ACN 130 955 725
Growth &
Development
ANNUAL REPORT 2012
Contents
2 Chairman’s Letter
4 Projects Overview
6 Review of Operations
10 Productora Copper Project
17 Tenement Schedule and Details
31 Corporate Governance Statement
35 Directors’ Report
40 Auditor’s Independence Declaration
41
Independent Auditor’s Report
43 Directors’ Declaration
44 Statement of Comprehensive Income
45 Statement of Financial Position
46 Statement of Changes In Equity
47 Statement of Cash Flows
48 Notes to the Financial Statements
68 Shareholder Information
72 Corporate Directory
HOT CHILI ANNUAL REPORT 2012
“ Our vision is ambitious, our strategic
positioning, strong funding support
and dedication to move quickly,
ensures that this vision is achievable.”
chairman’s
letter
Dear Shareholder,
Over the past year, as chairman of the board of
Hot Chili Limited (Hot Chili or Company), I have
had the pleasure of seeing our Company take
great strides towards establishing a new and
exciting, Australian mid-tier copper producer in
the lucrative Chilean copper space.
Against a backdrop of uncertainty in global equity markets and a cooling in
commodity prices, the fundamentals for copper have remained strong. Continuing
delays in new supply, depletion in global stockpiles and an ever decreasing grade of
new copper discoveries and developments have ensured that demand and prices for
the metal – now and into the medium term – remain high. For these reasons, access
to high-quality, low-cost and long-life copper supply in a tier-one jurisdiction is a rare
opportunity that the Company is pursuing with great vigour.
The Company’s 2012 annual report outlines the achievement of a number of major
milestones at our flagship Productora copper project which have laid a strong
foundation for the Company’s future growth. The rapid rise of Productora – from
discovery in September 2010 – to a rapidly emerging top four Chilean coastal copper
development, has established Hot Chili as a stand-out emerging copper producer on
the Australian Securities Exchange (ASX).
Like any success, our people have been key to our achievements. I would like
to thank our board, management and staff for their tireless effort in tackling and
achieving the Company’s aggressive growth plan during the year. This dedication
and ability to move fast is the soul of Hot Chili.
I would like to also thank our shareholders for their continuing support and
commitment through a year where Hot Chili invested significantly in laying the
foundations for future growth. In the coming year, shareholders can expect to see
the Productora copper resource tripled in size and a pre-feasibility delivered on the
project. In addition, the company aims to unveil further details around a targeted
production hub in central Chile capable of producing towards 150,000 tonnes of
copper per annum.
Ultimately, we have set ourselves on a journey that will see shareholders invested
in a Company aiming to establish itself as one of Australia’s largest emerging
copper producers in the coming years. While our vision is ambitious, our strategic
positioning, strong funding support and dedication to move quickly, ensures that this
vision is achievable. Our track record of delivery is something we are very proud of
and our future growth milestones are now Hot Chili’s complete focus.
On closing, I wish to particularly thank Mr Christian Easterday our Managing Director,
for his work and efforts in achieving such an excellent result.
Murray Edward Black
Non Executive Chairman
2
HOT CHILI ANNUAL REPORT 2012
“ Our track record of delivery
is something we are very
proud of and our future
growth milestones are now
Hot Chili’s complete focus.”
HOT CHILI ANNUAL REPORT 2012
3
projects
overview
“ ...transitioned from explorer
to developer...”
Hot Chili has assembled a portfolio
of five large copper projects in the
world class iron-oxide-copper-gold
(IOCG) belt of the Chilean coastal
range. All of these projects lie to the
north of Santiago, are close to
existing coastal infrastructure and lie
at low altitude (<1,000m elevation).
Although the company continued to assess all of its projects
and add further to its project landholdings, the majority of
Hot Chili’s activities were focussed towards fast-tracking the
development of its flagship Productora copper project.
In less than two years since listing the Company on
the Australian Securities Exchange (ASX), Hot Chili has
transitioned from explorer to project developer through
the emergence of a large-scale copper discovery at
Productora. The company is fast-tracking the development
of Productora as its lead development project while
undertaking exploration work on its earlier stage projects.
Hot Chili’s project pipeline and project advancement
strategy is summarised in Table 1 (page 5).
4
HOT CHILI ANNUAL REPORT 2012
Hot Chili continued to develop its relationships with key
partners Compañía Minera del Pacífico S.A. (CMP – Chile’s
largest iron ore producer) and CODELCO (the world’s
largest copper producer). Importantly, Hot Chili’s and CMP,
executed two non-binding letters of intent to negotiate a
joint infrastructure and an iron exploitation option over the
Productora copper project. CMP is one of Hot Chili’s largest
shareholders and is also a major project partner at Productora.
Throughout the year, Hot Chili’s team has continued to
expand. The company’s operating structure has been
organised into four critical departments to manage Hot Chili’s
activity streams, namely; geology, project development,
technical services and legal/ corporate services.
Table 1. Hot Chili’s copper project development pipeline in Chile
Projects
Current
Status
2012
2013
2014
2015
2016
2017
Productora
Advanced
Resource Development
Target for Dev/Construction
Target for Production
e
l
i
h
C
l
a
r
t
n
e
C
b
u
H
n
o
i
t
c
u
d
o
r
P
Frontera
Advanced
Exploration
Resource Development?
Banderas
Exploration
Exploration
Los Mantos
Advanced
Exploration
Chile Norte
Exploration
Exploration
Resource
Development?
Resource
Development?
m
k
0
0
4
SANTIAGO
SANTIAGO
Figure 1. Location of Hot Chili’s projects within central Chile
review of
operations
“ The project benefits greatly
from its location to near-by
existing infrastructure including
the PanAmerican Highway, rail,
power and port...”
Productora Project
The Productora project is Hot Chili’s flagship project in Chile.
The project is located 15km south of the township of Vallenar,
at low altitude (less than 1,000m) in Chile’s III region. The
project benefits greatly from its location to near-by existing
infrastructure including the PanAmerican Highway, rail, power
and port (40km distance) as shown on Figure 2.
Since drilling commenced in August 2010, the Company has
completed over 70,000m of drilling and outlined a large-scale,
bulk tonnage copper-gold-molybdenum deposit amenable to
open pit mining. In September 2011, the Company defined its
first resource estimate from within the central 1.4km extent of
the project, reporting a JORC compliant resource of 85.1Mt
grading 0.6% copper, 0.1g/t gold and 146ppm molybdenum
(0.8% copper equivalent) for 483,000 tonnes of copper,
290,000 ounces of gold, 12,418 tonnes of molybdenum
(644,000 tonnes of copper equivalent).
Significant exploration has outlined a 9.5km deposit footprint
at Productora where extensional drilling by Hot Chili and
previous explorer Teck has now confirmed significant drilling
intersections over 6.0km of strike extent so far.
6
HOT CHILI ANNUAL REPORT 2012
Huasco Port
Infrastructure
Major projects/mines
Power substations
Major town
Port/Maritime Concession
Fe Pellet Plant
Rail
Power Transmission lines
Sealed Roads
0km
10km
20km
Vallenar
Productora
Figure 2. Productora project location and associated coastal infrastructure position
“ our vision is ambitious, our strategic
“ our vision is ambitious, our strategic
positioning, strong funding support
and dedication to move quickly,
ensures that this vision is achievable.”
The Company formally commenced a scoping study over
Productora in early January 2012. Leading engineering and
project development group Ausenco have been appointed
to manage the scoping study with the assistance of Hot
Chili’s own development study management team. The study
is assessing a base-case 10Mtpa open pit mine with the
potential to produce approximately 60,000 tonnes of copper
metal per annum in concentrate over a 20 year life.
The Company is aiming to establish a significant resource
base at Productora from an identified 280-320M tonne target
mineralisation at similar grade to that estimated in the first
resource announced from the centre of the project. This
larger resource is targeted to be in-place within the coming
year following the completion of a major resource drilling
programme that is currently underway.
The Productora target mineralisation is summarised in
Table 2 below.
Table 2. Productora Target Mineralisation
Tonnage (Mt)
Grade
Contained Metal
Productora Target Mineralisation
Copper
Gold
Molybdenum
Copper Eq*
From
280
280
280
280
To
320
320
320
320
Unit
From
%
(g/t)
(g/t)
%
0.5
0.1
120
0.7
To
0.7
0.2
180
1.0
Unit
From
To
Tonnes
1,400,000
2,240,000
Ounces
900,223
2,057,653
Tonnes
33,600
57,600
Tonnes
1,876,000
3,168,000
Note: References to exploration target size and target mineralisation in this announcement are conceptual in nature and should not be construed as indicating
the existence of a JORC Code compliant mineral resource. Target mineralisation is based on projections of established grade ranges over appropriate
widths and strike lengths having regard for geological considerations including mineralisation style, specific gravity and expected mineralisation continuity as
determined by qualified geological assessment. There is insufficient information to establish whether further exploration will result in the determination of a
mineral resource within the meaning of the JORC Code.
HOT CHILI ANNUAL REPORT 2012
7
review of
operations
continued
Los Mantos Project
Los Mantos is located approximately 60km south of the
coastal city of La Serena, at low altitude and adjacent to the
Pan American Highway in Chile’s IV region. The project is at
an advanced stage with an operating small-scale mine, and
extensive historical underground and surface development.
The Company has recognised a zoned multi-commodity
IOCG system at the project. Extensive mantos and breccia
style mineralisation is exposed over 2.5km in strike length in
surface development and outcrop.
Although little work was undertaken over the project during
the year owing to Hot Chili’s focus on Productora, exploration
is scheduled to recommence at the project in the coming
year. Work will focus on delineating the size potential of high-
grade, bulk tonnage copper mineralisation intersected by
drilling within the southern extent of the project.
Chile Norte Project
Final assay results received from an 11,500m Reverse
Circulation (RC) drilling programme completed in 2011
highlighted the potential for Los Mantos to contain
breccia-hosted bulk tonnage copper-gold mineralisation.
The last assay results from this drilling included the widest
drilling intersection recorded to date at Los Mantos, with
hole MNP0056 intersecting 36m grading 1.4% copper
and 0.2g/t gold from 49m down-hole. The result is
contained within the southern extent of the project where
further drilling by Hot Chili has confirmed the location of
a large potassic-altered tourmaline breccia as shown in
Figure 3.
Chile Norte is located approximately 50km south of
the coastal city of Iquique, at low altitude and adjacent
to the Pan American Highway in Chile’s IV region. Hot Chili
is in its third year of a five-year agreement with CODELCO
to earn an interest in a large contiguous land holding that
adjoins the Company’s own landholding in the project area.
The company completed its second major airborne
magnetic and radiometric survey over the Chile Norte
project during the year as well as a concerted surface
mapping and geochemical rock-chip sampling programme
over a number of high-priority targets.
Figure 3. Drilling has confirmed a large tourmaline breccia with significant copper mineralisation at Los Mantos
8
HOT CHILI ANNUAL REPORT 2012
Helicopter Sampling Campaign at Chile Norte
Hot Chili is currently planning its next phase of copper
exploration at the project which may involve further site
geochemical programmes and detailed mapping of identified
high-priority alterations systems identified in work to date,
Early stage litho-structural mapping and reconnaissance
rock-chipping was undertaken over the project in June and
July. Further follow-up work is planned in the coming year to
prepare for a first-pass drilling programme at the project in
late 2013.
Banderas Project
During July 2012, Hot Chili executed several agreements
to acquire major interests in the Banderas copper
project. The project is located at low altitude (<1,000m),
approximately 50km directly north of the Company’s
Productora project adjacent to the Pan America Highway
in Region III of Chile. The project is at an early exploration
stage and has seen some historical, small-scale, copper
mining within an extensive, large-scale alteration system.
Along with the Frontera project, Hot Chili intends to
explore the project in the coming years for the potential
to identify and delineate near-by copper resources as
an additional supply source to a copper production hub
centred around Productora.
Frontera Project
In July 2012, Hot Chili announced that is had exercised a
100% purchase option agreement to acquire several leases
at the Frontera copper project. The Frontera project lies
70km directly south of Productora in Region IV of Chile and
is located adjacent to the PanAmerican highway and existing
power transmission corridor.
Frontera is a relatively advanced exploration stage project
with some historical drilling and a small-scale, historical,
copper-oxide open pit within the project. First-pass
reconnaissance mapping and rock-chip sampling has
identified significant potential for copper-porphyry style
mineralisation at the project. Like Banderas, the project was
acquired as an exploration project that had potential to host
additional near-by copper resource potential for a production
hub centred at Productora. Further follow-up exploration
work is planned at the project in 2013.
Reconnaissance exploration at the Banderas copper project
Hot Chili management reviewing plans at the Frontera project
HOT CHILI ANNUAL REPORT 2012
9
productora
copper project
“ the company is
now well advanced with
resource definition drilling...”
Productora First Resource
September 2011
Following nine months of intensive resource drilling
comprising 141 RC holes and 22 diamond (DD) holes, in
September 2011, the Company announced its first JORC
compliant resource for the project. The first resource was
estimated at 85million tonnes grading 0.6% copper,
0.1g/t gold, 146g/t molybdenum for 482,000 tonnes
of copper metal, 290,000 ounces of gold and 12,400
tonnes of molybdenum metal. The first resource is
confined to the central lease of the project and represents a
1.4km strike length section of a 9.5km mineralised footprint
which the company has identified at Productora.
The independently estimated mineral resource within the
central area is shown in Table 1 and includes the results
from all RC and diamond (DD) drill holes(141 RC holes and
22 DD) completed to the end of July 2011. The resource
estimate also utilised a large underground drilling database
and development models provided by the operators of the
Productora underground mine.
10
HOT CHILI ANNUAL REPORT 2012
A nominal +0.3% copper grade-shell model was utilised to
constrain the block model resource estimation. The distribution
of gold and molybdenum within the deposit only represents
those metals in co-association with copper.
Approximately 37% of the resource estimate comprises
indicated material and 63% inferred material. The majority of
the indicated resource lies within the first 200m from surface
and the average depth of the resource base is approximately
400m from surface.
Figure 4. Oblique view of the central area resource
(looking northwest) at the 60m depth level – showing
the distribution of copper grade across the resource
Importantly, the component of higher copper grade material
within the resource, equating to approximately 28 million
tonnes grading 0.8% copper, also lies within the first 200m
from surface. This, in addition to no pre-strip requirement,
provided an early indication of potential for reduced capital
and operating costs in the early stages of any potential future
open pit development.
Mineralisation is associated with a series of vertical lodes
and some minor subhorizontal lodes (mantos zones) within
a felsic volcanic country rock. The felsic volcanic sequence
has been extensively intruded by a tourmaline-breccia along
the main mineralised north-east fault corridor. The subvertical
breccia host corridor provides strong geological confidence
in along strike and depth continuations of the resource.
Sulphide ore mineralogy comprises pyrite, chalcopyrite,
bornite and molybdenite developed as breccia, vein and
cavity fill, as well as disseminations within the brecciated
host rocks. Within the oxide zone, copper is dominantly
associated with malachite. The resource extends from
surface and zones of oxide and transitional material appear
to be localised in specific locations across the deposit. The
resource is a sulphide from surface with localised zones of
preferentially developed oxide bowls.
Figure 4 shows an oblique view of the 1.4km strike length
resource at the 60m depth level, exposing the resource
copper grade distribution, underground mine location and a
reference cross section.
