More annual reports from Heron Resources :
2019 Report Corporate Directory
ABN 30 068 263 098
DIRECTORS
Chairman (Non-Executive)
Stephen Dennis BCom BLL.B GDipAppFin(Finsia)
Managing Director (Executive)
Wayne Taylor BEng (Mining), MBA, MAusIMM
Director (Non-Executive)
Borden Putnam III MSc (Geol), RPG, FAusIMM
Director (Non-Executive)
Fiona Robertson MA (Oxon) (Geology), MAusIMM, FAICD
Director (Non-Executive)
Mark Sawyer LL.B.
Director (Non-Executive)
Ricardo De Armas B.S. M.B.A (Harvard)
(appointed 22 September 2017)
Director (Non-Executive)
Peter Rozenauers BME (Hons I), MAppFin, MAusIMM
(appointed 22 September 2017)
Director (Non-Executive)
Ian Pattison B Sc (Hons), PhD, MAusIMM
(appointed 29 November 2017)
COMPANY SECRETARY
Simon Smith B.Bus, CA
REGISTERED OFFICE (head office)
and Address for Correspondence
Level 7, 191 Clarence Street
Sydney New South Wales 2000
Telephone: +61 2 9119 8111
Perth Office
Level 1, 12 Prowse Street
West Perth Western Australia 6005
Telephone: +61 8 6500 9200
Woodlawn Site Office
507 Collector Road, Tarago New South Wales 2580
Email:
Website:
heron@heronresources.com.au
www.heronresources.com.au
AUDITOR
Ernst & Young
200 George St
Sydney New South Wales 2000
BANKERS
Westpac Bank
230-236 Hannan Street
Kalgoorlie 6430 Western Australia
SHARE REGISTRY
Automic Pty Ltd
Level 5, 126 Phillip Street
Sydney New South Wales 2000
All securityholder correspondence to:
GPO Box 5193
Sydney New South Wales 2000
Telephone: 1300 288 664
Email:
hello@automic.com.au
SOLICITORS TO THE COMPANY
Allion Legal Pty Ltd
50 Kings Park Road, West Perth Western Australia 6005
Resources Legal Pty Ltd
1A Rosemead Rd, Hornsby New South Wales 2077
STOCK EXCHANGE
Australian Securities Exchange Limited
2 The Esplanade, Perth Western Australia 6000
ASX CODE HRR
INDUSTRY CLASSIFICATION
GICS classification code is 15104020
Diversified Metals and Mining
ISIN AU000 000 HRR6
Front and inside cover- Construction of Woodlawn Project is advanced
Highlights for FY2018
(cid:129) Construction of Woodlawn mine progressing on schedule and on
budget – now over 80% complete
(cid:129) On track to begin commissioning in late 2018,
production to begin in early 2019
(cid:129) Underground Mine development has commenced
(cid:129) Systems and processes in place and recruitment well advanced in
preparation for start of mine operations
(cid:129) Continued exploration success on tenements proximal to Woodlawn
(cid:129) Supportive Community and key stakeholders
Heron Resources Limited - Annual Report 2018 - Page 1
Forward Looking Statements
This report contains forward-looking statements and forward-looking information within the meaning of applicable securities laws, which are based on expectations,
estimates and projections as of the date of this report. This forward-looking information includes, or may be based upon, without limitation, estimates, forecasts and
statements as to management’s expectations with respect to, among other things, the timing and amount of funding required to execute the Company’s exploration,
development and business plans, capital and exploration expenditures, the effect on the Company of any changes to existing legislation or policy, government regulation
of mining operations, the length of time required to obtain permits, certifications and approvals, the success of exploration, development and mining activities, the geology
of the Company’s properties, environmental risks, the availability of labour, the focus of the Company in the future, demand and market outlook for precious metals and the
prices thereof, progress in development of mineral properties, the Company’s ability to raise funding privately or on a public market in the future, the Company’s future
growth, results of operations, performance, and business prospects and opportunities. Wherever possible, words such as “anticipate”, “believe”, “expect”, “intend”, “may”
and similar expressions have been used to identify such forward-looking information.
Forward-looking information is based on the opinions and estimates of management at the date the information is given, and on information available to management at
such time. Forward-looking information involves significant risks, uncertainties, assumptions and other factors that could cause actual results, performance or achievements
to differ materially from the results discussed or implied in the forward-looking information. These factors, including, but not limited to, fluctuations in currency markets,
fluctuations in commodity prices, the ability of the Company to access sufficient capital on favourable terms or at all, changes in national and local government legislation,
taxation, controls, regulations, political or economic developments in Australia or other countries in which the Company does business or may carry on business in the
future, operational or technical difficulties in connection with exploration or development activities, employee relations, the speculative nature of mineral exploration and
development, obtaining necessary licenses and permits, diminishing quantities and grades of mineral reserves, contests over title to properties, especially title to
undeveloped properties, the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drill results and other
geological data, environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding, limitations of insurance coverage and the
possibility of project cost overruns or unanticipated costs and expenses, and should be considered carefully. Many of these uncertainties and contingencies can affect the
Company’s actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of,
the Company. Prospective investors should not place undue reliance on any forward-looking information. Although the forward-looking information contained in this report
is based upon what management believes, or believed at the time, to be reasonable assumptions, the Company cannot assure prospective purchasers that actual results
will be consistent with such forward-looking information, as there may be other factors that cause results not to be as anticipated, estimated or intended, and neither the
Company nor any other person assumes responsibility for the accuracy and completeness of any such forward-looking information. The Company does not undertake, and
assumes no obligation, to update or revise any such forwardlooking statements or forward-looking information contained herein to reflect new events or circumstances,
except as may be required by law.
Page 2 - Heron Resources Limited - Annual Report 2018
Heron Resources Limited
ABN 30 068 263 098
2018 Annual Report
1.1
CHAIRMAN’S LETTER................................................................................................5
1.2
DIRECTORS ................................................................................................................6
1.3 MANAGEMENT .........................................................................................................9
1.3 MANAGING DIRECTOR’S REPORT..........................................................................10
2.0
3.0
OPERATIONS REPORT..............................................................................................12
CORPORATE PROFILE ...............................................................................................28
CORPORATE GOVERNANCE STATEMENT...............................................................29
4.0
DIRECTORS’ REPORT ...............................................................................................30
AUDIT INDEPENDENCE DECLARATION ..................................................................49
5.0
CONSOLIDATED FINANCIAL STATEMENTS............................................................50
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME................................................................50
CONSOLIDATED STATEMENT OF FINANCIAL POSITION........................................51
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................52
CONSOLIDATED STATEMENT OF CASHFLOWS......................................................53
NOTES TO AND FORMING PART OF THE ACCOUNTS ...........................................54
DIRECTORS’ DECLARATION ....................................................................................77
6.0
7.0
8.0
9.0
INDEPENDENT AUDIT REPORT ...............................................................................78
SHAREHOLDER INFORMATION ...............................................................................84
STATEMENT OF MINERAL RESOURCES & RESERVES.......................................... 86
INTEREST IN MINING TENEMENTS .......................................................................89
10.0
GLOSSARY ..............................................................................................................90
Heron Resources Limited - Annual Report 2018 - Page 3
“2018 has been a major milestone in the over twenty year history of
Heron. This is the year in which we have made the transition from junior
explorer to developing our first mine at Woodlawn, which we expect to
start commissioning in just a few months from now. ”
Stephen Dennis, Chairman
Page 4 - Heron Resources Limited - Annual Report 2018
1.1 Chairman’s Letter
Dear Shareholders,
It is with great pleasure that I write to you to declare that 2018 has been a major milestone in the over
twenty year history of Heron. This is the year in which we have made the transition from junior explorer
to developing our first mine at Woodlawn, which we expect to start commissioning in just a few
months from now.
There are many images in our Annual Report which record the remarkable transformation which has
taken place at Woodlawn over the last 12 months. It has been an exciting time for all involved, and I
am pleased to report that plant construction by Sedgman, our project engineer, is now over 80%
complete, and that the project remains on schedule and on budget. Our mining contractor, Pybar,
recently mobilised to site, and underground mine development is also now under way. The pace of
activity at site will only continue to increase as we prepare for the start-up of commissioning activities
in December.
I would like to congratulate our CEO Mr Wayne Taylor and our dedicated management team for their
efforts in readying Woodlawn for operations. There exists at site a strong culture of safety and
efficiency, and I am certain that we are well equipped to meet the technical challenges that can
inevitably arise during the early start-up phase of any new operation. We also continue to build up our
operations team in readiness for start-up, and we welcome the many new employees who have joined
Heron as we make the transition towards production.
As to matters outside of Woodlawn, I note that in March this year we took the decision to de-list Heron
from the Toronto Stock Exchange. This was purely an economic decision. The percentage shareholding
held by North American shareholders and the lack of liquidity in that market meant we could no longer
justify the cost of maintaining a dual listing.
I am pleased to say that Heron is supported by a particularly strong board, and I would like to thank all
Directors for their continued counsel and support. In November last year, we welcomed Dr Ian Pattison
to the Board. Ian is a respected metallurgist who brings considerable operational experience to Heron,
having also had an earlier association with Woodlawn through the mine’s previous owners.
Finally, thank you to all of our shareholders for your ongoing support. As a shareholder, I would like to
think that the market will eventually reward us with a higher share price as Woodlawn nears to
production. Whilst metal prices have declined significantly this year, the fundamentals for our
products, particularly zinc, remain strong, and we are anticipating a favourable price environment as
Woodlawn comes on stream.
I look forward to bringing you further reports of our progress as we complete construction at Woodlawn
and commence operations.
Sincerely
Stephen Dennis
Chairman
Heron Resources Limited - Annual Report 2018 - Page 5
1.2 Directors
STEPHEN DENNIS BCom BLL.B GDipAppFin(Finsia)
CHAIRMAN (NON-EXECUTIVE)
Stephen Dennis has been actively involved in the mining industry for 35 years. He has held senior management positions
at CBH Resources Limited (the Australian subsidiary of Toho Zinc), MIM Holdings Limited, and Minara Resources
Limited.
WAYNE TAYLOR BEng (Mining), MBA, MAusIMM
MANAGING DIRECTOR (EXECUTIVE)
Mr. Taylor is a mining engineer with over 30 years’ experience in the mining industry. Mr Taylor has held senior roles
with Western Mining Corporation and Glencore International’s Australian operations. For the six years prior to joining
TriAusMin he managed Glencore’s base metal business development based out of Australia which involved assessing
mining projects throughout the world. Prior to his role with Heron he was MD & CEO of TriAusMin Ltd from 2011 until
the time of the merger with Heron in 2014.
BORDEN PUTNAM III MSc (Geol), RPG, FAusIMM
DIRECTOR (NON-EXECUTIVE)
Mr. Putnam is a professional geologist with over 42 years of experience in the mineral industry, with focus on exploration
and asset evaluations in the mineral investment business. From 1976-1991 he worked as a Project Geologist and a
District Manager for AMAX Exploration and Newmont Exploration Limited respectively. He served as Vice-President and
Chief Geologist for MRDI (now AMEC) an internationally recognized mining consultancy firm from 1991-1996. Mr.
Putnam was Vice-President and Principal with Robertson Stephens Investment Management from 1996-2001, and from
2001-2009 was Managing Director of Eastbourne Capital Management; both firms which were engaged in mineral
investment management principally as private hedge funds. In 2009, Mr Putnam, established his mining industry
consultancy business providing technical evaluations, due diligence audits and investment advice to clients in the
mineral resource industry.
FIONA ROBERTSON MA (Oxon) (Geology), MAusIMM, FAICD
DIRECTOR (NON-EXECUTIVE)
Ms Robertson is a finance professional and practicing non-executive director and audit/risk committee chair with a
background of more than 20 years as a chief financial officer in the emerging and mid-tier resources sector and 14 years
as a corporate banker working in Sydney, New York and London with Chase Manhattan Bank. Ms Robertson’s executive
experience includes CFO roles with Petsec Energy Ltd; Climax Mining Ltd and Delta Gold Ltd; as well as various corporate
banking roles with Chase Manhattan Bank. Ms Robertson is also a non-executive Director of Whitehaven Coal.
Page 6 - Heron Resources Limited - Annual Report 2018
1.2 DIRECTORS CONTINUED
MARK SAWYER LL.B.
DIRECTOR (NON-EXECUTIVE)
Mr Sawyer co-founded Greenstone Resources in 2013 after a 16 year career in the mining sector. Prior to establishing
Greenstone, Mr Sawyer was GM and Co-Head Group Business Development at Xstrata plc where he was responsible
for originating, evaluating and negotiating new business development opportunities for Xstrata. Prior to Xstrata, Mr
Sawyer held senior roles at Cutfield Freeman & Co (a boutique corporate advisory firm in the mining industry) and at
Rio Tinto plc. Mr Sawyer is a solicitor and a resident of the United Kingdom.
RICARDO DE ARMAS B.S. M.B.A (Harvard)
DIRECTOR (NON-EXECUTIVE)
Mr De Armas is an investment professional at Castlelake, where he focuses on emerging market investments. Mr. De
Armas has more than 10 years of experience in investment and corporate finance, including roles as vice president at
De Jong Capital, principal at Zaff Capital, associate at Citigroup’s investment banking division, and financial analyst at
Procter & Gamble. His expertise includes value investments, restructuring and financial advisory. Mr. De Armas
received his M.B.A. from Harvard Business School and a B.S. from Universidad Metropolitana in Business
Administration.
PETER ROZENAUERS BME (Hons I), MAppFin, MAusIMM
DIRECTOR (NON-EXECUTIVE)
Mr Rozenauers is a Portfolio Manager with Orion Mine Finance and has over 25 years of experience in the natural
resources and finance industry. He earned a BEng (Honours I) in Mining from the University of NSW, a Master in Applied
Finance from the University of Technology Sydney and is a member of the Australasian Institute of Mining and
Metallurgy. Prior to Orion, Mr. Rozenauers was a Senior Investment Manager for a predecessor business of Orion, and
prior to that was Managing Director and Head of Asian Commodities Distribution for Barclays Capital in Singapore, a
leading global investment bank. Mr. Rozenauers spent over 13 years working in senior banking roles in Singapore, New
York and London. Mr. Rozenauers is a Non-Executive Director of ASX MacPhersons Resources Limited.
IAN PATTISON B Sc (Hons), PhD, MAusIMM
DIRECTOR (NON-EXECUTIVE)
Dr Pattison is a highly respected metallurgist with over 30 years of Australian and international experience. His early
career was with CRA where he held senior roles in operations, engineering and then as Metallurgy Manager in their
base metal division. He joined Denehurst following their purchase of the Woodlawn Mine from CRA to take on an
Executive Director role with the Woodlawn and Benambra mines. This was followed by Director and Managing Director
roles in the nutrition industries mainly with the German based Henkel/Cognis companies. For the past 10 years he has
been the Group Manager Metallurgy for the Australian operations of Japan’s Toho Zinc which incorporates the Rasp
Mine in Broken Hill and the Endeavor Mine at Cobar.
Heron Resources Limited - Annual Report 2018 - Page 7
Box Cut for underground access
Page 8 - Heron Resources Limited - Annual Report 2018
1.3 Management
ANDREW LAWRY BAppSc (Metallurgy), FAusIMM, GAICD
CHIEF OPERATING OFFICER
Mr Lawry brings more than 28 years’ experience in project management, engineering, construction, commissioning and
operations, both in Australia and overseas. He has worked for several leading resource companies including
Polymetals, Newcrest and engineering firms Bateman, Normet and Q-Proc. Notably, Mr Lawry managed, from
construction through to operation, the successful retreatment of the Hellyer base metal tailings project in 2006 in
western Tasmania. With this experience he is well qualified to lead the successful development of the Woodlawn
Project which comprises the retreatment of tailings in combination with the development of an underground mine.
SIMON SMITH B.Bus, CA.
GENERAL MANAGER FINANCE AND COMPANY SECRETARY
Mr Smith has been a Chief Financial Officer of both private and public companies in Australia and the USA. He brings
over 25 years’ experience in the business world as a Chartered Accountant and holds a Bachelor’s Degree in Business
from the University of Technology Sydney. Mr. Smith was the CFO and Company Secretary for TriAusMin prior to the
merger with Heron Resources.
DAVID VON PERGER BSc (Hons) MAusIMM (CP Geo)
GENERAL MANAGER EXPLORATION
David von Perger was appointed in 2004. Mr von Perger is a geologist with some 25 years’ experience in mineral
exploration having worked in several locations around Australia. Mr von Perger has worked on various styles of mineral
deposits including Archaean gold and nickel, and Proterozoic base-metals and iron-ore. His experience includes four
years as a business analyst for a major mining group involving analysis of mining operations, project development and
assessment of new opportunities. Since his appointment with Heron in February 2006, Mr von Perger has been
responsible for the identification and acquisition of several new nickel, gold, iron-ore and base-metal projects.
CHARLIE KEMPSON MEng (Oxon) MBA GAICD
GENERAL MANAGER STRATEGY & BUSINESS DEVELOPMENT
Charlie Kempson is a senior corporate finance executive who was most recently an equity partner and Director of Azure
Capital Limited, a mining focused leading independent Perth-based corporate advisor, where he worked for nine years
advising boards and senior executives across a range of industries including mining, oil & gas and related services on
business development, corporate strategy, finance, and mergers and acquisitions. Prior to his arrival in Australia in 2002
Mr Kempson spent five years with investment banks Commerzbank AG and Barclays Capital in London and Germany,
and four years working in technical roles for Logica (now part of CGI Group).
BRIAN HEARNE BAppSc (Metallurgy)
GENERAL MANAGER - WOODLAWN MINE
Mr Hearne is a qualified mining professional and holds a degree in metallurgy (BAppSc). Mr. Hearne has extensive
base-metals previously having had a 16-year tenure at Woodlawn, starting in 1978, with a further 2 years at the
Benambra Mine in Victoria. He then joined MIM at McArthur River (MRM) as the Metallurgical Manager, and following
a number of General Manager roles within MIM / Xstrata both in Australia and overseas and was appointed COO of
Xstrata Zinc Australia. The major achievements at all the operations he was involved in was improved safety statistics
and lower operations costs.
Heron Resources Limited - Annual Report 2018 - Page 9
1.4 Managing Director’s Report
In September last year we saw the commencement of construction at our
Woodlawn Zinc-Copper Project and it has been a year of solid progress
with the project literally rising out of the ground in Hickory’s paddock. As
anticipated, we are into the final stages of the build and significant effort
is being placed into gearing ourselves for the start of commissioning prior
to our first production. These are exciting times for the Company as it
transitions to become the newest Australian base metal producer.
Taking a look at the industry in general, the uplift in zinc prices in the last two years has seen renewed interest in zinc project developments,
typically characterised by the refurbishment of former projects and plants that had previously seen their best days. We believe a significant
competitive advantage of our Woodlawn Project is the new, ‘state of the art’ processing facility with this plant tailored specifically for our
project, incorporating the best process technology the industry has to offer. This will ensure we achieve optimal results from the high grade
Woodlawn deposit.
Progress over the year has seen the completion of extensive earthworks to prepare the site foundations, tailings storage infrastructure and
the establishment of the box cut for underground access. This was followed by completion of the concrete foundations and the erection of a
large quantity of structural steelwork. Next saw the installation of key process equipment such as the IsaMillTM which represents the step-
change in processing technology, facilitating cost effective mineral liberation to the optimal grind size. The last of the construction work is
heavily focused on the piping and electrical work which is well underway.
In parallel with the process plant, we are currently establishing two mining fronts for the commencement of production. The mobilisation and
recent commencement of the decline by Pybar Mining Services signifies a further significant milestone in the project development schedule.
We are now on our way to accessing the high grade massive sulphide mineralisation that makes Woodlawn a standout project amongst its
global peers. We expect to get a first “in-situ” look at this orebody in the next few months with the development of the newly discovered G2
lens. The second mining front is the hydraulicing of the former tailings, with construction of the required pumping station and trash screen
well advanced.
We have been progressively awarding all of the major operational contracts required to support our production activities covering aspects such
as power supply, transport of concentrates to port and the supply of reagents and consumables. We have been very pleased with the level of
competitive interest shown in assisting our business into production.
Production readiness is now in full swing. We have secured the key management, supervisory and technical roles and we are now placing
significant effort into the recruitment of personnel for production operations. The interest we have received has been pleasing with the project
location and the opportunity to be part of an exciting new operation proving to be major drawcards. The next few months will see our employee
count swell to more than triple our current size as we move to full manning numbers.
