Hot Chili Limited Annual Report 2018

FY2018 Annual Report · Hot Chili Limited
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  2018 Key 
Highlights

ANNUAL  
REPORT  
2018

Lulu

Contents

1  Chairman’s Letter 
2  Review of Operations 
3  Qualifying Statements 
4  Corporate Activities 
5  Directors’ Report 
6  Auditors’ Independence Declaration 
7  Auditors’ Report 
8  Directors’ Declaration 
9  Statement of Comprehensive Income 
10  Statement of Financial Position 
11  Statement of Changes in Equity 
12  Statement of Cash Flows 
13  Notes to the Financial Statements 
14  Shareholder Information 
15  Tenement Schedule 
16  Corporate Directory 

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66

HOT CHILI  Annual Report 2018

Valentina

Productora 
Copper 
Project

Productora Copper Project - Bulk tonnage

El Fuego Copper Project - High Grade

San  
Antonio

HOT CHILI  Annual Report 2018

1

  2018 Key 
Highlights

Exploration
•  Critical mass achieved with formation of newly 
consolidated El Fuego high grade coastal 
copper project in Chile, comprising the collective 
landholdings across three exciting high grade 
areas (San Antonio, Lulu & Valentina), all located 
within short trucking distance of Productora, and 
containing- or directly adjacent to - some of the 
area’s most substantial underground high grade 
copper mines.

•  Completion of a 5,000m maiden drilling 

programme across San Antonio and Valentina, 
with impressive shallow, wide, high grade copper 
drilling intersections confirming significant strike 
and depth extensions to high grade copper 
mineralisation at the San Antonio and Valentina 
copper mines.

•  San Antonio and Valentina set to become key 
additions to Hot Chili’s large-scale open pit 
resource inventory with the potential to add 
further scale and make a positive material impact 
on the head grade of the Company’s future 
copper production plans.

Significantly  
leveraged to improving  
copper price, Hot Chili  
is one of thelargest  
and most advanced  
copper developments  
on the ASX

•  Activities underway in preparation for initiation of 

geophysical surveys and environmental applications 
in advance of a second campaign of drilling at both 
San Antonio and Valentina, in an effort to accelerate 
the definition and incorporation of new high grade 
copper resources into the Company’s expanding 
coastal copper portfolio in Chile.

•  Multiple large scale targets identified through regional 
exploration across the El Fuego copper project, with 
targets being assessed by detailed mapping ahead 
of initiating drilling.

•  Partnerships for other expansion opportunities 

gaining in momentum, with Hot Chili well placed to 
leverage off almost 10 years operating in Chile.

View across San Antonio to Valentina Corrido El Fuego Copper Project, Chile.

San Antonio
Copper Mine

View Across San Antonio to Valentina Corridor
El Fuego Copper Project, Chile

2

HOT CHILI  Annual Report 2018Figure 1. The new consolidated El Fuego copper project in relation 
to the Company’s existing large-scale Productora copper project

Clearing a path 
forward to advance 
the Company’s flagship 
Productora copper 
project through the 
final stages of growth 
and development

Corporate
•  A $4 million Placement to sophisticated and institutional investors 

was successfully closed in May 2018, with the Placement 
cornerstoned by existing major shareholders Exploration  
Capital Partners (affil. Sprott), Taurus and Blue Spec Drilling,  
an associate of Hot Chili’s chairman Murray Black).

•  133,333,334 New Shares were issued at $0.03 each, and 
66,666,667 free attaching unlisted options, (exercise price  
of $0.10, expiry 31st May 2020).

•  A Share Purchase Plan was successfully completed in  
November 2017, with 28,757,205 New Shares issued at  
A$0.035 each, raising A$1,006,500 before costs.

•  Sprott representative Randall Nickson welcomed to the Board 
as a Non-Executive Director, with Mr Nickson’s experience 
considered a valuable asset in the growth and advancement  
of Productora toward production.

3

20 km RadiusHuascoFreirinaVallenarLos Losas Port (CAP)Maintencillo Sub StationSeawater PipelineEasementPan American HighwayLorem ipsumPowerTransmission EasementLuluValentinaSan AntonioProductoraPFS Complete10 year open pit mine life66kt Cu and 25koz Au annuallyJORC Resource237Mt @48% Cu, 0.1g/t Au, 135ppm MoHOT CHILI  Annual Report 20181  Chairman’s 

Letter

Dear Shareholder, 

I would like to thank my fellow directors, our management team 
and staff for their tireless efforts in delivering the beginnings of a 
resurgence for our Company this year.

Our team has been very successful in securing numerous opportunities that promise to deliver critical mass 
to our Productora project and cement Hot Chili as the largest copper developer on the ASX.

Our strategy to propel Hot Chili toward this goal is simple - add higher grade and more mine life to the 
credentials of our flagship Chilean copper asset. 

The past year has seen the consolidation of three high grade mines which sit close to Productora.  First 
pass drilling at two of these (San Antonio and Valentina) has met with strong results and confirmed the 
first of several satellite resource opportunities that look set to transform Productora into a regional copper 
production hub. 

It is an exciting time to be a copper developer, let-alone a copper developer with a US$100 million head-start 
towards developing a mine. 

We believe the fundamentals for forecast higher copper prices in the near-term are underpinned by a lack of 
quality large copper developments.  Large copper projects that can be developed at low capital intensity and 
in safe/stable jurisdictions, such as Productora, are rare.  

Over the coming year we have a great opportunity to re-establish Hot Chili as a copper sector leader on  
the ASX.

I look forward to a strong year ahead as we focus on delivering further success across exploration, resource 
growth and acquisitions for our Company and our shareholders.

Murray Edward Black 
Chairman

4

HOT CHILI  Annual Report 2018Our strategy to  
propel Hot Chili  
toward this goal is 
simple - add higher 
grade and more mine 
life to the credentials 
of our flagship Chilean 
copper asset

5

HOT CHILI  Annual Report 20182  Review of 
Operations

Securing El Fuego 
provides renewed vigour 
to successfully execute 
Hot Chili’s strategy to 
significantly re-rate the 
Company and generate 
substantial shareholder 
value in the near term

Hot Chili benefits from almost ten years operating in Chile, during 
which time the Company has fostered many partnerships, allowing 
for rapid review and evaluation of expansion opportunities. This year 
has been no exception, with Hot Chili continuing to actively pursue 
further suitable projects in its strategy to build a large-scale copper 
production centre in Chile.  

The Company is very pleased that its efforts this year have culminated 
in achieving critical mass with formation of the El Fuego high grade 
copper project, comprising collective landholdings across three 
exciting high grade mine areas (San Antonio, Lulu and Valentina). 

The El Fuego copper project is located within trucking distance of 
Productora, and provides an enriched pipeline of opportunity which 
builds on the Company’s existing large asset base. The addition of 
a high grade blend from satellite ore sources and extension of the 
project’s bulk tonnage mine life aims to provide critical mass for the 
expansion of Productora into a higher margin and larger scale  
copper operating centre.

6

HOT CHILI  Annual Report 2018Productora Copper Project

The Productora copper project currently stands as one of the largest 
copper developments controlled by an ASX listed company.

Productora’s 2016 Pre-feasibility Study (US$3.00/lb Cu 
and US$1,250/oz Au) already outlines a 10 year open 
pit mine life with the first eight years forecast to produce 
66kt of copper metal and 25koz of gold annually, at a 
strip ratio of 2.7:1. 

Productora sits in a commanding position within the 
global development pipeline, where large-scale, low 
cost, long life projects in tier-one mining jurisdictions 
with very low capital intensities, are rare. 

Hot Chili’s growth strategy is now in full thrust, with the 
Company capitalising on exciting project acquisition 
opportunities and executing three Joint Venture Option 
Agreements within the past year, to secure a stable  
of high-grade copper projects - collectively named  
El Fuego – located within close development distance 
of Productora, as seen in Figure 1. 

El Fuego has the potential to host high-grade ore 
sources which can take advantage of Productora’s 
planned large-scale, low-cost processing facilities. 

The impending improving copper price environment 
and its strong leverage to Productora’s existing asset 
value means that Hot Chili is poised for a significant 
re-rate. 

Figure 2 below outlines Productora’s significant 
exposure and economic sensitivity to long term  
copper price as outlined in the Company’s 2016 PFS 
(as announced to ASX on 2nd March 2016).

Figure 2. Financial analysis of Productora PFS valuation in relation to copper price.

7

HOT CHILI  Annual Report 20182  Review of  

Operations (cont’d)

San  
Antonio

El Fuego Copper Project
Hot Chili is excited to have secured the newly 
consolidated El Fuego high grade coastal copper 
project in Chile, comprising the collective landholdings 
across three high grade areas within a 30 kilometre 
radius of the Company’s flagship Productora copper 
project (as seen in Figure 1). These are:

•  San Antonio

•  Valentina

•   Lulu

Securing El Fuego marks the beginning of Hot Chili’s 
expanded growth strategy to secure and successfully 
delineate multiple, high grade satellite resources 
capable of supplying approximately 1Mtpa of high 
grade ore to Productora’s planned 14-15Mtpa, low-cost 
production base. 

This strategy aims to transform Productora by 
increasing margins and lowering production costs 
through higher head grade and expanded metal output. 

Hot Chili’s strategy to define high grade copper 
resource opportunities is gathering momentum with 
drill results from a maiden 5000 metre drilling campaign 
confirming a large extensional discovery at both the 
San Antonio and Valentina copper mines. 

These results provide further confidence in the 
Company’s ability to build a stable of high grade 
additions to Productora. 

Valentina

Lulu 

8

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
San Antonio

Hot Chili is pleased to have executed a formal agreement to earn a 90% interest in the San Antonio high grade 
copper project, located within a short 20km trucking distance, directly east of the Company’s Productora copper 
project in Chile (see Figure 1). For further details on the Joint Venture please refer  
to the Tenement section of this report. 

The San Antonio project has been privately owned for several decades and contains a substantial underground 
mine which historically produced some 2Mt grading 2% copper and 0.3g/t gold from shallow depths. The mine 
has been exploited over a 200m strike length to a vertical depth of 130m, at an average true width ranging 
between 7m and 30m.

Following its acquisition, the Company undertook an intensive period of data compilation which culminated  
in the creation of the first ever 3D geological model for San Antonio. The model integrated historical underground 
mine development plans and surveys, historical drilling and underground channel assay data, current mining data, 
and Hot Chili’s own detailed surface and underground mapping and geochemical sampling. 

The creation of an integrated 3D model enabled Hot Chili’s technical team to design and prioritise its maiden 
drilling campaign with confidence, targeting depth and strike extensions to known high grade copper 
mineralisation, resulting in multiple impressive significant copper intersections exceeding the Company’s 
expectations, as listed below:

•  19m grading 2.0% copper from 61m down-hole depth (including 11m grading 2.4% copper) 

•  9m grading 2.0% copper from 132m down-hole depth

•  6m grading 2.1% copper from 65m down-hole depth

•  5m grading 2.5% copper from 31m down-hole depth (including 2m grading 4.3% copper) 

•  15m grading 1.7% copper from 80m down-hole depth, 

•  16m grading 1.1% copper from 93m down-hole (including 5m grading 2.7% copper) 

•  13m grading 1.3% copper from 17m down-hole depth (including 5m grading 2.3% copper) 

•  53m grading 0.9% copper from 72m down-hole depth (including 27m grading 1.3% copper), 

•  10m grading 1.6% copper from 58m down-hole depth (including 4m grading 2.7% copper) 

•  18m grading 1.3% copper from 52m down-hole depth (including 5m grading 2.1% copper), and 

•  11m grading 1.6% copper from 83m down-hole depth

9

HOT CHILI  Annual Report 20182  Review of  

Operations (cont’d)

 San Antonio (cont’d)
Mineralisation at San Antonio remains open at depth and 
along strike as displayed in Figures 3, 4 and 5.

Given the shallow, high grade nature of mineralisation, San 
Antonio looks set to become a key addition to Hot Chili’s 
large-scale open pit resource inventory with the potential 
to make a positive material impact on the head grade of 
the Company’s future copper production plans. In addition, 
gold and silver co-products at San Antonio could potentially 
provide valuable additional credits. 

Drill planning is underway in advance of submission 
of regulatory applications to commence follow-up and 
resource definition drilling at San Antonio.

Figure 3. Plan displaying 
the location of significant 
drill intercepts in 
relation to the San 
Antonio underground 
development and 
interpretation of high grade 
copper mineralisation 
approximately 50m below 
surface (1,150m RL).

10

19m@ 2.0% Cu5m@ 2.5% Cu &18m@ 1.3% Cu (vertical hole)11m@ 1.6% Cu53m@ 0.9% Cu including 27m@ 1.3% Cu4m@ 2.0% Cu9m@ 2.0% Cu16m@ 1.1% Cu including 5m@ 2.7% Cu4m@ 2.7% Cu5m@ 0.9% Cu15m@ 1.7% Cu3m@ 1.0% Cu6m@ 2.1% Cu6m@ 1.2% Cu4m@ 0.9% Cu2m@ 1.2% Cu5m@ 1.3% Cu100mAA’10m@ 1.6% Cu13m@ 1.3% Cu, including 5m@ 2.3% CuCodelcodrill intercept20m @ 1.0% Cu(from 310.5m downhole)San Antonio Mineralisation(1150mRL interpretation)Main LodeFootwall LodeHangingwallLodeSan Antonio Mine DevelopmentHOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Figure 4. Long Section (looking west) displaying the pierce point locations of stand-out drill results (circles)  
at San Antonio.

Figure 5. Cross Section (looking north) displaying the continuation of the San Antonio Main Lode below the 
existing underground mine development as confirmed by recent drill results. Note the shallow dip of high grade 
copper mineralisation and confirmation of wide high grade copper.

11

700m0m100m200m300m400m500m600m342300mE342500mE6818800mN6819200mN1,200mRL1,000mRLHistorical Stope Area40 Level60 LevelRC Drilling ResultsSignificant Intercept (+10 % x m (metal))Significant Intercept (5-10 % x m (metal))Drill Intercept (2-5 % x m (metal))Drilled –did not intersect lode or structure)San Antonio Copper MineLong Section(El Fuego Copper Project, Chile)North1,100mRL90 Level110 Level120 Level150 Level19m@ 2.0% Cu10m@ 1.6% Cu5m@ 2.5% Cu &18m@ 1.3% Cu11m@ 1.6% Cu53m@ 0.9% Cu including 27m@ 1.3% Cu13m@ 1.3% Cu4m@ 2.0% Cu9m@ 2.0% Cu16m@ 1.1% Cu including 5m@ 2.7% Cu4m@ 2.7% Cu6m@ 2.1% Cu5m@ 1.3% CuDRILLING RESULTS15m@ 1.7% CuSouth60 LevelCollapsed stopeMine development1,200mRL1,100mRL342600mE342400mE342500mE50mFelsic-intermediate porphyryVolcaniclastic sedimentsHistorical StopeIntermediate volcaniclastics53m@ 0.9% Cu including 27m@ 1.3% Cu10m@ 1.6% CuPaula declineWestEastIntense sulphide alterationFootwall  LodeMain LodeHOT CHILI  Annual Report 20182  Review of  

Operations (cont’d)

San Antonio (cont’d) 

Mapping over the wider San Antonio project has 
identified and confirmed a number of mineralised 
copper targets, including shear-zone hosted vein and 
replacement systems, brecciated zones, manto zones 
and porphyry copper occurrences. 