Table 3. Productora Central Area Resource (Released 6 September 2011)
Category
Tonnage
Grade (>0.3% Cu)
Contained Metal (>0.3% Cu)
(Mt)
Copper
Gold Molybdenum CopperEq* Copper
Gold Molybdenum CopperEq*
Indicated
31.1
Inferred
54.0
%
0.6
0.6
(g/t)
0.1
0.1
Total
85.1
0.6
0.1
(g/t)
159
138
146
%
0.8
0.7
0.8
(Kt)
185
298
(Tonnes)
4,942
7,476
110
180
483
290
12,418
(Kt)
248
395
644
Note: The resource has been estimated in accordance with the guidelines of the Australasian Code for the Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC Code 2004). Figures in the above table are rounded to one significant figure in accordance with Australian JORC
code 2004 guidance on mineral resource reporting.
HOT CHILI ANNUAL REPORT 2012
11
productora
copper project
continued
Resource Growth
Drilling Programme
The deposit footprint of Productora was recognised to be
approximately 9.5km in strike length owing to a parallel
magnetite zone along the western flank of the breccia host
corridor. In September 2011 the company commenced
a major second phase drilling programme at Productora.
Australian drill rigs and drillers were implemented to increase
the speed of drilling a reduce costs. Following ramp-up,
the company dedicated one DD drill rig and two RC drill
rigs to complete a major 65,000m RC and 5,000m drilling
programme. Since commencement this was increased
to an 85,000m drilling programme owing to cost savings
gained through the implementation of new drill rigs.
All first-pass drilling over the entire 9.5km deposit footprint
has been completed and the company is now well advanced
with resource definition drilling over northern and southern
strike extensions of the project. Resource definition drilling in
these areas is expected to be completed in the last quarter of
2012 to facilitate a first resource up-grade for Productora.
Better results recorded by first-pass extensional RC drilling
included 56m grading 0.5% copper and 0.1g/t gold from
surface and 40m grading 0.5% copper, 0.1g/t gold and
122ppm molybdenum from 122m down-hole depth. These
new extensional results are summarised on Figure 5.
Drill planning is well advanced to prepare for a large drilling
programme over the direct extensions to the central resource,
following the announcement in July that the company had
secured the last critical lease within the centre of the project
(encircling the central area resource). This now allows the
company to test wider and higher value portions of the
identified deposit footprint where previous drilling by General
Minerals and Teck recorded their widest drilling intersections
at the project during the late 1990’s.
In addition to extensional RC drilling, DD drilling being
directed towards up-grading the depth component of the
central area resource has recorded strong widths and copper
grades. DD results included 47.3m grading 0.9% copper,
0.2g/t gold and 327ppm molybdenum from 225.7m down-
hole within the southern extent of the central area resource.
Results to-date for the second phase diamond drilling
programme over the central area resource are summarised
on Figure 6.
The results add further weight to the Company’s observation
that larger sample size produces better copper grade
estimation at Productora.
The second phase resource DD drilling programme is
planned to continue for the remainder of 2012 and aims to
increase the amount of indicated resources within the central
area in parallel with the progress of development studies.
The diamond drilling programme aims to facilitate a resource
grade revision over the central area resource once complete.
Productora Deposit Footprint
Phase 2 Drill Coverage
Magnetic Response & Drill Intercepts
Results
Pending
Significant Drill
Results
GMC/Teck drill intercept
HCH drill intercept
63m/0.4% CuEq *
29m/0.6% CuEq *&
13m/1.3% CuEq *
149m@0.6%
CuEq* (Teck hole)
32m/0.6% CuEq *
Uranio 1 to 70 Lease
Productora Central
Area Resource
85Mt @ 0.6%Cu, 0.1gt
Au, 146ppmMo
112m@0.9% CuEq *
(Teck hole)
40m/0.6% CuEq * & 13m/
1.2% CuEq *
30m/0.4% CuEq * & 12m/
0.8% CuEq *
56m/0.6% CuEq *
20m@1.0% CuEq *
(Teck hole)
47m/0.7% CuEq *
44m@0.6% Cu Eq*
Results
Pending
Figure 5. Selected first-pass drilling results across the 9.5km Productora
deposit footprint. Note the strong geological continuity
of the magnetite zone along the western flank of the copper corridor
“ reduced capital and
operating costs...”
12
HOT CHILI ANNUAL REPORT 2012
South
Uranio 1/70
lease
Oxide
Trans
Fresh
600m RL
400m RL
400m RLL
112m/0.9% CuEq *
(Teck )
200m RL
Phase 2 New
drill results
Productora Central Area Resource
Surface
56m/0.9% CuEq *
North
Uranio 1/70
lease
70m/0.9% CuEq *
open to end of hole
63m/0.8% CuEq *
28m/0.8%
28m/0.8% CuEq *
47m/1.3% CuEq *
28m/0.7% CuEq *
17.8m/1.2% CuEq *
open to end of hole
30.2m/0.8% CuEq *
open to end of hole
28m/0.7% CuEq *
27m/0.9%
27m/0.9% CuEq *
66m/0.8% CuEq *
Average Resource
Base Depth – 400m
37m/0.8% CuEq *
16m/0.6% CuEq *
149m/0.6% CuEq *
open to end of hole
(Teck )
Figure 6. Long Section displaying significant drilling intersections from second-phase diamond drilling of the inferred component of the central
area resource
Completion of Project Consolidation
The Uranio 1 to 70 lease lies within the centre of Hot
Chili’s flagship Productora copper project, forming an
encircling landholding (Figure 7) around the Company’s
existing JORC compliant central area resource. Securing
the Uranio 1 to 70 lease has been a key goal for Hot Chili
since it commenced project consolidation activities at
Productora over four years ago.
In April 2012, the Chilean Commission for Nuclear Energy
(CCHEN – the owners of Uranio 1 to 70) commenced a
public bidding process for a long-term lease agreement
over the Uranio 1 to 70 lease. Hot Chili, through its 100%
owned Chilean subsidiary Sociedad Minera El Aguila Limitida
(SMEAL), submitted a bid for the Lease on June 18 2012.
The public bid was held under specific minimum bidding
conditions which Hot Chili was able to satisfy given that it
already had a consolidated project position and was at an
advanced development phase at the Productora project.
Hot Chili has now officially executed a 30 year exploration
and exploitation agreement over Uranio 1 to 70 lease.
Importantly, the lease contains the direct extensions to the
central area resource where historical drilling undertaken
by Teck recorded several very wide drilling intersection
including 112m grading 0.7% copper, 0.1g/t gold and
160ppm molybdenum from 102m down-hole depth and
149m grading 0.4%copper, 0.1g/t gold and 90ppm
molybdenum from 200m down-hole depth.
Productora Landholding
Showing Location of Uranio 1/70 Lease
Project Consolidation Complete
100%
100%
purchase
purchase
option
option
100% HCH
h
h
t
t
g
g
n
n
e le
e le
rik
rik
sit s
sit s
t
t
o
o
p
p
e
e
m d
m d
k
k
9.5
9.5
Uranio 1 to 70 Lease 100%,
30 year lease agreement
65% HCH &
35% CMP
Productora Central
Area Resource -
(1.4km strike length)
100% HCH
Scale 2km
100%
purchase
option
Significant drill intercept
Figure 7. Hot Chili landholding of the Productora copper project –
consolidation complete with the final addition of the Uranio 1 to 70 lease
HOT CHILI ANNUAL REPORT 2012
13
productora
copper project
continued
Productora Copper Project
Preliminary Project Development Layout
The addition of this final Lease to the Productora copper
project allows the Company to consider a large central pit
option within its current development study plan as outlined
on Figure 8. Hot Chili is now well positioned to maximise the
size and life of any potential future copper operation at the
Productora project.
Drilling within the new lease is scheduled to commence
in August 2012 with site preparation and drill platform
construction already underway. Securing the Uranio 1 to
70 lease marks the end of over 4 years of consolidation
efforts by Hot Chili to secure the Productora copper project.
Strategic Alignment of CMP and
Hot Chili at Productora
Tailings Dam
649m elevation
at base
North Pit
North Waste
Dump 3
Central Waste
Dump 2
Central Waste
Dump 1
Processing
Plant
Uranio 1 to 70 Lease
Central Pit
Scale 2km
Compañia de Aceros del Pacifico (CAP) is listed on the
Chilean stock exchange with a market capitalisation as at
June 28 2012 of US$5.34 billion. CAP is the parent company
of Compañia Minera del Pacifica (CMP), an iron ore mining
company producing concentrate and iron ore pellets with
projects in the III and IV regions of the iron ore belt district in
northern Chile. The company is a vertically integrated steel
producer which also supplies Chile with steel from its plant
in the southern city of Talcahuano. Mitsubishi is a 19.1%
shareholder of CAP and 25% shareholder of CMP as at
December 31 2011.
CMP is a major partner in the Company’s flagship
Productora copper project and its parent company CAP
is a 3.7% shareholder of Hot Chili following their recent
participation in the Company’s last capital raising in late
December 2011.
In early July 2012, Hot Chili executed two non-binding
Letters of Intent (LOI) to formally cooperate on technical
studies and commence negotiation for a joint infrastructure
and iron production option for the Productora copper
project. Following the execution of the LOI’s, both
companies formed a technical working committee and
are currently progressing towards formal agreements
with both negotiations.
Productora lies in the heart of CMP’s existing coastal
infrastructure, including rail, port, easement corridor,
magnetite concentrator and iron pellet plant. CMP’s
infrastructure and the identification of significant iron
potential creates substantial operational synergies for
both companies.
Successful negotiation of a joint infrastructure agreement
would provide the Productora copper project with the
potential to be established in a shorter timeframe and
at a lower start-up capital cost than other comparable
large-scale emerging copper projects.
14
HOT CHILI ANNUAL REPORT 2012
Figure 8. Preliminary project development layout of the Productora
copper project showing the proposed location of the main open pits,
waste dumps, and tailings dam
In addition, any future development of an additional iron
source in such close proximity to CMP’s existing iron
processing and transport network has the potential to add
significantly to CMP’s current production expansion at its
existing operations. It also has the potential to add another
valuable revenue stream to Productora.
Formal agreements are expected to be finalised on an
infrastructure and iron exploitation option for the development
of Productora during 2013.
Development Studies
In late December 2011, Hot Chili formally commenced a
scoping study to assess a 10Mtpa open pit copper operation
at the Productora copper project. Leading engineering and
project development group Ausenco have been appointed to
undertake the study in cooperation with the Company’s own
development study management team.
Highlights from the development studies include the
completion of preliminary metallurgical testwork (mineralogy,
comminution and flotation) on three composite samples of
sulphide ore from within the current central area resource.
Initial results have provided early encouragement indicating
that the Productora ore will be amenable to processing
through a conventional crushing – SAG mill – ball mill
grinding circuit followed by a contemporary sulphide flotation
sequence. Ausenco has significant experience in the design
and construction of similar copper processing circuits
elsewhere in the world.
“ the company is now well
advanced with resource
definition drilling...”
Productora Central Area Resource
Aerial Photo Showing Location of New
Underground Mine in Relation to Drilling
Productora Site
Infrastructure
Productora
UG Mine
New UG Mine
Location
1.4km strike length
Productora Phase 2 Drilling
•
•
1 DD drill rig in central resource area
2 RC drill rigs testing northern and
southern extensions of 9.5km strike
length deposit
Figure 9. Location of new underground development at the Productora
central area copper resource
Rougher sulphide flotation results from within the
Productora central area resource indicate particularly high
copper recoveries of 93.5% to 96% over a relatively coarse
grind size (212µm-180µm, respectively). Clean flotation
test work has now also been completed, indicating a
commercial concentrate grade of +27% copper may be
expected following two stages of cleaning.
In addition to metallurgical test work, the company is well
advanced with study deliverables for:
. Project development lay-out and pit design (Figure 8)
. Infrastructure design for sulphide processing plant,
water pipeline and port option
. Capital and operating cost estimation
. Environmental baseline studies and assessment
. Easement corridor and maritime/surface
permitting assessment
. Advanced financial modelling and risk analysis.
A number of pre-feasibility work streams are being
planned to commence in the lead-up to the planned
submission of an Environmental Impact Assessment for
Productora in early 2013.
During March 2012, the Company announced that
development studies at Productora had been significantly
strengthened by the commencement of a new 250,000
tonnes underground mining operation.
In co-operation with lease mining company Playa Brava, Hot
Chili will be allowed access to conduct detailed reconciliation
over a new 250,000 tonne underground mining operation
that Playa Bravo will mine within the centre of the Productora
central resource.
Under the terms of Hot Chili’s current 100% purchase-option
agreement over the central lease at Productora, Playa Brava
are able to mine a capped amount of production prior to the
exercise of the option which is planned by Hot Chili in the near
future. Playa Brava is currently mining approximately 120,000
tonnes pa of ore material from the Productora underground
operation located within the northern extent of the Productora
central area resource (excised from the resource).
The agreement with Playa Brava will see the lease miner able
to secure 250,000 tonnes of total ore production at the new
underground located approximately 400m to the south of
the current Productora underground as shown on Figure 9.
In return, Hot Chili will gain the right to undertake a detailed
resource-mining-processing reconciliation project over the
course of life at the operation.
The company is very pleased with the opportunity to be
able to significantly enhance the rigour and value of its
development studies through its co-operative relationship
with lease miner Playa Brava. The results of the trial
mining reconciliation project will be used to assess
copper grade performance with a mine-scale sample size
and ultimately support a decision to mine at Productora
targeted for late 2013.
Qualifying Statements
* Copper Equivalent Calculation
Copper Equivalent (also Cu Eq*) Calculation represents
the total metal value for each metal, multiplied by the
conversion factor, summed and expressed in equivalent
copper percentage. These results are exploration results
only and no allowance is made for recovery losses that
may occur should mining eventually result. However it is the
Company’s opinion that elements considered here have a
reasonable potential to be recovered as evidenced in similar
multi-commodity natured mines elsewhere in the world.
Copper equivalent conversion factors and long-term price
assumptions used follow:
. Copper Equivalent Formula = Cu% + Mo(ppm)x0.0008 +
Au(ppm)x0.6832
. Price Assumptions – Cu (US$1.80/lb), Mo (US$15/lb),
Au (US$850/oz)
HOT CHILI ANNUAL REPORT 2012
15
productora
copper project
continued
Table 4. JORC Compliant Resource Statement – Reported 7 September 2011
Category
Tonnage
Grade (>0.3% Cu)
Contained Metal (>0.3% Cu)
(Mt)
Copper
Gold Molybdenum CopperEq* Copper
Gold Molybdenum CopperEq*
Indicated
31.1
Inferred
54.0
0.6
0.6
0.1
0.1
Total
85.1
0.6
0.1
159
138
146
0.8
0.7
0.8
185
298
110
180
4,942
7,476
483
290
12,418
248
395
644
Note: Figures in the above table are rounded to one significant figure in accordance with Australian JORC code 2004 guidance on mineral resource reporting
Target Mineralisation
References to exploration target size and target mineralisation
in this announcement are conceptual in nature and should
not be construed as indicating the existence of a JORC
Code compliant mineral resource. Target mineralisation
is based on projections of established grade ranges over
appropriate widths and strike lengths having regard for
geological considerations including mineralisation style,
specific gravity and expected mineralisation continuity
as determined by qualified geological assessment. There
is insufficient information to establish whether further
exploration will result in the determination of a mineral
resource within the meaning of the JORC Code.
