Ms Scott ceased employment on 1 February
2016. All annual leave were paid out during the year.
For accounting purposes Directors & Officers Indemnity Insurance is
required to be recorded as remuneration. No director receives any
cash benefits, simply the benefit of the insurance coverage for the
financial year.
(iii) A Swedish company paying employees for work is required to pay
Swedish Social Security Contribution (SSC) which is a framework of
publicly funded social provision, ranging from pensions and
to parental allowances and employment-related
healthcare
insurance. SSC is calculated on the basis of paid salaries and issued
benefits. No employee receives any cash benefit, simply the
benefit of social provision by the Swedish government. SSC
benefits for Ms Scott was $26,192 (2015: $38,303). Mr Hicks
returned to Australia and no SSC payments were required from
1 April 2015 (2015: $27,022).
The amounts included are under Hannans’ Employee Share Option
Plan (ESOP). They were approved by shareholder in November
2014 are non-cash items that are subject to vesting conditions.
(iv)
(v)
(vi)
(vii)
Tranche 3 options remain subject to continued service over a one-
year vesting period respectively. Refer to note 8 for more
information.
Long term benefits include benefits increment for the year in unpaid
long service leave of $925 (2015: $4,721).
In an effort to assist the Company with managing its cash flow and to
enable tax planning for the Group, Mr Hicks deferred a part of his salary
from 1 April 2013 to 31 March 2015. The deferred salary of $70,986 is
included in the 2015 remuneration. During the year, a payment of
$39,437 was made to Mr Hicks in relation to his deferred salary. Mr
Hicks’ salary payment resumed on 1 July 2016 at a reduced rate of
$120,000 per annum.
In an effort to assist the Company with managing its cash flow,
Mr Murray, Mr Bachmann and Mr Forslund have deferred their Non-
Executive Director fee from 1 January 2014 to 30 June 2016. The
deferred amount for the year of $36,000 (2015: $116,550) is included
in the above remuneration (equivalent of $12,000 per director). A total
payment of $36,000 for the deferred Non-Executive Directors fees from
1 July 2015 to 30 June 2016 were made to the Non-Executive Directors
on 7 July 2016.
(viii) Ms Scott was appointed as a Director of the Swedish subsidiaries on
29 March 2014 comprising of Scandinavian Resources AB, Kiruna Iron
AB and Scandinavian Iron AB.
22 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (cont’d)
C.
Service agreements
Managing Director
Mr Hicks commenced employment with Hannans Ltd on 3 December 2003.
Mr Hicks entered into an employment agreement as Managing Director of the Company on 21 December 2009. The remuneration package
comprised $230,000 per annum (exclusive of statutory superannuation entitlements), reimbursement of work related expenses, provision
of a motor vehicle, a remuneration increase of 5% per annum and provision for a performance based bonus as determined by the Board.
Either party can terminate the arrangement with three months written notice and payment by the Company of all statutory annual and
long service leave entitlements. Mr Hicks’ salary was increased to $258,648 per annum on 1 July 2012. Whilst Mr Hicks’ employment
agreement has not been amended since execution as from 1 July 2015 he is receiving a salary equivalent to $120,000 per annum plus
statutory superannuation and will remain at that level until 30 June 2017. It is the Boards intention to finalise a new employment
agreement with Mr Hicks’ in the future that will take into consideration market conditions and Mr Hicks’ outstanding entitlements pursuant
to employment agreement entered into on 21 December 2009.
On 10 March 2013 Mr Hicks and his family relocated to Malå and were provided with accommodation. The Board considered the relocation
to be necessary for Mr Hicks to fulfil his role of Managing Director considering Hannans’ major projects were located in Scandinavia. Mr
Hicks entered into an employment agreement with Hannans subsidiary Scandinavian Resources AB in accordance with visa requirements to
work and reside in Sweden. Prior to relocating to Sweden the Board finalised Mr Hicks’ salary arrangement on the basis that he would
receive the same (no less and no more) remuneration as if he had remained residing in Australia. As a consequence of Mr Hicks relocating
to Sweden Hannans became liable for significantly higher employment tax obligations including Swedish social security contributions.
Mr Hicks returned to Australia on 1 April 2015 and his employment agreement with Scandinavian Resources AB ended.
In an effort to assist the Company with managing its cash flow, Mr Hicks deferred $204,170 in salary entitlements during the period 1 April
2013 to 31 March 2015 (please refer to note 15). During the year $39,437 was paid to Mr Hicks for his accrued salary and a further $31,549
was made on 7 July 2016 as part payment.
Mr Hicks has accrued annual leave of $43,165 (2015: $58,054) and accrued long service leave of $52,851 (2015: $51,926) as at 30 June
2016. Mr Hicks has not received the salary entitlements provided for in his employment agreement since 1 July 2012 and has not been
provided with a motor vehicle since 1 April 2015. On 31 March 2010 Mr Hicks was provided with a $300,000 loan to exercise 1.5 million
Hannans options. The Company has agreed to suspend interest charged, principal repayments and interest payments until further notice.
The loan repayment date was extended by two (2) years to 31 March 2017.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of ordinary shares in lieu of Mr Hicks’
outstanding salary of $141,474, together with one free attaching option for each ordinary shares issued. The ordinary shares will be
deemed to have an issue price equal to the volume weighted average sale price of shares sold on ASX during the 40 trading days after the
date of the General Meeting. The issue of ordinary shares and attaching options are anticipated to be completed by 11 November 2016.
During the General Meeting the shareholders also approved to forgive the outstanding loan amount of $168,985. The loan is unrecoverable
and was derecognised as a receivable as at 30 June 2016. Refer to the Notice of General Meeting released on ASX dated 12 August 2016
for further information.
Non-Executive Directors
Remuneration and other terms of employment for the Non-executive Directors are formalised in service agreements. The Non-executive
directors are employed on a rolling basis with no specified fixed terms. They are remunerated on a fixed remuneration basis, exclusive of
superannuation. As from 1 July 2015 Non-Executive Directors accrued fees of $12,000 each per annum for each Non-executive Director.
In an effort to assist the Company with managing its cash flow, Mr Murray, Mr Bachmann and Mr Forslund have deferred their
Non-Executive Director fee from 1 January 2014 to 30 June 2016. The total deferred fees for the period of $36,000 is included in note 15. A
total payment of $36,000 for the deferred Non-Executive Directors fees from 1 July 2015 to 30 June 2016 were made to the Non-Executive
Directors on 7 July 2016.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of ordinary shares in lieu of the Non-
Executive Directors outstanding fee of $165,113, together with one free attaching option for each ordinary share issued. The ordinary shares
will be deemed to have an issue price equal to the volume weighted average sale price of shares sold on ASX during the 40 trading days
after the date of the General Meeting. The issue of ordinary shares and attaching options are anticipated to be completed by 11 November
2016. Refer to the Notice of General Meeting released on ASX dated 12 August 2016 for further information.
Major provisions of the agreements relating to the Non-executive directors are set out below.
Name
Non-Executive Directors
Jonathan Murray
Markus Bachmann
Olof Forslund
Termination Notice Period
By HANNANS
By Employee
Termination payments*
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
* Termination payments (other than for gross misconduct) are calculated on current remuneration at date of termination and are inclusive of the notice period.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 23
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (cont’d)
Executive
Remuneration and other terms of employment for the executive is formalised in an employment agreement. The executive is employed on
a rolling basis with no specified fixed terms. Major provisions of the agreements relating to the executive are set out below.
Name
Director
| Damian Hicks
KMP
| A Scott
Engagement
Employee
Consultancy
By HANNANS
By Employee
Termination payments*
3 months
30 days
3 months
30 days
3 months
None
* Termination payments (other than for gross misconduct) are calculated on current remuneration at date of termination and are inclusive of the notice period.
Termination Notice Period
D.
Share–based compensation
Options are issued to directors and executives as part of their remuneration. The options are not based on performance criteria, but are issued
to align the interests of directors, executives and shareholders. No options were issued during the year. As at 30 June 2016, 23,500,000
options (2015: 23,500,000) were held by Directors and Executive. Refer to the remuneration report for further details of the options
outstanding.
Options
awarded
during the
year
No.
Financial
year
Directors
Damian Hicks (i)
Jonathan Murray
Markus Bachmann
Olof Forslund
Executives
Amanda Scott
(Director of subsidiaries)
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Award
date
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
20 Nov 14
Fair
value
per
options
at grant
date
Vesting
date
Exercise
price
Expiry
date
Vested
during
the year
No.
Lapsed
during
the year
No.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20 Nov 14
0.8 cents
20 Nov 17
–
20 Nov 15
0.5 cents
20 Nov 18
3,166,667
20 Nov 16
(ii)
20 Nov 19
20 Nov 14
0.8 cents
20 Nov 17
–
–
20 Nov 15
0.5 cents
20 Nov 18
500,000
20 Nov 16
(ii)
20 Nov 19
20 Nov 14
0.8 cents
20 Nov 17
–
–
20 Nov 15
0.5 cents
20 Nov 18
500,000
20 Nov 16
(ii)
20 Nov 19
20 Nov 14
0.8 cents
20 Nov 17
–
–
20 Nov 15
0.5 cents
20 Nov 18
500,000
20 Nov 16
(ii)
20 Nov 19
20 Nov 14
0.8 cents
20 Nov 17
–
–
–
20 Nov 15
0.5 cents
20 Nov 18
3,166,667
20 Nov 16
(ii)
20 Nov 19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(i)
(ii)
At the direction of Mr Hicks, options were issued to Acacia Investments Pty Ltd (Acacia). Mr Hicks is neither a director, shareholder or
beneficiary of Acacia or any trust where Acacia is the trustee.
Exercise price will be calculated from the volume weighted average share price for the ten (10) trading days after 20 November 2016
for each Tranche PLUS a premium of 50%.
24 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (cont’d)
E.
Additional information
Performance income as a proportion of total compensation
No performance based bonuses have been paid to directors or executives during the financial year.
Key management personnel equity holdings
Fully paid ordinary shares of Hannans Ltd
Key management personnel
2016
Damian Hicks
Jonathan Murray
Markus Bachmann
Olof Forslund
Amanda Scott (i)
Balance at
1 July
No.
Granted as
remuneration
No.
Received on
exercise of
options
No.
6,000,001
5,249,129
58,582,353
–
260,001
70,091,484
–
–
–
–
–
–
–
–
–
–
–
–
Net other
change
No.
416,666
1,250,000
2,500,000
–
–
Balance at
30 June
No.
6,416,667
6,499,129
61,082,353
–
260,001
4,166,666
74,258,150
(i)
Ms Scott was appointed as a Director of the Swedish subsidiaries on 29 March 2014.
Options of Hannans Ltd
Key management personnel
2016
Damian Hicks (i)
Jonathan Murray
Markus Bachmann
Olof Forslund
Amanda Scott (ii)
Balance
at
1 July
No.
Granted
as
remune-
ration
No.
Vested at 30 June
Options
exer-
cised
No.
Net other
change
No.
Balance
at
30 June
No.
Exer-
cisable
No.
Not
exer-
cisable
No.
9,500,000
1,500,000
1,500,000
1,500,000
9,500,000
23,500,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,500,000
6,333,334
3,166,666
1,500,000
1,000,000
500,000
1,500,000
1,000,000
500,000
1,500,000
1,000,000
500,000
9,500,000
6,333,334
3,166,666
23,500,000
15,666,668
7,833,332
(i)
At the directions of Mr Hicks, options were issued to Acacia Investments Pty Ltd (Acacia). Mr Hicks is neither a director, shareholder or
beneficiary of Acacia or any trust where Acacia is the trustee.
(ii) Ms Scott exercised 1 million options on 20 July 2016.
The options include those held directly, indirectly and beneficially by KMP.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 25
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (cont’d)
E.
Additional information (cont’d)
Loans to KMP and their related parties
Details regarding loans outstanding at the reporting date to key management personnel and their related parties at any time in the reporting
period, are as follows:
Director
Damian Hicks
Balance
1 July 2015
$
Balance
30 June 2016
$
Interest
charged
$
Highest
balance in
period
$
Number of
KMP in Group
168,985
168,985
–
–
–
–
168,985
168,985
–
The Board approved a loan for $300,000 at 6% per annum repayable on or before 31 March 2015. The loan funds were used to exercise
1,500,000 options in Hannans at an exercise price of $0.20 per option. The interest charged has been suspended while Mr Hicks’ salary is
being deferred, therefore the interest charged for the year amounted to Nil (2015: Nil). The Company has agreed to suspend interest
charged, principal repayments and interest payments until further notice. The loan repayment date was extended by two (2) years to 31
March 2017.
On 15 September 2016 Hannans held a General Meeting and shareholders approved to forgive the outstanding loan amount of $168,985.
The Board determined that the loan is non-recoverable and was derecognised as a receivable as at 30 June 2016. Refer to the Notice of
General Meeting released on ASX dated 12 August 2016 for further information.
Other transactions and balances with KMP and their related parties
Director transactions
Steinepreis Paganin, of which Mr Jonathan Murray is a partner, provided legal services amounting to $39,974 (2015: $10,585) to the Group
during the year. The amounts paid were on arm’s length commercial terms. Mr Murray’s director’s fees are also paid to Steinepreis Paganin
and remain unpaid since January 2014. At 30 June 2016 $84,529 (2015: $449) was owing to Steinepreis Paganin which consists of $7,227 for
legal services and $77,302 accrued directors fee from 1 January 2014 to 30 June 2016. Mr Murray’s outstanding directors’ fees are expected
to be settled by the issue of ordinary shares, together with one free attaching option for each ordinary shares issued. The ordinary shares will
be deemed to have an issue price equal to the volume weighted average sale price of shares sold on ASX during the 40 trading days after
the date of the General Meeting. The issue of ordinary shares and attaching options are anticipated to be completed by 11 November 2016.
End of Remuneration Report
Directors Meetings
The following tables set information in relation to Board meetings held during the financial year.
Board Member
Damian Hicks
Jonathan Murray
Markus Bachmann
Olof Forslund
Board Meetings
Held while
Director
Attended
Circular
Resolutions
Passed
4
4
4
4
4
4
4
4
8
8
8
8
Total
12
12
12
12
26 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
PROJECTS
The Projects are constituted by the following tenements:
Tenement
Interest
Tenement
Interest
Tenement
Interest
Tenement Number
% Note
Tenement Number
% Note
Tenement Number
% Note
SWEDEN
Project: Kiruna Iron
Kiruna North Prospect
Altavaara Norra
Kiruna Central Prospect
Laukujärvi nr 3
Pahtohavare nr 2
Pahtohavare nr 4
Rakkurijärvi nr 2
Vieto nr 1
AUSTRALIA
Project: Forrestania
E77/2207-I
E77/2219-I
E77/2220-I
E77/2239-I
100
75
65
65
100
75
100
100
100
100
1
2
2
1
3
3
3
3
Project: Kiruna Iron
Kiruna South Prospect
Ekströmsberg nr 4
Ekströmsberg nr 5
Harrejaure nr 1
Piedjastjokko nr 6
Project: Lannavaara
Lannavaara nr 8
Paljasjärvi nr 2
100
100
75
100
100
100
Project: Varuträsk
Hällberg nr 1
Hällberg nr 2
Kågedalen nr 1
1
Kågedalen nr 2
Klöverfors nr 1
Nide nr 1
Tvärliden nr 1
Varuträsk nr 1
Varuträsk nr 2
Vorrmyran nr 1
Project: Forrestania
Project: Lake Johnston
E77/2303
P77/4290
P77/4291
100
100
100
3
3
3
E63/1365
Project: Queen Victoria Rocks
E15/1416
100
100
3
3
NOTE:
1
2
3
Kiruna Iron AB holds 75% interest and Tasman Metals AB holds 25% interest.
Kiruna Iron AB holds 65% interest and Lovisagruvan AB holds 35% interest.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of 620,833,333 Hannans shares to
Neometals Limited in consideration of the acquisition of 100% of the share capital in Reed Exploration Pty Ltd (Reed Exploration).
Reed Exploration owns the balance 80% interest in the Lake Johnston Project and Queen Victoria Rocks Project and the non-gold
rights at the Forrestania Project. Following the completion of the acquisition on 29 September 2016, Hannans owns 100% of the Lake
Johnston Project and Queen Victoria Project, and 100% of the non-gold mineral rights and 20% of the gold rights (free carried) at the
Forrestania Project.