Page 10 - Heron Resources Limited - Annual Report 2018
1.4 MANAGING DIRECTOR’S REPORT CONTINUED
Turning to exploration, and while it has been a quieter year than 2017, our results continue to reinforce the discovery potential within the
immediate mine area and also in the regional district. Follow-up drilling on the G2 lens, the first mineralisation to be accessed underground,
continues to deliver some very high grade results along with very good metallurgical test work results. This material will be excellent ore to
test the performance of the plant. We continue to add strategic ground to our tenement portfolio targeting the felsic volcanic occurrences
proximal to Woodlawn. Heron is one of the few active explorers in the district and has been able to acquire prime exploration ground.
Of paramount importance to the Company is the health, safety and welfare of our employees and contractors. While overall performance has
been commendable, in the past 12 months we recorded one lost time injury, along with a handful of minor injuries and incidents and shows
that we have more room for improvement and a lot more to do to achieve a zero harm result. We have progressively developed and
implemented the supporting systems to ensure our operating activities are undertaken with minimal risk to our workforce and the wider
environment.
The commencement of significant on site activity has made it possible to establish commercial arrangements with a number of local suppliers
and to utilise local specialist contractors. They have all been, and remain, singularly focused on the delivery of the Woodlawn Project and I
would like to take this opportunity to express my thanks for their efforts. Importantly, sitting behind this is the supportive guiding hand of the
Heron Board of Directors. The considerable accumulated technical, operational and commercial experience of the Board was further bolstered
with the appointment of Dr Ian Pattison who is not only a well experienced base metal metallurgist but also brings with him previous
experience of Woodlawn that will be a valuable source of knowledge as we enter production.
We continue to have a very positive relationship with the local community. The commencement of significant on site activity has made it
possible to establish commercial arrangements with a number of local service and equipment providers and opportunities to utilise local
specialist contractors. Our recruitment activities also continue to have a strong focus on sourcing candidates from the local area.
Our lead in to the commencement of production looks to be well timed with the commodity markets remaining supportive with good supply-
demand fundamentals. The zinc market has seen a continuation of the steady draw on the available global stocks throughout the year although
prices, which remain well above the 2016 Feasibility Study assumptions, have experienced some volatility as a result of the perceived risks
associated with the escalating US-China trade war. We maintain a view that the pull-back in the zinc price is not consistent with the market
fundamentals, the global zinc stock trends, and mine production shortfalls. We also see that the price volatility is likely to reduce the
probability of financing of new zinc projects (especially those at the higher end of the cost curve) further impinging on potential new supply.
The longer term outlook for our major commodity suite (zinc, copper and lead), on the back of continued global growth trends, remains highly
supportive for the Company’s activities.
We are looking forward to delivering our first concentrate production into the international markets early in 2019 and, after a
long journey, this will mark the formal transition for Heron from an ‘explorer’ at its inception to finally becoming a ‘producer’.
I look forward to keeping shareholders well informed on this progress throughout the remainder of 2018 and into 2019.
Heron Resources Limited - Annual Report 2018 - Page 11
Heron Projects
Figure 1: Heron Resources - Project locations
Page 12 - Heron Resources Limited - Annual Report 2018
2.0 Operations Report
HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY (HSEC)
Heron continues to demonstrate its commitment to “Zero Harm” to the Company’s employees, contractors and the communities in which
Heron works and to the environment.
HEALTH AND SAFETY
With the commencement of construction activities at site, Heron incurred one Lost Time Injury (LTI’s) during 2018 (2017 - Nil LTI's). While the
Company strives for zero harm through the highest levels of safety standards, the LTI provides a reminder that we have more to do. The
Company continues to develop risk management systems and processes to support our increased levels of activities. These resources will
continue to be refined as we target further improvements in this critical management area.
ENVIRONMENT
Heron’s HSEC Management System continues to be refined as we accommodate the increased site activity. The Company is committed to
minimising the environmental impacts of our activities and meeting our regulatory obligations. Our work places continue to be monitored and
assessed by both internal and external audits. With the expanded area of disturbance due to the construction activities on site, our
environmental staff have increased their activities to ensure compliance with applicable laws.
COMMUNITY AND STAKEHOLDER ENGAGEMENT
Heron continues to increase its involvement and interaction with the local community in parallel with the ramp-up in site activity. The Company
aims to enhance the communities in which we operate through support of local initiatives and by partnering with organisations and not-for-
profit groups to provide better services and improve the livability of the region.
During 2018, the Company undertook quarterly Community Consultation Committee meetings comprising members of the local community,
representatives from the Goulburn-Mulwaree Council, the Tarago Progress Association (TADPAI) and also Veolia Environmental Services, the
operators of the landfill located at the Woodlawn site. The meetings provide a conduit for information flow from the Company to the
community and also to raise matters of interest along with considering the areas which Heron can provide a constructive influence in the local
area. The Community Consultation Committee completed its 2-year term during the year and a new committee is in the process of being
established with an independent Chair being appointed by the Department of Planning and Environment.
Heron presence at the Annual Tarago Show
Heron Resources Limited - Annual Report 2018 - Page 13
2.0 OPERATIONS REPORT CONTINUED
WOODLAWN PROJECT
With the completion of Woodlawn financing in September last year, 2018
has been a year of construction and activity at Woodlawn. We expect to
be commissioning the project in late 2018 and into production in early
2019. We will be delivering zinc into a market which is becoming
increasingly constrained from a shortage of mine supply and underlying
strong demand.
The Woodlawn Project remains one of only a few new zinc projects that
has secured development funding and Heron’s transition to becoming a
significant producer of zinc and other metals will be a major milestone for
the Company.
Shotcreting the box cut in preparation to
start underground development
Page 14 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Woodlawn Project – Development Progress
Construction activities commenced in September 2017, and overall works are now over 80% complete. Structural, mechanical and piping
installation is well advanced, and civil works are 100% complete. Electrical and instrumentation works have commenced. The project remains
on schedule to commence commissioning of the processing plant late in 2018 and deliver the first shipment of concentrate to market in the
first quarter of 2019. Recent project developments include:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Safety & Environment: Disappointingly the project recorded its first lost time injury in August 2018 with investigation
recommendations being adopted and acted on. The Company remains focused on the continual improvement of its risk management
systems and processes that target the wellbeing of our employees and contractors and it remains committed to achieving zero harm.
There has been a significant increase in resources applied to environmental management on site commensurate with the ramp-up in
site activity. While there has been a rapid change in site activities we have not only managed these operational aspects but also
commenced the trial works that will support the longer term site rehabilitation.
Project Development Schedule: The EPC Contractor, Sedgman, is reporting the overall project schedule remains on track for the
commencement of commissioning in the December quarter and at the end of the September quarter the overall project progress was
reported at over 80% complete.
Earthworks: All major earthworks are complete with only minor items to be finalised. This included the preparation of Hickory’s
paddock for process plant construction, the building and refurbishment of site wide access roads, construction of the tailings storage
facility and the excavation of the box cut to permit access to the underground mine.
Project EPC Works: Engineering design and procurement are now both complete. Of special note is the 3MW IsaMillTM which was
delivered to site on 23 July and was craned into position on 15 August. Current work is focused on piping and electrical works. Off-site
fabrications are complete.
Water Treatment: The supply, installation and commissioning of a water treatment plant continues with civil work now underway.
Underground Mine: The underground mining contractor, Pybar Mining Services, has mobilised to site (office, equipment lay down area
etc.) with a specialised underground mining fleet for the initial mine access works. This is typical of a fleet for this scope and consists
of a twin boom development drill, load haul dump unit, underground dump truck, charge-up unit, shotcrete machine and utility vehicles.
This equipment list will be expanded as additional work areas underground are opened up and activities move to include ore production.
Additional infrastructure to support the underground mine is either in place, or under construction including concrete batch plant,
explosives emulsion plant, heavy vehicle workshop and paste plant. At the end of the September quarter access works to the
underground had included final ground support to the box cut and the initial few metres of decline development advance that signified
the commencement of the Woodlawn Underground Mine. The completion of the G2 drilling in the year has provided the opportunity to
access earlier production for the first ore with mine planning work being revised to include this into the activity schedule. Mine planning
work continues on the establishment of the primary ventilation infrastructure, second means of egress, power and pumping
installations.
Tailings Mining: The mining equipment supply, installation and commissioning contract has been awarded to National Pump & Energy,
and the specialist hydraulic mining services contract has been awarded to Paragon Tailings Australia. The combination of project
partners brings the complementary skill sets of proven equipment supply and operational expertise to the tailings hydraulic mining
operations. In addition, these two groups are being employed under a similar arrangement with another Australian operation, also
recovering zinc rich tailings for reprocessing, and this provides a local experience base to call upon. Work is advancing on the hydraulic
mining plant and includes overland pipelines which is progressing to schedule.
Electricity Supply: Under a competitive bid process, the Company entered into an electricity supply contract with a major electricity
provider. Stage 1 power was delivered to site by the end of September and upgrade works to the site substation for the delivery of Stage
2 power is almost complete.
Concentrate Transportation: The domestic transportation of the base metal concentrates to Port Botany and Port Kembla has been
awarded to a Goulburn-based road and rail services provider, Crawford’s Freightliners Pty Ltd. The construction of a dedicated
concentrate container has commenced and will be ready for the planned output from the operation.
Water Management: The Company and Veolia, continue to manage site water in line with the zero discharge requirements for the
site. The EPA has approved Stage 3 dewatering (ongoing operations). A new water bore for mine dewatering is under construction and
will be put into operation in the December quarter.
Community: The Company continues to hold quarterly Woodlawn Community Consultation Committee meetings. The Company also
continues to receive very supportive local feedback for the project development and the wider benefits it will provide the community
through employment opportunities, use of local suppliers and as an active participant in further community advancement.
Personnel: The Company has made good progress in the recruitment of project personnel with applicants being attracted to a new
project and the unique residential options that Woodlawn offers. Senior management, technical and support staff are largely in place
and over the December quarter it is expected that the employee numbers will expand significantly as operational personnel are on-
boarded in preparation for the start of commissioning.
Heron Resources Limited - Annual Report 2018 - Page 15
Figure 2: Woodlawn construction site - flotation area (front right), concentrate thickening and filtration (front left)
Figure 3: Concentrate storage tanks and thickener (background)
Page 16 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Figure 4: Flotation building – first floor structural steelwork
Figure 5: Concentrate handling area
Heron Resources Limited - Annual Report 2018 - Page 17
2.0 OPERATIONS REPORT CONTINUED
Figure 6: Installation of Flotation tanks in progress
Figure 7: IsaMillTM craned into position 15 August
Page 18 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Figure 8: Trash screen and transfer station for the hydraulic mining of the tailings
Figure 9: Shotcreting the box cut in preparation to start underground development
Heron Resources Limited - Annual Report 2018 - Page 19
2.0 OPERATIONS REPORT CONTINUED
Woodlawn Project – Exploration Drilling Programs
A diamond core drilling (DDH) program commenced in March 2018 aimed at better delineating the Lisa and G2 lenses for extraction in the
early mine schedule. The program was completed in June with 17 holes for 3,225m being drilled. The majority of the drilling was focused on
the G2 Lens with significant assays received to date including:
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6.1m grading 37.2% ZnEq from 120.3m (22.0% Zn, 1.0% Cu, 7.1% Pb, 3.3g/t Au, 115g/t Ag) WNDD0138
8.3m grading 15.6% ZnEq from 128.7m (8.2% Zn, 0.3% Cu, 4.8% Pb, 0.6g/t Au, 62g/t Ag) WNDD0139
4m grading 26.4% ZnEq from 116.0m (1.4% Zn, 0.1% Cu, 1.9% Pb, 7.7g/t Au, 549.8g/t Ag) WNDD0144
3.4m grading 15.6% ZnEq from 124.7m (6.5% Zn, 0.3% Cu, 3.1% Pb, 4g/t Au, 67.8g/t Ag) WNDD0145
3.2m grading 20.9% ZnEq from 140.0m (11.2% Zn, 0.5% Cu, 6.9% Pb, 0.5g/t Au, 69.3g/t Ag) WNDD0146
6.9m grading 20.7% ZnEq from 132.1m (9.9% Zn, 0.7% Cu, 4.9% Pb, 2.2g/t Au, 88.3g/t Ag) WNDD0149
2m grading 88.8% ZnEq from 102.1m (28.8% Zn, 1% Cu, 16.8% Pb, 14.2g/t Au, 1034.9g/t Ag) WNDD0150
3m grading 27.9% ZnEq from 153.0m (19.5% Zn, 1.4% Cu, 4.3% Pb, 0.2g/t Au, 14.3g/t Ag) WNDD0151
Figure 10: Long-section of the G2 Main Lens (top) G2HW bottom, showing interpreted lens shape, previous drill pierce points and
selected drill intercepts. View to northeast.
Page 20 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
The intercepts confirm the high-grade base-metal mineralisation within the lens and have better defined the limits of the area. The G2 Lens
will provide early-stage production for the operation. The G2 Hanging Wall surface continues to be characterised by high grade gold and silver
levels within the massive and stringer sulphide zones with results up to 14.2g/t Au and 1,035g/t Ag over 2.0m in hole WNDD0150. These are
some of the highest precious metal intercepts recorded at Woodlawn. The program has extended the G2 lens further towards the rhyolite
contact in the south.
Drilling at Lisa Lens consisted of 3 holes for 725m in the upper part of the lens. The central hole intersected a strong copper result of:
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8.6m @ 3.6% Cu from 203m (WNDD0135)
This high grade copper intercept in the upper part of the lens is encouraging. Further drilling is warranted (from underground) to better define
this position which maintains good potential to add to the early mine production profile.
Full details of these drilling results, including JORC compliance tables can be found in the ASX release dated 4 June 2018 and 21 Sept 2018.
Additional In - Mine Exploration Targets
A number of mine exploration targets are currently being reviewed for their potential to add significantly to the mining inventory further into
the mine life. One of the immediate targets is the combination of the B Extension Lens and the B Copper Lens. The B Extension Lens was
drilled in November 2016 and an Exploration Target of 0.6 – 1.1Mt at grades between 7.0 and 14% ZnEq was defined. The B Copper Lens
has an Inferred Resource of approximately 325,000t grading 2.7% Cu at a 0.5% cutoff (2017 estimate) with a number of key intercepts that
are open and warrant additional drilling including:
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26m @ 2.7% Cu from 383m (U458), true width approximately 18m
30m @ 2.4% Cu from 849m (WLTD011), true width approximately 28m
A review of the 2014 electro-magnetic surveys has been completed in this area, with at least one anomaly of interest providing a follow-up
target. Drilling requirements are also being reviewed and include an assessment of whether surface or underground drilling is best suited (or
a combination of both).
1 An Exploration Target is a term used within the JORC 2012 Code for an estimate of the exploration potential of a mineral deposit. As used in this release the stated
exploration target is based upon the parameters described in the text, however the potential quantity and grade is conceptual in nature and there is insufficient
information to estimate a Mineral Resource and it remains uncertain if further exploration will result in the estimation of a Mineral Resource in this area of recent drilling.
Woodlawn Regional Gravity Survey
A detailed, infill, gravity survey over the prospective 'north-west corridor' from Woodlawn to Currawang was recently completed. The survey
covered an area of approximately 62km2 over private land adjacent to the Woodlawn site. A regional scale gravity high has been noted in the
Currawang area since the 1970's although has not been follow-up since then. Gravity surveys measure the density of the underlying rocks
and can in certain situations directly detect certain types of mineralisation. The gravity survey has highlighted the main lithological contacts
between the Currawang Basalt and Woodlawn Volcanics within the north-west corridor and this data combined with the aeromagnetic data
acquired in 2015 has aided the geological interpretation of the regional Woodlawn area. Specific gravity features will be modelled in greater
detail to determine if direct drilling targets present.
The gravity data has highlighted the
Wattle and Montrose Electro-Magnetic
(EM) anomalies that were identified from
historic surface EM surveys undertaken
in the late 1990's and early 2000's. Both
these prospects
lie over a gravity
gradient which indicates the favourable
stratigraphic location between the mafic
and felsic volcanic units. These two
prospects are located to the north-west
of the Woodlawn Mine with the
geophysical responses being modelled in
greater detail and are targeted for
drilling in the next quarter. Land access
agreements and drilling approvals are
being finalised.
Figure 11: Gravity Survey of
Woodlawn north-east corridor
Heron Resources Limited - Annual Report 2018 - Page 21
2.0 OPERATIONS REPORT CONTINUED
G2 Lens - Metallurgical Results
The G2 lens contains three key geo-metallurgical types: 1) G2 Hanging Wall (G2HW) – high grade polymetallic mineralisation with elevated
precious metals; 2) G2 Main Lens (G2 Main) – polymetallic and zinc stringer mineralisation; and 3) G2 Copper (GC) – copper mineralisation.
Composite samples of each G2 lens type and representative of run-of-mine ore (including dilution) were sent for metallurgical test work to test
flotation yields of zinc, copper and lead mineral concentrates. The metallurgical test work for the G2 Lens provided results that indicated better
performance than the feasibility study assumptions. Copper and lead concentrates are of very good quality, and are well above the targets
that were established for the feasibility. Zinc concentrate grades and recoveries are also good, being on or slightly better than target. Also,
the G2HW sample contained notably higher grades of precious metals in the feed ore with resulting elevated silver and gold grades reporting
through to the copper and lead concentrates, dramatically increasing the value of these concentrates.
The strong metallurgical test work results returned for the G2 mineralisation provides the Company with confidence that these ore types will
be able to be readily processed through the plant and may provide the project with improved revenue results in the early stages of underground
mining operations. Full results were provided in the ASX release dated 8 May 2018.
WOODLAWN REGIONAL PROSPECTS
Heron continues to maintain and explore a strategic 1,206km2 tenement package over the prospective Silurian volcanic rocks which host the
Woodlawn VMS deposit. Heron's exploration strategy is to focus on known mineralisation zones with comparable grade and metallurgy to
Woodlawn and within potential trucking distance of the Woodlawn processing facility. The key project areas include Currawang, Peelwood,
Kangiara and Cullarin. In addition, the Burra Project, 60km south of Woodlawn was acquired during the September quarter. Figure 12 shows
the location of these projects.
Figure 12: Regional Prospect Locations
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(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
(cid:8)(cid:6)(cid:9)(cid:9)
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(cid:10)(cid:11)(cid:12)(cid:13)(cid:6)(cid:14)(cid:6)(cid:15)
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
Page 22 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Currawang Prospect
During the year the results of the Down-Hole Magneto Metric Resistivity (DHMMR) program (completed March 2018) were assessed for four
of the Currawang drill holes (5 DDH holes drill in total for 2,994m, ASX release 16 October 2017). DHMMR is designed to detect poorly
conducting mineralisation such as sphalerite (zinc sulphide) rich bodies and did show a significant anomaly to the east and below the existing
drilling. A review of this anomaly is being undertaken in relation to the geology and alteration in this zone. A review of the other geophysical
data-sets available for the area is also being undertaken.
Figure 13: Currawang Long Section
Peelwood Project
The Peelwood Project1 is located 165km west of Sydney, and 105 kilometres north from the Company’s Woodlawn Zinc-Copper Project in New
South Wales, Australia. (Figures 1,12). It lies within undulating, mostly forested country 800m above sea level, and is underlain by Silurian
aged rocks consisting of the shales and other fine grained sedimentary rocks of the Cuddyong Formation, and the felsic volcanic rocks of the
Kangaloolah Volcanics. VMS style deposits were first mined here in 1890’s with three key centres occurring on the tenements newly pegged
by Heron, namely the Peelwood, John Fardy and Cordillera deposits (Figure 14). Each of these historical deposits includes a number of massive
sulphide lenses located at, or adjacent to, the sheared contact between the Cuddyong Formation and the Kangaloolah Volcanics.
[1] The geological description for the Peelwood deposits are adapted from the publication: Downes, P.M., 2017.
Heron Resources Limited - Annual Report 2018 - Page 23
2.0 OPERATIONS REPORT CONTINUED
Figure 14: Geological Map of
the Peelwood area showing the
location of the key EM
anomalies.
John Fardy Deposit
The John Fardy VMS deposit, located 1km northwest of the Peelwood mine, was discovered in the early 1950s. It is hosted by a steeply west-
dipping sequence of shales (Cuddyong Formation) at the contact with rhyodacitic crystal tuffs of the Kangaloolah Volcanics.