Competent Person’s Statement –
Resource Reporting
Information in this announcement relating to mineral
resources is based on information compiled by Mr. Alfred
Gillman, a Fellow of the Australian Institute of Mining and
Metallurgy (CP). Mr. Gillman is an independent resource
consultant and has sufficient experience which is relevant
to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the Australasian
Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves (JORC code 2004). Mr. Gillman consents
to the inclusion in this presentation of the matters based on
his information in the form and context in which it appears.
Competent Person’s Statement –
Exploration Reporting
Information in this announcement that relates to exploration
results and mineralisation is based on information compiled
by Mr Christian Easterday, a Director, who is a Member
of The Australian Institute of Geoscientists. Mr Easterday
has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as a
‘Competent Person’ as defined in the 2004 Edition of the
Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’ (the JORC Code).
Mr Easterday consents to the inclusion in this presentation
of the statements based on his information in the form and
context in which they appear.
16
HOT CHILI ANNUAL REPORT 2012
tenement
schedule and details
“ Hot Chili recently successfully
acquired further tenements
along the southern extension
to the Productora project.”
Productora Tenement Details
Outside of the Company’s own landholding, Hot Chili
has executed agreements with several private parties,
government organisations and major miners. Importantly,
these parties together with Hot Chili control 100% of the
strike extent of defined mineralisation within this land position
including the central mining lease of Productora which
contains an operating underground copper mine.
Hot Chili recently successfully acquired further tenements
along the southern extension to the Productora project. The
new tenements extend the strike length of the Productora
Project, providing further up-side to Hot Chili’s plans to
delineate and develop significant copper-gold-molybdenum
resources at the project.
Hot Chili has established close working relationships with
both government and private stakeholders, of particular
note is the major local partnership with CMP (Chile’s largest
iron ore producer).
An underground copper mine is in operation within the
central mining lease of the Productora project. Under the
terms of Hot Chili’s (SMEAL’s) agreement with the owners of
this mining lease (Coyigualles) the lease miner will be allowed
to continue mining throughout SMEAL’s five year purchase
option period with extraction limited to 1.3 million tonnes
of ore, and mining terminated with a 120 day notice period
upon exercise of the option at any time within the five year
purchase option period.
The lease mining company will have 6 months from exercise
of the option agreement in which to remove all equipment.
Importantly, on August 22 2012, SMEAL secured a 30 year
lease agreement for the Uranio 1 to 70 mining tenement. This
tenement lies within the centre of the Productora project,
forming an encircling landholding around the Company’s
existing JORC compliant central resource (85.1Mt grading
0.6% copper, 0.1g/t gold and 146ppm molybdenum).
The lease represents the last critical portion of the central
resource development area to be consolidated and adds a
further 1.2km of strike length to the project.
The details of the tenement holding for the Productora project
are listed in Table 5 (page 18).
HOT CHILI ANNUAL REPORT 2012
17
tenement
schedule and details
continued
Table 5. Productora project tenement details
Licence ID
Holder (1)
% Interest
Licence Type
Area (ha)
Mining
Patents**
2012-2013
US$ (2)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
FRAN 1, 1-60
FRAN 2, 1-60
FRAN 3, 1-60
FRAN 4, 1-60
FRAN 5, 1-60
FRAN 6, 1-60
FRAN 7, 1-60
FRAN 8, 1-60
FRAN 12, 1-40
FRAN 13, 1-40
FRAN 14, 1-40
FRAN 15, 1-60
FRAN 18, 1-60
FRAN 21, 1-60
FRAN 22
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
ALGA 7A, 1-32
SMEAL
100%
ALGA VI, 5-24
SMEAL
100%
MONTOSA 1-4
SMEAL
100%
CHICA
SMEAL
100%
ESPERANZA 1-5
SMEAL
100%
LEONA SEGUNDA
1-4
CARMEN I, 1-60
CARMEN II, 1-60
ZAPA 1, 1-10
SMEAL
SMEAL
SMEAL
SMEAL
100%
100%
100%
100%
ZAPA 3, 1-23
SMEAL
100%
ZAPA 5A, 1-16
SMEAL
100%
ZAPA 7, 1-24
SMEAL
100%
CABRITO, CABRITO
1-9
SLM Cabrito
80%
CUENCA A, 1-51
CMP
65%
CUENCA B, 1-28
CUENCA C, 1-51
CUENCA D
CUENCA E
CHOAPA 1-10
ELQUI 1-14
LIMARÍ 1-15
LOA 1-6
MAIPO 1-10
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
CMP
65%
65%
65%
65%
65%
65%
65%
65%
65%
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Mining Claim
Exploitation
concession
Mining Claim
Mining Claim
Mining Claim
Exploration
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Mining Claim
Mining Claim
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
Exploitation
concession
300
300
300
300
300
300
300
300
200
200
200
300
300
300
400
89
66
35
1
11
10
300
300
100
92
80
120
50
255
139
255
3
1
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61
66
30
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2.374,20
2.374,20
2.374,20
2.374,20
2.374,20
2.374,20
2.374,20
2.374,20
1.582,80
1.582,80
1.582,80
2.374,20
2.374,20
2.374,20
633
707,36
522,32
279
7,91
87
79,1
2.374,20
2.374,20
791
728,08
633,12
949,68
395,7
2.018
1.100
2.018
24
7,91
395,7
482
522
238
395,7
None
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18
HOT CHILI ANNUAL REPORT 2012
Comments
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Constituted
Constituted
Constituted
Being processed
Being processed
Being processed
06/02/2014
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Being processed
Being processed
Constituted
Constituted
Constituted
Constituted
Constituted
n
o
i
t
p
o
n
i
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n
r
a
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5
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r
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Y
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d
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Licence ID
Holder (1)
% Interest
Licence Type
Area (ha)
Mining
Patents**
2012-2013
US$ (2)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
Comments
TOLTÉN 1-4
CMP
65%
Exploitation
concession
70
553
CACHIYUYITO 1,
1-60
CACHIYUYITO 2,
1-60
CACHIYUYITO 3,
1-60
CMP
65%
Mining Claim
300
2374,2
CMP
65%
Mining Claim
300
2374,2
CMP
65%
Mining Claim
300
2.374,20
LA
PRODUCTORA 1-16
SLM Productora
100%
Exploitation
concession
75
593,55
BUENA
SUERTE 1-6
SLM Buena
Suerte
100%
Exploitation
concession
30
238
PILAR 1-2
SLM Pilar
100%
Exploitation
concession
10
79,1
ORO
INDIO I, 1-20
JGT
100%
Exploitation
concession
82
648,94
AURO
HUASCO I, 1-8
JGT
100%
Exploitation
concession
35
277
URANIO, 1-70
CCHEN
100%
Exploitation
concession
350
2.770,00
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%
0
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1
–
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Y
5
-
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%
0
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–
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5
d
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t
a
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p
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4
1
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,
8
1
r
e
b
m
e
v
o
N
e
t
a
d
n
o
i
t
a
r
i
p
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4
1
0
2
,
8
1
r
e
b
m
e
v
o
N
-
e
s
a
h
c
r
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P
%
0
0
1
–
r
a
e
Y
5
d
e
t
u
c
e
x
e
t
n
e
m
e
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r
g
A
n
o
i
t
p
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t
a
d
n
o
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t
a
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p
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7
1
0
2
,
3
1
y
r
a
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r
b
e
F
)
s
r
a
e
y
0
3
o
t
l
e
b
a
w
e
n
e
r
(
r
a
e
y
5
l
n
o
i
t
a
t
i
o
p
x
e
d
n
a
n
o
i
t
a
r
o
p
x
e
l
t
n
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m
e
e
r
g
a
e
s
a
e
l
e
t
a
d
n
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t
a
n
m
r
e
T
i
2
4
0
2
,
2
2
t
s
u
g
u
A
Total Expenditure in Exploration Commitments due
(next 5 Yrs) US$6,000,000
60.910
Total Exercise Payment Commitments due
(or price) US$8,680,000
Total lease price next 5 Yrs USD$400,000
Obs.: (1) CMP = Compañía Minera del Pacífico; SLM Productora = Sociedad Legal Minera La Productora 1 de la Sierra Coyigualles; SLM Buena Suerte = Sociedad
Legal Minera Buena Suerte 1 de la Sierra Tamarico; SLM Pilar = Sociedad Legal Minera Pilar 1 de la Sierra Tamarindo; SLM Cabrito = Sociedad Legal Minera Cabrito
de la Sierra Zapallo; JGT = Julio Godoy Torres; CCHEN = Comisión Chilena de Energía Nuclear. (2) In accordance with an estimate dollar exchange rate (CH$500).
HOT CHILI ANNUAL REPORT 2012
19
tenement
schedule and details
continued
Figure 10. Productora project tenement location plan
20
HOT CHILI ANNUAL REPORT 2012
Los Mantos Tenement Details
The Los Mantos project comprises 9 licences in total,
including 5 Mining Exploitation and 4 Exploration Licences.
The Exploration Licences have been constituted as a layer of
protection and add very little to the landholding of the project,
defined only by the 5 Mining Exploitation Licences. The
Mining Exploitation Licences cover approximately 264ha.
Hot Chili, through its Chilean subsidiary company Sociedad
Minera El Aguila Limitida (SMEAL), have entered into a five
year option agreement for the 100% purchase of the Los
Mantos project. The private purchase-option agreement
with local Chilean landholder and mine operator Mr. Aldo
Cordero Godoy was executed on the 11 of June 2009, with
the payment of US$220,000. The right to purchase 100%
of the Aldo Cordero concession is exercisable at any time
within the five year option period following satisfaction of all
remaining yearly option payments and an exercise payment
of US$2,000,000.
Table 6. Los Mantos project tenement details
Licence ID
Holder (1)
% Interest
Licence Type
Area (ha)
Mining
Patents**
2012-2013
US$ (2)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
FELIZ DIECIOCHO 1
FELIZ DIECIOCHO 2
FELIZ DIECIOCHO 3
FELIZ DIECIOCHO 4
ICS
ICS
ICS
ICS
ANTONIO 1-29
ACG
100%
100%
100%
100%
100%
Exploration
Exploration
Exploration
Exploration
Exploration
ESPADA 1-12
ACG
100%
Exploration
ROSITA 1-6
ACG
100%
Exploration
ALINDERAMIENTO
Y OTRAS
ACG
100%
Exploration
ENSUEÑO 1-11
ACG
100%
Exploration
200
200
200
200
139
36
30
9
50
317
317
317
317
1
284,9
237,42
71,22
395,7
None
None
None
None
03.05.2014
12.06.2014
12.06.2014
12.06.2014
.
0
0
0
,
0
7
4
,
2
$
D
S
U
f
o
l
a
t
o
T
i
n
o
p
u
d
a
p
y
d
a
e
r
l
a
0
0
0
,
0
2
2
$
D
S
U
0
0
0
,
0
5
$
S
U
f
o
s
t
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m
y
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P
;
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u
t
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g
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3
,
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,
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t
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0
0
0
,
2
$
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U
f
o
t
n
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m
y
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x
E
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.
5
r
Y
f
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d
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h
t
t
a
Comments
Floor of Protection
licences only.
n
o
i
t
p
o
-
e
s
a
h
c
r
u
P
%
0
0
1
–
r
a
e
Y
5
.
d
e
t
u
c
e
x
e
t
n
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m
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r
g
A
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a
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n
o
i
t
a
r
i
p
x
E
4
1
0
2
,
4
l
y
u
J
2.258
Total Exercise Payment Commitments due
(or price) US$2,100,000
Obs.: (1) ICS = Irwin Cordova Sepulveda; ACG = Aldo Cordero Godoy. (2) In accordance with an approximate dollar exchange rate (CH$500).
HOT CHILI ANNUAL REPORT 2012
21
tenement
schedule and details
continued
Figure 11. Los Mantos project tenement plan
22
HOT CHILI ANNUAL REPORT 2012
Chile Norte Tenement Details
The Company’s tenements comprise 102 mining and
exploration licences over areas considered to be highly
prospective for the definition of a large IOCG deposit.
Of these licenses, 54 have been approved and 48 are in
the process of being approved (constituted). Hot Chili’s
exploration licences cover the northern and southern
extensions of a large segment of the Atacama fault zone.
Table 7. Chile Norte project tenement details
The Company executed an “Exploration and Promise
to Incorporate” agreement with CODELCO on the 22 of
October, 2009.
Licence ID
Holder (1) % Interest
Licence Type
Area
(ha)
Mining
Patents** 2012-
2013 US$ (2)-(3)
Exploration and
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
MURRAY B1
MURRAY B2
MURRAY B3
MURRAY B4
MURRAY B5
MURRAY B6
MURRAY B7
MURRAY B8
MURRAY B12
MURRAY B13
MURRAY B14
MURRAY B15
MURRAY B16
MURRAY B17
MURRAY B18
MURRAY B19
MURRAY B20
MURRAY B21
MURRAY B22
MURRAY B23
MURRAY B24
MURRAY B25
MURRAY B26
MURRAY B27
MURRAY 29
MURRAY 30
MURRAY 31
MURRAY 32
MURRAY 33
MURRAY 34
MURRAY 35
MURRAY 36
MURRAY 37
MURRAY 38
MURRAY 39
MURRAY 40
MURRAY 9
MURRAY 10
MURRAY 11
MURRAY 21
MURRAY 23
MURRAY 25
MURRAY 26
MURRAY 27
MURRAY 28
BRAVO 1
BRAVO 2
BRAVO 3
BRAVO 4
BRAVO 5
BRAVO 8
BRAVO 9
BRAVO 10
BRAVO 12
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
SMEAL
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Exploration concession
Exploration concession
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Exploration concession
Mining Petition
Exploration concession
Exploration concession
Exploration concession
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
Mining Petition
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
100
300
200
300
100
100
100
200
200
300
300
300
100
200
300
300
300
300
300
300
300
200
200
100
200
200
100
100
300
300
300
200
200
200
100
200
200
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
158,28
478,84
317
478,84
158,28
158,28
158,28
317
317
478,84
478,84
478,84
158,28
307,6
461,4
461,4
461,4
461,4
461,4
478,84
478,84
317
317
158,28
317
317
158,28
158,28
478,84
478,84
478,84
317
317
317
158,28
317
317
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
15.12.2013
15.12.2013
06.07.2014
09.07.2012
06.07.2014
06.07.2014
13.07.2014
05.07.2014
05.07.2014
06.07.2014
09.07.2012
06.07.2014
05.07.2014
05.07.2014
05.07.2014
05.07.2014
05.07.2014
06.03.2014
06.07.2014
15.12.2013
06.07.2014
15.12.2013
15.12.2013
15.12.2013
05.07.2014
12.07.2014
27.06.2014
05.07.2014
05.07.2014
05.07.2014
05.07.2014
12.07.2014
Comments
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Being processed
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Constituted
Being processed
HOT CHILI ANNUAL REPORT 2012
23
tenement
schedule and details
continued
Licence ID
Holder (1) % Interest
Licence Type
Area
(ha)
Mining
Patents** 2012-
2013 US$ (2)-(3)
Exploration and
Expenditure
Commitment-
Payments
Expiration
date of the
concession
(dd.mm.yyyy)
Comments
AUGITA 4B, 1-40
CODELCO
QUITO B 1
QUITO B 2
QUITO B 3
QUITO B 4
QUITO B 5
QUITO B 6
QUITO B 7
QUITO B 8
QUITO B 9
QUITO B 10
QUITO B 11
QUITO B 12
QUITO B 13
QUITO B 14
QUITO B 15
QUITO B 16
QUITO B 17
QUITO B 18
QUITO B 19
QUITO B 20
QUITO B 21
QUITO B 22
QUITO B 23
QUITO B 24
QUITO B 25
QUITO B 26
QUITOS 35
APIR B 1
APIR B 2
APIR B 3
APIR B 4
APIR B 5
APIR B 6
APIR B 7
APIR B 8
APIR B 9
APIR B 10
APIR B 11
APIR B 12
APIR B 13
APIR B 14
APIR B 15
APIR B 16
APIR B 17
APIR B 18
APIR B 19
APIR 20
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
CODELCO
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
65%
Exploitation concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
Exploration concession
400
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
200
200
300
300
300
300
200
300
300
300
800
1200
600
1200
1000
1200
800
600
600
100
1000
400
1200
1200
200
600
200
200
200
200
3165,6
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
478,84
317
317
478,84
478,84
478,84
478,84
317
478,84
478,84
478,84
1266,24
1899,36
949,68
1899,36
1582,8
1899,36
1266,24
949,68
949,68
158,28
1582,8
633
1899,36
1899,36
317
949,68
317
317
317
317
:
s
e
s
n
e
p
x
e
n
o
i
t
a
r
o
p
x
E
l
.
