Impact Minerals Limited
Annual Report 2017

Plain-text annual report

annual report 2017 Excellence in Exploration CONTENTS CORPORATE DIRECTORY CHAIRMAN’S LETTER REVIEW OF OPERATIONS FINANCIAL REPORT DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF PROFIT OR LOSS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS’ DECLARATION AUDITOR’S REPORT ADDITIONAL SHAREHOLDER INFORMATION TENEMENT SCHEDULE 4 5 6 38 39 54 55 56 57 59 60 98 99 104 107 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 3 CORPORATE DIRECTORY DIRECTORS Peter Unsworth Michael Jones Paul Ingram Markus Elsasser Felicity Gooding Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director AUDITORS Bentleys Audit and Corporate (WA) Pty Ltd London House Level 3, 216 St Georges Terrace Perth, WA 6000 COMPANY SECRETARY Bernard Crawford REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS 26 Richardson Street West Perth, WA 6005 Telephone: Facsimile: Email: Web: +61 (8) 6454 6666 +61 (8) 6454 6667 info@impactminerals.com.au www.impactminerals.com.au SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth, WA 6000 Telephone: Facsimile: +61 (8) 9323 2000 +61 (8) 9323 2033 SECURITIES EXCHANGE LISTING The Company is listed on the Australian Securities Exchange Ltd (“ASX”) Home Exchange: Perth, Western Australia ASX Code: IPT, IPTOA 4 | IMPACT MINERALS LTD ANNUAL REPORT 2017 CHAIRMAN’S LETTER Dear Fellow Shareholder, This year has seen an increasing focus by your Company on the Commonwealth Project which covers about 1,000 square kilometres of the Lachlan Fold Belt in New South Wales, one of the most prolific mining provinces in Australia. In September 2016 drill hole CMIPT046 at the Silica Hill Prospect returned an outstanding intercept of 41.3 metres at 2.0 g/t gold and 176 g/t silver (4.7 g/t gold equivalent) from 61 metres; which includes 16.3 metres at 3.7 g/t gold and 246 g/t silver (7.6 g/t gold equivalent) from 86 m. Since then further drilling, which is still in progress, has continued to demonstrate a very large mineralised system is present with the potential to lead to an increase in the resources at the project. In addition a large number of other drill targets have been identified which also offer the potential for further discoveries. Numerous targets for follow up work were also identified during the year at the Broken Hill and Mulga Tank Projects and management is considering how best to fund further exploration here. It is now evident that the resources sector is recovering following a very difficult five year period. This is being reflected in stronger commodity prices and easier conditions for capital raisings. A Share Purchase Plan was completed during the year and shareholders are thanked for their participation. Impact’s management team, led by Managing Director, Dr Mike Jones, continues to work exceptionally hard as they strive to deliver a major discovery for the Company and you, its shareholders. On your behalf I thank them for their ongoing commitment and dedication. PETER UNSWORTH CHAIRMAN IMPACT MINERALS LTD ANNUAL REPORT 2017 | 5 REVIEW OF OPERATIONS COMMONWEALTH GOLD-SILVER-BASE METAL PROJECT (IPT 100%) 1. The Commonwealth Project comprises five 100% owned exploration licences that cover about 1,000 sq km of the highly prospective Lachlan Fold Belt about 100 km north of Orange in NSW. The belt is host to many major gold-silver-copper mines including the Cadia-Ridgeway deposits that contain at least 25 million ounces of gold and 10 million tonnes of copper (Figure 1). Figure 1. Location of the Commonwealth Project within the Lachlan Fold Belt of NSW, home to many significant gold and copper mines. During the year, new drill assay, Induced Polarisation (IP) and soil geochemistry data from the Commonwealth-Silica Hill area continue to demonstrate the significant exploration potential of these two key prospects and in particular the breakthrough high grade gold-silver discovery at Silica Hill. As we go to press, a drill programme is ongoing at Silica Hill and is demonstrating significant potential to host a major deposit. The discovery of Silica Hill led to Impact being selected for the second year in a row for the New South Wales Explorer of the Year Award for outstanding performance of an exploration company, business unit or project in exploration in NSW. 6 | IMPACT MINERALS LTD ANNUAL REPORT 2017 During the year Impact identified a significant number of follow up drill targets in and around the Commonwealth-Silica Hill area (Figure 2). In particular targets were identified at: Silica Hill: extensive and strong IP chargeability anomalies with coincident strong gold-silver-in-soil anomalies covering about one square kilometre. Main Shaft: a prominent conductor has been identified at depth below the massive sulphide lens. Main Shaft North: a prominent conductor with coincident copper-lead-zinc-in-soil anomalies located 200 metres north of Main Shaft. Silica Hill East: several prominent conductors, very strong IP chargeability anomalies and extensive soil geochemistry anomalies of pathfinder metals as well as gold and silver. All of these targets have the potential to significantly expand the high grade gold-silver-zinc-lead-copper resource already defined which stand at an Inferred Resource of 720,000 tonnes at 2.8 g/t gold, 48 g/t silver, 1.5% zinc and 0.6% lead. Within this resource is a massive sulphide lens about 50 metres by 50 metres by about 8 metres thick in size which has an Inferred Resource of 145,000 tonnes at 4.5 g/t gold, 142 g/t silver, 4.8% zinc, 1.7% lead and 0.2% copper. Note: further information on the resource estimate can be found in Section 1.9. In addition a review of all of Impact’s work over the past few years has now demonstrated strong similarities between the mineralised system at Commonwealth-Silica Hill and surrounding area to the very high grade Eskay Creek Mine in British Columbia, Canada (4 million ounces of gold, 180 million ounces of silver). Drilling of the new targets will test this geological model. 1.1 Silica Hill At Silica Hill the new targets identified occur within a large area of up to one square kilometre which contains numerous undrilled IP and gold and silver-in soil anomalies north of the small area drilled to date (Lines 10,000 mN, 10,100 mN and 10,200 mN, Figures 2 and 3). All three traverses contain coincident strong IP chargeability and gold and silver-in-soil anomalies. Previous work by Impact has shown a strong correlation between IP chargeability anomalies and gold-silver-sulphide mineralisation in drill holes. On Line 10,000 mN the target area lies east of the current drilling and is 500 metres wide with peak soil geochemistry values of 50 ppb gold and 12 grams per tonne silver. These are of the same order as the soil geochemical anomalies over Silica Hill and Commonwealth on this traverse (Figure 3). On Line 10,100 mN the target area is 750 metres wide with peak soil geochemistry values of 235 ppb gold and 18.8 grams per tonne silver. On Line 10,200 mN the target area is 700 metres wide with peak soil geochemistry values of 104 ppb gold and 7.1 grams per tonne silver. The size and strength of the IP anomalies and their coincidence with strong gold and very strong silver-in-soil anomalies is very encouraging for the discovery of further high grade gold and silver mineralisation. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 7 REVIEW OF OPERATIONS (CONTINUED) Figure 2. Geology and exploration results for the Silica Hill-Commonwealth area. 8 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Line 10,200mN Drill target 700 m wide Peak gold result 104 ppb Peak silver result 7.1 g/t (ppm) Line 10,100mN Drill target 750 m wide Peak gold result 235 ppb Peak silver result 18.8 g/t (ppm) Line 10,000mN Drill target 500 m wide Peak gold result 50 ppb (undrilled) Peak silver result 12 g/t (ppm) Figure 3. IP chargeability and gold and silver-in-soil values. Host rhyolite shown by + symbol. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 9 REVIEW OF OPERATIONS (CONTINUED) 1.2 Priority Drill Targets for Massive Sulphides at Main Shaft North Specific drill targets have also been identified with the potential to significantly extend the high grade gold- silver-zinc-lead-copper massive sulphide mineralisation that forms part of the Commonwealth deposit (Figure 2). The targets occur at depth below and along trend from Main Shaft which lies at the northern end of the Commonwealth deposit. Accordingly this new area is called the Main Shaft North Prospect (Figure 2). The new targets have been generated and prioritised for drilling from a detailed interpretation of three lines of Induced Polarisation (IP) conductivity data and from soil geochemistry data (Figure 4). IP conductivity anomalies may represent massive sulphide bodies, such as that found at Main Shaft at the northern end of the Commonwealth deposit which comprises a relatively small massive sulphide lens about 50 metres by 50 metres by about 8 metres thick in size. Figure 4. IP Conductivity data along Section 10,000 mN showing the massive sulphide body at Main Shaft and copper- rich drill hole CMIPT06. All three traverses comprise coincident good IP conductivity anomalies and coincident lead-zinc-copper-in- soil anomalies. On Line 10,000 mN the IP conductivity data has clearly identified the small massive sulphide body at Main Shaft above the main rhyolite unit (Figure 4). A larger and stronger anomaly has been identified at about 200 metres below surface and just below the deepest hole drilled at Main Shaft (CMIPT06, Figure 4). This hole has returned the thickest and highest grade copper mineralisation yet discovered within the Commonwealth deposit of: 30 metres at 0.13% copper from 209 metres, including 1 metre at 0.7% copper, 1.1% zinc, 0.4% lead, 31 g/t (one ounce) silver and 0.4 g/t gold and 1 metre at 1% copper, 2% zinc and 14 g/t silver. 