TENEMENTS UNDER APPLICATION
Applications for tenements have been submitted are as follows:
Tenement Number
Tenement Number
Tenement Number
SWEDEN
Project: Varuträsk
Kågedalen nr 3
Kågedalen nr 4
Project: Varuträsk
Varuträsk nr 3
Varuträsk nr 4
Project: Kiruna Iron
Rakkurijärvi nr 5
H A N N A N S A N N U A L R E P O R T 2 0 1 6 27
DIRECTORS’ REPORT
CAPITAL
Hannans Ltd issued capital is as follows:
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of ordinary shares in lieu of the Managing
Director and the Non-Executive Directors outstanding fee of $306,587, together with one free attaching option for each ordinary shares
issued. The ordinary shares will be deemed to have an issue price equal to the volume weighted average sale price of shares sold on ASX
during the 40 trading days after the date of the General Meeting. The issue of ordinary shares and attaching options are anticipated to be
completed by 11 November 2016. The capital structure of Hannans will increase as a result of the shares and options issue by
11 November 2016.
Ordinary Fully Paid Shares
At the date of this report there are the following number of Ordinary fully paid shares
Ordinary fully paid shares at 30 June 2016
Exercise of options at 0.4 cents, expiring 3 June 2018
Exercise of options at 0.5 cents, expiring 20 November 2018
Issue of shares* – acquisition of Reed Exploration Pty Ltd (refer note 28(e))
Ordinary fully paid shares at the date of this report
Number of shares
970,707,755
31,250,000
4,166,667
620,833,333
1,626,957,755
* The issued shares are subject to escrow period of twelve (12) months from date of issue that must be satisfied before the Shares can be
sold, transferred, or encumbered. The issued shares will be released from escrow on 29 September 2017.
At a general meeting of shareholders:
(a)
(b)
on a show of hands, each person who is a member or sole proxy has one vote; and
on a poll, each shareholder is entitled to one vote for each fully paid share.
Shares Under Option
At the date of this report there are a total of 11 unlisted option holders holding 67,295,833 unissued ordinary shares in respect of which
options are outstanding. Gold Mines of Kalgoorlie Pty Ltd holds 31,250,000 unlisted options. The unlisted options do not carry voting rights at
a general meeting of shareholders.
Balance at the beginning of the year
Movements of share options during the year
Issued at 0.4 cents, expiring 10 March 2018
Issued at 0.4 cents, expiring 3 June 2018
Exercised at 0.4 cents, expiring 3 June 2018
Balance at 30 June 2016
Movements of share options from 1 July 2016 to the date of this report
Exercised at 0.4 cents, expiring 3 June 2018
Exercised at 0.5 cents, expiring 20 November 2018
Total number of options outstanding at the date of this report
Substantial Shareholders
Hannans Ltd has the following substantial shareholders as at 29 September 2016:
Number of options
36,050,000
31,250,000
41,662,500
(6,250,000)
102,712,500
(31,250,000)
(4,166,667)
67,295,833
Name
Gold Mines of Kalgoorlie Pty Ltd
Equity & Royalty Investments Ltd
MCA Nominees Pty Ltd
28 H A N N A N S A N N U A L R E P O R T 2 0 1 6
Number of shares
Percentage of issued capital
684,583,333
120,000,003
86,220,443
42.08
7.38
5.30
DIRECTORS’ REPORT
CAPITAL (cont’d)
Range of Shares as at 29 September 2016
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999
Total
Range
Total Holders
96
217
206
814
742
Units
28,578
747,631
1,735,694
38,447,446
1,585,998,406
2,075
1,626,957,755
% Issued Capital
0.00
0.05
0.11
2.36
97.48
100.00
Unmarketable Parcels as at 29 September 2016
Minimum $500.00 parcel at $0.017 per unit
29,412
Minimum parcel size
Holders
805
Units
8,063,251
Top 20 holders of Ordinary Shares as at 29 September 2016
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Gold Mines of Kalgoorlie Pty Ltd
Equity & Royalty Investments Ltd
MCA Nominees Pty Ltd
JP Morgan Nominees Australia Limited
Mr Bruce Drummond + Mrs Judith Drummond
Marfield Pty Ltd
CSB Investments (WA) Pty Ltd
Melaid Holding Inc
Errawarra Pty Ltd
Mr William Scott Rankin
HSBC Custody Nominees (Australia) Limited - A/C 2
Allua Holdings Pty Ltd
Mr Michael Sydney Simm
Citicorp Nominees Pty Limited
Mossisberg Pty Ltd
Mr Alexander Fairbairn Russell
Mr Daryl Ponsford
Anglo American Exploration BY
Acacia Investments Pty Ltd
Mr Robert Zupanovich
Units
684,583,333
120,000,003
86,220,443
67,181,102
27,000,000
23,672,157
20,834,666
16,719,600
16,000,000
11,358,942
10,374,351
10,000,000
9,462,454
8,970,606
8,096,642
8,000,000
7,930,000
7,389,162
7,157,168
6,500,000
% of Issued
Capital
42.08
7.38
5.30
4.13
1.66
1.45
1.28
1.03
0.98
0.70
0.64
0.61
0.58
0.55
0.50
0.49
0.49
0.45
0.44
0.40
Total of Top 20 Holders of ORDINARY SHARES
1,157,450,629
71.14
H A N N A N S A N N U A L R E P O R T 2 0 1 6 29
DIRECTORS’ REPORT
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were the exploration and evaluation of mining tenements with the objectives of
identifying economic mineral deposits.
FINANCIAL REVIEW
The Group began the financial year with cash reserves of $345,497.
During the year total exploration expenditure expensed by the Group amounted to $29,998 (2015: $387,160). The exploration expenditures
relate to non JORC compliant mineral resource projects and this has been expensed in accordance with the Group’s accounting policy. In
addition, exploration expenditure relating to expenditure on JORC compliant mineral resource project amounted to $97,599 (2015: $161,630)
was capitalised in accordance with the Group’s accounting policy. Impairment assessment is carried out at each reporting date by evaluating
the conditions specific to the Group and the assets that may lead to impairment. Taking into consideration the relinquishment of tenements
during the year the Board has decided to write off the capitalised exploration expenditure of $123,945 (2015: $28,275,372 impaired) in line
with the assessment of the Group. This will have no impact on the Group’s cash position. The administration expenditure incurred amounted
to $1,112,895 (2015: $961,192). This has resulted in an operating loss after income tax for the year ended 30 June 2016 of $964,387 (2015:
$29,120,403 loss).
Hannans also achieved notable savings in administration expenses following a review of all corporate and operating costs during the year
which saw the Group securing additional fixed cost arrangements to reduce the Perth office rent.
As at 30 June 2016 cash and cash equivalents totalled $1,425,160.
Summary of 5 Year Financial Information as at 30 June
Cash and cash equivalents ($)
Net assets/equity ($)
2016
1,425,160
903,218
2015
345,497
2014
695,163
2013
1,809,204
2012
167,740
73,563
29,189,786
30,363,102
32,071,828
Exploration expenditure expensed ($)
(29,998)
(387,160)
(534,311)
(2,896,893)
(5,355,852)
Exploration and evaluation
expenditure capitalised ($)
No of issued shares
No of options
Share price ($)
(97,599)
(161,630)
(577,164)
(837,196)
–
970,707,755
102,712,500
721,966,133
36,050,000
721,966,133
Nil
706,966,133
300,000
479,772,810
31,210,017
0.016
0.002
0.005
0.015
0.038
Market capitalisation (Undiluted) ($)
15,531,324
1,443,932
3,609,831
10,604,492
18,231,367
Summary of Share Price Movement for Year ended 30 June 2016
Highest
Lowest
Latest
Price (cents)
2.1
0.2
1.7
Date
10 June 2016
1 – 21 July 2015
21 Dec 2015
23 Dec 2015 – 6 Jan 2016
11 Jan – 16 Feb 2016
29 September 2016
30 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
ANNOUNCEMENTS
ASX Announcements for the year and to the date of this report
Date
Announcement Title
Date
Announcement Title
29 Sep 2016
Strategic Collaboration Completed
27 Sep 2016
In-specie Distribution Completed
14 Apr 2016
11 Apr 2016
Share Purchase Plan (SPP) Documentation
Placement, Underwritten SPP and Preferred
Contract
15 Sep 2016
Voting results from General Meeting
17 Mar 2016
Cleansing Notice
15 Sep 2016
In-specie Presentation
15 Mar 2016
Half-Year Financial Report
15 Sep 2016
General Meeting Presentation
11 Mar 2016
Change in substantial holding
15 Aug 2016
Updated Capital Structure
11 Mar 2016
Becoming a substantial holder from NMT
12 Aug 2016
Notice of General Meeting
11 Mar 2016
Placement to Neometals
11 Aug 2016
Update on Neometals Transaction
04 Mar 2016
Strategic Collaboration with Neometals
29 Jul 2016
4th Quarter Activities and Cashflow Report
03 Mar 2016
Trading Halt
27 Jul 2016
Drilling at Forrestania
17 Feb 2016
Lithium in Sweden
27 Jul 2016
Update on Neometals Transaction
29 Jan 2016
2nd Quarter Activities and Cashflow Report
22 Jul 2016
Change in substantial holding
10 Dec 2015
Updated Capital Structure
20 Jul 2016
Exercise of options
24 Nov 2015
2015 Annual General Meeting Results
19 Jul 2016
Response to ASX Price Query
24 Nov 2015
2015 AGM presentation
15 Jul 2016
Exercise of options
24 Nov 2015
Positive Joint Venture Decision
08 Jul 2016
Becoming a substantial holder
16 Nov 2015
Exploration at Forrestania
24 Jun 2016
Exercise of options
30 Oct 2015
1st Quarter Activities and Cashflow Report
17 Jun 2016
Change in substantial holding
28 Oct 2015
Discovery Zone Update
10 Jun 2016
Change in substantial holding – NMT
16 Oct 2015
Notice of Annual General Meeting
10 Jun 2016
Change in substantial holding – ERI
09 Oct 2015
Discovery Zone Update
10 Jun 2016
Becoming a substantial holder
30 Sep 2015
Appendix 4G
09 Jun 2016
Response to ASX Price Query
30 Sep 2015
2015 Annual Report
07 Jun 2016
Updated Capital Structure
30 Sep 2015
High Grade Copper
26 May 2016
Updated Capital Structure
27 Aug 2015
High Grade Copper
23 May 2016
Placement and SPP Raises $1.43M
26 Aug 2015
Trading Halt
19 May 2016
Voting results from General Meeting
31 Jul 2015
4th Quarter Activities and Cashflow Report
16 May 2016
Purchase HNR Shares at 20% Discount
13 Jul 2015
Lapland Project Granted
29 Apr 2016
3rd Quarter Activities and Cashflow Report
06 Jul 2015
Drilling Copper-Gold Targets
14 Apr 2016
Notice of General Meeting
02 Jul 2015
Sale of Exploration Database
H A N N A N S A N N U A L R E P O R T 2 0 1 6 31
DIRECTORS’ REPORT
CORPORATE STRUCTURE
The corporate structure of Hannans group is as follows:
Hannans Ltd
(ASX: HNR)
HR Forrestania
Pty Ltd
(100%)
HR Equities
Pty Ltd
(100%)
Critical Metals Ltd
(100%)
Scandinavian Resources Pty Ltd
(100%)
SR Equities
Pty Ltd
(100%)
Kiruna Iron
AB
(100%)
Scandinavian
Resources
AB
(100%)
On 15 September 2016 Hannans held a General Meeting and shareholders approved the equal reduction of capital and a pro rata in-specie
distribution of 99,987,442 Critical Metals shares to Hannans Shareholder and issue of 620,833,333 Hannans shares to Neometals Ltd in
consideration of the acquisition of 100% of the issued share capital of Reed Exploration Pty Ltd. On 27 September 2016 the in-specie
distribution was completed and on 29 September 2016 the acquisition of Reed Exploration Pty Ltd was completed. Refer to the Notice of
General Meeting released on ASX dated 12 August 2016 for further information.
32 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
The Board of Directors is responsible for the corporate governance of the Company. The Board guides and monitors the business affairs of
the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.
The ASX document ‘Corporate Governance Principles and Recommendations 3rd Edition' published by the ASX Corporate Governance Council
applies to listed entities with the aim of enhancing the credibility and transparency of Australia’s capital markets. The Principles and
Recommendations can be viewed at www.asx.com.au.
The Board has assessed the Group’s current practice against the Principles and Recommendations and other than the matters specified
below under “If Not, Why Not” Disclosure, all the best practice recommendations of the ASX Corporate Governance Council have been
applied.
Please refer to the Company’s website (www.hannansreward.com) for Hannans’ Governance Statements and Policies.
In relation to departures by the Company from the best practice recommendations, Hannans makes the following comments:
Principle 1: Lay solid foundations for management and oversight
1.5 A listed entity should have a diversity policy which includes requirements for the board to set measurable objectives for
achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them.
The Board is responsible for establishing and monitoring on an annual basis the achievement against gender diversity
objectives and strategies, including the representation of women at all levels of the organisation.
The proportion of women within the Group as at 30 June 2016 was as follows:
Employee
50%
Management
Board of Hannans
Board of subsidiaries
67%
0%
33%
The Board acknowledges the absence of female participation on the Board of Directors of the parent company. However, the
Board has determined that the composition of the current Board represents the best mix of Directors that have an appropriate
range of qualifications and expertise, can understand and competently deal with current and emerging business issues and
can effectively review and challenge the performance of management.
The Company has not set or disclosed measurable objectives for achieving gender diversity. As can be seen from the statistics
67% of senior management positions are filled by women. Due to the size of the Company, the Board does not deem it
practical to limit the Company to specific targets for gender diversity as it operates in a very competitive labour market where
positions are sometimes difficult to fill. However, every candidate suitably qualified for a position has an equal opportunity of
appointment regardless of gender, age, ethnicity or cultural background.
1.6 Companies should disclose, in relation to each reporting period, whether a performance evaluation of the Board was
undertaken in the reporting period in accordance with that process.
Evaluation of the Board is carried out on a continuing and informal basis. The Company will put a formal process in place as
and when the level of operations justifies it. No performance evaluation was undertaken in the reporting period.
1.7 Companies should disclose, in relation to each reporting period, whether a performance evaluation of its senior executives
was undertaken in the reporting period in accordance with that process.
Evaluation of the senior executives is carried out on a continuing and informal basis. The Company will put a formal process in
place as and when the level of operations justifies it. No performance evaluation was undertaken in the reporting period.
Principle 2: Structure the Board to add value
2.1 The Board should establish a nomination committee
The Board as a whole will decide on the choice of any new director upon the creation of any new Board position and if any
casual vacancy arises. Decisions to appoint new directors will be minuted. The Board will identify candidates and assess their
skills in deciding whether an individual has the potential to add value to the Company. The Board may also seek independent
advice to assist with the identification process. The Board considers that this process is appropriate given the size and the
complexity of the Group’s affairs. Until the situation changes the Board will carry out any necessary nomination committee
functions.
2.4 The majority of the Board should be independent directors
The Board consists of three Non–Executive Directors and a Managing Director. Details of their skills, experience and expertise
and the period of office held by each Director have been included in the Directors’ Report. The number of Board meetings and
the attendance of the Directors are set out in the Directors’ Report.
The Board considers that the composition of the existing Board is appropriate given the scope and size of the Group’s
operations and the skills matrix of the existing Board members. The Board will continue to monitor whether this remains
appropriate as the scope and scale of its activities evolves and expands. The Company does not have the financial resources
to pay the current Directors nor appoint additional Directors so until that situation changes the current Board will remain in
place.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 33
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT (cont’d)
2.5 The Chair of the Board should be an independent director and, in particular, should not be the same person as the Managing
Director/Chief Executive Officer
The current Chair of the Company, Mr Damian Hicks does not satisfy the ASX Corporate Governance Principles and
Recommendations definition of an independent director.
However the Board considers Mr Hicks’ role as Executive Chairman and Managing Director essential to the success of the
Group in its current stage, wherein the Group continues to refine its focus on the strategic development of the business. Over
time, it is proposed that the Chair position will transition to an independent non-executive director.
Principle 4: Safeguard integrity of corporate reporting
4.1 The Board should establish an audit committee
The Board as a whole meets with the auditor to identify and discuss the areas of audit focus, appropriateness of the
accounting judgement or choices exercised by management in preparation of the financial statements. The Board may also
seek independent advice as and when required to address matters pertaining to appointment, removal or rotation of auditor.
