For personal use only ABOUT HANNANS LTD Hannans Ltd (ASX:HNR) is an exploration company with a focus on nickel, gold and lithium in Western Australia. Hannans’ major shareholder is leading Australian specialty minerals company Neometals Ltd. Since listing on the ASX in 2003 Hannans and its subsidiaries have at various times since listing signed agreements with Vale Exploration, Rio Tinto Exploration, Anglo American, Boliden, Warwick Resources, Cullen Resources, Azure Minerals, Neometals, Tasman Metals, Grängesberg Iron, Lovisagruvan and Element 25. Shareholders at various times since listing have included Rio Tinto, Anglo American, OM Holdings, Craton Capital and BlackRock. For more information, visit www.hannans.com and search for ‘Hannans’ on Twitter. ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Corporate Directory ....................................................................................................................... 1 Directors’ Report ............................................................................................................................ 2 Independence Declaration to the Directors of Hannans Ltd ......................................... 33 Directors’ Declaration ................................................................................................................. 34 Independent Auditor’s Report to the Members of Hannans Ltd .................................. 35 Consolidated Statement of Profit and Loss and Other Comprehensive Income ..... 40 Consolidated Statement of Financial Position .................................................................... 41 Consolidated Statement of Changes in Equity ................................................................... 42 Consolidated Statement of Cash Flows ................................................................................ 43 Notes to the Consolidated Financial Statements............................................................... 44 For personal use only CORPORATE DIRECTORY BOARD OF DIRECTORS PRINCIPAL OFFICE SHARE REGISTRY Level 11, 216 St Georges Terrace Computershare NON-EXECUTIVE CHAIRMAN Perth, Western Australia 6000 Level 11, 172 St George’s Terrace Mr Jonathan Murray Perth, Western Australian 6000 REGISTERED OFFICE Telephone 1300 787 272 EXECUTIVE DIRECTOR Level 11, 216 St Georges Terrace Website www.computershare.com.au Mr Damian Hicks Perth, Western Australia 6000 NON-EXECUTIVE DIRECTORS POSTAL ADDRESS AUDITORS Ernst & Young Mr Markus Bachmann PO Box 1227 11 Mounts Bay Road Mr Clay Gordon Ms Amanda Scott West Perth, Western Australia 6872 Perth, Western Australia 6000 CONTACT DETAILS LAWYERS COMPANY SECRETARY Telephone +61 (8) 9324 3388 Steinepreis Paganin Mr Ian Gregory Email info@hannans.com Level 4, The Read Buildings Website www.hannans.com 16 Milligan Street ABN 52 099 862 129 Perth, Western Australia 6000 SOCIAL NETWORK SITES Twitter @Hannans_Ltd LinkedIn Hannans Ltd H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 1 For personal use only CHAIRMAN’S LETTER 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 2020. Dear Shareholders, We remain focussed on transforming into a West Australian mining company through exploration success, joint venture and project acquisition targeting nickel, gold and lithium opportunities. During the year and despite fielding interest from third parties to joint venture the Forrestania Nickel Project, the Board elected to implement the exploration strategy recommended by our consultants. Accordingly, the Company retains 100% exposure to exploration success. At the end of the day we are an exploration company, we deploy funds to test the targets. Exploration success will create value for all shareholders but it is also a high-risk endeavour. Our next phase of exploration drilling at the Forrestania nickel project has just commenced and we look forward to updating the market. We have reduced our expenditure rate at the Mt Holland lithium project due to the limited success of recent exploration campaigns. We do however propose testing one more target with a deep hole in October 2020 before deciding on our next steps at Mt Holland. We initiated a new exploration front in the Gascoyne region of Western Australia and our team has been very active assessing whether the conceptual targets at the Moogie Project have the potential to host a large, sustainable and economic deposit. Big targets potentially mean big rewards. Our work to date indicates that the structural architecture is in place at Moogie to host mineralisation. When the tenements are granted, we will seek approvals to complete reconnaissance drilling to test these theories. Hannans has also made several opportunistic tenement applications in the Fraser Range over ground prospective for nickel mineralisation. These tenements cover a small area however the landholding might prove in time to be a platform from which to aggregate additional tenure in the Fraser Range. Thank you to our team of consultants and advisors that have contributed to the exploration strategy, planning and execution. Once again, and on behalf of my fellow Directors, we thank you for your continued support. We are eager for exploration success and remain hopeful that the next drill program at Forrestania may be the impetus that sets a course for an exciting future for our Company. Yours sincerely, Jonathan Murray Chairman 2 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT STRATEGIC PLAN VISION Our vision is to build a successful exploration and production company. MISSION Our mission is to develop an economic interest in a portfolio of mineral exploration, development and production assets. Our focus is to provide shareholders with a satisfactory return on investment by managing our people, projects and capital in an entrepreneurial and responsible manner. We recognise that a professional, knowledgeable and ethical team of directors, employees and consultants is the key to our business. The ability to implement the strategic plan is determined by Hannans' ability to access funding. Hannans might chose to sole fund exploration, contribute funding to maintain joint venture interests or receive royalties from future production. Hannans aims to fund the development of its portfolio of projects via equity raisings at increasing valuations, project sales and farm-outs. GOALS People ∂ ∂ 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. Projects ∂ To access prospective mineral exploration and development opportunities in Australia. ∂ ∂ ∂ ∂ ∂ ∂ To implement an effective acquisition program that secures access to projects that have the potential to host significant economic deposits. To add value by identifying, accessing and exploring projects that have potential to host economic deposits and then seek partners to diversify project risk. To retain a financial interest in projects but not necessarily an operational responsibility. To conduct our affairs in a responsible manner considering various stakeholder rights and beliefs. To create shareholder wealth as measured by the potential of our projects, the strength of our balance sheet and share price. To maintain sufficient funding and working capital to implement exploration and development programs through the peaks and troughs in sentiment and commodity prices fluctuations. Capital H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 3 For personal use only DIRECTORS’ REPORT OPERATIONAL AND FINANCIAL REVIEW MAJOR PROJECTS NON CORE PROJECTS ∂ Forrestania Nickel (100% interest); ∂ Moogie Gold & Copper (100% interest); ∂ Mt Holland Lithium (100% interest); ∂ ∂ Forrestania Gold (20% free-carried interest). Fraser Range Nickel-Copper (100% interest);and ∂ Milly Boo Precious & Base Metals (100% interest); and ∂ Queen Victoria Rocks Nickel (100% interest). Figure 1: State map showing location of Hannans’ Forrestania, Mt Holland, Fraser Range, Moogie and Milly Boo projects (red font with yellow background) relative to the location of major projects not owned by Hannans (in blue font with white background). Source: Company web sites. 4 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT Forrestania Nickel Project (Hannans 100%) Background Hannans’ Forrestania Nickel Project (FNP) is located within the Forrestania Greenstone Belt which has a length of ~250 kilometres, a width ranging from ~5 to 35 kilometres and is subdivided into six ultramafic1 belts namely the Western, Mid-Western, Takashi, Central, Mid- Eastern and Eastern. The Western ultramafic belt is regionally the most well-endowed with nickel-sulphide mineralisation. The Spotted Quoll, New Morning, Beautiful Sunday, and Flying Fox2 nickel sulphide deposits are all located within the Western ultramafic belt. Hannans’ tenure covers a significant strike length of the Western, Mid-Western and Takashi ultramafic belts and minor parts of the Central and Mid-Eastern ultramafic belts. The Forrestania Greenstone Belt hosts several different nickel sulphide mineralisation settings and styles including basal massive sulphides, matrix sulphides, disseminated sulphides in cumulates and remobilised massive sulphides3. The nickel deposits are generally associated with olivine cumulate4 ultramafic rocks, however mineralisation may occur in a range of rock types / settings and exhibit a range of geophysical responses. Exploration Despite a significant amount of nickel exploration at Forrestania by several companies, the last major nickel sulphide discovery was made more than 13 years ago, that being the Spotted Quoll deposit (mine) owned by Western Areas Ltd. A detailed review of Hannans’ FNP was initiated by Newexco Exploration Pty Ltd mid-2018 and completed early 2019. The review identified a range of early stage to advanced geophysical, geological, and geochemical targets that warranted further investigation. Hannans has been systemically following the recommendations outlined in the report and the results of these activities have previously been released to ASX. Large flora and fauna surveys were subsequently completed in spring 2019 enabling Hannans to obtain approvals to clear limited amounts of native vegetation if necessary, to advance exploration within the project. Additional surveys will be required in the future. A summary of the exploration completed during 2019/2020 can be found in Table 1. Figure 2. Regional location map showing Hannans 100% owned Forrestania Nickel Project outlined in red and major nickel mines (operating and historic) and nickel deposits. Source: Company web sites 1 Ultramafic rocks (also referred to as ultrabasic rocks, although the terms are not wholly equivalent) are igneous and meta-igneous rocks with a very low silica content (less than 45%), generally >18% MgO, high FeO, low potassium, and are composed of usually greater than 90% mafic minerals (dark coloured, high magnesium and iron content). 2 All these deposits are owned by Western Areas NL (not Hannans Ltd). 3 There are five different settings to nickel sulphide mineralisation at Flying Fox. 4 Cumulate rocks are igneous rocks formed by the accumulation of crystals from a magma either by settling or floating. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 5 For personal use only DIRECTORS’ REPORT Forrestania Nickel Project (cont’d) Figure 3. Project location map showing Hannans Forrestania Nickel Project tenure outlined in red and the major nickel mines and deposits within the Western Areas Ltd tenure outlined in blue. Targets A1, A2, C1, C4, C5 and C6 were RC drill tested in January 2020. There is significant supporting infrastructure in the Forrestania region, with good road access and an existing electricity network primarily due to past and present mining operations. Located to the south of the Stormbreaker Prospect area is the 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 potential to expand to 1,000,000 tonnes per annum. 6 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT Moogie Gold & Copper Project (Hannans 100%) Introduction Moogie represents a conceptual greenfields exploration opportunity based on large-scale tectonic controls on mineralisation. The concept is that deep, long-lived crustal scale structures like major shear zones represent excellent tectonic settings for large scale mineralising events. Government seismic lines indicate the surface expression of a major structure occurs at the Moogie Project. Hannans is currently focussed on surface sampling and mapping to determine if rocks with potential to host economic mineralisation exist within the tenure. Figure 4. Regional location map showing Moogie ~ 260kms north-west of Meekatharra and the proximity of several current and historical mines. Background The Moogie Project comprises three exploration licence applications in the Gascoyne Province, Western Australia, located 260kms north- west of Meekatharra and 270kms east of Carnarvon (refer Figure 4 and Figure 5). Moogie is located within the Glenburgh Terrane of the Gascoyne Province, a Proterozoic5 metamorphic belt located at the northern margin of the Yilgarn Craton. The project tenure covers the intersection of the crustal scale Cardilya Fault with the northeast trending Deadman Fault. The project is considered prospective for orogenic6 gold, copper mineralisation and intrusion-related nickel-copper-platinum group element mineralisation. The Glenburgh Gold Project, owned by Gascoyne Resources Ltd (ASX:GCY), is located ~7km due south of Hannans’ applications and contains a Measured, Indicated and Inferred mineral resource of 21.3 Mt @ 1.5 g/t Au for 1.0M ounces of gold7. The gold mineralisation at Glenburgh is hosted within silica altered quartz-feldspar-biotite-garnet-gneiss and is located along the northeast trending Deadman Fault which continues along strike into Hannans’ applications. The Deadman Fault zone is a sinistral transcurrent fault8 hosting not only gold but also copper mineralisation (Dalgety Downs). The Deadman Fault zone forms a 14km low ridge on Hannans’ E09/2373 tenement application (refer Figure 5) and ASTER satellite imagery shows argillic alteration9 along its length; the ridge has not previously been drill tested. 