The mineralisation at John Fardy comprises disseminated and massive sulphides up to 20m thick within two lenses separated by a 0.5-5m
zone of altered shale and a pyritic and cherty exhalate which also occurs above and below the mineralised horizon. The massive sulphides
are commonly banded and consist of fine to coarse grained pyrite and sphalerite with minor galena, chalcopyrite and traces arsenopyrite and
tetrahedrite. A JORC (2004) Mineral Resource for the John Fardy deposit was released on the ASX by Sultan Corporation Ltd on the 12
November 2008. However, Heron has not, as yet, been able to source and verify the open-file or other data for this estimate and so cannot
state resource numbers at this stage.
At John Fardy there appears to be excellent potential to delineate a high-grade resource (see Figure 15 cross section over page) and some of
the better, higher grade results include2:
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8.4m @ 23.5% Zn, 2.6% Cu, 0.6% Pb, 41g/t Ag from 36m JF15
6.1m @ 22.7% Zn, 1.2% Cu, 1.5% Pb, 23g/t Ag from 45m JF38
4.0m @ 18.6% Zn, 1.0% Cu, 3.9% Pb, 40g/t Ag from 50m SFJ001
4.0m @ 23.2% Zn, 1.4% Cu, 0.2% Pb, 13g/t Ag from 280m SJF004
7.5m @ 15.7% Zn, 2.1% Cu, 3.0% Pb, 36g/t Ag from 29m JF6
4.7m @ 16.9% Zn, 6.5% Cu, 4.8% Pb, 58g/t Ag from 25m JF5
6.2m @ 12.4% Zn, 0.7% Cu, 0.8% Pb, 17g/t Ag from 55m JF37
6.7m @ 10.7% Zn, 2.1% Cu, 0.9% Pb, 25g/t Ag from 36m JF3
8.7m @ 12.9% Zn, 1.0% Cu, 2.4% Pb, 33g/t Ag from 63m JF15
[2] Results have been taken: Sultan Corp Ltd, ASX release, 5 June 2007: High Grade Zinc Intersections at John Fardy, Sultan Corp Ltd, ASX release, 6 February 2008:
Near surface, high grade intersected at John Fardy and Sultan Corp Ltd, ASX release, 19 February 2008: Another significant zinc and copper intersection.
Page 24 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Figure 15: John Fardy Prospect Cross Section
Cordillera Prospect
The Cordillera Prospect is centered on the historic Cordillera mine located 4km north-west of Peelwood (Figure 14). The mine was opened in
1883 and production peaked in 1888 with 9,000t of ore being treated that year producing copper, lead, silver and gold from oxidised ore down
to a depth of 60m. Underground production continued until 1889 and the dumps were reworked in 1928. The mineralisation is considered to
be of a Volcanogenic Massive Sulphide (VMS) type consisting of lenses contained within shales close to the steeply (75-85˚) dipping structural
contact with the overlying coarse grained felsic volcanics.
A 2014 Airborne Electro-Magnetic (AEM) survey undertaken by previous owners has been reviewed by Heron's geophysical consultant who
has identified several bedrock conductors potentially related to mineralisation. In particular, these Electro-Magnetic (EM) conductors (Figure
16) occur along the line of the historically mined mineralisation and have not been tested at depth. The conductors north of the old mine are
modelled starting at some 50m below the surface in an area of known workings (shafts and costeans) with moderate pyrite alteration seen in
the surface felsic volcanic and shale rocks. A program of drilling is being planned to test these conductors. The Company is working through
land owner access arrangements and statutory approvals.
A number of additional modelled EM anomalies at the John Fardy prospect are also being assessed and may provide further drill targets as
part of this program. Subject to suitable drill rig availability, the Company is aiming to drill a number of these targets before the end of the
year.
Heron Resources Limited - Annual Report 2018 - Page 25
2.0 OPERATIONS REPORT CONTINUED
Figure 16: Cordillera
Prospect detail - showing
location of EM anomalies in
relation to the geology and
previous mine workings.
The VMS mineralisation
occurs close to the contact
between the felsic
volcanics and shale units.
Refer to legend in Figure 11.
Figure 17: Cordillera Prospect Long Section looking east showing position of modelled AEM plate and how historical drilling failed to test
the target. Pierce-point for the proposed hole shown as red dot.
Page 26 - Heron Resources Limited - Annual Report 2018
2.0 OPERATIONS REPORT CONTINUED
Burra Project
EL8797 is located over the Queanbeyan Thrust on the eastern side of the Cowra-Yass Trough within the eastern Lachlan Fold Belt and
approximately 65km southwest of Woodlawn. It covers the historic London Bridge and Burra Pb-Ag deposits that were worked in the early
1900's with London Bridge having a reported average production grade of 15% Pb and 765g/t Ag. The area contains Siluro-Devonian
sequences of felsic flows, marine sediments, carbonates and intermediate intrusions known as the Colinton Volcanics, Cappanana Formation
and Bransby Beds. Mineralisation at London Bridge and Burra is hosted within limestone lenses of the Cappanana Formation which is overlain
by the Colinton Volcanics, a time equivalent to the Woodlawn Volcanics to the north. The area is prospective for VMS base metal
mineralisation and previous work most recently by Alderan Resources Ltd has defined a number of significant targets for future work.
Exploration Joint Venture Projects
Heron retains an interest in a high quality tenement holding in the Lachlan Fold Belt of NSW and the Eastern Goldfields of Western Australia.
This tenure is held through farm-in and joint ventures interests and includes several other free-carried residual or royalty interests which
results in minimal costs to Heron.
Alchemy Farm-In and JV (Overflow, Girilambone, Eurow and Yellow Mountain)
Heron entered into a Farm-In Agreement with Alchemy Resources Limited (Alchemy) (ASX: ALY) covering a portfolio of Heron's NSW
exploration tenements (see Figure 1) in May 2016. The Farm-In Agreement covers 674 km2 of the central Lachlan Orogen in NSW, including
the following exploration tenements: EL5878 Overflow, EL7941 Overflow, EL8267 Overflow, EL8192 Eurow, EL8318 Girilambone, and EL8356
Yellow Mountain. An Option Agreement was also finalised in March 2018 with the addition of two tenements EL 8631 Nyngan (Ni-Co) and
EL 8711 Barraba (Mn-Ni-Co) into the existing Alchemy JV for 10M ALY shares (2.3c) and 10M ALY options (strike at 5c).
A program of aircore drilling commenced in early July on the Nyngan project with 80 holes for 4,300m planned. The drilling is designed to
better delineate and expand the known nickel/cobalt mineralisation. Previous drilling results in the area include: 19m @ 1.21% Ni and 0.1%
Co from 36m depth. See ALY:ASX announcement dated 13 July 2018.
Approval for follow-up drilling at Overflow has been delayed due to Native Title clearance, negotiations for this are continuing.
Drilling Woodlawn G2
Heron Resources Limited - Annual Report 2018 - Page 27
3.0 Corporate Profile
HERON RESOURCES LIMITED (“Heron” or “the Company”) is engaged in the exploration and development of base and precious metal
deposits in Australia. The Company is focused on the development of the high grade Woodlawn Project located 250km southwest of Sydney
in New South Wales.
WOODLAWN ZINC-COPPER PROJECT
Heron holds a direct 100% ownership of the mineral rights at the Woodlawn Mine site situated 40km south of Goulburn and 250km south-
west of Sydney, in southern NSW, Australia (Figure 18). It is Heron’s aim to create a profitable, long-life, low-cost mining operation producing
base metal concentrates.
Heron also holds a portfolio of exploration tenements adjacent to and contiguous with the Woodlawn site covering the prospective felsic
volcanic units that host the Volcanogenic Massive Sulphide (VMS) deposit at Woodlawn.
Heron’s principal focus is developing the Woodlawn Zinc-Copper Project which is expected to start commissioning in December 2018. Project
development followed the successful completion of a Preliminary Economic Assessment (PEA) in 2015, a Feasibility Study (FS) in June 2016,
and the completion of project financing in September 2017. Construction of the project commenced in September 2017 and is now over 80%
complete. Underground mine development will commence in September. The price outlook for all metals to be produced at Woodlawn, while
seeing some recent volatility, remains relatively strong, particularly for zinc which continues to face a significant supply shortfall.
Figure 18: Woodlawn Project Location Plan
Page 28 - Heron Resources Limited - Annual Report 2018
3.0 CORPORATE PROFILE CONTINUED
CORPORATE GOVERNANCE STATEMENT
The Board of Heron is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board is responsible to
its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The Board believes that sound
Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability.
In accordance with Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance with them
on its website, rather than in the Annual Report. Accordingly, the following information about the Company's Corporate Governance practices
is set out on the Company's website at www.heronresources.com.au:
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Board Charter;
Audit & Governance Committee Charter;
Remuneration & Nomination Committee Charter
Policy on securities trading;
Policy on continuous disclosure;
Policy regarding communication with Shareholders;
Policy on the Company’s risk management;
Community Engagement Policy
Environmental Policy
Fitness for Work policy
Health and Safety policy
Human Resources and Workplace practises policy (includes Diversity Policy)
Workplace Injury and illness management policy
Policy on Whistleblowers; and
Code of Conduct.
Heron Resources Limited - Annual Report 2018 - Page 29
4.0 Directors’ Report
The Directors submit their Report on the Company and its controlled entities for the year ended 30 June 2018.
DIRECTORS
The names and details of the Directors of the Company in office at any time during or since the end of the year are:
Director
Appointed
Position
Stephen Dennis - BCom BLL.B GDipAppFin(Finsia)
05 December 2006
Chairman (Non-Executive) of the Board, Member of Audit and Governance Committee, Chair of Remuneration and Nomination
Committee.
Stephen Dennis has been actively involved in the mining industry for 35 years. He has held senior management positions at
CBH Resources Limited (the Australian subsidiary of Toho Zinc), MIM Holdings Limited, and Minara Resources Limited.
Other current directorships
Non-executive Chairman of EHR Resources Limited, Non-executive Chairman of Rox Resources Limited, Non-executive
Chairman of Graphex Mining Limited, Non-executive Chairman of Lead FX Inc
Former directorships in last 3 years
Managing Director of CBH Resources Limited.
Director
Appointed
Position
Wayne Taylor - BEng (Mining), MBA, M AusIMM
11 August 2014
Managing Director and CEO
Mr. Taylor is a mining engineer with over 30 years’ experience in the mining industry. Mr Taylor has held senior roles with
Western Mining Corporation and Glencore International’s Australian operations. For the six years prior to joining TriAusMin
he managed Glencore’s base metal business development based out of Australia which involved assessing mining projects
throughout the world. Prior to his role with Heron he was MD & CEO of TriAusMin Ltd from 2011 until the time of the merger
with Heron in 2014.
Other current directorships
None.
Former directorships in last 3 years
None.
Director
Appointed
Position
Borden Putnam III - MSc (Geol), RPG, F AusIMM
12 December 2014
Director (Non-Executive), Member of Audit and Governance Committee, Member of Remuneration and Nomination Committee
Mr. Putnam is a professional geologist with over 42 years of experience in the mineral industry, with focus on exploration and
asset evaluations in the mineral investment business. From 1976-1991 he worked as a Project Geologist and a District
Manager for AMAX Exploration and Newmont Exploration Limited respectively. He served as Vice-President and Chief
Geologist for MRDI (now AMEC) an internationally recognized mining consultancy firm from 1991-1996. Mr. Putnam was Vice-
President and Principal with Robertson Stephens Investment Management from 1996-2001, and from 2001-2009 was
Managing Director of Eastbourne Capital Management; both firms which were engaged in mineral investment management
principally as private hedge funds. In 2009, Mr Putnam, established his mining industry consultancy business providing
technical evaluations, due diligence audits and investment advice to clients in the mineral resource industry.
Other current directorships
None.
Former directorships in last 3 years
None.
Director
Appointed
Position
Fiona Robertson - MA (Oxon) (Geology), M AusIMM, FAICD
9 April 2015
Director (Non-Executive), Chairman of Audit and Governance Committee, Member of Remuneration and Nomination Committee
Ms Robertson is a finance professional and practicing non-executive director and audit/risk committee chair with a background
of more than 20 years as a chief financial officer in the emerging and mid-tier resources sector and 14 years as a corporate
banker working in Sydney, New York and London with Chase Manhattan Bank. Ms Robertson’s executive experience includes
CFO roles with Petsec Energy Ltd; Climax Mining Ltd and Delta Gold Ltd; as well as various corporate banking roles with Chase
Manhattan Bank.
Other current directorships
Non-executive Director of Whitehaven Coal Ltd.
Former directorships in last 3 years
Non-executive Director and Chair of the Audit & Risk Committee of Drillsearch Energy Ltd;
Non-executive Chair of One Asia Resources Ltd.
Page 30 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
Director
Appointed
Position
Mark Sawyer - LL.B.
19 August 2015
Director (Non-Executive)
Mr Sawyer co-founded Greenstone Resources in 2013 after a 16 year career in the mining sector. Prior to establishing
Greenstone, Mr Sawyer was GM and Co-Head Group Business Development at Xstrata plc where he was responsible for
originating, evaluating and negotiating new business development opportunities for Xstrata. Prior to Xstrata, Mr Sawyer held
senior roles at Cutfield Freeman & Co (a boutique corporate advisory firm in the mining industry) and at Rio Tinto plc. Mr
Sawyer is a solicitor and a resident of the United Kingdom.
Other current directorships
Non-executive Director of Metro Mining Ltd.
Former directorships in last 3 years
None.
Director
Appointed
Position
Ricardo De Armas B.S. M.B.A. (Harvard)
22 September 2017
Director (Non-Executive)
Mr De Armas is an investment professional at Castlelake, where he focuses on emerging market investments. Mr. De Armas
has more than 10 years of experience in investment and corporate finance, including roles as vice president at De Jong Capital,
principal at Zaff Capital, associate at Citigroup’s investment banking division, and financial analyst at Procter & Gamble. His
expertise includes value investments, restructuring and financial advisory. Mr. De Armas received his M.B.A. from Harvard
Business School and a B.S. from Universidad Metropolitana in Business Administration.
Other current directorships
None.
Former directorships in last 3 years
None.
Director
Appointed
Position
Peter Rozenauers BME (Hons I), MAppFin, MAusIMM
22 September 2017
Director (Non-Executive)
Mr Rozenauers is a Portfolio Manager with Orion Mine Finance and has over 25 years of experience in the natural resources
and finance industry. He earned a BEng (Honours I) in Mining from the University of NSW, a Master in Applied Finance from
the University of Technology Sydney and is a member of the Australasian Institute of Mining and Metallurgy. Prior to Orion,
Mr. Rozenauers was a Senior Investment Manager for a predecessor business of Orion, and prior to that was Managing
Director and Head of Asian Commodities Distribution for Barclays Capital in Singapore, a leading global investment bank. Mr.
Rozenauers spent over 13 years working in senior banking roles in Singapore, New York and London. Mr. Rozenauers is a Non-
Executive Director of ASX MacPhersons Resources Limited.
Other current directorships
Non-executive Director of MacPhersons Resources Ltd.
Former directorships in last 3 years
Non-executive Director of Lynx Resources.
Non-executive Director of Blackham Resources Ltd.
Director
Appointed
Position
Ian Pattison B Sc (Hons), PhD, MAusIMM
29 November 2017
Director (Non-Executive), Member of the Remuneration and Nomination Committee
Dr Pattison is a highly respected metallurgist with over 30 years of Australian and international experience. His early career
was with CRA where he held senior roles in operations, engineering and then as Metallurgy Manager in their base metal
division. He joined Denehurst following their purchase of the Woodlawn Mine from CRA to take on an Executive Director role
with the Woodlawn and Benambra mines. This was followed by Director and Managing Director roles in the nutrition
industries mainly with the German based Henkel/Cognis companies. For the past 10 years he has been the Group Manager
Metallurgy for the Australian operations of Japan’s Toho Zinc which incorporates the construction of the Rasp Mine in Broken
Hill and operations at the Endeavor Mine at Cobar.
Other current directorships
None.
Former directorships in last 3 years
None.
Heron Resources Limited - Annual Report 2018 - Page 31
4.0 DIRECTORS’ REPORT CONTINUED
SENIOR EXECUTIVE OFFICERS
Chief Operating Officer
The Chief Operating Officer (COO) is Andrew Lawry B App Sc (Metallurgy), ); F AusIMM. Mr Lawry brings more than 28 years’ experience in
project management, engineering, construction, commissioning and operations, both in Australia and overseas. He has worked for several
leading resource companies including Polymetals, Newcrest and engineering firms Bateman, Normet and Q-Proc. Notably, Mr Lawry managed,
from construction through to operation, the successful retreatment of the Hellyer base metal tailings project in 2006 in western Tasmania.
With this experience he is well qualified to lead the successful development of the Woodlawn Project which comprises the retreatment of
tailings in combination with the development of an underground mine.
General Manager – Finance and Administration and Company Secretary
The GM - Finance and Company Secretary is Simon Smith B.Bus CA. Mr. Smith has been a Chief Financial Officer of both private and public
companies in Australia and the USA. He brings over 25 years’ experience in the business world as a Chartered Accountant and holds a
Bachelor’s Degree in Business from the University of Technology Sydney. Mr. Smith was the CFO and Company Secretary for TriAusMin prior
to the merger with Heron Resources.
General Manager - Exploration and Geology
The Exploration Manager, David von Perger BSc (Hons) MAusIMM was appointed to this position in February 2006. Mr von Perger is a
geologist with some 25 years’ experience in mineral exploration having worked in several locations around Australia. Mr von Perger has
worked on various styles of mineral deposits including Archaean gold and nickel, and Proterozoic base-metals and iron-ore. His experience
includes four years as a business analyst for a major mining group involving analysis of mining operations, project development and
assessment of new opportunities. Since his appointment with Heron in February 2006, Mr von Perger has been responsible for the
identification and acquisition of several new nickel, gold, iron-ore and base-metal projects.
General Manager - Strategy & Business Development
Charlie Kempson MEng (Oxon), MBA, GAICD is a senior corporate finance executive who was most recently an equity partner and Director of
Azure Capital Limited, a mining focused leading independent Perth-based corporate advisor, where he worked for nine years advising boards
and senior executives across a range of industries including mining, oil & gas and related services on business development, corporate
strategy, finance, and mergers and acquisitions. Prior to his arrival in Australia in 2002 Mr Kempson spent five years with investment banks
Commerzbank AG and Barclays Capital in London and Germany, and four years working in technical roles for Logica (now part of CGI Group).
General Manager – Woodlawn
Brian Hearne is the General Manager of Woodlawn Mine. He is a mining professional who has worked in the industry since 1978. He started
his career in mineral processing plants, firstly at Woodlawn. Brian has managed mineral processing plants, smelters and mines both in
Australia and overseas. The major achievements at all the operations he was involved in was improved safety statistics and lower operating
costs.
PRINCIPAL ACTIVITIES
The principal activity of the Consolidated Entity during the year was the financing and development of the Woodlawn Mine which is scheduled
to commence commissioning late in 2018.
OPERATING RESULTS
The loss of the consolidated entity for the 2018 financial year after income tax of nil (2017: nil) was $5,819,116 (2017: $2,856,542).
DIVIDENDS
No dividends were paid during the year and the Directors do not recommend the payment of a dividend.
OPERATIONS REVIEW
The detailed review of operations of the Consolidated Entity for the year is contained in Section 3.0 – Corporate Review of Operations in this
Annual Report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the financial year, the Company was successful in completing the Woodlawn financing. Shortly thereafter the Company began
construction at Woodlawn which is now over 80% complete.
Other notable changes in the state of affairs of the Company was its delisting from the Toronto Stock Exchange (TSX) on 29 March 2018 due
to the North American shareholding falling to below 2% of the shares on issue and low market liquidity.
Page 32 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
On the 26 September 2018, the company successfully completed the draw down of the second tranche (US$20M) of Debt from Orion Mine
Finance.
Other than noted at the date of this Report there is no matter or circumstance which has arisen since 30 June 2018 that has significantly
affected or may significantly affect:
(cid:129)
(cid:129)
(cid:129)
The operations, in the financial years subsequent to 30 June 2018, of the Consolidated Entity;
The results of those operations; or
The state of affairs, in the financial years subsequent to 30 June 2018, of the Consolidated Entity.