The Board considers that this process is appropriate given the size and the complexity of the Group’s affairs. It is not
considered necessary to have a separate audit committee.
Principle 7: Recognise and manage risk
7.1 The Board should establish a risk committee
The Company is constantly monitoring risks associated with the economy, industry and company due to their role as
professional fund managers, lawyers, in-country specialists and shareholders with a view to managing risks and identifying
threats. This process is on-going. The preparation of the Board pack and its timely distribution is a key element of this process
along with monthly cash flow budgets, management discussions and informal communications between the Board and
management via telephone, email and in person. The Board considers that this process is appropriate given the size and
complexity of the Group’s affairs. It is not considered necessary to have a separate risk committee.
7.2 The Board should review the entity’s risk management framework and disclose at each reporting period
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are
aligned with the risks and opportunities identified by the Board.
The Company believes that it is crucial for all Board members to be part of this process, and as such the Board has not
established a separate risk management committee. The Board considers that this process is appropriate given the size and
the complexity of the Group’s affairs.
The Board has a number of mechanisms in place to ensure management’s objectives and activities are aligned by the Board.
These include but are not limited to the following:
Board approval of a strategic plan, which
Implementation of Board approved operating plans
and Board monitoring of the progress against
budgets that is reviewed at every board meeting.
encompasses strategy statements designed to meet
stakeholders’ needs and manage business risk.
7.3 The Company should establish an internal audit function
The Company reviews its risk and internal control processes on a continual informal basis and work alongside auditors at half
year and year end reviews to identify the Company’s risks, systems and procedures. The Company may also seek
independent advice to assist with the identification of risks and processes if and when required. The Board considers that this
process is appropriate given the size and the complexity of the Group’s affairs. It is not considered necessary to have an
internal audit function. Nonetheless it remains committed to effective management and control of these factors.
7.4 The Company should disclose whether it has any material exposure to economic, environmental and social sustainability
risks and how it manages or intends to manage those risks
The nature of the Group’s exploration operations are such that it could be seen to be constantly exposed to economic,
environmental and social risks. The Board and Management have respect for the rights and beliefs of all stakeholders and it is
part of the Group’s culture to have open, honest and constant two way communication with stakeholders and to operate fully
within the laws of the jurisdictions the Group operates within. The Group maintains high standards with regards its
environmental and social practices and is constantly striving to improve its engagement and information processes. The Board
and Management will continue to monitor these risks to the Group.
34 H A N N A N S A N N U A L R E P O R T 2 0 1 6
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT (cont’d)
Principle 8: Remunerate fairly and responsibly
8.1 The Board should establish a remuneration committee
The Board as a whole may appoint independent a working group comprising consultants, Directors and/or Company Secretary
to review and make recommendations to the board in relation to the remuneration framework, identify candidates and
assess their skills in deciding whether an individual has the potential to add value to the Company. The Board considers that
this process is appropriate given the size and the complexity of the Group’s affairs. It is not considered necessary to have a
separate nomination or remuneration committee. Until the situation changes the Board of Hannans will carry out any
necessary remuneration committee functions.
Independent Professional Advice
Directors of the Company are expected to exercise considered and independent judgement on matters before them and may need to seek
independent professional advice. A director with prior written approval from the Chairman may, at the Group’s expense obtain independent
professional advice to properly discharge their responsibilities.
Managing Director (MD) and Group Accountant Certifications
The MD and Group Accountant provide the following declaration to the Board in respect of each quarter, half and full year financial period:
that Hannans financial records have been properly maintained;
that Hannans’ financial statements, in all material respects, are complete and present a true and fair view of the financial condition
and operational results of Hannans and the Group and are in accordance with the relevant accounting standards;
that the financial statements are founded on a sound system of risk management and internal compliance and control which
implements the policies adopted by the Board; and
that Hannans’ risk management and internal compliance and control systems are operating effectively in all material respects.
COMPLIANCE
Significant Changes in State of Affairs
Other than those disclosed in this annual report no significant changes in the state of affairs of the Group occurred during the financial year.
Significant Events after the Balance Date
On 7 June 2016 Avalon Minerals Ltd (Avalon, ASX:AVI) served Hannans with a Writ issued out of the Supreme Court of Western Australia for
$1 million in relation to the Discovery Zone transaction. Hannans filed and served Avalon with a Defence and Counterclaim for $9 million.
Hannans applied for a summary judgement in respect of Avalon’s claim and came before the Supreme Court on 6 September 2016. Avalon
approached Hannans for a private mediation on the matter after the court hearing. The rights and obligations of this matter have been
transferred to spin out company Critical Metals Ltd.
On 15 July 2016, 25 million unlisted options exercisable at 0.4 cents expiring on or before 3 June 2016 were exercised. On 20 July 2016, 4.2
unlisted options related to the Employee Share Option Plan (Tranche 2) exercisable at 0.5 cents on or before 20 November 2018 were
exercised. On 15 August 2016 a further 6.25 million unlisted options exercisable at 0.4 cents expiring on or before 3 June 2016 were
exercised.
On 15 September 2016 Hannans held a General Meeting and announced that all resolutions put to the shareholder were passed by a show
of hands and a majority of proxy votes cast were in favour of all resolutions. Refer to the Notice of General Meeting released on ASX dated
12 August 2016 for further information.
On 27 September 2016 the equal reduction of capital and in-specie distribution of 99,987,442 Critical Metals Shares was completed.
On 28 September 2016 the parties to the Discovery Zone transaction executed a Deed of Termination, Settlement and Release meaning that
all legal disputes and court actions between the respective companies have been settled, without an admission of liability by either party and
this matter is now resolved.
On 29 September 2016 Hannans completed the issue of 620,833,333 shares to Neometals Ltd in consideration of the acquisition of 100%
of the issued share capital of Reed Exploration Pty Ltd.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the Group, the results of those operations, or state of affairs of the Group in future financial years.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 35
DIRECTORS’ REPORT
COMPLIANCE (cont’d)
Likely developments and Expected Results
The Group expects to maintain the present status and level of operations and hence there are no likely developments in the Group’s
operations.
Environmental Regulation and Performance
The Group is subject to significant environmental regulation in respect to its exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it’s aware of and is in
compliance with all environmental legislation. The Directors of the Group are not aware of any breach of environmental legislation for the
year under review.
Share options
As at the date of this report, there were 67,295,833 unissued ordinary shares under options (102,712,500 at the reporting date). Refer to the
remuneration report for further details of the options outstanding.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of ordinary shares in lieu of the Managing
Director and the Non-Executive Directors outstanding fee of $306,587, together with one free attaching option for each ordinary shares
issued. The ordinary shares will be deemed to have an issue price equal to the volume weighted average sale price of shares sold on ASX
during the 40 trading days after the date of the General Meeting. The issue of ordinary shares and attaching options are anticipated to be
completed by 11 November 2016. The capital structure of Hannans will increase as a result of the shares and options issue by
11 November 2016.
Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.
Insurance of Directors and Officers
During or since the end of the financial year, the Company has paid premiums insuring all the Directors of Hannans Ltd against costs incurred
in defending conduct involving:
(a)
(b)
A wilful breach of duty, and
A contravention of sections 182 or 183 of the Corporations Act 2001,
as permitted by section 199B of the Corporations Act 2001.
The total amount of insurance contract premiums paid is $10,827.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to
indemnify Ernst & Young during or since the financial year.
Dividends
No dividends were paid or declared during the financial year and no recommendation for payment of dividends has been made.
Non–Audit Services
During the year Ernst & Young or any of its associated entities, the Group auditor, has performed other non-audit services in addition to its
statutory duties. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor
independence was not compromised.
Ernst & Young or any of its associated entities received or are due to receive $27,774 for the provision of tax compliance services and
professional services with regards to the members’ voluntary liquidation of Kiruna Iron Ltd (UK).
Auditor’s independence declaration
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 37.
Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Damian Hicks
Managing Director
Perth, Australia this 30th day of September 2016
36 H A N N A N S A N N U A L R E P O R T 2 0 1 6
INDEPENDENCE DECLARATION TO THE DIRECTORS OF
HANNANS LTD
H A N N A N S A N N U A L R E P O R T 2 0 1 6 37
DIRECTORS’ DECLARATION
The Directors declare that:
(a)
(b)
in the Directors’ opinion, subject to achieving the matters set out in note 2 to the financial report, there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they become due and payable;
in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with Australian Accounting Standards and International Financial Reporting Standards as disclosed in note 2 to the
financial report and giving a true and fair view of the financial position and performance of the Group for the financial year ended
30 June 2016;
(c)
the audited remuneration disclosures set out in the Directors’ Report comply with the Corporations Act and Regulations 2001; and
(d)
the Directors have been given the declarations required by s.295A of the Corporations Act 2001 for the financial year ended
30 June 2016.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Damian Hicks
Managing Director
Perth, Australia this 30th day of September 2016
38 H A N N A N S A N N U A L R E P O R T 2 0 1 6
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
HANNANS LTD
H A N N A N S A N N U A L R E P O R T 2 0 1 6 39
40 H A N N A N S A N N U A L R E P O R T 2 0 1 6
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the financial year ended 30 June 2016
Revenue
Other income
Other income
Gain on disposal of shares
Employee and contractors expenses
Depreciation expense
Consultants expenses
Interest expense
Occupancy expenses
Marketing expenses
Exploration and evaluation expenses
Write off exploration and evaluation expenses
Impairment of exploration and evaluation expenses
Transfer of available-for-sale revaluation reserve from
other comprehensive income
Other expenses
Note
5(a)
5(b)
5(c)
5(d)
5(e)
5(f)
2016
$
203,181
251,301
325
(345,241)
(18,175)
(232,925)
(1,630)
(133,354)
(4,699)
(29,998)
(123,945)
–
–
(529,227)
2015
$
50,630
452,691
–
(595,601)
(28,680)
(7,704)
(2,337)
(92,702)
(5,853)
(387,160)
–
(28,275,372)
(26,875)
(201,440)
Loss from continuing operations before income tax expense
(964,387)
(29,120,403)
Income tax benefit/(expense)
Loss from continuing operations attributable
to members of the parent entity
Other comprehensive income/(loss) for the year
Items that may be reclassified subsequently to profit or loss
6
–
–
(964,387)
(29,120,403)
Foreign currency translation differences for foreign operations
19
43,470
Net change in fair value of available-for-sale financial assets
Net change in fair value of available-for-sale financial assets
reclassified to profit or loss
Total items that may be reclassified subsequently to profit or loss
Items that will not be reclassified to profit or loss
Total other comprehensive income/(loss) for the year
–
–
43,470
–
43,470
(100,410)
2,335
26,875
(71,200)
–
(71,200)
Total comprehensive loss for the year
(920,917)
(29,191,603)
Net loss attributable to the parent entity
(964,387)
(29,120,403)
Total comprehensive loss attributable to the parent entity
(920,917)
(29,191,603)
Loss per share:
Basic (cents per share)
Diluted (cents per share)
The accompanying notes form part of the financial statements.
21
21
(0.13)
(0.13)
(4.03)
(4.03)
H A N N A N S A N N U A L R E P O R T 2 0 1 6 41
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2016
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Assets held for distribution
Total current assets
Non–current assets
Other receivables
Property, plant and equipment
Other financial assets
Exploration and evaluation expenditure
Total non–current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions
Other financial liabilities
Liabilities directly associated with the assets held for distribution
Total current liabilities
Non–current liabilities
Provisions
Other financial liabilities
Total non–current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Reserves directly associated with the assets held for distribution
Accumulated losses
TOTAL EQUITY
The accompanying notes form part of the financial statements.
42 H A N N A N S A N N U A L R E P O R T 2 0 1 6
Note
2016
$
29(a)
1,425,160
2015
$
345,497
76,590
5,526
427,613
–
427,613
154,275
29,681
168,985
1,356,340
1,709,281
2,136,894
1,737,519
244,585
2,884
1,984,988
–
1,984,988
78,343
–
78,343
71,079
1,301
1,497,540
1,631,931
3,129,471
56,000
12,047
53,582
–
121,629
3,251,100
830,230
121,727
32,472
984,429
1,243,569
2,227,998
–
119,884
119,884
2,347,882
2,063,331
903,218
73,563
46,285,309
44,577,512
118,155
(269,880)
(237,970)
–
(45,230,366)
(44,265,979)
903,218
73,563
10
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44 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
for the financial year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Receipt of exclusive due diligence fee
Receipt/(payments) for exploration and evaluation
Payments to suppliers and employees
Interest received
Interest paid
Note
2016
$
2015
$
328,095
–
7,329
(927,917)
6,300
(1,541)
135,630
559,498
(336,455)
(878,136)
10,407
(1,838)
Net cash used in operating activities
29(b)
(587,734)
(510,894)
Cash flows from investing activities
Payments for exploration and evaluation
Proceeds on sale of investment securities
Proceeds on sale of fixed assets
Amounts received from outside entities
Payment for property, plant and equipment
Release of security bonds
Receipt of payment for first tranche for the Joint Venture Cooperation
on Pahtohavare (note 14)
Net cash provided by investing activities
Cash flows from financing activities
Proceeds from issues of equity securities
Proceeds from exercise of options
Payment for share issue costs
Repayment of borrowings/finance leases
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial year
29(a)
1,675,160
The accompanying notes form part of the financial statements.
(97,599)
(161,630)
5,420
16,391
188,289
(518)
98,567
–
210,550
1,743,300
25,000
(60,503)
(2,971)
1,704,826
1,327,642
345,497
2,021
–
3,641
86,743
–
86,000
151,100
165,854
–
–
–
(5,093)
(5,093)
(350,133)
695,163
467
345,497
H A N N A N S A N N U A L R E P O R T 2 0 1 6 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
1.
General Information
The consolidated financial statements of Hannans Ltd (the Company or Hannans) and its subsidiaries (collectively, the Group) for the
year ended 30 June 2016 were authorised for issue in accordance with a resolution of the Directors on 27 September 2016.
Hannans Ltd is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the
Australian Securities Exchange.
The nature of the operations and principal activities of the Group are mineral exploration and project development which is further
described in the Directors' Report. Information on other related party relationships is provided in note 27.
2.
Summary of significant accounting policies
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report includes the financial statements of the Hannans Ltd and its subsidiaries.
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
(a)
Basis of preparation
The financial report has been prepared on an accruals basis and is based on historical cost, except for certain financial assets
and liabilities which are carried at fair value. Cost is based on the fair values of the consideration given in exchange for assets.
All amounts are presented in Australian dollars, unless otherwise noted.
Separate financial statements for Hannans Ltd as an individual entity are no longer presented as the consequence of a change
to the Corporations Act 2001, however, required financial information for Hannans Ltd as an individual entity is included in note
32.
The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2016
and the comparative information presented in these financial statements for the year ended 30 June 2015.
Going concern basis of preparation
The Group recorded a loss of $964,387 (2015: loss $29,120,403) for the year ended 30 June 2016 and had a cash outflow from
operating and investing activities of $377,184 (2015: $345,040 outflow) during the twelve (12) month period. The Group had
cash and cash equivalents at 30 June 2016 of $1,425,160 (2015: $345,497) and has a working capital surplus of $513,111
(2015: $1,557,375 deficit), excluding the $1.63 million assets held for distribution as approved by shareholders at a General
Meeting held on 15 September 2016 and a $1.24 million relating to liabilities directly associated with the assets held for
distribution.
Notwithstanding the above the directors consider they have a reasonable basis to prepare the financial statements on a going
concern basis after having regard to the following:
(i)
On 28 September 2016 Avalon Minerals Ltd (Avalon) and Hannans executed a Deed of Termination, Settlement and
Release for the Discovery Zone transaction which means that all legal disputes and court actions between the respective
companies have been settled with no financial impact on the continuing Hannans’ Group, without an admission of liability
by either party and this matter is now resolved.
(ii) On 15 September 2016 Hannans held a General Meeting and shareholders approved the following matters which has a
positive impact on the cashflow of the Company:
issue of ordinary shares in lieu of the Managing Director and Non-Executive Directors outstanding salary and fees of
$380,806, recognised as creditors as at 30 June 2016;
divestment of the Group’s Scandinavian operations via the distribution of 100% of the shares capital in Critical
Metals Ltd to shareholders; and
acquisition of 100% of the issued share capital of Reed Exploration Pty Ltd (Reed). On acquisition, Reed will have a
cash balance of $1 million less the costs of the nickel exploration drilling completed in September 2016 estimated to
be a maximum of $250,000.