The San Antonio East target, located along the eastern 
flank of San Antonio, is the largest target identified 
and comprises occurrences of porphyry copper 
mineralisation (associated with chalcopyrite, bornite 
and copper oxides/carbonates evident as replacements 
and in veins) and a K-feldspar tourmaline breccia zone 
that extends over a strike length of at least 600m. 

Five large targets have been defined within a domain 
extending over approximately 3km south of San 
Antonio as shown in Figure 6. 

Each of the five targets show attractive size and  
surface metal distribution (from surface rock chip  
and soil data) and are considered high priority based  
on a combination of structural setting; evidence of 
copper mineralisation; copper soil anomalism; and 
visual alteration. 

A programme of infill soil geochemistry and detailed 
target mapping is planned to assist with future drill 
design and scheduling against a growing number 
of high grade copper targets that the Company is 
assembling within the El Fuego copper project.

Hot Chili’s exploration team has also commenced 
planning and preparation for the initiation of geophysical 
surveys to further refine these targets in addition to San 
Antonio and Valentina.

+1km 
strike

1.2% Cu, 12.9g/t Ag

1.0% Cu

3.9% Cu

2.4% Cu

3.1% Cu

2.2% Cu

5.6% Cu

XRF Rock 
Chip Results

Cu Rock Chip 
Results

San Antonio Mine
Historical Production 
2Mt @ 2.0% copper 
& 0.2g/t gold

1.9% Cu

2.0% Cu

2.4% Cu

1.5% Cu, 19.2g/t Ag

1.5% Cu

1.3% Cu

2.3% Cu

3.2% Cu

9.7% Cu

4.6% Cu

10.4% Cu

1.5% Cu

1km

Figure 6. High priority 
targets in relation to 
surface rock chip, 
surface rock XRF 
results and earlier 
defined copper soil 
anomalies south of the 
San Antonio mine area.

12

HOT CHILI  Annual Report 2018

HOT CHILI  Annual Report 2018Valentina
The Company is pleased to have executed a Joint 
Venture Option Agreement to earn a 90% interest in  
the Valentina project, located 5 kilometres north of  
San Antonio (see Figure 1). For further details on the 
Joint Venture please refer to the Tenement section of 
this report. 

Due diligence work by Hot Chili confirmed Valentina  
as a potential high grade copper opportunity to define 
resources from a shallow high grade copper mine which 
has been privately owned for several decades. 

Copper mineralisation is fault hosted within a sequence 
of andesites and volcaniclastics that have been locally 
intruded by felsic porphyry dykes, with high grade 
copper sulphide mineralisation present from near 
surface and associated with chalcopyrite and bornite. 

Certified historical mine production data, recorded 
in 1997, from the shallow small-scale Valentina 
underground mine, logged ore parcels grading 
between 3.4% and 4.8% copper over mined widths  
of 1 to 5 metres.

Although Hot Chili’s 5,000m first-pass drilling 
programme across El Fuego primarily focussed on 
assessing the potential of the San Antonio copper mine 
area, three shallow drill holes were also completed 
across the southern extent of the shallowly developed 
Valentina copper mine. 

Two of these holes recorded significant drilling 
intersections including: 

•  12m grading 1.5% copper from 28m down-hole 
depth (including 6m grading 2.7% copper), and

•  8m grading 2.0% copper from 124m down-hole 
depth (including 2m grading 4.8% copper)

Importantly, the drill holes have successfully confirmed 
significant strike and depth extensional potential to high 
grade copper mineralisation immediately south of the 
Valentina underground mine development. 

Valentina is now the second high grade copper mine 
to deliver successful extensional results, with recent 
drilling results providing further confidence in Hot Chili’s 
ability to build a stable of high grade resource additions 
to Productora. 

Hot Chili next aims to confirm and advance the  
Valentina copper mine toward the commencement  
of resource definition.  

HOT CHILI  Annual Report 2018

13

2  Review of  

Operations (cont’d)

Lulu

The Company has executed a Joint Venture Option 
Agreement to earn a 70% interest in the Lulu copper 
project, located 30km directly west of Productora  
(see Figure 1). For further details on the Joint Venture 
please refer to the Tenement section of this report. 

underground mine over a strike extent of approximately 
800m within the Lulu project.  Evidence of the strike 
extensive outcropping carbonate vein, and small-scale 
surface workings can be observed across Lulu as 
displayed in Figure 7. 

Importantly, the project represents the direct extension of 
one of the regions highest grade substantial underground 
mines, with the mine reportedly exploiting vein hosted 
material to 600m depth, over widths ranging between 
1.5m and 2m and grades averaging 6% copper and 
3g/t gold. Higher grade ore shoots within the historical 
underground mine, adjacent to the Lulu project, exploited 
vein widths up to 7m with grades averaging 12% copper 
and 5g/t gold.

Mining in the area surrounding the Lulu project dates back 
to the late 19th century. However, fractured ownership 
by multiple private landholders has restricted modern 
exploration, preserving highly prospective areas, such as 
the Lulu project, which have never been drill tested.

Copper mineralisation at Lulu is hosted within a 
moderately (60 - 70°) southwest dipping carbonate vein 
which varies in width between 0.7m and 4.1m (where 
observed). The main carbonate vein trends NW-SE 
and transects a granodiorite which has also been 
variably intruded by andesitic dykes. Brecciation and 
secondary veining occurs within a 10m to 15m wide zone 
encompassing the main copper-bearing carbonate vein.

Hot Chili has confirmed the presence of the main copper-
gold hosting structure, extending from the historical 

Preliminary surface results have confirmed significant 
shallow vein hosted mineralisation, with rock chip 
samples returning grades of up to 2.8% copper and 
3.9g/t gold highlighting high grade copper and gold 
resource potential (see Figure 8). The high gold grades 
will add significant value to the economics of any 
potential ore that may eventually be exploited from  
the project. 

Given that surface samples were taken from copper 
oxide material, there is a potential for an elevation 
in grades in copper sulphide material similar to that 
recognised in the adjacent underground mine, with 
average production grades of 6% copper and 3g/t 
gold associated with sulphide mineralogy comprising 
chalcopyrite, bornite pyrrhotite and magnetite.

Oxidation at Lulu occurs to a depth of approximately  
75m vertical, where copper oxide mineralisation is 
associated with malachite, chrysocolla and cuprite. 
Sulphide copper is associated with chalcopyrite,  
bornite and minor covellite.

Additional surface sampling and focussed mapping is 
planned to commence in the coming months at Lulu to 
assist with prioritising target areas for drill testing.

14

Figure 7. Plan displaying 
surface rock chip results 
in relation to vein width 
mapping across Lulu’s 
800m copper-gold 
bearing structure.

HOT CHILI Lulu8100m100m2.81% Cu, 0.38 g/t Au2.67 % Cu, 0.19 g/t Au2.75% Cu, 0.39 g/t Au2.25 % Cu, 0.13 g/t Au1.25 % Cu, 3.86 g/t Au0.56 % Cu, 3.24 g/t Au1.18 % Cu, 0.62 g/t AuRock Chip Assays (Cu %)Vein Thickness (cm)HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Figure 8. Long section displaying significant surface samples returned over an 800m strike extent

Further consolidation 
opportunities continue to 
be pursued as part of the 
Company’s strategy to add 
critical mass and establish 
Hot Chili as the leading 
copper developer listed  
on the ASX

15

2.81% Cu0.38 g/t Au2.67 % Cu0.19 g/t Au2.75% Cu0.39 g/t Au2.25 % Cu 0.13 g/t Au1.24 % Cu3.86 g/t Au0.56 % Cu3.24 g/t Au1.18 % Cu0.62 g/t AuLulu Project NE facing long sectionUnderground mine accessUnderground mine access100mMapped Vein width>1m vein widthMineralised vein0.00 -0.050.05 -0.100.10 -0.500.50 -1.001.00 -2.81Rock Chips (Cu %)1.67 % Cu0.16 g/t Au1.01 % Cu0.10 g/t Au1.25 % Cu0.17 g/t AuHOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20183  Qualifying 
Statements

JORC Compliant Ore Reserve Statement

Productora Open Pit Probable Ore Reserve Statement – Reported 2nd March 2016

Grade

Contained Metal

Payable Metal

Reserve  Tonnage Cu
(%)
Category

(Mt)

Au Mo
(g/t)

(ppm)

Cu
(tonnes)

Au
(ounces)

Mo
(tonnes)

Cu
(tonnes)

Au
(ounces)

Mo
(tonnes)

24.1

20.5

0.43

0.08

0.45

0.08

49

92

103,000

59,600

91,300

54,700

1,200

1,900

55,600

61,500

24,400

800

122.4

0.43

0.09

163

522,500

356,400

20,000

445,800

167,500

10,400

Probable

166.9 0.43 0.09 138

716,800 470,700 23,100 562,900 191,900 11,200

Ore Type

Oxide

Fresh

Total

Transitional

Probable

Note 1:  Figures in the above table are rounded, reported to two significant figures, and classified in accordance with the Australian JORC Code 2012 

guidance on Mineral Resource and Ore Reserve reporting.  Note 2: Price assumptions:  Cu price - US$3.00/lb; Au price US$1200/oz; Mo price 
US$14.00/lb.  Note 3: Mill average recovery for fresh Cu - 89%, Au - 52%, Mo - 53%. Mill average recovery for transitional; Cu 70%, Au - 50%, Mo 
- 46%.  Heap Leach average recovery for oxide; Cu - 54%.  Note 4: Payability factors for metal contained in concentrate: Cu - 96%; Au - 90%; Mo - 
98%. Payability factor for Cu cathode - 100%. 

JORC Compliant Mineral Resource Statements

Productora Higher Grade Mineral Resource Statement, Reported 2nd March 2016  

Deposit

Classification

Indicated

Productora

Inferred

Alice

Sub-total

Indicated

Inferred

Sub-total

Indicated

Combined

Inferred

Total

Tonnage
(Mt)

166.8

51.9

218.7

15.3

2.6

17.9

182.0

54.5

236.6

Cu
(%)

0.50

0.42

0.48

0.41

0.37

0.41

0.50

0.42

0.48

Grade

Au
(g/t)

0.11

0.08

0.10

0.04

0.03

0.04

0.10

0.08

0.10

Contained Metal

Mo
(ppm)

Cu
(tonnes)

Au
(ounces)

Mo
(tonnes)

151

113

142

42

22

39

142

109

135

841,000

572,000

25,000

219,000

136,000

6,000

1,059,000

708,000

31,000

63,000

10,000

20,000

2,000

73,000

23,000

600

100

700

903,000

592,000

26,000

228,000

138,000

6,000

1,132,000

730,000

32,000

Reported at or above 0.25 % Cu.  Figures in the above table are rounded, reported to two significant figures, and classified in accordance with the Australian 
JORC Code 2012 guidance on Mineral Resource and Ore Reserve reporting.  Metal rounded to the nearest thousand, or if less, to the nearest hundred. 

Productora Low Grade Mineral Resource Statement, Reported 2nd March 2016  

Deposit

Classification

Indicated

Productora

Inferred

Alice

Sub-total

Indicated

Inferred

Sub-total

Indicated

Combined

Inferred

Total

Tonnage
(Mt)

150.9

50.7

201.6

12.3

4.1

16.4

163.2

54.8

218.0

Cu
(%)

0.15

0.17

0.16

0.14

0.12

0.13

0.15

0.17

0.16

Grade

Au
(g/t)

0.03

0.04

0.04

0.02

0.01

0.02

0.03

0.04

0.04

Contained Metal

Mo
(ppm)

Cu
(tonnes)

Au
(ounces)

Mo
(tonnes)

66

44

60

29

20

27

63

43

58

233,000

170,000

10,000

86,000

72,000

2,000

320,000

241,000

12,000

17,000

5,000

7,000

2,000

22,000

9,000

400

100

400

250,000

176,000

10,000

91,000

74,000

2,000

341,000

250,000

13,000

Reported at or above 0.1% Cu and below 0.25 % Cu.  Figures in the above table are rounded, reported to two significant figures, and classified in accordance 
with the Australian JORC Code 2012 guidance on Mineral Resource and Ore Reserve reporting.  Metal rounded to nearest thousand, or if less, to the nearest 
hundred. Metal rounded to nearest thousand, or if less, to the nearest hundred. 

16

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Competent Person’s Statement  
- Ore Reserves
The information in this Announcement that relates 
to Productora Project Ore Reserves, is based on 
information compiled by Mr Carlos Guzmán, Mr 
Boris Caro, Mr Leon Lorenzen and Mr Grant King.  
Mr Guzmán is a Fellow of the Australasian Institute 
of Mining and Metallurgy (AusIMM), a Registered 
Member of the Chilean Mining Commission (RM- a 
‘Recognised Professional Organisation’ within the 
meaning of the JORC Code 2012) and a full time 
employee of NCL Ingeniería y Construcción SpA (NCL).  
Mr Caro is a former employee of Hot Chili Ltd, now 
working in a consulting capacity for the Company, 
and is a Member of the Australasian Institute of Mining 
and Metallurgy (AusIMM) and a Registered Member 
of the Chilean Mining Commission.  Mr Lorenzen 
is employed by Mintrex Pty Ltd and is a Chartered 
Professional Engineer, Fellow of Engineers Australia, 
and is a Fellow of the Australasian Institute of Mining 
and Metallurgy (AusIMM).  Mr King is employed by 
AMEC Foster Wheeler (AMEC FW) and is a Member 
of the Australasian Institute of Mining and Metallurgy 
(AusIMM).  NCL, Mintrex and AMEC FW have 
been engaged on a fee for service basis to provide 
independent technical advice and final audit for the 
Productora Project Ore Reserve estimate.  
Mr. Guzmán, Mr Caro,Mr Lorenzen and Mr King have 
sufficient experience which is relevant to the style of 
mineralisation and type of deposit under consideration, 
and to the activity which they are undertaking to qualify 
as a Competent Person as defined in the 2012 Edition 
of the ‘Australasian Code for Reporting of Exploration 
Results, Mineral Resources and Ore Reserves’.  
Mr Guzmán, Mr Caro, Mr Lorenzen and Mr King 
consent to the inclusion in the report of the matters 
based on their information in the form and context in 
which it appears.

Mineral Resource and  
Ore Reserve Confirmation

The information in this report that relates to Mineral 
Resources and Ore Reserve estimates on the 
Productora copper projects were originally reported 
in the ASX announcements “Hot Chili Delivers PFS 
and Near Doubles Reserves at Productora” dated 
2nd March 2016. The company confirms that it is not 
aware of any new information or data that materially 
affects the information included in the original market 
announcement and that all material assumptions and 
technical parameters underpinning the estimates in 
that announcement continue to apply and have not 
materially changed. The company confirms that the 
form and context in which the Competent Person’s 
findings are presented have not been materially 
modified from the original market announcement.