I
I
.
0
0
0
,
0
0
0
,
2
$
D
S
U
e
u
a
v
l
n
o
i
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a
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p
r
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c
n
i
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f
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.
I
;
t
e
m
–
0
0
0
,
0
0
3
$
D
S
U
r
a
e
y
2
)
i
i
(
;
t
e
m
–
0
0
0
,
0
5
1
$
D
S
U
r
a
e
y
1
)
i
(
0
0
0
,
0
5
7
$
D
S
U
r
a
e
y
5
)
v
i
(
;
0
0
0
,
0
0
5
$
D
S
U
r
a
e
y
4
)
v
i
(
;
0
0
0
,
0
0
3
$
D
S
U
r
a
e
y
3
)
i
i
i
(
30.05.2013
30.05.2013
30.05.2013
30.05.2013
20.04.2013
20.04.2013
20.04.2013
20.04.2013
20.04.2013
20.04.2013
20.04.2013
05.05.2013
05.05.2013
31.05.2013
26.05.2013
26.05.2013
26.05.2013
30.05.2013
30.05.2013
30.05.2013
30.05.2013
30.05.2013
31.05.2013
30.05.2013
31.05.2013
31.05.2013
25.11.2012
20.04.2013
09.09.2013
20.04.2013
09.09.2013
31.05.2013
09.09.2013
05.05.2013
05.05.2013
05.05.2013
05.05.2013
05.05.2013
05.05.2013
09.09.2013
09.09.2013
26.05.2013
26.05.2013
26.05.2013
26.05.2013
26.05.2013
16.03.2012
d
e
t
u
c
e
x
e
t
n
e
m
e
e
r
g
A
n
o
i
t
p
O
V
J
%
5
6
–
r
a
e
Y
5
57.750
Total Exploration Expenditure Commitment due
(5 Yrs) – US$1,437,352
Total Exercise Payment Commitment due
(or price) US$2,000,000
Obs.: (1) SMEAL = Sociedad Minera El Águla Limitada; CCMLA = Compañía Contractual Minera Los Andes. (2) In accordance with an approximate dollar
exchange rate (CH$460). (3) Exercise Payment Commitment of US$2,000,000 is due following the completion of a Bankable Feasibility Study and 30 days
after decision to construct has been taken.
24
HOT CHILI ANNUAL REPORT 2012
Figure 12. Chile Norte project tenement map
HOT CHILI ANNUAL REPORT 2012
25
tenement
schedule and details
continued
Banderas Tenement Details
The Banderas project is located at low altitude (<1,000m)
approximately 50km north of Hot Chili’s Productora project,
adjacent to the Pan American highway in Region III of Chile.
The project is at an early exploration stage and has seen some
historical, small-scale, copper mining within an extensive, large-
scale alteration system.
Sociedad Minera El Aguila Limitida (SMEAL – Hot Chili’s wholly
owned Chilean subsidiary) has entered into several option
agreements to purchase 65% and 100% interests in each of the
mining exploitation and exploration concessions at the Banderas
project owned by a number of private Chilean individuals.
Table 8. Banderas project tenement details
The option exercise period for each of the 65% purchase-option
agreements is five years, while the exercise period for the 100%
purchase-option agreement is four years.
In addition, SMEAL has 100% ownership over some 157ha of
tenements in the area.
Licence ID
Holder (1) % Interest
Licence Type
Mining
Patents**
2012-2013
US$ (2)
Area
(ha)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
Comments
i
.
e
r
u
t
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Being processed
COTOTO 1
COTOTO 2
COTOTO 3
COTOTO 4
COTOTO 5
PIMPOLLA 1
PIMPOLLA 2
PIMPOLLA 3
PIMPOLLA 4
COTOTO A1
COTOTO A2
COTOTO A3
COTOTO A4
COTOTO A5
COTOTO A6
COTOTO A7
COTOTO A8
PIMPOLLA A1
PIMPOLLA A2
PIMPOLLA A3
PIMPOLLA A4
PIMPOLLA A5
PIMPOLLA A6
PIMPOLLA A7
PIMPOLLA A8
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
IPL
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
65% Exploration concession
TITIRUTA 2, 1-20
SMEAL
100%
Mining claim
200
200
200
200
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
300
57
317
317
317
317
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
475,00
451,00
26
HOT CHILI ANNUAL REPORT 2012
Licence ID
Holder (1) % Interest
Licence Type
Mining
Patents**
2012-2013
US$ (2)
Area
(ha)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
Comments
RENACIMIENTO
1-10
JSR
65% Exploitation Concession
348,20
44
ESCONDIDA 1-10
ADC
65% Exploitation Concession
395,7
50
BANDERITA 1-5
SLM
BANDERITA
100% Exploitation Concession
40,00
5
RESGUARDO 1, 2,
3, 4, 5, 6, 7, 8, 12,
13, 14 y 20
SLM
RESGUARDO
100% Exploitation Concession
474,84
RESGUARDO 9,
10, 11, 15, 16, 17,
18 y 20
SLM
RESGUARDO
100% Exploitation Concession
60
40
316,56
.
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N
CONEJA 1-10
SMEAL
100% Exploitation Concession
100
791
None
Constituted
14060,3
Total Exercise Payment Commitments due
(or price) US$888,000
Obs.: (1) IPL = Inversiones Pimpolleda Limitada; SMEAL = Sociedad Minera El Águila Ltda.; JSR = Julio Salomon Richards; ADC = Arnaldo Del Campo; SLM
Banderita Uno de la Sierra Algarrobo; and, SLM Resguardo = Sociedad Legal Minera Resguardo Uno de la Sierra Algarrobo. (2) In accordance with an estimate dollar
exchange rate (CH$500).
HOT CHILI ANNUAL REPORT 2012
27
tenement
schedule and details
continued
Figure 13. Banderas project tenement plan
28
HOT CHILI ANNUAL REPORT 2012
Frontera Tenement Details
The Frontera project lies 70km directly south of
Productora in Region IV of Chile. Frontera is a relatively
advanced exploration stage project with some historical
drilling and a small-scale, historical, copper-oxide open
pit within the project.
Future outstanding payments include US$300,000 due
in 18 months and a final purchase price of US$5,000,000
due 12 months later. In addition, SMEAL has committed to
complete 10,000m of drilling at the project within the first
24 month period.
SMEAL has entered into a 30 month, 100% purchase-option
agreement with private Chilean company Compañía Minera
Taruca SCM. The agreement has been executed with a
US$600,000 payment.
Table 9. Frontera project tenement details
Licence ID
Holder
% Interest
Licence Type
Mining
Patents**
2012-2013
US$ (1)
Area
(ha)
Exploration and
Expenditure
Commitment-Payments
Expiration date of
the concession
(dd.mm.yyyy)
Comments
LA UNION 1-2
Compañía
Minera Taruca
SCM
100%
Exploitation
Concession
10
791
JOTA 1
Compañía
Minera Taruca
SCM
100%
Mining Claim
1
7,91
MADRID 1
Compañía
Minera Taruca
SCM
100%
Mining Petition
100
158,28
MADRID 2
Compañía
Minera Taruca
SCM
100%
Mining Petition
300
478,84
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Obs.: (1) In accordance with an approximate dollar exchange rate (CH$500).
1436,03
Total Exercise Payment Commitments due
(or price) US$5,300,000
HOT CHILI ANNUAL REPORT 2012
29
tenement
schedule and details
continued
Figure 14. Frontera project tenement plan
30
HOT CHILI ANNUAL REPORT 2012
corporate
governance
statement
“ ...the highest standards
of ethical behaviour
and accountability.”
HOT CHILI ANNUAL REPORT 2012
31
corporate
governance
statement
continued
Corporate governance
procedures and policies
The Board
The Board is responsible for the overall corporate
governance of the Company, and it recognises the
need for the highest standards of ethical behaviour and
accountability. The Board is committed to administering
its corporate governance structures to promote integrity
and responsible decision making.
Board charter
The Board has adopted a board charter. Under the board
charter, the Board is responsible for the overall operation and
stewardship of the Company and its subsidiaries and,
in particular, is responsible for:
a) setting the strategic direction of the Company, establishing
goals to ensure that these strategic objectives are met and
monitoring the performance of management against these
goals and objectives;
b) ensuring there are adequate resources available to meet the
Company’s objectives;
c) appointing the managing director and company secretary
and chief financial officer of the Company;
d) evaluating the performance and determining the
remuneration of senior executives, and ensuring that
appropriate policies and procedures are in place for
recruitment, training, remuneration and succession planning;
e) approving and monitoring financial reporting and
capital management;
f) approving and monitoring the progress of
business objectives;
g) ensuring that any necessary statutory licences are held
and compliance measures are maintained to ensure
compliance with the law and licences;
h) ensuring that adequate risk management procedures exist
and are being used;
i) ensuring that the Company has appropriate
corporate governance structures in place, including
standards of ethical behaviour and a culture of
corporate and social responsibility;
j) ensuring that the Board is and remains appropriately
skilled to meet the changing needs of the Company; and
k) ensuring procedures are in place for ensuring the
Company’s compliance with the law.
32
HOT CHILI ANNUAL REPORT 2012
Conflicts of interest
In accordance with the Corporations Act and the
Constitution, Directors must keep the Board advised, on an
ongoing basis, of any interest that could potentially conflict
with those of the Company. Where the Board believes a
significant conflict exists, the Director concerned will not
receive the relevant papers and will not be present at the
Board meeting whilst the matter is being considered.
Independent professional advice
In fulfilling their duties, each Director dealing with
corporate governance matters may obtain independent
professional advice at the Company’s expense, subject to
prior approval of the Chairman, whose approval will not be
unreasonably withheld.
Corporate governance policies
The Board has adopted the corporate governance policies
described below. Copies of the policies are available on the
Company’s website at: www.hotchili.net.au.
As the Company’s activities develop in size, nature
and scope, the implementation of additional corporate
governance policies will be given further consideration.
Code of conduct
The Board believes that the success of the Company has
been and will continue to be enhanced by a strong ethical
culture within the organisation.
The Company has established a corporate code of conduct
(Code) which aims to develop a consistent understanding
of, and approach to, the desired standards of conduct and
behaviour with which the Directors, officers, managers,
employees and consultants of the Company are expected
to comply.
The Code sets out the Company’s policies on various
matters, including the following:
a) conflicts;
b) air dealing;
c) Company assets and property;
d) computer, email and internet use;
e) health, safety and environment;
f) employment practices; and
g) gifts and entertainment.
In addition to their obligations under the Corporations
Act in relation to inside information, all Directors, employees
and consultants have a duty of confidentiality to the
Company in relation to confidential information they possess.
The Code also outlines the procedure for reporting any
breaches of the Code and the possible disciplinary action the
Company may take in respect of any breaches.
Continuous disclosure policy
Once listed, the Company will be a “disclosing entity”
pursuant to Section 111AR of the Corporations Act
and, as such, will need to comply with the continuous
disclosure requirements of Chapter 3 of the ASX Listing
Rules and section 674 of the Corporations Act. Subject
to the exceptions contained in the ASX Listing Rules, the
Company will be required to disclose to ASX any information
concerning the Company which is not generally available and
which a reasonable person would expect to have a material
effect on the price or value of the Shares.
The Company is committed to observing its disclosure
obligations under the Corporations Act and its obligations
under the ASX Listing Rules. All relevant information provided
to ASX will be posted on the Company’s website.
The Company has adopted a continuous disclosure policy,
the purpose of which is to:
a) ensure that the Company, as a minimum, complies
with its continuous disclosure obligations under the
Corporations Act and the ASX Listing Rules and, as much
as possible, seeks to achieve and exceed best practice;
b) provide Shareholders and the market with timely,
direct and equal access to information issued by the
Company; and
c) promote investor confidence in the integrity of the
Company and its securities.
Securities dealing policy
The Company has in place a securities dealing policy which
sets out the requirements for all Directors, executives,
employees, contractors, consultants and advisers of the
Company dealing in the Company’s securities.
Directors and senior executives of the Company may not
deal in the Company’s securities without first notifying
the Managing Director and the Company Secretary of
the intention to trade. There is a blackout period of two
weeks before the periodic reports are lodged with the ASX
and twenty four hours after the reports are lodged ,during
which trading is prohibited. The Managing Director may
not deal in the Company’s securities without prior approval
of the Chairman, and notifying the Company Secretary of
the intention to trade. The Company Secretary must be
subsequently notified of any trade that has occurred.
Shareholder communication policy
The Company has adopted a shareholder communication
policy which outlines the processes through which the
Company will endeavour to ensure timely and accurate
information is provided equally to all Shareholders and the
broader market.
The Company supports Shareholder participation in
general meetings. Mechanisms for enabling Shareholder
participation will be reviewed regularly to encourage the
highest level of Shareholder participation.
Risk management policy
The Company has established a risk management policy,
the purpose of which is to:
a) provide a framework for identifying, assessing,
monitoring and managing risk;
b) communicate the roles and accountabilities of
participants in the risk management system; and
c) highlight the status of risks to which the Company
is exposed, including any material changes to the
Company’s risk profile.
The Board is responsible for:
a)
risk management and oversight of internal controls;
b) establishing procedures which provide assurance that
business risks are identified, consistently assessed and
adequately addressed; and
c)
for the overseeing of such procedures.
The Board will review assessments of the effectiveness of
risk management and internal compliance and control on an
annual basis.
HOT CHILI ANNUAL REPORT 2012
33
corporate
governance
statement
continued
Corporate governance – exceptions
to ASX recommendations
The Company sets out below its “if not why not” report
in relation to those matters of corporate governance where
the Company’s practice departs from the ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations (2nd edition) (Recommendations) to
the extent that they are currently applicable to the Company.