(iii)
The directors have an established track record of being able to raise equity when required.
In the event that the Group is unable to raise additional funds to meet the Group’s ongoing working capital requirements when
required, there is a significant uncertainty as to whether the Group will be able to meet its debts as and when they fall due and
thus continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, nor to the amounts or classification of liabilities that might be necessary should the Group not be able to continue as
a going concern.
46 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods
New standards, interpretations and amendments adopted by the Group during the financial year
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed
in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2015, except for the
adoption of new standards and interpretations effective as of 1 July 2015 as detailed below. The nature and the impact of each
new standard or amendment are described below:
AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and
Financial Instruments
The Standard contains three main parts and makes amendments to a number Standards and Interpretations.
Part A of AASB 2013-9 makes consequential amendments arising from the issuance of AASB CF 2013-1.
Part B makes amendments to particular Australian Accounting Standards to delete references to AASB 1031 and also
makes minor editorial amendments to various other standards.
Part C makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6 Hedge
Accounting into AASB 9 Financial Instruments. Adoption of AASB 2013-9 did not impact the Group financial statements.
Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
The Standard completes the AASB’s project to remove Australian guidance on materiality from Australian Accounting
Standards. Adoption of the amendment did not impact the Group financial statements.
New standards issued but not yet effective
The following standards and interpretations have been issued by the AASB but are not yet effective and have not been early
adopted by the Group for the period ended 30 June 2016:
Reference / Title
AASB 9
Financial Instruments
Application date of standard
Application date for Group
1 January 2018
1 July 2018
Summary
AASB 9 (December 2014) is a new standard which replaces AASB 139. This new version supersedes AASB 9
issued in December 2009 (as amended) and AASB 9 (issued in December 2010) and includes a model for
classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1 January 2018. However, the Standard is
available for early adoption. The own credit changes can be early adopted in isolation without otherwise
changing the accounting for financial instruments.
Classification and measurement
AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets
compared with the requirements of AASB 139. There are also some changes made in relation to financial
liabilities.
The main changes are described below.
Financial assets
(a) Financial assets that are debt instruments will be classified based on (1) the objective of the entity's
business model for managing the financial assets; (2) the characteristics of the contractual cash flows.
(b) Allows an irrevocable election on initial recognition to present gains and losses on investments in equity
instruments that are not held for trading in other comprehensive income. Dividends in respect of these
investments that are a return on investment can be recognised in profit or loss and there is no
impairment or recycling on disposal of the instrument.
(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition if
doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise
from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d)
New standards issued but not yet effective (cont’d)
Reference / Title
AASB 9 (cont’d)
Financial Instruments
Application date of standard
Application date for Group
1 January 2018
1 July 2018
Summary
(cont’d)
Financial liabilities
Changes introduced by AASB 9 in respect of financial liabilities are limited to the measurement of liabilities
designated at fair value through profit or loss (FVPL) using the fair value option.
Where the fair value option is used for financial liabilities, the change in fair value is to be accounted for as
follows:
The change attributable to changes in credit risk are presented in other comprehensive income (OCI)
The remaining change is presented in profit or loss
AASB 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities
elected to be measured at fair value. This change in accounting means that gains or losses attributable to
changes in the entity’s own credit risk would be recognised in OCI. These amounts recognised in OCI are not
recycled to profit or loss if the liability is ever repurchased at a discount.
Impairment
The final version of AASB 9 introduces a new expected-loss impairment model that will require more timely
recognition of expected credit losses. Specifically, the new Standard requires entities to account for expected
credit losses from when financial instruments are first recognised and to recognise full lifetime expected
losses on a more timely basis.
Hedge accounting
Amendments to AASB 9 (December 2009 & 2010 editions and AASB 2013-9) issued in December 2013
included the new hedge accounting requirements, including changes to hedge effectiveness testing,
treatment of hedging costs, risk components that can be hedged and disclosures.
Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB
2009-11 and superseded by AASB 2010-7, AASB 2010-10 and AASB 2014-1 – Part E.
AASB 2014-7 incorporates the consequential amendments arising from the issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of AASB 9 (AASB 9 (December 2009) and AASB 9
(December 2010)) from 1 February 2015 and applies to annual reporting periods beginning on after 1 January
2015.
Impact
Management is in the process of determining the impact of this accounting standard.
AASB 2014-3
Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations
[AASB 1 & AASB 11]
1 January 2016
1 July 2016
Summary
AASB 2014-3 amends AASB 11 Joint Arrangements to provide guidance on the accounting for acquisitions of
interests in joint operations in which the activity constitutes a business. The amendments require:
(a) the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in
AASB 3 Business Combinations, to apply all of the principles on business combinations accounting in AASB
3 and other Australian Accounting Standards except for those principles that conflict with the guidance in
AASB 11
(b) the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for
business combinations
This Standard also makes an editorial correction to AASB 11.
Impact
When acquiring an interest in a joint operation in which the activity constitutes a business, the Group will be
required to apply all the principles on business combination accounting and disclose information required by
AASB 3.
48 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d)
New standards issued but not yet effective (cont’d)
Reference / Title
AASB 2014-4
Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to AASB 116 and AASB 138)
Application date of
standard
Application date for
Group
1 January 2016
1 July 2016
Summary
AASB 116 Property Plant and Equipment and AASB 138 Intangible Assets both establish the principle
for the basis of depreciation and amortisation as being the expected pattern of consumption of the
future economic benefits of an asset.
The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an
asset is not appropriate because revenue generated by an activity that includes the use of an asset
generally reflects factors other than the consumption of the economic benefits embodied in the
asset.
The amendment also clarified that revenue is generally presumed to be an inappropriate basis for
measuring the consumption of the economic benefits embodied in an intangible asset. This
presumption, however, can be rebutted in certain limited circumstances.
Impact
The adoption of AASB 2014-4 is not expected to significantly affect the Group’s deprecation method
in respect to property, plant and equipment.
AASB 15
Revenue from Contracts with Customers
1 January 2018
1 July 2018
Summary
AASB 15 Revenue from Contracts with Customers replaces the existing revenue recognition
standards AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations
(Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the
Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers,
Interpretation 131 Revenue—Barter Transactions Involving Advertising Services and
Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry). AASB 15
incorporates the requirements of IFRS 15 Revenue from Contracts with Customers issued by the
International Accounting Standards Board (IASB) and developed jointly with the US Financial
Accounting Standards Board (FASB).
AASB 15 specifies the accounting treatment for revenue arising from contracts with customers
(except for contracts within the scope of other accounting standards such as leases or financial
instruments). The core principle of AASB 15 is that an entity recognises revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or
services. An entity recognises revenue in accordance with that core principle by applying the
following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the performance obligations in the contract
(e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
AASB 2015-8 amended the AASB 15 effective date so it is now effective for annual reporting
periods commencing on or after 1 January 2018. Early application is permitted.
AASB 2014-5 incorporates the consequential amendments to a number Australian Accounting
Standards (including Interpretations) arising from the issuance of AASB 15.
AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15 amends
AASB 15 to clarify the requirements on identifying performance obligations, principal versus agent
considerations and the timing of recognising revenue from granting a licence and provides further
practical expedients on transition to AASB 15.
Impact
Given the Group’s current principal activities being that of exploration and evaluation, adoption of
AASB 15 is not expected to have a significant impact. The Group’s revenue recognition policy will be
reviewed to ensure compliance with AASB 15 upon adoption.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d)
New standards issued but not yet effective (cont’d)
Reference / Title
AASB 2014-10
Amendments to Australian Accounting Standards
– Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
Application date of
standard
Application date for
Group
1 January 2016
1 July 2016
Summary
AASB 2014-10 amends AASB 10 Consolidated Financial Statements and AASB 128 to address an
inconsistency between the requirements in AASB 10 and those in AASB 128 (August 2011), in
dealing with the sale or contribution of assets between an investor and its associate or joint venture.
The amendments require:
(a) a full gain or loss to be recognised when a transaction involves a business (whether it is housed
in a subsidiary or not)
(b) a partial gain or loss to be recognised when a transaction involves assets that do not constitute a
business, even if these assets are housed in a subsidiary.
AASB 2014-10 also makes an editorial correction to AASB 10.
AASB 2014-10 applies to annual reporting periods beginning on or after 1 January 2016. Early
adoption permitted.
Impact
The adoption of AASB 2014-10 is not expected to significantly impact the Group financial statement.
AASB 2015-1
Amendments to Australian Accounting Standards
– Annual Improvements to Australian Accounting Standards
2012–2014 Cycle
1 January 2016
1 July 2016
Summary
The subjects of the principal amendments to the Standards are set out below:
AASB 5 Non-current Assets Held for Sale and Discontinued Operations:
Changes in methods of disposal – where an entity reclassifies an asset (or disposal group)
directly from being held for distribution to being held for sale (or vice versa), an entity shall not
follow the guidance in paragraphs 27–29 to account for this change.
AASB 7 Financial Instruments: Disclosures:
Servicing contracts - clarifies how an entity should apply the guidance in paragraph 42C of AASB
7 to a servicing contract to decide whether a servicing contract is ‘continuing involvement’ for
the purposes of applying the disclosure requirements in paragraphs 42E–42H of AASB 7.
Applicability of the amendments to AASB 7 to condensed interim financial statements - clarify
that the additional disclosure required by the amendments to AASB 7 Disclosure–Offsetting
Financial Assets and Financial Liabilities is not specifically required for all interim periods.
However, the additional disclosure is required to be given in condensed interim financial
statements that are prepared in accordance with AASB 134 Interim Financial Reporting when its
inclusion would be required by the requirements of AASB 134.
AASB 119 Employee Benefits:
Discount rate: regional market issue - clarifies that the high quality corporate bonds used to
estimate the discount rate for post-employment benefit obligations should be denominated in
the same currency as the liability. Further it clarifies that the depth of the market for high quality
corporate bonds should be assessed at the currency level.
AASB 134 Interim Financial Reporting:
Disclosure of information ‘elsewhere in the interim financial report’ - amends AASB 134 to clarify
the meaning of disclosure of information ‘elsewhere in the interim financial report’ and to
require the inclusion of a cross-reference from the interim financial statements to the location of
this information.
The adoption of AASB 2015-1 is not expected to significantly impact disclosure in the Group interim
financial statement or the application of discount rates when determining long term employee
benefit obligations. The Company has classified the assets held for distribution in the current year
which will have no impact in future years.
Impact
50 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d)
New standards issued but not yet effective (cont’d)
Reference / Title
AASB 2015-2
Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 101
Application date of
standard
Application date for
Group
1 January 2016
1 July 2016
Summary
The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s
Disclosure Initiative project. The amendments are designed to further encourage companies to apply
professional judgment in determining what information to disclose in the financial statements. For example,
the amendments make clear that materiality applies to the whole of financial statements and that the
inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendments also
clarify that companies should use professional judgment in determining where and in what order information
is presented in the financial disclosures.
Impact
The adoption of AASB 2015-2 is not expected to significantly impact the information of financial disclosure in
the Group’s financial statements.
AASB 16
Leases
Summary
The key features of AASB 16 are as follows:
Lessee accounting
1 January 2019
1 July 2019
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value.
A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly
to other financial liabilities.
Assets and liabilities arising from a lease are initially measured on a present value basis. The
measurement includes non-cancellable lease payments (including inflation-linked payments), and also
includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option
to extend the lease, or not to exercise an option to terminate the lease.
AASB 16 contains disclosure requirements for lessees.
Lessor accounting
AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a
lessor continues to classify its leases as operating leases or finance leases, and to account for those two
types of leases differently.
AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information
disclosed about a lessor’s risk exposure, particularly to residual value risk.
AASB 16 supersedes:
(a) AASB 117 Leases
(b) Interpretation 4 Determining whether an Arrangement contains a Lease
(c) SIC-15 Operating Leases—Incentives
(d) SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application
is permitted, provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been
applied, or is applied at the same date as AASB 16.
Impact
Management is in the process of determining the impact of this accounting standard.
AASB 2016-2
Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107
1 January 2017
1 July 2017
Summary
This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require entities preparing financial
statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of
financial statements to evaluate changes in liabilities arising from financing activities, including both changes
arising from cash flows and non-cash changes.
Impact
The adoption of AASB 2016-2 is not expected to significantly impact the information of financial disclosure in
the Group’s financial statements.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
Statement of significant accounting policies (cont’d)
(b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d)
New standards issued but not yet effective (cont’d)
Reference / Title
AASB 2016-5
Amendments to Australian Accounting Standards
– Classification and Measurement of Share-based
Payment Transactions
Application date of
standard
Application date for
Group
1 January 2018
1 July 2018
Summary
This Standard amends AASB2 Share-based Payment to address:
(a) the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled
share-based payments;
(b) the classification of share-based payment transactions with a net settlement feature for withholding tax
obligations; and
(c) the accounting for a modification to the terms and conditions of a share-based payment that changes the
classification of the transaction from cash-settled to equity-settled.
Impact
Management is in the process of determining the impact of this accounting standard.
(c)
Cash and cash equivalents
(e)
Financial assets (cont’d)
Cash and cash equivalents comprise cash on hand, cash
in banks and investments in money market instruments
with original maturity of less than 3 months, net of
outstanding bank overdrafts.
(d)
Employee benefits
Provision is made for benefits accruing to employees in
respect of wages and salaries and annual leave when it
is probable that settlement will be required and they
are capable of being measured reliably.
Liabilities recognised in respect of employee benefits
expected to be settled within 12 months, are measured
at their nominal values using the remuneration rate
expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits
which are not expected to be settled within 12 months
are measured as the present value of the estimated
future cash outflows to be made by the entity in
respect of services provided by employees up to
reporting date.
(e)
Financial assets
Financial assets are recognised and derecognised on
trade date where purchase or sale of an investment is
under a contract whose terms require delivery of the
investment within the timeframe established by the
market concerned, and are initially measured at fair
value, net of transaction costs.
Subsequent to initial recognition, investments in
subsidiaries are measured at cost.
Other financial assets are classified into the following
specified categories: financial assets ‘at fair value
through profit or loss’, ‘available–for–sale’ financial
assets, and ‘loans and receivables’. The classification
depends on the nature and purpose of the financial
assets and is determined at the time of initial
recognition.
Financial assets at fair value through profit or loss
The Group classifies certain shares as financial assets at
fair value through profit or loss. Financial assets held for
trading purposes are classified as current assets and are
stated at fair value, with any resultant gain or loss
recognised in profit or loss.
Available–for–sale financial assets
Shares and options held by the Group are classified as
being available–for–sale and are stated at fair value less
impairment. Gains and losses arising from changes in
fair value are recognised directly in the available–for–
sale revaluation reserve, until the investment is
disposed of or is determined to be impaired, at which
time the cumulative gain or loss previously recognised
in the available–for–sale revaluation reserve is included
in profit or loss for the period.
Loans and receivables
Subsequent to initial recognition, trade receivables,
loans, and other receivables are recorded at amortised
cost using the effective interest rate method less
impairment.
Debt and equity instruments
Debt and equity instruments are classified as either
liabilities or as equity in accordance with the substance
of the contractual arrangement.
(f)
Financial instruments issued by the Company
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity
instruments are recognised directly in equity as a
reduction of the proceeds of the equity instruments to
which the costs relate. Transaction costs are the costs
that are incurred directly in connection with the issue of
those equity instruments and which would not have
been incurred had those instruments not been issued.
52 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(g)
Goods and services tax
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not
recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of an
asset or as part of an item of expense; or
ii.
for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables.
Cash flows are included in the cash flow statement on
a gross basis. The GST component of cash flows arising
from investing and financing activities which is
recoverable from, or payable to, the taxation authority
is classified as operating cash flows.
(h)
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to
determine whether there is any indication that those
assets have suffered an impairment loss. Where the
asset does not generate cash flows that are
independent from other assets, the Group estimates
the recoverable amount of the cash–generating unit to
which the asset belongs. If any such indication exists,
the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if
any), being the higher of the asset’s fair value less
costs to sell and value in use to the asset’s carrying
value. Excess of the asset’s carrying value over its
recoverable amount is expensed to the consolidated
statement of comprehensive income.
Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their
present value using a pre–tax discount rate that reflects
current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash–generating unit) is
increased to the revised estimate of its recoverable
amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount
that would have been determined had no impairment
loss been recognised for the asset (cash–generating
unit) in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a
revaluation increase.
(i)
Tax
Current tax
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated
using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for
current and prior periods is recognised as a liability (or
asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the full liability
method in respect of temporary differences arising
from differences between the carrying amount of
assets and liabilities in the financial statements and the
corresponding tax base of those items.
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments in
subsidiaries, branches, associates and joint ventures
except where the entity is able to control the reversal
of the temporary differences and it is probable that the
temporary differences will not reverse in the
foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with these
investments and interests are only recognised to the
extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of
the temporary differences and they are expected to
reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)
when the asset and liability giving rise to them are
realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by
reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that
would follow from the manner in which the entity
expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the entity intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or
income in the statement of comprehensive income,
except when it relates to items credited or debited
directly to equity, in which case the deferred tax is also
recognised directly in equity, or where it arises from
the initial accounting for a business combination, in
which case it is taken into account in the determination
of goodwill or excess.
Tax consolidation
Legislation to allow groups, comprising a parent entity
and its Australian resident wholly owned entities, to
elect to consolidate and be treated as a single entity for
income tax purposes was substantively enacted on 21
October 2002. The Company and its 100% owned
Australian resident subsidiaries have implemented the
tax consolidation legislation on 1 July 2008 with
Hannans Ltd as the head entity.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(j)
Exploration and evaluation expenditure
(k)
Joint arrangements (cont’d)
Exploration and evaluation expenditure incurred is
expensed immediately to the profit and loss where the
applicable area of interest does not contain a JORC
compliant mineral resource. Where the area of interest
contains a JORC compliant mineral resource exploration
and evaluation expenditure is capitalised. These costs
are carried forward only if they relate to an area of
interest for which rights of tenure are current and in
respect of which:
i.
such costs are expected to be recouped through
successful development and exploitation or from
sale of the area; or
ii. exploration and evaluation activities in the area
have not, at balance date, reached a stage which
permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves,
and active operations in, or relating to, the area are
continuing.
Accumulated costs in respect of areas of interest which
are abandoned are written off in full against profit or
loss in the year in which the decision to abandon the
area is made. A regular review is undertaken of each
area of interest to determine the appropriateness of
continuing to carry forward costs in relation to that area
of interest.
Notwithstanding the fact that a decision not to abandon
an area of interest has been made, based on the
above, the exploration and evaluation expenditure in
relation to an area may still be written off if considered
appropriate to do so.
(k)
Joint arrangements
Joint ventures
A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint
control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions
about the relevant activities require unanimous consent
of the parties sharing control.
The considerations made in determining significant
influence or joint control is similar to those necessary to
determine control over subsidiaries.
The Group’s investments in joint ventures are
accounted for using the equity method.
Under the equity method, the investment in a joint
venture is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise
changes in the Group’s share of net assets of the joint
venture since the acquisition date. Goodwill relating to
the joint venture is included in the carrying amount of
the investment and is neither amortised nor individually
tested for impairment.
The statement of profit or loss reflects the Group’s
share of the results of operations of the joint venture.
Any change in OCI of those investees is presented as
part of the Group’s OCI. In addition, when there has
been a change recognised directly in the equity of the
joint venture, the Group recognises its share of any
changes, when applicable, in the statement of changes
in equity. Unrealised gains and losses resulting from
transactions between the Group and joint venture are
eliminated to the extent of the interest in the joint
venture.
The aggregate of the Group’s share of profit or loss of a
joint venture is shown on the face of the statement of
profit or loss outside operating profit and represents
profit or loss after tax and non-controlling interests in
the subsidiaries of the joint venture.
The financial statements of the joint venture are
prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
After application of the equity method, the Group
determines whether it is necessary to recognise an
impairment loss on its investment in its joint venture.
At each reporting date, the Group determines whether
there is objective evidence that the investment in the
joint venture is impaired.
If there is such evidence, the Group calculates the
amount of impairment as the difference between the
recoverable amount of the joint venture and its carrying
value, then recognises the loss as ‘Share of profit of a
joint venture’ in the statement of profit or loss.
Upon loss of joint control over the joint venture, the
Group measures and recognises any retained
investment at its fair value. Any difference between the
carrying amount of the joint venture upon loss of joint
control and the fair value of the retained investment
and proceeds from disposal is recognised in profit or
loss.
Joint operations
The Group’s recognises its interest in joint operations by
recognising its:
Assets, including its share of any assets held jointly
Liabilities, including its share of any liabilities
incurred jointly
Revenue from the sale of its share of the output
arising from the joint operation
Share of the revenue from the sale of the output by
the joint operation
Expenses, including its share of any expenses
incurred jointly
(l)
Payables
Trade payables and other accounts payable are
recognised when the entity becomes obliged to make
future payments resulting from the purchase of goods
and services.
54 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(m)
Foreign currency translation
(n)
Principles of consolidation
Functional and presentation currency
The consolidated financial statements are presented in
Australian Dollars, which is Hannans Ltd’s functional and
presentation currency.
Transactions and balance
Transactions in foreign currencies are initially recorded
in the functional currency (Australian Dollars (AUD),
Swedish Krona (SEK) and Great Britain Pound (GBP)) by
applying the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at
the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value was
determined.
Differences arising on settlement or translation of
monetary items are recognised in profit or loss with the
exception of monetary items that are designated as
part of the hedge of the Group’s net investment of a
foreign operation. These are recognised in other
comprehensive income until the net investment is
disposed of, at which time, the cumulative amount is
reclassified to profit or loss. Tax charges and credits
attributable to exchange differences on those monetary
items are also recorded in other comprehensive
income.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of
non-monetary items measured at fair value is treated
in line with the recognition of gain or loss on change in
fair value of the item (i.e., translation differences on
items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss are also
recognised in other comprehensive income or profit or
loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into dollars at the rate of
exchange prevailing at the reporting date and their
statements of profit or loss are translated at exchange
rates prevailing at the dates of the transactions. The
exchange differences arising on translation for
consolidation are recognised in other comprehensive
income. On disposal of a foreign operation, the
component of other comprehensive income relating to
that particular foreign operation is recognised in profit
or loss.
The consolidated financial statements comprise the
financial statements of Hannans Ltd and its subsidiaries
as at and for the period ended 30 June 2016 (the
Group). Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement
with the investee and has the ability to affect those
returns through its power over the investee.
Specifically, the Group controls an investee if and only if
the Group has:
Power over the investee (i.e. existing rights that
give it the current ability to direct the relevant
activities of the investee);
Exposure, or rights, to variable returns from its
involvement with the investee; and
The ability to use its power over the investee to
affect its returns.
When the Group has less than a majority of the voting
or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether
it has power over an investee, including:
The contractual arrangement with the other vote
holders of the investee;
Rights arising from other contractual arrangements;
and
The Group’s voting rights and potential voting
rights.
The Group re-assesses whether or not it controls an
investee if facts and circumstances indicate that there
are changes to one or more of the three elements of
control. Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired
or disposed of during the year are included in the
statement of comprehensive income from the date the
Group gains control until the date the Group ceases to
control the subsidiary.
Profit or loss and each component of other
comprehensive income (OCI) are attributed to the
equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. When
necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions
between members of the Group are eliminated in full
on consolidation.
A change in the ownership interest of a subsidiary,
without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary,
it:
De-recognises the assets (including goodwill) and
liabilities of the subsidiary;
De-recognises the carrying amount of any non-
controlling interests;
De-recognises the cumulative translation
differences recorded in equity;
H A N N A N S A N N U A L R E P O R T 2 0 1 6 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
2.
Statement of significant accounting policies (cont’d)
(n)
Principles of consolidation (cont’d)
(q)
Revenue recognition (cont’d)
Recognises the fair value of the consideration
Service fee
received;
Recognises the fair value of any investment
retained;
Recognises any surplus or deficit in profit or loss;
and
Reclassifies the parent’s share of components
previously recognised in OCI to profit or loss or
retained earnings, as appropriate, as would be
required if the Group had directly disposed of the
related assets or liabilities.
A list of subsidiaries appears in note 4 to the financial
statements.
(o)
Plant and equipment
Plant and equipment are stated at cost less
accumulated depreciation and impairment loss. Cost
includes expenditure that is directly attributable to the
acquisition of the item.
Depreciation is provided on plant and equipment.
Depreciation is calculated on a straight line or
diminishing value basis so as to write off the net cost of
each asset over its expected useful life to its estimated
residual value. The estimated useful lives, residual
values and depreciation method are reviewed at the
end of each annual reporting period.
The depreciation rates used for each class of
depreciable assets are:
Class of fixed asset
Depreciation rate (%)
Office furniture
10.00 – 20.00
Building
2.50
Office equipment
7.50 – 66.67
Motor vehicles
16.67 – 25.00
(p)
Provisions
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation as a result of a past event at
reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a
provision is measured using the cashflows estimated to
settle the present obligation, its carrying amount is the
present value of those cashflows.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it
is virtually certain that recovery will be received and
the amount of the receivable can be measured reliably.
(q)
Revenue recognition
Dividend and interest revenue
Dividend revenue is recognised on a receivable basis.
Interest revenue is recognised on a time proportionate
basis that takes into account the effective yield on the
financial asset.
Revenue from service fee is recognised when the
service has been rendered in proportion to the stage of
completion. No revenue is recognised if there are
significant uncertainties regarding recovery of the
consideration due and the cost incurred or to be
incurred cannot be reliably measured.
(r)
Share–based payments
Equity–settled share–based payments are measured at
fair value at the date of grant. Fair value is measured
by use of the Black and Scholes model or Monte-Carlo
simulation model. The expected life used in the model
has been adjusted, based on management’s best
estimate, for the effects of non–transferability, exercise
restrictions, and behavioural considerations.
The fair value determined at the grant date of the
equity–settled share–based payments is expensed on a
straight–line basis over the vesting period, based on the
entity’s estimate of shares that will eventually vest.
For cash–settled share–based payments, a liability equal
to the portion of the goods or services received is
recognised at the current fair value determined at each
reporting date.
(s)
Fair value measurement
The Group measure capitalised exploration and
evaluation expenditure and available-for-sale financial
assets at fair value and receivables are measured at
amortised costs at each balance sheet date.
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most
advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in
active markets for identical assets or liabilities;
Level 2: Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable; or
Level 3: Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable.
(t)
Segment reporting policy
Operating segments are identified and segment
information disclosed on the basis of internal reports
that are regularly provided to, or reviewed by the
Group’s chief operating decision maker which, for the
Group, is the Board of Directors. In this regard, such
information is provided using similar measures to those
used in preparing the statement of comprehensive
income and statement of financial position.
56 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
3.
Critical accounting estimates and judgements
In the application of the Group’s accounting policies, which are described in note 2, management is required to make judgments,
estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting period are:
Key estimates — impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment
of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined taking into consideration the
assessment of the global market and with the decrease in valuations being attributed to exploration and mining companies. The
Board did not impair any expenditure (2015: $28,275,372 impaired) in line with the current transactions of the Group as at 30 June
2016. Exploration, evaluation and development expenditure incurred may either be expensed immediately to the profit and loss or
be accumulated in respect of each identifiable area of interest.
Key judgements — exploration and evaluation expenditure
The future recoverability of exploration and evaluation expenditure capitalised on the acquisition of areas of interest and/or capitalised
JORC compliant mineral resource expenditure are dependent on a number of factors, including whether the Group decides to exploit
the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. To the
extent that capitalised acquisition costs and/or capitalised JORC compliant mineral resource expenditure are determined not to be
recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.
Key judgements — share–based payments
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value is determined using a Black Scholes and/or Monte-Carlo simulation model. The
related assumptions detailed in note 8. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amount of assets and liabilities within the next annual reporting period but may impact
expenses and equity.
Key judgements — assets held for distribution
On 4 March 2016 Hannans announced it entered into a transaction with Neometals Ltd. One of the precedent condition of the
transaction was that Hannans was to complete a pro rata in-specie distribution of Critical Metals Ltd and its subsidiaries. The shares of
Critical Metals Ltd will be distributed to the shareholders of the Company. Therefore the operations of Critical Metals Ltd are classified
as a disposal group held for distribution to equity holders of Hannans. The Directors considered the subsidiary to meet the criteria to be
classified as held for distribution at 30 June 2016 for the following reasons:
Critical Metals Ltd is available for immediate distribution and can be distributed to shareholders in its current condition;
the actions to complete the in-specie distribution were initiated and expected to be completed within one year;
the shareholders approved the distribution on 15 September 2016; and
the Company expects the secretarial procedures and procedural formalities for the distribution to be completed by
27 September 2016.
Refer to note 25 for further information on the assets held for distribution.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
4.
Subsidiaries
The consolidated financial statements of the Group include:
Name of entity
Parent entity:
Hannans Ltd (i)
Subsidiaries:
Principal
Activities
Country of
incorporation
2016
2015
% Ownership interest
Exploration
Australia
HR Subsidiary Pty Ltd (ii)
HR Forrestania Pty Ltd (iii)
HR Equities Pty Ltd (iv)
Corporate Board Services Pty Ltd (v)
Critical Metals Ltd^ (vi)
Scandinavian Resources Pty Ltd^ (vii)
Holding company
Exploration
Equities holding
Service provider
Exploration
Exploration
SR Equities Pty Ltd^ (viii)
Holding company
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Kiruna Iron Ltd (ix)
Kiruna Iron AB^ (x)
Scandinavian Iron AB (xi)
Scandinavian Resources AB^ (xii)
Holding company
United Kingdom
Exploration
Exploration
Exploration
Sweden
Sweden
Sweden
^ Subsidiaries held as assets held for distribution. Refer to note 25 for further information.
–
100
100
–
100
100
100
–
100
–
100
100
100
100
100
100
100
100
100
100
100
100
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
Hannans Ltd is the ultimate parent entity. All the companies are members of the group.
The 100% interest in HR Subsidiary Pty Ltd was held by the parent entity. The company was deregistered on 19 April 2016.
The 100% interest in HR Forrestania Pty Ltd is held by the parent entity. During the year the 100% interest was transferred from HR Subsidiary
Pty Ltd to Hannans Ltd.
The 100% interest in HR Equities Pty Ltd is held by the parent entity.
The 100% interest in Corporate Board Services was held via HR Equities Pty Ltd. The 100% interest was transferred to Mrs Ku on 30 June 2016.
Critical Metals Ltd was incorporated in August 2016 and the 100% interest in Critical Metals Ltd was held by the parent entity. On
15 September 2016 Hannans held a General Meeting and shareholders approved an equal reduction of capital and a pro rata in-specie
distribution of 99,987,442 Critical Metals Shares to the Company’s shareholders. The in-specie distribution was completed on 27 September
2016.
The 100% interest in Scandinavian Resources Pty Ltd is held by the parent entity. On 31 August 2016 the 100% interest was transferred from
the parent entity to Critical Metals Ltd.
The 100% interest in SR Equities Pty Ltd is held via Scandinavian Resources Pty Ltd.
The 100% interest in Kiruna Iron Ltd (KIL) was held via SR Equities Pty Ltd. The company initiated a Members’ Voluntary Liquidation on
31 March 2016. KIL does not have any outstanding obligation and liabilities at the date of application.
The 100% interest in Kiruna Iron AB is held via Scandinavian Resources Pty Ltd. During the year the 100% interest was transferred from Kiruna
Iron Ltd to Scandinavian Resources Pty Ltd.
The 100% interest in Scandinavian Iron AB was held via Kiruna Iron AB. The company was liquidated on 16 June 2016.
The 100% interest in Scandinavian Resources AB is held via Scandinavian Resources Pty Ltd.
(xi)
(xii)
Refer to page 32 for the Corporate Structure.
5.
Income/(expenses) from operations
(a)
Revenue
Interest revenue
Bank
Loans
Service fees
Total revenue
58 H A N N A N S A N N U A L R E P O R T 2 0 1 6
2016
$
2015
$
5,998
3,582
193,601
203,181
4,325
–
46,305
50,630
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
5.