5 The period from 2,500 million years ago (mya) to 541 mya. 6 Orogenic lode gold mineralising systems comprise epigenetic mineralisation that formed because of focused fluid flow late during active deformation and metamorphism of volcano-plutonic terranes. 7 Refer https://www.gascoyneresources.com.au/gascoyne-projects/glenburgh-gold-project/ 8 A left lateral, strike-slip fault, i.e. a sideways movement rather than up or down. 9 A type of hydrothermal alteration, typically low temperature and producing clays like kaolin and smectite. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 7 For personal use only DIRECTORS’ REPORT Moogie Gold & Copper Project (cont’d) Figure 5. Project location map showing Hannans tenement applications E09/2373 and E09/2374 (outlined in red) and the intersection of the crustal scale Cardilya Fault with the Deadman Fault considered prospective for orogenic gold and or copper mineralisation and intrusion-related Ni-Cu-PGE mineralisation. Regional Setting and Target Concept The Moogie Project is located at the ‘top’ of the Cardilya Fault (Shear Zone), a crustal-scale structure that extends from under the Yilgarn Craton. The Cardilya Fault separates the 2200-2000Ma Dalgaringa Supersuite from the 1800Ma Moorarie Supersuite, where the Glenburgh Terrane and the Yilgarn Craton came together at approximately 2,000Ma during the Glenburgh Orogeny. The tectonic setting is considered prospective for orogenic (hydrothermal) gold mineralisation, copper mineralisation and mafic intrusion associated Ni-Cu-PGE deposits during a period from around 2000-1800Ma. Tectonic similarities exist with the Albany-Fraser Zone at the south-eastern margin of the Yilgarn Craton. Detailed aeromagnetic data flown by Hannans in December 2019 defined a 2-5km wide ductile shear zone traversing through the tenement package, rather than discrete faults. Hannans now refers to this feature as the Cardilya Shear Zone (CSZ). Gneissic rocks deformed within this anastomosing shear zone include likely equivalents to the ~2,200Ma Moogie Metamorphics or Camel Hills Metamorphics, in addition to other granitic gneisses. A regionally significant 10-15km bend or kink in the CSZ is a key area of exploration interest. A major splay off the CDZ in the south-central part of the tenement area continues in a west-south-westerly direction towards the string of gold prospects and deposits in the Glenburgh Gold Project. This data was collected and interpreted during the period December 2019 – February 2020. Exploration Hannans has also compiled and levelled historic geochemical data and completed two geochemical sampling programs during the period January – April 2020. Sampling is targeting areas of interest identified from structural, magnetic, radiometric, and remote sensing (ASTER) interpretations. Thin section analysis of samples collected in the field have identified metamorphosed mafic and granitic rock units within the central portion of Moogie tenement package. A regional soil sampling program is also being planned. At this early stage of exploration, the presence of a major shear system (The Cardilya-Dalgety Shear Zone) and associated mylonite and paragneiss together with magnetic anomalies as well as the presence of copper oxides are together considered sufficient to justify further exploration. A summary of the exploration completed during 2019/2020 can be found in Table 1. 8 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT Mt Holland Lithium Project (Hannans 100%) Introduction The Mt Holland Lithium Project is located adjacent to Earl Grey, one of the most significant hard rock lithium deposits in the world jointly owned by New York Stock Exchange listed SQM and ASX listed Wesfarmers Ltd. Earl Grey will underpin a world-class, long-life integrated lithium project10. Hannans’ exploration goal at Mt Holland is to discover a lithium deposit comparable to Earl Grey. Background Hannans notes that the potential of the greater Mt Holland area to host globally significant hard rock lithium deposits is confirmed simply by the presence of the Earl Grey and Bounty lithium deposits11 and there are large areas of prospective tenure within the Hannans’ project that remain unexplored. Despite intersecting pegmatites in aircore and reverse circulation drilling at Mt Holland West, to date there has been no indication in the analyses of fertile pegmatites12. Figure 6. Map showing major lithium mines, projects and processing infrastructure. Hannans’ exploration model is based on targets located within a 10km radius of late stage fertile granitoids, reliance on the best geological interpretation of aeromagnetic data for defining granitoids, greenstones and structures; and interpretations of data from weathered samples recognising the high mobility of lithium in the weathered zone. Exploration Hannans has completed seven drilling programs at Mt Holland and aims to test its best lithium target with one reverse circulation (RC) drill hole at the end of the nickel drilling campaign planned for the current Quarter. All government approvals have been received for the drilling. If warranted further holes will be drilled in due course. A summary of the exploration completed during 2019/2020 can be found in Table 1. 10 Refer kidmanresources.com.au 11 Owned by Kidman Resources and SQM, not Hannans. 12 The host to the lithium mineralisation. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 9 For personal use only DIRECTORS’ REPORT Fraser Range (Hannans 100%) Introduction Hannans tenure comprises several small exploration license applications located approximately 100kms east of Norseman and 60 kms south-west of the operating Nova nickel-copper-cobalt mine. Four applications E63/2020 – 2023 are proximal to the Talbot nickel-copper- cobalt anomaly explored by Sirius Resources Ltd and later IGO Ltd (refer Figure 7). Background The general area of this group of tenements has been the subject of nickel exploration since the 1960’s. The Talbot prospect (situated immediately west of E63/2021, or roughly between the four Hannans tenements) was one of the localities at which weak nickel-copper sulphide mineralisation was discovered at that time, along with Gnama South (approximately 3km to the NW of E63/2022). Exploration during the era post the Nova discovery has been carried out exclusively by Sirius and later IGO. A significant amount of exploration was completed in this area between 2011 and 2019, including the blocks currently under application by Hannans. Exploration Given the proximity of the tenements to a known nickel sulphide occurrence (which are not common in the Fraser Range area), the leases are of exploration interest. It is important to note that two applications adjacent to the Talbot nickel prospect have seen little coverage with surface geophysics (electromagnetic). A ground EM survey will be completed by Hannans when the tenements are granted. However, given the work that has been completed to date by previous operators, it would appear there is limited scope for additional exploration that might lead to a discovery of a deposit that was not identified by the previous work. A summary of the exploration completed during 2019/2020 can be found in Table 1. Figure 7. Regional location map showing Hannans recent tenement applications in red relative to tenements owned by IGO Ltd and Bodicea Resources Ltd. The location of the producing Nova nickel-copper-cobalt mine is also shown. 10 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT Forrestania Gold (Hannans 20% Free-Carried) Introduction Joint venture partner, Classic Minerals Ltd (ASX:CLZ), is funding exploration on the Forrestania Gold Project located approximately 120km south of Southern Cross in the Goldfields region of Western Australia. Hannans owns a 20% free-carried interest in the FGP13 meaning Hannans is not required to fund the costs of exploration until a decision to mine gold has been made by the joint venture. For the avoidance of doubt Hannans owns a 100% interest in all non-gold rights on the tenements including but not limited to nickel, lithium, and other metals. Figure 8. Forrestania Gold Project (FGP) location map showing the range of priority gold targets identified by previous explorers. Hannans holds a 20% free-carries interest in the gold rights at the FGP. 13 Please refer to the ASX releases made by Classic Minerals Ltd dated 2 May 2017, 18 December 2019 and 21 January 2020 for full details of the mineral resource estimates reported in compliance with the JORC Code, 2012 Edition. Hannans has no interest in either the Lady Lila or Kat Gap prospects owned by Classic Minerals Ltd. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 11 For personal use only DIRECTORS’ REPORT ANNUAL RESOURCE STATEMENTS Hannans through the joint venture with Classic Minerals Ltd holds a 20% interest in the following JORC resources for the year ended 30 June 2019 and 30 June 2020. JULY 2019 – JUNE 2020 Forrestania Gold Project14 JORC Compliant Indicated and Inferred Mineral Resource Table Indicated Grade (Au g/t) 2.01 – 2.01 Ounces (Au) Tonnes 16,600 – 1,090,800 5,922,700 16,600 7,013,500 Prospect Lady Ada Tonnes 257,300 Lady Magdalene – TOTAL 257,300 JULY 2018 – JUNE 2019 Forrestania Gold Project15 JORC Compliant Indicated and Inferred Mineral Resource Table Prospect Lady Ada Tonnes 283,500 Lady Magdalene 1,828,500 TOTAL 2,112,000 Competent Person’s Statements – Forrestania Gold Project Indicated Grade (Au g/t) 1.78 1.08 1.17 Ounces (Au) Tonnes 16,200 63,700 79,900 260,000 2,450,000 2,710,000 Inferred Grade (Au g/t) 1.23 1.32 1.3 Inferred Grade (Au g/t) 2.2 1.5 1.6 Ounces (Au) 43,100 251,350 294,450 Ounces (Au) 18,750 118,000 136,750 The information contained in the JORC Compliant Resource Table relates to information compiled or reviewed by Edward S. K. Fry, a Competent person who is a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Fry is a consultant exploration geologist with BGM Investments Pty Ltd and consults to Classic Minerals Ltd. Mr Fry has sufficient experience that is relevant to the styles of mineralisation and the types of deposit under consideration, and to the activities undertaken to qualify as a Competent Person as defined in the 2012 edition of the ‘JORC Australian code for reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Fry consents to the inclusion in this report of the matters based on information in the form and context in which it appears. Acknowledgement Hannans would like to acknowledge the work completed by several advisors, consultants and contractors (Team) through the year. Hannans appreciates the quality, focus and professionalism of these individuals and organisations. Hannans and its Team are focussed on the discovery of a world class orebody at Forrestania, Moogie, Mt Holland and Fraser Range. 12 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 14 Refer to Classic Minerals Ltd (ASX: CLZ) ASX announcement on 31 July 2020 for further information. 15 Refer to Classic Minerals Ltd (ASX: CLZ) ASX announcement on 14 March 2017 for further information. For personal use only DIRECTORS’ REPORT Exploration Exploration activities completed by Hannans and its joint venture partners during the year ended 30 June 2020 are set out below: Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Forrestania (Gold) Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) Qtr 1 A major nickel sulphide exploration campaign was commenced along strike from high grade operating nickel mines; exploration was planned and managed by Newexco Exploration (www.newexco.com), a Team with an outstanding “discovery” track record. Hannans postponed joint venture discussions with third parties to provide Shareholders with the greatest leverage to a future nickel discovery. Refer ASX release dated 15 October 2019. Qtr 2 Two extensive flora and fauna surveys were completed to enable ground clearing activities for ground geophysical (electromagnetic, or EM) surveys and drill testing of nickel targets to be approved by the government. Ground EM surveys and the 1st round of drilling were commenced but were halted due to a major bush fire in the region that endangered the safety of staff, contractors, and their equipment. Refer ASX releases dated 19 November 2019, 3 and 5 December 2019. Qtr 4 Qtr 3 The 1st phase of nickel exploration was completed (ground EM survey and drilling), all results were interpreted and reported. The 2nd phase of exploration, including field visits and planning follow- up surveys (ground and down-hole EM surveys) was commenced. Refer ASX releases dated 18 March 2020. The 2nd phase of EM surveying was completed, data was interpreted and reported after the end of the Quarter. Approvals to test six target areas prospective for nickel sulphide mineralisation with reverse circulation (RC) and diamond drilling (DD) were received from the government. After the end of the Quarter, two additional (high priority) nickel targets were approved for drilling by the government. Refer ASX release dated 29 July 2020. Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Forrestania (Gold) Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) Qtr 1 Qtr 2 Seventy-nine aircore holes were drilled at Mt Holland West and identified anomalous lithium and pathfinder elements including rubidium, tantalum, caesium, tin and beryllium. Deeper drilling was planned to determine if fresh pegmatite beneath the anomalism hosted economic lithium mineralisation. A Spring flora & fauna survey was completed at Mt Holland East to support the next round of drilling. Refer ASX release dated 1 October 2019. Qtr 3 Government approvals were received to drill 2 deep holes at Mt Holland West testing the fresh pegmatite beneath lithium anomalism identified in the 1st Quarter. Refer ASX releases dated 31 January 2020. Qtr 4 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 13 For personal use only DIRECTORS’ REPORT Exploration (cont’d) Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Qtr 1 Qtr 2 Forrestania (Gold) Qtr 3 Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) A detailed interpretation of the airborne geophysical survey flown in the 1st Quarter was completed as was an initial field reconnaissance. Soil samples were collected by prospectors across regional areas of interest, assay results were received, and interpretation of the results commenced. Refer ASX release dated 31 January 2020. Qtr 4 Additional soil samples were collected by prospectors and the Company continued interpreting the results. After the Quarter ended the 1st phase of field mapping was undertaken and prospectors collected yet more surface samples for analysis. Refer ASX release dated 10 June 2020 and 14 September 2020. Tenement applications were lodged over prospective terrane in the Gascoyne Province, approximately 200kms north-east of Meekatharra to secure tenure over an exploration concept with the potential to host large scale mineral deposits. An airborne magnetic (gradiometer) survey (~11,000 line kilometres) was flown to generate high quality geophysical data for interpretation. Refer ASX release dated 5 December 2019. Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Forrestania (Gold) Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) Qtr 1 Qtr 2 An updated mineral resource estimate was released by Hannans’ joint venture partner for the Lady Magdalene deposit, 5.92 mt @ 1.32 g/t gold for 251,350 ounces. This represented a 38% increase in the contained gold ounces. Hannans’ interest is free- carried until a decision to mine is made. Refer ASX release dated 19 December 2019. Qtr 4 Qtr 3 Hannans joint venture partner Classic Minerals Ltd (ASX:CLZ) updated the mineral resource estimate for Lady Ada to total resources of 7.27mt @ 1.33 g/t gold for 311,050 ounces of gold. Hannans’ interest is free-carried until a decision to mine is made. Refer ASX release dated 28 January 2020. Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Forrestania (Gold) Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) Qtr 1 Qtr 2 Qtr 3 14 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 Qtr 4 Several exploration licenses were applied for within prospective terrain adjoining tenure held by mining company IGO Ltd. Hannans applications were ”opportunistic” as there is very limited ground available in the Fraser Range that is not controlled by IGO, or multi-millionaire prospector Mark Creasy. Refer ASX release dated 1 May 2020. A detailed review of all historic exploration data covering Hannans new tenement applications was completed by Newexco Exploration. The review identified areas within the applications that had not been adequately tested for nickel sulphide mineralisation, and an exploration strategy was planned. Refer ASX release dated 31 July 2020. For personal use only DIRECTORS’ REPORT Exploration (cont’d) Forrestania (Nickel) Mt Holland (Lithium) Moogie (Gold & Copper) Forrestania (Gold) Fraser Range (Nickel) Milly Boo (Iron Oxide-Copper-Gold) Qtr 1 Qtr 2 Qtr 3 Qtr 4 Exploration expenditure Mineral Exploration Activities in 2020 In line with the Group’s accounting policy, Hannans expensed $1,254,103 on mineral exploration activities in 2020 (2019: $766,344) relating to its non-JORC compliant mineral projects. These amounts exclude all administration, transaction costs and exploration expenditure by Hannans joint venture partners. Table 1. Summary of the exploration completed during 2019/2020. Geological activities Geochemical activities Geophysical activities Drilling Field supplies Field camp and travel Drafting activities Environmental Rehabilitation Annual tenement rent & rates Tenement administration Tenement application fees An application for a new tenement was lodged in the Gascoyne region over a deep magnetic anomaly identified as having characteristics of an IOCG target. A ground based geophysical (gravity) survey was completed to test the concept. After the Quarter ended interpretation of the data was completed and a gravity anomaly located “higher up” in cover sediments was identified. Whilst the anomaly did not fit an IOCG model it will be further investigated. Refer ASX release dated 31 July 2020. $ 442,372 72,554 252,461 205,313 47,788 32,803 1,580 261 47,767 76,064 56,264 18,876 % 35% 6% 20% 16% 4% 3% 0% 0% 4% 6% 5% 2% TOTAL MINERAL EXPLORATION ACTIVITIES 1,254,103 100% Figure 9. Historical record since listing on ASX of exploration expenditure, cash at bank and market capitalisation as at 30 June. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 15 For personal use only DIRECTORS’ REPORT 16 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 Goals Scorecard 2018 – 2020 Hannans introduced the Scorecard in 2015 The Scorecard enables the Directors, Management and Shareholders to remain focussed on the Goals on a rolling three- year basis. The table below highlights Hannans achievements relative to the stated Goals: Item Strategic Plan Shareholder Returns Stated Goal AGM 2018 Hannans is aiming to develop into a West Australian mining company via: ∂ exploration success for lithium and or nickel at Forrestania; ∂ ∂ participation in joint ventures for gold at Forrestania and lithium at Lake Johnston; and or acquisition of a major project. Implement a strategy giving shareholders the opportunity to: ∂ return multiples on their original investment, and/or ∂ recover original investment. Joint Venture (JV) Monitor joint venture partners’ activities Outcome to Date ∂ No world class minerals exploration discovery so far. ∂ No requirement to contribute funding to JV partners activities so far. ∂ No acquisition of a major project despite due diligence on several projects. Hannans share price was ∂ 20 cents (IPO) on 5 December 2003 ∂ ∂ ∂ ∂ ∂ $1.04 (high) on 22 May 2007 0.2 cents (low) on 21 December 2015, 23 December 2015 to 6 January 2016, 11 January to 15 February 2016 1.8 cents on 24 August 2018; 0.9 cents on 26 August 2019; and 0.8 cents on 13 August 2020. Hannans has a JV over certain tenements at Forrestania with Classic Minerals Ltd (ASX:CLZ). Classic has been active and had exploration success. Hannans is free carried at 20% through to a decision to mine. Sole Funded Projects Secure joint venture partners A JV partner was sought for Mt Holland, but the deal was not completed. Corporate Activities Spin outs Hannans received a binding offer from a global major to JV nickel at Forrestania however the Board elected to continue sole funding. Errawarra Resources Ltd was demerged from Hannans in February 2012. (www.errawarra.com) Critical Metals Ltd was demerged from Hannans in 2016. (www.criticalmetals.eu) For personal use only 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 Jonathan Murray, Non-Executive Chairman (Appointed 29 November 2016, previously appointed Non-Executive Director on 22 January 2010) Mr Damian Hicks, Executive Director (Appointed on 29 November 2016, previously appointed Managing Director on 11 March 2002) Mr Murray is a partner at law firm Steinepreis Paganin, based in Perth, Western Australia. He has over 20 years experience advising on numerous initial public offers and secondary market capital raisings, public and private M&A transactions, corporate governance and strategy. Mr Murray graduated from in 1996 with a Murdoch University Laws and Commerce Bachelor of (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: ∂ Vietnam Industrial Investments Limited (appointed 19 January 2016, resigned 15 May 2020) ∂ Peak Resources Limited* (appointed 22 February 2011) Mr Markus Bachmann, Non-Executive Director (Appointed 2 August 2012) Mr Markus Bachmann holds a Master (MA) in Business and Economics (cum laude) from the University of Berne, Switzerland. Markus started his career in the corporate finance department of the Credit Suisse Group, before joining the SBC Brinson Asset Management Emerging Markets team in 1997. Moving to South Africa in 2000 he joined Coronation Fund Managers in Cape Town, South Africa, as a senior manager for various retail products and institutional mandates. Markus co-funded Craton Capital in 2003 whereas he is the manager of the Craton Capital Precious Metals Fund and the Global Resources Fund since their inception. Over the past 20 years and under his management, his funds received a number of prestigious industry awards. Markus accumulated over 25 years of experience in global equity markets, precious metals and raw materials. During the past 3 years Mr Bachmann did not serve as a director on other listed companies. Mr Hicks was a founding Director of Hannans Ltd and appointed to the position of Managing Director on 5 April 2007 and appointed as Executive Director on 29 November 2016. Mr Hicks is also Executive Director of the Group’s subsidiary companies. Mr Hicks graduated from the University of Western Australia with a Bachelor of Commerce (Accounting and Finance) in 1992 and was admitted as a Barrister and Solicitor of the Supreme Court of Western Australia in 1999. He 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. During the past 3 years Mr Hicks did not serve as a director on other listed companies. Mr Clay Gordon, Non-Executive Director (Appointed 5 October 2016) Mr Clay Gordon was appointed a director of Hannans in 2016. Mr Gordon obtained a Bachelor of Applied Science (Geology) and a Master of Science (Mineral Economics) and has more than 25 years’ experience in senior roles (operational, management and corporate) within large and small resource companies active in a range of commodities within Australia, Africa and South East Asia. He was founding Non-Executive Director of ASX listed Phoenix Gold Limited, founding Managing Director of ASX listed Primary Gold Limited and is currently the Group Geologist of a private mining investment company, Adaman Resources Pty Ltd. Mr Gordon was also founder and CEO of Mining Assets Pty Ltd, a private company involved in the assessment and marketing of mineral projects. He is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. During the past 3 years Mr Gordon did not serve as a director on other listed companies. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 17 For personal use only DIRECTORS’ REPORT DIRECTORS (cont’d) COMPANY SECRETARY Ms Amanda Scott (Appointed Non-Executive Director on 29 November 2016) Mr Ian Gregory (Appointed 5 April 2007) Ms Scott was appointed a director of Hannans in 2016 and has been the Exploration Manager for Hannans Ltd and its subsidiary companies since 2008. Ms Scott played an 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 integral role Australia. Ms Scott holds a Bachelor of Science (Geology) from Victoria University of Wellington, and is a Member of the Australian Institute of Mining & Metallurgy. In 2016, Ms Scott created Scandinavian-based consultancy Scott Geological AB providing geological and exploration services to a number of clients from around the world. During the past 3 years Ms Scott did not serve as a director on other listed companies. is a professional well- Mr Gregory connected Director and Company Secretary with over 30 years’ experience in the provision of company secretarial and business administration services in a variety including exploration, mining, mineral processing, oil and gas, banking and insurance. industries, of Mr Gregory holds a Bachelor of Business degree from Curtin University and is a Fellow of the Governance Institute of Australia, the Financial Services Institute of Australia and a Member of the Australian Institute of Company Directors. 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. He has also served on the National Council of GIA. Directors’ 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 2020. Director Damian Hicks Jonathan Murray Markus Bachmann(i) Clay Gordon Amanda Scott Ordinary Shares Options over Ordinary Shares Current Holding Net Increase/ (decrease) 7,007,218 12,705,132 75,725,134 2,362,204 1,260,001 – – – – – Current Holding – 10,500,000 10,500,000 10,500,000 10,500,000 Net Increase/ (decrease) – (3,237,500) (2,697,917) – – (i) These shares are held by Craton Capital Funds of which Mr Bachmann is a founding partner and Chief Executive Officer. 