OPTIONS
There were no options issued during the year under the Employee Share Ownership Plan (ESOP). There were no options exercised during the
year. All options numbers reflect the 1 for 10 Consolidation that occurred in December 2017.
Number Issued
Nil
Expiry Date
Nil
Exercise Price
NIl
The following Options expired or were forfeited during the year:
Number Issued
300,000
100,000
21,459
Expiry Date
4/12/20
5/3/18
23/10/17
Exercise Price
$0.72
$2.90
$1.20
As at the date of this report the Company had the following options on issue:
Date Options Granted
5 August 2014
5 December 2015
1 February 2017
PERFORMANCE RIGHTS
Expiry Date
20-Nov-18
4-Dec-20
1-Feb-22
TOTAL
Number Issued
85,836
1,650,000
265,000
2,000,836
Exercise Price
$0.70
$0.72
$1.10
At the 2017 AGM, Shareholders approved a Performance Rights Long Term Incentive (LTI) program. During the 2017/18 financial year the
following Performance Rights were issued. Refer to the Remuneration Report for further information on the LTI program.
Number Issued
2,895,000
Expiry Date
30 June 2020
Exercise Price
$0.00
No option or performance rights holder has any right under the options or rights to participate in any other share issue of the Company or of
any other entity.
LIKELY DEVELOPMENTS
Further information on the likely developments in the operations of the Consolidated Entity and the expected results of those operations have
not been included in this Report because the Directors believe it would be likely to result in unreasonable prejudice to the Consolidated Entity.
Heron Resources Limited - Annual Report 2018 - Page 33
4.0 DIRECTORS’ REPORT CONTINUED
DIRECTORS AND KEY MANAGEMENT PERSONNEL SHAREHOLDINGS IN THE COMPANY
As at the end of FY2018 the interests of the Directors in the Shares of the Company were:
Directors
S B Dennis
W Taylor
B Putnam
F Robertson
M Sawyer
R De Armas
P Rozenauers
I Pattison
Key Management Personnel
A Lawry
D von Perger
S Smith
C Kempson
Brian Hearne
DIRECTORS MEETINGS
Ordinary Shares
179,429
250,740
-
71,429
-
-
-
51,429
17,000
60,814
60,000
485,130
-
Options over
Ordinary Shares
100,000
485,369
100,000
100,000
100,000
-
-
-
165,000
165,000
165,000
165,000
165,000
Performance
Rights
115,000
485,000
90,000
90,000
90,000
90,000
90,000
-
295,000
240,000
255,000
255,000
245,000
During the year the Company held 6 meetings of Directors. The attendance of the Directors at meetings of the Board were:
Director
S Dennis
W Taylor
B Putnam
F Robertson
M Sawyer
R De Armas
P Rozenauers
I Pattison
Meetings held
while a director
Number of
meetings
attended
Audit
Committee
Meetings
held (attended)
6
6
6
6
6
5
5
4
6
6
6
6
1
4
5
4
4 (4)
-
4 (3)
4 (4)
-
-
-
-
Remuneration
and Nomination
Committee
meetings
(attended)
2 (2)
-
2 (2)
2 (2)
-
-
-
1 (1)
REMUNERATION REPORT (AUDITED)
The Board continues to apply a fair and responsible executive remuneration framework which operates effectively to appropriately incentivise
and reward senior executives and members of the Board to execute our strategy while being aligned with shareholder interests.
At the 2017 Annual General Meeting (AGM), shareholders voted 97.9% in favour of our Remuneration Report.
Changes to remuneration framework for FY2018
To increase the employee retention value of the Long Term Incentive (LTI) scheme and to further align the scheme with shareholders’ interests,
the Board introduced a change to LTI awards in FY2018. At the 2017 AGM shareholders approved a Performance Rights program for LTI awards
and this has been implemented across the Executive Team and the Board of Directors during FY2018.
Non-executive Directors fees
With the increase in the number of Non-executive Directors following the successful completion of the Woodlawn, financing the shareholders
voted to increase the Non-executive Directors fees pool at the 2017 AGM. The Directors fees paid to individual Non-Executive Directors has
not changed in FY 2018 however for FY 2019, the Company intends to remunerate Non-executive Directors who sit on the Audit and
Governance Committee and the Remuneration and Nomination Committee to reflect the additional workload involved.
Page 34 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
1.
Introduction
This Remuneration Report forms part of the Directors Report.
In accordance with Section 308 (3C) of the Corporations Act 2001 (Cth) (Corporation Act), the external auditors, Ernst & Young, have audited
this Remuneration Report.
This report details the remuneration and fees during FY2018 of the Key Management Personnel (KMP) of the Company, who are listed in the
table below. For the remainder of this Remuneration Report, the KMP are referred to as either Executive KMP or Non-executive Directors.
1.1
Key Management Personnel for FY2018
This report details the remuneration during FY2018 of:
Name
Role held during FY2018
Committee positions held
Non-executive Directors
Stephen Dennis
Chairman and Non-executive Director
Chair of Remuneration and Nomination Committee
Member of the Audit and Governance Committee
Borden Putnam III
Non-executive Director
Member of the Remuneration and Nomination Committee
Member of the Audit and Governance Committee
Fiona Robertson
Non-executive Director
Chair of the Audit and Governance Committee
Member of the Remuneration and Nomination Committee
Mark Sawyer
Non-executive Director
Ricardo De Armas
Non-executive Director
Peter Rozenauers
Non-executive Director
None
None
None
Ian Pattison
Non-executive Director
Member of the Remuneration and Nomination Committee
Executive KMP
Wayne Taylor
Andrew Lawry
Simon Smith
David von Perger
Charlie Kempson
Brian Hearne
Role held during FY2018
Managing Director and CEO
Chief Operating Officer
General Manager, Finance & Administration and Company Secretary
General Manager, Exploration & Geology
General Manager, Strategy & Business Development
General Manager, Woodlawn Mine
1.2
Summary of Company performance
The Remuneration Committee is of the view that the Executive Key Management Personnel (Executive KMP) have continued to
successfully execute the Company’s strategy and that remuneration outcomes for FY2018 are aligned to company performance. In
FY2018, the Executive KMP have focused on key activities and initiatives including:
-
-
-
-
Safety at Woodlawn
Construction and other project development activities at Woodlawn to meet project schedule and key milestones.
Effective management of key stakeholder relationships including Veolia, government regulators and the community.
Satisfaction of key conditions precedent for Senior Debt and Silver Stream draw downs.
Heron Resources Limited - Annual Report 2018 - Page 35
4.0 DIRECTORS’ REPORT CONTINUED
Company performance for the last five years
A snapshot of key Company performance indicators for the past five years is set out below: (in 000’)
Revenue ($m’s)
Net Assets ($’000’s)
Profit/(loss) attributable to the group ($'000's)
Share price at year end (dollars per share) (1) (2)
Basic EPS (cents per share) (1)
Dividends paid (cents per share)
2018
Nil
$168,882
($5,819)
$0.63
($0.028)
Nil
2017
Nil
$44,010
($2,857)
$0.71
($0.06)
Nil
2016
Nil
$55,084
($4,253)
$1.23
2015
Nil
$52,151
($5,429)
$0.95
2014
Nil
$41,762
($6,389)
$0.99
($0.0104)
($0.0162)
($0.0252)
Nil
Nil
Nil
The EPS and Share price information reflect the 1 for 10 share consolidation completed in December 2017 to ensure comparability between years.
Ardea was spun out of Heron in February 2017 via an “in specie” distribution at an equivalent of $0.20 cents per share.
Remuneration Governance
(1)
(2)
2.
This section describes the role of the Board, Remuneration Committee and external remuneration advisers when making remuneration
decisions, and sets out an overview of the principles and policies that underpin the Company’s remuneration framework.
2.1 Role of the Board and Remuneration Committee
The Board is responsible for ensuring that the Company’s remuneration structures are equitable and aligned with the long-term interests
of the Company and its shareholders. Consistent with this responsibility, the Board has established a Remuneration Committee, whose
role is to:
-
-
-
Review and recommend to the Board the remuneration of the Executive KMP;
Review and approve the remuneration policies and practices for the Group generally,including incentive plans and other benefits;
and
Review and make recommendations to the Board regarding the remuneration of Non-executive Directors.
The Remuneration Committee comprises four Non-executive Directors: Stephen Dennis (Chairman), Borden Putman III, Fiona Robertson
and Ian Pattison. The Remuneration Committee has a formal charter, which sets out its roles and responsibilities, composition structure
and membership requirements. A copy of this charter can be viewed on Heron’s website.
Further information regarding the Remuneration Committee’s role, responsibilities and membership is set out in the Company’s
Corporate Governance Statement.
2.2 Use of external remuneration advisors
From time to time, the Remuneration Committee seeks and considers advice from external advisors who are engaged by and report
directly to the Remuneration Committee. Such advice will typically cover Non-executive Director fees, Executive KMP remuneration and
advice in relation to equity plans.
The Corporations Act (2001) requires companies to disclose specific details regarding the use of remuneration consultants. The
mandatory disclosure requirements only apply to those advisers that provide a ‘remuneration recommendation’ as defined in the
Corporations Act. The Committee did not receive any such recommendations in FY2018.
The Company does participate in an industry recognised remuneration survey which it uses to assist in the benchmarking of
remuneration across the organisation.
2.3
Executive KMP remuneration principles and framework
The Company’s Executive KMP remuneration framework is based on the following core principles:
-
-
-
-
to ensure the Company’s remuneration structures are equitable and aligned with the long-term interests of the Company and its
shareholders, having regards to relevant Company policies;
to attract and retain skilled executives;
to structure short and long term incentives that are challenging and linked to the creation of sustainable shareholder returns; and
to ensure any termination benefits are justified and appropriate.
These principles are reflected in the Company’s remuneration framework, which is comprised of both fixed and at-risk remuneration
components as indicated below.
Details of each of these components and how they applied during FY2018 are described in the tables below and in Section 3. All STI
and LTI guidelines noted below are subject to Remuneration Committee and Board approval.
Page 36 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
Fixed remuneration (TFR)
At-risk STI
At-risk LTI
-
-
-
-
includes salary and
superannuation
reviewed annually by the
Remuneration Committee
benchmarked against peer
companies
influenced by individual
performance and experience
-
-
determined based on a mix of
financial and non-financial
measures
STI for 2018 was a discretionary
cash bonus determined at the
end of the year based on KMP
performance against KPI’s and
the company’s capacity to fund
such awards. Going forward it is
proposed that STI opportunity is
set between 10% and 50% of
TFR for target performance and
between 20% and 100% of TFR
for stretch performance.
-
The STI is delivered as cash.
-
-
-
-
provides the Remuneration
Committee with the flexibility to
determine the nature, terms and
conditions of the grant each year
Operated in FY2018 as an award
of performance rights.
the face value of the LTI
opportunity is currently set
between 20% and 75% of TFR
vesting is subject to an
independent performance hurdle
– Relative TSR
Remuneration framework summary
CEO
COO
KMP - GM’s
Other Executives
Form of Delivery
Performance Period
Further explanation
1 As a % of TFR.
TFR
Benchmarked
Benchmarked
Benchmarked
Benchmarked
--------------------At-risk % of TFR-----------------
STI TARGET – STRETCH1
LTI
50% - 100%
20% -50%
20% - 50%
10% - 20%
50-75%
30-50%
30-50%
20-30%
Salary & Superannuation
Cash 100%
Deferred Share Rights
N/A
Section 3.1 to 3.2
1 year
Section 3.3
3 years
Section 3.4
3.
Remuneration of the Executive KMP for FY2018
This section describes in greater detail the different components of Executive KMP remuneration for FY2018.
3.1
Benchmarking total remuneration
While benchmarking is a useful starting point, it is only one input used by the Remuneration Committee when determining total
remuneration for the Executive KMP. Executive KMP remuneration is benchmarked against the results of a survey conducted by a
remuneration consulting organisation of similar roles across the Australian mining industry.
The objective of the Board’s positioning remuneration levels in this manner is to ‘meet the market’ so as to attract and retain a leading
management team while still ensuring appropriate restraint in respect of executive remuneration.
Actual market positioning for each individual may deviate from the positioning policy (above or below) due to consideration such as
internal relativities, experience, tenure in role, individual performance and retention considerations.
3.2
Fixed remuneration
Fixed remuneration received by Executive KMP is subject to review by the Remuneration Committee which will then make
recommendations to the Board for approval. Fixed remuneration is comprised of base salary and superannuation. In line with Company
policy and executives’ service agreements, remuneration levels are reviewed annually based on market benchmarking and individual
performance.
At present, fixed remuneration for Executive KMP is typically positioned between the 25th and 50th percentile of the market comparator
group adopted by the Board.
Heron Resources Limited - Annual Report 2018 - Page 37
4.0 DIRECTORS’ REPORT CONTINUED
3.3
STI awards and structure for FY2018
The terms of the STI (1) that applied during FY2018 were.
Who participated
All Executive KMP.
What was the performance period?
The STI for FY2018 operated over a 12 month performance period from 1 July 2017 to
30 June 2018.
What was the target STI award?
In light of the Company’s stage of development and constraints on cash during the
construction of Woodlawn, Executive KMP’s STI remained a discretionary award
determined at the end of the year in light of KMP’s performance against KPI’s and the
Company’s capacity to fund such awards.
The STI amount actually awarded to each Executive KMP in FY2018 is shown in section
3.7, with a conservative approach being adopted in FY 2018 ahead of Woodlawn’s
planned start-up in FY 2019
What were the performance conditions,
why were they chosen and how were
they assessed?
Heron has chosen performance conditions that expressly link to the strategy and motivate
out-performance of annual business plans. The following KPIs were adopted as
performance conditions and applied to the FY2018 STI:
-
-
-
-
Zero harm to employees and contractors
All construction and project activities to meet Woodlawn project schedule
including key milestones
Project capital and operating expenditures to be within Budget
Satisfaction of Conditions Precedent to draw down of the Silver Stream and
Senior Debt
At the commencement of FY2018, the Board set Target KPIs, the achievement of which
was expected to be critical to the success of the Company as it began construction at
Woodlawn.
The Remuneration Committee and the Board assessed and approved the STI performance
conditions applying to the CEO’s STI award. The performance conditions for Other
Executive KMP were assessed by the CEO and approved by the Board following the
recommendation of the Remuneration Committee.
The weightings of each performance condition are set out in the following table.
Safety & Environment
Woodlawn project KPI’s
Corporate KPI’s
Individual Leadership KPIs
CEO
10%
30%
20%
40%
COO
10%
30%
20%
40%
KMP – GM’s Other Execs
10%
30%
20%
40%
10%
30%
20%
40%
What performance level was achieved?
A snapshot of the performance levels achieved for FY2018 is set out below:
Performance condition1
Safety & Environment
Woodlawn project KPI’s
Individual KPI’s
Corporate KPI’s
Actual (2)
75% of target achieved
75% of target achieved
Outcome
On target – below stretch
On target – below stretch
70-75% of target achieved On target – below stretch
On target – below stretch
75% of target achieved
(1)
(2)
All STI’s noted in this Remuneration Report for FY1 were accrued as at 30 June 2018
The actual achievement of the target is a representative sample for Individual KPI’s across
the KMP Executive team
Page 38 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
3.4
LTI awards and structure for FY2018
The terms of the FY2018 LTI grants to Executive KMP were:
Who participated
All Executive KMP.
How will LTI be delivered?
FY2018 LTI Awards that vest will be delivered in the form of performance rights, being
rights to receive ordinary shares at no cost.
What was the value of LTI awards granted?
What is the exercise price for LTI awards?
What are the performance conditions?
Why was this performance
conditions chosen?
The CEO was granted LTI awards with a face value equal to 62% of his TFR, the COO was
granted LTI awards with a face value equal to 47% of his TFR. The KMP-GM’s were
granted LTI awards with a face value equal to between 40-47% of their TFR. Other
Executive KMP were granted LTI awards with a face value equal to between 40-45% of
their TFR.
LTI awards were granted in performance rights. An independent valuation was
undertaken to determine the value of Performance Rights using Monte Carlo simulation.
No discount was applied to the valuation in respect of the probability of the performance
conditions being met. Shareholder approval was obtained at the 2017 Annual General
Meeting for the FY2018 grant of LTI awards to the CEO.
There is no exercise price payable on vesting or exercise of the performance rights. On
exercise, each performance right entitles the recipient to one ordinary share in the
Company.
Vested rights will have a last date for exercise that is 3 years following the grant date.
(Last Exercise Date). On the Last Exercise Date, vested but unexercised rights will be
automatically exercised if the TSR performance hurdle is achieved (see below).
100% of the award is subject to a relative total shareholder return (TSR) performance
hurdle (TSR Hurdle), which compares the TSR performance of the Company with the TSR
performance of a peer group of companies operating in the Australian and overseas
resources sectors.
The TSR Hurdle was chosen because:
1.
2.
3.
It allows for an objective external assessment of the shareholder value created by
the Company relative to a group of peers over a sustained period; and
It is widely adopted metric that is well understood by markets, and
It seeks to align management performance with shareholder interests
What are the performance periods?
Each TSR Award is capable of vesting and becoming exercisable after a three a year
performance period, with the performance period commencing on 1 July 2017.
How will the performance condition be
calculated for the TSR Awards?
For the TSR Hurdle, the TSR of the Company for the FY2018 LTI grant is measured as a
percentile ranking compared to the below comparator group of listed entities over the
relevant performance period for the tranche. The TSR comparator group was established
before the commencement of the respective performance period.
Red River Resources
Aurelia Metals
Sandfire Resources
Trevali
Titan Mining Corp
Silver Lake Resources
Perseus Mining
Mincor Resources
Atalaya
Central Asia Metals
Beadell Resources
Havilah Resources
Western Areas
Nevsun
Continued next page
Heron Resources Limited - Annual Report 2018 - Page 39
4.0 DIRECTORS’ REPORT CONTINUED
How will the performance condition be
calculated for the TSR Awards? CONT
The level of vesting will be determined based on the ranking against the comparator
group companies in accordance with the following schedule:
-
-
-
-
At the 75% percentile or above – 100% of the TSR Awards vest;
Between the 50th and 75th percentile – vesting will occur on a pro rata straight
line basis;
At 50th percentile – 50% of the TSR Awards vest; and
Below the 50th percentile – no TSR Awards vest.
In respect of the FY2018 LTI grant, unless the Remuneration Committee determines
otherwise, the TSR of a Company for a performance period will be calculated adopting the
following determination of the relevant opening and closing share prices:
-
-
The volume weighted average share price over the 20-trading day period
commencing 10 trading days before 30 June 2017 (opening share price); and
The volume weighted average share price over the corresponding 20-trading day
period at the conclusion of the performance period ending 30 June 2020, as
applicable (closing share price).
Re-testing
All performance awards that do not vest following testing will lapse immediately. There
is no re-testing of awards that do not vest.
What happens in the event of a
change in control?
In the event of a takeover bid or other transaction, event or state of affairs that in the
Board’s opinion is likely to result in a change in control of the Company, the Board has
discretion to determine that vesting of some or all of any unvested performance awards
should be accelerated.
Do the performance rights and options
attract dividend and voting rights?
LTI Awards do not have any dividend or voting rights prior to vesting and exercise.
Shares allocated on exercise of performance rights rank equally with other ordinary
shares on issue, including in relation to dividend and voting rights. Participants are
required to comply with the Company’s securities trading policy in respect of their
performance rights, options and any shares they receive upon exercise. They are
prohibited from hedging or otherwise protecting the value of their performance rights and
options.
What happens if an executive ceases
employment during the performance period?
In general, unless the Board determines otherwise, where an executive’s employment is
terminated:
-
-
-
For cause or due to resignation: all unvested performance awards will lapse; or
By mutual agreement with the Company: unvested performance awards will remain
on foot and subject to the original performance hurdle. However, the Board may at
its discretion determine to lapse any or all of the unvested performance awards
and ordinarily, in the case of a resignation, would be expected to do so; or
For any other reason: unvested performance awards will remain on foot and subject
to the original performance hurdle, with Board discretion to determine that some
of the performance awards (up to a pro rata portion based on how much of the
performance period remains) will lapse. The performance awards that remain on
foot will be tested in the normal course following the end of the relevant
performance period.
Page 40 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
3.5
Executive KMP realised remuneration outcomes
As set out in Section 1.2 the Remuneration Committee is of the view that the Executive KMP have continued to successfully execute
the Company’s current strategy. The table below is designed to give shareholders a better understanding of the actual remuneration
outcomes for Executive KMP in FY2018. It includes:
- Fixed remuneration earned in FY2018;
- STI earned in respect of FY2018 performance;
The amounts disclosed in the table, while not in accordance with accounting standards, are considered more helpful for shareholders
to demonstrate the linkage between Company performance and remuneration outcomes for executives for FY2018.