10 | IMPACT MINERALS LTD ANNUAL REPORT 2017 This is a significant intercept and the conductor below it is an obvious target. The conductor appears to lie below the rhyolite and it may represent a copper-rich “feeder zone” to the upper massive sulphide deposit. On Line 10,100 mN a significant coincident lead+zinc+copper-in-soil anomaly of about 1,000 ppm combined, occurs over the northern extension of the rhyolite unit associated with the massive sulphide mineralisation. There is a strong conductivity contrast below this anomaly. On Line 10,200 mN an IP conductivity anomaly occurs at about 200 metres below surface in a similar position along trend from that on 10,000mN. This is directly overlain by another significant lead+zinc+copper- in-soil anomaly of up to 820 ppm combined (Figure 5). Figure 5. IP Conductivity data along Section 10,200 mN showing coincident IP conductivity and lead-zinc-copper-in-soil anomalies. The gold-in-soil anomaly is coincident with strong IP chargeability anomalies (see announcement 9 May 2017). The nature and location of the IP conductivity anomalies and their coincidence with strong lead-zinc-copper- in-soil anomalies is very encouraging for the discovery of further high-grade massive sulphide mineralisation. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 11 REVIEW OF OPERATIONS (CONTINUED) 1.3 Silica Hill East Prospect Until now, Impact’s exploration has been mostly focussed at the Main Shaft-Commonwealth South-Silica Hill Prospects up to one kilometre away on the lower, western contact of the Silica Hill Rhyolite and the underlying thinner Commonwealth Rhyolite (Figure 2). However, certain features within these rhyolites and the associated mineralisation suggest that the area explored to date could be part of a much larger and very prospective high grade “feeder zone” that extends for one kilometre north east through the Silica Hill Rhyolite up to its eastern upper contact with overlying volcanic rocks (Figures 2 and 6). In addition, the position where the interpreted feeder zone intersects the upper contact is an excellent conceptual target for further gold-rich VMS mineralisation (Figure 6) and the following geophysical and soil geochemical anomalies support this interpretation and have provided specific drill targets close to or at this location: 1. A barium and other pathfinder metal-in-soil anomaly that extends for at least 800 metres north- south along the contact and which forms the southern end of a recently recognised 5 kilometre long unexplored trend identified in regional geochemical data (see below). A very strong IP chargeability anomaly extending for some distance into the rocks overlying the Silica Hill Rhyolite (Figure 6). This anomaly is the strongest and largest IP chargeability anomaly identified so far in the Commonwealth Project. Such anomalies may be caused by disseminated sulphides. A moderate IP conductivity anomaly of similar magnitude and strength to that related to the massive sulphide mineralisation at Main Shaft (Figure 6) 2. 3. Figure 6. Section Line 10,200 mN (Figure 7) showing IP chargeability data from Main Shaft North to Silica Hill East. Note the size and strength of the Silica Hill East anomaly and increasing gold-in-soil response over the target contact and associated conductor. 12 | IMPACT MINERALS LTD ANNUAL REPORT 2017 1.4 Significant Discovery at Silica Hill Significant gold and silver mineralisation continued to be discovered during the year at the Silica Hill Prospect and drilling is still in progress. Mineralisation has been intersected over an area of 250 metres by 100 metres down to a depth of 100 metres below surface and with an average true thickness of up to 50 metres. The zone strikes north east with a strong secondary east-west control and dips steeply to the south east (Figure 7). The mineralisation is open in all directions including up-dip and is terminated by a fault suggesting further mineralisation may have been offset. The mineralisation, which comprises disseminated sulphide, veins and semi-massive sulphide veins within the Silica Hill rhyolite, is zoned with an upper silver-rich part containing extensive visible silver minerals in many places and a lower gold-rich part. There are lesser variable amounts of zinc, lead, copper and pathfinder sulphide minerals throughout the mineralised zone. The veins commonly contain high to very high grades of gold and in particular silver. For example, as reported last year, Hole CMIPT046 returned 30 individual assays of varying widths of between 2 g/t and 24 g/t gold and 12 individual assays with more than 500 g/t silver. Hole CMIPT011 returned two veins with 3,146 g/t silver (0.9 metres thick) and 3,600 g/t silver (0.15 m thick). In addition there is a large silver “halo” of up to 10 to 15 g/t silver in the Silica Hill rhyolite which extends further outwards over many hundreds of square metres (Figure 7). It is possible that this may be a “leakage halo” from depth and accordingly the down-dip extension of the mineralisation in Holes CMIPT011 and CMIPT046 are compelling drill targets. Two diamond drill holes were completed in December 2016 and returned the following assay results. Hole CMIPT048 returned: 126 metres at 0.6 g/t gold and 25 g/t silver (1.0 g/t gold equivalent) from 33 metres including: 6 metres at 1 g/t gold and 26 g/t silver (1.4 g/t gold equivalent) from 58 metres; and 11 metres at 1.9 g/t gold and 132 g/t silver (3.9 g/t gold eq) from 79 metres which includes 3 metres at 4 g/t gold and 377 g/t silver (9.6 g/t gold eq) from 84 metres; and 8 metres at 1.9 g/t gold and 35 g/t silver (2.4 g/t gold eq) from 132 metres which includes 2 metres at 3.9 g/t gold and 56 g/t silver (4.7 g/t gold eq) from 137 metres. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 13 REVIEW OF OPERATIONS (CONTINUED) Figure 7. Silica Hill: Significant drill results showing new results from CMIPT048 and 049. The mineralisation is open in all directions. Hole CMIPT049 returned numerous zones of between 5 g/t and 50 g/t silver in a 70 metre thick zone of mineralisation with best assays of: 13 metres at 0.1 g/t gold and 49 g/t silver (0.8 g/t gold eq) from 174 metres which includes 2 metres at 115 g/t silver from 178 metres and 1 metre at 0.5 g/t gold and 144 g/t silver (2.6 g/t gold eq) from 184 metres. The mineralisation in this drill hole is terminated by a fault at 189 metres down hole and detailed studies suggest that only the upper silver rich part of the mineralised zone has been intersected. It is interpreted that the mineralisation has been offset along the fault to the west, close to Main Shaft and further drilling is required in this area. The mineralisation at Silica Hill is still open in all directions and further infill and extensional drilling is in progress, in particular down dip and also to the north where the new IP anomalies have been identified (Figures 2 and 3). 1.5 Connection between mineralisation at Main Shaft and Silica Hill The style and nature of mineralisation in Hole CMIPT043 is similar to that encountered in the rhyolite unit within the Commonwealth deposit and further demonstrates that the mineralisation at the two prospects is part of one larger system. It is possible that the mineralisation at Silica Hill and Main Shaft may be linked at depth. Areas where the two styles of mineralisation may connect will be priority target areas. 14 | IMPACT MINERALS LTD ANNUAL REPORT 2017 A gold and silver-in-soil anomaly extends in a NE direction from Main Shaft to Silica Hill and widens in that direction (Figure 2). This anomaly is open to the north and north-east. This is a further indication that the two areas may be linked and further drilling at depth is required. Very high grade silver values of almost 1 kg/tonne (1,000 g/t) over 1 metre were returned during the year from Hole CMIPT031 at Main Shaft in a 7 metre thick zone of massive sulphide mineralisation that returned: 7 metres at 6.3 g/t gold, 496 g/t silver (15.9 ounces), 7.2% zinc, 2.9% lead and 0.2% copper including 3 metres at 10.6 g/t gold, 571 g/t silver (18.4 ounces), 7.8% zinc, 2.1% lead and 0.2% copper from 92 metres and also including 1 metre at 2.5 g/t gold, 979 g/t silver (31.5 ounces), 8.3% zinc, 4.4% lead and 0.1% copper from 95 metres This intercept is open down dip and offers potential to increase the massive sulphide resource. 