18 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only 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 Executive Director and executives receive a superannuation guarantee contribution required by the government where applicable, 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 methodology 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 $250,000 which may be divided among the Non-Executive Directors in the manner determined by the Board and Company from time to time. Fees for Non–Executive Directors are not linked to the performance of the Company. The 2019 remuneration report was approved at the last Annual General Meeting held on 17 October 2019. The remuneration policy has been tailored to increase the direct positive relationship between shareholders investment objectives and directors and executive performance. The Company facilitates this through the issue of options from time to time to the directors and executives to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth. The Company currently has no performance based remuneration component built into director and executive remuneration packages. The Board does not consider earnings during the current and previous financial years when determining, and in relation to, the nature and amount of directors’ remuneration. Refer below for a summary of the Group’s earnings and the Company’s market performance for the past 5 years. Summary of 5 Years earnings and market performance as at 30 June Profit/(Loss) ($) Share price (c) Market capitalisation (Undiluted) ($) 2020 2019 2018 2017 2016 (1,900,520) (2,085,563) (1,379,271) 11,663,780 (964,387) 0.5 1.0 1.4 1.5 1.6 9,939,773 19,879,545 27,724,264 25,239,608 15,531,324 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 19 For personal use only 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 listed on pages 17 and 18. 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(ii) insurance Superan- nuation Other benefits Options (iii) Long term benefits Other benefits $ $ $ $ $ $ $ $ Value options as proportion of remuneration % Total $ 2020 Directors Damian Hicks (iv) 240,000 20,138 2,396 22,800 Jonathan Murray (v) 24,000 Markus Bachmann (v) 24,000 Clay Gordon (v) Amanda Scott (v) 24,000 24,000 – – – – 2,396 2,395 – – 2,395 2,280 2,395 – 336,000 20,138 11,977 25,080 Total 2019 Directors Damian Hicks 218,000 Jonathan Murray Markus Bachmann Clay Gordon Amanda Scott 20,000 20,000 20,000 20,000 – – – – – 2,139 2,140 2,140 – – – 2,140 1,900 2,140 – Total 298,000 – 10,699 1,900 (i) Short Term Other benefits include annual leave accrued during the year of $20,138 (2019: nil) for Mr Damian Hicks. (ii) 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) The amounts included are issued under Hannans’ Director Equity Option Plan approved by shareholders in September 2016. The amounts are non-cash items that are subject to vesting conditions. Refer to Section D for more information. C. Service agreements – Executive Director – – – – – – – – – – – – 26,318 6,580 6,580 6,580 6,580 52,638 127,189 31,797 31,797 31,797 31,797 254,377 – – – – – – – – – – – – – – – – – – – – – – – – 311,652 32,976 32,975 35,255 32,975 445,833 347,328 53,937 53,937 55,837 53,937 564,976 8.4% 20.0% 20.0% 18.7% 20.0% 11.8% 36.6% 59.0% 59.0% 56.9% 59.0% 45.0% (iv) After a further review of Mr Hicks’ contract with the Company, the Board resolved from 1 July 2019 to increase his fees to $240,000 per annum for executive services. In an effort to assist the Company with managing its cash flow, Mr Hicks deferred $28,750 in salary & fees entitlements during the period 1 April 2020 to 30 June 2020. From 1 July 2020 Mr Hicks continues to receive his salary in accordance with his contract. The deferred salary was paid to Mr Hicks in September 2020. (v) After a further review of Non-Executive Directors’ fees, the Board resolved to increase these fees to $24,000 per annum starting from 1 July 2019. Mr Hicks was appointed a Director Hannans on 11 March 2002 and commenced employment with Hannans Ltd on 3 December 2003. He entered into an employment agreement as Managing Director of the Company on 21 December 2009. On 29 November 2016, Mr Hicks was appointed as the Executive Director of the Group. The Board resolved from 1 July 2017 to increase his fees to $198,000 per annum for executive services and $20,000 per annum for services related specifically to his role as a director of the Board. On 1 July 2019, Mr Hicks’ entered into an executive employment agreement with the Company with his salary increased to $240,000 per annum. The remuneration package includes statutory superannuation entitlements, a remuneration increase of not less than 5% per annum and provision of leave in accordance to the National Employment Standards. In an effort to assist the Company with managing its cash flow, Mr Hicks deferred $28,750 in salary entitlements during the period 1 April 2020 to 30 June 2020. The deferred salary was paid to Mr Hicks in September 2020. 20 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (cont’d) C. Service agreements (cont’d) Executive Director (cont’d) 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 Engagement By HANNANS By Employee Termination Notice Period Termination payments* Director | Damian Hicks Employee 6 months 3 months 3 months * Termination payments (other than for gross misconduct) are calculated on current remuneration at date of termination and are inclusive of the notice period. 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. On 1 July 2017 the Non-Executive Directors fees were set at $20,000 per annum for each Non-executive Director. From 1 July 2019 the Non-Executive Directors fee is $24,000 per annum for each Non-executive Director. Major provisions of the agreements relating to the Non-executive directors are set out below. Name Non-Executive Directors Jonathan Murray Markus Bachmann Clay Gordon Amanda Scott Termination Notice Period By HANNANS By Director Termination payments* 1 month 1 month 1 month 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. D. Share–based compensation If approved by shareholders, 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. There were no options issued to the directors and executives during the year. As at 30 June 2020, 47,935,417 options (2019: 52,102,083) were held by Directors and Non- Executives. Directors J Murray M Bachmann Finan- cial year 2015 2017(ii) 2018 2018 2018 2015 2017(ii) 2018 2018 2018 Options issued during the year No of options No. No. Issue date Fair value per options at issue date Vesting date(i) Exercise price Expiry date Vested during the year Expired/ Exercised during the year No. No. – – – – – – – – – – – 20 Nov 14 0.3 cents 20 Nov 16 2.9 cents 20 Nov 19 3,237,500 15 Sep 17 0.9 cents 15 Sep 17 2.7 cents 15 Sep 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 17 2.6 cents 27 Oct 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 18 1.8 cents 27 Oct 21 – – – – 3,500,000 27 Oct 17 1.2 cents 27 Oct 19 1.5 cents 27 Oct 22 3,500,000 – 20 Nov 14 0.3 cents 20 Nov 16 2.9 cents 20 Nov 19 2,697,917 15 Sep 17 0.9 cents 15 Sep 17 2.7 cents 15 Sep 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 17 2.6 cents 27 Oct 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 18 1.8 cents 27 Oct 21 – – – – 3,500,000 27 Oct 17 1.2 cents 27 Oct 19 1.5 cents 27 Oct 22 3,500,000 500,000 – – – – 500,000 – – – – H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 21 For personal use only DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (cont’d) D. Share–based compensation (cont’d) Directors C Gordon A Scott Finan- cial year 2018 2018 2018 2015 2018 2018 2018 Options issued during the year No of options No. No. Issue date Fair value per options at issue date Vesting date(i) Exercise price Expiry date Vested during the year Lapsed/ Exercised during the year No. No. – – – – – – – 3,500,000 27 Oct 17 1.0 cents 27 Oct 17 2.6 cents 27 Oct 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 18 1.8 cents 27 Oct 21 – – 3,500,000 27 Oct 17 1.2 cents 27 Oct 19 1.5 cents 27 Oct 22 3,500,000 – 20 Nov 14 0.3 cents 20 Nov 16 2.9 cents 20 Nov 19 3,500,000 27 Oct 17 1.0 cents 27 Oct 17 2.6 cents 27 Oct 20 3,500,000 27 Oct 17 1.0 cents 27 Oct 18 1.8 cents 27 Oct 21 – – – 3,500,000 27 Oct 17 1.2 cents 27 Oct 19 1.5 cents 27 Oct 22 3,500,000 – – – 3,166,666 – – – (i) The unlisted options become vested on the vesting date. No other vesting condition applies. (ii) On 15 September 2020 the unlisted options exercisable at 2.7 cents expired unexercised 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 (KMP) equity holdings Fully paid ordinary shares of Hannans Ltd Balance at 1 July Granted as remuneration Received on exercise of options Key management personnel No. No. No. Net other change No. Balance at 30 June No. 2020 Damian Hicks Jonathan Murray Markus Bachmann(i) Clay Gordon Amanda Scott 7,007,218 12,705,132 76,985,838 2,362,204 1,260,001 100,320,393 – – – – – – – – – – – – – – 7,007,218 12,705,132 (1,260,704) 75,725,134 – – 2,362,204 1,260,001 (1,260,704) 99,059,689 (i) These shares are held by Craton Capital Funds of which Mr Bachmann is a founding partner and Chief Executive Officer. The decrease in shares held resulted from a restructuring of ownership of Craton Capital Ltd. There was no on-market disposal of shares. 22 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (cont’d) E. Additional information (cont’d) Options of Hannans Ltd Key management personnel 2020 Damian Hicks Jonathan Murray(i) Markus Bachmann Clay Gordon Amanda Scott Balance at 1 July No. – 14,237,500 13,697,917 10,500,000 13,666,666 52,102,083 Granted as remune- ration Options exercised Net other change Balance at 30 June Exercisable Not exercisable Vested at 30 June No. No. No. No. No. No. – – – – – – – – – – – – – – – (500,000) 13,737,500 13,737,500 (500,000) 13,197,917 13,197,917 – 10,500,000 10,500,000 (3,166,666) 10,500,000 10,500,000 (4,166,666) 47,935,417 47,935,417 – – – – – – (i) Mr Murray holds 840,000 in trust for unrelated third parties. The options include those held directly, indirectly and beneficially by KMP. Loans to KMP and their related parties There were no loans to KMP and their related parties during the year. 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 $4,983 (2019: $690) 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. At 30 June 2020 there was no amount outstanding owed to Steinepreis Paganin (2019: Nil). Corporate Board Services Pty Ltd (CBS), of which Mr Damian Hicks is a director, provided accounting and compliance services amounting to $143,750 (2019: $150,000) to the Group during the year. The amounts paid were on arm’s length commercial terms. At 30 June 2020 there was no amount outstanding owed to CBS. During the year, Hannans invoiced $2,894 (2019: $3,655) for expenses paid on behalf CBS. At 30 June 2020 CBS owed $1,298 (2019: $1,005) to the Group. Scott Geological AB, of which Ms Amanda Scott is a director, provided geological services amounting to $13,639 to the Group during the year. The amounts paid were on arm’s length commercial terms. Ms Scott’s director’s fees are also paid to Scott Geological. At 30 June 2020 a total of $5,029 was owed to Scott Geological AB. End of Remuneration Report DIRECTORS MEETINGS The following tables set information in relation to Board meetings held during the financial year. Board Member Held while Director Attended Board Meetings Damian Hicks Jonathan Murray Markus Bachmann Clay Gordon Amanda Scott 3 3 3 3 3 3 3 2 2 3 Circular Resolutions Passed 2 3 3 4 4 Total 5 6 5 6 7 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 23 For personal use only 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 Project: Forrestania Project: Forrestania Project: Forrestania E77/2207-I E77/2219-I E77/2220-I E77/2239-I E77/2303 100 100 100 100 100 1,2 1,2 1,2 1,2 1,2 P77/4290 P77/4291 E77/2546 E77/2610 P77/4534 100 100 100 100 100 1,2 1,2 1 1 1 E77/2460 Project: Mt Holland E77/2489 100 100 Project: Queen Victoria Rocks E15/1416 100 3 1 1 NOTE: 1 2 3 Reed Exploration Pty Ltd (REX) is a wholly owned subsidiary of Hannans Ltd. REX is the registered holder of the tenements. REX holds a 100% interest in all minerals excluding gold. REX holds a 20% free-carried interest in the gold rights. HR Forrestania Pty Ltd (HRF) is a wholly owned subsidiary of Hannans Ltd. HRF is the registered holder of the tenements. TENEMENTS UNDER APPLICATION Applications for tenements have been submitted are as follows: Tenement Number Project: Moogie E09/2373 E09/2374 E09/2417 Project: Milly Boo E09/2418 Project: Maggie Hayes E63/2016 Project: Forrestania E77/2711 Tenement Number Project: Fraser Range E63/2020 E63/2021 E63/2022 E63/2023 E63/2024 E63/2025 E63/2026 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%) Reed Exploration Pty Ltd (100%) 24 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only DIRECTORS’ REPORT CAPITAL Hannans Ltd issued capital is as follows: 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 2020 Ordinary fully paid shares at the date of this report Number of shares 1,987,954,539 1,987,954,539 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 8 unlisted option holders holding 108,655,848 unissued ordinary shares in respect of which options are outstanding. 