Executive KMP
TFR1
STI2 paid
Wayne Taylor
Andrew Lawry
Simon Smith
David von Perger
Charlie Kempson
Brian Hearne
$464,500
$374,913
$323,138
$308,500
$322,900
$308,263
$33,000
$27,500
$30,000
$20,000
$27,500
$17,500
LTI3 awarded
at fair value
of award
$261,415
$159,005
$137,445
$129,360
$137,445
$132,055
Other4
Total
Remuneration
-
-
-
$7,449
-
-
$758,915
$561,418
$490,583
$465,309
$487,845
$457,818
1.
2.
3.
4.
4.
Fixed remuneration comprises base salary and superannuation.
STI represents the amount of cash STI that each Executive KMP was be paid in July 2018 based on FY2018 performance.
LTI represents LTI awards for which were awarded in FY2018 and which have not yet vested.
Other includes parking, motor vehicle benefits and other similar items.
Executive KMP employment contracts
The following section sets out an overview of key terms of employment for the Executive KMP, as provided in their service agreements.
All Executive KMP contracts give the Company discretion to make payment in lieu of notice upon termination. No notice is required where
termination is for cause. The contracts do not provide for any termination payments other than payment in lieu of notice.
Treatment of unvested incentives is dealt with in accordance with the terms of grant. In general, under the STI and LTI arrangements, unvested
entitlements will be forfeited where an executive is terminated for cause or, subject to the Board’s discretion, where they resign. In all other
circumstances where the Board considers the executive to be a ‘good leaver’, outgoing executives will generally retain a pro-rata share of
entitlements (subject to satisfying any applicable performance conditions in the case of LTI arrangements).
Managing Director
Wayne Taylor was appointed as Managing Director and CEO of the Company on 11 August 2014. This table outlines the key terms of
My Taylor’s contract of employment.
Fixed remuneration
Short term incentive
Long term incentive
Other key terms
Mr Taylor’s annual TFR for FY2019 is $477,480. It includes salary and superannuation
(@15% of Base Salary). TFR is reviewed annually.
Mr Taylor is eligible to participate in the annual STI plan as described in Section 3.4. At
Target performance, his FY2019 STI opportunity is 50% of TFR with up to 100% for FY2019
stretch performance.
Mr Taylor is eligible to participate in the LTI plan as described in section 3.5 and subject
to receiving required or appropriate shareholder approval. Subject to recommendation by
the Remuneration Committee and approval by the Board and shareholders, Mr Taylors LTI
grant for FY2019 will be between 50-75% of TFR.
Other key items of Mr Taylor’s service agreement include the following;
His employment is ongoing subject to 6 months’ notice of term by either party.
Heron Resources Limited - Annual Report 2018 - Page 41
4.0 DIRECTORS’ REPORT CONTINUED
Other Executive KMP contracts
A summary of the notice periods and key terms of the current Executive KMP contracts, other than Mr Taylor, are set out in the table
below.
All of the contracts below are of ongoing duration.
Name and position
(at year end)
Fixed Remuneration
(Base salary + SGC)
STI Participation
LTI Participation
Notice
Andrew Lawry
Chief Operating Officer
Appointed 22 June 2015
$387,630.
TFR is reviewed
annually.
Simon Smith
General Manager,
Finance &
Administration/
Company Secretary
Appointed 11 August 2014
$332,333.
TFR is reviewed
annually.
David von Perger
General Manager,
Exploration & Geology
Appointed February 2004
$316,455.
TFR is reviewed
annually.
Charlie Kempson
General Manager,
Strategy & Business
Development
Appointed March 2013
$332,333.
TFR is reviewed
annually.
Brian Hearne
General Manager,
Woodlawn Mine
Appointed 4 October 2016
$320,288.
TFR is reviewed
annually.
3 months by either party
3 months by either party
3 months by either party
3 months by either party
3 months by either party
Mr Lawry is eligible to
participate in the annual
STI plan as described in
Section 3.3. At Target
performance, his FY2019
STI opportunity is 20% of
TFR with up to 50% for
FY2019 stretch
performance.
Mr Smith is eligible to
participate in the annual
STI plan as described in
Section 3.3. At Target
performance, his FY2019
STI opportunity is 20% of
TFR with up to 50% for
FY2019 stretch
performance.
Mr Lawry is eligible to
participate in the LTI plan
as described in section 3.5.
Subject to approval by the
Board, Mr Lawry’s LTI grant
for FY2019 will be
between 30-50% of TFR
Mr Smith is eligible to
participate in the LTI plan
as described in section 3.5.
Subject to approval by the
Board, Mr Smith’s LTI grant
for FY2019 will be
between 30-50% of TFR
Mr von Perger is eligible to
participate in the annual
STI plan as described in
Section 3.3. At Target
performance, his FY2019
STI opportunity is 20% of
TFR with up to 50% for
FY2019 stretch
performance.
Mr von Perger is eligible to
participate in the LTI plan
as described in section 3.5.
Subject to approval by the
Board, Mr von Perger’s LTI
grant for FY2019 will be
between 30-50% of TFR
Mr Kempson is eligible to
participate in the annual
STI plan as described in
Section 3.3. At Target
performance, his FY2019
STI opportunity is 20% of
TFR with up to 50% for
FY2019 stretch
performance.
Mr Hearne is eligible to
participate in the annual
STI plan as described in
Section 3.3. At Target
performance, his FY2019
STI opportunity is 20% of
TFR with up to 50% for
FY2019 stretch
performance.
Mr Kempson is eligible to
participate in the LTI plan
as described in section 3.5.
Subject to approval by the
Board, Mr Kempson’s LTI
grant for FY2019 will be
between 30-50% of TFR
Mr Hearne is eligible to
participate in the LTI plan
as described in section 3.5.
Subject to approval by the
Board, Mr Hearne’s LTI
grant for FY2019 will be
between 30-50% of TFR
Page 42 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
5.
Executive KMP remuneration tables
5.1
Executive KMP – Statutory remuneration table
The following table sets out the statutory remuneration disclosures required under the Corporations Act and has been prepared in
accordance with the appropriate accounting standards and has been audited.
Non
Salary & Monetary
benefits
fees
Super-
annuation
benefits
STI
Perfo-
(1)Rights
mance
& Options Remuneration related
Total
$
%
400,000
367,000
340,000
310,000
292,500
261,000
280,000
261,468
292,500
261,468
280,000
163,958
-
-
-
-
-
-
7,449
6,148
-
-
-
-
64,950
64,050
33,000
60,000
94,200
98,987
592,150
590,037
34,913
33,250
30,638
29,070
28,500
27,452
30,400
29,589
28,263
16,288
27,500
45,000
30,000
40,000
20,000
27,500
27,500
50,000
17,500
7,500
48,882
40,832
44,658
40,832
43,074
40,832
44,658
40,832
45,519
22,086
451,295
429,082
397,796
370,902
379,023
363,400
395,058
381,889
371,282
209,832
1,885,000
1,624,834
7,449
6,148
217,664
199,699
155,500
230,000
320,991
284,401
2,586,604
2,345,082
5.5
10.1
6.1
10.4
7.5
10.7
5.2
7.5
6.9
13
4.7
3.5
6
9.8
In AUD
FY
Managing Director & CEO
Wayne Taylor
2018
2017
Other Executive KMP
Andrew Lawry
Simon Smith
David von Perger
Charlie Kempson
Brian Hearne
Total
(1)
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
The Statutory Remuneration disclosure includes the accounting value of share based payments. Accounting Standards require share based payments to be
amortised over the relevant performance and service periods. The accounting value for share based payments do not have regard to whether performance
conditions were achieved.
5.2
LTI awards made in FY2018
A summary of the LTI awards for FY2018 (i.e. the value and the fair value of the LTI granted to each Executive KMP) is set out in the
table below.
Number of
performance
rights
granted
Number
of
options
granted
Fair value of
performance
rights
at grant
Performance
Hurdle
Fair Value
per right
at grant
date (1)
Latest
Vesting
Date
485,000
295,000
255,000
240,000
255,000
245,000
-
-
-
-
-
-
$261,415
$159,005
$137,445
$129,360
$137,445
$132,055
TSR
TSR
TSR
TSR
TSR
TSR
$0.539
30 June 2020
$0.539
30 June 2020
$0.539
30 June 2020
$0.539
30 June 2020
$0.539
30 June 2020
$0.539
30 June 2020
Executive KMP
Wayne Taylor
Andrew Lawry
Simon Smith
David von Perger
Charlie Kempson
Brian Hearne
1.
The fair value for awards granted to the Executive KMP is based on their fair value at 29 November 2017 being the grant date. The factors and assumptions used
in determining the fair value are set out in note 28(b) to the financial statements. The value of the LTI performance rights was calculated by an independent
valuer, Maven Libera, using Monte Carlo simulation analysis.
Heron Resources Limited - Annual Report 2018 - Page 43
4.0 DIRECTORS’ REPORT CONTINUED
6.
Non-executive Director remuneration
This section explains the fees paid to Non-executive Directors during FY2018.
6.1
Setting Non-executive Director fees
Non-executive Directors fees are designed to ensure that the Company can attract and retain suitably qualified and experienced Non-
executive Directors.
Non-executive Directors may also receive share options, performance rights and, in exceptional circumstances, a performance-related
payment as part of their fees from the Company. Although there is no formal minimum shareholding, Non-executive Directors are
encouraged to hold shares.
Non-executive Directors are also entitled to be reimbursed for travel and other expenses reasonably incurred when attending meetings
of the Board or in connection with the business of the Company.
The Remuneration Committee reviews and makes recommendations to the Board with respect to Non-executive Directors’ fees and
Committee fees.
In 2017 the shareholders approved a total aggregate maximum of Non-executive Directors’ fees of $750,000 per annum.
6.2 Current Non-executive Director fee levels and fee pool
The table below sets out the Board and Committee fees in Australian dollars for FY2019.
The Board has reviewed Non-executive Director fees for FY2019 against the market. The Company has not increased Directors Board
fees since the 2014 merger with TriAusMin. For the upcoming financial year Board and Committee fees have been determined as
follows;
Chair
Member
Board
Remuneration Committee
Audit Committee
$90,000
$8,500
$10,000
$70,000
$5,000
$5,000
The fees set out above exclude mandatory statutory superannuation contributions made on behalf of the Non-executive Directors. It is
not proposed to issue any additional options or performance rights to Non-executive Directors under the LTI awards for 2019 FY other
than to Mr Ian Pattison who will be allocated Performance Rights at the same level (90,000) as the other Non-executive Directors
subject to shareholder approval at the 2018 AGM.
In addition to the meetings that the Non-executive Directors attended (as shown on page 40), the Non-executive Directors participated
in regular site visits to Woodlawn.
6.3 Non-executive Director fees – statutory disclosures
The statutory disclosures required under the Corporations Act and in accordance with the Accounting Standards are set out in the table
below.
In AUD
FY
NON-EXECUTIVE DIRECTORS
Stephen Dennis
Borden Putnam III
Fiona Robertson
Mark Sawyer
Ricardo de Armas
Peter Rozenauers
Ian Pattison
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Board &
Committee fees
Short-
Term
incentive
Share
based
payments
Superannuation
benefits
Total fees for
services as a
Non-exec Director
90,000
90,000
76,650
76,650
70,000
70,000
76,650
76,650
57,487
-
42,075
-
44,713
-
-
30,000
-
-
-
-
-
-
-
-
-
-
-
-
457,575
313,300
-
30,000
23,159
24,786
20,250
24,786
20,250
24,786
20,250
24,786
9,503
-
9,503
-
-
102,915
99,144
8,550
12,113
-
-
6,650
6,650
-
-
-
-
-
15,200
18,763
121,709
156,899
96,900
101,436
96,900
101,436
96,900
101,436
66,990
-
51,578
-
44,713
-
575,690
461,207
Page 44 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
LTI awards made in FY2018
A summary of the LTI awards for FY2018 (i.e. the value and the fair value of the LTI granted to each Non-Executive Director) is set out
in the table below.
Number of
performance
rights
granted
Number
of
options
granted
Fair value of
performance
rights
at grant
Performance
Hurdle
Fair Value
per right
at grant
date (1)
115,000
90,000
90,000
90,000
90,000
90,000
-
-
-
-
-
-
-
-
$61,985
$48,510
$48,510
$48,510
$48,510
$48,510
-
TSR
TSR
TSR
TSR
TSR
TSR
-
$0.539
$0.539
$0.539
$0.539
$0.539
$0.539
-
Latest
Vesting
Date
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
30 June 2020
-
Non-Executive Director
Stephen Dennis
Fiona Robertson
Borden Putnam
Mark Sawyer
Ricardo De Armas
Peter Rozenauers
Ian Pattison
1.
The fair value for awards granted to the Executive KMP is based on their fair value at 29 November 2017 being the grant date. The factors and assumptions used
in determining the fair value are set out in note 28 (b) to the financial statements. The value of the LTI performance rights was calculated by an independent
valuer, Maven Libera, using Monte Carlo simulation analysis.
7.
Related party transactions and additional disclosures
7.1
Loans with Executive KMP and Non-executive Directors
There were no loans outstanding to any Executive KMP or any Non-executive Director or their related parties, at any time in the current
or prior reporting periods.
7.2
Other KMP transactions
Apart from the details disclosed in this report, no Executive KMP or Non-executive Director or their related parties have entered into a
material contract with the consolidated entity since the end of the previous financial year and there were no material contracts involving
those people’s interests existing at year end.
7.3 Movement in options and rights over equity instruments held by Executive KMP
The movement during the reporting period, by number and value of equity instruments in the Company held by each Executive KMP is
detailed below.
Executive KMP
Instrument
Balance as
at 1 Jul 17
(number)
Granted
(number)
(A)
Granted
(value)
(B) $
Vested
during the
year
(number)
Exercised
(number)
Exercised Lapsed
Lapsed
(year
(number) of grant)
(value)
$
Vested &
Balance
as at 30 exercisable
at 30 Jun 18
Jun 18
(number)
(number)
Wayne Taylor
Performance Rights (LTI)
Options (LTI)
Andrew Lawry
Performance Rights (LTI)
Options (LTI)
Simon Smith
Performance Rights (LTI)
Options (LTI)
David von Perger
Performance Rights (LTI)
Options (LTI)
Charlie Kempson
Performance Rights (LTI)
Options (LTI)
Brian Hearne
Performance Rights (LTI)
Options (LTI)
-
485,837
485,000
-
261,415
-
-
133,334
165,000
295,000
-
159,005
-
-
55,000
165,000
255,000
-
137,445
-
-
55,000
165,000
240,000
-
129,360
-
-
55,000
-
265,000
255,000
-
137,445
-
-
55,000
-
165,000
245,000
-
132,055
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(100,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
485,000
485,837
-
133,334
295,000
165,000
-
55,000
255,000
165,000
240,000
165,000
255,000
165,000
245,000
165,000
55,000
55,000
55,000
-
-
(A)
(B)
The number of rights granted during FY2018. Further details are provided in section 5.3; and,
The value of LTI performance rights granted in the year is the fair value of the performance rights at grant date.
Heron Resources Limited - Annual Report 2018 - Page 45
4.0 DIRECTORS’ REPORT CONTINUED
7.4 Movement in options and rights over equity instruments held by Non-executive Directors
The movement during the reporting period, by number and value of equity instruments in the Company held by each Non-Executive
Director is detailed below.
Vested
during the
year
(number)
Exercised
(number)
Exercised Lapsed
Lapsed
(year
(value)
(number) of grant)
Vested &
Balance
as at 30 exercisable
at 30 Jun 18
Jun18
(number)
(number)
Non-Executive KMP
Instrument
Balance as
at 1 Jul 17
(number)
Granted
(number)
Granted
(value)
(A)
(B) $
Stephen Dennis
Performance Rights (LTI)
Options (LTI)
Fiona Robertson
Performance Rights (LTI)
Options (LTI)
Borden Putnam
Performance Rights (LTI)
Options (LTI)
Mark Sawyer
Performance Rights (LTI)
Options (LTI)
Ricardo De Armas
Performance Rights (LTI)
Options (LTI)
Peter Rozenauers
Performance Rights (LTI)
Options (LTI)
Ian Pattison
Performance Rights (LTI)
Options (LTI)
-
100,000
115,000
-
61,985
-
-
33,333
100,000
90,000
-
48,510
-
-
33,333
100,000
90,000
-
48,510
-
-
33,333
100,000
90,000
-
48,510
-
-
33,333
-
-
-
-
-
-
90,000
-
48,510
-
90,000
-
48,510
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
115,000
100,000
-
33,333
90,000
100,000
-
33,333
90,000
100,000
90,000
100,000
90,000
-
90,000
-
-
-
33,333
33,333
-
-
-
-
(A)
(B)
The number of rights granted during FY2018. Further details are provided in section 6.3; and,
The value of LTI performance rights granted in the year is the fair value of the performance rights at grant date.
Page 46 - Heron Resources Limited - Annual Report 2018
4.0 DIRECTORS’ REPORT CONTINUED
7.5
Additional disclosures relating to ordinary shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by
each Executive KMP and each Non-executive Director, including their related, parties is as follows:
No. of shares
DIRECTORS
Stephen Dennis
Wayne Taylor
Borden Putnam II
Fiona Robertson
Mark Sawyer
Ricardo de Armas
Peter Rozenauers
Ian Pattison
EXECUTIVE
Andrew Lawry
Simon Smith
David von Perger
Charlie Kempson
Brian Hearne
Held at
1 July 2017
Received on
vesting and
excersice of LTI
Received as
remuneration
Other
net change
Held at
30 June 2018
135,000
186,453
-
50,000
-
-
-
-
17,000
27,296
60,814
320,847
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,429
64,287
-
21,429
-
-
-
179,429
250,740
-
71,429
-
-
-
51,429
51,429
-
32,704
-
164,283
-
17,000
60,000
60,814
485,130
-
EMPLOYEE DIVERSITY:
Women currently represent 37% of employees in the Company as a whole. There is currently one woman on the Board.
INSURANCE OF OFFICERS
During the financial year the Company has paid an insurance premium in respect of a Directors’ and Officers’ Liability Insurance Contract. The
insurance premium relates to liabilities that may arise from an officer’s position within the Company, with the exception of conduct involving
a wilful breach of duty or improper use of information or position to gain personal advantage.
The officers covered by the insurance policies are the Directors and Officers of the Company.
The contract of insurance prohibits the disclosure of the nature of the liabilities and the amount of premium.
CORPORATE GOVERNANCE
The Company has undertaken a thorough review of its Corporate Governance practices and policies in accordance with ASX Corporate
Governances Best Practices Recommendations. Following guidance from the ASX the Corporate Governance policy can be found on our
website in line with Listing Rule 4.10.3.
ENVIRONMENTAL REGULATION
The Consolidated Entity is subject to and compliant with all aspects of environmental regulation in respect of its exploration and development
activities. The Directors are not aware of any environmental regulation which is not being complied with.
ABORIGINAL CULTURE AND HERITAGE
The Consolidated Entity is subject to and compliant with all aspects of Aboriginal Heritage regulation in respect of its exploration and
development activities. The Directors are not aware of any regulation which is not being complied with. The Directors are committed to
cultural respect in undertaking business activities of the Company.
Heron Resources Limited - Annual Report 2018 - Page 47
4.0 DIRECTORS’ REPORT CONTINUED
INDEMNITY AND INSURANCE OF OFFICERS
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the Company against
a liability to the extent permitted by the Corporations Act 2001. The insurance premium relates to liabilities that may arise from an officers
position within the company, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain
personal advantage.
The office covered by the insurance policies are the Directors and officers of the Company.
The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has indemnified the Directors and Executives of the Company for costs incurred, in their capacity as a director or executive, for
which they may be held personally liable, except where there is a lack of good faith.
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 audit (for an unspecified amount). No payment has been made to indemnify
Ernst & Young during or since the financial year.
NON-AUDIT SERVICES
During the year the Consolidated Entity employed the auditor to perform non audit services in relation to the Woodlawn capital raise including
work on the Canadian prospectus.
ROUNDING OFF
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 and in accordance with that Corporations Instrument, amounts
in the financial report and directors' report have been rounded off to the nearest thousand dollars, unless otherwise stated.