Competent Person’s Statement  
- Exploration Results
Exploration information in this Announcement is based 
upon work undertaken by Mr Christian Easterday, the 
Managing Director and a full-time employee of Hot 
Chili Limited whom is a Member of the Australasian 
Institute of Geoscientists (AIG). Mr Easterday has 
sufficient experience that is relevant to the style of 
mineralisation and type of deposit under consideration 
and to the activity which he is undertaking to qualify as 
a ‘Competent Person’ as defined in the 2012 Edition 
of the ‘Australasian Code for Reporting of Exploration 
Results, Mineral Resources and Ore Reserves’ (JORC 
Code). Mr Easterday consents to the inclusion in the 
report of the matters based on their information in the 
form and context in which it appears.

Competent Person’s Statement  
- Mineral Resources
The information in this Announcement that relates to 
the Productora Project Mineral Resources, is based 
on information compiled by Mr J Lachlan Macdonald 
and Mr N Ingvar Kirchner. Mr Macdonald is a part 
time employee of Hot Chili, and is a Member of 
the Australasian Institute of Mining and Metallurgy 
(AusIMM). Mr Kirchner is employed by AMC 
Consultants (AMC). AMC has been engaged on a fee 
for service basis to provide independent technical 
advice and final audit for the Productora Project 
Mineral Resource estimates. Mr Kirchner is a Fellow 
of the Australasian Institute of Mining and Metallurgy 
(AusIMM) and is a Member of the Australian Institute 
of Geoscientists (AIG). Both Mr Macdonald and Mr 
Kirchner have sufficient experience that is relevant to 
the style of mineralisation and type of deposit under 
consideration and to the activity being undertaken 
to qualify as a Competent Person as defined in the 
2012 Edition of the ‘Australasian Code for Reporting 
of Exploration Results, Mineral Resources and Ore 
Reserves’ (the JORC Code 2012). Both Mr Macdonald 
and Mr Kirchner consent to the inclusion in the report of 
the matters based on their information in the form and 
context in which it appears.

17

HOT CHILI  Annual Report 20183  Qualifying  

Statements (cont’d)

Forward Looking Statements
This Announcement is provided on the basis that 
neither the Company nor its representatives make 
any warranty (express or implied) as to the accuracy, 
reliability, relevance or completeness of the material 
contained in the Announcement and nothing contained 
in the Announcement is, or may be relied upon as a 
promise, representation or warranty, whether as to 
the past or the future. The Company hereby excludes 
all warranties that can be excluded by law. The 
Announcement contains material which is predictive in 
nature and may be affected by inaccurate assumptions 
or by known and unknown risks and uncertainties and 
may differ materially from results ultimately achieved. 

The Announcement contains “forward-looking 
statements”. All statements other than those of 
historical facts included in the Announcement are 
forward-looking statements including estimates 
of Mineral Resources. However, forward-looking 
statements are subject to risks, uncertainties and 
other factors, which could cause actual results to differ 
materially from future results expressed, projected or 
implied by such forward-looking statements. Such risks 
include, but are not limited to, copper, gold and other 
metals price volatility, currency fluctuations, increased 

production costs and variances in ore grade recovery 
rates from those assumed in mining plans, as well 
as political and operational risks and governmental 
regulation and judicial outcomes. The Company 
does not undertake any obligation to release publicly 
any revisions to any “forward-looking statement” 
to reflect events or circumstances after the date of 
the Announcement, or to reflect the occurrence of 
unanticipated events, except as may be required under 
applicable securities laws. All persons should consider 
seeking appropriate professional advice in reviewing the 
Announcement and all other information with respect 
to the Company and evaluating the business, financial 
performance and operations of the Company. Neither 
the provision of the Announcement nor any information 
contained in the Announcement or subsequently 
communicated to any person in connection with the 
Announcement is, or should be taken as, constituting 
the giving of investment advice to any person. 

18

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20184  Corporate 
Activities

The Company is very pleased to have achieved financing 
arrangements during the year which have significantly strengthened 
the Company’s financial position and allowed it to focus on growth 
activities at El Fuego. 

Convertible Notes
Quarterly interest on convertible notes was paid to 
convertible note holders in the form of shares, pursuant 
to the terms and conditions of the convertible notes.  
The following issues of shares in lieu of cash took place 
during the year:

Date

Interest 
due $

VWAP

Shares

31 July 2017

21,536

N/a

N/a

2 October 2017

223,644

0.03710

6,028.186

4 January 2018

229,411

0.03523

6,511,789

4 April 2018

224,389

0.03679

6,099,183

3 July 2018

226,900

0.02840

7,989,446

Share Purchase Plan
A Share Purchase Plan was also successfully 
completed, with 28,757,205 New Shares issued at 
A$0.035 each, for A$1,006,502 before costs.  

A$4.0 Million Placement
On 30 April 2018 the Company announced its intention 
to raise approximately $4,000,000 (before costs) by 
way of a placement of Shares and free-attaching Offer 
Options exercisable at $0.10 each on or before 31 
May 2020 to various sophisticated and professional 
investors in Australia, and to investors in other 
jurisdictions, including the United States, on the basis 
of one free-attaching Offer Option for every two Shares 
subscribed for under the Placement.  

The Placement saw strong demand from existing major 
shareholders as well as professional and sophisticated 
investors in Australia.  EverBlu Capital Pty Ltd acted 
as Corporate Advisor to the Placement.  Continued 
support was received from Blue Spec (a related party 
of Murray Black) and the Managing Director, Christian 
Easterday, who participated in the placement following 
shareholder approval.

Funds from the Placement were used to  
advance exploration and drilling work at  
El Fuego as well as to provide general  
working capital for Hot Chili.  

19

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20184  Corporate 

Activities (cont’d)

Hot Chili looks 
forward to a strong 
year ahead with a 
focus on delivering 
further success across 
exploration, resource
growth and 
acquisitions

20

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20185  Directors’ 
Report

Your Directors have pleasure in presenting their report, 
together with the financial statements, for the year ended  
30 June 2018 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

Dr Michael Anderson 
Non-Executive Director

Dr Allan Trench 
Independent Non-Executive Director

Roberto de Andraca Adriasola 
Non-Executive Director

George Randall Nickson 
Non-Executive Director  
(Appointed 17 August 2017)

Melanie Leighton 
Alternate for M Black

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 43 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.  Mr Black Is 
currently a non-executive director of Great Boulder Resources 
Ltd (appointed 6 April 2016).

Christian Ervin Easterday      
Managing Director  

Mr Easterday is a geologist with over 20 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.  For the past five years,  
Mr Easterday has been involved in various aspects of project 
negotiation drawing together his commercial, financial and 
project valuation skills.  This work has involved negotiations 
and valuations 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. Mr Easterday has not held any directorships in 
any public listed company in Australia in the last three years.

Dr Allan Trench       
Independent Non-Executive Director

Dr Trench is a geologist/geophysicist and business 
management consultant with over 28 years experience across 
a broad range of commodities. His minerals sector experience 
spans strategy formulation, exploration, project development 
and mining operations. Dr Trench holds degrees in geology, 
a doctorate in geophysics, a Masters degree in Mineral 
Economics and a Masters degree in Business Administration.  
He currently acts or acted as independent director to Pioneer 
Resources Ltd, commenced 5 September 2008, Enterprise 
Metals Ltd, commenced 3 April 2012, Trafford Resources 
Ltd, commenced 7 May 2012, resigned 22 May 2015, and 
Emmerson Resources Ltd, commenced 3 March 2015.

Dr Trench 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.  

Dr Trench maintains academic links as a Professor at the 
University of Western Australia (UWA) Business School 
and also research professor at the Centre for Exploration 
Targeting, UWA.

Dr Michael Anderson       
Non-Executive Director  

Dr Anderson has more than 25 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.  Dr Anderson 
subsequently held senior management positions including 
Corporate Development Manager at Gallery Gold Limited and, 
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.

Dr Anderson joined specialist resource investor Taurus Funds 
Management Pty Ltd as a Director in August 2011.  He was 
appointed as a Non-Executive Director of Base Resources 
Ltd on 28 November 2011 he resigned on 31 August 2017.He 
was appointed as a Non- Executive  Director of Heemskirk 
Consolidated Ltd on 31 May 2017 on a temporary basis and 
resigned on 25 August 2017.

Roberto de Andraca Adriasola  
Non-Executive Director

Mr de Andraca Adriasola is a business manager with 25  
years’ experience in the financial and mining business.  Over 
the last five years he has been working in the main Iron Ore 
and Steel Producer in Chile, CAP S A. He also oversaw the 
construction of the first desalination plant dedicated 100% to 
producing water for mining companies in the north of Chile.  
Mr de Andraca Adriasola has finance experience working at 
Chase Manhattan Bank, ABN Amro and Citigroup, working 
both in Chile and in New York and holds an MBA from the 
Adolfo Ibanez Business School of Chile.  He is a director of 
Puerto Los Losas, a port in the Atacama Region of Chile. He 
was elected to the board of directors of CAP S.A. on April 
18th 2017, until that date he held the position of VP  
of Business Development. 

21

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20185  Directors’  
Report (cont’d)

Review of Operations

Refer to Operations Report on pages 6 to 14.

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

On 3 July 2018 quarterly interest of $226,900 was settled by 
the issue of 7,989,446 ordinary fully paid shares using a VWAP 
of $0.0284.  

There were no other significance events occurring after the 
balance date that require reporting. 

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.    

Corporate Governance Statement

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.  It is committed to administering its corporate 
governance structures to promote integrity and responsible 
decision making.  

The Company’s corporate governance structures, policies 
and procedures are described in its Corporate Governance 
Statement which is available on the Company’s website at 
http://www.hotchili.net.au/about/corporate-governance-
procedures-and-policies/

Directors (cont’d)

George Randall Nickson
Non-Executive Director  
(Appointed 17 August 2017)

Mr. Nickson has more than 36 years of global experience in 
the mining industry, including 14 years based in Chile devoted 
to copper exploration.  His career includes work across 
a range of base and precious metals, bulk commodities 
and energy.  He holds an honours degree in Geological 
Engineering and a Masters degree in Business Administration.

Mr Nickson is currently engaged as an independent 
consultant to the exploration sector, specializing in business 
development, commercial advisory and business evaluations.  
Prior to that he spent 16 years with BHP, where he worked 
in a variety of senior technical, exploration management and 
business development roles while based in Chile, Brazil and 
Australia.  He is a member of the Australasian Institute of 
Mining & Metallurgy and the Prospectors and Developers 
Association of Canada. Mr Nickson has not held any 
directorships in any public listed company in Australia in the 
last three years.

Melanie Leighton 
Alternate Director 

Ms Leighton holds a degree in Geology from the University  
of Western Australia, is a Member of the Australian Institute  
of Geoscientists, and has almost 20 years’ experience  
within the mineral exploration industry. She has held project 
and senior geologist roles with several Australian listed 
companies including Hill 50 Gold, Harmony, and Terra Gold, 
gaining practical and management experience within the 
areas of exploration, mining and resource development. 
Ms Leighton has extensive experience in mineral exploration 
and resource development and acts in a project management 
role for Hot Chili in regard to resource estimation, land 
management, systems development and data integration  
and stakeholder relations. Ms Leighton is currently a non-
executive director of Great Boulder Resources Ltd (appointed 
6 April 2016).

Corporate Information

Hot Chili Limited 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 2018 was a loss of $4,010,556 (2017: loss $2,498,476).

Dividends

No dividends were paid or declared since the end of the 
previous year.  The Directors do not recommend the payment 
of a dividend.

22

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Security Holding Interests of Directors

Ordinary Shares

Options Over 
Ordinary Shares

Convertible 
Notes

Directors
Murray E Black

Christian E Easterday

Dr Allan Trench  

Michael Anderson

Roberto de Andraca Adriasola
George Randall Nickson 
(Appointed 17 August 2017)

Direct
Interest

-

Indirect
Interest
71,795,243

Direct
Interest
-

300,000

20,764,065

-

-

1,000,000

-

174,258

-

-

-

-

Indirect
Interest
6,666,666

833,333

-

-

-

-

-

Direct
Interest
-

Indirect
Interest
3,834

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Melanie Leighton (Alternate for M Black)  

140,000

Shares under Option

Company Secretary – Lloyd Flint

There were 108,666,667 ordinary shares under option at  
30 June 2018 (2017: 39,000,000). 

Shares Issued on the Exercise  
of Options

There were no ordinary shares of Hot Chili Limited issued 
during the year ended 30 June 2018 (2017: nil) from the 
exercise of options. 

Options Lapsed/ Cancelled  
During the Year

No options lapsed or were cancelled during the year.

Convertible Notes

There are 113,009 convertible notes on issue as at 30 June 
2018 (2017: 109,175).  There were no shares issued during 
the financial year on redemption, conversion or repayment.  
Quarterly interest payable on the convertible notes was settled 
by the issue of shares.

Directors Benefits

Since 30 June 2018, 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.

Lloyd Flint is a Chartered Accountant. He has 25 years’ 
experience in providing corporate secretarial, financial 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.

Indemnification and Insurance  
of Auditor

The consolidated entity has not, during or since the end of the 
financial year, indemnified or agreed to indemnify the auditor 
of the company or any related entity against a liability incurred 
by the auditor.

During the financial year, the company has not paid a premium 
in respect of a contract to insure the auditor of the company 
or related entity. 

23

HOT CHILI  Annual Report 2018 
5  Directors’  
Report (cont’d)

Directors’ Meetings

The number of directors’ meetings attended and written resolutions signed by each of the Directors of the Company during the 
year were:

Director

Murray E Black

Dr Michael Anderson

Christian E Easterday

Dr Allan Trench

Roberto de Andraca Adriasola

George Randall Nickson (Appointed 17 August 2017)

Melanie Leighton (Alternate for M Black)

Environmental Issues

The consolidated entity’s exploration and mining operations 
are subject to environment regulation under the law of Chile.  
No bonds are necessary in respect of the consolidated 
entity’s tenement holdings.

The Directors advise that during the year ended 30 June 2018 
no claim has been made by any competent authority that any 
environmental issues, condition of license or notice of intent 
has been breached.

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 2017 to  
30 June 2018, the Directors have assessed that there are  
no current reporting requirements but may be required to  
do so in the future.

Occupational Health and Safety

HHealth and Safety actions are framed within the “Quality, 
Environment, Safety and Occupational Health Integrated 
Policy” that states people´s health and safety is safeguarded 
within the different fields of our activity. Hot Chili Limited 
strictly follows the Chilean safety rules and communicates a 
set of key performance indicators to the Chilean Mining Safety 
Authority on a monthly basis. Health and Safety activities 
follow an action plan aimed to prevent and control different 
forms of risk at company operations. The plan covers specific 
areas such as the Compliance of Legal and Other Standards, 
Risk Assessment and Control, Occupational Health, 
Emergency Response, Training, Incidents - Corrective and 
Preventive Action, Management of Contractors and Suppliers, 
Audit and Management Review. 

Hot Chili Limited provides continuous training to enable 
employees to perform their work safely and efficiently. 
Training focuses on six areas where the risks are more evident 
according to the nature of our operations: Safe Driving, Drilling 
Platform Operations, Emergency Plans and Protection from 
Ultraviolet Radiation, Dust and Noise Emissions.  

In terms of Safety performance, “Lost Time Incident 
Frequency Rate (LTIFR*)” is the main indicator we monitor to 

Eligible 
Meetings while 
in office

Eligible 
Meetings 
attended

5

5

5

5

5

4

-

5

5

5

5

4

4

-

make sure our action plan remains effective and relevant. The 
LTIFR during the last 24 months (until 30th June 2018) is 0.