Income/(expenses) from operations (cont’d)
(b)
Other Income
Prospect transaction fees
Other
Total other income
(c)
Gain on disposal of shares
Proceeds on disposal of shares (net of broker fees)
Less:
Carrying fair value of shares disposed
Total gain on disposal of shares
(d)
Employee benefits expense
Salaries and wages
Post employment benefits:
Defined contribution plans
Share–based payments:
Equity settled share–based payments
Total employee benefits expense
2016
$
2015
$
–
251,301
251,301
5,420
(5,095)
325
335,263
117,428
452,691
–
–
–
281,028
486,110
21,438
34,111
42,775
345,241
75,380
595,601
(e)
Depreciation of non–current assets
18,175
28,680
(f)
Operating lease rental expenses:
Minimum lease payments
Rent provision (refer note 16)
Total operating lease rental expenses
6.
Income taxes
Income tax recognised in profit or loss
Current income tax
Current income tax charge
Overprovision of current tax in prior year
Deferred tax
Release of deferred tax assets previously recognised to offset a deferred
tax liability arising on unrealised gains on available-for-sale investments
Total tax benefit/(expense)
278,455
(145,101)
133,354
252,764
(160,062)
92,702
–
–
–
–
–
–
–
–
H A N N A N S A N N U A L R E P O R T 2 0 1 6 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
6.
Income taxes (cont’d)
The prima facie income tax benefit/(expense) on pre–tax accounting loss from
operations reconciles to the income tax expense in the financial statements as
follows:
Loss from operations
Income tax benefit calculated at 28.5% (2015: 30%)
Effect of tax rates in foreign jurisdictions
Effect of expenses that are not deductible in determining taxable profit
Effect of FCTR expensed to P&L (Swedish entities)
Effect of net deferred tax asset not recognised as deferred tax assets
Change in recognised deductible temporary differences
Income tax benefit/(expense) attributable to operating loss
The tax rate used in the above reconciliation is the corporate tax rate of 28.5%
(2015: 30%) payable by Australian corporate entities on taxable profits under
Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.
Deferred tax related to items charged or credited directly to
Other Comprehensive Income during the year:
Unrealised loss on available-for-sale investments
2016
$
2015
$
(964,387)
(274,850)
(9,779)
78,721
129,233
76,675
(29,120,403)
(8,736,121)
35,520
8,505,290
(46,756)
242,067
–
–
–
–
–
–
–
–
Deferred Income Tax
Deferred income tax at 30 June
relates to the following
Deferred tax liabilities
Unearned income
Deferred tax assets
Accruals
Prepayments
Provision for employee entitlements
Provision – other
Capital raising costs
Revaluation reserve
Revenue tax losses
Deferred tax assets not brought to account
as realisation is not probable
Deferred tax assets not recognised
Deferred tax (income)/expense
Statement of
Financial Position
Statement of
Comprehensive Income
2016
$
2015
$
2016
$
2015
$
(853)
(988)
135
937
39,504
3,647
31,654
949
49,123
(32,328)
104,795
4,546
38,717
46,848
59,957
8,063
6,803,049
6,677,647
(6,894,744)
(6,939,585)
–
–
(65,291)
(899)
(7,063)
(45,899)
(10,834)
(40,391)
125,402
30,659
(1,931)
672
(47,899)
(45,362)
8,063
296,927
44,840
(242,066)
–
–
The Group has tax losses of $6,803,049 (FY15: $6,520,361) that are available for offsetting against future taxable profits of the
companies in which the losses arose.
Tax consolidation
Relevance of tax consolidation to the Group
Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and
be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company and its 100%
owned Australian resident subsidiaries have implemented the tax consolidation legislation.
60 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
7.
Key management personnel disclosures
(a)
Details of key management personnel
The Directors and Executives of Hannans Ltd during the year were:
Directors
Damian Hicks
Jonathan Murray
Markus Bachmann
Olof Forslund
Executives
Amanda Scott
(Director of Sweden subsidiaries)
(b)
Key management personnel compensation
The aggregate compensation made to key management personnel of the Company
and the Group is set out below.
Short–term employee benefits
Share based payments
Long–term employee benefits
Post–employment benefits
Total key management personnel compensation
2016
$
2015
$
292,786
27,884
925
54,121
375,716
513,001
49,136
4,721
113,994
680,852
The compensation of each member of the key management personnel of the Group is set out in the Directors Remuneration report
on pages 21 to 26.
8.
Share–based payments
The Company has an ownership–based compensation arrangement for employees of the Group.
Each option issued under the arrangement converts into one ordinary share of Hannans Limited on exercise. No amounts are paid or
payable by the recipient on receipt of the option. Options neither carry rights to dividends nor voting rights. Options may be exercised
at any time from the date of vesting to the date of their expiry. The number of options granted is at the sole discretion of the
Directors.
Incentive options issued to Directors (executive and non–executive) are subject to approval by shareholders and attach vesting
conditions as appropriate.
The following unlisted options were issued during the year and are not share based payments to employees of the Group.
Options series
10 March 2016
3 June 2016
Number
31,250,000
41,662,500
Grant date
Expiry date
10 March 2016
10 March 2018
19 May 2016
3 June 2018
Exercise price
Cents
0.4
0.4
On 24 June 2016 6,250,000 unlisted options exercisable at 0.4 cents expiring on 3 June 2018 were exercised.
The following share–based payment arrangements were in existence during the current and comparative reporting periods:
Options series
20 November 2016
Number
Grant date
Expiry date
12,016,664
20 November 2014
20 November 2019
20 November 2015
20 November 2014
12,016,668
20 November 2014
20 November 2018
12,016,668
20 November 2014
20 November 2017
Exercise price
Cents
VWAP* for
10 trading days
after 20 Nov 2016
(+) 50% premium
0.5
0.8
* VWAP = Volume Weighted Average Price
Details of options over ordinary shares in the Company provided as remuneration to each director during the year are set out in the
Directors Remuneration report on pages 21 to 26. Further information on remuneration to Hannans’ directors are set out in note 27.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
8.
Share-based payments (cont’d)
The following reconciles the outstanding share options granted at the beginning and end of the financial year:
2016
2015
Weighted
average
exercise price
$
0.015
–
–
0.012
0.007
Number of
options
36,050,000
–
–
36,050,000
24,033,336
Weighted
average
exercise price
$
–
0.015*
–
0.015
0.008
Number of
options
–
36,050,000
–
36,050,000
12,016,668
Balance at beginning of the financial year
Granted during the financial year (i)
Expired during the financial year
Balance at end of the financial year (ii)
Exercisable at end of the financial year
(i)
Issued during the financial year
No share options were granted to senior executives and employees during the year. On 20 November 2014, 36,050,000 share
options were granted to senior executives and employees of the Group. The options terms and conditions are shown below.
Details
Number of options
Exercise price
Expiry date
Vesting date (ii)
Tranche 1
Tranche 2
Tranche 3
TOTAL
12,016,668
12,016,668
12,016,664
36,050,000
0.8 cents
0.5 cents
(i)
20 Nov 2017
20 Nov 2018
20 Nov 2019
20 Nov 2014
20 Nov 2015
20 Nov 2016
(i)
(ii)
Exercise price will be calculated from the volume weighted average share price for the ten (10) trading days after the Vesting Date for
each Tranche PLUS a premium of 50%. The Monte-Carlo simulation model was used for Tranche 3.
Senior executive and employees are entitled to the Options upon working for the Group to the vesting dates. Options that have vested
prior to termination must be exercised within three months or they will lapse, unvested options will lapse immediately on termination.
The fair value of the options granted is issued and valued at the date of grant taking into account the terms and conditions
upon which the options were granted using a Black Scholes model for Tranche 1 and Tranche 2. There is no cash settlement of
the options.
The weighted average fair value of the options granted during for the year ended 30 June 2015 was 0.015 cents.
For the year ended 30 June 2016, the Group has recognised $42,775 of share-based payments transactions expense in the
statement of profit or loss (30 June 2015: $75,380).
(ii)
Balance at end of the financial year
The share options outstanding at the end of the financial year had a weighted average exercise price of $0.012 (2015: $0.015)
and a weighted average remaining contractual life of 2.39 years (2015: 3.39 years).
No options were exercised in the current year. On 20 July 2016, 4,166,667 Tranche 2 options exercisable at 0.5 cents were exercised.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of ordinary shares in lieu of the
Managing Director and the Non-Executive Directors outstanding fee of $306,587, together with one free attaching option for each
ordinary shares issued. The ordinary shares will be deemed to have an issue price equal to the volume weighted average sale price
of shares sold on ASX during the 40 trading days after the date of the General Meeting. The issue of ordinary shares and attaching
options are anticipated to be completed by 11 November 2016. The capital structure of Hannans will increase as a result of the
shares and options issue by 11 November 2016.
62 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
9.
Remuneration of auditors
The auditor of Hannans Ltd is Ernst & Young.
Audit or review of the financial report of the Group
Australia
UK
Sweden
Tax compliance services in relation to the Group
10.
Current trade and other receivables
Accounts receivable (i)
Net goods and services tax (GST) receivable
Other
(i)
There were no current trade and other receivables that were past due but not impaired
(2015: past due but not impaired $1,797).
11.
Other financial assets
Current
Available-for-sale investments
Quoted equity shares (i)
Unquoted equity shares (ii)
Total available-for-sale investments
(i)
(ii)
20,000 ordinary fully paid shares in Brighton Mining Group Ltd; and
20,000 ordinary fully paid shares in Lithex Resources Ltd.
Investments in listed entities include the following:
(a)
(b)
Hannans Ltd holds 1 share at $1 in Equity & Royalty Investments Ltd. Equity & Royalty
Investments Ltd has 100 million ordinary shares on issue. The principal activity of the
Company is the investment in equity and royalties in other companies with the
objective of realising gains through equity and generating an income stream through
the royalties.
Non-current
Loans
Loans to director (i)
Loan to outside entity (ii)
Total loans
2016
$
2015
$
31,930
–
8,327
27,774
68,031
2,023
33,262
35,794
71,079
34,710
10,942
3,013
7,140
55,805
3,571
12,010
61,009
76,590
1,300
1
1,301
5,525
1
5,526
–
53,582
53,582
168,985
–
168,985
(i)
(ii)
On 15 September 2016 Hannans held a General Meeting and shareholders approved to forgive the outstanding loan amount of $168,985.
Hannans does not expect to recover the loan from Damian and the loan was derecognised as a receivable as at 30 June 2016. Details of the
loan are provided in the remuneration report.
Errawarra Resources Ltd (Errawarra), of which Mr Damian Hicks, Mr Jonathan Murray and Mr Markus Bachmann are the Directors, was provided
with a loan facility of $50,000 at an interest rate of 20% per annum. The loan is secured against Errawarra’s rights, title and interest in the
agreement executed between Errawarra, Reid Systems Inc and Reid Systems (Australia) Pty Ltd. Errawarra made a loan drawdown of $25,000
on 10 February 2016 and a further loan drawndown of $25,000 on 9 March 2016. Interest accrued to 30 June 2016 amounts to $3,582. The
loan is repayable by Errawarra on 1 July 2016. Refer to note 27 for further information.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
12. Non–current other receivables
Other receivables – bonds
13.
Property, plant and equipment
2016
$
56,000
56,000
2015
$
154,275
154,275
Cost
Balance at 1 July 2014
Additions
Disposals
Exchange differences
Balance at 1 July 2015
Additions
Disposals
Exchange differences
Transfer to assets held for distribution (i)
Balance at 30 June 2016
Accumulated depreciation and impairment
Balance at 1 July 2014
Depreciation expense
Disposals on deconsolidation
Exchange differences
Balance at 1 July 2015
Depreciation expense
Disposals
Exchange differences
Transfer to assets held for sale (i)
Balance at 30 June 2016
Motor Vehicles
at cost
Office furniture
and equipment
at cost
$
$
Building
at cost
$
Total
$
59,060
–
(3,590)
(113)
55,357
–
291,850
–
(6,002)
(191)
12,428
363,338
–
–
–
–
(9,592)
(304)
285,657
12,428
353,442
–
–
–
(56,048)
(107,928)
(9,102)
(173,078)
691
–
–
43,613
11,432
(3,051)
94
52,088
3,054
(55,710)
568
–
–
1,234
(100,056)
78,907
250,734
17,170
(5,561)
(46)
262,297
15,044
(108,436)
986
(100,056)
69,835
–
–
3,326
9,298
78
–
–
9,376
77
(9,102)
–
–
351
1,925
(100,056)
82,233
303,645
28,680
(8,612)
48
323,761
18,175
(173,248)
1,554
(100,056)
70,186
(i)
On 2 March 2016 the Group announced that it has entered into a binding terms sheet with Neometals Limited. The transaction is conditional
upon the satisfaction of conditions precedent. One of the conditions is for the Group to complete an in-specie distribution of the Scandinavian
subsidiaries. In accordance with AASB 5 the assets held for the distribution are disclosed accordingly. Refer to note 25 for further information.
Net book value
As at 30 June 2015
As at 30 June 2016
3,269
–
23,360
9,072
3,052
2,975
29,681
12,047
64 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
13.
Property, plant and equipment (cont’d)
Aggregate depreciation allocated during the year:
Motor vehicles
Office furniture and equipment
Building
14.
Exploration and evaluation expenditure
Balance at beginning of financial year
Exploration expenditure during the period
Foreign currency translation movement during the period
LESS: Expenditure recovered
LESS: Write off costs (i)
LESS: Impairment costs (i)
Transfer to assets held for distribution (ii)
Balance at end of financial year
2016
$
2015
$
3,054
15,044
77
18,175
11,432
17,170
78
28,680
1,356,340
29,688,557
97,599
17,648
–
(123,945)
161,630
(67,375)
(151,100)
–
–
(28,275,372)
(1,347,642)
–
–
1,356,340
(i)
During the year ended 30 June 2016, Hannans recognised a write off in respect of capitalised exploration and evaluation to the extent of
$123,945 (2015: Nil). In the prior year, Hannans performed an impairment assessment and impaired $28,275,372 to the Consolidated
Statement of Comprehensive Income. No impairment was recognised in the current year. The recoverability of the carrying amount of the
capitalised acquisition costs and the exploration and evaluation assets is dependent upon successful development and commercial exploitation,
or alternatively, sale of the respective areas of interest. The impairment of the exploration and evaluation expenditure has arisen as a result of
the decrease in valuations being attributed to exploration and mining companies globally and the potential withdrawal from vendor
agreements to acquire permits, relinquishments of licences and applications for exemptions of minimum expenditure requirements that have
yet to be approved.
The estimated recoverable amount of the Kiruna Project was determined to be $1,070,100 on the basis of fair value less costs to sell.
Comparable resource multiples for Exploration and Evaluation companies range from $0.01/t to $0.29/t of contained Fe, with a median and
average of $0.12/t and $0.12/t of contained Fe, respectively. Based on the Hannan’s total contained Fe of 78.8Mt, this implies a multiple of
$0.01/tonne of contained iron.
The estimated recoverable amount of the Pahtohavare Project was determined to be $277,542 on the basis of fair value less costs to sell. Pre-
development copper assets in comparable markets have multiples ranging from $26/t to $540/t of contained copper equivalent. Based on
Hannans total contained copper equivalents of 1.7Mt @ 2.3% Cu, this implies a multiple of $5.25/t of contained copper equivalent.
On 2 March 2016 the Group announced that it has entered into a binding terms sheet with Neometals Limited. The transaction is conditional
upon the satisfaction of conditions precedent. One of the conditions is for the Group to complete an in-specie distribution of the Scandinavian
subsidiaries. In accordance with AASB 5 the assets held for the distribution are disclosed accordingly. Refer to note 25 for further information.
(ii)
Considering no exploration expenditure, other than rental and incidental land costs, has been budgeted for the financial year ended
30 June 2017, Hannans has taken the conservative view that the fair value less costs to sell for the projects at 30 June 2016 are at
the low end of the ranges.
The valuation methodology undertaken by the Group was determined with reference to comparable exploration companies in the
industry and their respective contained iron and copper resource multiples. All comparable companies are primarily focused on
magnetite projects within Australia. Although the Kiruna Project and Pahtohavare Project are located in Sweden, many of the same
risks are applicable to the projects in both countries. The estimated recoverable amount is classified as level 3 in the fair value
hierarchy and is sensitive to the movements in the iron ore and copper prices.
Hannans entered into a legally binding unconditional agreement with Mine Builder Pty Ltd for the sale of Hannans’ interest in gold
rights on Mining Lease M77/544 for $800,000. The consideration for the gold rights was to be paid via four cash instalments
between March 2015 and December 2015. Mine Builder Pty Ltd has requested additional time to make the payments pursuant to the
binding unconditional agreement.