1.6 The Nature of the Mineralisation at Commonwealth–Silica Hill Impact has amassed a considerable amount of geological data on the nature of the mineralised system at Commonwealth-Silica Hill and surrounding areas over the past two years. All of this work, summarised below, has shown that the mineralisation belongs to a class of deposits known as “gold-rich VMS systems”, a style that has only been widely recognised in the past 20 years. The type-deposit of the gold-rich VMS systems is the well known Eskay Creek deposit in British Columbia, Canada which was mined mostly during the early 2000’s. The deposit contained over 4 million ounces of gold and 180 million ounces of silver and contained numerous gold and silver rich ore shoots as shown in Figure 8 over a vertical extent of at least 700 metres. Silica Hill at same scale Figure 8. Long section of the Eskay Creek gold mine showing the principal ore shoots (eg 21B, NEX etc) coloured by gold equivalent grade. The graph shows the tonnes and gold equivalent grade of each of the shoots. Also shown for comparison at the same scale in the top left hand corner is the cross section of Silica Hill (image is slightly transparent in order to show the upper most Eskay Creek ore shoots). IMPACT MINERALS LTD ANNUAL REPORT 2017 | 15 REVIEW OF OPERATIONS (CONTINUED) All of Impact’s work shows that there are compelling similarities specifically to Eskay Creek in terms of the nature of the host rock, the style of mineralisation, the contained commodity and pathfinder metals and the high grades of individual units and veins of commodity metals. The work done by Impact in reaching this conclusion has included the following: • detailed field mapping and logging of diamond core to identify the principal rock types and the nature of the original submarine volcanic environment; • petrographic studies of the mineralisation and host rock units to determine their relative timing relationships; • detailed structural analysis of outcrops and diamond core to help identify the structural controls on mineralisation; • geochemical studies that have helped define a halo of specific alteration minerals around the mineralisation and which are providing vectors to ore. These minerals include chlorite, sericite, K-feldspar and in particular barite amongst others. The studies have included interpretation of handheld pXRF data taken on every metre sample of RC drilling and every 0.5 metres on diamond core; chemical analyses for multi-element data (up to 61 elements) for every mineralised sample and every 10 metres away from mineralisation and multispectral analysis to identify specific minerals on four key drill holes; and independent reviews from several well respected consultants. • Figure 8 also shows the depth of drilling to date at Silica Hill at the same scale as the Eskay Creek deposit for comparison. It is evident that there is scope for a significant discovery with further drilling. Impact triples landholding around the Commonwealth Project 1.7 As a result of the Silica Hill discovery and its similarities to Eskay Creek, Impact applied for and has been granted three new 100% owned exploration licences both adjacent and close to the Commonwealth Project (Figure 9). The new licences bring Impact’s total ground holdings in the Lachlan Fold Belt to 1,000 square kilometres. Impact’s work at Commonwealth over the past three years has shown that rocks on both the eastern and western side of the Molong Belt which hosts the Cadia-Ridgeway Mine and which were perceived to be relatively unprospective, do in fact have tremendous potential for the discovery of deposits similar to those at Commonwealth and Silica Hill. Like Commonwealth when Impact acquired that project, this new ground contains abundant mineralised locations most of which have not been drilled and are poorly understood. This is an excellent development for Impact and its shareholders. The new licences are located in three areas and all contain a large number of precious and base metal prospects, many of which have indications of high grade mineralisation (Figure 9). About the new Exploration Licences New licence EL8505 forms an extension to the Commonwealth Project; EL8362 is located 50 km north east of Orange is called the Day Dawn Project; and EL8504 is located 50 km north west of Orange and is called the Pine Hill Project (Figure 9). Exploration highlights include: EL8505, which covers several areas between 10 km and 50 km north and east of Wellington, encompasses many kilometres of the same rocks that host the Silica Hill and Commonwealth mineralisation. Examples of the key prospects include the Boda and Federal Prospects. 16 | IMPACT MINERALS LTD ANNUAL REPORT 2017 At Boda previous rock chip samples with copper sulphide and copper oxide returned up to 1.2% copper and are associated in places with several Induced Polarisation anomalies. A diamond drill hole to 503 m completed by Goldfields returned 141 m at 0.11% copper, 0.1 g/t gold and 33 ppm Mo including 7 m at 0.4% copper and 0.8 g/t gold including 1 m at 4 g/t gold. Stockwork and disseminated pyrite-chalcopyrite mineralisation occurs within skarn-altered basalt and a porphyry diorite stock at depth. At the Federal Mine rock chip samples returned up to 19.9 g/t gold from quartz-pyrite veins in granite and up to 39.2 g/t gold and 1.2% lead from the nearby Bonnie Doon workings. Drilling intersected up to 2 m at 1.4 g/t gold and 12 m at 0.4 g/t gold in silica-altered porphyry granite near the contact with surrounding sedimentary rocks. EL8362 to the north east of Orange also contains rocks of the same age as those at Commonwealth. It lies 15 km east of the Copper Hill porphyry copper-gold deposit (Figure 9) and contains rocks prospective for massive sulphide, epithermal and intrusion-related gold and base metal deposits. At the Day Dawn area, a number of base and precious metal prospects occur over a 2 km strike and include the Day Dawn North, South, Southeast, Far South and Lone Pine workings. At Day Dawn North rock chip samples returned up to 2.0 g/t gold, 720 g/t silver, 0.1% copper, 0.1% zinc and 1.7% lead. Coincident IP, PEM and SP anomalies have been reported. Drilling intersected up to 5 m at 3.2% zinc, 0.1% copper, 0.7% lead and 9 g/t silver. Gold was not assayed for. Of note, the well respected epithermal specialist, Dr Greg Corbett, assessed the drill core and assay data and concluded the mineralisation displays similarities to intrusion-related epithermal systems which overprint massive sulphide (VMS)-style mineralisation. This is a similar environment to that proposed by Impact at Commonwealth. EL8504 to the north west of Orange and 10 km west of the Copper Hill deposit contains rocks of a variety of ages that are cut by several major faults that control a number of old gold, silver and copper mine workings in the Cumnock, Gumble and Delaneys area. In addition the sedimentary and volcanic rocks have been intruded by granites and are prospective for so called “skarn mineralisation” in the contact zone of the granite. At the Delaneys Mine, drilling of two soil anomalies near the historic mine area intersected skarn mineralisation with up to 8 m at 0.7% copper, 0.15% tin, 0.2 g/t gold and 30 g/t silver. At the Gumble Copper Mine historic records indicate the mine produced a small tonnage of copper oxide ore with grades in excess of 10% copper, and up to three ounces each of gold and silver. This area has not been drilled. At the Pine Hill Prospect drilling intersected significant skarn mineralisation and returned 19 m at 0.3% tin and 0.3% copper including 2 m at 0.6% tin and 1.0% copper. Gold was not assayed for. A nearby hole returned 6 m at 0.3% tin and 30 m at 0.2% tin (no other assay data) and the mineralisation remains open at depth and along strike along the granite contact. A comprehensive review and synthesis of previous exploration data is in progress. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 17 REVIEW OF OPERATIONS (CONTINUED) Figure 9. Location of Impact’s licences north of Orange showing geology and key prospects. 18 | IMPACT MINERALS LTD ANNUAL REPORT 2017 1.8 Two 5 kilometre long trends newly identified as Prospective for High Grade Gold-Silver Deposits Two new 5 kilometre long trends that are very prospective for further discoveries of high grade gold silver- base metal mineralisation similar to that discovered at Commonwealth-Silica Hill have also been identified. Figure 10. Barium Trends at Commonwealth. The two newly identified trends are: A. 5 km north of the Commonwealth-Welcome Jack area; and B. the Yaragal area along the western limb of the Yaragal anticline. This area contains the same rocks as at Commonwealth-Silica Hill repeated by large regional folds. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 19 REVIEW OF OPERATIONS (CONTINUED) The prospective trends have been recognised as significant following the identification in new drill assay data of extensive barium as an important pathfinder and indicator element directly associated with the Commonwealth-Silica Hill mineralisation. This has led to a new interpretation of the barium results from both Impact’s soil geochemistry database and also the Geological Survey of New South Wales regional stream sediment geochemistry database. Barium is significant because it is an important accessory element and can be used as a vector to, and direct indicator of, ore in gold-rich VMS (volcanogenic massive sulphide) deposits such as Eskay Creek. 1.8.1 Barium in Drill Assays from Massive Sulphide at the Commonwealth Deposit In Impact’s 2016 drill programme a very high grade 7 metre thick intercept of massive sulphide was returned in Hole CMIPT31. Recent petrographic work identified barite as a significant component of the mineralisation and accordingly the samples were re-submitted for assay. Barium mostly occurs as barite (barium sulphate) which is very resistive and which requires an (expensive) XRF fusion assay to accurately determine the quantity present. Assays of up to 1 metre at 17.7% barium were returned within a thicker intercept of 7 metres at 9.0% barium. Accordingly the entire massive sulphide intercept is: 7 metres at 6.3 g/t gold, 496 g/t silver (15.9 ounces), 7.2% zinc, 2.9% lead, 0.2% copper and 9.0% barium from 91 metres including 3 metres at 10.6 g/t gold, 571 g/t silver (18.4 ounces), 7.8% zinc, 2.1% lead, 0.2% copper and 14.9% barium from 92 metres and also including 1 metre at 2.5 g/t gold, 979 g/t silver (31.5 ounces), 8.3% zinc, 4.4% lead, 0.1% copper and 7.9% barium from 95 metres. There is a strong correlation between high grade gold and high grade barium. Sporadic assays from drill holes completed by previous explorers also indicate high-grade barium in places and it is clearly present throughout the massive sulphide mineralisation. It is also a minor component in the surrounding disseminated mineralisation and also within the high-grade gold-silver mineralisation at Silica Hill. The recognition of extensive barite intimately associated with ore is a further compelling similarity between Commonwealth-Silica Hill and Eskay Creek as well as the nature of the host rock, the style of mineralisation, the contained commodity and pathfinder metals and the high grades of individual units and veins of commodity metals. 1.8.2 Soil Geochemistry Data A review of Impact’s soil geochemistry data has identified significant barium anomalies over Commonwealth- Silica Hill, the southern part of the Doughnut Prospect, west of the Welcome Jack Trend and the Stringers Prospect (Figures 10 and 11). At the Walls and Stringers Prospects previous rock chip results also show a close association between barium and gold-silver-base metal mineralisation (see table below). Impact has completed one drill hole at Walls which returned 20 m at 0.5 g/t gold and 27 g/t silver including 1 metre at 2.9 g/t gold, 144 g/t silver and 1.1% zinc equivalent from 55 metres with follow up drilling required. Barium was not assayed by XRF fusion and therefore correlation to the mineralised intercept is not possible at present. 20 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Figure 11 Barium-in-soil anomalies in the central Commonwealth area. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 21 REVIEW OF OPERATIONS (CONTINUED) Sample# Y120 Y125 Y126 Y130 Y131 Y145 Y121 Y124 Prospect Stringers Stringers Stringers Stringers Stringers Stringers Walls Walls Au g/t 0.6 2.3 0.65 0.35 0.3 1.3 2.1 15 Ag g/t 38 1100 Cu ppm 1550 26500 Pb ppm 6400 13300 23 6 1 16 40 600 1050 5500 290 3400 290 360 8800 1750 6800 19500 8550 1130 Zn ppm 500 6400 57000 2500 770 2400 2200 30 Ba % 7.65 0.16 0.4 0.04 4.05 1.95 0.54 0.05 Accordingly these areas warrant further exploration for massive sulphide deposits. Follow up drilling at Welcome Jack and Walls is planned as part of the next drill programme at Commonwealth together with field checking at Stringers. In addition to the areas of strong barium anomalism, lower grade barium occurs over several square kilometres centred on the Silica Hill area (Figure 11) and is commonly associated with silica-pyrite alteration. This association further confirms to Impact that the entire area is part of one very large hydrothermal system. 1.8.3 Regional Stream Sediment Geochemistry Stream sediment geochemistry data for barium (NSW Government) clearly identifies the central part of the Commonwealth Project as being highly anomalous in barium on a regional scale (Figure 12). The two 5 km trends clearly visible in the data are the northern extension of the Welcome Jack and to a lesser extent the Commonwealth-Silica Hill area and a newly identified area 3 km to the east called the Yaragal Prospect (Figures 10, 11 and 12). The trend north of Welcome Jack is associated with several old gold workings and ends at the dormant Kellys-Perseverance workings which have a recorded production 818 ounces of gold from 714 tonnes of ore. Face sampling of the mine in the 1970’s at a depth of 8 metres below surface returned up to 3 m at 22 g/t gold. This has not been properly followed up. The second trend covers the western limb of the Yaragal Anticline. It is evident that this area is a fold- repetition of the same rocks as those around the Commonwealth-Silica Hill area. The presence of barium over such a large strike extent is again evidence of a major regional hydrothermal system. Both trends are priority areas for follow up work. A third significant area of anomalous barium is also evident in the regional stream sediment data (Figure 12). This is directly associated with the very large North Parkes porphyry copper gold camp where barite also occurs as an accessory mineral. North Parkes is currently in production with resources of 480 Mt at 0.56% copper and 0.18 g/t gold. The host intrusions at North Parkes are of a similar age to the volcanic rocks at Commonwealth. 22 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Figure 12 NSW stream sediment geochemistry assays for barium shown as point data over the regional geology map. Impact’s licences are shown in white. Three areas stand out: Commonwealth, Yaragal and an area centred on the North Parkes-endeavour porphyry copper deposits. Impact’s view is that this confirms the potential, as suggested previously, that a porphyry copper-gold system may be present at depth below, and is driving the entire mineralised gold-rich VMS system, in the Commonwealth-Silica Hill-Welcome Jack area. 2018 promises to be an exciting year for exploration at Commonwealth. 1.9 About the Commonwealth Mineral Resource Estimate and Statement of Resources The Inferred Resource at Commonwealth was prepared in accordance with the JORC 2012 Code by independent resource consultants Optiro. At a 0.5 g/t gold cut off the Inferred Resource is: Category Inferred Tonnes 720,000 Au ppm 2.8 Ag ppm 48 Cu% 0.1 Pb% 0.6 Zn% 1.5 The resource, which is open along trend and at depth, contains both massive sulphide mineralisation at the Main Shaft prospect and disseminated, vein and lesser massive sulphide mineralisation at the Commonwealth South prospect. It extends from surface to an average depth of 90 m, has a strike length of 400 m and is up to 25 m thick. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 23 REVIEW OF OPERATIONS (CONTINUED) A separate Inferred Mineral Resource (included within the overall resource) has also been calculated for the massive sulphide lens at Main Shaft alone to demonstrate the high grade nature of such deposits that are the principal target for Impact’s exploration programme. The Main Shaft Inferred Resource is: Category Inferred Tonnes 145,000 Au ppm 4.3 Ag ppm 142 Cu% 0.2 Pb% 1.7 Zn% 4.8 The Commonwealth deposit comprises two areas, Main Shaft and Commonwealth South. The mineralisation at Main Shaft comprises massive sulphide with high grade gold, silver, zinc, lead and copper mineralisation at the upper contact between a rhyolite unit and overlying volcanic sedimentary rocks. Mineralisation at Commonwealth South occurs at both the upper and lower contacts of the rhyolite and is dominated by 1-50 mm thick stringers and disseminations of sulphide, often associated with intense brecciation and faulting of the rhyolite. The Commonwealth Resource strike length is 400 m and it is open along trend in particular to the south. The mineralisation has been defined to a maximum depth of 150 m and is still open. Twenty one new holes were drilled by Impact in 2014. The total number of holes into the Commonwealth project is 108, comprising 49 reverse circulation (RC) holes, 45 diamond holes, 10 underground channel samples and four underground drill holes. Of these holes, 52 intersected the mineralisation wireframe and were used in the estimation. Although some of the holes are from previous explorers, Impact has twinned some of the higher grade intersections and these have largely confirmed the grades and widths. Quality control measures employed during Impact’s drill programme included the use of certified standards (1% of total sample population), field duplicates (2% of total sample population) and blanks (2% of total sample population). No previous quality assurance/quality control (QAQC) has been carried out at the Commonwealth Project. Analysis of the standards and blanks showed acceptable to good levels of accuracy in the assaying and little contamination. The duplicate samples matched the originals with a high degree of precision. The drill hole database was reviewed and validated by Optiro. Three-dimensional solid wireframes were constructed from sectional interpretations of the mineralisation using a nominal 0.5 g/t gold cut off grade. Drill hole intercepts were composited down-hole to 1 m lengths and gold, silver, copper, zinc, lead and arsenic grade estimation was carried out using ordinary kriging with hard boundaries. Three search passes, with increasing search distances and decreasing minimum sample numbers, were employed to fully inform the model. Less than 1% of blocks were not filled in the first three passes. Further estimation passes were run to assign mean grades to un-estimated blocks. The Commonwealth Mineral Resource estimate has been classified as an Inferred Mineral Resource in accordance with the guidelines of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012). Mineral Resources have been classified on the basis of confidence in geological and grade continuity, geological modelling confidence, grade continuity and limited QAQC. No Measured or Indicated Mineral Resources have been defined. The Mineral Resource estimate for the Commonwealth Project has been reported above a 0.5 ppm gold cut-off grade. The estimate has been depleted for previous historic mining. Grades have been reported as individual elements (gold, silver, zinc, lead and copper). 24 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. BROKEN HILL PROJECT The Broken Hill Project comprises three granted exploration licences (EL7390, EL8234 and EL8609) and two exploration licence applications (ELA5193 and ELA5265, Figure 13) that cover 727 square kilometres of rocks prospective for three distinct styles of mineralistion: 1. PGE-copper-nickel associated with ultramafic rocks; 2. Zinc-lead-silver in “Broken Hill-style” deposits hosted mostly by metasedimentary rocks and amphibolites; and 3. Cobalt-copper-gold deposits associated with metasedimentary rocks and ironstones. Impact owns 100% of four of the licences. Under previous owners, the mineral rights for the fifth licence, EL7390, were split in the early 2000’s into the two different styles of mineralisation and Impact is now entitled to: • 100% of the PGE-copper-nickel mineralisation; and • 80% of the zinc-lead-silver Broken Hill-style mineralisation in EL7390 in joint venture with Silver City Minerals Limited (ASX: SCI). Impact will free-carry Silver City’s 20% interest to a Decision to Mine. Golden Cross has a 1% gross production royalty on all metals to which Impact has rights for. Impact, at its election, also has the right to buy back the royalty for $1.5 million at anytime up to a Decision to Mine, or leave the royalty uncapped during any production. 2.1 VTEM Survey During the year a VTEM helicopter-borne electromagnetic survey was completed over two key areas: • • the Red Hill-Rockwell Little Broken Hill Gabbro trend; and the Little Darling Creek Prospect. A third area, the Moorkai Trend, which contains very anomalous platinum palladium and gold rock chip samples and a 9 km long ultramafic body, could not be flown because of mustering by the relevant landowner. This area will likely be flown later in 2018. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 25 REVIEW OF OPERATIONS (CONTINUED) Moorkai Trend Rockwell Little Broken Hill Figure 13 Image of magnetic data showing Impact’s tenements at Broken Hill and key prospects. 26 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Anomalies that warrant further exploration were identified in both the EM data and also in Induced Polarisation data. The Induced Polarisation parameter is a calculated value based on the decay of the inductive current used in the VTEM survey. IP anomalies are commonly caused by disseminated sulphides although other sources are possible. Rockwell-Little Broken Hill Trend Eight areas for follow up exploration for high grade deposits of nickel-copper-platinum group metals (PGM)- cobalt were identified in the EM data along the Rockwell-Little Broken Hill Trend. These areas are within or at the margins of an mafic-ultramafic complex interpreted from regional magnetic and gravity data to be about 8 kilometres long and up to 750 metres wide (Figure 14). The eight areas contain numerous clusters of conductors of varying strength that are consistent with the expected response for the style of very high grade nickel-copper-PGM sulphide mineralisation being explored for and as have been discovered by Impact at the Red Hill and Platinum Springs Prospects to the north (Figures 13 and 14). At Red Hill exceptional grades have been returned from drilling including a stand out intercept of 1.2 metres at 283 g/t (9.1 ounces) platinum equivalent comprising 10.4 g/t gold, 254 g/t (9.5 ounces) palladium, 7.4 % nickel, 1.8% copper, 19 g/t silver and 0.5% cobalt in vein hosted sulphide. The processed IP data has highlighted two main areas of interest in the centre and northern parts of the Rockwell-Little Broken Hill Trend, a mafic-ultramafic complex interpreted from regional magnetic and gravity data to be about 8 kilometres long and up to 750 metres wide (Figure 14). Linear anomalies in the IP data occur along the margins of the ultramafic-mafic complex and also at high angles to it. Four specific IP anomalies are coincident with areas identified in the EM data and this is encouraging for the definition of targets for both massive sulphide and disseminated sulphide (Figure 14). The Rockwell-Little Broken Hill complex lies south of a major shear zone that separates it from the Red Hill Prospect in an area that has been very poorly explored because of extensive shallow alluvial cover. Limited shallow RAB drilling to depths of less than 20 metres has identified near surface anomalous nickel-copper- platinum-palladium-gold in several places. At Rockwell a coherent near-surface geochemical anomaly one kilometre long and 150 metres wide has been defined in shallow 2 metre deep drill holes along the north western margin of the complex with results of up to 0.1% nickel, 0.1% copper and 0.5 g/t PGM over a one metre thick intercept (Figure 14). In the Little Broken Hill area two widely spaced shallow RAB holes returned a maximum intercept of 7 metres at 0.3% nickel, 0.1% copper, 0.02% cobalt and 0.04 g/t Pt+Pd+Au from 12 metres depth. There has been no drilling at depth along the entire trend. The geometry and nature of the mafic-ultramafic host rocks along the Rockwell-Little Broken Hill trend is similar to that of the Sally Malay-Savannah deposit in northern Western Australia (approx. 20 Mt at 1.7% nickel, 0.7% copper and 0.1% cobalt) and Figure 14 also shows the geology of this area for comparison. The size of the surface expression of Sally Malay is also shown for comparison at the same scale. It is evident that considerable scope exists to discover a significant nickel-copper-PGM-cobalt deposit in this area. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 27 REVIEW OF OPERATIONS (CONTINUED) Figure 14 Processed IP data (top left) showing interpreted IP trends. In the top right the IP trends are shown in red over the magnetic data with the areas for follow up work identified in the EM data (pink). The outline of the mafic-ultramafic complex is shown in black. The geology and size of the Sally Malay orebody are shown for comparison. Geology of the Sally Malay area at same scale 28 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Figure 15 Processed IP data for Little Darling Creek. At Little Darling Creek the processed IP data has identified a prominent anomaly close to and in the centre of numerous outcrops of ultramafic rocks that are highly anomalous in nickel, copper and platinum group metals. Several small mine shafts and previous drilling attest to local high grades. Detailed field checking and rock chip sampling has recently shown that the area of the IP anomaly contains numerous small outcrops of ultramafic rocks not recognised by previous explorers. The rock chip samples are anomalous in gold, platinum and palladium with two stand-out results of 5 g/t palladium and 4.5 g/t platinum (Figure 15). IMPACT MINERALS LTD ANNUAL REPORT 2017 | 29 REVIEW OF OPERATIONS (CONTINUED) The IP anomaly may represent disseminated sulphides within ultramafic rocks hidden below surface. A ground IP survey is now required to identify specific drill targets. Next Steps Further interpretation and modelling of the VTEM data is in progress and follow up ground work will commence once completed. This work will include field checking, surface geochemical sampling and ground geophysical surveys where required to identify targets for drilling. Any targets identified will be drill tested together with follow up drilling at Red Hill. 2.2 Cobalt Potential A review of previous exploration data during the year has identified significant potential for cobalt mineralisation at Broken Hill both as credits to the high grade nickel-copper-platinum group metal (PGM) mineralisation discovered by Impact and as stand alone deposits. It is now well established that cobalt demand is forecast to grow considerably into the future due to its use in a variety of products but in particular battery materials, high temperature and other alloys, adhesives, magnetic materials, glass and ceramics. Accordingly exploration for cobalt either as a primary commodity or as a by-product is warranted. Over the past 2 years Impact has quietly acquired a significant tenement holding in the Broken Hill region covering some 707 square kilometres and about 100 kilometres of strike extent to the south of the Broken Hill Mine (Figure 13). The company is now one of the largest landholders in this highly mineralised province. A review of previous exploration results from Impact and previous explorers as well as mineral occurrences named and documented by the Geological Survey of New South Wales has now shown that Impact’s ground is prospective for three different styles of cobalt mineralisation: 1. Cobalt associated with high grade nickel-copper-PGM mineralisation; 2. Pyrite-cobalt deposits (so called Big Hill style deposits) similar to the Thackaringa Cobalt deposits now being considered for development (three deposits totalling 33 Mt at 0.08% cobalt). 3. Cobalt commonly associated with copper-cobalt-gold in ironstones (Great Eastern style deposits) or iron-rich cherts (Sister’s style deposits) and similar for example to the large deposits at Starra (Selwyn) and Ernest Henry in the Mt Isa region of Queensland. The review has confirmed that there has been little systematic exploration for either of these two deposit styles throughout Impact’s significant tenement holding in the Broken Hill region. In particular it is evident that very few soil, rock chip and drill samples have been assayed for gold even though it has long been known to be associated with both styles of mineralisation. For example at the Copper Blow Prospect (near to but not on Impact’s tenements, Figure 13) historic drilling returned intercepts of up to 11.8 metres at 6.7% copper, 1.9 g/t gold and 13 g/t silver in ironstone. However, where more detailed work for cobalt has been done by previous explorers, significant results have always been returned and which have not been properly followed up. 30 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2.2.1 Cobalt associated with high grade nickel-copper-PGM In previous drill campaigns at Broken Hill, Impact has discovered very high grade nickel-copper-PGM at two prospects: Red Hill and Platinum Springs. Although not reported at the time, the mineralisation also contains good grades of cobalt and the metal is a common by-product to nickel-copper sulphide deposits. At the Red Hill Prospect Hole RHDH012 returned one of the highest drill intercepts for PGM’s ever reported in Australia and this also contains significant cobalt. From 68.5 metres down-hole, the hole returned: 1.2 metres at 0.5% cobalt, 7.4% nickel, 1.8% copper, 10.4 g/t platinum, 10.9 g/t gold, 294 g/t (9.5 ounces) palladium and 19 g/t silver, 4.6 g/t rhodium, 7.2 g/t iridium, 5.6 g/t osmium and 3.1 g/t ruthenium Part of the 1.2 metre intercept of exceptional PGM mineralisation Six other drill holes of the 13 mineralised holes completed by Impact at Red Hill returned anomalous cobalt grades of 0.01% to 0.03% up to 20 metres thick. Intercepts include Hole RHDH001 that returned: 1.9 m at 0.1% cobalt, 2.0% copper 1.2% nickel, 1.1 g/t platinum, 3.4 g/t palladium, 0.2 g/t gold and 15 g/t silver from 53.7 metres down hole; and Hole RHDH006 which returned: 5.2 m at 0.06% cobalt 1.1% copper 1.6% nickel 0.2 g/t gold 3.9 g/t palladium and 0.8 g/t platinum from 54.2 metres down hole. Of interest, low grade cobalt is also associated with the high grade zinc-lead silver mineralisation also discovered by Impact at Red Hill and attests to the widespread nature of cobalt in the Broken Hill area. Hole RHDH020 at Red Hill returned: 1.6 metres at 0.013% cobalt, 66.7 g/t silver 22% zinc and 1.6% lead. Note that Silver City Minerals Limited holds a 20% interest in the silver-lead-zinc rights on E7390 that hosts Red Hill, free carried to a decision to mine. At the Platinum Springs Prospect located some 35 km north east of Red Hill, a narrow unit of massive nickel-copper sulphide unit intersected in Impact’s drill Hole PSD02 returned: 0.6 metres at 0.16% cobalt, 7.4% nickel, 7.6% copper 11.5 g/t platinum, 25.6 g/t palladium, 1.4 g/t gold and 44.3 g/t silver. Together, these results all show the potential for significant cobalt credits to any economic nickel-copper- PGM mineralisation that may be found. Follow up drilling is required at both prospects. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 31 REVIEW OF OPERATIONS (CONTINUED) 2.2.2 Pyrite-cobalt deposits (Big Hill style) Although the Broken Hill region of New South Wales Australia is well known for its silver-lead-zinc mineralisation, it is also well endowed with extensive cobalt mineralisation including the Thackaringa Cobalt Project located 25 km west of Broken Hill and about 3 to 5 kilometres west of Impacts extensive tenement holdings. The Thackaringa Project has an Inferred Resource of 33 Mt at 0.08% cobalt (833 ppm) for 27,500 tonnes of contained cobalt. The cobalt occurs within three separate layer parallel bodies of massive pyrite (Big Hill, Pyrite Hill and Railway) along a 15 km trend of rocks in the so-called Thackaringa Group (Figure 13 and see http://www.cobaltblueholdings.com). An interpretation of the regional magnetic data, regional geological maps and mineral occurrence data indicates that within the western half of Impact’s licences and to the south of the Red Hill Prospect, there are many tens of kilometres of strike extent of the same rocks that host the Thackaringa deposits that are prospective for cobalt (Figure 13). There has been virtually no exploration for cobalt in these areas, much of which lies beneath a thin cover of recent gravel. A number of occurrences of Big Hill style cobalt deposits have been mapped within, close to or along strike from Impact’s licences and accordingly the potential for the discovery of further mineralisation is considered high. About 30 drill holes have been recorded by the Geological Survey of New South Wales as having maximum intercepts of between 0.01% and 0.04% cobalt over one to two metre intercepts with maximum intercepts of up to 0.1% cobalt. However the majority of the drill holes were shallow air core holes and not targeted specifically at cobalt mineralisation. A synthesis and interpretation of the scant previous exploration data in this area has identified the Pine Creek Project as having significant previous results. Big Hill Style Deposits: Pine Creek The Pine Creek Prospect is located 10 km west of Broken Hill and occurs in the same rocks that host the Thackaringa deposits some 30 km to the south (Figure 13). Exploration in the 1980’s identified two north- south trending units of felsic gneiss with extensive disseminated pyrite. Two drill holes intersected the western gneiss unit and intersected extensive pyrite (5-20%) with cobalt grades from 0.02% to 0.15% over at least 122 m and ended in mineralisation (Figure 16). Assay results returned: 92 metres of 0.04% cobalt (true thickness of about 45 metres, Figure 16). Of note, a 20 metre thick intercept of low grade gold occurs in the last 20 metres of the hole and is also open at depth and associated with an increase in magnetite content (Figure 16). The best intercept in the hole is 10 metres at 0.1 g/t gold and this is considered significant and worthy of follow up. These are very encouraging results and may indicate the possibility of a large cobalt resource similar to Big Hill-Pyrite Hill in the area that may also have significant gold credits. The airborne magnetic data indicates two sub-parallel zones of interest that extend for at least one kilometre along trend on Impact’s licence. In addition IP and EM data completed by the previous explorers identified many anomalies for disseminated and massive sulphide targets that have not been followed up or drilled. 