*LTIFR: number of lost time injuries in accounting period / total 
hours worked in accounting period * 1,000,000.

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.

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 Australia Partners, have been disclosed in  
Note 17. 

Auditors Independence Declaration

The lead auditor’s independence declaration for the year 
ended 30 June 2018 has been received and is included within 
this annual report.

24

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018REMUNERATION 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 practices:

•  competitiveness and reasonableness
•  acceptability to shareholders

• 

transparency 

The current base remuneration for Directors was last reviewed with effect from 1 July 2013. All director fees are periodically 
recommended for approval by shareholders.

The consolidated entity’s policy regarding executive’s remuneration is that the executives are paid a commercial salary and 
benefits based on the market rate and experience. 

Details of Remuneration of Directors

2018

Short Term

Consulting 
Fees 
(Related 
Parties)

$

-

36,792

Salary

$

-

-

Directors’ 
Fee

$

-

   -

-
-

- 

259,200
-

-
33,600

- 

36,178

-
36,792

-
259,200

32,144
101,922

Name
Murray E Black
Dr Michael 
Anderson
Christian E 
Easterday
Dr Allan Trench
Roberto de 
Andraca Adriasola
Randall Nickson 
(Appointed 17 
August 2017)

Post- 
Employment

Share-
based 
Payments

Other 
Benefits
$

Super- 
annuation
$

Options
$

-

-

-
-

-

-
-

-

-

24,624
3,192

 -

-
27,816

-

-

-
-

-

-
-

2017

Short Term

Consulting 
Fees 
(Related 
Parties)

$

-

36,792

Salary

$

-

-

-
-

259,200
-

- 
36,792

- 
259,200

Directors’ 
Fee

$

-

   -

-
33,600

6,745
40,345

Name
Murray E Black
Dr Michael 
Anderson
Christian E 
Easterday
Dr Allan Trench
Roberto de 
Andraca Adriasola 

Post- 
Employment

Share-
based 
Payments

Other 
Benefits
$

Super- 
annuation
$

Options
$

-

-

-
-

-
-

-

-

24,624
3,192

 -
27,816

-

-

-
-

-
-

Total
$

 -

 36,792

283,824
36,792

36,178 

32,144
425,730

Total
$

 -

 36,792

283,824
36,792

 6,745 
364,153

25

HOT CHILI  Annual Report 20185  Directors’  
Report (cont’d)

Remuneration of Key Management Personnel

2018

Short Term

Post- 
Employment

Share-based 
Payments

Consulting 
Fees 
Related 
Parties

$

-

-

-

-

Salary

$

45,000

180,000

163,212

388,212

Other 
Benefits

Super- 
annuation

$

$

Options

$

-

-

-

-

4,188

17,100

-

21,288

-

-

-

-

Name
John Sendziuk
(Company Secretary)1

Melanie Leighton
(Corporate Projects Manager / 
Alternate Director)

Jose Ignacio Silva
(Chief Legal Counsel)

1 Resigned 3 April 2018

2017

Short Term

Post- 
Employment

Share-based 
Payments

Name
John Sendziuk
(Company Secretary)

Melanie Leighton
(Corporate Projects Manager)

Jose Ignacio Silva
(Chief Legal Counsel)

Consulting 
Fees 
Related 
Parties

$

-

-

-

-

Salary

$

60,000

180,000

165,495

405,495

Other 
Benefits

Super- 
annuation

$

$

Options

$

-

-

-

-

5,700

17,100

-

22,800

-

-

-

-

Total

$

49,188

197,100

163,212

409,500

Total

$

65,700

197,100

165,495

428,295

26

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Key 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 to 30 June 2018, by each Key Management 
Personnel of Hot Chili Limited, including their personally related parties, is set out below.  There were no shares granted as 
compensation during the year.

2018

Directors

Murray E Black

Christian E Easterday

Dr Allan Trench

Dr Michael Anderson**

Roberto de Andraca Adriasola

George Randall Nickson**

Key Management Personnel
John Sendziuk
Melanie Leighton
Jose Ignacio Silva

Total

Balance at the  
start of the year

Granted as 
compensation

Other changes 
during the year

Balance at the  
end of the year

25,599,242

17,050,000

41,400

-

40,000

-

 42,730,642

970,000
40,000
270,000
1,280,000 
44,010,642

-

-

-

-

-

-

-

-
-
-
-
-

46,196,001

4,014,065

132,858

-

71,795,243

21,064,065

174,258

-

960,000

1,000,000

-

-

51,302,924

94,033,566

1(970,000)
100,000
3,720,834
2,850,834
54,153,758

-
140,000
3,990,834
4,130,834
98,164,400

1 Net changes during the period to date of resignation

2017

Directors

Murray E Black

Christian E Easterday

Dr Allan Trench

Dr Michael Anderson **

Roberto de Andraca Adriasola

Key Management Personnel

John Sendziuk*   

Melanie Leighton

Jose Ignacio Silva 

Total

Balance at the  
start of the year

Granted as 
compensation

Other changes 
during the year

Balance at the  
end of the year

21,599,242

17,050,000

41,400

-

40,000

38,730,642

970,000

40,000

270,000

1,280,000

40,010,642 

-

-

-

-

-

-

-

-

-

-

-

4,000,000

-

-

-

-

25,599,242

17,050,000

41,400

-

40,000

4,000,000

 42,730,642

-

-

-

-

4,000,000

970,000

40,000

270,000

1,280,000 

44,010,642

*  Resigned on 3 April 2018
** There are no shares held during the financial year and up to 30 June 2018 by the director.

27

HOT CHILI  Annual Report 2018 
5  Directors’  
Report (cont’d)

Options
Pursuant to participating in a placement of share to raise funds some directors and key management personnel were granted 
free attaching options during the year (2017: Nil).  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. Directors and key 
management personnel holdings of options are as followed:

2018

Directors

Murray E Black

Christian E Easterday

Key Management Personnel

Jose Ignacio Silva 

Balance at the  
start of the year

Granted as 
compensation

Other changes 
during the year

Balance at the  
end of the year

-

-

-

-

-

-

-

-

6,666,666

833,333

6,666,666

833,333

1,666,667

9,166,666

1,666,667

9,166,666

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
The Company has entered into an executive service 
agreement with Mr Christian Easterday, as Managing Director 
of the Company.

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.

Remuneration
Under the agreement, Mr Easterday will receive an 
annual salary of $259,200 after voluntary reductions, plus 
superannuation at the rate of 9.5% and other entitlements.  
Mr Easterday’s remuneration is subject to annual review.

Term and termination

Mr Easterday was employed for an initial term of 3 years, 
commencing on 9 October 2013.  At least 6 months before 
the End Date, either party may give notice that the agreement 
will terminate on the End date.

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’ 

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.

Additional information
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:

Revenue

Expenses

EBITDA

EBIT

Loss after income tax

2018

140,513

(4,151,069)

(2,419,012)

(2,431,564)

(4,010,556)

2017

1,356,693

(3,855,169)

(1,311,457)

(1,327,339)

(2,498,476)

2016

186,665

(9,775,548)

(7,153,060)

(7,234,332)

(9,588,883)

2015

71,601

(8,726,371)

(6,290,813)

(6,399,228)

(8,654,770)

2014

538,546

(9,152,108)

(6,542,811)

(6,664,920)

(8,613,562)

28

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:

Share price at financial  
year end ($)
Basic earnings per share 
(cents per share)

2018

0.03

(0.65)

2017

0.023

(0.44)

2016

0.06

(2.22)

2015

0.10

(2.47)

2014

0.19

(2.67)

Other transactions with directors, key management personnel  
and their related parties

MRA Consulting Pty Ltd, a company associated with Dr Anderson, a director, was paid $36,792 (2017: $36,792) in directors and 
consulting fees. There were no amounts payable as at 30 June 2018 (2017: Nil).

On 8 September 2017, the company issued 3,834 convertible notes with a face value of $100 to raise $383,400. The company 
also issued 766,800 ordinary shares pursuant to the subscription agreement for the convertible notes. The convertible notes and 
shares were issued to Blue Spec Drilling Pty Ltd, a company associated with Mr Murray Black, a director, following shareholder 
approval.  Quarterly interest accruing on the convertible notes payable to Blue Spec Drilling Pty Ltd of $25,110 for the year was 
settled by the issue of 753,266 shares. ($7,698 was payable as at June 2018 which was settled by issue of 271,054 shares on  
3 July 2018).

Blue Spec Sondajes Chile Limitada, a company in which Mr Murray Black is a director, was paid $49,171 (2017: $276,499) for 
rent and drilling services. There were no amounts payable as at 30 June 2018 (2017: Nil). 

All transactions were made at commercial terms.

End of Remuneration Report

Dated this 28th day of September 2018 in accordance with a resolution of the Directors and signed for on behalf of the  
Board by:  

Christian E Easterday
Managing Director

29

HOT CHILI  Annual Report 2018 
 
 
 
6  Auditors’ Independence 

Declaration

30

          AUDITOR’S INDEPENDENCE DECLARATION  As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been no contraventions of:  (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and  (ii) any applicable code of professional conduct in relation to the audit.             RSM AUSTRALIA PARTNERS             Perth, WA      ALASDAIR WHYTE Dated: 28 September 2018    Partner  HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20187  Auditors’ 
Report

31

         INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOT CHILI LIMITED   Opinion  We have audited the financial report of Hot Chili Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.   In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:   (i) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial performance for the year then ended; and  (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.  Basis for Opinion  We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.   We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.         HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20187  Auditors’ 
Report (cont’d)

32

     Material Uncertainty Related to Going Concern  We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of $4,010,556 and had cash outflows from operating activities of $2,163,922 and from investing activities of $1,596,499 during the year ended 30 June 2018 and, as of that date, the Group's current liabilities exceeded its current assets by $5,644,344. As stated in Note 1, these events or conditions, along with other matters as set forth in Note1, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.  Key Audit Matters  Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.  Key Audit Matter  How our audit addressed this matter Carrying value of Exploration and Evaluation Expenditure  Refer to Note 10 in the financial statements  The Group has capitalised a significant amount of exploration and evaluation expenditure, with a carrying value of $108,743,662 as at 30 June 2018.   We determined this to be a key audit matter due to the significant management judgment involved in assessing the carrying value in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, including: • Determination of whether expenditure can be associated with finding specific mineral resources, and the basis on which that expenditure is allocated to an area of interest; • Determination of whether exploration activities have progressed to the stage at which the existence of an economically recoverable mineral reserve may be assessed; and • Assessing whether any indicators of impairment are present, and if so, judgments applied to determine and quantify any impairment loss.   Our audit procedures in relation to the carrying value of exploration and evaluation expenditure included: • Obtaining evidence that the Group has valid rights to explore in the areas represented by the capitalised exploration and evaluation expenditure; • Agreeing a sample of additions to capitalised exploration and evaluation expenditure during the year to supporting documentation and ensuring that the amounts were capital in nature and relate to the area of interest;  • Reviewing and enquiring with management the basis on which they have determined that the exploration and evaluation of mineral resources has not yet reached the stage where it can be concluded that no commercially viable quantities of mineral resources exists;  • Enquiring with management and reviewing budgets and plans to test that the Group will incur substantive expenditure on further exploration for and evaluation of mineral resources in the specific area; • Reviewing whether management has received sufficient data to conclude that the exploration and evaluation asset is unlikely to be recovered in full, from the successful development or by sale.  This included the assessment of the key inputs, design and accuracy of the Productora Asset pre-feasibility financial model that supported management’s assessment; and • Reviewing minutes of director meetings and Australian Securities Exchange announcements to ensure that the Group has not resolved to discontinue activities in the specific area of interest. HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201833

        Key Audit Matter  How our audit addressed this matter Accounting for Convertible Notes issued  Refer to Note 12 and Note 13 in the financial statements  The Group has 113,009 unsecured convertible notes with a face value of $100 each as at 30 June 2018. The convertible notes have been treated as a compound financial instrument, with the debt component classified in the consolidated statement of financial position as borrowings ($3,814,764), and the conversion option classified as a derivative financial liability ($7,010,455).  The accounting for the convertible notes issued was considered to be a key audit matter due to the following: • It is a significant liability of the Group; and • The accounting is technically complex and requires judgement in valuing the derivative financial liability.    Our audit procedures in relation to the accounting for convertible notes issued included: • Reviewing the convertible note deed to understand the transaction and the related accounting considerations; • Evaluating the accounting treatment to determine whether the accounting for the convertible notes issued were in compliance with Australian Accounting Standards; • Reviewing the valuation of the derivative financial liability at both inception and subsequent measurement as at balance date, including the reasonableness of key inputs to the valuation model; and • Assessing the appropriateness of the disclosures in respect of the borrowings and derivative financial liability.    Other Information   The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2018, but does not include the financial report and the auditor's report thereon.   Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.   In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.   If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.    HOT CHILI  Annual Report 20187  Auditors’ 
Report (cont’d)

34

     Responsibilities of the Directors 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error.   In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.   Auditor's Responsibilities for the Audit of the Financial Report  Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.   A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report.   Report on the Remuneration Report  Opinion on the Remuneration Report  We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2018.  In our opinion, the Remuneration Report of Hot Chili Limited, for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001.   Responsibilities  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.                 RSM AUSTRALIA PARTNERS             Perth, WA      ALASDAIR WHYTE Dated: 28 September 2018    Partner   HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20188  Directors’ 

Declaration

In the directors’ opinion:

• 

• 

• 

• 

the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the 
Corporations Regulations 2001 and other mandatory professional reporting requirements;

the attached financial statements and notes comply with International Financial Reporting Standards as issued by the 
International Accounting Standards Board as described in note 1 to the financial statements;

the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2018 and 
of its performance for the financial year ended on that date; and

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due  
and payable.

The directors have been given the declarations required by section 295A of the Corporations Act 2001. 

Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. 