AUDITOR’S INDEPEDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.
Signed in accordance with a resolution of Directors
Signed in accordance with a resolution of Directors
S Dennis
Chairman
Sydney, 27 September 2018
Page 48 - Heron Resources Limited - Annual Report 2018
Heron Resources Limited - Annual Report 2018 - Page 49
5.0 Consolidated Financial Statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018
OTHER INCOME
Accountancy/Professional fees
Consultants expense
Depreciation and Amortisation expense
Directors fees
Financing expense amortised
Employee benefits expense
Insurance expense
Legal fees
Equity settled share based payments
Rental Expenses
Stock exchange fees (TSX/ASX)
Other expenses from ordinary activities
Exploration expenditure expensed
Hedge financing costs
Investment gain/(loss)
Interest Expense
Fair value gain/(loss)
Unrealised Foreign Exchange gain/(loss)
(LOSS) FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
(LOSS) FROM ORDINARY ACTIVITIES AFTER INCOME TAX EXPENSE
(LOSS) ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY
OTHER COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
Basic earnings per Share
Diluted earnings per Share
Notes
2
3(a)
6(b)
19(a)
3(b)
11
21(b)
7
15(c)
15(b)
4
27
27
Consolidated Entity
2017
$'000
2018
$'000
3,635
(102)
(123)
(55)
(488)
(507)
(1,204)
(57)
(147)
(587)
(167)
(187)
(1,671)
(1,011)
(776)
561
(227)
(1,018)
(1,688)
(5,819)
-
(5,819)
(5,819)
-
(5,819)
$
(0.028)
(0.028)
422
(183)
-
(60)
(320)
-
(3,289)
(94)
(99)
(554)
(137)
(63)
(1,150)
(1,341)
-
4,011
-
-
-
(2,857)
-
(2,857)
(2,857)
-
(2,857)
$
(0.06)
(0.06)
The accompanying notes form part of these financial statements
Page 50 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
CURRENT ASSETS
Cash assets
Trade and other receivables
Derivative Asset
Other Assets – deferred costs
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Restricted Cash
Trade and other receivables
Investments
Property, plant and equipment
Woodlawn Mine – under construction
Exploration and evaluation costs carried forward
TOTAL NON-CURRENT ASSETS
Notes
20(b)
5
21(a)
6(a)
20(c)
8
7
9
10
11
Consolidated Entity
2017
$'000
2018
$'000
65,532
2,571
1
-
68,104
8,777
35
5,901
647
156,517
-
171,877
11,690
717
-
2,481
14,888
-
35
5,775
40
-
26,434
32,284
TOTAL ASSETS
239,981
47,172
CURRENT LIABILITIES
Trade and other payables
Provisions – employee entitlements
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions – Rehabilitation
Provisions – employee entitlements
Silver Stream
Senior Debt
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Option reserve
Accumulated losses
TOTAL EQUITY
12
13
16
14
15
15
17
19(a)
19(b)
7,002
547
7,549
15,781
162
22,666
24,941
63,550
71,099
2,461
564
3,025
30
107
-
-
137
3,162
168,882
44,010
259,742
2,076
(92,936)
168,882
129,638
1,489
(87,117)
44,010
The accompanying notes form part of these financial statements
Heron Resources Limited - Annual Report 2018 - Page 51
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
Notes
Shares
$’000
Accumulated
Losses
$’000
Option
Reserve
$’000
As at 30 June 2017
Total comprehensive income for the year
19(b)
Issue of share capital
Share issue costs
Realised FX Loss
Cost of share based payments
Option reserve write back
17
17
17
19(a)
129,638
-
140,115
(5,055)
(4,956)
-
-
(87,117)
(5,819)
-
-
-
-
-
1,489
-
-
-
-
646
(59)
Total
$’000
44,010
(5,819)
140,115
(5,055)
(4,956)
646
(59)
As at 30 June 2018
259,742
(92,936)
2,076
168,882
As at 30 June 2016
Total comprehensive income for the year
Return of Capital - Spin-out Ardea Resources Ltd
Option reserve write back
Cost of share based payments
138,409
-
(8,771)
-
-
(84,260)
(2,857)
-
-
-
935
-
-
(7)
561
55,084
(2,857)
(8,771)
(7)
561
As at 30 June 2017
129,638
(87,117)
1,489
44,010
The accompanying notes form part of these financial statements
Page 52 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2018
Notes
Consolidated Entity
2017
$'000
2018
$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Expenses reimbursed from Ardea Resources Ltd
Payments to suppliers
Exploration and development expenditure – expensed
NET CASH USED IN OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and development expenditure – capitalised
Proceeds from sale of tenements
Woodlawn Mine – asset under construction
Payment of Bond/Bank Guarantees
Proceeds from sale of investments
Purchase of plant and equipment
Payment for US dollar debt and stream FX hedge
Proceeds from R&D Refund
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity raising
Payments for capital raising costs
Realised FX loss – Woodlawn equity raising
Proceeds from drawdown of Silver Stream
Proceeds from drawdown of Senior Debt
NET CASH PROVIDED BY FINANCING ACTIVITIES
NET INCREASE / (DECREASE) IN CASH HELD
Cash at the beginning of the reporting period
Unrealised FX gain(loss) on translation
CASH AT THE END OF THE REPORTING PERIOD
1,174
-
(7,774)
(1,011)
(7,611)
(317)
-
(111,721)
(8,577)
2,584
(663)
(776)
1,839
(117,631)
140,115
(4,623)
(4,956)
21,648
27,060
179,244
54,002
11,690
(160)
65,532
322
226
(5,549)
(1,341)
(6,342)
(6,105)
100
-
-
465
(9)
-
3,171
(2,378)
-
(2,481)
-
-
-
(2,481)
(11,201)
22,891
-
11,690
11
11
20(c)
9
11
17
17
17
15
15
20(b)
The accompanying notes form part of these financial statements
Heron Resources Limited - Annual Report 2018 - Page 53
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1.
STATEMENT OF ACCOUNTING POLICIES
The Company is a public company limited by shares. The Company was incorporated in Western Australia.
The Company is a for profit entity for the purpose of preparing the financial statements.
The following is a summary of the material accounting policies adopted by Heron Resources Limited and its controlled entities (the Company)
in the preparation of the financial statements.
a)
Basis of preparation
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards
(AASB's) (including Australian interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial
Reporting Standards (AIFRS). The financial report also complies International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
In the application of AIFRS, 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 factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making judgment. Actual results may differ from these estimates.
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale
financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit and loss, certain classes of
property, plant and equipment and investment property.
The accounting policies and methods of computation adopted in the preparation of the full year financial report are consistent with
those adopted and disclosed in the Company’s 2018 annual financial report for the financial year ended 30 June 2018.
Exploration expenditure is transferred from ‘Exploration and evaluation assets’ to ‘Mines under construction’ which is a sub-category
of ‘Mine properties’ once the work completed to date supports the future development of the property and such development receives
appropriate approvals.
After transfer of the exploration and evaluation assets, all subsequent expenditure on the construction, installation or completion of
infrastructure facilities is capitalised in ‘Mines under construction’. Development expenditure is net of proceeds from the sale of ore
extracted during the development phase to the extent that it is considered integral to the development of the mine. Any costs incurred
in testing the assets to determine if they are functioning as intended, are capitalised, net of proceeds received from selling any product
produced while testing. Where these proceeds exceed the cost of testing, any excess is recognised in the statement of profit or loss
and other comprehensive income. After production starts, all assets included in ‘Mines under construction’ are then transferred to
‘Producing mines’ which is also sub-category of ‘Mine properties’. Concentrate produced from ore extracted during the development
phase and sold will be recorded as revenue.
b)
Basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the Company has power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
Investments in subsidiaries are carried at their cost of acquisition in the Company's financial statements.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting
policies.
All inter-company balances and transactions between entities in the Company, including any unrealised profits or losses, have been
eliminated on consolidation.
c)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the notional income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The
relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax
asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Page 54 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 1. STATEMENT OF ACCOUNTING POLICIES CONTINUED
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability at the
same time.
The resulting deferred tax assets of the Company are currently not recognised and included as an asset because recovery is not
considered probable in the next five years.
Heron Resources Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of
1 July 2003.
d)
Segment reporting
A segment is a distinguishable component of the Company that is engaged in the minerals industry in Australia. The Company's
activities are divided into three main categories and this information is presented on the same basis as the internal reports provided to
the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and
assessing their performance. The CODM reviews segmental information on a monthly basis vs budget. The accounting policies adopted
for internal reporting are consistent with those adopted in the financial statements.
Woodlawn – Tenements related to the Woodlawn Project
Exploration – Tenements not Woodlawn related.
Corporate – Corporate activity.
e)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns,
duties and taxes paid. The main revenue is interest received, which is recognised on an accrual basis using the effective interest rate
method.
f)
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses where
applicable.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Depreciation and amortisation on assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of
their residual values, over their estimated useful lives, as follows:
Motor Vehicles
3-5 years
Fixtures and Fittings
5-15 years
Plant and Equipment
5-15 years
Buildings
15-25 years
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the financial period
in which they are incurred.
g)
Exploration and evaluation costs
Exploration, evaluation and development expenditure incurred is expensed immediately unless it relates to a specific project in which
case it is carried forward to the extent that it is expected to be recouped through the successful development of the area, or by its sale.
During 2018 all expenses capitalised relate to the Woodlawn project.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon
the area is made.
Accumulated costs are not carried forward in respect of any area of interest unless rights to tenure of that area are current.
h
Provision for Rehabilitation
Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration, evaluation and development
phases that give rise to the need for restoration.
A provision for restoration and rehabilitation is recognized when there is a present obligation as a result of development activities
undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision
can be measure reliably. The estimated future obligations include the costs of abandoning sites, removing facilities and restoring
affected areas.
The provision for future restoration costs is the best estimate of the present value (including an appropriate discount rate relevant to
the time value of money plus any risk premium associated with the liability) of the expenditure required to settle the restoration
Heron Resources Limited - Annual Report 2018 - Page 55
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 1. STATEMENT OF ACCOUNTING POLICIES CONTINUED
obligation at the reporting date. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the
present value of the restoration provision.
The initial estimate of the restoration and rehabilitation provision is capitalised into the cost of the related asset and amortised on the
same basis as the related assets, unless the present obligation arises from the production of inventory in the period, in which case the
amount is included in the cost of production for the period. Changes in the estimate of the provision for restoration and rehabilitation
are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognized as a finance cost
rather than being capitalised into the cost of the related asset.
i)
Investments
Investments held by the Company are classified as being available-for-sale financial assets and are stated at fair value, being the
market value of the shares held at balance date. Where a reduction in value is significant or prolonged it is recognised as impairment
in the statement of profit or loss, with any other resultant gain or loss recognised in equity and included in other comprehensive income.
Where these investments are derecognised, the cumulative gain and loss previously recognised directly in equity is recognised in profit
and loss. Where these investments are interest bearing, interest calculated using the effective interest method is recognised in the
statement of profit or loss and other comprehensive income.
Financial instruments classified as held for trading or available-for-sale investments are recognised/derecognised by the Company on
the date it commits to purchase/sell the investment. Securities held to maturity are recognised/derecognised on the day they are
transferred to/by the Company.
j)
Trade and other receivables
Trade and other receivables are stated at their cost and are due for settlement no more than 30 days from the date of invoicing.
k)
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with the banks, other short term liquid investments with original
maturities of three months or less, and bank overdrafts. Bank overdrafts, if any, are shown within short-term borrowings on the
statement of financial position.
l)
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject
to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
m)
Employee benefits
(i)
Wages and salaries, annual leave
Liabilities for wages and salaries and annual leave are recognised as employee benefits in respect of employees’ services up to the
reporting date and are measured at the amounts to be paid when the liabilities are settled.
(ii)
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service and final average salary.
n)
Share-based payment transactions
The Company provides benefits to the Directors and employees of the Company in the form of share based payment transactions,
whereby services are rendered in exchange for shares or rights over shares ("Equity-settled transactions").
An Employee Share Option Plan ("ESOP") and a Performance Rights Program (zero exercise price options) provides benefits to Directors,
employees and consultants.
The cost of these equity-settled transactions is measured by reference to fair value at the date at which they are granted. The fair value
is determined by using either the Black-Scholes or Monte Carlo model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of
the shares of Heron Resources Limited ("market conditions").
The cost of equity-settled securities is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant individual becomes fully entitled to the award ("vesting
date").
Where the Company acquires some form of interest in an exploration tenement or an exploration area of interest and the consideration
comprises share-based payment transactions, the fair value of the equity instruments granted is measured at grant date. The cost of
equity securities is recognised within capitalised mineral exploration and evaluation expenditure, together with a corresponding
increase in equity.
Page 56 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 1. STATEMENT OF ACCOUNTING POLICIES CONTINUED
o)
Provisions
Provisions for legal claims and service warranties are recognised when: the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
p)
Trade and other payables
Trade and other payables are stated at cost. The amounts are unsecured and are usually paid on 30 days.
q)
Dividends
No dividends have been paid or proposed during or since the end of the year.
r)
Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition
of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to the ATO
is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to the ATO are classified as operating cash flows.
s)
Contributed equity
Incremental costs directly attributed to the issue of new shares or options are shown in the equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included
in the cost of the acquisition as part of the purchase consideration.
t)
Financial Liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are
recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee
contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification and are described below.
u)
Debt
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
v)
Silver Stream
The Company has accounted for the Silver Stream as a financial liability under AASB139. Financial Liabilities are assessed at fair value
through profit or loss. These liabilities include financial liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition,
and only if the criteria in AASB 139 are satisfied. The Group has designated its Silver Stream financial liability as at fair value through
profit or loss.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of
a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Heron Resources Limited - Annual Report 2018 - Page 57
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 1. STATEMENT OF ACCOUNTING POLICIES CONTINUED
w)
Significant accounting judgments, estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
The resulting accounting estimates will, by definition, seldom equal the related actual results.
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The
key estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of certain assets and
liabilities within the next annual reporting period include the Provision for Rehabilitation (refer Note 1(h)), the Silver stream (refer Note
1 (w)) and the Woodlawn Asset under Construction. Other Assets and Liabilities subject to significant accounting judgments, estimates
and assumptions include:
Impairment of property, plant and equipment
Property, plant and equipment is reviewed for impairment if there is any indication that the carrying amount may not be recoverable.
Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'value in use' (being net
present value of expected future cash flows of the relevant cash generating unit) and 'fair value less costs to sell'.
Share based payment transactions
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 by using either the Black-Scholes or Monte Carlo methodology.
Options in Ardea Resources Ltd
During 2017, the Company received 10,000,000 options with an exercise price of $0.25 cents in Ardea Resources as consideration for
the costs incurred by Heron in the Ardea IPO. The fair value is determined by using either the Black-Scholes or Binomial methodology.
New, revised or amending Accounting Standards and Interpretations adopted
Heron Resources has adopted the following new and amended accounting standards from 1 July 2017:
AASB 2015-2 Disclosure Initiative Amendment to AASB 101 - This Standard amends AASB 101 Presentation of Financial Statements to
clarify existing presentation and disclosure requirements and to ensure entities are able to use judgement when applying the Standard
in determining what information to disclose, where and in what order information is presented in their financial statements
AASB 2014-4 Amendments to Australian Accounting Standards - Clarification of Acceptable Methods of Depreciation and Amortisation.
The amendments clarify the principle in AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets that revenue reflects
a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic
benefits that are consumed through use of the asset.
Adoption of these standards did not have any material effect on the Statement of Financial Performance, Statement of Comprehensive
Income and Statement of Financial Position of the Group.
Accounting standards issued but not yet effective
Australian Accounting Standards and Interpretations that have been issued or amended but are not yet effective have not been adopted
by the Consolidated Entity for the year ended 30 June 2018. At this time the following standards and interpretations may have an
impact, but the extent of this is not expected to be material:
AASB 2016-2 Disclosure Initiative - The amendments to AASB 107 Statement of Cash Flows require entities to provide disclosures about
changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such
as foreign exchange gains or losses).
AASB 9 Financial Instruments - A new standard which replaces AASB 139. This new Standard version includes a model for classification
and measurement for all financial assets and liabilities, a single, forward-looking ‘expected credit loss’ impairment model and a
substantially-reformed approach to hedge accounting. Effective for annual periods beginning on or after 1 January 2018. (Company 1
July 2018).
A finalised version of AASB 9 has been issued which contains accounting requirements for financial instruments, replacing AASB 139
Financial Instruments: Recognition and Measurement. The standard contains requirements in the areas of classification and
measurement, impairment, hedge accounting and derecognition. The Group has determined that the impact of the new standard on the
Group’s financial report will be immaterial. This standard applies to annual reporting periods beginning on or after 1 January 2018 and
will be applicable for the Group for the annual reporting period beginning 1 July 2018."
AASB 15 Revenue from Contracts with Customers. The core principle of AASB 15 is that an entity recognises revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. Effective for annual periods beginning on or after 1 January 2018. (Company 1 July
2018). As the Group is not generating revenue, there is no impact on current reporting.
AASB 16 Leases. AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance
leases. Effective for annual periods beginning on or after 1 January 2019. (Company 1 July 2019). All existing operating leases (as
disclosed in the commitment note) are expected to come on to the Balance Sheet. At this time the interpretation may have an impact,
but the potential extent of this has not been determined as the company does not currently have significant operating leases and would
depend on establishment of any new operating lease arrangements.
Page 58 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 1. STATEMENT OF ACCOUNTING POLICIES CONTINUED
IFRIC 23 Uncertainty over Income Tax Treatments. The Interpretation clarifies the application of the recognition and measurement
criteria in IAS 12 Income Taxes when there is uncertainty over income tax treatments. Effective for annual periods beginning on or after
1 January 2019. (Company 1 July 2019).
x)
Capital risk management
The Group's and the parent entity's objectives when managing capital are to safeguard their ability to continue as a going concern, so
that they can continue to fund exploration activities and develop or secure access to a cash producing asset.
Consistent with others in the industry, the Group and the parent entity monitor capital on the basis of working capital requirements and
capital expenditure commitments.
During 2018 the Group's strategy, was to maintain a current account balance sufficient to meet the Company's day to day expenses
and near-term capital expenditure commitments with the balance held in term deposits, while maintaining sufficient cash, term deposits
and undrawn debt facilities to meet the projected development costs of Woodlawn through to projected peak cash draw.
y)
Fair value
Management assessed that the fair values of cash and short term deposits, receivables, trade payables and other current liabilities
approximate their carrying amounts largely due to the short-term maturities of these instruments.
Under AASB 139, the company’s long term debt and Silver Stream will continue to be reported as Financial Liabilities.
The company has elected to measure the Silver Stream at fair value under AASB 139 based on the US exchange rate and the price of
Silver (both spot and forward curve prices) at each reporting date. Once Woodlawn is in production, actual Silver reserves and discount
(risk) rate will also be used to assess fair value. Any gain or loss from the movement of the price of silver and from the foreign exchange
rate will be taken up in the Statement of Profit and Loss.
The Senior Debt is accounted for under the amortisation cost method under AASB 139, with the initial measurement being taken up at
fair value and subsequent measurement at amortised cost. This debt will be revalued according to the US exchange rate at each
reporting period and any gain or loss will be taken up in the Statement of Profit and Loss.
Fair value measurement
IFRS establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities sand the lower priority to
unobservable inputs. The three levels of fair value hierarchy are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the
measurement date.
Level 2: Inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.
The Silver Stream was classified as Level 3 as its valuation is based on the Silver price at 30 June 2018.
The fair value of the silver stream obligation is calculated using a combination of spot Silver prices, forward Silver prices, the risk free
interest rate derived from the RBA and expected silver ounces to be delivered from the Woodlawn project life of mine model.
Investments in Listed Entities was classified as a Level 1 valuation at 30 June 2018
Heron Resources Limited - Annual Report 2018 - Page 59
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Consolidated Entity
2017
$'000
2018
$'000
NOTE 2.
OTHER INCOME
Interest received
Proceeds from exercise of Alchemy/Siberia agreement
Gain from sale of listed investments1
Sundry Income
Total revenues from continuing activities
1,410
170
1,979
76
3,635
1.
The gain on sale of listed investments represents the sale of Ardea Loyalty options in December 2017.
NOTE 3.