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 1.5 cents, expiring 19 November 2022 Expired at 2.9 cents, expiring 20 November 2019 Balance at 30 June 2020 Expired at 2.7 cents, expiring 15 September 2020 Total number of options outstanding at the date of this report Substantial Shareholders Hannans Ltd has the following substantial shareholders as at 11 September 2020: Number of options 117,172,512 3,500,000 (12,016,664) 108,655,848 (21,155,848) 87,500,000 Name Number of shares Percentage of issued capital Neometals Investments Pty Ltd 706,209,483 35.52% Range of Shares as at 11 September 2020 Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – 9,999,999 Total Total Holders 122 200 162 888 832 Units 33,973 687,336 1,365,355 44,134,386 1,941,733,489 2,204 1,987,954,539 % Issued Capital 0.01% 0.03% 0.07% 2.22% 97.67% 100.00% H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 25 For personal use only DIRECTORS’ REPORT CAPITAL (cont’d) Unmarketable Parcels as at 11 September 2020 Minimum $500.00 parcel at $0.007 per unit 71,429 Minimum parcel size Holders 1,144 Units 25,440,229 Top 20 holders of Ordinary Shares as at 11 September 2020 Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Neometals Investments Pty Ltd HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited MCA Nominees Pty Ltd Equity & Royalty Investments Ltd Anglo American Exploration Marfield Pty Limited C Y T Investment Pty Ltd Mr Bruce Drummond + Mrs Judith DrummondRedland Plains Pty Ltd Acacia Investments Pty Ltd CSB Investments (WA) Pty Ltd Mr Michael Sydney Simm Mrs Andrea Murray Mossisberg Pty Ltd Allua Holdings Pty Ltd Over The Hill Wa Pty Ltd Mr William Scott Rankin J P Morgan Nominees Australia Pty Limited Anglo American Exploration BV Units 706,209,483 103,715,959 95,456,700 87,401,545 60,000,003 60,000,000 26,896,651 26,000,000 22,500,000 21,668,669 20,733,503 20,000,000 20,000,000 11,775,956 10,577,744 10,000,000 10,000,000 8,699,489 7,466,371 7,389,162 % of Issued Capital 35.52% 5.22% 4.80% 4.40% 3.02% 3.02% 1.35% 1.31% 1.13% 1.09% 1.04% 1.01% 1.01% 0.59% 0.53% 0.50% 0.50% 0.44% 0.38% 0.37% Total of Top 20 holders of ORDINARY SHARES 1,336,491,235 67.23% On-market buy back There is no current on-market buy-back. 26 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only 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 $2,686,790. During the year total exploration expenditure expensed by the Group amounted to $1,254,103 (2019: $766,344). The exploration expenditures relate to non JORC compliant mineral resource projects and this has been expensed in accordance with the Group’s accounting policy. Administrative expenditure incurred amounted to $800,096 (2019: $909,381). This has resulted in an operating loss after income tax for the year ended 30 June 2020 of $1,900,520 (2019: $2,085,563 loss). As at 30 June 2020 cash and cash equivalents totalled $855,949. Summary of 5 Year Financial Information as at 30 June 2020 2019 2018 2017 2016 Cash and cash equivalents ($) 855,949 2,686,790 4,082,079 1,481,828 1,425,160 Net assets/equity ($) 3,157,778 4,989,155 6,788,307 4,043,759 Exploration expenditure expensed ($) (1,254,103) (766,344) (505,967) (804,102) 903,218 (29,998) Exploration and evaluation expenditure capitalised ($) No of issued shares No of options Share price ($) – (404,000) (28,000) 2,688,000^ (97,599) 1,987,954,539 108,655,848 1,987,954,539 117,172,512 1,980,304,538 125,022,513 1,682,640,560 970,707,755 57,201,681 102,712,500 0.005 0.010 0.014 0.015 0.016 Market capitalisation (Undiluted) ($) 9,939,773 19,879,545 27,724,264 25,239,608 15,531,324 ^ On 15 September 2016 Hannans held a General Meeting and shareholders approved the 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 29 September 2016 the acquisition of Reed Exploration Pty Ltd was completed. The capitalised exploration and evaluation expenditure related to the acquisition of Reed Exploration Pty Ltd. Summary of Share Price Movement for year ended 30 June 2020 Highest Lowest Latest Price (cents) Date 1.2 0.3 0.7 16 – 17 Jul, 17 & 19 Sep 2019 23 – 25 Mar 2020 11 September 2020 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 27 For personal use only DIRECTORS’ REPORT ANNOUNCEMENTS ASX Announcements for the year and to the date of this report Date Announcement Title Date Announcement Title 16 Sep 2020 Change of Director's Interest Notice 5 Dec 2019 Forrestania Nickel Update 16 Sep 2020 Expiry of Options 5 Dec 2019 Moogie Gold and Copper 15 Sep 2020 Forrestania Nickel Drilling 3 Dec 2019 Forrestania Nickel Drilling 14 Sep 2020 Moogie Geochemical Sampling Update 22 Nov 2019 Issue of Options 31 Jul 2020 4th Quarter Activities Report 21 Nov 2019 Expiry of Options 31 Jul 2020 4th Quarter Cashflow Report 19 Nov 2019 Gold at Forrestania 29 Jul 2020 Drill Testing of Nickel Targets 14 Nov 2019 Forrestania Nickel Surveys Commence 2 Jul 2020 Forrestania Nickel Project (Interim Update) 5 Nov 2019 Updated Capital Structure 10 Jun 2020 Moogie Au & Ni-Cu-PGE Sampling 31 Oct 2019 1st Quarter Activities Report 9 Jun 2020 Forrestania Nickel Geophysical Surveys 31 Oct 2019 1st Quarter Cashflow Report 4 Jun 2020 Moogie Gold & Nickel-Copper-PGE Project 17 Oct 2019 AGM results 20 May 2020 Forrestania Nickel Update 17 Oct 2019 AGM Presentation 1 May 2020 3rd Quarter Activities Report 15 Oct 2019 Major Nickel Exploration Campaign Forrestania 30 Apr 2020 3rd Quarter Cashflow Report 1 Oct 2019 Mt Holland Lithium Project Update 18 Mar 2020 Forrestania Nickel Update 17 Sep 2019 Notice of Annual General Meeting 13 Mar 2020 Half Year Financial Report 30 Aug 2019 Change of Directors Interest Notice 31 Jan 2020 2nd Quarter Activities Report 30 Aug 2019 Appendix 4G 31 Jan 2020 2nd Quarter Cashflow Report 30 Aug 2019 2019 Annual Report 28 Jan 2020 Forrestania Gold Resource Update 28 Aug 2019 Mt Holland Lithium Update 10 Jan 2020 Company Update 31 Jul 2019 4th Quarter Activities Report 9 Jan 2020 Forrestania Nickel Drilling 31 Jul 2019 4th Quarter Cashflow Report 19 Dec 2019 Forrestania Gold Resource Update 28 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only 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 4th 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.hannans.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 2020 was as follows: Employee 50% Management 0% Board of Hannans 20% The Company has five directors, one executive director (who is contracted to the Company) and two casual employees. 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. Due to the size of the Company, the Board does not deem it practical to limit the Company to specific targets for gender diversity. 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 decides 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 one Non-Executive Chairman, three Non-Executive Directors and an Executive Director. There are no independent directors on the Board. 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. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 29 For personal use only 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 is Mr Jonathan Murray. Mr Murray does not satisfy the ASX Corporate Governance Principles and Recommendations definition of an independent director however the Board considers Mr Murray’s role as Non-Executive Chairman 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 encompasses strategy statements designed to meet stakeholders’ needs and manage business risk. Implementation of Board approved operating plans and Board monitoring of the progress against budgets that is reviewed at every board meeting. 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 works 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 is 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. 30 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only 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 an independent working group comprising consultants, Directors and/or the Company Secretary to review and make recommendations to the board in relation to the remuneration framework as well as 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. 8.3 The listed entity which has an equity-based remuneration scheme should have a policy on whether participants are permitted to enter into transactions which limit the economic risk of participating in the scheme and disclose the policy. The Company has an equity-based remuneration scheme in place in the form of an employee share option plan. The Company prohibits participants in equity-based remuneration plan from entering into transactions which limit the economic exposure of participating in the plan, whether through the use of derivatives or otherwise. 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. Executive Director (ED) and Group Finance Officer Declaration The ED and Group Finance Officer 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. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 31 For personal use only DIRECTORS’ REPORT COMPLIANCE Significant Changes in State of Affairs Share options As at the date of this report, there were 87,500,000 options on issue to purchase ordinary shares at a range of exercise prices (108,655,848 at the reporting date). Refer to the remuneration report for further details of the options outstanding. 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 was $11,977. 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, the Group auditor, did not performed other non-audit services in addition to its statutory duties. Auditor’s independence declaration The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 33. Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001. 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 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 other than those stated below: (a) The impact of the Coronavirus (COVID-19) pandemic is ongoing and, while it has had limited impact on the Group up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation continues to develop and imposed by the Australian Government such as maintaining social distancing requirements, quarantine, travel restrictions and economic stimulus that may be provided. is dependent on measures (b) On 15 September 2020 21,155,848 unlisted options exercisable at 2.7 cents expired unexercised. 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. The COVID-19 pandemic continues to pose a global socio- political, economic and health risk. The potential for the pandemic to have both lasting and unforeseen impacts is high. As a Group, we adhere to the changes in government policies and changed the way we work to protect the wellbeing of our people and ensure busines continuity. We continue to maintain a state of response readiness commensurate with the risks and in accordance with Government recommendations and health advice. 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. On behalf of the Directors Jonathan Murray Non-Executive Chairman Perth, Australia this 18th day of September 2020 32 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only 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 2 0 | 33 For personal use only DIRECTORS’ DECLARATION The Directors declare that: (a) (b) in the Directors’ opinion, subject to the achievement of matters noted in note 2(a), 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 2020; and (c) the Directors have been given the declarations required by s.295A of the Corporations Act 2001 for the financial year ended 30 June 2020. 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 Jonathan Murray Non-Executive Chairman Perth, Australia this 18th day of September 2020 34 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only INDEPENDENT AUDITOR’S 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 2 0 | 35 For personal use only 36 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 37 For personal use only 38 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 39 For personal use only CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2020 Note 2020 $ 2019 $ Interest and other income 5(a)(b) 117,561 73,834 Employee and contractors expenses Depreciation expense Consultants expenses Occupancy expenses Marketing expenses Exploration and evaluation expenses Write off of exploration and evaluation expenses Fair value changes in financial assets designated at fair value through P&L Other expenses Loss from continuing operations before income tax expense Income tax benefit/(expense) Loss from continuing operations attributable to members of the parent entity Other comprehensive loss for the year Items that may be reclassified subsequently to profit or loss Items that will not be reclassified to profit or loss Total other comprehensive loss for the year 5(c) 5(d) 5(e) 14 6 (413,386) (4,248) (220,738) (1,910) (4,483) (1,254,103) – 36,118 (155,331) (554,278) (3,744) (195,527) (3,000) (6,896) (766,344) (404,000) (79,672) (145,936) (1,900,520) (2,085,563) – – (1,900,520) (2,085,563) – – – – – – Total comprehensive loss for the year (1,900,520) (2,085,563) Net loss attributable to the parent entity (1,900,520) (2,085,563) Total comprehensive loss attributable to the parent entity (1,900,520) (2,085,563) Loss per share: Basic (cents per share) Diluted (cents per share) The accompanying notes form part of the financial statements. 20 20 (0.10) (0.10) (0.11) (0.11) 40 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2020 Current assets Cash and cash equivalents Trade and other receivables Other financial assets at fair value through profit and loss Note 27(a) 10 11 2020 $ 855,949 85,760 12,603 2019 $ 2,686,790 86,461 1,985 Total current assets 954,312 2,775,236 Non–current assets Other receivables Property, plant and equipment Other financial assets at fair value through profit and loss Exploration and evaluation expenditure Total non–current assets TOTAL ASSETS Current liabilities Trade and other payables Provisions Total current liabilities TOTAL LIABILITIES NET ASSETS Equity Issued capital Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of the financial statements. 