On behalf of the directors

Director 

Christian E Easterday
Managing Director

Dated this 28th day of September 2018

35

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 20189  Statement of 

Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2018

Statement of Profit or Loss & Other Comprehensive Income

Interest income

Other income

Depreciation

Convertible notes expenses

Exploration expenses written off

Corporate fees

Legal and professional

Employee benefits expense

Administration expenses

Accounting fees

Travel costs

Other expenses

Foreign exchange loss
Loss on revaluation of derivative liability

Finance costs

Loss before income tax

Income tax expense

Loss after income tax 

Other comprehensive income

Total Comprehensive Loss 

Loss attributable to:

Non-controlling interests  

Owners of Hot Chili Limited

Basic earnings per share (cents)
Diluted earnings per share (cents)

Consolidated Entity

2018

$

6,708

133,805

140,513

(12,552)

(77,474)

(422,109)

(94,722)

(219,196)

(824,946)

(183,913)

(63,142)

(29,229)

(350,116)

(76,081)
(218,597)

2017

$

14,179

1,342,514

1,356,693

(15,882)

(788,723)

(114,375)

(81,522)

(136,523)

(799,244)

(175,266)

(114,078)

(84,383)

(374,036)

-
-

(1,578,992)

(4,010,556)

-

(1,171,137)

(2,498,476)

-

(4,010,556)

(2,498,476)

-

-

(4,010,556)

(2,498,476)

(106,610)

(155,296)

(3,903,946)

(2,343,180)

(4,010,556)

(2,498,476)

(0.65)
(0.65)

(0.44)
(0.44)

Note

4

5

10

6

16
16

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 

36

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
 
10 Statement of 

Financial Position

AS AT 30 JUNE 2018

Current Assets

Cash and cash equivalents

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

Derivative financial instruments

Total Current Liabilities

Non-Current Liabilities

Borrowings

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity

Contributed equity

Option reserve

Foreign currency translation reserve

Accumulated losses  

Capital and reserves attributable to owners of Hot Chili Limited

Non-controlling interests

Total Equity

Consolidated Entity

Note

2018

$

2017

$

7

8

9

10

11

13

12

3,656,560

2,402,980

12,086

113,438

3,668,646

2,516,418

193,353

219,928

108,743,662

107,555,248

108,937,015

107,775,176

112,605,661

110,291,594

2,302,535

7,010,455

9,312,990

2,571,093

6,451,250

9,022,343

3,814,764

3,814,764

3,184,082

3,184,082

13,127,754

12,206,425

99,477,907

98,085,169

14

15(b)

15(c)

15(a)

127,432,848

122,053,043

1,497,028

1,473,539

1,222

1,222

(48,762,425)

(44,858,479)

80,168,673

78,669,325

15(d)

19,309,234

19,415,844

99,477,907

98,085,169

The above Statement of Financial Position should be read in conjunction with the accompanying notes. 

37

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
11 Statement of 

Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2018

Consolidated Entity

Contributed 
Equity

Option 
Reserve

Foreign 
Currency 
Translation 
Reserve

Accumulated 
Losses

Non-
controlling 
Interest

Total Equity

$

$

$

$

$

$

Balance at 1 July 2017

122,053,043

1,473,539

1,222

(44,858,479)

19,415,844

98,085,169

Loss for the year

Total Comprehensive 
Income for the Year

-

-

Shares issued

Share issue costs

5,703,116

(323,311)

-

-

-

-

Share based payments

-

23,489

-

-

-

-

-

(3,903,946)

(106,610)

(4,010,556)

(3,903,946)

(106,610)

(4,010,556)

-

-

-

-

-

-

5,703,116

(323,311)

23,489

Balance at 30 June 2018

127,432,848

1,497,028

1,222

(48,762,425)

19,309,234

99,477,907

Balance at 1 July 2016

117,209,608

1,125,616

1,222

(42,515,299)

19,571,140

95,392,287

Loss for the year

Total Comprehensive 
Income for the Year

-

-

Shares issued

Share issue costs

5,206,476

(363,041)

-

-

-

-

Share based payments

-

347,923                       

-

-

-

-

-

(2,343,180)

(155,296)

(2,498,476)

(2,343,180)

(155,296)

(2,498,476)

-

-

-

-

-

-

5,206,476

(363,041)

347,923

Balance at 30 June 2017

122,053,043

1,473,539

1,222

(44,858,479)

19,415,844

98,085,169

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

38

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
 
 
 
 
 
 
 
12 Statement of 
Cash Flows

FOR THE YEAR ENDED 30 JUNE 2017

Cash Flows from Operating Activities

Payments to suppliers and employees

Interest payment

Interest received

Other receipts

Consolidated Entity
2018

 2017

Note

$

$

(2,159,372)

(1,874,137)

(145,063)

(1,141,946)

6,708

133,805

14,179

122,269

Net cash used in operating activities

19(b)

(2,163,922)

(2,879,635)

Cash Flows from Investing Activities

Payments for plant and equipment

Payments for exploration and evaluation

Net cash used in investing activities

Cash Flows from Financing Activities

Proceeds from issue of shares

Share issue costs

Proceeds from issuance of Convertible Note

Repayment of borrowings

Net cash provided by financing activities

Net increase / (decrease) in cash held

Cash and cash equivalents at the beginning of the financial year

Effects of exchange rates on cash holdings in foreign currencies

(15,029)

(45,344)

(1,581,470)

(1,333,893)

(1,596,499)

(1,379,237)

5,006,380

4,400,050

(299,698)

(231,653)

383,400

10,917,500

-

(8,664,357)

5,090,082

1,329,661

6,421,540

2,162,668

2,402,980

(76,081)

221,576

 18,736

Cash and cash equivalents at the end of the financial year

19(a)

3,656,560

2,402,980

The above Statement of Cash Flows should be read on conjunction with the accompanying notes.

39

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
13 Notes to the Financial 

Statements

1.  SUMMARY OF SIGNIFICANT  
ACCOUNTING POLICIES 

The financial report was authorised for issue on 28th 
September 2018 by the Board of Directors.

The functional and presentation currency of Hot Chili Limited 
is Australian Dollars.  

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.

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.

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.

Going concern
The directors have prepared the financial statements on 
a going concern basis, which contemplates continuity of 
normal business activities and the realisation of assets and 
extinguishment of liabilities in the normal course of business.

As disclosed in the financial statements, the consolidated 
entity incurred a net loss of $4,010,556 and had cash outflows 
from operating activities of $2,163,922 and from investing 
activities of $1,596,499 for the year ended 30 June 2018.  
As of that date, the consolidated entity had net current 
liabilities of $5,644,344. 

These factors indicate a material uncertainty which may  
cast significant doubt over the ability of the consolidated  
entity to continue as a going concern and therefore whether  
it will realise its assets and extinguish its liabilities in the  
normal course of business and at the amounts stated in the 
financial report. 

The principal accounting policies adopted in the preparation of 
the financial statements are set out below. These policies have 
been consistently applied to all the years presented, unless 
otherwise stated.

New, revised or amending Accounting Standards 
and Interpretations adopted

The consolidated entity has adopted all of the new, revised or 
amending Accounting Standards and Interpretations issued 
by the Australian Accounting Standards Board (‘AASB’) that 
are mandatory for the current reporting period.  Any new, 
revised or amending Accounting Standards or Interpretations 
that are not yet mandatory have not been early adopted. 

The adoption of these Accounting Standards and 
Interpretations did not have any significant Impact on the 
financial performance or position of the consolidated entity.  

The following Accounting Standards and Interpretations are 
most relevant to the consolidated entity:

AASB 2016-1 Amendments to Australian Accounting 
Standards - Recognition of Deferred Tax Assets for  
Unrealised Losses

The consolidated entity has adopted AASB 2016-1 from 1 July 
2017. The amendments to AASB 112 ‘Income Taxes’ clarify 
the requirements on recognition of deferred tax assets for 
unrealised losses on debt instruments measured at fair value.

AASB 2016-2 Amendments to Australian Accounting 
Standards - Disclosure Initiative: Amendments to AASB 107

The consolidated entity has adopted AASB 2016-2 from 1 
July 2017. The amendments to AASB 107 ‘Statement of Cash 
Flows’ require the disclosure of changes in liabilities arising 
from financing activities, including both changes arising from 
cash flows and non-cash changes.

AASB 2017-2 Amendments to Australian Accounting 
Standards - Further Annual Improvements 2014-2016 Cycle

The consolidated entity has adopted AASB 2017-2 from 1 July 
2017. The amendments to AASB 12 ‘Disclosure of Interests 
in Other Entities’ clarify that the disclosure requirements 
of AASB 12 (other than the requirements for summarised 
information for subsidiaries, joint ventures and associates) 
apply to an entity’s interests in other entities that are  
classified as held for sale, held for distribution to owners 
in their capacity as owners, or discontinued operations in 
accordance with AASB 5 ‘Non-current Assets Held for Sale 
and Discontinued Operations’.

(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. These financial statements also 
comply with International Financial Reporting Standards as 
issued by the International Accounting Standards Board. 

40

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
Where control of an entity is obtained during a financial year, 
its results are included in the consolidated statement of profit 
and loss and 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. 

(d)  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.

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. 

1.  SUMMARY OF SIGNIFICANT  

ACCOUNTING POLICIES (CONT’D)

The directors believe there are reasonable grounds to believe 
that the consolidated entity will be able to continue as going 
concern, after consideration of the following factors: 

• 

• 

Included in current liabilities is a derivative liability of 
$7,010,455 (Note 13) and debt component of $3,814,764 
(Note 12) attributed to granting an option to the convertible 
note holder that may be converted at any time prior 
to maturity. The convertible note is redeemable at the 
option of the company and thus will not be a drain on the 
company’s funds;

Included in current liabilities a refundable deposit option 
fee of $2,029,500 (Note 11). The option fee is refundable 
at the option of Campania Minera del Pacífico S.A. 
(CMP).  The directors are working co-operatively with 
CMP to co-ordinate the exercise of Tranche 1 of the 
associated Additional Purchase Option, which would 
raise USD $26m, enable the potential settlement of the 
convertible facility and provide significant cash flow to the 
consolidated entity; and

•  Other sources of funding may also be contemplated. This 
may include the issue of additional equity securities under 
the Corporations Act 2001 to raise further working capital.

Accordingly, the Directors believe that the consolidated 
entity will be able to continue as a going concern and that 
it is appropriate to adopt the going concern basis in the 
preparation of the financial report.  

The financial report does not include any adjustments relating 
to the amounts or classification of recorded assets or liabilities 
that might be necessary if the consolidated entity does not 
continue as a going concern.

(b)  Parent entity information

In accordance with the Corporations Act 2001, these financial 
statements present the results of the consolidated entity 
only. Supplementary information about the parent entity is 
disclosed in note 26.

(c)  Principles of consolidation

The consolidated financial statements comprise the financial 
statements of Hot Chili Limited 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 entity is shown separately in the consolidated 
statement of profit or loss and other comprehensive  
income and the consolidated statement of financial  
position respectively.

41

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201813 Notes to the  

Financial Statements (cont’d)

1. 

SUMMARY OF SIGNIFICANT  
ACCOUNTING POLICIES (CONT’D) 

(h)  Plant and equipment

Plant and equipment

(e)  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.

(f)  Current and non-current classification

Assets and liabilities are presented in the statement of financial 
position based on current and non-current classification.

An asset is current when: it is expected to be realised or 
intended to be sold or consumed in normal operating cycle; 
it is held primarily for the purpose of trading; it is expected to 
be realised within twelve months after the reporting period; 
or the asset is cash or cash equivalent unless restricted 
from being exchanged or used to settle a liability for at least 
twelve months after the reporting period. All other assets are 
classified as non-current.

A liability is current when: it is expected to be settled in  
normal operating cycle; it is held primarily for the purpose  
of trading; it is due to be settled within twelve months after  
the reporting period; or there is no unconditional right to  
defer the settlement of the liability for at least twelve months 
after the reporting period. All other liabilities are classified  
as non-current. 

Deferred tax assets and liabilities are always classified as  
non-current.

(g)  Exploration and evaluation expenditure

Exploration and evaluation expenditure in relation to 
separate areas of interest for which rights of tenure are 
current is carried forward as an asset in the statement of 
financial position where it is expected that the expenditure 
will be recovered through the successful development and 
exploitation of an area of interest, or by its sale; or exploration 
activities are continuing in an area and activities have not 
reached a stage which permits a reasonable estimate of the 
existence or otherwise of economically recoverable reserves. 
Where a project or an area of interest has been abandoned, 
the expenditure incurred thereon is written off in the year in 
which the decision is made.

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 
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.    

(i)  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.

42

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
1. 

SUMMARY OF SIGNIFICANT  
ACCOUNTING POLICIES (CONT’D)

(j)  Equity-based payments

Equity-based compensation benefits can be provided to 
directors and executives.

(n)  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.  

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 become 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.

(k)  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.

(o)  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.

(p)  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.

ii.  Diluted earnings per share

(q)  Borrowings

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.

(l)  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.

(m) Impairment of assets

Assets that have an indefinite useful life are not subject to 
amortisation and are tested annually for impairment.  Assets 
that are subject to amortisation are reviewed for impairment 
whenever events or changes in circumstances indicate that 
the carrying amount may not be recoverable.  An impairment 
loss is recognised for the amount by which the asset’s 
carrying amount exceeds its recoverable amount.  The 
recoverable amount is the higher of an asset’s fair value  
less 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).

Loans and borrowings are initially recognised at the fair value 
of the consideration received, net of transaction costs. They 
are subsequently measured at amortised cost using the 
effective interest method.

Where there is an unconditional right to defer settlement of 
the liability for at least 12 months after the reporting date, the 
loans or borrowings are classified as non-current.

The component of the convertible notes that exhibits 
characteristics of a liability is recognised as a liability in the 
statement of financial position, net of transaction costs.

(r)  Derivative financial instruments

Derivatives are initially recognised at fair value on the date 
a derivative contract is entered into and are subsequently 
remeasured to their fair value at each reporting date. The 
accounting for subsequent changes in fair value depends on 
whether the derivative is designated as a hedging instrument, 
and if so, the nature of the item being hedged.

(s)  Finance costs

Finance costs attributable to qualifying assets are capitalised 
as part of the asset. All other finance costs are expensed in 
the period in which they are incurred, including interest on 
short-term and long-term borrowings.

(t)  Issued Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new 
shares or options are shown in equity as a deduction, net of 
tax, from the proceeds.

43

HOT CHILI  Annual Report 2018 
13 Notes to the  

Financial Statements (cont’d)

New Accounting Standards and Interpretations not 
yet mandatory or early adopted

Australian Accounting Standards and Interpretations that have 
recently been Issued or amended but are not yet mandatory, 
have not been early adopted by the consolidated entity 
for the annual reporting period ended 30 June 2018. The 
consolidated entity’s assessment of the Impact of these new 
or amended Accounting Standards and Interpretations, most 
relevant to the consolidated entity, are set out below:

AASB 9 Financial Instruments

This standard is applicable to annual reporting periods 
beginning on or after 1 January 2018. The standard replaces 
all previous versions of AASB  9 and completes the project 
to replace IAS  39 ‘Financial Instruments:  Recognition and 
Measurement’. AASB 9 introduces new classification and 
measurement models for financial assets. A financial asset 
shall be measured at amortised cost, if it is held within a 
business model whose objective is to hold assets in order to 
collect contractual cash flows, which arise on specified dates 
and solely principal and interest. All other financial instrument 
assets are to be classified and measured at fair value 
through profit or loss unless the entity makes an irrevocable 
election on initial recognition to present gains and losses 
on equity instruments (that are not held -for-trading) in other 
comprehensive income (‘OCI’).  For financial liabilities, the 
standard requires the portion of the change in fair value that 
relates to the entity’s own credit risk to be presented in OCI 
(unless it would create an accounting mismatch).  New simpler 
hedge accounting requirements are intended to more closely 
align the accounting treatment with the risk management 
activities of the entity.  New impairment requirements will 
use an ‘expected credit loss’ (‘ECL’) model to recognise an 
allowance. Impairment will be measured under a 12-month 
ECL method unless the credit risk on a financial instrument 
has increased significantly since initial recognition in which 
case the lifetime ECL method is adopted. The standard 
introduces additional new disclosures. The consolidated entity 
will adopt this standard from 1 July 2018 but the impact of 
its adoption is not expected to have a material impact on the 
consolidated entity.