OPERATING EXPENSES
The profit / (loss) before income tax expense has been determined after charging a number of items including the following:
a)
Depreciation and amortisation expense
Plant & equipment
Office equipment & furniture
Motor vehicles
b)
Other expenses include the following:
Travel & accommodation
Office expenses and supplies
Information technology
Report expenses and printing
Conferences and seminars
Investor Research and Relations
Miscellaneous expenses
Payroll tax
Total other expenses
NOTE 4.
INCOME TAX
a)
Temporary differences carried forward
Current Tax
Deferred tax
282
100
-
40
422
(13)
(41)
(6)
(60)
(200)
(105)
(189)
(55)
(18)
(328)
(101)
(154)
(8)
(19)
(28)
(55)
(186)
(146)
(168)
(1)
(8)
(319)
(545)
(298)
(1,671)
(1,150)
-
-
-
-
-
-
The Heron Resources Limited group of companies was tax consolidated on 1 July 2003 and during FY2017 the Company entered into tax
sharing and/or tax funding agreements with its members.
The parent entity made a tax loss and on consolidation the group made a tax loss during the year. The parent and the subsidiaries have
approximately $123M in tax losses carried forward in both Group losses and Transferred Losses Due to the uncertainty of offsetting these
tax losses with future taxable income, the carried forward tax losses are not recognised as an asset on the Balance Sheet as at 30 June
2018.
The Directors are of the view that there is insufficient probability that the parent entity and its subsidiaries will derive sufficient income in
the foreseeable future to justify recognising the tax losses and temporary differences as deferred tax assets and deferred tax liabilities.
Heron Resources Limited is the head entity for the group.
Page 60 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 4. INCOME TAX CONTINUED
Consolidated Entity
2017
$'000
2018
$'000
b)
Numerical reconciliation of income tax expense to prima facie tax payable is as follows:
Profit (loss) from operations before income tax expense
Tax at Australian tax rates of 27.5% (2017 27.5%)
Tax effect of non-temporary differences
Tax effect of equity raising costs debited to equity
Over or under provision from previous years
Tax effect of tax losses and temporary differences not recognised
Income tax expense
(5,819)
(1,600)
(583)
(286)
-
2,469
-
There is no amount of tax benefit recognised in equity as the tax effect of temporary differences has not been booked
c)
d)
Tax Losses - Revenue
Unused tax losses for which no tax loss has been booked as a
DTA adjusted for non-temporary differences
Potential tax benefit at 30%
e)
Unrecognised temporary differences
Non-deductible amounts as temporary differences
Accelerated deductions for book compared to tax
Total at 100%
Potential effect on future tax expense for temporary differences at 27.5%
f)
There are no franking credits available for future years
NOTE 5.
TRADE AND OTHER RECEIVABLES – CURRENT
Accrued interest receivable
Prepayments
Goods & services tax receivable
Property bonds
Tenement securities (refer Note 20)
Ardea Resources Ltd
Sundry Debtors
(2,857)
(787)
(964)
(5)
-
1,756
-
95,758
26,333
736
(8,633)
(7,897)
(2,171)
2
155
166
-
-
238
156
717
122,861
33,787
14,292
(30,096)
(15,804)
(4,346)
236
666
1,488
38
90
-
53
2,571
Heron Resources Limited - Annual Report 2018 - Page 61
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 6.
OTHER ASSETS – CURRENT
a)
Equity financing costs (1)
Stream financing costs (2)
Debt financing costs (3)
Expense for Woodlawn Project Finance
Consolidated Entity
2017
$'000
2018
$'000
-
-
-
-
489
419
1,573
2,481
(1)
(2)
(3)
Cost of Equity raise were re-allocated to the Statement of Changes in Equity during the year
Steam financing costs have been amortised directly to the Profit and Loss upon recognition of the Stream
Debt Financing costs have been re-allocated to Senior Debt - refer note 15(c)
Expenses for Woodlawn Project finance include external legal, broker, financial advisory costs and independent experts that are directly
related to the Woodlawn project funding process.
On 12 March 2018, the US$16M Silver Stream was drawn down. On 31 May 2018, the first debt tranche of US$20M was also drawn
down. On 26 September 2018, the company successfully completed the draw down of the second tranche of US$20M of Debt from Orion
Mine Finance.
A summary of the amortised costs is shown below. The costs will be amortised over the expected tenor for the Senior Debt.
b)
Reconciliation of Woodlawn Project
Financing Costs for each debt category
Capitalised costs at 1 July 2017
Costs incurred on drawdown
Amortised costs to date
Carrying value at 30 June 2018
(1)
Refer Note 15 (c)
Silver Stream
$'000
Senior Debt
$'000
Total Financing
Costs $'000
419
61
(480)
-
1,573
800
(27)
2,346(1)
1,992
861
(507)
2,346
NOTE 7 .
INVESTMENTS IN ENTITIES - NON CURRENT
Centennial Mining Ltd (CTL) is an Australian listed public exploration company with 1,044,434,244 fully paid ordinary shares on issue.
Heron holds 23,000,000 fully paid shares as at 30 June 2018.
On 21 June 2018, Centennial entered into a trading halt and shares have been suspended due to the company’s inability to pay off its
convertible notes by their due date. The company is seeking to raise funds via a rights issue in order to provide funds to pay its convertible
notes and working capital for the company, therefore the shares have been valued at nil as at 30 June 2018.
Metalicity Limited (MCT) is an Australian listed public exploration company with 578,574,858 fully paid ordinary shares on issue. During
the year, the company sold 13,375,000 shares in Metalicity on market for cash proceeds of $605,000 less brokerage fees. Heron held nil
shares as at 30 June 2018.
Alchemy Resources Ltd (ALY) is an Australian listed public exploration company with 352,335,585 shares on issue. On 16 April 2018,
Heron was issued 10,000,000 new shares and 10,000,000 options in Alchemy under a binding option agreement to include tenement
licences into existing Alchemy/Heron NSW Farm In and JV agreement, which have been valued at a closing price of $0.017 on that day.
As at 30 June 2018, Heron owns 12,000,000 shares in Alchemy and 12,500,000 options with a 3-year term and an exercise price of $0.10
(for 2,500,000 options) and $0.05 (for 10,000,000 options) (nil value ascribed) as at 30 June 2018.
Ardea Resources Ltd (ARL) is an Australian listed public exploration company that was spun out of Heron in February 2017. To
compensate Heron for the costs it incurred during the IPO, Heron was issued 10,000,000 options in Ardea with an exercise price of $0.25
cents. The options are escrowed until February 2019.
Since 30 June 2017, the Ardea share price has increased from $0.58 to $0.78 as at 30 June 2018. Using the same Black Scholes
assumptions as at 30 June 2017, the options value at 30 June 2018 is calculated at $0.5721 per option. The 10,000,000 options have been
revalued on this basis as at 30 June 2018.
Page 62 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 7. INVESTMENTS IN ENTITIES - NON CURRENTS CONTINUED
Investments in other entities at fair value
Alchemy Resources Limited
Ardea Resources Limited
Centennial Mining Limited
Metalicity Limited
Movement in investments
Centennial Mining
Opening carrying value 30 June 2017 (shares and options)
Sold on market - Shares/Options
Gain/(Impairment)
Closing carrying value 30 June 2018
Metalicity Limited
Opening carrying value 30 June 2017
Proceeds from issue of shares for Rocky Gully
Sold on market - Shares
Gain/(impairment)
Closing carrying value 30 June 2018
Alchemy Resources Limited
Opening carrying value 30 June 2017
Proceeds from issue of shares for exercise option agreement
Gain/(Impairment)
Closing carrying value 30 June 2018
Ardea Resources
Opening carrying value 30 June 2017
Gain/(Impairment)
Closing carrying value 30 June 2018
Summary
Opening carrying value 30 June 2017
Assets sold to Ardea
Value of 10m options in Ardea at initial recognition
Proceeds from issue of shares for Alchemy option agreement
Sold on market – Metalicity Shares/Options
Gain/(Impairment)
Closing carrying value 30 June 2018
30 June 2018
$'000
30 June 2017
$'000
180
5,721
-
-
5,901
2018
$'000
460
-
(460)
-
535
-
(605)
70
-
40
170
(30)
180
4,740
981
5,721
5,775
-
-
170
(605)
561
5,901
40
4,740
460
535
5,775
2017
$'000
673
(379)
166
460
1,006
-
(86)
(385)
535
50
-
(10)
40
-
500
4,240
4,740
1,907
(178)
500
-
(465)
4,011
5,775
Heron Resources Limited - Annual Report 2018 - Page 63
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Consolidated Entity
2017
$'000
2018
$'000
35
35
480
(332)
148
1,003
(922)
81
662
(244)
418
647
8
148
-
(8)
148
18
82
-
(19)
81
13
433
-
(28)
418
35
35
333
(325)
8
921
(902)
19
229
(216)
13
40
22
9
(9)
(14)
8
70
-
(11)
(39)
191
19
-
-
(6)
13
NOTE 8.
TRADE AND OTHER RECEIVABLES - NON CURRENT
Employee share option plan – non-recourse loan
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
(a)
Plant and equipment at cost
Accumulated depreciation
Office equipment & furniture at cost
Accumulated depreciation
Motor vehicles at cost
Accumulated depreciation
Total property, plant and equipment
Reconciliation
Plant and equipment:
Carrying amount at 1 July 2017
Additions
Disposals
Depreciation Expense
Carrying value at 30 June 2018
Office equipment and furniture:
Carrying amount at 1 July 2017
Additions
Disposals
Depreciation Expense
Carrying value at 30 June 2018
Motor vehicles:
Carrying amount at 1 July 2017
Additions
Disposals
Depreciation Expense
Carrying value at 30 June 2018
1
Rounding
Page 64 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 10. WOODLAWN MINE – ASSET UNDER CONSTRUCTION
Balance at beginning of period
Rehabilitation Asset (refer Note 16)
Woodlawn Mine property– capitalised exploration transferred (refer Note 11)
Sedgman EPC1
Earthworks2
Owners Costs 3
Balance at end of period
30 June 2018
-
15,751
24,912
83,482
12,887
19,485
156,517
1
2
3
Sedgman EPC represents the Engineer, Procurement and Construction costs related to the construction of the Woodlawn processing plant
Earthworks include the ROM pad, TSF4 Tailings dam, the Box Cut and other earthworks infrastructure at Woodlawn
Owner’s costs represent all Woodlawn costs of construction incurred which are not covered by the EPC Contract with
Sedgman or the Earthworks contract with Ertech.
Rehabilitation Woodlawn
Asset
$'000
-
15,751
15,751
Mine
Property
Capitalised
Exploration
$'000
26,434
(1,522)
24,912
Sedgman
EPC
Earthworks
Owners
Costs
Construction
Total
$'000
-
83,482
83,482
$'000
-
12,887
12,887
$'000
-
19,485
19,485
$'000
26,434
130,083
156,517
Balance brought forward as at 30 June 2017
Costs incurred/transferred during period
Balance at 30 June 2018
In September 2017, the Company commenced Construction activities at Woodlawn.
NOTE 11.
EXPLORATION, EVALUATION AND DEVELOPMENT COSTS CARRIED FORWARD
Balance brought forward
Exploration and evaluation costs incurred - Woodlawn
Ardea Spin-out
Exploration and evaluation costs incurred – other projects
Exploration and evaluation expensed as incurred
R&D Tax incentive refund
Woodlawn Exploration costs transferred to Woodlawn Mine Property (refer Note 10)
Balance carried forward
NOTE 12.
TRADE AND OTHER PAYABLES – CURRENT
Trade creditors and accruals - Woodlawn
Trade creditors and accruals – Corporate
Trade creditors are non-interest bearing and are normally settled on 30 day terms.
30 June 2018
$'000
30 June 2017
$'000
26,434
317
-
1,011
(1,011)
(1,839)
(24,912)
-
31,068
6,837
(8,300)
1,341
(1,341)
(3,171)
-
26,434
Consolidated Entity
2017
$'000
2018
$'000
6,737
265
7,002
733
1,728
2,461
Heron Resources Limited - Annual Report 2018 - Page 65
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 13.
PROVISIONS – CURRENT
Employee entitlements
Annual Leave
Long Service Leave
NOTE 14.
PROVISIONS – NON CURRENT
Employee entitlements
Long Service Leave
Annual Leave
NOTE 15. BORROWINGS – NON CURRENT
a)
Silver Stream
Senior Debt – 1st Debt Tranche
Consolidated Entity
2017
$'000
2018
$'000
511
36
547
162
-
162
22,666
24,941
47,607
421
143
564
107
-
107
-
-
-
Silver Stream
The Company through its wholly owned subsidiary, Tarago Operations Pty Ltd, entered into a financing agreement with OMF Fund II (H) Ltd
during the year. This agreement included a Silver Streaming arrangement of US$16 million, which the Company received on the 8th of
March 2018. The sum received has been accounted for as a Financial Liability at fair value through profit and loss. Under this agreement,
the Company will deliver 80% of the Silver extracted from the Woodlawn Mine (SML20) until it has delivered 2,150,000 ounces of Refined
Silver, followed by 40% of the Silver in the mine until it has delivered 3,400,000 of Refined Silver, and thereafter 25% of the Refined Silver
extracted from the mine.
Heron has elected to fair value the entire instrument. The obligation represents a derivative liability for the silver price option feature
included in the agreement and will therefore be remeasured at each balance sheet date at fair value with the movement being recorded in
the profit and loss. The obligation resulted in an unrealised fair value (loss) of ($1,018) for the year ended 30 June 2018 which has been
included in the Statement of Profit and Loss.
b)
Silver Stream
Opening Balance as at 1 July 2017
Silver Stream drawdown as at 8 March 2018
Foreign exchange adjustment (30 June 2018)
Fair value loss/(gain) (30 June 2018)
Senior Debt (all numbers in ‘000s)
c)
Senior Debt
Opening Balance as at 1 July 2017
Debt drawn down on 29 May 2018
Foreign exchange adjustment
Interest Accrued
Debt financing costs
Carrying value at 30 June 2018
Page 66 - Heron Resources Limited - Annual Report 2018
2018
$'000
-
20,516
1,132
21,648
1,018
22,666
-
26,664
396
27,060
227
(2,346)
24,941
2017
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 15. BORROWINGS - NON CURRENT CONTINUED
A Loan Facility for US$60 million with funds to be drawn in 3 tranches, was provided as part of the financing agreement with OMF Fund II
(H) Ltd. The first tranche of US$20M was drawn on the 29th of May 2018. The second tranche was drawn down on 26 September 2018 and
the third and final tranche is expected to be drawn down in December 2018. The funding rate is the aggregate of a margin of 7.25% and the
applicable Libor rate, being a minimum of 2.5%, for each interest period. The loan was initially recorded at fair value less associated
transaction costs. The proceeds from draw down was considered to represent the fair value of the facility at that time. The loan is
subsequently measured at amortised cost. Under the agreement, Heron has to maintain a cash balance of not less than $15 million in its
Tarago Operations subsidiary operating accounts.
NOTE 16.
PROVISION FOR REHABILITATION (all numbers in ‘000’s)
Provision for Rehabilitation – Woodlawn
Provision for Rehabilitation – Other tenements
Consolidated Entity
2017
$'000
2018
$'000
15,751
30
15,781
-
30
30
With respect to Woodlawn, the rehabilitation provision both on the date that construction activities began and as at 30 June 2018, is based
on the assessment of an independent environmental consultant using the NSW Department of Resources and Energy (DRE) rehabilitation
cost estimation tool. The rehabilitation costs are the estimated costs to rehabilitate the mine site areas that the company is responsible for
as at 30 June 2018. Given that tailings re-processing is a rehabilitation activity the company will assess the adequacy of the rehabilitation
provision at each balance sheet date.
NOTE 17. CONTRIBUTED EQUITY
Ordinary shares are fully paid and have no par value. They entitle the holder to participate in dividends and the proceeds on winding up of
the Company in proportion to the number of and amounts paid on the shares. On a show of hands every holder of ordinary shares present at
a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Issue of ordinary shares
Opening balance
30 June 2018
Shares
30 June 2017
Shares
415,009,381
415,009,381
Issue of shares – Sept 2017 for Woodlawn Financing
2,001,562,259
1 for 10 Share Consolidation – Dec 2017
(2,174,904,728)
Return of capital – Ardea Spin-out
Share issue costs
Realised FX Loss
Closing balance
-
-
-
30 June 2018
$’000
129,638
140,115
-
-
(5,055)
(4,956) (1)
30 June 2017
$’000
138,409
-
-
(8,771)
-
-
-
-
-
-
-
241,666,912
415,009,381
259,742
129,638
(1)
For the Woodlawn capital raising, 2.002 billion shares were issued at $A0.07 cents per share (pre the 1 for 10 share consolidation in December 2017).
The three cornerstone investors subscribed for their shares in US$ which was converted to A$ upon receipts of funds in September 2017 thereby creating an
FX loss.
Heron Resources Limited - Annual Report 2018 - Page 67
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 18.
SEGMENT REPORTING
Segmental information for consolidated statement of comprehensive income
Year ended June 2018
Interest received - other persons/corporations
Proceeds from exercise of options agreement
Gain from sale of listed investments
Sundry Income
Option fee received
Total revenues
Depreciation
Exploration expenditure expensed as incurred
Other expenses
Profit / (loss)
Corporate
$’000
Woodlawn Project
$’000
Exploration
$’000
1,115
170
1,913
68
8
3,340
(22)
-
(6,337)
(3,085)
295
-
66
-
-
361
(33)
-
(2,050)
(1,722)
-
-
-
-
-
-
(1,011)
(1)
(1,012)
Total
$’000
1,410
170
1,979
68
8
3,635
(55)
(1,011)
(8,388)
(5,819)
Year ended June 2017
Corporate Woodlawn Lewis Ponds
Sale of fixed assets (loss)
Sale of investments
Interest received - other persons/corporations
Sundry Income
Total revenues
Depreciation
Exploration expenditure expensed as incurred
Termination – severance
Other expenses
Profit / (loss)
$'000
-
100
282
40
422
(33)
-
(2,291)
413
(1,489)
$'000
-
-
-
-
(27)
-
-
(27)
$'000
-
-
-
-
-
-
-
-
-
KNP
$'000
-
-
-
-
(371)
-
-
(371)
Exploration
$'000
-
-
-
-
-
(970)
-
-
(970)
Total
$'000
-
100
282
40
422
(60)
(1,341)
(2,291)
413
(2,857)
Segmental information for statement of financial position
Balance at June 2018
Total current assets
Corporate
$’000
27,217
Woodlawn Project
$’000
Exploration
$’000
40,810
77
Total
$’000
68,104
Property, plant and equipment
Exploration and evaluation costs carried forward
Investment
Restricted Cash
Woodlawn Mine – under construction
Other non-current assets
51
-
5,901
8,777
-
35
596
-
-
-
156,517
-
Total non-current assets
14,764
157,113
Total assets
Total liabilities
41,981
197,923
525
70,544
-
-
-
-
-
-
-
77
30
647
-
5,901
8,777
156,517
35
171,877
239,981
71,099
Page 68 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 18. SEGMENT REPORTING CONTINUED
Balance at June 2017
Corporate Woodlawn Lewis Ponds
Total current assets
Property, plant and equipment
Exploration and evaluation costs carried forward
Investment
Other non-current assets
Total non-current assets
Total assets
Total liabilities
$'000
12,407
40
-
5,775
2,516
8,331
$'000
-
-
26,434
-
-
26,434
20,738
26,434
1,783
1,349
$'000
-
-
-
-
-
-
-
-
NOTE 19. ACCUMULATED LOSSES AND RESERVES
a)
Option Reserve
Balance at the beginning of the year
Cost of share based payments
Write back lapsed options expense
Equity settled share based payments
KNP
$'000
-
Exploration
$'000
-
Total
$'000
12,407
-
-
-
-
-
-
-
-
-
-
-
-
-
40
26,434
5,775
2,516
34,765
47,172
30
3,162
Consolidated Entity
2017
$'000
2018
$'000
1,489
646
(59)
587
935
561
(7)
554
Balance at end of the year
2,076
1,489
The option reserve is used to recognise the fair value of options issued and expensed over
the vesting period and credited to this reserve. The shares will reverse against the share
capital when the underlying options are exercised or lapse.
b)
Accumulated losses
Balance at the beginning of the year
Net profit/(loss) for the period
Balance at end of the year
(87,117)
(5,819)
(92,936)
(84,260)
(2,857)
(87,117)
Heron Resources Limited - Annual Report 2018 - Page 69
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 20.