Recommendations 1.2 and 2.5
(process for evaluation)
The Company does not have in place a formal process for
evaluation of the Board, its committees, individual Directors
and key executives.
The small size of the Board and the nature of the Company’s
activities make the establishment of a formal performance
evaluation strategy unnecessary. Performance evaluation is
a discretionary matter for consideration by the entire Board
and in the normal course of events the Board will review
performance of the management, Directors and the Board
as a whole.
Recommendation 2.1 (independent directors)
At present, the Board does not comprise a majority
of “independent directors”. There is one Director who
satisfies the criteria for independence as outlined in
Recommendation 2.1. Dr Allan Trench holds no shares
in the company and is not involved in the day-to-day
management of the company. However, given the size and
scope of the Company’s operations, the Board considers
that it has the relevant experience in the exploration
and mining industry and is appropriately structured
to discharge its duties in a manner that is in the best
interests of the Company and its Shareholders from both
a long-term strategic and operational perspective.
The Board intends to appoint further independent non-
executive directors as suitably qualified candidates are
identified, and the size and scale of the Company’s
operations determine.
Recommendation 2.2 (independent chairman)
The Chairman of the Company, Mr Murray Black, is not
an independent director in accordance with the criteria
for independence as outlined in Recommendation 2.1.
However, given the size and scope of the Company’s
operations, the Board considers that Mr Black has the
relevant experience in the exploration and mining industry
and his appointment as Chairman is in the best interests of
the Company and its Shareholders.
Recommendation 2.4 (nomination committee)
There is no nomination committee. The full Board, which
comprises three (3) Non-Executive Directors and one
(1) Executive Director, considers the matters and issues
that would fall to the nomination committee. The Board
considers that, given the current size and scope of the
Company’s operations, no efficiencies or other benefits
would be gained by establishing a separate nomination
committee. The Board intends to reconsider the requirement
for, and benefits of, a separate nomination committee
as the Company’s operations grow and evolve.
Recommendation 3.4 (gender diversity)
The Company has a policy to employ the best available
person for the position. Appointments are made on ability
and availability, not necessarily on gender. However, the policy
has enabled the Company to employ a Corporate Projects
Manager, a Resource Development Manager, two Senior
Geologists, one Junior Geologist and three administration
staff, who are women and comprise approximately 35% of
all the staff and almost 50% of the technical staff.
The Directors are aware of their responsibility to the
community, the staff and the Company.
Recommendations 4.1, 4.2, 4.3 and 4.4
(audit committee)
There is no audit committee. The role of the audit committee
is undertaken by the full Board, which comprises three (3)
Non-Executive Directors and one (1) Executive Director. The
Board considers that, given the current size and scope of the
Company’s operations and that only one (1) Director holds
an executive position in the Company, no efficiencies or other
benefits would be gained by establishing a separate audit
committee at present.
As the Company’s operations grow and evolve, the
Board will reconsider the appropriateness of forming
a separate audit committee.
Recommendation 8.1 (remuneration committee)
The Company has not established a separate remuneration
committee and does not have a formal remuneration policy in
place. The role of the remuneration committee is undertaken
by the full Board. The Board considers that, given its current
size and that only one (1) Director holds an executive position
in the Company, no efficiencies or other benefits would be
gained by establishing a separate remuneration committee.
As the Company’s operations grow and evolve, the Board
will reconsider the appropriateness of forming a separate
remuneration committee.
34
HOT CHILI ANNUAL REPORT 2012
directors’
report
Directors’ Report
Your Directors have pleasure in presenting their report
together with the financial statements for the year ended
30 June 2012 and the auditor’s report thereon.
Directors
The names of the Directors of Hot Chili Limited during the
financial year and to the date of this report are:
Murray E Black
(Chairman)
Christian E Easterday
(Executive Director)
Michael Anderson
(Non Executive Director –
Appointed 12 December 2011)
Dr Allan Trench
(Non Executive Director)
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Directors Information
Murray Edward Black, Non-Executive Chairman
Mr Black has over 37 years’ experience in the mineral
exploration and mining industry and has served as an
executive director and chairman for several listed Australian
exploration and mining companies. He part-owns and
manages a substantial private Australian drilling business,
has interests in several commercial developments and has
significant experience in capital financing.
Christian Ervin Easterday, Managing Director
Mr Easterday is a geologist with over 15 years’ experience
in the mineral exploration and mining industry. He holds an
Honours Degree in Geology from the University of Western
Australia, a Masters degree in Mineral Economics from Curtin
University of Technology and a Masters Degree in Business
Administration from Curtin’s Graduate School of Business.
Mr Easterday has held several senior positions and
exploration management roles with top-tier gold companies
including Placer Dome, Hill 50 Gold and Harmony Gold,
specialising in structural geology, resource development and
mineral economic valuation. Mr Easterday has significant
experience in project identification, valuation and negotiation
covering gold, copper, uranium, iron ore, nickel, and tantalum
resource projects in Australia and overseas. Mr Easterday is
a Member of The Australian Institute of Geoscientists.
Dr Allan Trench, Non-Executive Director
Dr Allan Trench is a geologist/geophysicist and business
management consultant with over 22 years experience
across a broad range of commodities. His minerals sector
experience spans strategy formulation, exploration, project
development and mining operations. Allan holds degrees
in geology, a doctorate in geophysics, a Masters degree
in Mineral Economics and a Masters degree in Business
Administration. He currently acts as independent director to
Venturex Resources Ltd, commenced 12 November 2008,
Pioneer Resources Ltd, commenced 5 September 2003,
Navigator Resources Ltd, commenced 14 November 2005,
Kimberley Rare Earths Ltd. commenced 2 December 2010,
Enterprise Metals Ltd, commenced 3 April 2012, Tratford
Resources Ltd, commenced 7 May 2012.
Allan has previously worked with McKinsey & Company as
a management consultant, with Woodside Petroleum in
strategy development and with WMC both as a geophysicist
and exploration manager. He is an Associate Consultant with
international metals and mining advisory firm CRU Group
and has contributed to the development of that company’s
uranium practice, having previously managed the CRU Group
global copper research team.
Allan maintains academic links as an Adjunct Professor
to the Western Australian School of Mines, Curtin University
of Technology. Dr Allan Trench’s appointment adds
considerable experience and expertise to Hot Chili’s board.
Michael Anderson, Non-Executive Director
(Appointed 12 December 2011)
Mr Anderson has more than 20 years industry experience,
largely in southern Africa and Australia. His career
commenced as a geologist with Anglo American, followed
by roles in the metallurgical and engineering industries with
Mintek, Bateman and Kellogg Brown & Root. Mr Anderson
subsequently held senior management positions including
Corporate Development Manager at Gallery Gold Limited
and, most recently, as Managing Director at Exco Resources
Limited where he oversaw the successful development of
the White Dam Gold Project and the sale of the Company’s
Cloncurry Copper Project to Xstrata. He had joined the Board
in April 2006 and resigned on 5 August 2011.
Mr Anderson joined specialist resource investor Taurus Funds
Management Pty Limited as a Director in August 2011.
He was appointed as a Non-Executive Director of Base
Resources Ltd on 28 November 2011 and also as a Non
Executive Director of Ampella Mining Ltd on 18 June 2012.
HOT CHILI ANNUAL REPORT 2012
35
directors’
report
continued
Directors’ Report (continued)
Corporate Information
Hot Chili Ltd is a Company limited by shares and is
domiciled in Australia.
Principal Activities
During the year, the consolidated entity was involved in
mineral exploration.
Results of Operations
The results of the consolidated entity for the year ended
30 June 2012 was a loss of $2,894,482 (2011: loss
$11,065,643).
Dividends
No dividends were paid or declared since the end of
the previous year. The Directors do not recommend the
payment of a dividend.
Review of Operations
Refer to Operations Report on pages 6 to 16.
Security Holding Interests of Directors
Directors
Murray E Black
Christian E Easterday
Dr Allan Trench
Michael Anderson (Appointed 12 December 2011)
Significant Changes in the State of Affairs
There were no significant changes to the state of affairs,
subsequent to the end of the reporting period, other than
what has been reported in other parts of this report.
Matters Subsequent to the End of the Financial Year
At the date of this report there are no other matters or
circumstances which have arisen since 30 June 2012 that
has significantly affected or may significantly affect:
i)
ii)
iii)
the operations of the consolidated entity;
the results of its operations; or
the state of affairs of the consolidated entity subsequent to
30 June 2012.
Likely Developments and Expected
Results of Operations
Further information on the likely developments in the
operations of the consolidated entity and the expected results
of operations have been included in the review of operations.
Ordinary
Shares
Options Over
Ordinary Shares
Direct
Interest
Indirect
Interest
- 10,000,000
200,000 10,000,000
-
-
-
-
Direct
Interest
-
100,000
-
-
Indirect
Interest
6,750,000
6,750,000
-
-
Shares Under Option
Company Secretary – J Sendziuk
There were 56,756,336 ordinary shares under option at
30 June 2012.
Shares Issued on the Exercise of Options
There were 200,000 ordinary shares of Hot Chili Limited
issued during the year ended 30 June 2012 from the
exercise of options.
Directors Benefits
Since 30 June 2012, no Director of the consolidated
entity has received or become entitled to receive a benefit
(other than a benefit included in the aggregate amount of
emoluments received or due and receivable by Directors
shown in the financial statements) by reason of a contract
made by the consolidated entity with the Director or with a
firm of which he is a member, or with a company in which he
has a substantial financial interest.
John Sendziuk is a Chartered Accountant. He has 25 years
experience in providing corporate secretarial, taxation and
business advice to a diverse group of business clients and
public companies.
Indemnification and Insurance
of Directors and Officers
During the financial year, the consolidated entity maintained
an insurance policy which indemnifies the Directors and
Officers of Hot Chili Limited in respect of any liability
incurred in connection with the performance of their duties
as Directors or Officers of the consolidated entity. The
consolidated entity’s insurers have prohibited disclosure
of the amount of the premium payable and the level of
indemnification under the insurance contract.
36
HOT CHILI ANNUAL REPORT 2012
Directors’ Meetings
The number of Sirectors’ meetings attended and number of written resolutions signed by each of the Directors of the Company
during the year were:
No. of
Meetings
while in office
No. of
Meetings
attended
20
10
20
20
20
10
20
20
The consolidated entity was not a party to any such
proceedings during the year.
Non-Audit Services
The Board of Directors is satisfied that the provision of non-
audit services during the year is compatible with the general
standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the
services disclosed below did not compromise the external
auditor’s independence for the following reasons:
. all non-audit services are reviewed and approved by
the directors prior to commencement to ensure they
do not adversely affect the integrity and objectivity of
the auditor; and
. the nature of the services provided does not compromise
the general principles relating to auditor independence
in accordance with APES 110: Code of Ethics for
Professional Accountants set by the Accounting
Professional and Ethical Standards Board.
Non audit services that have been provided by the entity’s
auditor, RSM Bird Cameron Partners, have been disclosed
in Note 14.
Auditors Independence Declaration
The lead auditor’s independence declaration for the year
ended 30 June 2012 has been received and is included
within this annual report.
Director
Murray E Black
Michael Anderson (Appointed 12 December 2011)
Christian E Easterday
Dr Allan Trench
Environmental Issues
The consolidated entity’s exploration and mining operations
are subject to environment regulation under the law of Chile.
The consolidated entity holds exploration/mining tenements
in Chile thus is subject to the Mining Acts of that country
each with specific conditions relating to environmental
management. In some jurisdictions Cash Bonds must be
lodged with the relevant Department until conditions are
fulfilled. There are no bonds currently in place in respect of
the consolidated entity’s tenement holdings.
The Directors advise that during the year ended 30 June
2012 no claim has been made by any competent authority
that any environmental issues, condition of license or notice
of intent has been breached, and no claim has been made
for increase of bond.
The Directors have considered compliance with the National
Greenhouse and Energy Reporting Act 2007 which requires
entities to report annual greenhouse gas emissions and
energy use. For the measurement period, 1 July 2011 to
30 June 2012, the Directors have assessed that there are
no current reporting requirements but may be required to do
so in the future.
Shares under Option
At the date of this report, there were 51,656,336 unissued
ordinary shares under options.
Options Lapsed During the Year
No options lapsed during the year.
Proceedings on Behalf of Company
No person has applied for leave of Court to bring
proceedings on behalf of the consolidated entity or intervene
in any proceedings to which the consolidated entity is a
party for the purpose of taking responsibility on behalf of the
consolidated entity for all or any part of those proceedings.
HOT CHILI ANNUAL REPORT 2012
37
directors’
report
continued
Remuneration Report (Audited)
The information provided in this remuneration report has
been audited.
Principles used to determine amount
and nature of remuneration
The objective of the consolidated entity’s executive reward
framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The Board ensures
that executive reward satisfies the following key criteria for
good reward governance practises:
. competitiveness and reasonableness
. acceptability to shareholders
. transparency
The current base remuneration for Directors was last
reviewed with effect from 1 July 2011. All director fees are
periodically recommended for approval by shareholders.
The consolidated entity’s policy regarding executives
remuneration is that the executives are paid a commercial
salary and benefits based on the market rate and experience.
Details of Remuneration of Key Management
Personnel of the consolidated entity
and Remuneration of Directors
Details of the nature and amount of each element of
remuneration of each Director of the consolidated entity for
the financial year are as follows:
Short-term
Post
Employment
Share-based
Payments
Consulting
Fees
Related
Parties
$
Salary
$
Directors’
Fee
$
Other
Benefits
$
Super-
annuation
$
Options
$
Total
$
-
-
78,000
-
9,360
40,088
-
-
40,088
-
285,000
-
285,000
-
-
46,000
124,000
-
8,164
-
8,164
-
-
-
-
-
-
65,000
-
220,000
2,043
-
-
220,000
37,957
105,000
-
-
-
-
-
-
34,200
5,520
49,080
7,800
-
26,400
4,555
38,755
-
-
-
-
-
-
-
-
-
-
87,360
40,088
327,364
51,520
506,332
72,800
2,043
246,400
42,512
363,755
Name
2012
Murray E Black
Michael Anderson
(Appointed 12 December 2011)
Christian E Easterday
Dr Allan Trench
2011
Murray E Black
Bernard R Mountford
(Resigned 19 July 2010)
Christian E Easterday
Dr Allan Trench
(Appointed 19 July 2010)
Remuneration of Key Management Personnel
Short-term
Post
Employment
Share-based
Payments
Consulting
Fees
Related
Parties
$
-
-
-
-
-
-
Salary
$
212,684
20,000
232,684
187,425
7,000
194,425
Other
Benefits
$
Super-
annuation
$
Options
$
Total
$
-
-
-
-
-
-
40,000
40,000
-
28,000
28,000
106,767
45,757
152,524
319,451
105,757
425,208
-
-
-
187,425
35,000
222,425
Name
2012
Rodrigo Diaz (Manager Chile)
John Sendziuk (Company Secretary)
2011
Rodrigo Diaz (Manager Chile)
John Sendziuk (Company Secretary)
38
HOT CHILI ANNUAL REPORT 2012
The employee options issued to the key management
personnel have a strike price of 90 cents and are exercisable
by 19 July 2014.