AASB 16 Leases

This standard is applicable to annual reporting periods 
beginning on or after 1 January 2019. The standard replaces 
AASB 117 ‘Leases’ and for lessees will eliminate the 
classifications of operating leases and finance leases.  
Subject to exceptions, a ‘right-of-use’ asset will be capitalised 
in the statement of financial position, measured as the present 
value of the unavoidable future lease payments to be made 
over the lease term.  The exceptions relate to short -term 
leases of 12 months or less and leases of low-value assets 
(such as personal computers and small office furniture) where 
an accounting policy choice exists whereby either a ‘right-
of-use’ asset is recognised or lease payments are expensed 
to profit or loss as incurred.  A liability corresponding to the 
capitalised lease will also be recognised, adjusted for lease 
prepayments, lease incentives received, initial direct costs 
incurred and an estimate of any future restoration, removal 
or dismantling costs.  Straight-line operating lease expense 
recognition will be replaced with a depreciation charge 
for the leased asset (included in operating costs) and an 

interest expense on the recognised lease liability (included 
in finance costs).  In the earlier periods of the lease, the 
expenses associated with the lease under AASB  16 will be 
higher when compared to lease expenses under AASB 117.  
However, EBITDA (Earnings before Interest, Tax, Depreciation 
and Amortisation) results will be improved as the operating 
expense is replaced by interest expense and depreciation 
in profit or loss under AASB 16. For classification within the 
statement of cash flows, the lease payments will be separated 
into both a principal (financing activities) and interest (either 
operating or financing activities) component. For lessor 
accounting, the standard does not substantially change how 
a lessor accounts for leases.  The consolidated entity will 
adopt this standard from 1 July 2019. The impact of the new 
leases standard is that leased asset will be capitalised in the 
statement of financial position, measured as the present  
value of the unavoidable future lease payments to be made 
over the lease term and a liability corresponding to the 
capitalised lease will also be recognised, adjusted for lease 
prepayments, lease incentives received, initial direct costs 
incurred and an estimate of any future restoration, removal  
or dismantling costs.

2.  CRITICAL ACCOUNTING 

JUDGEMENTS, ESTIMATES  
AND ASSUMPTIONS

The preparation of the financial statements requires 
management to make judgements, estimates and 
assumptions that affect the reported amounts in the 
financial statements. Management continually evaluates its 
judgements and estimates in relation to assets, liabilities, 
contingent liabilities, revenue and expenses. Management 
bases its judgements, estimates and assumptions on 
historical experience and on other various factors, including 
expectations of future events; management believes to be 
reasonable under the circumstances. The resulting accounting 
judgements and estimates will seldom equal the related actual 
results. The judgements, estimates and assumptions that 
have a significant risk of causing a material adjustment to the 
carrying amounts of assets and liabilities (refer to  
the respective notes) within the next financial year are 
discussed below.

Exploration and evaluation costs
Exploration and evaluation costs have been capitalised on  
the basis that the consolidated entity will commence 
commercial production in the future, from which time the 
costs will be amortised in proportion to the depletion of the 
mineral resources. Key judgements are applied in considering 
costs to be capitalised which includes determining 
expenditures directly related to these activities and allocating 
overheads between those that are expensed and capitalised. 
In addition, costs are only capitalised that are expected to 
be recovered either through successful development or sale 
of the relevant mining interest. Factors that could impact the 
future commercial production at the mine include the level  
of reserves and resources, future technology changes, which 
could impact the cost of mining, future legal changes and 
changes in commodity prices. To the extent that capitalised 
costs are determined not to be recoverable in the future,  
they will be written off in the period in which this determination 
is made.

44

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Fair value measurement hierarchy
The consolidated entity is required to classify all assets and 
liabilities, measured at fair value, using a three level hierarchy, 
based on the lowest level of input that is significant to the 
entire fair value measurement, being: Level 1: Quoted prices 
(unadjusted) in active markets for identical assets or liabilities 
that the entity can access at the measurement date; Level 
2: Inputs other than quoted prices included within Level 1 
that are observable for the asset or liability, either directly or 
indirectly; and Level 3: Unobservable inputs for the asset or 
liability. Considerable judgement is required to determine what 
is significant to fair value and therefore which category the 
asset or liability is placed in can be subjective.

Share-based payment transactions
The consolidated entity measures the cost of equity-settled 
transactions with employees by reference to the fair value of 
the equity instruments at the date at which they are granted. 
The fair value is determined by using either the Binomial 
or Black-Scholes model taking into account the terms and 
conditions upon which the instruments were granted.  
The accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on  
the carrying amounts of assets and liabilities within the  
next annual reporting period but may impact profit or loss  
and equity.

Derivative financial instruments
The directors have determined that the convertible notes 
issued during the year are a compound financial Instrument 
with both a debt component and derivative financial liability 
representing the conversion option. The accounting for 
the derivative financial instrument requires management 
judgements and estimates in determining the fair value.  

Consolidation of entities
The directors have concluded that the group controls 
Sociedad Minera El Aguila SpA (SMEA), even though it holds 
less than all the voting rights of this subsidiary. This is because 
the group is the largest shareholder with an 80% equity 
interest and the ability to appoint 4 of the 5 Directors while the 
remaining 20% of shares are held by Compañía Minera del 
Pacífico S.A (CMP) with the ability to appoint the remaining 
Director. An agreement signed between the group and CMP 
requires a quorum to hold a Board meeting and adopt a 
resolution to be of at least three Directors with the right to 
vote.  The accounting treatment of SMEA will be evaluated at 
each reporting date subject to any developments between  
the shareholders.

45

HOT CHILI  Annual Report 201813 Notes to the  

Financial Statements (cont’d)

3.  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 (2017: 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.

GEOGRAPHICAL INFORMATION

Australia 

Chile

4. 

INTEREST INCOME 

Interest income

5.  OTHER INCOME

Foreign exchange gain
Gain on revaluation of derivative liability
Other

6. 

INCOME TAX EXPENSE

(a)  Reconciliation of income tax expense to prima facie tax payable
Loss before income tax 
Prima facie income tax at 27.5% (2017: 27.5%)
Tax-effect of amounts not deductible in calculating taxable income
Tax loss not recognised
Income tax expense

(b)  Tax losses:
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 27.5% (2017: 27.5%)

Geographical 

Non-current assets

2018
$
53,521

2017
$
51,044

108,883,494
108,937,015

107,724,132
107,775,176

Consolidated Entity
2017
2018
$
$

6,708

6,708

14,179

14,179

-
-
133,805
133,805

227,745
992,500
122,269
1,342,514

(4,010,556)
(1,102,903)
471,044
631,859
-

(2,498,476)
(687,081)
(128,557)
815,638
-

21,574,064

5,932,868

19,353,868

5,322,314

(c)  The directors estimate that the potential deferred tax asset at 30 June 2018 in respect of tax losses not 

brought to account is $5,932,868 (2017: $5,322,314).

In addition, Chilean subsidiaries of Hot Chili Limited also have tax losses that are a potential deferred tax asset of $20,713,268 
(2017: $17,726,786).

46

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
6. 

INCOME TAX EXPENSE (CONT’D)

(d)  The benefit for tax losses will only be obtained if:

i. 

ii. 

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.

7.  CASH AND CASH EQUIVALENTS

Cash at bank

8.  OTHER CURRENT ASSETS

Prepayment
Accounts receivable
VAT receivable

9.  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
Disposals and scrapped
Depreciation (i)
Carrying amount at the end of the year

Consolidated Entity

2018

$

3,656,560
3,656,560

2017

$

2,402,980
2,402,980

-

11,953

133

12,086

723,395

(530,042)

193,353

219,928

15,029

-

(41,604)

193,353

35,449

77,856

133

113,438

708,366

(488,438)

219,928

325,086

45,344

(84,170)

(66,332)

219,928

(i)  Depreciation of $29,052 (2017: $50,450) was capitalised into exploration costs.

10.  EXPLORATION AND EVALUATION EXPENDITURE

Carrying amount at the beginning of the year
Consideration given for mineral exploration acquisition
Capitalised mineral exploration and evaluation
Exploration costs written off

107,555,248

106,335,730

173,741

1,436,782

(422,109)

-

1,333,893

(114,375)

Carrying amount at the end of the year (i)

108,743,662

107,555,248

(i)  Management have determined that the capitalised expenditure relating to the projects in Chile are still in the exploration phase 
and are to be classified as Exploration and Evaluation expenditure. In accordance with AASB 6 Exploration for and evaluation 
of Mineral Resources management have assessed whether there are any indicators of impairment on the capitalised 
expenditure as at balance date. In making this assessment management have considered whether sufficient data exists to 
conclude that the exploration and evaluation assets are unlikely to be recovered in full from successful development or sale.  
This included management engaging an independent consultant to review and update the key drivers within the Productora 
pre-feasibility financial model including the long term copper price, discount rate and the operating and capital costs. Based 
on this review, management are satisfied that there are no impairment indicators as at balance date.   

The future realisation of these non-current assets is dependent on further exploration and funding necessary to commercialise 
the resources or realisation through sale. 

47

HOT CHILI  Annual Report 2018 
13 Notes to the  

Financial Statements (cont’d)

11.    TRADE AND OTHER PAYABLES

Trade payables and accruals

Refundable deposit (option fee) (i)

Consolidated Entity

2018

$

273,035

2,029,500

2,302,535

2017

$

619,721

1,951,372

2,571,093

(i)  Sociedad Minera El Águila SpA (SMEA) granted Compañía Minera del Pacífico S.A. (CMP) an option (Additional Purchase 

Option) to acquire shares in SMEA such that upon exercise of the option, CMP will be entitled to acquire a further 32.6% 
interest, taking its total interest up to 52.6%, by acquiring existing shares from Hot Chili subsidiary, SMECL. The additional 
32.6% shareholding interest in SMEA that CMP may acquire can be exercised in two tranches and determined by reference to 
a valuation and will have a minimum value of US$80 million and a maximum value of US$110 million.  The Option fee of US$1.5 
million had been received following confirmation of the executed merger agreement. In the case where the parties do not 
execute the option, Hot Chili shall refund CMP the Option fee. 

12.  BORROWINGS 

NON-CURRENT
Convertible note – debt component1

Consolidated Entity
2017
2018
$
$
3,184,082
3,814,764

3,814,764

3,184,082

1  There are a total of 113,009 convertible notes on issue (2017: 109,175).  On 22 June 2017, the consolidated entity issued 

109,175, 8% five-year convertible notes, with a face value of $100 each and a further 3,834 convertible notes were issued on 
8 September 2017 for total proceeds of $11,300,900.  Interest is paid quarterly in arrears at a rate of 8% per annum based on 
the face value. The maturity date of the notes is 22 June 2022. The conversion rights associated with the convertible notes are:

a)  The holder of the notes may convert into ordinary shares of the parent entity at any time prior to maturity at a conversion 

price of A$0.03333 per share;

b)  The company can redeem the notes early in cash for the face value plus interest accrued, only after two years since the 
issue date provided the VWAP for the shares traded on the ASX for the 20 consecutive trading days preceding the date 
on which the notice of redemption is given is not less than 300% of the conversion price of A$0.03333 per share; and

c)  The Convertible note will automatically be converted on the maturity date at the lower of $0.03333 or 95% of the VWAP 

traded on the ASX for the 10 consecutive trading days preceding the maturity date.

48

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201812.  BORROWINGS (CONT’D)

Convertible note - reconciliation

Balance Brought forward
Proceeds from Issue
Derivative liability at inception
Transaction costs

Interest expense
Interest paid
At the end of the financial year

Consolidated Entity
2017
$

2018
$
3,184,082
383,400
(340,608)
(2,140)
3,224,734
1,494,376
(904,346)
3,814,764

-
10,917,500
(7,443,750)
(299,716)
3,174,034
29,190
(19,142)
3,184,082

13.  DERIVATIVE FINANCIAL INSTRUMENTS

Derivative Liability - Convertible Note

Consolidated Entity
2017
2018
$
$
6,451,250
7,010,455
6,451,250
7,010,455

The holders of the convertible notes have the option to convert into ordinary share capital of the Company. Refer to Note 12.

Fair value hierarchy

The consolidated entity using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair value 
measurement, being:

•  Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the 

measurement date; 

•  Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly  

or indirectly;  

•  Level 3: Unobservable inputs for the asset or liability

The derivative liability is determined to be Level 2 and has been valued using quoted market prices at the end of the reporting 
period. This valuation technique maximises the use of observable market data where it is available and relies as little as possible 
on entity specific measurements.

Derivative liability - reconciliation

Balance at beginning of period
Derivative liability at inception
Net Change in fair value during the period
At the end of the financial year

Consolidated Entity
2017
2018
$
$
6,451,250
340,608
218,597
7,010,455

-
7,443,750
(992,500)
6,451,250

49

HOT CHILI  Annual Report 2018 
13 Notes to the  

Financial Statements (cont’d)

14.  CONTRIBUTED EQUITY

(a)  Share capital

No. Shares

Consolidated Entity

2018

2017

2018

$

2017

$

At the beginning of the financial year         

554,381,254

445,723,709

122,053,043

117,209,608

Shares issued during the financial year

Shares issued in lieu of convertible note costs

162,090,539

19,404,971

Shares issued for the extension of the  
finance facility
Less cost of issue 

At the end of the financial year

(b)  Terms and Conditions of Contributed Equity

Ordinary Shares

88,001,000

11,300,976

9,355,569

5,006,502

696,614

-

(323,311)

4,400,050

282,514

523,912

(363,041)

-

-

735,876,764

554,381,254

127,432,848

122,053,043

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 financial year

Issued during the financial year

Balance at end of financial year

Listed Options

2018   
Options

2017
Options

39,000,000

69,666,667

108,666,667

11,000,000

28,000,000

39,000,000

There are no listed options over ordinary shares in the company at 30 June 2018 (2017: NIL).

(d)  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.

50

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201815.  RESERVES, ACCUMULATED LOSSES AND NON-CONTROLLING INTERESTS

(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)  Option reserve
The options reserve is used to recognise the fair value of options issued.
As at 30 June 2018, 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 currency translation reserve
Balance at the beginning of the year
Additions during the year
Balance at the end of the year

(d)  Non-controlling interests
Balance at the beginning of the year
Share of loss for the year
Balance at the end of the year

16.  LOSS PER SHARE

Loss after tax attributable to the owners of Hot Chili Limited

Basic loss per share (cents)

Diluted loss per share (cents)

Unexercised options are not dilutive.