12 13 11 14 15 16 17 18 19 30,000 23,288 143,751 2,256,000 2,453,039 3,407,351 238,497 11,076 249,573 56,000 27,536 – 2,256,000 2,339,536 5,114,772 125,617 – 125,617 249,573 125,617 3,157,778 4,989,155 40,872,810 40,872,810 1,092,358 1,061,897 (38,807,390) (36,945,552) 3,157,778 4,989,155 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 41 For personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 30 June 2020 Attributable to equity holders Ordinary Shares $ Option Reserves $ Accumulated Losses $ Total Equity $ Balance as at 1 July 2019 40,872,810 1,061,897 (36,945,552) 4,989,155 Loss for the year Other comprehensive loss for the period Total comprehensive loss for the period Transactions with owners Share based payments Exercise/Lapse of options Share issue expense Total transactions with owners – – – – – – – – – – 69,143 (38,682) – 30,461 (1,900,520) (1,900,520) – – (1,900,520) (1,900,520) – 38,682 – 38,682 69,143 – – 69,143 Balance as at 30 June 2020 40,872,810 1,092,358 (38,807,390) 3,157,778 Balance as at 1 July 2018 40,840,777 838,321 (34,890,791) 6,788,307 Loss for the year Other comprehensive loss for the period Total comprehensive loss for the period Transactions with owners Share based payments Exercise/Lapse of options Share issue expense Total transactions with owners – – – – 38,250 (6,217) 32,033 – – – 254,378 (30,802) – 223,576 (2,085,563) (2,085,563) – – (2,085,563) (2,085,563) – 30,802 – 30,802 254,378 38,250 (6,217) 286,411 Balance as at 30 June 2019 40,872,810 1,061,897 (36,945,552) 4,989,155 42 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS for the financial year ended 30 June 2020 Cash flows from operating activities Payments for exploration and evaluation Payments to suppliers and employees Interest received Income tax paid Note 2020 $ (1,227,871) (550,425) 39,705 – 2019 $ (772,850) (693,237) 68,990 – Net cash used in operating activities 27(b) (1,738,591) (1,397,097) Cash flows from investing activities Payment for investment securities Payment for property, plant and equipment Repayment of loans from outside Entities Release of security bonds Net cash (used)/received by investing activities Cash flows from financing activities Proceeds from exercise of options Payment for share issue costs Net cash received by financing activities (118,250) – – 26,000 (92,250) – – – – (30,225) – – (30,225) 38,250 (6,217) 32,033 Net (decrease)/increase in cash and cash equivalents (1,830,841) (1,395,289) Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 27(a) 2,686,790 855,949 4,082,079 2,686,790 The accompanying notes form part of the financial statements. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 43 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 1. General Information The consolidated financial statements of Hannans Ltd (Company or Hannans) and its subsidiaries (collectively, the Group) for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the Directors on 17 September 2020. Hannans 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 25. 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. Coronavirus (COVID-19) pandemic The COVID-19 pandemic has developed rapidly in 2020, with a significant number of cases in Australia. Measures taken by the Australia and Western Australian governments to contain the virus have minimise the effect on economic activity. The Group has taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for our people and consultants that are essential to the operation of the business. At this stage, the impact on our business and results has not been significant and, based on our experience to date, we expect this to remain the case. We will continue to follow the various government policies and advice and, in parallel, we will do our utmost to continue our operations in the best and safest way possible without jeopardising the health of our people. (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 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 as an individual entity is included in note 30. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2020 and the comparative information presented in these financial statements for the year ended 30 June 2019. (a) Basis of preparation (cont’d) Going concern basis of preparation The Group recorded a loss of $1,900,520 (2019: loss $2,085,563) for the year ended 30 June 2020 and had a cash outflow from operating and investing activities of $1,830,841 (2019: $1,427,322 outflow) during the twelve (12) month period. The Group had cash and cash equivalents at 30 June 2020 of $855,949 (2019: $2,686,790) and has a working capital surplus of $704,739 (2019: $2,649,619 surplus). The Group’s cashflow forecast for the period ended 1 September 2020 to 31 March 2022 reflects that the Group will need to raise additional working capital during the quarter ending 31 December 2020 to enable the Group to continue to meet its current committed administration and exploration expenditure. Notwithstanding the above matters, the Directors are satisfied they will be able to raise additional working capital as required and thus it is appropriate to prepare the financial statements on a going concern basis. In arriving at this position the Directors have considered the following pertinent matters: ∂ The planned exploration expenditure is staged and expenditure may or may not be spent depending on the result of the prior exploration stage; and ∂ The Directors are satisfied that they will be able to raise additional funds by either an equity raising and/or implementation of joint ventures agreements to fund ongoing exploration commitments and for working capital. 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. 44 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (b) New Accounting Standards for Application in the Current Financial Year and Future Periods (b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d) 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 2019. All other new standards and interpretations effective from 1 July 2019 were adopted with the main impact being disclosure changes. The adoption of the new or amended standards and interpretations, other than AASB 16 Leases, did not result in any significant changes to the Group’s accounting policies. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. AASB 16: Leases The application date of AASB 16 for the Group was 1 July 2019. AASB 16 was issued in January 2016 and it replaces AASB 117 Leases ("AASB 117"), AASB Interpretation 4 Determining whether an Arrangement contains a Lease ("AASB Interpretation 4"), AASB Interpretation-1 15 Operating Leases-Incentives ("AASB Interpretation 1 15") and AASB Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease ("AASB Interpretation 127"). AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117. At the commencement date of a lease, a lessee recognises a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees are required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of- use asset. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets and short-term leases (i.e., leases with a lease term of 12 months or less). The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 July 2019. At the transition date, the Group assessed all contracts including those which had assets embedded in it for leases under AASB 16. The Group elected to use the practical expedient for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ("short-term leases"). Adoption of AASB 16 did not have an impact as the Group's leases had a lease term of shorter than 12 months or were leases of ‘low-value’ assets. Classification and measurement (i) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term (where the entity does not have a purchase option at the end of the lease term). Right-of-use assets are subject to impairment. (ii) Lease Liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 45 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (b) New Accounting Standards for Application in the Current Financial Year and Future Periods (cont’d) (e) Financial assets (cont’d) Trade and other receivables (iii) Short-term leases and Low Value Assets The Group applies the short-term lease recognition exemption to its short-term leases of their Office Spaces (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption (i.e. below $5,000). Lease payments on short-term leases and leases of low-value assets are expensed on a straight-line basis over the lease term. (c) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments that are readily convertible to known amount of cash which are subject to an insignificant risk of change in value , 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. Subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ (SPPI) on the principal amount outstanding (the SPPI criterion). The SPPI test is applied to the entire financial asset, even if it contains an embedded derivative. Consequently, a derivative embedded in a debt instrument is not accounted for separately. 46 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 Trade receivables are initially recognised at their transaction price and other receivables at fair value. Receivables that are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest are classified and subsequently measured at amortised cost. Receivables that do not meet the criteria for amortised cost are measured at FVPL. The group assesses on a forward-looking basis the ECL associated with its debt instruments carried at amortised cost. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises the lifetime ECL for trade receivables carried at amortised cost. The ECL on these financial assets are estimated based on the Group’s historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as forecast conditions at the reporting date. For all other receivables measured at amortised cost, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to ECL within the next 12 months. The Group considers an event of default has occurred when a financial asset is more than 90 days past due or external sources indicate that the debtor is unlikely to pay its creditors, including the Group. A financial asset is credit impaired when there is evidence that the counterparty is in significant financial difficulty or a breach of contract, such as a default or past due event has occurred. The Group writes off a financial asset when there is information indicating the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. Equity instruments Shares and options held by the Group are classified as equity instruments and are stated at FVPL. Gains and losses arising from changes in fair value are recognised directly to profit or loss for the period. Loans receivables Loans receivables are classified, at initial recognition, and subsequently measured at amortised cost, FVOCI, or FVPL. Loan receivables that are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest are classified and subsequently measured at amortised cost. Loan receivables that do not meet the criteria for amortised cost are measured at FVPL. For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (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. (g) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: (h) Impairment of non-financial assets (cont’d) 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 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. where the amount of GST incurred is not (i) Tax 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. 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. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 47 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (i) Tax (cont’d) (k) Government grants 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 implemented the tax consolidation legislation on 1 July 2008 with Hannans as the head entity. (j) Exploration and evaluation expenditure 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. Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments. (l) 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. 48 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (l) Joint arrangements (cont’d) (n) Foreign currency translation 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 (m) 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. Functional and presentation currency The consolidated financial statements are presented in Australian Dollars, which is Hannans’ functional and presentation currency. Transactions and balance Transactions in foreign currencies are initially recorded in the functional currency (Australian Dollars (AUD)) 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. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 49 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (o) Principles of consolidation (o) Principles of consolidation (cont’d) The consolidated financial statements comprise the financial statements of the Group as at and for the period ended 30 June 2020. 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; ∂ Recognises the fair value of the consideration 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. (p) 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 50 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 2. Statement of significant accounting policies (cont’d) (q) Leases (q) Leases (cont’d) The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short- term leases (i.e., leases with a lease term of 12 months or less) and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. (i) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term (where the entity does not have a purchase option at the end of the lease term). Right-of-use assets are subject to impairment assessment. (ii) Lease Liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. (iii) Short-term leases and Low Value Assets The Group applies the short-term lease recognition exemption to its short-term leases of their Office Spaces (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption (i.e. below $5,000). Lease payments on short-term leases and leases of low-value assets are expensed on a straight-line basis over the lease term. (r) 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. (s) Revenue recognition Revenue is recognised when or as the Group transfers control of goods or services to a customer at the amount to which the Group expects to be entitled. If the Group estimates the amount of consideration promised includes a variable amount, the Group estimates the amount of consideration to which it will be entitled. 