Fair value of options issued
The fair value at issue date was determined using a Black-
Scholes option pricing model that takes into account the
exercise price, the share price at issue date and expected
price volatility of the underlying share and the risk free interest
rate for the term of the loan.
The model inputs for options granted during the year ended
30 June 2012 included:
a) options are granted for no consideration
b) exercise price – $0.90
c)
issue date – 20 July 2011
d) expiry date – 19 July 2014
e) expected price volatility of the Company’s shares – 80%
f)
risk-free interest rate – 5.25%
g) spot price at date of valuation – $0.58.
There were no termination benefits paid during the year to
any director or key management personnel.
There were no key management personnel employed
by the Company during the year for which disclosure of
remuneration is required, apart from the remuneration details
disclosed above.
At the date of this report, the Company had no employees
that fulfilled the role of key management personnel, other
than those disclosed above.
Service Contracts
Term and termination
Mr Easterday is employed for an initial term of 3 years,
commencing on 5 April 2010. At least 6 months’ before the
End Date, either party may give notice that the agreement will
terminate on the End date.
During the initial 3 year term, the Company may terminate
the agreement by providing Mr Easterday with notice of
termination or payment in lieu of notice up to an amount
equivalent to 6 months’ remuneration.
After the initial term, the agreement will continue until either
Mr Easterday terminates by giving the Company 6 months’
notice or the Company terminates by giving Mr Easterday
6 months’ notice or payment in lieu of notice up to an
amount equivalent to 6 months’ remuneration.
The Company may terminate the agreement summarily for
any serious incidents or wrongdoing by Mr Easterday.
Termination entitlements
Upon termination of the agreement, Mr Easterday will be
entitled to termination benefits in accordance with Part 2D.2
of the Corporations Act. The termination benefits (including
any amount of payment in lieu of notice) must not exceed the
amount equal to one times the executive’s average annual
base salary in the last 3 years’ of service with the Company,
unless the benefit has first been approved by Shareholders in
a general meeting.
Post termination restraints
Mr Easterday is subject to post termination non-competition
restraints up to a maximum of 12 months from the date
of termination.
The Company has entered into an executive service
agreement with Mr Christian Easterday, as Managing Director
of the Company.
Dated this 19 day of September 2012 in accordance with
a resolution of the Directors and signed for on behalf of the
Board by:
Remuneration
Under the agreement, Mr Easterday will receive an annual
salary of $285,000, plus superannuation at the rate of 12%
and other entitlements. Mr Easterday’s remuneration is
subject to annual review.
Christian E Easterday
Managing Director
HOT CHILI ANNUAL REPORT 2012
39
auditor’s
independence declaration
RSM Bird Cameron Partners
8 St George’s Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 8 9261 9100 F +61 8 9261 9101
www.rsmi.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2012, I declare
that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM BIRD CAMERON PARTNERS
Perth, WA
Dated: 19 September 2012
TUTU PHONG
Partner
Liability limited by a
scheme approved
under Professional
Standards Legislation
Major Offices in:
Perth, Sydney, Melbourne,
Adelaide and Canberra
ABN 36 965 185 036
RSM Bird Cameron Partners is a member of the RSM network. Each member
of the RSM network is an independent accounting and advisory firm which
practises in its own right. The RSM network is not itself a separate legal entity
in any jurisdiction.
Quality
ISO 9001
40
HOT CHILI ANNUAL REPORT 2012
independent
auditor’s report
RSM Bird Cameron Partners
8 St George’s Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 8 9261 9100 F +61 8 9261 9101
www.rsmi.com.au
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOT CHILI LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Hot Chili Limited, which comprises the consolidated
statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the
directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Liability limited by a
scheme approved
under Professional
Standards Legislation
Major Offices in:
Perth, Sydney, Melbourne,
Adelaide and Canberra
ABN 36 965 185 036
RSM Bird Cameron Partners is a member of the RSM network. Each member
of the RSM network is an independent accounting and advisory firm which
practises in its own right. The RSM network is not itself a separate legal entity
in any jurisdiction.
Quality
ISO 9001
HOT CHILI ANNUAL REPORT 2012
41
independent
auditor’s report
continued
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of Hot Chili Limited, would be in the same terms if given to the directors as at the time of this auditor's
report.
Opinion
In our opinion:
(a) the financial report of Hot Chili Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2012.
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Hot Chili Limited for the year ended 30 June 2012 complies with
section 300A of the Corporations Act 2001.
RSM BIRD CAMERON PARTNERS
Perth, WA
Dated: 19 September 2012
TUTU PHONG
Partner
42
HOT CHILI ANNUAL REPORT 2012
directors’
declaration
The directors of the company declare that:
1. the financial statements and notes are in accordance with the Corporations Act 2001 and:
a) comply with Australian Accounting Standards, which, as stated in accounting policy Note 1(a) to the financial statements,
constitutes explicit and unreserved compliance with International Financial Reporting Standards; and
b) give a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year
ended on that date;
2. the Chief Executive Officer and Chief Finance Officer have each declared that:
a)
the financial records of the consolidated entity for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
b)
the financial statements and notes for the financial year comply with Australian Accounting Standards; and
c)
the financial statements and notes for the financial year give a true and fair view; and
3. in the directors’ opinion there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as
and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Christian E Easterday
Managing Director
Dated this 19th day of September 2012
HOT CHILI ANNUAL REPORT 2012
43
statement of
comprehensive income
For the year ended 30 June 2012
Interest income
Other income
Depreciation
Consulting fees
Exploration expenses
Corporate fees
Legal and professional
Employee benefits expense
Administration expenses
Accounting fees
Travel costs
Other expenses
Foreign exchange loss
Share based payments
Note
2
3
Consolidated Entity
2012
$
57,295
762,772
2011
$
104,498
-
820,067
104,498
(8,520)
(147,248)
(41,017)
(452,924)
(464,300)
(8,031,965)
(141,890)
(178,146)
(101,602)
(584,036)
(938,038)
(1,204,618)
(409,667)
(76,122)
(400,606)
(333,257)
-
(616,755)
(258,809)
(34,642)
(134,180)
(144,592)
(181,756)
-
Loss from continuing operations before income tax
(2,894,482)
(11,065,643)
Loss after income tax
Other comprehensive income
5
-
-
(2,894,482)
(11,065,643)
-
-
Total comprehensive income attributable to members of Hot Chili Limited
(2,894,482)
(11,065,643)
Basic earnings per share (cents)
Diluted earnings per share (cents)
13
13
(1.64)
(1.64)
(8.11)
(8.11)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
44
HOT CHILI ANNUAL REPORT 2012
comprehensive income
statement of
financial position
As at 30 June 2012
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Plant and equipment
Exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Option reserve
Foreign currency translation reserve
Accumulated losses
Total equity
Consolidated Entity
Note
2012
$
2011
$
6
7
8
9
10
16,861,320
4,220,660
-
15,807
9,151
-
16,877,127
4,229,811
324,844
243,984
15,821,745
2,342,138
16,146,589
2,586,122
33,023,716
6,815,933
435,712
435,712
435,712
1,327,701
1,327,701
1,327,701
32,588,004
5,488,232
11
48,566,232
19,239,321
12(b)
12(c)
12(a)
739,651
1,222
72,308
1,222
(16,719,101)
(13,824,619)
32,588,004
5,488,232
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
HOT CHILI ANNUAL REPORT 2012
45
statement of
changes in equity
As at 30 June 2012
Consolidated Entity
Contributed
Equity
Option
Reserve
Foreign
Currency
Translation
Reserve
Accumulated
Losses
Total
Equity
$
$
$
$
$
Balance at 1 July 2011
19,239,321
72,308
1,222
(13,824,619)
5,488,232
Loss for the year
Total Comprehensive
Income for the year
Shares issued
Share issue costs
Options issued
-
-
30,299,401
(972,490)
-
-
-
-
-
667,343
-
-
-
-
-
(2,894,482)
(2,894,482)
(2,894,482)
(2,894,482)
-
-
-
30,299,401
(972,490)
667,343
Balance at 30 June 2012
48,566,232
739,651
1,222 (16,719,101) 32,588,004
Balance at 1 July 2010
11,419,755
72,308
1,222
(2,758,976)
8,734,309
Loss for the year
Total Comprehensive
Income for the year
Shares issued
Share issue costs
-
-
8,330,017
(510,451)
-
-
-
-
-
-
-
-
(11,065,643)
(11,065,643)
(11,065,643)
(11,065,643)
-
-
8,330,017
8,330,017
Balance at 30 June 2011
19,239,321
72,308
1,222 (13,824,619)
5,488,232
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
46
HOT CHILI ANNUAL REPORT 2012
statement
of cash flows
For The Year Ended 30 June 2012
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Consolidated Entity
Note
2011
$
2010
$
(2,390,582)
(9,499,464)
57,295
104,498
Net cash (used in) operating activities
16(b)
(2,333,287)
(9,394,966)
Cash flows from investing activities
Payments for plant and equipment
Payments for mineral exploration areas
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Net cash provided by financing activities
Net increase (decrease) in cash held
(228,108)
(117,127)
(14,887,628)
(512,643)
(15,115,736)
(629,770)
30,299,401
8,330,017
(972,490)
(510,451)
29,326,911
7,819,566
11,877,888
(2,205,170)
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rates on cash holdings in foreign currencies
4,220,660
6,607,586
762,772
(181,756)
Cash and cash equivalents at the end of the financial year
16(a)
16,861,320
4,220,660
The above Statement of Cash Flows should be read on conjunction with the accompanying notes.
HOT CHILI ANNUAL REPORT 2012
47
notes to the
financial statements
1 Summary of Significant Accounting Policies
The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the
financial statements.
a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian equivalents to
International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting
Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.
The financial report was authorised for issue on 19 September 2012 by the Board of Directors.
The functional and presentation currency of Hot Chili Limited is Australian Dollars.
Compliance with IFRSs
Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the financial statements of Hot
Chili Limited comply with International Financial Reporting Standards.
New Accounting Standards and Interpretations
In the current year, the consolidated entity has adopted all of the new and revised Standards and Interpretations issued
by the Australian Accounting Standards Board that are relevant to its operations and effective for the current annual
reporting period. The adoption of these new and revised Standards and Interpretations has not resulted in a significant or
material change to the consolidated entity’s accounting policies.
At the date of this financial report the following standards, which may impact the entity in the period of initial application,
have been issued but are not yet effective:
Reference
Title
Summary
AASB 9
AASB 10
AASB 11
AASB 12
AASB 127
Joint Arrangements
Consolidated
Financial Statements
Financial Instruments Replaces the requirements of AASB 139
for the classification and measurement of
financial assets. This is the result of the first
part of Phase 1 of the IASB’s project to
replace IAS 39.
Replaces the requirements of AASB 127
and Interpretation 112 pertaining to the
principles to be applied in the preparation
and presentation of consolidated financial
statements.
Replaces the requirements of AASB 131
pertaining to the principles to be applied
for financial reporting by entities that have
in interest in arrangements that are jointly
controlled.
Replaces the disclosure requirements of
AASB 127 and AASB 131 pertaining to
interests in other entities.
Prescribes the accounting and disclosure
requirements for investments in subsidiaries,
joint ventures and associates when an entity
prepares separate financial statements.
Disclosure of Interests
in Other Entities
Separate
Financial Statements
Application date
(financial years
beginning)
Expected
Impact
None
1 January 2013
(likely to be
extended to
2015 by ED 215)
1 January 2013
None
1 January 2013
None
1 January 2013
None
1 January 2013
None
48
HOT CHILI ANNUAL REPORT 2012
Reference
Title
Summary
AASB 128
Investments in
Associates and
Joint Ventures
AASB 13
Fair Value
Measurement
AASB 119
Employee Benefits
IFRIC
Interpretation
20
Stripping Costs in
the Production Phase
of a Surface Mine
Prescribes the accounting for investments in
associates and sets out the requirements for
the application of the equity method when
accounting for investments in associates and
joint ventures.
Provides a clear definition of fair value, a
framework for measuring fair value and
requires enhanced disclosures about fair
value measurement.
Prescribes the accounting and disclosure for
employee benefits. This Standard prescribes
the recognition criteria when in exchange for
employee benefits.
This Interpretation clarifies the requirements
for accounting for stripping costs in the
production phase of a surface mine, such
as when such costs can be recognised
as an asset and how that asset should be
measured, both initially and subsequently.
Application date
(financial years
beginning)
Expected
Impact
1 January 2013
None
1 January 2013
None
1 January 2013
None
1 January 2013
None
The consolidated entity has decided against early adoption of these standards.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets.
Critical accounting estimates
The preparation of financial statements in conformity of AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in the notes to the financial statements.
b) Principles of consolidation
The consolidated financial statements comprise the financial statements of Hot Chili Ltd and its controlled entities. Control
exists where the consolidated entity has the capacity to dominate the decision-making in relation to the financial and
operating policies of another entity so that the other entity operates with the consolidated entity to achieve the objectives of
the consolidated entity. All inter-company balances and transactions between entities in the consolidated entity, including
any unrealised profits and losses have been eliminated on consolidation.
Non-controlling interests in the results and equity of the consolidated entities are shown separately in the consolidated
statement of comprehensive income and consolidated statement of financial position respectively.
Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of
comprehensive income from the date on which control commences. Where control ceases, de-consolidation occurs
from that date.
Investments in associates are accounted for in the consolidated financial statements using the equity method. Under
this method, the consolidated entity’s share of the post-acquisition profits or losses of associates is recognised in the
consolidated statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised
in consolidated reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment.
Associates are those entities over which the consolidated entity exercises significant influence, but not control. Investments
in subsidiaries are recognised at cost less impairment losses.
HOT CHILI ANNUAL REPORT 2012
49
notes to the
financial statements
continued
1 Summary of Significant Accounting Policies (continued)
c) Income tax
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on
the profit adjusted for any non-assessable or disallowed items.
Deferred tax is accounted for using the statement of balance sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where
there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in the statement of comprehensive income except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against
which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility
imposed by the law.
Hot Chili Limited and its wholly-owned Chilean subsidiaries have not formed an income tax consolidated group under
the Tax Consolidation Regime.
d) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for major business
activities as follows:
i)
Interest Income
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the
financial assets.
ii) Other Services
Other debtors are recognised at the amount receivable and are due for settlement within 30 days from the end of the
month in which services were provided.
e) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest.
These costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a stage which permits reasonable
assessment of the economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which
the decision to abandon the area is made.
When production commences the accumulated costs for the relevant area of interest are amortised over the life of the
project area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest.
50
HOT CHILI ANNUAL REPORT 2012
f) Plant and equipment
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
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 consolidated entity and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive
income during the financial period in which they are incurred.
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation
and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows
that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been
discounted to their present values in determining recoverable amounts.
Depreciation
The depreciable amount of all plant and equipment is depreciated on a diminishing value over their useful lives to the
consolidated entity commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and Equipment
Depreciation Rate
10-33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses
are included in the statement of comprehensive income.
g) Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid, together with assets ordered before the end of the financial year. The amounts are
unsecured and are usually paid within 30 days of recognition.
h) Equity-based payments
Equity-based compensation benefits can be provided to directors and executives.
The fair value of options granted to directors and executives is recognised as an employee benefit expense with a
corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the period
during which the directors and/or executives becomes unconditionally entitled to the options.