Consolidated Entity

2018

$

2017

$

(44,858,479)
(3,903,946)
(48,762,425)

(42,515,299)
(2,343,180)
(44,858,479)

1,473,539
23,489
1,497,028

1,125,616
347,923
1,473,539

1,222
-
1,222

1,222
-
1,222

19,415,844
(106,610)
19,309,234

19,571,140
(155,296)
19,415,844

Consolidated Entity

2018
$

2017
$

(3,903,946)

(2,343,180)

(0.65)

(0.65)

(0.44)

(0.44)

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 the denominator in calculating diluted loss per share

596,376,912

537,703,601

596,376,912

537,703,601

51

HOT CHILI  Annual Report 2018 
 
13 Notes to the  

Financial Statements (cont’d)

17.  REMUNERATION OF AUDITORS

Remuneration of the auditor for:

- Auditing and reviewing of financial reports

- Tax services

Consolidated Entity
2018
$

2017
$

46,000

18,434

64,434

44,300

22,636

66,936

18.  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 
Dr Michael Anderson 
Dr Allan Trench 
Roberto de Andraca Adriasola 
George Randall Nickson 

(Chairman)
(Executive Director)
(Non-Executive Director)  
(Independent Non-Executive Director)
(Non-Executive Director)
(Independent Non-Executive Director, appointed 17 August 2017)

(b)  Company Secretary

John Sendziuk (Resigned 3 April 2018)

Lloyd Flint (Appointed 3 April 2018)

(c)  Corporate Projects Manager

Melanie Leighton (also Alternate Director)

(d)  Chief Legal Counsel and country manager

Jose Ignacio Silva

(e)  Details of Remuneration of Key Management Personnel for the year ended 30 June 2017:

Consolidated Entity
2017
2018
$
$

397,914

27,816

425,730

388,212

21,288

409,500

835,230

336,337

27,816

364,153

405,495

22,800

428,295

792,448

Directors

Short-term benefits

Post-employment benefits

Key Management Personnel

Short-term benefits

Post-employment benefits

Total

52

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
 
 
 
 
 
 
 
19.  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

(b)  Reconciliation of Net Cash used in Operating Activities to Operating

Loss for the year

Depreciation

Effect of exchange rates on holdings in foreign currencies

Exploration expenditure written off

Gain on revaluation of derivative liability

Loss on scrapped plant

Amortised finance costs

Non-cash finance costs

Shares issued in lieu of convertible note transaction costs

Options issued in lieu of convertible note transaction costs

Consolidated Entity

2018

$
3,656,560

3,656,560

2017

$

2,402,980

2,402,980

(4,010,556)

(2,498,476)

12,552

76,081

422,109

218,597

-

587,888

677,443

-

19,170

66,332

(227,745)

114,375

(992,500)

84,170

-

-

192,116

146,381

Net cash flows from operating activities before change in assets and liabilities

(1,996,716)

(3,115,347)

Change in assets and liabilities during the financial year:

Other current assets

Trade and other payables

Net cash outflow from operating activities

(c)  Non cash investing and financing activities

101,352

(268,558)

(113,305)

349,017

(2,163,922)

(2,879,635)

66,666,667 options exercisable at 10c per share expiring on 31 May 2020 were issued as free attaching on a one option issued 
for every two shares successfully applied for in a placement of shares announced 30 April 2018.  A further 3,000,000 of the 
same series of options were issued to EverBlu Capital Pty Ltd as fees for managing the placement.

Quarterly convertible note interest that accrued to noteholders was settled through the issue of fully paid ordinary shares 
calculated on the 5 day volume weighted average price (VWAP) prior to quarter end:

Quarter ended

Date paid

Interest due $

30 September 2017

2 October 2017

31 December 2017

4 January 2018

31 March 2018

30 June 2018

4 April 2018

3 July 2018

223,644

229,411

224,389

226,900

VWAP

0.03710

0.03520

0.03679

0.02840

Shares issued

6,028,186

6,511,789

6,099,183

7,989,446

There were no non cash investing and financing activities during the 2017 year.

53

HOT CHILI  Annual Report 2018 
 
 
13 Notes to the  

Financial Statements (cont’d)

20.  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

(b)  Exploration Commitments

Consolidated Entity
2017
2018
$
$
78,000 

105,116

- 
105,116

- 
78,000

During the year the consolidated entity entered into a formal agreement to acquire a 90% interest in the San Antonio Project, 
a 70% interest in Lulu project and a 90% interest in the Valentina Project over a four-year period. The Joint ventures involves 
an Option agreement whereby the full interest of 90%, 70% and 90% respectively of the mining rights of the project will be 
transferred upon satisfaction of the following Option payments committed as at 30 June 2018:

Within one year
Later than one year but not later than five years

(c)  Operating Leases

101,475
18,197,808 
18,299,283

- 
- 
-

The consolidated entity leases office premises under operating leases. The leases have various terms and renewal rights.

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

113,300
75,533
188,833

113,300
188,833
302,133

The Company sub leases its head office premises for 50% of the total cost under the lease agreement. The above operating 
lease commitments does not include the benefit under this sub lease arrangement.

21.  EVENTS OCCURRING AFTER REPORTING DATE

On 3 July 2018 quarterly interest of $226,900 was settled by the issue of 7,989,446 ordinary fully paid shares using a VWAP  
of $0.0284. There were no other significance events occurring after the balance date that require reporting.

22.   RELATED PARTIES

MRA Consulting Pty Ltd, a company associated with Dr Anderson, a director, was paid $36,792 (2017: $36,792) in directors and 
consulting fees. 

There were no amounts payable as at 30 June 2018 (2017: Nil).

On 8 September 2017, the company issued 3,834 convertible notes with a face value of $100 to raise $383,400. The company 
also issued 766,800 ordinary shares pursuant to the subscription agreement for the convertible notes. The convertible notes and 
shares were issued to Blue Spec Drilling Pty Ltd, a company associated with Mr Murray Black, following shareholder approval.  
Quarterly interest accruing on the convertible notes payable to Blue Spec Drilling Pty Ltd of $25,110 for the year was settled by 
the issue of 753,266 shares. ($7,698 was payable as at June 2018 which was settled by issue of 271,054 shares on 3 July 20180.

Blue Spec Sondajes Chile Limitada, a company in which Mr Murray Black is a director, was paid $49,171 (2017: $276,499) for 
rent and drilling services. There were no amounts payable as at 30 June 2018 (2017: Nil). 

All transactions were made at recognised commercial terms. 

23.  CONTINGENT LIABILITIES

As at 30 June 2018, Hot Chili Limited had accumulated VAT refund payments totalling $12,602,329 (CLP 6,018,998,141). Under 
the terms of the VAT refund payment, the consolidated entity has until the 31 December 2019 to commercialise production from 
Productora and meet certain export targets. Hot Chili also has the right to extend this term. In the event that the term is not 
extended and Hot Chili does not meet certain export targets, Hot Chili will be required to re-pay the VAT refund payments to the 
Chilean Tax Authority subject to certain terms and conditions. However, if Hot Chili achieves the export targets from Productora 
within that timeframe or its renewal, if required, any VAT refund payments will not be required to be repaid. Given potential delays 
to Productora’s planned future production target, owing to depressed global copper price conditions, the Company intends to 
exercise its right to extend the date of commercial production from Productora with the Chilean Tax Authority.

54

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201824.  INTEREST IN SUBSIDIARIES

(a)  Material subsidiaries

The consolidated financial statements incorporate the assets, liabilities, and results of the following material subsidiaries, in 
accordance with the accounting policy described in Note 1:

Name of Entity
Sociedad Minera El Corazon Limitada
Sociedad Minera El Aguila SpA*
Sociedad Minera Los Mantos SpA
Sociedad Minera Frontera SpA
Sociedad Minera Bandera SpA

Equity Holding

Country of 
Incorporation
Chile
Chile
Chile
Chile
Chile

Class of  
Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

2018 
%
100
 80*
100
100
100

 2017 
%
100
80*
100
100
100

*  The non-controlling interests hold 20% of Sociedad Minera El Aguila SpA (SMEA) - refer to note 24 (b)

(b)  Non-controlling interests (NCI)

Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are 
set out below:

Summarised statement of financial position

Current assets
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities

Net assets

Summarised statement of profit or loss and other comprehensive income
Revenue
Expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Other comprehensive income
Total comprehensive loss

Statement of cash flows
Net cash used in operating activities
Net cash used in investing activities
Net cash from in financing activities
Net increase in cash and cash equivalents

Other financial information
Profit / (loss) attributable to non-controlling interests
Accumulated non-controlling interests at the end of reporting period

SMEA

30-Jun-18

30-Jun-17

185,614
108,133,390
108,319,004

139,094
107,354,922
107,494,016

-
25,521,627
25,521,627

25,169
24,138,425
24,163,594

82,797,377

83,330,422

133,805
(666,849)
(533,044)
-
(533,044)
-
(533,044)

-
(776,482)
(776,482)
-
(776,482)
-
(776,482)

(620,874)
(778,468)
1,383,201
(16,141)

(700,527)
(1,265,909)
2,028,521
62,085

(106,610)
19,309,234

(155,296)
19,415,844

55

HOT CHILI  Annual Report 201813 Notes to the  

Financial Statements (cont’d)

25.  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 summarized 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. 

Risk Exposures and Responses 

(a)  Interest rate risk exposure 

The consolidated entity’s is not exposed to interest rate risk.  Borrowings are issued at fixed rates (Note 12). 

(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 trades 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.

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.

Financing arrangements
Remaining contractual maturities

The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables 
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial 
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual 
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

56

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018Weighted 
average  
interest rate
%

1 year  
or less
$

Between 1  
and 5 years
$

Remaining 
contractual 
maturities
$

Amount as 
per Statement 
of Financial 
Position
$

-%

-%

8%

-%

273,035 

2,029,500

-

2,302,535

7,010,455

7,010,455

-

-

273,035 

273,035 

2,029,500

2,029,500

11,300,900

11,300,900

11,300,900

13,603,435

-

-

7,010,455

7,010,455

3,814,764

6,117,299

7,010,455

7,010,455

Weighted 
average  
interest rate
%

1 year  
or less
$

Between 1  
and 5 years
$

Remaining 
contractual 
maturities
$

Amount as 
per Statement 
of Financial 
Position
$

-%

-%

8%

-%

-%

619,721 

1,951,372

-

2,571,093

6,451,250

6,451,250

-

-

10,917,500

10,917,500

-

-

619,721

1,951,372

10,917,500

13,488,593

6,451,250

6,451,250

619,721

1,951,372

3,184,082

5,755,175

6,451,250

6,451,250

Consolidated - 2018
Non-derivatives

Non-interest bearing

Trade payables

Refundable deposit

Convertible note debt  
– fixed rate

Total non-derivatives

Derivatives

Convertible note debt

Total derivatives

Consolidated - 2017

Non-derivatives

Non-interest bearing

Trade payables

Refundable deposit

Interest-bearing - fixed rate

Total non-derivatives

Trade payables

Refundable deposit

(d)  Market risk

Foreign exchange risk
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.

2018

2017

  AUD/USD + 10%
  AUD/USD - 10%

  AUD/USD + 10%
  AUD/USD - 10%

Consolidated Entity

Post tax profit

Equity

$

$

-
-

Post tax profit

Equity

$

$

-
-

-
-

-
-

57

HOT CHILI  Annual Report 2018 
 
 
 
13 Notes to the  

Financial Statements (cont’d)

26.  PARENT ENTITY DISCLOSURES

Financial position

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Equity

Issued capital

Reserves

Accumulated losses

Total equity

Financial performance

Loss for the year

Other comprehensive income

Total comprehensive income

2018
$

2017
$

3,419,774

90,470,785

93,890,559

2,357,525

87,986,425

90,343,950

7,283,490

3,814,764

7,045,801

3,184,082

11,098,254

10,229,883

127,432,859

122,053,054

1,497,029

1,473,539

(46,137,583)

(43,412,526)

82,792,305

80,114,068

(2,992,689)

(1,811,540)

-

-

(2,992,689)

(1,811,540)

Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017.

Contractual commitments for the acquisition of property, plant or equipment
The parent entity did not have any contractual commitments for the acquisition of property, plant or equipment as at 30 June 
2018 or 30 June 2017.

27.  SHARE BASED PAYMENTS

Below are details of share based payments made during the current year and prior financial years.

(a)  Options issued

No options are currently issued to employees.  

Set out below is a summary of options on issue as at 30 June 2018:

Issue 
date

27/06/2014
24/08/20162
06/06/20173
09/05/20181
21/06/20181
Total

Expiry date

27/06/2019
06/09/2018
20/06/2019
31/05/2020
31/05/2020

Balance 
at start of 
year

Number 
issued during 
year

Number 
expired 
during 
year

Exercised 
during the 
year

11,000,000
 8,000,000
20,000,000
-
-
39,000,000

-
-
-
52,189,305
17,477,362
69,666,667

-
-
-
-

-

- 
-
-
-

-

Balance at 
end of year

11,000,000
 8,000,000
20,000,000
52,189,305
17,477,362
108,666,667

Number 
exercisable 
at end of 
year

11,000,000
 8,000,000
20,000,000
52,189,305
17,477,362
108,666,667

(1)  Weighted average exercise price for options issued during the financial year was $0.10 (2017: $0.052).  

(2)  The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.2 years (2017:  

1.71 years).

58

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201827.  SHARE BASED PAYMENTS (CONT’D)

(b)  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.

2018
(1)  69,666,667 options exercisable at 10c each expiring 31 May 2020 were issued pursuant to a placement announced 30 

April 2018 and a prospectus dated 2 May 2018. 66,666,667 of the options were free attaching options issued to successful 
places on a “one option for every two shares” successfully applied for. 3,000,000 of the options were a share based payment 
forming part of the fees paid for managing the placement. The inputs for the fair value model for fee options were as follows:

a)  options are granted for no consideration.
b)  exercise price - $0.10
c) 
issue date – 9 May 2018
d)  expiry date – 31 May 2020
e)  expected price volatility of the Company’s shares:  100%
f) 
risk-free interest rate: 2.01%
g)  spot price at date of issue: $0.03
fair value of 0.783c per option
h) 

2017
(2)  The model inputs for options granted during the year ended 30 June 2017 included:

a)  options are granted for no consideration.
b)  exercise price - $0.10
c) 
issue date - 24 August 2016
d)  expiry date – 6 September 2018
e)  expected price volatility of the Company’s shares:  94%
f) 
g)  spot price at date of valuation: $0.05

risk-free interest rate: 1.50%

(3)  The model inputs for options granted during the year ended 30 June 2017 included:

a)  options are granted for no consideration.
b)  exercise price - $0.033
c)  issue date - 6 June 2017
d)  expiry date – 20 June 2019
e)  expected price volatility of the Company’s shares 94%
f) 
g)  spot price at date of valuation: $0.030

risk-free interest rate: 1.50%

(c)  Shares issued as share-based payment transactions:

During the year the Company issued 19,404,971 shares (2017: 11,300,976) at a fair value of $923,514 (2017: $282,524) in lieu of 
interest and transaction costs related to the convertible note issue.  As at 30 June 2018 interest of $226,900 had accrued and 
the 7,989,446 shares issued on 3 July 2018 are included in total issued for the year.  

(d)  Expenses arising from share-based payment transactions:

Total transactions arising from share-based payment transactions recognised during the year were as follows:

Options issued in lieu of capital raising costs
Shares issued for convertible note costs - expensed
Shares issued for convertible note costs - capitalised borrowing cost
Options issued for convertible note costs - expensed
Options issued for convertible note costs - capitalised borrowing cost
Convertible note interest and transaction costs

2018

2017

23,490
-
-
-
-
923,514
947,004

132,657
192,116
90,408
146,381
68,885
-
630,447

59

HOT CHILI  Annual Report 2018 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14 Shareholder 
Information

AS AT 24 SEPTEMBER 2018

Information Required by the Australian Securities Exchange Limited

(a)  Spread of Holdings

1 

-  1,000

1,001 

-  5,000

5,001 

-  10,000

10,001 

-  100,000

100,001  &  Over

There are 859 holders of unmarketable parcels comprising 743,866,210 shares.