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. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 51 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 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 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. (t) 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. (u) Fair value measurement The Group measures equity instrument 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. (v) 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. 52 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 4. Subsidiaries The consolidated financial statements of the Group include: Name of entity Parent entity: Hannans Ltd (i) Subsidiaries: Principal Activities Country of incorporation 2020 2019 % Ownership interest Exploration Australia HR Equities Pty Ltd (ii) HR Forrestania Pty Ltd (ii) Reed Exploration Pty Ltd (ii) Equities holding Exploration Exploration Australia Australia Australia 100 100 100 100 100 100 (i) (ii) Hannans is the ultimate parent entity. All the companies are members of the group. The 100% interest in HR Equities Pty Ltd, HR Forrestania Pty Ltd and Reed Exploration Pty Ltd are held by the parent entity. 5. Income/expenses from operations (a) Interest income Bank Loans Total interest income (b) Other Income Other Cash flow boost(i) Total other income (i) Due to the recent COVID-19 outbreak, the Cash Boost scheme was introduced to provide eligible entities with additional cash flow as a credit to their account with the Australia Taxation Office (ATO). The Company was an eligible entity and the amount relates to the Cash Boost received in reference to the amount of employee income tax withheld. (c) Employee benefits expense Salaries and wages Post employment benefits: Defined contribution plans Share–based payments: Equity settled share–based payments Total employee benefits expense 2020 $ 2019 $ 30,489 4,783 35,272 7,289 75,000 82,289 67,016 – 67,016 6,818 – 6,818 324,594 298,000 36,156 1,900 52,636 413,386 254,378 554,278 (d) Depreciation of non–current assets 4,248 3,744 (e) Lease rental expenses: Lease payments Total lease rental expenses The Group has a lease of office space with lease terms of 12 months or less and is a lease of low-value asset. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemption for the lease. 1,910 1,910 3,000 3,000 (f) Non-employee share based payments 16,507 – H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 53 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 6. Income taxes Income tax recognised in profit or loss Current income tax Current income tax charge Deferred tax Total tax benefit/(expense) 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 27.5% (2019: 27.5%) Effect of expenses that are not deductible in determining taxable profit Effect of net deferred tax asset not recognised as deferred tax assets Income tax benefit/(expense) attributable to operating loss The tax rate for year ended 30 June 2020 payable by Australian corporate entities on taxable profits under Australian tax law is 27.5% (2019: 27.5%). The enacted tax rate for base rate entities is 26% with effect from 1 July 2020 and 25% with effect from 1 July 2021. Unrecognised deferred tax above is calculated at 26% (2019: 27.5%). Deferred tax related to items charged or credited directly to Other Comprehensive Income during the year: Unrealised loss on available-for-sale investments 2020 $ 2019 $ – – – – – – (1,900,520) (522,643) (15,817) 538,460 – (2,085,563) (573,530) 70,232 503,298 – – – – – Statement of Financial Position Statement of Comprehensive Income 2020 $ 2019 $ 2020 $ 2019 $ Deferred Income Tax Deferred income tax at 30 June relates to the following Deferred tax liabilities Exploration and evaluation assets (250,790) (233,691) (17,099) Unearned income Prepayments Property, plant and equipment Deferred tax assets Accruals Provision for employee entitlements Provision for loss on loan Financial assets Capital raising costs Revenue tax losses Capital losses Deferred tax assets not brought to account as realisation is not probable Deferred tax assets not recognised Deferred tax (income)/expense 54 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 (93) (4,819) (6,055) 11,992 – 3,345 9,391 17,857 5,452,124 4,807,030 (1,317) (4,557) (7,572) 8,144 – 26,717 4,239 31,573 5,194,028 5,083,809 (10,039,982) (10,101,373) – – 1,224 (262) 1,517 3,848 – (23,372) 5,152 (13,716) 258,096 (276,779) 79,532 543 (512) (7,572) (5,111) – 26,717 1,365 (10,978) 421,023 – 61,391 (505,007) – – For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 6. Income taxes (cont’d) 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. 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 Clay Gordon • Amanda Scott (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 2020 $ 2019 $ 368,115 52,638 – 25,080 445,833 308,699 254,377 – 1,900 564,976 The compensation of each member of the key management personnel of the Group is set out in the Directors Remuneration report on pages 19 to 23. 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 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 share–based payment arrangements were in existence during the current and comparative reporting periods: Options series 20 November 2015 20 November 2016 15 September 2016 27 October 2017 27 October 2018 27 October 2019 Number Grant date Expiry date Exercise price (cents) 7,850,001 20 November 2014 20 November 2018 12,016,664 20 November 2014 20 November 2019 21,155,848 11 November 2016 15 September 2020 28,000,000 28,000,000 28,000,000 27 October 2017 27 October 2020 27 October 2017 27 October 2021 27 October 2017 27 October 2022 0.5 2.9 2.7 2.6 1.8 1.5 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 19 to 23. The following unlisted options were issued during the period and are share–based payment to an external consultant. Options series Number Grant date Expiry date Exercise price (cents) 19 November 2019 3,500,000 19 November 2019 19 November 2022 1.5 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 55 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 8. Share-based payments (cont’d) The following reconciles the outstanding share options granted at the beginning and end of the financial year: 2020 2019 Weighted average exercise price $ 0.032 0.015 Number of options 117,172,512 3,500,000 Number of options 125,022,513 – – – (7,650,001) (12,016,664) 108,655,848 108,655,848 0.029 0.021 0.021 (200,000) 117,172,512 117,172,512 Weighted average exercise price $ 0.032 – 0.005 0.005 0.032 0.032 Balance at beginning of the financial year Granted during the financial year Exercised during the financial year Expired during the financial year Balance at end of financial year Exercisable at end of the financial year (i) Issued during the financial year A total of 3,500,000 was issued to an external consultant during the year (2019: nil). No options over ordinary share were granted to senior executives and employees during the year (2019: nil). Details Fair value at grant date Expected volatility (%) Risk-free interest rate (%) Expected life of share options Share price on issue Model used Option granted on 19 Nov 2019 0.5 cents 100% 2.03% 3 years 0.9 cents Black-Scholes (ii) Exercised at end of the financial year No options over ordinary shares were exercised during the year (2019: 7,650,001). (iii) Expired during the financial year During the financial year a total of 12,016,664 (2019: 200,000) options over ordinary shares expired, comprising of the following: • 12,016,664 at 2.9 cents options expiring on 20 November 2019. (iv) 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 $0.021 (2019: $0.032) and a weighted average remaining contractual life of 1.15 years (2019: 1.94 years). 2020 $ 2019 $ 9. Remuneration of auditors Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Total fees to Ernst & Young (Australia) 34,614 34,614 32,966 32,966 Total auditor remuneration 34,614 32,966 56 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 10. Current trade and other receivables Accounts receivable (i) Net goods and services tax (GST) receivable Other receivables (ii) (i) (ii) There were no current trade and other receivables that were past due but not impaired (2019: nil). The Company had $56,150 due from the Australia Taxation Office (ATO) in relation to the Cash Boost scheme introduced to provide eligible entities with additional cash flow as a credit to their account at 30 June 2020 (2019: nil). 11. Other financial assets at fair value through profit and loss Current Equity instruments Quoted equity shares (i) Total Non-current Equity instruments Unquoted equity shares (ii) Loan Loans to a director of related entities (iii) Provision (iii) Total (i) (ii) (iii) Investments in listed entities include the following: (a) 277,778 fully paid ordinary shares in Metalicity Limited; (b) 25,000 fully paid ordinary shares in S2 Resources Ltd; and (b) 20,000 fully paid ordinary shares in Ultracharge Limited. Hannans Ltd holds: (a) 575,000 fully paid ordinary shares in Critical Metals Ltd. Critical Metals Ltd has 35,902,500 ordinary shares on issue. The principal activity of the Company is to investigate the recovery of vanadium from steel making slag, sourcing lithium ion battery feedstock for recycling and exploration of mining tenements. (b) 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. 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. On 30 June 2019, the loan interest rate was amended from 20% to 12.5% per annum starting from 1 July 2019 onwards. 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 has fully drawndown on the loan facility. The loan is repayable by Errawarra on 1 July 2020. Refer to note 25 for further information. The loan is carried at its fair value and is measured using a discount cash flow model with inputs that reflect the timing and credit risk of the cash flows (level 3 financial assets) refer to note 29. 12. Non–current other receivables Other receivables – bonds 2020 $ 4,682 24,928 56,150 85,760 12,603 12,603 143,751 – – 143,751 2019 $ 3,360 14,794 68,307 86,461 1,984 1,984 1 – – 1 30,000 30,000 56,000 56,000 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 57 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 13. Property, plant and equipment Cost Balance at 1 July 2018 Additions Disposals Balance at 1 July 2019 Additions Disposals Office furniture and equipment at cost Motor vehicles at cost $ 19,092 1,199 – 20,291 – – $ – 29,025 – 29,025 – – Total $ 19,092 30,224 – 49,316 – – Balance at 30 June 2020 20,291 29,025 49,316 Accumulated depreciation and impairment Balance at 1 July 2018 Depreciation expense Disposals Balance at 1 July 2019 Depreciation expense Disposals Balance at 30 June 2020 Net book value As at 30 June 2019 As at 30 June 2020 Aggregate depreciation allocated during the year: Office furniture and equipment Motor vehicles 14. Exploration and evaluation expenditure Balance at beginning of financial year LESS: Write off costs (i) LESS: Disposal of assets Balance at end of financial year 18,036 704 – 18,740 609 – 19,349 – 3,040 – 3,040 3,639 – 6,679 1,551 942 25,985 22,346 2020 $ 609 3,639 4,248 18,036 3,744 – 21,780 4,248 – 26,028 27,536 23,288 2019 $ 704 3,040 3,744 2,256,000 – – 2,660,000 (404,000) – 2,256,000 2,256,000 (i) During the year, Hannans did not recognised a write off in respect of capitalised exploration and evaluation (2019: $404,000). The recoverability of the carrying amount of the exploration and evaluation assets is dependent on the continuance of the consolidated entities right to tenure of the interest, the results of future exploration and the successful development and commercial exploration, or alternatively, sale of the respective area of interest. For those areas of interest de-recognised or written off during the year, exploration results indicates the subsequent successful development and commercial exploration may be unlikely and the decision was made to discontinue activities in these areas, resulting in full de recognition of the capitalised exploration and evaluation in relation to the related areas of interest. 58 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 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 Balance at 1 July 2018 Increase/(decrease) in provision Balance at 1 July 2019 Increase/(decrease) in provision Balance at 30 June 2020 2020 $ 66,746 139,973 31,778 238,497 2019 $ 20,566 98,667 6,384 125,617 11,076 11,076 – – Employee benefits $ – – – 11,076 11,076 2020 $ Total $ – – – 11,076 11,076 2019 $ 17. Issued capital 1,987,954,539 fully paid ordinary shares (2019: 1,987,954,539) 40,872,810 40,872,810 40,872,810 40,872,810 2020 No. 2019 $ No. $ Fully paid ordinary shares Balance at beginning of financial year 1,987,954,539 40,872,810 1,980,304,538 40,840,777 Exercise of options to shares - 20 November 2018 Share issue costs – – – – 7,650,001 – 38,250 (6,217) Balance at end of financial year 1,987,954,539 40,872,810 1,987,954,539 40,872,810 Fully paid ordinary shares carry one vote per share and carry the right to dividends. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 59 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 18. Reserves Balance at 1 July 2018 Share based payment expense Exercise/lapse of options Balance at 1 July 2019 Share based payment expense Exercise/lapse of options Loss in an associate Balance at the end of the financial year Nature and purpose of reserves Option reserve Option reserve $ 838,321 254,378 (30,802) Total reserve $ 838,321 254,378 (30,802) 1,061,897 1,061,897 69,143 (38,682) – 69,143 (38,682) – 1,092,358 1,092,358 The option reserve recognises the fair value of options issued and valued using the Black-Scholes and Monte-Carlo simulation model. Share options As at 30 June 2020, options over 108,655,848 (2019: 117,172,512) ordinary shares in aggregate are as follow: Issuing entity Hannans Ltd Hannans Ltd Hannans Ltd Hannans Ltd Hannans Ltd No of shares under option 21,155,848 28,000,000 28,000,000 28,000,000 3,500,000 Class of shares Ordinary Ordinary Ordinary Ordinary Ordinary Exercise price of option 2.7 cents each 2.6 cents each 1.8 cents each 1.5 cents each Expiry date of options 15 Sep 2020 27 Oct 2020 27 Oct 2021 27 Oct 2022 1.5 cents each 19 Nov 2022 Share options are all unlisted, carry no rights to dividends and no voting rights. On 19 November 2019 3,500,000 options were issued to an unrelated third party (2019: Nil). No options were exercised during the period (2019: 7,650,001). A total of 12,016,664 (2019: 200,000) expired unexercised during the period. 19. Accumulated losses Balance at beginning of financial year Loss attributable to members of the parent entity Items of other comprehensive income recognised directly in retained earnings: Options lapsed Options exercised Balance at end of financial year 2020 $ 2019 $ (36,945,552) (1,900,520) (34,890,791) (2,085,563) 38,682 – – 30,802 (38,807,390) (36,945,552) 60 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 20. Loss per share Basic loss per share: Diluted loss per share: Loss for the year 2020 Cents per share 2019 Cents per share (0.10) (0.10) (0.11) (0.11) 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 Weighted average number of ordinary shares adjusted for the effect of dilution loss per share 2020 $ 2019 $ (1,900,520) (2,085,563) 2020 No. 2019 No. 1,987,954,539 1,985,108,785 – – 1,987,954,539 1,985,108,785 At 30 June 2020 108,655,848 (2019: 117,172,512) were not included in the diluted earnings per share calculation as they are anti- dilutive. 21. Commitments for expenditure Exploration, evaluation & development (expenditure commitments) Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years 2020 $ 2019 $ 143,080 436,240 – 579,320 179,000 716,000 – 895,000 H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 61 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 22. Contingent liabilities and contingent assets The Office of State Revenue (OSR) informed the Company on 30 October 2012 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. On 21 October 2015 OSR informed the Company that the matter is currently being reviewed by the technical branch. The Company does not consider it probable a stamp duty liability will arise. 23. Segment reporting The Group operates in the mineral exploration industry in Australia. For management purposes, the Group is organised into one main operating segment which involves the exploration of minerals in Australia. All of the Group’s activities are interrelated and discrete financial information is reported to the Board as a single segment. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. 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. 24. Joint operations Name of project Lake Johnston (i) Forrestania (ii) Principal activity Exploration Exploration Interest 2020 % 0 20 2019 % 15 20 (i) (ii) Reed Exploration entered into a joint arrangement with Montezuma Mining Company Ltd (Montezuma) (ASX: MZM) whereby Reed Exploration retained a 15% interest in the Lake Johnston Project which is free-carried until a decision to mine has been made, at which point Reed Exploration may elect to contribute or revert to a 1% net smelter royalty. Montezuma is required to meet all exploration expenditure to keep the project in good standing. The joint venture ended during the year. Reed Exploration entered into a joint arrangement with Classic Minerals Ltd (Classic) (ASX: CLZ) whereby Reed Exploration retained a 20% interest in the Forrestania gold rights which is free-carried until a decision to mine has been made. Classic is required to meet all exploration expenditure to keep the project in good standing. Capital commitments and contingent liabilities The capital commitments and contingent liabilities arising from the Group’s interests in joint operations are disclosed in note 22. 25. 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 24 to the financial statements. (b) Key management personnel (KMP) remuneration Details of KMP remuneration are disclosed in note 7 to the financial statements. 62 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 25. Related party disclosures (cont’d) (c) Loans to KMP 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 was amended from 20% to 12.5% starting 1 July 2019. The loan repayment date is on 1 July 2020. 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 KMP and their related parties, and the number of individuals in each group, are as follows: 30 June 2020 Total for KMP Total for other related parties (i) Total for KMP and their related parties 2020 30 June 2019 Total for KMP Total for other related parties (i) Total for KMP and their related parties 2019 Opening Balance $ Closing Balance $ Interest charged $ Number in group at 30 June – – – – 79,672 79,672 – – – – – – – – – – – – – 1 1 – 1 1 (i) The Company provided a loan facility of $50,000 at an interest rate of 20% per annum to Errawarra Resources Ltd (Errawarra), of which Mr Damian Hicks, Mr Jonathan Murray and Mr Markus Bachmann are the Directors. 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 drawdown of $25,000 on 9 March 2016. The fair value of the loan at 30 June 2020 was estimated using a discounted cashflow model to be nil. (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 Corporate Board Services Scott Geological Sales to related parties $ Purchases from related parties $ Amounts owed by related parties* $ Amounts owed to related parties* $ 2020 2019 2020 2019 2020 2019 – – 2,894 3,655 – – 4,983 690 143,750 150,000 13,639 – – – 1,298 1,005 – – – – – – 5,029 – * 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 2 0 | 63 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 26. Subsequent events The following matters or circumstances have arisen since 30 June 2020 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) The impact of the Coronavirus (COVID-19) pandemic is ongoing and, while it has had limited impact on the Group up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation continues to develop and is dependent on measures imposed by the Australian Government such as maintaining social distancing requirements, quarantine, travel restrictions and economic stimulus that may be provided. (b) On 15 September 2020 21,155,848 unlisted options exercisable at 2.7 cents expired unexercised. 27. Notes to the consolidated 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 (b) Reconciliation of loss for the year to net cash flows from operating activities Loss for the year Write off exploration and evaluation expenses Movement in fair value of equity instrument at FVPL Depreciation of non–current assets Equity settled share-based payments Change in fair value of financial assets designated at fair value though profit or loss Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/Decrease in assets: Trade and other receivables Increase/(Decrease) in liabilities: Trade and other payables and provisions Net cash from operating activities 2020 $ 2019 $ 855,949 – 855,949 586,790 2,100,000 2,686,790 (1,900,520) – – 4,248 69,142 (2,085,563) 404,000 4,967 3,744 254,378 (36,118) 79,672 701 (44,497) 123,956 (13,798) (1,738,591) (1,397,097) Non–cash financing activities During the current year, the Group did not enter into any non-cash financing activities which are not reflected in the consolidated statement of cash flows. 64 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 28. 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 2020, 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 2020 it is also exposed to market price risk. The Group does not enter into derivative financial instruments to manage its exposure to interest rate. (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 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 2019: 2020 Variable rate instruments 2019 Variable rate instruments Profit or Loss Equity 1% increase 1% decrease 1% increase 1% decrease 6,119 6,119 25,358 25,358 (6,119) (6,119) (25,358) (25,358) – – – – – – – – The following table details the Group’s exposure to interest rate risk. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 65 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 28. 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 $ 0.04% 611,850 – – 1.60% 30,000 641,850 – – – 0.72% 2,535,822 – – 2.55% 56,000 – – – – – – – – 2,591,822 79,672 – – – – – – – – – – – – – – – – – – 244,099 855,949 85,760 85,760 30,000 – 329,859 971,709 – – – – – – – – 238,497 238,497 238,497 238,497 150,968 2,686,790 86,461 86,461 – 56,000 237,429 2,829,251 125,617 125,617 125,617 125,617 Consolidated 2020 Financial assets: Cash and cash equivalents Trade and other receivables Other receivables – non-current Financial liabilities: Trade and other payables 2019 Financial assets: Cash and cash equivalents Trade and other receivables Other receivables – non-current Financial liabilities: Trade and other payables 66 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 28. Financial risk management objectives and policies (cont’d) (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 $ 2020 Trade and other payables 238,497 Other financial liabilities – 238,497 2019 Trade and other payables 125,617 Other financial liabilities – 125,617 $ – – – – – – $ – – – – – – $ – – – – – Total $ 238,497 – 238,497 125,617 – 125,617 It is a policy of the Group that creditors are paid within 30 days. (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 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 and the Cash Boost receivable from ATO which is claimed in July 2020. (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 listed and unlisted equity investments are as detailed in note 11. A 5 per cent increase (2019: 1 per cent increase) at reporting date in the listed equity prices would increase the market value of the securities by $7,818 (2019: $19) and an equal change in the opposite direction would decrease the value by the same amount. The increase/decrease would be reflected in the statement of profit or loss as these equity instruments are classified as equity instruments at FVPL. The increase/decrease net of deferred tax would be $5,472 (2019: $13). (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 2020 was $3,157,778 (2019: $4,989,155). 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 2020 the Group does not hold any external debt funding (2019: Nil) and is not subject to any externally imposed covenants in respect of capital management. H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 67 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 29. Financial instruments 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 Quoted prices in active market (Level 1) Significant observable inputs (Level 2) Significant unobser- vable inputs (Level 3) Total 2020 Assets measured at fair value Equity instruments (note 11): Quoted equity shares (i) Unquoted equity shares (ii) Loans to a director of related entities (note 11) (iii) 2019 Assets measured at fair value Equity instruments (note 11): Quoted equity shares (i) Unquoted equity shares (ii) Loans to a director of related entities (note 11) (iii) 12,603 – – 12,603 1,984 – – 1,984 – – – – – – – – – 143,751 – 12,603 143,751 – 143,751 156,354 – 1 – 1 1,984 1 – 1,985 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 equity instruments and financial assets is derived from quoted market prices in active markets. Refer note 28(g) for market price risk impact. (ii) (iii) The lowest level input has been used to fair value unquoted ordinary shares. The investment was fair valued using the most recent capital raise dated May 2020.An increase in share price of +/- 20% would have an impact to the consolidated statement of profit or loss of $28,750. The fair value of the loan to a director of related entities is measured using a discount cash flow model with inputs that reflect the timing and credit risk of the cash flows. The Groups has fair valued to nil as the loan is considered unrecoverable. 68 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 30. Parent entity disclosures The following details information related to the parent entity, Hannans Ltd, at 30 June 2020. 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 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 2020 $ 2019 $ (2,009,017) (1,946,870) – – (2,009,017) (1,946,870) 819,663 2,335,292 3,154,955 194,126 – 194,126 2,621,899 2,339,540 4,961,439 60,736 – 60,736 54,846,901 1,092,358 54,846,901 1,061,897 (52,978,430) (51,008,095) 2,960,829 4,900,703 (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 2020 (2019: Nil). (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 2020 (2019: Nil). H A N N A N S A N N U A L R E P O R T 2 0 2 0 | 69 For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 30 June 2020 70 | H A N N A N S A N N U A L R E P O R T 2 0 2 0 For personal use only