CASH FLOW STATEMENTS
a)
Reconciliation of operating loss after income tax to the net cash flows from operations:
Operating loss after income tax
Add:
Depreciation
Financing expense
Share based payments
Exploration and evaluation costs expensed
Unrealised Foreign Exchange loss
Fair Value loss
Investment gain
(Increase) in Trade payables, creditors and accruals
(Increase) in accrued interest, GST receivable and other Debtors
(Increase) in prepayments
b)
Cash
Cash on hand
Deposits at Call (1)
Closing cash balance
c)
Restricted Cash – Non-current
Environmental Bond
Bank Guarantee – Veolia
Westpac Corporate Credit Card Bond
Consolidated Entity
2017
$'000
2018
$'000
(5,819)
(2,857)
55
507
587
1,011
1,688
1,018
(561)
(4,348)
(1,237)
(512)
(7,611)
15,532
50,000
65,532
3,577
5,000
200
8,777
60
-
554
1,341
-
-
(4,011)
(1,387)
187
(229)
(6,342)
1,690
10,000
11,690
-
-
200
200
(1)
Deposits at Call are Term Deposits of range between 1 to 3 months. The yield on the Term Deposits during the year ranges between 1.96% - 2.56%
During the 12 months to 30 June 2018, the Company posted a rehabilitation Bond of $3,577,000 with the Department of Resources and
Energy (DRE) to cover the environmental liabilities at the Woodlawn Mine (excluding Veolia’s area of operations). The Company also
provided a $5,000,000 Bank Guarantee to Veolia in compliance with its obligations under the Veolia Cooperation Deed. The Company has
also provided $200,000 Bond to Westpac as security for Company Credit Cards.
Cash security for tenement and environmental bonds of $90,000 is included in Trade and Other Receivables (refer to Note 5) in the
Consolidated Statement of Financial Position. This cash is not available to the Company for ordinary activities. Property Bonds of $38,121
(June 2017: $35,711) are also not included in Cash. This amount is held as a security term deposit and is not available to the Company for
ordinary activities and is also included in Trade and Other Receivables (refer Note 5).
Page 70 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 21. DERIVATIVE ASSET
a)
Foreign Exchange Forward Contract
Consolidated Entity
2017
$'000
2018
$'000
1
1
-
-
During the 12 months to 30 June 2018, the Company entered into three Foreign Currency hedges (AUD Call options) to mitigate the risk of
adverse movements in the USD: AUD. The three hedges cover the foreign exchange risk of the US dollar denominated Silver Stream of
$16M and two of the three US$20M Debt trenches. As at 30 June 2018, only one of the hedges remained outstanding and it expired as at
31 July 2018 unexercised.
-
777
(776)
1
-
-
-
-
b)
Opening as at 1 July 2017
Purchase of Derivative Assets
Derivative write-off
Closing balance as at 30 June 2018
NOTE 22. RELATED PARTY TRANSACTIONS
The Directors of the Company during the financial year were:
Non-Executive Directors
Stephen Dennis
Fiona Robertson
Borden Putnam III
Mark Sawyer
Peter Rozenauers (appointed 22 September 2017)
Ricardo de Armas (appointed 22 September 2017)
Ian Pattison (appointed 29 November 2017)
Executive Directors
Wayne Taylor
The Key Management Personnel other than Executive Directors for the financial year were (for full year unless stated):
Chief Operating Officer
Andrew Lawry
General Manager - Finance and Company Secretary
Simon Smith
General Manager - Exploration Manager
David von Perger
General Manager - Strategy and Business Development
Charlie Kempson
General Manager - Woodlawn
Brian Hearne
Detailed remuneration disclosures are provided in the remuneration report on pages 40-53 of the Directors report.
Heron Resources Limited - Annual Report 2018 - Page 71
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 23.
FINANCIAL INSTRUMENTS
Financial risk management
The Company's activities expose it to a variety of financial risks; market risk (fair value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk. The Company's overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the Company.
Credit risk
Credit risk is the risk of loss associated with counterparty’s inability to fulfil its payment obligations. The Company's credit risk is primarily
attributable to cash and accounts receivable. Cash consists of cash on hand with reputable financial institutions. Financial instruments
included in accounts receivable consist of GST receivable from government authorities in Australia and deposits held with vendors.
Management believes that credit risk with respect to financial instruments included in cash and accounts receivable is low.
Liquidity risk (all financial numbers in ‘000s)
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at 30 June
2018, the Company had cash of $65,532 (30 June 2017: $11,690) to settle current liabilities of $7,549 (30 June 2017: $3,025).
A significant portion of the current cash on the Balance Sheet will be utilised for the construction of the Woodlawn Mine via the EPC contract
with Sedgman.
As at 30 June 2018 the Company also had undrawn debt facilities of US$40M which together with the cash on its balance sheet will be used
to meet the ongoing development costs of the Woodlawn mine through to peak cash draw.
Non-current interest bearing loans and borrowings
$US20,000,000 Loan
Liquidity Risk
Year ended 30 June 2018
Trade and other payable
Interest-bearing loans and borrowings
Year ended 30 June 2017
Trade and other payable
Interest-bearing loans and borrowings
Interest Rate
%
Maturity
LIBOR+7.5
31 Dec 2022
2018
$’000
24,941
2017
$’000
-
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
-
-
-
-
-
-
(7,002)
-
(7,002)
(2,461)
-
(2,461)
-
-
-
-
-
-
1 to 5
years
$'000
-
(24,941)
(24,941)
-
-
-
> 5 years
$'000
Total
$'000
-
-
-
-
-
-
(7,002)
(24,941)
(31,943)
(2,461)
-
(2,461)
Apart from provision for employee entitlements (e.g. Annual Leave), most of the Company's financial liabilities have contractual maturities of
less than 30 days and are subject to normal trade terms.
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity
prices. The Company continues to monitor the long term assets and assesses the value of the asset on a regular basis.
Interest rate risk
The Company has cash balances. The Company's current policy is to invest excess cash in term deposits with banks.
The Company’s debt is subject to a market based interest rate (LIBOR + margin). The Company continues to assess the short and long term
interest rate risk on its debt.
Foreign currency risk
The Company's functional reporting currency is the Australian dollar and major purchases are transacted in Australian dollars and to a lesser
extent, US dollars.
The Company funds the development of Woodlawn and administrative expenses using a combination of Australian dollars and US dollars. The
company holds sufficient currency in native denominations to fund its ongoing currency obligations.
During FY2018, the Company entered into Foreign Currency Hedges (AUD Call options) to hedge the conversion of the majority of the US
denominated debt into Australian dollars.
Page 72 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 23. FINANCIAL INSTRUMENTS CONTINUED
Commodity price risk
The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the potential adverse impact on
earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices as it relates
to valuable minerals to determine the appropriate course of action to be taken by the Company. The ability of the Company to develop its
properties and the future profitability of the Company is directly related to the market price of nickel, zinc, lead and copper and certain other
metals.
As the Company moves closer to commercial production in early 2019, the Company will investigate appropriate commodity hedging
strategies.
NOTE 24. AUDITORS' REMUNERATION
Amounts received or due and receivable for:
Ernst & Young – Audit services
NOTE 25.
COMMITMENTS FOR EXPENDITURE
a)
Exploration Commitments
$'000
$'000
89
56
In order to maintain current rights of tenure to exploration and mining tenements, the Company estimates the following annual
exploration expenditure up until expiry or relinquishment of the mining tenure with the NSW Department of Resources and Energy. Due
to the Company's operation in exploring and evaluating areas of interest, exploration expenditure beyond twelve months cannot be
reliably determined. These obligations are not provided for in the financial statements and are payable based on granted tenements:
Not later than 1 year
491
527
If the Company decides to relinquish certain leases and/or does not meet these obligations, assets recognised in the statement of
financial position may require review to determine the appropriateness of carrying values. The sale, transfer or farm-out of exploration
rights to third parties will reduce or extinguish these obligations. Those amounts detailed above include expenditure commitments
which are the responsibility of earn-in / joint venture partners. If those joint venture partners continue to meet the expenditure
commitments under respective joint venture / earn-in agreements, the estimates detailed above will reduce.
b)
Operating Lease Commitments
The Company has leased two office premises under non-cancellable operating leases for periods of five years and one year. Lease
amounts include a base amount, plus variable outgoings and car parking and are subject to an annual rent review by way of the
consumer price index at the time of review.
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
c)
Capital Commitments
242
653
-
13
-
-
For the construction of the Woodlawn Processing plant, the Company has entered into an Engineering, Procurement and Construction
(EPC) Contract with Sedgman Australia. The EPC Contract is for a guaranteed maximum price (GMP). The GMP means that the
Company’s capital commitments are capped at the agreed EPC Contract sum of $107 million plus any agreed variations. As at 30 June
2018, the Company had capital commitments remaining under this contract of $25.6 million. This commitment will be paid for prior to
30 June 2019.
The Company has also entered into long term contracts with major suppliers. These contracts are subject to mine production
commencing.
Heron Resources Limited - Annual Report 2018 - Page 73
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 26.
INVESTMENTS IN CONTROLLED ENTITIES
Name of
Entity
Country of
Registration
Class of
Shares
Consolidated
Entity’s Investment
2017
2018
Tarago Operations Pty Ltd
Woodlawn Mine Holdings Pty Ltd
Hampton Nickel Pty Limited
Ochre Resources Pty Limited
Tarago Exploration Pty Ltd
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Cost of Parent
Entity’s Investment
2018
$
100
10
10
100
10
2017
$
100
10
10
100
10
Hampton Nickel Pty Limited is being used by the Company to hold the Bulong nickel properties which are subject to a joint venture with
Southern Gold Ltd.
Ochre Resources Pty Limited ("Ochre") was registered on 7 February 2005 and holds the Girilambone and Overflow tenements which are
subject to a joint venture with Alchemy Resources Ltd.
Woodlawn Mine Holdings Pty Ltd was incorporated on 27 May 2016 to act as a holding company for Tarago Operations Pty Ltd, the principal
owner of the Woodlawn Mine assets.
During the financial year, TriOrigin Mining Pty Ltd changed its name to Tarago Exploration Pty Ltd
Consolidated Entity
2017
$
2018
$
(0.028)
(0.06)
205,191,724
41,500,9381
(0.028)
(0.06)
205,191,724
41,500,938
(5,818,754)
(2,856,542)
NOTE 27.
EARNINGS PER SHARE
Basic earnings per Share
Weighted average number of ordinary shares outstanding during the year
used in the calculation of basic earnings per share
Diluted earnings per Share
Weighted average number of ordinary shares outstanding during the year
used in the calculation of diluted earnings per share.
Earnings profit/(loss) used in calculating basic and diluted earnings
profit/(loss) per share
(1)
1 for 10 Share Consolidation – Nov 2017
The 2,000,836 (2017: 24,829,828) options and 2,895,000 performance rights outstanding
as at 30 June 2018 are not considered to be dilutive given the Group incurred a loss.
NOTE 28.
EMPLOYEE SHARE SCHEME
a)
Employee Share Scheme
An Employee Share Option Plan (ESOP) has been established for Heron Resources Limited, whereby employees, Directors and Officers
of the Company may be issued with options over ordinary shares of Heron Resources Limited. At the General Meeting on 17 November
2015, shareholders approved the ESOP. Under the ESOP, the options vest upon the successful achievement of a number of key
milestones at Woodlawn.
The Options cannot be transferred and will not be quoted on the ASX. No options were issued under this ESOP during the year. During
the year 421,459 options expired under the ESOP.
Page 74 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 28. EMPLOYEE SHARE SCHEME CONTINUED
Details of options as at the beginning and end of the reporting date and movements during the year are set out in the table below:
Grant date
Expiry date
5-Mar-13
5-Aug-14
5-Aug-14
5-Dec-15
1-Feb-17
5-Mar-18
23-Oct-17
20-Nov-18
4-Dec-20
1-Feb-22
Weighted average exercise price
b)
Performance Rights Program
price
Exercise Number of
Options at
the beginning
of the year
100,000
21,459
85,836
1,950,000
265,000
2,422,295
0.86
$2.90
$1.20
$0.70
$0.72
$1.10
Options
expired /
lapsed this
year
(100,000)
(21,459)
-
(300,000)
-
(421,459)
1.26
Options
issued
in the
year
-
-
-
-
-
-
N/A
Number
of Options
at the end
of the year
-
-
85,836
1,650,000
265,000
2,000,836
0.77
Options
exercisable
at the end
of the year
-
-
85,836
550,000
-
635,836
0.72
A Performance Rights Plan (the Plan) has been established for Heron Resources Limited, where employees, Directors and Officers of the
Company may be issued with zero exercise price options over ordinary shares of Heron Resources Limited (Performance Rights) which
will vest in 3 years’ time subject to achieving Total Shareholder Return (TSR) hurdles. At the 2017 General Meeting, shareholders
approved the Plan.
Performance Rights cannot be transferred and will not be quoted on the ASX. During the year, 2,895,000 Performance Rights were
issued under the Plan during the year.
Performance Rights:
Date
1 July 2017
30 June 2018
Details
Exercise price
Expiry date
Number
Opening balance
Rights issued
Rights cancelled
Closing balance
Nil
$Nil
Nil
-
N/A
Nil
30 June 2020
2,895,000
N/A
Nil
-
2,895,000
The value of the Performance Rights at the date of grant was undertaken by an independent valuer using a Monte Carlo simulation
methodology. The value of the Performance Rights was deemed to be $0.539 per right and were granted after the 1 for 10 share
consolidation.
NOTE 29.
SUBSEQUENT EVENTS
Other than those noted below there is no matter or circumstance which has arisen since 30 June 2018 that has significantly affected or may
significantly affect:
a)
b)
The operations, in the financial years subsequent to 30 June 2018, of the Company;
The results of those operations
On 26 September 2018 the Company successfully drew down the second US$20M debt tranche.
NOTE 30.
CONTINGENT LIABILITIES
a)
Performance bonds and rental bond commitment
The Company has provided cash backed performance bonds with the NSW Dept. of Resources and Energy of $90,000 (30 June 2017:
$120,000) and a rental bond commitment ($17,187) over its office in Sydney. The performance bonds and rental bond commitment are
cash backed. The Company also has and a rental bond commitment ($15,623) over its Perth office.
b)
Agreement with Veolia Environmental Services (Australia) Pty Ltd (“Veolia”)
In 2011, the Company and Tarago Operations Pty Ltd (“TOP”), a wholly owned subsidiary of the Company, entered into an agreement
with Veolia. This agreement was further updated in 2017, under which the Company agreed:
(i)
To assume the environmental liabilities associated with the Woodlawn site, excluding Veolia’s area of operation. The Company
will be required to provide a performance bond with the NSW Division of Resources and Energy (DRE) as surety against
completion of environmental rehabilitation once mining on the site is complete. The amount of the bond is $3,577,000 and was
lodged with the DRE prior to commencement of construction.
(ii)
Subject to certain approvals being received by Veolia and the Company, the Company will receive “free-on-board” compost from
Veolia to be utilised in the rehabilitation of the site.
Heron Resources Limited - Annual Report 2018 - Page 75
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
NOTE 30. CONTINGENT LIABILITIES CONTINUED
(iii)
(iv)
To fully indemnify Veolia for all direct and or consequential loss and damage suffered by Veolia as a result of or caused by or
contributed to by any act or omission or default of the Company, or TOP, connected with its operations at the Woodlawn site.
To provide staged bank guarantees in favour of Veolia up to $10M of which $5M has been provided at 30 June 2018. A further
$5M Bank Guarantee will be provided in favour of Veolia approximately 30 months after commencement of the box cut.
c)
Other contingent liabilities
Native title claims have been made with respect to areas which include tenements in which the Company has interests. The Company
is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the
claims may significantly affect the consolidated entity or its projects.
None of these contingent liabilities has been provided for in the financial report.
NOTE 31.
PARENT ENTITY INFORMATION
The following information relates to the parent entity, Heron Resources Limited, at 30 June 2018. The information presented here has been
prepared using accounting policies consistent with those presented in Note 1.
a)
Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Intercompany Loans - subsidiaries
Contributed equity
Option reserve
Accumulated losses
Subsidiary - Accumulated loss
Total equity
Loss for the year
Total comprehensive loss for the year
b)
Guarantees entered into by the Parent
2018
$'000
24,393
14,764
39,157
342
183
525
130,250
259,742
2,076
(90,263)
(2,673)
168,882
(3,085)
(3,085)
2017
$'000
12,417
17,927
30,344
1,933
107
2,040
-
113,993
1,489
(84,528)
-
30,954
(2,652)
(2,652)
Under the Loan facility agreement between Tarago Operations Pty Ltd and Orion Mine Finance, Heron Resources Limited has entered
into a deed of cross guarantee with its wholly owned subsidiary Tarago Operations Pty Ltd
c)
d)
Contingent liabilities of the Parent
Heron Resources Limited’s contingent liabilities are consistent with those disclosed in Note 30.
Capital commitments of the Parent
Heron Resources Limited’s capital commitments are disclosed in Note 25 (c)
Page 76 - Heron Resources Limited - Annual Report 2018
5.0 CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Directors’ Declaration
In accordance with a resolution of the Directors of Heron Resources Limited it is declared that:
a)
b)
The financial statements and notes comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
Give a true and fair view of the Company's and the Consolidated Entity's financial position as at 30 June 2018 and of their performance,
as represented by the results of their operations, for the financial year ended on that date.
In the Directors' opinion:
a)
b)
c)
The financial statements and notes are in accordance with the Corporations Act 2001; and
At the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts when they become
due and payable; and
The Directors have been given the declarations by the Chief Financial Officer and Chief Executive Officer required by section 295A of
the Corporations Act 2001.
On behalf of the Board
S Dennis
Chairman
Sydney, 27 September 2018
Heron Resources Limited - Annual Report 2018 - Page 77
Page 78 - Heron Resources Limited - Annual Report 2018
Heron Resources Limited - Annual Report 2018 - Page 79
Page 80 - Heron Resources Limited - Annual Report 2018
Heron Resources Limited - Annual Report 2018 - Page 81
34 to 48
Page 82 - Heron Resources Limited - Annual Report 2018
Heron Resources Limited - Annual Report 2018 - Page 83
7.0 Shareholder Information
AT 6 SEPTEMBER 2018
1.
a)
b)
c)
d)
e)
Issued Shares and Options
Distribution of Shareholders:
Size of Holding
1
1,001
5,001
10,001
100,001
1,000
5,000
10,000
100,000
-
-
-
-
-
Number of Holders
1,468
956
281
447
84
3,236
Shares Held
617,391
2,363,330
2,218,309
13,904,430
222,563,452
241,666,912
The twenty largest shareholders hold 86.56% of the issued fully paid capital of the Company.
Substantial Shareholders including related parties who have notified the Company:
Holder
Greenstone Management (Delaware) LLC
Citicorp Nominees Pty Limited
Castlelake (III, IV and V) LP
Number of Shares
45,262,790
68,524,190
53,920,145
%
18.73
28.36
22.31
There were 1,273 shareholders who held less than a marketable parcel.
No securities have been classified by ASX as restricted.
VOTING RIGHTS
In accordance with the Company's constitution, voting rights are on the basis of a show of hands, one vote for every registered holder and
on a poll, one vote for each share held by registered holders.
Twenty largest shareholders as at 6 September 2018
Number of Shares
68,524,190
45,262,790
23,335,069
23,335,069
11,260,717
10,537,277
7,250,007
4,854,529
4,096,685
3,836,320
1,995,890
1,800,000
1,460,003
1,408,392
1,358,315
1,311,529
1,259,952
1,066,381
988,422
780,000
215,721,537
241,666,912
%
28.36
18.73
9.66
9.66
4.66
4.36
2.99
2.01
1.70
1.59
0.83
0.74
0.60
0.58
0.56
0.54
0.52
0.44
0.41
0.32
89.26%
100.00%
CITICORP NOMINEES PTY LIMITED
GREENSTONE MANAGEMENT (DELAWARE) LLC
CASTLELAKE IV LP
CASTLELAKE III LP
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CASTLELAKE V LP
J PAUL GETTY TRUST
G LTP LLC
COPPER INVESTMENTS PTY LIMITED
NATIONAL NOMINEES LIMITED
1
2
3
4
5
6
7
8
9
10
11
12 MBM CORPORATION PTY LTD
13
14
15
16
17
18
19
20
"CANADIAN REGISTER
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