(b)  Substantial Shareholders (from substantial shareholder notices)

Shareholders

Units

113

275

189

726

446

32,113

793,514

1,569,023

28,925,717

712,545,843

1,749

743,866,210

93,340,695

66,153,868

12.68%

8.89%

Shares Held 
Directly

-

300,000

-

-

-

-

Held by Companies in  
which Directors’ have a  
beneficial Interest

71,795,243

20,764,065

174,258

-

1,000,000

-

%

9.65%

2.83%

0.02%

-

0.13%

-

Taurus SM Holdings Pty Ltd

CAP SA

(c)  Directors’ Shareholdings

Murray E Black

Christian E Easterday

Dr Allan Trench

Dr Michael Anderson

Roberto de Andraca Adriasola

George Randall Nickson

60

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
(d)  The names of the twenty largest shareholders as at 24 September 2018, who between them held 65.34% of 

the issued capital are listed below:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

J P MORGAN NOMINEES AUSTRALIA 

CITICORP NOMINEES PTY LIMITED 

KALGOORLIE AUTO SERVICE PTY 

CAP S A 

BLUE SPEC DRILLING PTY LTD 

BLUE SPEC SONDAJES CHILE SPA 

HSBC CUSTODY NOMINEES 

MR BERNARD OWEN STEPHENS & 

SAMLISA NOMINEES PTY LTD 

YARANDI INVESTMENTS PTY LTD 

TWO TOPS PTY LTD 

SAFARI CAPITAL PTY LTD 

REPLAY HOLDINGS PTY LTD 

AUSTERIDAD INVERSIONES 

EXPLORATION CAPITAL PARTNERS 

MR GRAHAM JOHN WOOLFORD 

AMC INVESTMENTS (WA) PTY LTD 

AJAVA HOLDINGS PTY LTD 

INVERSIONES CANTO DEL AGUA 

INVERSIONES PIMPOLLEDA 

Number of Ordinary Shares

100,588,142

76,562,624

67,000,000

66,153,868

30,799,033

24,246,210

21,746,447

17,000,000

14,000,000

11,293,473

9,294,243

7,277,036

5,928,572

5,872,804

5,717,518

5,000,000

4,920,467

4,449,996

4,152,813

3,990,834

%

13.52%

10.29%

9.01%

8.89%

4.14%

3.26%

2.92%

2.29%

1.88%

1.52%

1.25%

0.98%

0.80%

0.79%

0.77%

0.67%

0.66%

0.60%

0.56%

0.54%

485,994,080

65.34%

(e)  As at 24 September 2018 there are 18 holders of the 113,009 Convertible Notes on issue.  Convertible Note 

holders holding more than 20% of the notes:

1

Exploration Capital Partners 2008 Ltd Partnership

There are no voting rights attached to Convertible Notes

Number Held

80,873

%

71.56%

(f)  As at 24 September 2018 there are 91 holders of the 100,666,667 Options over shares on issue.  There are no 

Option holders holding more than 20% of the options.  There are no voting rights attached to Options

(g)  As at 24 September 2018 there is no current on-market buyback under way.

61

HOT CHILI  Annual Report 201815 Tenement 
Schedule

Hot Chili has significantly added to its landholdings in Chile with addition of the San Antonio, Valentina and Lulu projects  
during the year.   

Productora

Table 1. Productora project tenement schedule

Licence ID

Holder

% 
Interest

Licence Type

Expiration 
date  
(dd.mm.yyyy)

Area 
(ha)

Exploration and 
Expenditure 
Commitment- 
Payments

FRAN 1, 1-60

FRAN 2, 1-20

FRAN 3, 1-20

FRAN 4, 1-20

FRAN 5, 1-20

FRAN 6, 1-26

FRAN 7, 1-37

FRAN 8, 1-30

FRAN 12, 1-40

FRAN 13, 1-40

FRAN 14, 1-40

FRAN 15, 1-60

FRAN 18, 1-60

FRAN 21, 1-46

ALGA 7A, 1-32

ALGA VI, 5-24

MONTOSA 1-4

CHICA

ESPERANZA 1-5

LEONA 2A 1-4

CARMEN I, 1-50

CARMEN II, 1-60

ZAPA 1, 1-10

ZAPA 3, 1-23

ZAPA 5A, 1-16

ZAPA 7, 1-24

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

CABRITO, CABRITO 1-9

SMEA SpA

CUENCA A, 1-51

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

TOLTÉN 1-14

CACHIYUYITO 1, 1-20

CACHIYUYITO 2, 1-60

CACHIYUYITO 3, 1-60

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

62

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

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

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

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

Exploitation concession

220

100

100

100

100

130

176

120

200

200

200

300

273

226

89

66

35

1

11

10

222

274

100

92

80

120

50

255

139

255

3

1

50

61

66

30

50

70

100

300

300

NSR 3%

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Licence ID

Holder

% 
Interest

Licence Type

Expiration 
date  
(dd.mm.yyyy)

Area 
(ha)

Exploration and 
Expenditure 
Commitment- 
Payments

LA PRODUCTORA 1-16

SMEA SpA

ORO INDIO 1A, 1-20

AURO HUASCO I, 1-8

SMEA SpA

SMEA SpA

80%

80%

80%

Exploitation concession

Exploitation concession

Exploitation concession

75

82

35

URANIO, 1-70

CCHEN

80%

Exploitation concession

350

JULI 9, 1-60

JULI 10, 1-60

JULI 11 1/60

JULI 12 1/42

JULI 13 1/20

JULI 14 1/50

JULI 15 1/55

JULI 16, 1-60

JULI 17, 1-20

JULI 19

JULI 20

JULI 21 1/60

JULI 22

JULI 23 1/60

JULI 24, 1-60

JULI 25

JULI 27 1/30

JULI 27 B 1/10

JULI 28 1/60

JULIETA 5

JULIETA 6

JULIETA 7

JULIETA 8

JULIETA 9

JULIETA 10 1/60

JULIETA 11

JULIETA 12

JULIETA 13, 1-60

JULIETA 14, 1-60

JULIETA 15, 1-40

JULIETA 16

JULIETA 17

JULIETA 18, 1-40

ARENA 1 1-6

ARENA 2 1-17

ZAPA 1 - 6

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

SMEA SpA

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

80%

Exploitation concession

Exploitation concession

Exploration concession

Exploration concession

Exploration concession

Exploration concession

Exploration concession

Exploitation concession

Exploitation concession

Exploration concession

Exploration concession

Exploration concession

Exploration concession

Exploration concession

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

Exploitation concession

Exploitation concession

Exploitation concession

Exploration concession

Exploration concession

Exploitation concession

Mining Claim

Mining Claim

Exploitation concession

300

300

300

210

100

250

275

300

100

300

300

300

300

300

300

300

150

50

300

200

200

100

100

100

300

300

300

298

269

200

200

200

200

40

113

6

16/03/2020

21/03/2020

15/03/2018

16/03/2020

27/03/2020

14/03/2020

15/03/2020

15/03/2020

21/03/2020

15/03/2020

15/03/2020

16/03/2020

14/03/2020

Lease agreement 
USD 250,000 per Yr 
(average for the 25 year 
term); plus 2% NSR all 
but gold; 4% NSR gold; 
5% NSR non-metallic

NSR 1%

Notes SMEA SpA (Sociedad Minera El Aguila SpA) is a wholly owned Chilean subsidiary of Hot Chili Limited; CMP= Compañía 
Minera del Pacífico; CCHEN= Comisión Chilena de Energía Nuclear.

63

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 Tenement 
  Schedule (cont’d)

San Antonio

The Company has executed a Joint Venture Option Agreement to earn a 90% interest in the San Antonio project, 
located 20km trucking distance to the east of Productora. The Joint Venture (JV) involves an Option agreement 
whereby full ownership of 90% of the mining rights of the project will be transferred upon satisfaction of the following 
Option payment schedule:

1.  US$nil paid on execution of a formal JV Option agreement (executed 7 November 2017)

2.  US$300,000 36 months from execution of a formal JV Option agreement

3.  US$6,700,000 48 months from execution of a formal JV Option agreement

Exploration by Hot Chili at San Antonio shall be at its discretion and during the first 36 months of the JV the owner will 
be able to exploit up to 50,000 tonnes of ore per year from within the Project.

Along with entering into a 90% JV option agreement, the Company has successfully doubled the size of the San 
Antonio project through exploration lease applications over available prospective land positions around the project, with 
the landholding now standing at almost 4000 hectares. A schedule of tenements is tabled below.

Table 2. San Antonio project tenement schedule

Licence ID

Holder

Santiago 21 al 36

Arnaldo Del Campo

Santiago 37 al 43

Arnaldo Del Campo

Santiago A, 1 al 26

Arnaldo Del Campo

Santiago B, 1 al 20

Arnaldo Del Campo

Santiago C, 1 al 30

Arnaldo Del Campo

Santiago D, 1 al 30

Arnaldo Del Campo

Santiago E, 1 al 30

Arnaldo Del Campo

Prima Uno

Prima Dos

Arnaldo Del Campo

Arnaldo Del Campo

Santiago 15 al 19

Arnaldo Del Campo

San Antonio 1 al 5

Arnaldo Del Campo

Santiago 1 AL 14 Y 20

Arnaldo Del Campo

Mercedes 1 al 3

Arnaldo Del Campo

CORTADERA 1

CORTADERA 2

CORTADERA 3

CORTADERA 4

CORTADERA 5

CORTADERA 6

CORTADERA 7

SAN ANTONIO 1

SAN ANTONIO 2

SAN ANTONIO 3

SAN ANTONIO 4

SAN ANTONIO 5

DORO 1

DORO 2

DORO 3

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

Frontera SpA

% 
Interest

90%

90%

90%

90%

90%

90%

90%

90%

90%

90%

90%

90%

90%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Licence Type

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

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 

Area  
(ha)

Expiration date  
(dd.mm.yyyy)

Exploration and 
Expenditure 
Commitment- 
Payments

90% (HCH)-10% JV. 
4 years term. USD 
300,000 to be paid  
on year 3 -Nov 7th 
2020. USD 6,700,000 
as a final exercise 
payment on year 4..

 76

 26

236

 200

 300

 300

 300

 1

2

 25

 25

 75

 50

200

200

200

200

200

300

100

200

200

300

300

300

200

200

300

02/02/2020

28/02/2020

08/03/2020

28/02/2020

02/03/2020

19/02/2020

06/03/2020

02/03/2020

28/02/2020

06/03/2020

20/02/2020

02/03/2020

25/07/2020

06/08/2020

25/07/2020

Note: Frontera SpA (Sociedad Minera Frontera SpA) is a wholly owned Chilean subsidiary of Hot Chili Limited.

64

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 2018 
Valentina

The Company has executed a Joint Venture Option Agreement to earn a 90% interest in the Valentina project, located 
20km east of Productora. The Joint Venture (JV) involves an Option agreement whereby full ownership of 90% of the 
mining rights of the project will be transferred upon satisfaction of the following Option payment schedule:

1.  US$nil paid on execution of a formal JV Option agreement (executed 4 June 2018)

2.  US$150,000 36 months from execution of a formal JV Option agreement

3.  US$4,000,000 48 months from execution of a formal JV Option agreement

Exploration by Hot Chili at Valentina shall be at its discretion other than for the requirement that 1,500 meters of drilling 
be completed during the first 24 months of the JV by Hot Chili. 

A schedule of tenements is tabled below.

Table 3. Valentina project tenement schedule

Licence ID

Holder

% 
Interest

Licence Type

Area  
(ha)

Expiration date  
(dd.mm.yyyy)

SAN JUAN SUR 1/5

Arnaldo Del Campo

90%

Exploitation concession

10

SAN JUAN SUR 6/23

Arnaldo Del Campo

90%

Exploitation concession

90

Note: Frontera SpA (Sociedad Minera Frontera SpA) is a wholly owned Chilean subsidiary of Hot Chili.

Lulu

Exploration and 
Expenditure 
Commitment- 
Payments

90% (HCH)-10% JV. 
4 years term. USD 
150,000 to be paid on 
year 3 -June 1st 2020. 
USD 4,000,000 as a 
final exercise payment 
on year 4.

The Joint Venture (JV) involves an Option agreement whereby full ownership of 70% of the mining rights of the project 
will be transferred upon satisfaction of the following Option payment schedule:

1.  US$75,000 upon execution of a formal JV Option agreement (executed 3 November 2017)

2.  US$75,000 12 months from execution of a formal JV Option agreement

3.  US$150,000 24 months from execution of a formal JV Option agreement

4.  US$150,000 36 months from execution of a formal JV Option agreement, and

5.  US$2 million 48 months from execution of a formal JV Option agreement

Exploration by Hot Chili at Lulu shall be at its discretion and during the first 36 months of the JV the owner will be able 
to exploit up to 50,000 tonnes of ore per year from within the Project. A schedule of tenements is tabled below. 

Table 4. Lulu project tenement schedule

Licence ID

Holder

% 
Interest

Licence Type

Area  
(ha)

Expiration date  
(dd.mm.yyyy)

El Sarco 1 al 16

Hernán Callejas

70%

Exploitation concession

40

La Gringa 1-40  
(23 y 24)

Hernán Callejas

70%

Exploitation concession

10

Note: Frontera SpA (Sociedad Minera Frontera SpA) is a wholly owned Chilean subsidiary of Hot Chili Limited.

Exploration and 
Expenditure 
Commitment- 
Payments

70% (HCH)-30% JV. 
4 years term. USD 
75,000 paid upon 
execution -3 Nov 
2017-. USD 75,000 
after one year; USD 
150,000 after 2 years; 
USD 150,000 after 3 
years and final exercise 
payment of USD 
2,000,000 year 4.    

65

HOT CHILI  Annual Report 2018HOT CHILI  Annual Report 201816 Corporate 
Directory

Directors

Murray E Black 
(Non-Executive Chairman)  

Christian E Easterday 
(Managing Director)  

Dr Allan Trench 
(Independent Non-Executive Director)

Dr Michael Anderson 
(Non-Executive Director) 

Roberto de Andraca Adriasola 
(Non-Executive Director)  

George Randall Nickson 
Non-Executive Director, appointed 17 August 2017)

Melanie Leighton 
(Alternate for M Black) 

Company Secretary

Lloyd Flint

Chief Legal Counsel

Jose Ignacio Silva

Principal Place of Business and  
Registered Office

First Floor 768 Canning Highway 
APPLECROSS WA 6153

Telephone:  08 9315 9009 
Facsimile:   08 9315 5004 
Email: 
Web: 

admin@hotchili.net.au 
www.hotchili.net.au

Solicitors

Jackson McDonald 
Level 17 225 St George’s Terrace 
PERTH WA 6000 

Share Registry

Security Transfer Registrars Pty Ltd 
770 Canning Highway 
APPLECROSS WA 6153

Telephone:   08 9315 0933 
Facsimile:   08 9315 2233

Auditors

RSM Australia Partners 
Level 32 Exchange Tower 
2 The Esplanade 
PERTH WA 6000

Principal Banker

Westpac Banking Corporation 
Hannan Street 
KALGOORLIE WA 6430

66

HOT CHILI  Annual Report 2018www.hotchili.net.au