Hannans has executed a Deed of General Security with Mine Builder Pty Ltd over 100% of that company’s assets to protect Hannans’
interests and has received a fully executed off-market share transfer form for Mine Builder's interest in a large gold mining project.
This transfer will be held as security for the payments owing under the gold rights agreement.
No cash instalment payments which are past due have been received by the Company as at the reporting date. The Company has
been in close contact with Mine Builder to recover the cash instalment payments.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
15.
Current trade and other payables
Trade payables (i)
Accruals
Other payable
(i)
The average credit period on purchases of goods and services is 30 days. No interest is
charged on the trade payables for the first 30 to 60 days from the date of invoice.
Thereafter, interest is charged at various penalty rates. The consolidated entity has
financial risk management policies in place to ensure that all payables are paid within
the credit timeframe.
16.
Provisions
Current
Employee benefits
Rent – unoccupied space (i)
Non-current
Employee benefits
Rent – unoccupied space (i)
2016
$
494,170
290,678
45,382
830,230
111,067
10,660
121,727
–
–
–
2015
$
183,881
516,953
1,036,685
1,737,519
159,660
84,925
244,585
7,508
70,835
78,343
(i)
The provision was recognised on the basis that Hannans currently occupies and subleases part of its Perth office premises as a portion of the
space is surplus to the requirements of the Group. The provision for the unoccupied space is calculated based on the difference between the
Company’s full operating office lease commitment to the end of the lease term on 14 December 2016 and the current occupied and subleased
space discounted to present value as of 30 June 2016.
Employee
benefits
$
158,061
24,921
(15,814)
–
167,168
39,680
(90,503)
Rent –
unoccupied
space
$
315,822
–
Total
$
473,883
24,921
(131,287)
(147,101)
(28,775)
155,760
–
(133,842)
–
(11,258)
(5,278)
111,067
–
10,660
(28,775)
322,928
39,680
(224,345)
(11,258)
(5,278)
121,727
Balance at 1 July 2014
Increase in provision
Utilised during the year
Unwinding of discount rate and
changes in the discount rate
Balance at 1 July 2015
Increase in provision
Utilised during the year
Unwinding of discount rate and
changes in the discount rate
Transfer to assets held for distribution
Balance at 30 June 2016
66 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
17.
Other financial liabilities
Current
Payroll related liabilities
Finance lease liabilities
Non-current
Payroll related liabilities
Finance lease liabilities
18.
Issued capital
970,707,755 fully paid ordinary shares (2015: 721,966,133)
2016
$
32,474
–
32,474
119,884
–
119,884
2015
$
–
2,884
2,884
–
2,884
2,884
46,285,309
46,285,309
44,577,512
44,577,512
2016
No.
$
2015
No.
$
Fully paid ordinary shares
Balance at beginning of financial year
721,966,133
44,577,512
721,966,133
44,577,512
Placement of shares – 9 March 2016
Placement of shares – 23 May 2016
Share Purchase Plan – 26 May 2016
Placement of shares – 3 June 2016
Exercise of options to shares – 21 June 2016
62,500,000
17,666,665
73,999,957
88,325,000
6,250,000
250,000
212,000
887,999
393,300
25,000
Share issue costs
–
(60,502)
–
–
–
–
–
–
–
–
–
–
–
–
Balance at end of financial year
970,707,755
46,285,309
721,966,133
44,577,512
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Option conversions
Date of conversion
No of options
15 July 2016
20 July 2016
12 August 2016
TOTAL
25,000,000
4,166,667
6,250,000
35,416,667
Exercise price
per option
0.4 cents
0.5 cents
0.4 cents
Expiry date
3 June 2018
20 November 2018
3 June 2018
Increase in
contributed equity
$
100,000
20,833
25,000
145,833
H A N N A N S A N N U A L R E P O R T 2 0 1 6 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
19.
Reserves
Balance at the beginning of the financial year
Option reserve
Available for sale revaluation reserve
Foreign currency translation differences
Reserves of assets held for distribution
Balance at the end of the financial year
The balance of reserves is made up as follows:
Option reserve
Foreign currency translation reserve
Nature and purpose of reserves
2016
$
2015
$
(237,970)
42,775
–
43,470
(151,725)
269,880
118,155
118,155
(269,880)
(151,725)
(242,150)
75,380
29,210
(100,410)
(237,970)
–
(237,970)
75,380
(313,350)
(237,970)
Option reserve
Revaluation reserve
Foreign currency translation reserve
The option reserve recognises the fair
value of options issued and valued
using the Black-Scholes and Monte-
Carlo simulation model.
The asset revaluation reserve is used
to record increases and decreases in
the fair value of ordinary shares held
in listed entities to the extent that
they offset one another.
foreign
currency
The
translation
reserve is used to record exchange
differences arising from the translation
of the financial statements of foreign
subsidiaries.
Share options
As at 30 June 2016, options over 102,712,500 (2015: 36,050,000) ordinary shares in aggregate are as follows.
Issuing entity
Hannans Ltd
Hannans Ltd
Hannans Ltd
Hannans Ltd
Hannans Ltd
No of shares
under option
12,016,668
12,016,668
12,016,664
31,250,000
35,412,500
Class of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Exercise price
of option
0.8 cents each
0.5 cents each
To be calculated
from VWAP* for
10 days after
20 Nov 2016
0.4 cents each
0.4 cents each
Expiry date
of options
20 Nov 2017
20 Nov 2018
20 Nov 2019
10 Mar 2018
3 Jun 2018
* VWAP: Volume Weighted Average Price
Share options are all unlisted, carry no rights to dividends and no voting rights. A total of 6,250,000 were exercised during the year.
20.
Accumulated losses
Balance at beginning of financial year
Loss attributable to members of the parent entity
Balance at end of financial year
2016
$
2015
$
(44,265,979)
(964,387)
(15,145,576)
(29,120,403)
(45,230,366)
(44,265,979)
68 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
21.
Loss per share
Basic loss per share:
Diluted loss per share:
Loss for the year
2016
Cents per share
2015
Cents per share
(0.13)
(0.13)
(4.03)
(4.03)
The loss and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share are as follows:
Loss for the year
Weighted average number of ordinary shares
for the purposes of basic loss per share
Effects of dilution from:
Share options
2016
$
2015
$
(964,387)
(29,120,403)
2016
No.
2015
No.
757,044,977
721,966,133
6,997,625
–
Weighted average number of ordinary shares adjusted
for the effect of dilution loss per share
The rights of options held by option holders have not been included in the weighted average number of ordinary shares for the
purposes of calculating diluted loss per share as they do not meet the requirements for inclusion in AASB 133 “Earnings per Share”.
The rights of options are non–dilutive as the exercise prices are higher than the Company’s share price at 30 June 2016 and the
Company has also incurred a loss for the year.
764,042,602
721,966,133
The Company does not have authorised capital nor par value in respect of its issued shares.
Subsequent to 30 June 2016, 35,416,667 options were exercised and 620,833,333 shares issued were issued. This has been disclosed
as a subsequent event in note 28.
22.
Commitments for expenditure
Exploration, evaluation & development (expenditure commitments) (i)
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Future minimum rentals payable under non–cancellable operating leases as at
30 June 2016 are as follows: (ii)
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2016
$
2015
$
252,860
252,860
–
505,720
109,032
–
–
109,032
180,267
793,787
–
974,054
296,323
137,784
–
434,107
(i)
In Sweden an exploration permit is valid for a period of three years from date of issue and following that may be extended for another
maximum three year period if it can be shown suitable exploration has been carried out within the area. There are no minimum exploration
commitments required to be spent on the permits, apart from permit renewal fees, by the Swedish authorities.
(ii)
The Group has a non–cancellable office lease, expiring within 0.5 years and with rent payable monthly in advance.
23.
Contingent liabilities and contingent assets
The Office of State Revenue (‘OSR’) has informed the Company that it has raised a Duties Investigation regarding the restructure
involving the Mineral Rights Deed between the Company and Errawarra Resources Ltd. OSR has requested preliminary supporting
information to assess the duty on the transaction. The Company does not consider it probable a stamp duty liability will arise.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
24.
Segment reporting
The Group operates predominantly in the mineral exploration industry in Sweden. For management purposes, the Group is organised
into one main operating segment which involves the exploration of minerals in Sweden and Australia. All of the Group’s activities are
interrelated and discrete financial information is reported to the Board (Chief Operating Decision Maker) as a single segment.
Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this
segment are equivalent to the financial statements of the Group as a whole.
Revenue analysis by geographic area
Revenue
Total revenue and other income
Australia
Sweden
Consolidated
2016
$
116,514
86,667
203,181
2015
$
28,120
22,510
50,630
2016
$
354,567
100,240
454,807
2015
$
147,105
356,216
503,321
2015
$
(28,834,647)
(285,756)
(29,120,403)
(29,120,403)
–
2016
$
(771,796)
(192,591)
(964,387)
(964,387)
–
(964,387)
(29,120,403)
Assets
Liabilities
2016
$
1,619,169
1,631,931
3,251,100
2015
$
547,511
1,589,383
2,136,894
2016
$
1,104,313
1,243,569
2,347,882
2015
$
813,468
1,249,863
2,063,331
Result analysis by geographic area
Australia
Sweden
Loss before income tax benefit
Income tax benefit/(expense)
Loss for the year
Assets and liabilities analysis by geographic area
Australia
Sweden
Consolidated
25.
Assets and liabilities held for distribution
Subsequent to year end, Hannans announced that it had completed an equal reduction of capital and a pro rata in-specie distribution
of Critical Metals shares to Hannans shareholder. As at 30 June 2016, these assets were classified as a disposal group held for
distribution.
The major classes of assets and liabilities classified as held for distribution as at 30 June are as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Capitalised exploration and evaluation expenditure
Assets held for distribution
2016
$
250,000
34,289
–
1,347,642
1,631,931
2015
$
–
–
–
–
–
70 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
25.
Assets and liabilities held for distribution (cont’d)
Liabilities
Trade and other payables (i)
Provisions
Other liabilities (ii)
Liabilities held for distribution
2016
$
1,000,000
5,278
238,291
1,243,569
388,362
2015
$
–
–
–
–
–
Net assets held for distribution
(i)
In May 2013, Hannans entered into a Heads of Agreement (HOA) with Avalon Minerals Limited (Avalon, ASX: AVI) for the sale of the Discovery
Zone copper-iron prospect in Sweden for $4 million. On 10 May 2013, Hannans made an application with the Inspectorate to transfer the
tenements to Avalon which was granted on 23 May 2013.
On 1 October 2013, Hannans reached an agreement with Avalon that varies the HOA. The variation deleted and replaced clause 3 of the
original HOA with the following:
$1 million upon successful completion of a rights issue by Avalon or no later than 31 October 2013; and
$3 million when the Mining Inspectorate of Sweden has formally granted the Discovery Zone Exploitation Concession to Avalon.
On 8 October 2013 Hannans confirmed that Avalon has paid $1 million pursuant to the varied HOA.
The HOA provided that if the Discovery Zone exploration concession is not granted or not granted within 2 years of the first payment date
(being 1 October 2015) or a later date to be agreed by the parties, the Group is required to refund the first $1 million received from Avalon
and Avalon will be required to transfer title in the Discovery Zone back to the Group. The HOA provides that the Company can transfer a project
of equivalent value to Avalon. There is no requirement in the HOA for the Group to make a cash payment to Avalon.
If the Discovery Zone exploration concession is granted, the Group will receive a further $3 million within five business days of the exploitation
concession being granted.
On 9 October 2015 Hannans received a Refund Notice from Avalon pursuant to the HOA. The Refund Notice has been presented on the basis
that the Discovery Zone exploitation concession application has not been granted within the time stipulated in the HOA.
On 21 October 2015 Hannans was made aware that the Discovery Zone exploitation concession application had been dismissed by the Mining
Inspectorate of Sweden and Avalon can no longer transfer the application back to the Group as required by the HOA. A consequence of this
dismissal is that the Group has lost title to its Discovery Zone copper-gold project, Rakkurijärvi iron project and Tributary Zone copper-gold
prospect. Hannans considers this to be a very serious matter and has in addition to reserving its rights, requested Avalon provide a written
explanation of the circumstances that lead to the dismissal as a matter of urgency.
Avalon then lodged an appeal with the Swedish Administrative Court against the decision of the Mining Inspectorate of Sweden to dismiss the
Discovery Zone exploitation concession application registered in the name of Avalon’s wholly owned Swedish subsidiary company, Avalon
Minerals Adak AB. On 3 June 2016 the Swedish Administrative Court dismissed the appeal by Avalon. Avalon had three weeks from 3 June
2016 to lodge an appeal to the Swedish Superior Administrative Court against the decision. Avalon did not submit an appeal within the three
weeks and the decision to dismiss the Discovery Zone exploitation concession application made by the Mining Inspectorate of Sweden is final.
The Discovery Zone exploitation concession application was removed from further processing and the underlying permit expired.
On 11 November 2015 Avalon issued Hannans with a Statutory Demand in relation to the 50% recovery of the expenditure incurred on the
Discovery Zone Exploitation Concession application. Hannans’ submitted an application to set aside a statutory demand issued by Avalon and
believe that there is a genuine dispute about the existence of the alleged debt. Hannans’ application was heard by Master Sanderson in the
Supreme Court of Western Australian on 22 March 2016 and a decision on the application was handed down on 3 May 2016. The Supreme
Court of Western Australia set aside a statutory demand served on Hannans by Avalon and the court ordered Avalon to pay Hannans’ costs.
On 8 June 2016 Avalon served Hannans with a Writ issued out of the Supreme Court of Western Australia numbered CIV 1945 of 2016 claiming
$1 million pursuant to an agreement entered into by Hannans, its wholly owned subsidiary Kiruna Iron AB, Avalon Minerals Limited and its
wholly owned subsidiary Avalon Minerals Adak AB. On 4 July 2016 Hannans filed and served Avalon with a Defence and Counterclaim for $9
million and a Summary Judgement Application in respect of Avalon’s claim. The Summary Judgement Application was heard on 6 September
2016.
On 28 September 2016 the parties to the Discovery Zone transaction executed a Deed of Termination, Settlement and Release meaning that all
legal disputes and court actions between the respective companies have been settled with no financial impact on the continuing Hannans’
group, without an admission of liability by either party and this matter is now resolved.
(ii)
On 24 November 2015 the Company announced that the joint venture partner, Lovisagruvan AB (LOVI) has formally notified the Company of its
decision to proceed to Stage 2 of the joint venture. As part of their Stage 2 commitment LOVI will provide the Company with a SEK 3 million
(equivalent to AUD 476,577 as at 30 June 2016) interest free working capital facility which can only be drawn down in two equal instalments.
Each instalment must be repaid within 12 months from the drawdown date.
The Company received the first loan instalment of SEK 1.5 million (equivalent to AUD 238,289) on 29 January 2016. The amount is repayable by
29 January 2017.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
26.
Joint operations
Name of project
Pahtohavare (i)
Principal activity
Exploration
Interest
2016
%
65
2015
%
80
Lake Johnston (ii)
The Group’s interest in assets employed in the above joint operation is included in the consolidated financial statements. The interest
in Pahtohavare has been capitalised and forms part of the total assets however the interest in Lake Johnston does not form part of
the total assets as the expenditure exploration and evaluation is expensed.
Exploration
20
20
(i)
On 27 March 2015 Hannans Ltd announced a joint operation with Lovisagruvan AB (a Swedish mining company) over its
Pahtohavare Copper-Gold Project, located near Kiruna, northern Sweden. The terms of the joint venture are as follows:
Consideration:
Initial payment of SEK 1 million within seven days of signing the agreement.
Provide the Group with an interest free working capital facility to the value of SEK 4 million if the joint venture
proceeds to Stage 2.
Stage Funding:
(i)
(ii)
Stage 1: Lovisagruvan AB (LOVI) pays Hannans SEK 1 million, complete drilling and metallurgical test work within six
months to earn 20% interest in Pahtohavare. LOVI is required to provide written notification to the Group if it wishes to
continue in the joint venture.
Stage 2: LOVI prepares to lodge an exploitation concession and environmental permit for Pahtohavare and provide the
Group with an interest free working capital facility to the value of SEK 3 million on normal commercial terms to earn
further 15% in Pahtohavare.
(iii)
Stage 3: Received exploitation concession and environmental permit approval and provide the Group with a Bankable
Feasibility Study to earn further 16% in Pahtohavare.