The fair value at grant date is independently determined using an option pricing model that takes into account the exercise
price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the
option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the
risk-free interest rate for the term of the option.
HOT CHILI ANNUAL REPORT 2012
51
notes to the
financial statements
continued
1 Summary of Significant Accounting Policies (continued)
i) Earnings per share
i) Basic earnings per share
Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
j) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the board of directors.
k) Impairment of assets
Assets that have an indefinite useful like 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 costs 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 (cash generating units).
l) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value, and bank overdrafts.
m) Provisions
Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past
events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has
been reliably estimated.
n) GST
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation. In this case it is recognised as part of the cost of acquisition of the asset or as part of the
expense.
Receivables and payables are stated as inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
52
HOT CHILI ANNUAL REPORT 2012
2
Interest Income
Interest income
3 Other Income
Foreign exchange gain
Consolidated Entity
2012
$
57,295
57,295
2011
$
104,498
104,498
Consolidated Entity
2012
$
762,772
762,772
2011
$
-
-
4 Segment Information
The consolidated entity has identified its operating segments based on the internal reports that are reviewed and
used by the board of directors (chief operating decision makers) in assessing performance and determining the
allocation of resources.
The consolidated entity operates as a single segment which is mineral exploration.
The consolidated entity is domiciled in Australia. All revenue from external parties is generated from Australia only.
Segment revenues are allocated based on the country in which the party is located.
Operating revenues of approximately Nil (2011 – Nil) are derived from a single external party.
All the assets relate to mineral exploration. Segment assets are allocated to segments based on the purpose for which
they are used.
HOT CHILI ANNUAL REPORT 2012
53
notes to the
financial statements
continued
5
Income Tax Expense
a) Income tax expense
Current tax
Deferred tax
b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax
Prima facie income tax at 30% (2011: 30%)
Tax-effect of amounts not assessable in calculating taxable income:
Tax-effect of amounts not deductible in calculating taxable income:
Tax loss not recognised
Income tax expense
Consolidated Entity
2012
$
2011
$
-
-
-
-
-
-
(2,894,482)
(868,345)
(240,573)
573,563
(535,354)
-
(11,065,643)
(3,319,693)
-
3,004,370
(315,323)
-
c) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
4,205,296
1,261,589
2,539,841
761,952
d) The directors estimate that the potential deferred tax asset at 30 June 2012 in respect of tax losses not brought to account is
$1,261,589 (2011: $761,952).
In addition, Chilean subsidiaries of Hot Chili Ltd also have tax losses that are a potential deferred tax asset of $2,652,062
(2011: $985,246). The companies will be taxed independently in Chile.
e) The benefit for tax losses will only be obtained if:
i) The consolidated entity and the subsidiaries derive income, sufficient to absorb tax losses.
ii) There is no change to legislation to adversely affect the consolidated entity and its subsidiaries in realising the benefit from the
deduction of the losses.
54
HOT CHILI ANNUAL REPORT 2012
6 Cash and Cash Equivalents
Cash at bank
7
Trade and Other Receivables
Trade and other receivables
There are no impaired receivables or any provision for impairment against the receivables.
8 Plant and Equipment
Plant and equipment at cost
Less provision for depreciation
Reconciliations:
Plant and equipment
Carrying amount at the beginning of the year
Additions
Depreciation
Carrying amount at the end of the year
9
Exploration and Evaluation Expenditure
Mining tenements at cost
Capitalised mineral exploration and evaluation
Tenements
Carrying amount at the beginning of the year
Purchase of mineral interests
Exploration costs written off
Capitalised mineral exploration and evaluation
Carrying amount at the end of the year
Consolidated Entity
2012
$
2011
$
16,861,320
16,861,320
4,220,660
4,220,660
-
-
9,151
9,151
434,912
(110,068)
289,588
(45,604)
324,844
243,984
243,984
145,324
(64,464)
167,874
117,127
(41,017)
324,844
243,984
3,300,184
2,342,138
12,521,561
-
15,821,745
2,342,138
2,342,138
1,420,346
(462,300)
12,521,561
1,829,495
512,643
-
-
15,821,745
2,342,138
The future realisation of these non-current assets is dependent on further exploration and funding necessary to commercialise
the resources or realisation through sale.
HOT CHILI ANNUAL REPORT 2012
55
notes to the
financial statements
continued
10 Trade and Other Payables
Trade payables
Other payables
11 Contributed Equity
Consolidated Entity
2012
$
342,601
93,111
2011
$
1,265,704
61,997
435,712
1,327,701
No. Shares
No. Shares
Consolidated Entity
2012
2011
2012
$
2011
$
a) Share capital
At the beginning of the financial year
149,043,888
124,210,527
19,239,321
11,419,755
Shares issued during the year
Shares cancelled during the year
Less cost of issue
50,632,336
24,833,361
30,299,402
8,330,017
-
-
-
-
-
-
(972,491)
(510,451)
At the end of the financial year
199,676,224 149,043,888
48,566,232
19,239,321
b) Terms and Condition of Contributed Equity
Ordinary Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
c) Movement in Unlisted Options
Balance at beginning of year
Issued during the year
Options exercised during the year
Options lapsed during the year
2012
Options
2011
Options
40,590,000
40,740,000
16,366,336
-
(200,000)
(150,000)
-
-
Balance at end of year
56,756,336
40,590,000
d) Listed Options
There are no listed options over ordinary shares in the company at 30 June 2012 (2011: Nil).
56
HOT CHILI ANNUAL REPORT 2012
e) Capital Risk Management
The consolidated entity’s objectives when managing capital are to safeguard their ability to continue as a going concern,
so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may issue new shares, pay dividends or return
capital to shareholders.
Capital is calculated as ‘equity’ as shown in the statement of financial position, and is monitored on the basis of funding
exploration activities.
12 Reserves and Accumulated Losses
a) Accumulated losses
Accumulated losses at the beginning of the year
Net loss for the year
Accumulated losses at the end of the year
b) Reserves
Options reserve
The options reserve is used to recognise the fair value of options issued.
As at 30 June 2012, no options to which the reserve relates have been exercised.
Balance at the beginning of the year
Movement during the year
Balance at the end of the year
c) Foreign transaction reserve
Balance at the beginning of the year
Additions during the year
Balance at the end of the year
Consolidated Entity
2012
$
2011
$
(13,824,619)
(2,758,976)
(2,894,482)
(11,065,643)
(16,719,101)
(13,824,619)
72,308
667,343
72,308
-
739,651
72,308
1,222
-
1,222
1,222
-
1,222
Total reserves and accumulated losses
(15,978,228)
(13,751,089)
HOT CHILI ANNUAL REPORT 2012
57
notes to the
financial statements
continued
13 Loss Per Share
Consolidated Entity
2012
$
2011
$
Loss after tax attributable to members of Hot Chili Limited
(2,894,482)
(11,065,643)
Basic loss per share (cents)
Diluted loss per share (cents)
(1.64)
(1.64)
(8.11)
(8.11)
Unexercised options are not dilutive. The weighted average number of ordinary shares
on issue used in the calculation of basic loss per share
Weighted average number of ordinary shares and potential ordinary shares used as
he denominator in calculating diluted loss per share
176,957,302
136,403,634
176,957,302
136,403,634
14 Remuneration of Auditors
Remuneration of the auditor for:
Auditing and reviewing of financial reports
43,000
43,000
33,500
33,500
15 Key Management Personnel Disclosures
a) Directors
The following persons were Directors of Hot Chili Limited during the financial year and up to the date of this report:
Murray E Black
Christian E Easterday
Michael Anderson
Dr Allan Trench
(Chairman)
(Executive Director)
(Non-Executive Director) (Appointed 12 December 2011)
(Non-Executive Director)
b) Company Secretary
John Sendziuk
c) Country Manager
Rodrigo Diaz Borquez
Details of Remuneration of Key Management Personnel for the year ended 30 June 2012:
Short-term benefits
Post-employment benefits
Share based payment
58
HOT CHILI ANNUAL REPORT 2012
Consolidated Entity
2012
$
689,936
89,080
152,524
2011
$
519,425
66,755
-
931,540
586,180
d) Key Management Personnel Interests in the Shares and Options of the Company
Shares
The number of shares in the company held during the financial year, and up 30 June 2012, by each Key Management
Personnel of Hot Chili Limited, including their personally related parties, are set out below. There were no shares granted
as compensation during the year.
2012
Murray E Black
Christian E Easterday
Dr Allan Trench
Michael Anderson
John Sendziuk
Rodrigo Diaz
2011
Murray E Black
Christian E Easterday
Dr Allan Trench
Bernard R Mountford
John Sendziuk
Rodrigo Diaz
Balance at
the start
of the year
10,000,000
10,200,000
-
-
1,000,000
-
21,200,000
Balance at
the start
of the year
10,000,000
10,200,000
-
-
1,100,000
-
21,300,000
Granted as
compensation
Other changes
during the year
-
-
-
-
-
-
-
-
-
-
-
90,000
31,511
121,511
Granted as
compensation
Other changes
during the year
-
-
-
-
-
-
-
-
-
-
-
(100,000)
-
(100,000)
Balance at
the end
of the year
10,000,000
10,200,000
-
-
1,090,000
31,511
21,321,511
Balance at
the end
of the year
10,000,000
10,200,000
-
-
1,000,000
-
21,200,000
HOT CHILI ANNUAL REPORT 2012
59
notes to the
financial statements
continued
15 Key Management Personnel Disclosures (continued)
d) Key Management Personnel Interests in the Shares and Options of the Company (continued)
Options
The number of options over ordinary shares in the company held during the financial year, and up to 30 June 2012,
by each Key Management Personnel of Hot Chili Ltd including their personally related parties are set out below:
2012
Balance at
start of
the year
Acquired
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance at
the end of
the year
Vested and
exercisable at
the end of
the year
Murray E Black
6,750,000
Christian E Easterday
6,850,000
Dr Allan Trench
Michael Anderson
John Sendziuk
Rodrigo Diaz
-
-
-
-
-
-
350,000
-
300,000
700,000
13,950,000
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,750,000
6,750,000
6,850,000
6,850,000
-
-
-
-
650,000
700,000
350,000
-
14,950,000
13,950,000
2011
Balance at
start of
the year
Acquired
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance at
the end of
the year
Vested and
exercisable at
the end of
the year
Murray E Black
6,750,000
Christian E Easterday
6,850,000
Dr Allan Trench
Bernard R Mountford
John Sendziuk
Rodrigo Diaz
-
-
350,000
-
13,950,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,750,000
6,750,000
6,850,000
6,850,000
-
-
-
-
350,000
350,000
-
-
13,950,000
13,950,000
16 Notes to Statement of Cash Flows
a) Reconciliation of Cash
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money
market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement
of cash flows is reconciled to the related items in the statement of financial position as follows:
Cash and short-term deposits
60
HOT CHILI ANNUAL REPORT 2012
Consolidated Entity
2012
$
2011
$
16,861,320
4,220,660
16,861,320
4,220,660
Consolidated Entity
2012
$
2011
$
(2,894,482)
(11,065,643)
147,248
(762,772)
464,300
616,755
41,017
181,756
-
-
(2,428,951)
(10,842,870)
(6,656)
219,296
102,320
1,228,608
(2,333,287)
(9,394,966)
b) Reconciliation of Net Cash used In Operating Activities to
Operating Loss after Income Tax
Loss for the year
Depreciation
Effect of exchange rates on holdings in foreign currencies
Write off of mining lease option payments
Share based payments
Net cash flows from operating activities before change
in assets and liabilities
Change in assets and liabilities during the financial year:
Other current assets
Payables
Net cash outflow from operating activities
c) Non cash investing and financing activities
There were no non cash investing and financing activities during the year.
17 Finance Facilities
No credit standby facility arrangement or loan facilities existed at 30 June 2012.
18 Commitments for Expenditure
a) Exploration Commitments
In order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the
following discretionary exploration expenditure requirements up until expiry of leases. These obligations are not
provided for in the financial statements and are payable:
Within one year
Later than one year but not later than five years
483,682
1,481,156
16,127,956
14,291,323
16,611,638
15,772,479
b) Operating Leases
The consolidated entity leases office premises under an operating lease expiring in three years. The lease has various
terms and renewal rights and commenced on 1 May 2010.
Commitments for minimum lease payments in relation to operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
192,887
538,733
-
21,450
-
-
731,620
21,450
HOT CHILI ANNUAL REPORT 2012
61
notes to the
financial statements
continued
19 Events Occurring after Reporting Date
There are other no matters or circumstances that have arisen since 30 June 2012 that has significantly affected or may
significantly affect the operations, the results of those operations, or the state of affairs of the consolidated entity.
20 Related Parties
Blue Spec Mining, a business in which Mr Black is a Director, was paid $60,000 for administration and bookkeeping.
MRA Consulting Pty Ltd, a company associated with Michael Anderson, a Director, was paid $40,088 in Directors and
consulting fees.
Blue Spec Sondajes Chile Limitada, a company in which Mr Black is a Partner, was paid $7,382,084 for drilling services.
All payments were made at recognised commercial rates.
21 Contingent Liabilities
There are no contingent liabilities at reporting date (2011: Nil).
22
Investment in Controlled Entities
Name of Entity
Sociedad Minera El Corazon Limitada
Sociedad Minera El Aguila Limitada
Sociedad Minera El Huerto Limitada
Equity Holding
Country of
Incorporation
Class of
Shares
Chile
Chile
Chile
Ordinary
Ordinary
Ordinary
2012
%
100
100
100
2011
%
100
100
100
23 Financial Risk Management
The consolidated entity’s principal financial instruments comprise receivables, payables cash and short-term deposits.
The consolidated entity manages its exposure to key financial risks in accordance with the consolidated entity’s financial
risk management policy. The objective of the policy is to support the delivery of the consolidated entity’s financial targets
while protecting future financial security.
The main risks arising from the consolidated entity’s financial instruments are interest rate risk, credit risk and liquidity risk.
The consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These
include monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates. Ageing analysis
of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of
future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees
policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow
forecast projections.
62
HOT CHILI ANNUAL REPORT 2012
Risk Exposures and Responses
a) Interest rate risk exposure
The consolidated entity’s exposure to market interest rates relates primarily to the consolidated entity’s cash balances
and short-term deposits. The consolidated entity constantly analyses its interest rate exposure. Within this analysis
consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and
variable interest rates.
The consolidated entity’s cash balance is available at call and is held at a floating interest rate, all creditors and debtors
are non-interest bearing and are payable and receivable on commercial terms.
The consolidated entity has considered the sensitivity relating to its exposure to interest rate risk at reporting date. This
analysis considers the effect on current year results and equity which could result in a change in this risk. Management
have considered the potential impact on the profit and equity and considered that it would not be a material amount.
b) Credit risk exposure
Credit risk arises from the financial assets of the consolidated entity, which comprise deposits with banks and trade and
other receivables. The consolidated entity’s exposure to credit risk arises from potential default of the counter party,
with the maximum exposure equal to the carrying amount of these instruments. The carrying amount of financial assets
included in the statement of financial position represents the consolidated entity’s maximum exposure to credit risk in
relation to those assets.
The consolidated entity does not hold any credit derivatives to offset its credit exposure.
The consolidated entity trades only with recognised, credit worthy third parties and as such collateral is not requested
nor is it the Company’s policy to securities it trade and other receivables.
Receivable balances are monitored on an ongoing basis with the result that the consolidated entity does not have a
significant exposure to bad debts.
There are no significant concentrations of credit risk within the consolidated entity.
c) Liquidity risk
Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s subsequent ability
to meet their obligations to repay their financial liabilities as and when they fall due.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and, the availability
of funding through the ability to raise further equity or through related party entities. Due to the dynamic nature of the
underlying businesses, the Board aims at maintaining flexibility in funding through management of its cash resources.
The consolidated entity has no financial liabilities at the year-end other than normal trade and other payables incurred in
the general course of business.
HOT CHILI ANNUAL REPORT 2012
63
notes to the
financial statements
continued
23 Financial Risk Management (continued)
Risk Exposures and Responses (continued)
d) Fair values
The fair values of the consolidated entity’s financial assets and liabilities are summarised in the table below:
2012
Cash and cash
Trade and other receivables
Trade and other payables
2011
Cash and cash
Trade and other receivables
Trade and other payables
e) Foreign exchange risk
Consolidated Entity
Carrying
amount
$
16,861,320
-
435,712
Carrying
amount
$
4,220,660
9,151
1,327,701
Fair
value
$
16,861,320
-
435,712
Fair
value
$
4,220,660
9,151
1,327,701
The consolidated entity has considered the sensitivity relating to its exposure to foreign currency risk at reporting date.
This sensitivity analysis considers the effect on current year results and equity which could result in a change in the USD/
AUD rate. The consolidated entity is exposed to foreign exchange risk through its USD cash holdings at reporting date.
The table below summarises the impact of + / – 10% strengthening/weakening of the AUD against the USD on the
consolidated entities post tax profit for the year and equity. The analysis is based on a 10% strengthening /weakening
of the AUD against the USD at reporting date with all other factors remaining equal.
2012
AUD/USD + 10%
AUD/USD – 10%
2011
AUD/USD + 10%
AUD/USD – 10%
64
HOT CHILI ANNUAL REPORT 2012
Consolidated Entity
Post tax
profit
$
Equity
$
1,662,178
1,662,178
(1,662,178)
(1,662,178)
Post tax
profit
$
296,976
(296,976)
Equity
$
296,976
(296,976)
24 Critical Accounting Estimates and Judgements
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 consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Recoverability of exploration expenditure
The directors tests annually whether the exploration and evaluation expenditure incurred in identifiable areas of interest is
expected to be recouped through the successful development of the area or where activities in the area have not yet reached
a stage that permits reasonable assessment of the existence of reserves and further work is expected to be performed. All
expenditure that does not meet these criteria is expensed to the statement of comprehensive income.
25 Parent Entity Disclosures
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
2012
$
2011
$
16,774,286
15,980,830
4,158,943
1,397,234
32,755,116
5,556,177
167,112
167,112
67,945
67,945
48,566,232
19,239,321
739,651
72,308
(16,717,879)
(13,823,397)
32,588,004
5,488,232
(2,894,482)
-
(2,894,482)
(11,053,978)
-
(11,053,978)
HOT CHILI ANNUAL REPORT 2012
65
notes to the
financial statements
continued
25 Parent Entity Disclosures (continued)
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2012 or 30 June 2011.
Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2012 (30 June 2011 – $Nil), the parent entity did not have any contractual commitments for the acquisition of
property, plant or equipment.
26 Share Based Payments
Below are details of share based payments made during the current year and prior financial years.
a) Options issued
The Company issued options to a consultant as part payment of share issue costs in 2010.
The Company issued options to employees and consultants pursuant to the Company’s Employee Share Option Plan.
Set out below is a summary of options on issue as at 30 June 2012:
Issue date
01/05/2009
10/01/2010
29/04/2010
20/7/2011
30/1/2012
Expiry
date
29/10/2014
29/10/2014
29/10/2014
19/07/2014
29/01/2015
Balance
at start
of year
Number
issued
during year
Number
expired
during year
Balance
at end
of year
Number
exercisable
at end of year
200,000
140,000
400,000
-
-
-
-
-
3,500,000
500,000
-
-
-
-
-
200,000
140,000
400,000
3,500,000
500,000
200,000
140,000
400,000
-
-
b) Fair value of options issued (Consultants 2010):
The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the
exercise price, the share price at issue date and expected price volatility of the underlying share, and the risk free interest
rate for the term of the loan.
The model inputs for options granted during the year ended 30 June 2010 included:
i) options are granted for no consideration
ii) exercise price – $0.20
iii)
issue date – 1 May 2009, 10 January 2010, 29 April 2010
iv) expiry date – 29 October 2014
v) expected price volatility of the Company’s shares: 110%
vi) risk-free interest rate: 5.36%
vii) spot price at date of valuation: $0.05, $0.10 and $0.20.
66
HOT CHILI ANNUAL REPORT 2012
c) Fair value of options issued (Consultants and Employees – 20 July 2011):
The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the
exercise price, the share price at issue date and expected price volatility of the underlying share, and the risk free interest
rate for the term of the loan.
The model inputs for options granted during the year ended 30 June 2012 included:
i) options are granted for no consideration.
ii) exercise price – $0.90.
iii)
issue date – 20 July 2011
iv) expiry date – 19 July 2014
v)
expected price volatility of the Company’s shares: 80%
vi) risk-free interest rate: 5.25%
vii) spot price at date of valuation: $0.58.
d) Fair value of options issued (Consultants and Employees – 20 July 2011):
The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the
exercise price, the share price at issue date and expected price volatility of the underlying share, and the risk free interest
rate for the term of the loan.
The model inputs for options granted during the year ended 30 June 2012 included:
i) options are granted for no consideration
ii) exercise price – $1.00.
iii)
issue date – 30 January 2012
iv) expiry date – 29 January 2015
v) expected price volatility of the Company’s shares: 67%
vi) risk-free interest rate: 4.50%
vii) spot price at date of valuation: $0.625.
e) Expenses arising from share-based payment transactions
Total transactions arising from share-based payment transactions recognised during the year were as follows:
Expenses related to options issued to consultants
Shares issued for option payment on Chilean mining rights
2012
$
616,755
50,588
667,343
2011
$
-
-
-
HOT CHILI ANNUAL REPORT 2012
67
shareholder
information
Information Required by the Australian Stock Exchange Limited
Shareholder Information as at 13 August 2012
Shareholders
Units
70
266
237
651
170
40,639
845,264
2,036,456
25,561,170
171,192,695
1,394 199,676,224
10,000,000
10,000,000
10,000,000
10,000,000
29,680,046
11,500,001
10,393,245
7,460,527
Shares
Held
Directly
Held by
Companies in
which Directors
have a
beneficial
interest
-
10,000,000
200,000
10,000,000
-
-
-
-
a) Spread of Holdings
1
- 1,000
1,001
- 5,000
5,001
- 10,000
10,001
- 100,000
100,001 & Over
b) Substantial Shareholders
Westralian Diamond Drillers Pty Ltd
R Leighton
C Easterday
Kalgoorlie Auto Service Pty Ltd
J P Morgan Nominees Australia Ltd
Panoramic Copper Pty Ltd
Fenice Investments Inc
Port Finance Ltd NV
c) Directors’ Shareholdings:
Murray E Black
Christian E Easterday
Dr Allan Trench
Michael Anderson
68
HOT CHILI ANNUAL REPORT 2012
Shareholder Information as at 13 August 2012 (continued)
d) The names of the twenty largest shareholders as at 13 August 2012, who between them held 65.44% of the
issued capital are listed below:
1 Kalgoorlie Auto Service Pty Ltd
2 J P Morgan Nominees Australia Ltd
3 Panoramic Copper Pty Ltd
4 Fenice Investments Inc
5 Port Finance Ltd NV
6 Citicorp Nominees Pty Ltd
7 Cecich Miro & Helen
8 Fitel Nominees Ltd
9 Norman Lester Mountford
10 Graham John Woolford
11 Campari Holdings Pty Ltd
12 BO & EJ Stephens
13 SHL Pty Ltd
14 Greenwood Neville Hyland
15 Romulus Pty Ltd
16 UBS Wealth Management Australia Nominees
17 Stephens Group Pty Ltd
18 Peralillo Fondo D P
19 Poole-Johnson Rose Emma
20 Timothy James Carter
Number of
Ordinary Shares
40,000,000
29,680,046
11,500,001
10,393,245
7,460,527
4,907,308
4,215,667
4,134,688
2,656,667
2,577,000
2,200,000
2,000,000
1,750,000
1,130,000
1,110,000
1,001,381
1,000,000
1,000,000
970,000
950,000
130,636,530
%
20.03
14.86
5.76
5.21
3.74
2.46
2.11
2.07
1.33
1.29
1.10
1.00
0.88
0.57
0.56
0.50
0.50
0.50
0.49
0.48
65.44
HOT CHILI ANNUAL REPORT 2012
69
shareholder
information
continued
Optionholder Information as at 13 August 2012
e) The spread of optionholders as at 13 August 2012, who between them held 94.08% of the issued options
are listed below:
Holder Name
Romulus Pty Ltd
Mr Matthew Peter Noble
Ms Melanie Leighton
Ms Alice Docherty
Inversiones Maes Limitada
Inversiones Txsalazar
Mrs Jacqueline Tracey Hunter
Inversiones Pimpolleda
Mr Jorge Dominguez Cruzat
Romulus Pty Ltd
Mr Matthew Peter Noble
Ms Melanie Leighton
Ms Alice Docherty
Inversiones Maes Limitada
Inversiones Txsalazar
Mrs Rachel Anne Glassock
Port Finance Limited Nv
Panoramic Copper Pty Ltd
J P Morgan Nominees Australia
Mr Seager Rex Harbour
Conlatuse Limited
Fenice Investments Inc
The Harbour Foundation
Mrs Susan Jennifer Harbour
Citicorp Nominees Pty Limited
Balintore Pty Ltd
Pretain Pty Ltd
Mr Miro Cecich &
Talzo Limited
Rb Manners Pty Ltd
Terala Nominees Pty Ltd
Mr Geoffrey Wake
Mr Alan Harold Tear
Mr Ronald George Martin &
Mrs Toni Mathieson Frank
Ashlaw Pty Limited
Mr Peter Michael Beggs &
Abn Amro Clearing Sydney
Talltree Holdings Pty Ltd
Mrs Cherie Elizabeth
Graeme Kerr Farms Pty Ltd
Mr Douglas Henry Miller &
Ms Nerida White
Mr Russell Malcolm Phillis &
Super Seed Pty Ltd
Mr Michael James Ron
Mrs Terina Nancy Beeching
Mr John Robert Tyrrell
Mrs Tracy Ann Bradsell &
70
HOT CHILI ANNUAL REPORT 2012
Price
No of Secs.
Total
3,500,000
500,000
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
0.9
1
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
150,000
100,000
150,000
150,000
350,000
100,000
700,000
500,000
300,000
150,000
100,000
150,000
150,000
350,000
100,000
500,000
416,667
1,611,111
6,666,667
333,333
27,778
166,667
127,778
11,112
555,555
27,778
6,667
27,778
5,556
55,556
1,667
3,333
5,000
30,852
4,000
83,333
8,333
191,667
83,333
8,333
10,000
16,667
10,000
5,533
55,556
5,533
33,333
5,533
10,000
Holder Name
Mr John David Parkes &
Hotlake Pty Ltd
Montrose Investments (Wa)
Miss Asha Kaur Singh
Hsbc Custody Nominees
Confadent Limited
Mr Simon Robert Evans
Hahn Properties Pty Ltd
Mr David Nepote Moala
Glengyre Superannuation Pty
Leilani Investments Pty Ltd
Hendaye Pty Ltd
Mr Roger Kenneth Wingate &
J P Morgan Nominees Australia
Hd Welding Services Pty Ltd
Penson Australia Nominees Pty
Mr Cornelis Edmondus De Graauw
Mr Kiran Paul Singh
Mr Jeremy Garry Iredell
Ranlak Pty Ltd
Mr Benjamin Edward Blake
Mr Bernard Owen Stephens &
Stevens Family Pty Ltd
Bell Potter Nominees Limited
Powerform Asset Pty Ltd
Mr Bernard Owen Stephens &
Accbell Nominees Pty Ltd
Reilly Lisa Ersilia
King Russell L + T E
Coote Douglas James
Dj Carmichael Pl
Mining Technical Solution
Lim Meng Kang + Lian C
Oregonwood Pl
Glenella Pl
Dorrington Ian William
Oakstream Pl
Milwal Pl
Hewitt-Dutton S J + B A
Danaher Ian S J + S A
Bradsell Tracy Ann + R P
Hunter Jacqueline Tracey
Campari Hldgs Pl
Hainsworth David Richard
Jefferis T P + Clarke B M
Carter Timothy James
Easterday Christian E
Romulus Pl
Alf's Crew Pl
Kinglane Inv Pl
Polinelli John Anthony
Talltree Hldgs Pl
Ajava Hldgs Pl
Cecich Miro + Helen
Hahn Props Pl
Kalgoorlie Auto Svc Pl
Radford Rowan
Short James F + C A
Adams Terina Nancy B
Herath A K + Soysa K H
Stephens B O + E J
Mancini Mgnt Pl
Gale Gary Dene
Peralillo Fondo D P
Price
No of Secs.
Total
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.75
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
10,000
138,889
33,333
1,765
41,667
16,667
13,889
55,556
6,667
2,833
166,667
4,000
1,111
236,111
4,000
168,802
2,667
36
4,333
2,778
5,000
333,333
4,000
277,778
28,000
166,667
27,778
200,000
250,000
250,000
429,000
100,000
200,000
250,000
155,500
250,000
250,000
200,000
100,000
50,000
100,000
300,000
500,000
50,000
100,000
100,000
100,000
350,000
250,000
155,500
50,000
250,000
2,500,000
500,000
250,000
27,000,000
250,000
200,000
100,000
200,000
800,000
250,000
250,000
3,000,000
12,366,336
40,290,000
56,656,336
HOT CHILI ANNUAL REPORT 2012
71
corporate
directory
Solicitors
Jackson McDonald
140 St George’s Terrace
PERTH WA 6000
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
APPLECROSS WA 6153
Telephone: +61 8 9315 0933
Facsimile: +61 8 9315 2233
Auditors
RSM Bird Cameron Partners
8 St George’s Terrace
PERTH WA 6000
Principal Banker
Westpac Banking Corporation
Hannan Street
KALGOORLIE WA 6430
Directors
Murray E Black
(Non-Executive Chairman)
Christian E Easterday
(Managing Director)
Dr Allan Trench
(Independent Non Executive Director)
Michael Anderson
(Independent Non Executive Director)
Appointed 12 December 2011
Company Secretary
John E Sendziuk
Principal Place of Business
Corner Federal Road and Wilson Street
KALGOORLIE WA 6430
Telephone: +61 8 9021 3033
Facsimile: +61 8 9021 6995
Email: ally@hotchili.net.au
Web: www.hotchili.net.au
Perth Office
768 Canning Highway
APPLECROSS WA 6153
Telephone: +61 8 9315 9009
Facsimile: +61 8 9315 5004
72
HOT CHILI ANNUAL REPORT 2012
www.hotchili.net.au