(iv)
Stage 4: LOVI delivers the Feasibility Study to the Group to earn further 24% in Pahtohavare.
On 24 November 2015 the Company announced that LOVI has formally notified the Company of its decision to proceed to
Stage 2 of the joint venture. As part of their Stage 2 commitment LOVI will prepares to lodge an exploitation concession and
environmental permit for Pahtohavare and provide the Group with an interest free working capital facility to the value of SEK 3
million on normal commercial terms to earn further 15% in Pahtohavare. The Company received the first loan instalment of
SEK 1.5 million (equivalent to AUD 238,290) on 29 January 2016. The amount is repayable by 29 January 2017.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the equal reduction of capital and a pro
rata in-specie distribution of Critical Metals shares to Hannans shareholder. Kiruna Iron AB is part of Critical Metals group. The
in-specie distribution was completed on 27 September 2016.
(ii)
On 24 June 2014 Hannans Ltd announced a joint operation with NeoMetals Ltd (ASX: NMT) (previously Reed Resources Ltd
(ASX: RDR)) over its Lake Johnston nickel sulphide project, located west of Norseman in Western Australia. Hannans has
retained 20% interest, free carried through to a Decision to mine.
On 15 September 2016 Hannans held a General Meeting and shareholders approved the issue of 620,833,333 Hannans shares
to Neometals Limited in consideration of the acquisition of 100% of the share capital in Reed Exploration Pty Ltd (Reed
Exploration). Reed Exploration owns the balance 80% interest in the Lake Johnston Project and Queen Victoria Rocks Project
and the non-gold rights at the Forrestania Project. Following the completion of the acquisition on 29 September 2016,
Hannans owns 100% of the Lake Johnston Project and Queen Victoria Project, and 100% of the non-gold mineral rights and
20% of the gold rights (free carried) at the Forrestania Project as at the date of this report.
Contingent liabilities and capital commitments
The capital commitments and contingent liabilities arising from the Group’s interests in joint operations are disclosed in notes 22 and
23 respectively.
72 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
27.
Related party disclosures
(a)
Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 4 to the financial statements.
Equity interests in joint operations
Details of interests in joint operations are disclosed in note 26 to the financial statements.
(b)
Key management personnel (KMP) remuneration
Details of key management personnel remuneration are disclosed in note 7 to the financial statements.
(c)
Loans to key management personnel and their related parties
Errawarra Resources Ltd (Errawarra), of which Mr Damian Hicks is the Chairman and Mr Jonathan Murray and Mr Markus
Bachmann are the Non-Executive Directors, received a loan amounting to $50,000. The loan is secured against 100% of
Errawarra’s rights, title and interest in the agreement executed between Errawarra, Reid Systems Inc and Reid Systems
(Australia) Pty Ltd dated on or about 9 February 2016. The interest rate on the outstanding loan amount is at 20% per annum
and the loan repayment date is on 1 July 2016. The loan is disclosed in note 11 as a non-current financial asset.
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the Group to key management
personnel and their related parties, and the number of individuals in each group, are as follows:
Total for key management personnel 2016
Total for key management personnel 2015
Total for other related parties 2016
Total for other related parties 2015
Total for key management personnel
and their related parties 2016
Total for key management personnel
and their related parties 2015
Opening
Balance
$
168,985
168,985
–
–
Closing
Balance
$
–
168,985
53,582
–
168,985
53,582
168,985
168,985
Interest
charged
$
Number in
group at
30 June
–
–
3,582
–
3,582
–
–
1
1
–
1
1
On 15 September 2016 Hannans held a General Meeting and shareholders approved to forgive the outstanding loan amount
of $168,985 from Damian Hicks. The loan is unrecoverable and was derecognised as a receivable as at 30 June 2016.
(d)
Transactions with other related parties
The following table provides the total amount of transactions that have been entered into with related parties for the relevant
financial year.
Director transactions
Steinepreis Paganin
Sales to
related parties
$
Purchases
from related
parties
$
2016
2015
–
–
43,971
10,585
Amounts
owed by
related
parties*
$
–
–
Amounts
owed to
related
parties*
$
7,226
449
* The amounts are classified as trade receivables and trade payables, respectively.
(e)
Parent entity
The ultimate parent entity in the Group is Hannans Ltd.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
28.
Subsequent events
The following matters or circumstances have arisen since 30 June 2016 that may significantly affect the operations of the Group, the
results of those operations, or the state of affairs of the Group in future financial years.
(a)
On 15 July 2016, 25 million unlisted options exercisable at 0.4 cents expiring on or before 3 June 2016 were exercised. On 20
July 2016, 4.2 unlisted options related to the Employee Share Option Plan (Tranche 2) exercisable at 0.5 cents on or before 20
November 2018 were exercised. On 15 August 2016 a further 6.25 million unlisted options exercisable at 0.4 cents expiring
on or before 3 June 2016 were exercised.
(b) On 7 June 2016 Avalon Minerals Ltd (Avalon, ASX:AVI) served Hannans with a Writ issued out of the Supreme Court of Western
Australia for $1 million in relation to the Discovery Zone transaction. Hannans filed and served Avalon with a Defence and
Counterclaim for $9 million. Hannans applied for a summary judgement in respect of Avalon’s claim and came before the
Supreme Court on 6 September 2016. On 28 September 2016 the parties to the Discovery Zone transaction executed a Deed
of Termination, Settlement and Release meaning that all legal disputes and court actions between the respective companies
have been settled, without an admission of liability by either party and this matter is now resolved.
(c)
(d)
(e)
On 15 September 2016 Hannans held a General Meeting and announced that all resolutions put to the shareholder were
passed by a show of hands and a majority of proxy votes cast were in favour of all resolutions. Refer to the Notice of General
Meeting released on ASX dated 12 August 2016 for further information.
Following from the General Meeting held on 15 September 2016, the equal reduction of capital and in-specie distribution of
99,987,442 Critical Metals Shares were completed on 27 September 2016.
On 29 September 2016 Hannans completed the issue of 620,833,333 shares to Neometals Ltd in consideration of the
acquisition of 100% of the issued share capital of Reed Exploration Pty Ltd. Pursuant to the Share Sale Agreement with
Neometals Ltd, Reed Exploration Pty Ltd will have a cash balance of $1 million less the costs of the nickel exploration drilling
in July 2016.
29. Notes to the statement of cash flows
(a)
Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents
includes cash on hand and in banks and investments in money market
instruments, net of outstanding bank overdrafts. Cash and cash equivalents
at the end of the financial year as shown in the statement of cash flows is
reconciled to the related items in the statement of financial position as
follows:
Cash and cash at bank
Term deposit
Cash at bank attributable to assets held for distribution
2016
$
2015
$
109,417
1,315,743
1,425,160
250,000
1,675,160
343,618
1,879
345,497
–
345,497
74 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
29. Notes to the statement of cash flows (cont’d)
(b)
Reconciliation of loss for the year to net cash flows from
operating activities
Loss for the year
Write off exploration and evaluation expenses
Impairment of exploration and evaluation expenses
Impairment of available-for-sale investments
Depreciation of non–current assets
Gain on disposal of shares
Gain on sale or disposal of assets
Loss from prospect transaction fees
Broker fees on shares sold
Equity settled share-based payments
Interest on loan to outside entity
Finance charges on leased assets
Foreign exchange differences
Forgiveness of loan to related party
Changes in net assets and liabilities, net of effects from acquisition and
disposal of businesses:
Decrease in assets:
Trade and other receivables
Decrease in liabilities:
Trade and other payables and provisions
Net cash from operating activities
2016
$
2015
$
(964,387)
123,945
–
(900)
18,175
(325)
(16,043)
–
30
42,775
(3,582)
90
23,125
168,985
(29,120,403)
–
28,275,372
26,875
28,680
–
(2,661)
190,980
–
75,380
–
498
(33,150)
–
(19,466)
98,811
39,844
(587,734)
(51,276)
(510,894)
Non–cash financing and investing activities
During the current year, the Group did not enter into the any non-cash investing and financing activities which are not reflected in
the consolidated statement of cash flows.
30.
Financial risk management objectives and policies
(a)
Financial risk management objectives
The Group manages the financial risks relating to the operations of the Group.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes although it holds, at 30 June 2016, shares in various other listed mining companies. The use of financial derivatives is
governed by the Group’s Board of Directors.
The Group’s activities expose it primarily to the financial risks of changes in interest rates, but at 30 June 2016 it is also
exposed to market price risk. The Group does not enter into derivative financial instruments to manage its exposure to interest
rate.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
30.
Financial risk management objectives and policies (cont’d)
(b)
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 2 to the financial statements.
(c)
Foreign currency risk management
The Group is not exposed to any significant currency risk on receivable, payable or borrowings. All loans are denominated in
the Group’s functional currency.
(d)
Interest rate risk management
The Group is exposed to interest rate risk as it places funds at both fixed and floating interest rates. The risk is managed by
maintaining an appropriate mix between fixed and floating rate products which also facilitate access to money.
Cash flow sensitivity analysis for variable rate instruments
A change of 1 per cent 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 is performed on the same basis for
2015:
30 June 2016
Variable rate instruments
Cash flow sensitivity
30 June 2015
Variable rate instruments
Cash flow sensitivity
Profit or Loss
1%
increase
1%
decrease
Equity
1%
increase
1%
decrease
14,252
14,252
3,455
3,455
(14,252)
(14,252)
(3,455)
(3,455)
14,252
14,252
3,455
3,455
(14,252)
(14,252)
(3,455)
(3,455)
The following table details the Group’s exposure to interest rate risk.
Fixed maturity dates
Weighted
average
effective
interest
rate
Variable
interest
rate
%
$
Less
than 1
year
$
1–5
years
$
5+
years
$
Non
interest
bearing
$
Total
$
1.73%
1,425,087
–
–
2.49%
56,000
1,481,087
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34,472
34,472
119,884
119,884
–
–
–
–
–
–
–
73
1,425,160
71,079
71,079
–
56,000
71,152
1,552,239
830,230
830,230
–
154,356
830,230
984,586
Consolidated
2016
Financial assets:
Cash and cash
equivalents
Trade and other
receivables
Other receivables
– non-current
Financial liabilities:
Trade and
other payables
Other financial liabilities
76 H A N N A N S A N N U A L R E P O R T 2 0 1 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
30.
Financial risk management objectives and policies (cont’d)
(d)
Interest rate risk management (cont’d)
Fixed maturity dates
Weighted
average
effective
interest
rate
Variable
interest
rate
%
$
Less
than 1
year
$
1–5
years
$
5+
years
$
Non
interest
bearing
$
Total
$
0.03%
345,352
–
–
2.87%
130,000
–
–
475,352
–
–
–
–
–
–
–
–
168,985
168,985
–
–
–
–
–
–
–
2,883
2,883
–
–
–
–
–
–
–
–
–
–
–
145
345,497
76,590
76,590
24,275
154,275
–
168,985
101,010
745,347
1,737,519
1,737,519
1
2,884
1,737,520
1,740,403
Consolidated
2015
Financial assets:
Cash and cash
equivalents
Trade and other
receivables
Other receivables
– non-current
Loans
Financial liabilities:
Trade and
other payables
Other financial liabilities
(e)
Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash to meet the operating requirements of the business and
investing excess funds in highly liquid, high security short term investments. The Group’s liquidity needs can be met through a
variety of sources, including cash generated from operations and issue of equity instruments.
The following table details the Group’s non-derivative financial instruments according to their contractual maturities. The
amounts disclosed are based on contractual undiscounted cash flows.
Less than
6 months
6 months
to 12 months
1 to 2 years
Greater than
2 years
$
–
32,472
32,472
$
–
59,942
59,942
$
–
59,942
59,942
Total
$
830,230
152,356
982,586
2016
Trade and other payables
830,230
$
Other financial liabilities
2015
Trade and other payables
Other financial liabilities
–
830,230
282,018
2,460
284,478
1,000,000
455,501
423
–
1,000,423
455,501
–
1
1
1,737,519
2,884
1,740,403
H A N N A N S A N N U A L R E P O R T 2 0 1 6 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
30.
Financial risk management objectives and policies (cont’d)
(f)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where
appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored. The Group measures credit risk on a fair value basis.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having
similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit–ratings
assigned by international credit–rating agencies.
The Group currently does not have any material debtors apart from GST receivable which is claimed at the end of each quarter
during the year.
It is a policy of the Group that creditors are paid within 30 days.
(g) Market price risk
Market risk is the potential for loss arising from adverse movements in the level and volatility of equity prices.
The Group’s investments subject to price risk are listed on the Australian Securities Exchange as detailed in note 11. A 1 per
cent increase at reporting date in the equity prices would increase the market value of the securities by $13 (2015: $55) and
an equal change in the opposite direction would decrease the value by the same amount. The increase/decrease would be
reflected in equity as these financial instruments are classified as available–for–sale. The increase/decrease net of deferred tax
would be $9 (2015: $39).
(h)
Capital risk management
For the purposes of the Group’s capital management, capital includes issued capital and all other equity reserves attributable
to the equity holders of the parent, which at 30 June 2016 was $903,218 (30 June 2015: $73,563). The Group’s objective
when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for
shareholders.
At 30 June 2016 the Group does not hold any external debt funding (30 June 2015: Nil) and is not subject to any externally
imposed covenants in respect of capital management.
31.
Fair value measurement
The fair value of financial assets and financial liabilities of the Group approximated their carrying amount. It does not include fair
value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable
approximation of fair value. The table below analyses financial instruments carried at fair value by value measurement hierarchy.
Quantitative disclosures fair value measurement hierarchy
as at 30 June
2016
Assets measured at fair value
Available-for-sale financial assets (note 11):
Quoted equity shares (i)
Unquoted equity shares (ii)
Capitalised exploration and evaluation expenditure
held for distribution (note 14 and note 25)
2015
Assets measured at fair value
Available-for-sale financial assets (note 11):
Quoted equity shares (i)
Unquoted equity shares (ii)
Capitalised exploration and evaluation expenditure (note 14)
78 H A N N A N S A N N U A L R E P O R T 2 0 1 6
Quoted
prices in
active
market
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobser-
vable inputs
(Level 3)
Total
1,300
–
–
1,300
5,525
–
–
5,525
–
–
–
–
–
–
–
–
–
1
1,300
1
1,347,642
1,347,642
1,347,643
1,348,943
–
1
5,525
1
1,356,340
1,356,340
1,356,341
1,361,866
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the financial year ended 30 June 2016
31.
Fair value measurement (cont’d)
The management assessed that cash and short-term deposits, trade receivables, trade payables and other current liabilities
approximate their carrying amounts largely due to the short term maturities of these instruments.
The fair value of the financial assets is included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the
fair value:
(i)
Fair value of available-for-sale financial assets is derived from quoted market prices in active markets. Refer note 31(g) for
market price risk impact.
The historical cost has been used to fair value unquoted ordinary shares. There is no market for the share and the value of the
share does not warrant further discount or valuation.
(ii)
The estimated recoverable amount of the capitalised exploration and evaluation expenditure is classified as level 3 and is sensitive to
the movements in the iron ore and copper prices. The valuation methodology undertaken by the Group was determined with
reference to comparable exploration companies in the industry and their respective contained iron and copper resource multiples.
Refer note 14 for further information.
Parent entity disclosures
32.
The following details information related to the parent entity, Hannans Ltd, at 30 June 2016.
The information presented here has been prepared using consistent accounting policies as presented in note 2.
Results of the parent entity
Loss for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Financial position of parent entity at year end
Current assets
Non–current assets
Total Assets
Current liabilities
Non–current liabilities
Total Liabilities
Total equity of the parent entity comprising of:
Share capital
Reserves
Accumulated losses
Total Equity
2016
$
2015
$
(502,418)
(18,860,375)
–
–
(502,418)
(18,860,375)
1,621,269
121,632
1,742,901
780,861
119,884
900,745
99,563
289,650
389,213
716,868
78,343
795,211
47,013,839
118,155
45,306,042
75,380
(46,289,838)
(45,787,420)
842,156
(405,998)
(a)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had not entered into any guarantees in relation to the debts of its subsidiaries as at 30 June 2016 and
30 June 2015.
(b)
Commitments for the acquisition of property, plant and equipment by the parent entity
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2016 and 30 June 2015.
H A N N A N S A N N U A L R E P O R T 2 0 1 6 79
HANNANS LIMITED
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@Hannans Reward