32 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Figure 16 Geology and significant drill results of the Pine Creek Project. Note the mineralisation is open at depth. 2.2.3. Cobalt-Copper-Iron deposits (Broken Hill Great Eastern and Sister’s Styles) Cobalt mineralisation in the Broken Hill area is also associated with various types of ironstone and variably with copper and sometimes gold. Great Eastern-style deposits comprise cobalt+/-copper in magnetite ironstones recognisable as prominent anomalies in regional magnetic data and Sisters-style deposits which comprise cobalt+/- copper in iron-rich chert layers. Four target areas for these styles of mineralisation have been identified from the previous exploration data in the north east part of Impact’s licences (Figure 13). Three prominent magnetic units are prospective for Great Eastern-style deposits. Two occur close to the northern boundary of Impact’s licences and no records of significant exploration have been found for these areas. One magnetic unit occurs south of Impact’s Little Darling Creek nickel-copper-PGM prospect where a prominent magnetic unit has been explored for copper mineralisation (Figure 10). Anomalous cobalt-in-soil results between 0.05% and 0.22% cobalt occur in many places within an area of several square kilometres and drill holes have returned intercepts of up to 0.2% cobalt. The area has not been systematically explored and a detailed review of all this data is warranted. A number of Sisters-style mineral occurrences have been documented close to and along the Moorkai Trend of ultramafic rocks that extends over 10 kilometres to the north west of the Platinum Springs Prospect (Figure 13). There has been no exploration for cobalt in this area. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 33 REVIEW OF OPERATIONS (CONTINUED) Copper King The Copper King area is a series of historic copper occurrences and workings located in the east of Impact’s tenements (Figure 13). Previous work has identified an anomalous copper-cobalt-gold trend up to 3.5 kilometres long which is in part defined by variably magnetic ironstone units. However the focus was mainly on copper exploration and assays for both gold and cobalt are minimal. Gold is mostly reported in rock chip samples with values reported of up to 0.75 g/t gold. Soil samples and drill samples were not assayed for gold. Rock chip samples for cobalt range up to 0.13% cobalt but there are no drill hole assays. Three trenches dug in 2012 across parts of the trend near old workings returned up to: 23 metres at 1.5% copper and 4 g/t silver including 1.5 metres at 3.2% copper. The shafts and workings were extensively sampled with good grades and returned up to 3.3% copper, 1.2% lead, 1.2% zinc and 40 g/t silver. This data and limited shallow drilling was used to define a small non-JORC compliant resource estimate for copper. Gold and cobalt were not assayed. The work done by previous explorers at these and other prospects has often been piecemeal and poorly conceived and executed. There is clear scope within Impact’s licences to make multiple discoveries of deposits of copper-cobalt-gold. Other Targets Magnetic ironstones that are potential hosts for cobalt-copper-gold mineralisation are identifiable in the regional airborne magnetic data. An interpretation of this data and regional geological maps shows that there are many strike kilometres of prospective ironstones within Impact’s ground. In addition there are large tracts of ground that may contain the same rocks prospective for the Thackaringa style of pyrite-cobalt-gold deposits (Figure 13). 2..4 Next Steps at Broken Hill Impact remains firmly focussed on its exploration for deposits of high grade nickel-copper-PGM at Broken Hill and follow up work for this style of deposit will be a priority, in particular follow up field work in the eight areas identified by the VTEM survey in the Rockwell-Little Broken Hill Trends. However the ongoing review of previous exploration data continues to reveal the potential for other styles of mineralisation including cobalt-copper-gold and silver-lead-zinc, all of which deserve further work. Accordingly Impact is considering various options to fund exploration for these other styles of deposit. Impact has also discovered highgrade silver-lead-zinc at the Dora Prospect near Red Hill where drill hole RHD018 returned: 5 metres at 10% zinc, 0.8% lead and 40 g/t silver including: 1 metre at 26.8% zinc, 2.8% lead and 133 g/t (4 ounces) silver; and 1 metre at 21.4% zinc, 0.8% lead and 31 g/t (1 ounce) silver. 34 | IMPACT MINERALS LTD ANNUAL REPORT 2017 MULGA TANK NICKEL-COPPER-PGE PROJECT (Impact 100%) 3. Impact owns 100% of the Mulga Tank Project that covers about 509 sq km of the Minigwal greenstone belt located 200 km north east of Kalgoorlie in Western Australia. The project is prospective for gold and nickel deposits (Figure 17). Impact discovered high tenor nickel and copper sulphides at the Mulga Tank Dunite in its maiden drill programme in 2013. Three styles of nickel-copper mineralisation were identified: 1. Extensive disseminated nickel in the Mulga Tank Dunite with assays of: 2 m at 1.3% nickel including 1 m at 2% nickel and multiple 0.5 m thick zones of 0.5% to 1.2% nickel within an intercept of 115 m at 0.3% nickel; Other thick intercepts including 21 m at 0.4% nickel and 59 m at 0.3% nickel. 2. High tenor veins at the base of the Mulga Tank Dunite with assays of: 0.25 m at 3.8% nickel, 0.7% copper and 0.7 g/t PGE and 0.3 m at 0.7% nickel; and 3. High tenor nickel sulphide in multiple komatiites in a flow channel in the upper part of the dunite with assays of: 0.75 m at 0.85% nickel, 0.35% copper and 0.28 g/t PGE (Pt+Pd+Au); and 6.7 m at 0.5% nickel. The style of mineralisation and the nature of the rocks are similar to those that host the significant nickel deposits at Perseverance (1 Mt of contained nickel) and Mt Keith (>2 Mt of contained nickel) near Leinster in WA). In addition the project area occurs in the same geological terrain as the recently discovered Gruyere deposit of more than 5 million ounces of gold. The Mulga Tank project has been poorly explored for gold and this will also be a focus of the forward programme. In 2015 Impact completed an airborne magnetic and radiometric survey over the entire project area, an innovative combined airborne and ground electrical survey as well as a large soil geochemistry survey over key target areas. During the year, 20 targets for gold and 16 targets for nickel were identified from this data. Many of these targets are drill-ready and Impact is considering its options to fund this work. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 35 REVIEW OF OPERATIONS (CONTINUED) Figure 17 Location of the Mulga Tank Project and significant nickel sulphide mines and prospects including Perseverance and Rocky’s Reward and with new nickel-copper-PGE discoveries in the emerging nickel- copper province to the east. 36 | IMPACT MINERALS LTD ANNUAL REPORT 2017 COMPETENT PERSON’S STATEMENT Exploration Results The review of exploration activities and results contained in this report is based on information compiled by Dr Mike Jones, a Member of the Australian Institute of Geoscientists. He is a director of the company and works for Impact Minerals Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits 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 (the JORC Code). Dr Jones has consented to the inclusion in the report of the matters based on his information in the form and context in which it appears. Impact Minerals confirms that it is not aware of any new information or data that materially affects the information included in the previous market announcements referred to and in the case of mineral resource estimates, that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. Mineral Resources The information in this report which relates to Mineral Resources is based upon information compiled by Mr Ian Glacken, who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Glacken is an employee of Optiro Pty Ltd and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (the JORC Code). Mr Glacken consents to disclosure of the information in this report in the form and context in which it appears. FORWARD LOOKING STATEMENTS This document may contain certain forward-looking statements. Forward-looking statements include, but are not limited to statements concerning Impact Minerals Limited’s (Impact’s) current expectations, estimates and projections about the industry in which Impact operates, and beliefs and assumptions regarding Impact’s future performance. When used in this document, words such as “anticipates”, “could”, “plans”, “estimates”, “expects”, “seeks”, “intends”, “may”, “potential”, “should”, and similar expressions are forward-looking statements. Although Impact believes that its expectations reflected in these forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of Impact and no assurance can be given that actual results will be consistent with these forward-looking statements. Actual values, results or events may be materially different to those expressed or implied in this document. Given these uncertainties, recipients are cautioned not to place reliance on forward- looking statements. Any forward-looking statements in this document speak only at the date of issue of this document. Subject to any continuing obligations under applicable law and the ASX Listing Rules, Impact does not undertake any obligation to update or revise any information or any of the forward-looking statements in this document or any changes in events, conditions or circumstances on which any such forward-looking statement is based. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 37 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017 CONTENTS DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF PROFIT OR LOSS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS’ DECLARATION AUDITOR’S REPORT ADDITIONAL SHAREHOLDER INFORMATION TENEMENT SCHEDULE 39 54 55 56 57 59 60 98 99 104 107 DIRECTORS’ REPORT Your Directors present their report on the consolidated entity consisting of Impact Minerals Limited and its subsidiaries at the end of the year ended 30 June 2017. Throughout the report, the consolidated entity is referred to as the Group. DIRECTORS The following persons were Directors of Impact Minerals Limited during the whole of the financial year and up to the date of this report unless noted otherwise: Peter Unsworth Michael Jones Paul Ingram Markus Elsasser Felicity Gooding PRINCIPAL ACTIVITIES The principal activity of the Group during the financial year was exploration for deposits of nickel, gold, copper and platinum group elements. FINANCIAL RESULTS The consolidated loss of the Group after providing for income tax for the year ended 30 June 2017 was $721,564 (2016: $977,735). DIVIDENDS No dividends have been paid or declared since the start of the financial year. No recommendation for the payment of a dividend has been made by the Directors. OPERATIONS AND FINANCIAL REVIEW Activity during the 2017 financial year was focussed at the emerging high grade gold-silver discovery at the Silica Hill Prospect, part of the 100% owned Commonwealth Project centred about 100 km north of Orange in NSW. Gold and silver mineralisation with base metal credits has been intersected over an area of 200 metres by 100 metres down to 100 metres below surface and with an average true thickness of about 50 metres. The veins commonly contain high to very high grades of gold and in particular silver. For example Hole CMIPT046 returned 41.3 metres at 2 g/t gold and 176 g/t silver which comprised 30 individual assays of varying widths of between 2 g/t and 24 g/t gold and 12 individual assays with more than 500 g/t silver. Hole CMIPT011 returned two veins with 3,146 g/t silver (0.9 metres thick) and 3,600 g/t silver (0.15 m thick) (refer ASX announcement dated 5 December 2016). A follow up drill programme is in progress. The programme is testing a large number of targets generated from Induced Polarisation and soil geochemistry data that were also collected during the year. Initial results confirm that the discovery continues to grow. Two 5 kilometre long trends within Impact’s extensive ground holdings of 1,000 km2 in the area, were newly identified as prospective for high grade gold silver deposits similar to Commonwealth-Silica Hill mineralisation. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 39 DIRECTORS’ REPORT (CONTINUED) Detailed studies by Impact have shown strong similarities to the well-known Eskay Creek deposit in Canada (4 million ounces of gold and 150 million ounces of silver). There is also potential for the discovery of a por- phyry copper-gold system at depth below Silica Hill. At the 100% owned Broken Hill Project a VTEM survey was completed over two key areas and identified eight targets along the Rockwell-Little Broken Hill Trend and two targets at Little Darling Creek for follow up work for nickel-copper-PGM mineralisation. In addition significant potential for cobalt-copper-gold mineralisa- tion was recognised on Impact’s large ground holding at Broken Hill including previous drill results of 92 metres of 0.04% cobalt with 10 metres at 0.1 g/t gold at end of hole (refer ASX announcement dated 5 May 2017). At the 100% owned Mulga Tank Project about 2,500 soil samples were submitted for multi-element analysis. An interpretation of the results identified 20 targets for gold and 16 targets for nickel. Follow up drill programmes are being planned. Exploration and evaluation costs totalling $101,406 (2016: $186,489) were expensed during the year in accordance with the Group’s accounting policy. The expensed exploration and evaluation costs for the year ended 30 June 2017 primarily comprise business development activities on potential new projects. As at 30 June 2017 the Group had net assets of $12,248,077 (2016: $11,689,939) including cash and cash equivalents of $1,917,206 (2016: $3,929,972). The review of operations contained in this report is based on information compiled by Dr Mike Jones, a Member of the Australian Institute of Geoscientists. He is a director of the company and works for Impact Minerals Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits 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 (the JORC Code). Dr Jones has consented to the inclusion in the report of the matters based on his information in the form and context in which it appears. Impact Minerals confirms that it is not aware of any new information or data that materially affects the information included in the previous market announcements referred to and in the case of mineral resource estimates, that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Group during the financial year were as follows: In June 2017 the Company successfully completed a Share Purchase Plan (“SPP”) and Shortfall Offer raising $1,073,971 (before costs). Under the SPP eligible shareholders were entitled to subscribe for up to $15,000 of new fully paid ordinary shares (“New Shares”) at an issue price of 1.8 cents per share. Eligible shareholders were also offered three free attaching listed options (“Free Attaching Options”) exercisable at $0.04 with an expiry date of 15 June 2020 for every two New Shares subscribed for. The New Shares and Free Attaching Options not subscribed for under the SPP formed the Shortfall Offer which was open to individuals eligible under all applicable securities laws. The Company issued a total of 34,601,161 New Shares under the SPP (with 51,901,752 Free Attaching Options) and 25,063,890 New Shares under the Shortfall Offer (with 37,595,838 Free Attaching Options). There were no other significant changes in the state of affairs of the Group during the financial year. 40 | IMPACT MINERALS LTD ANNUAL REPORT 2017 EVENTS SINCE THE END OF THE FINANCIAL YEAR On 7 September the Company announced that it had placed all of the shortfall from the SPP. The aggregate amount raised from the shortfall was $2,927,429 (before costs), comprising the issue of 162,634,949 Shares and 243,952,410 Free Attaching Options. The Shares and Free Attaching Options were issued on the same terms and conditions as those under the SPP, being $0.018 for each Share, with three Free Attaching Options exercisable at $0.04 on or before 15 June 2020 for every two New Shares subscribed for. Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations, the results of those operations, or the state of affairs of the Group in future financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Directors are not aware of any developments that might have a significant effect on the operations of the Group in subsequent financial years not already disclosed in this report. ENVIRONMENTAL REGULATION The Group is subject to significant environmental regulation in respect of its exploration activities. Tenements in Western Australia, New South Wales and Queensland are granted subject to adherence to environmental conditions with strict controls on clearing, including a prohibition on the use of mechanised equipment or development without the approval of the relevant government agencies, and with rehabilitation required on completion of exploration activities. These regulations are controlled by the Department of Mines and Petroleum (Western Australia), the Department of Industry, Resources and Energy (New South Wales) and the Department of Natural Resources and Mines (Queensland). Impact Minerals Limited conducts its exploration activities in an environmentally sensitive manner and the Group is not aware of any breach of statutory conditions or obligations. Greenhouse gas and energy data reporting requirements The Directors have considered compliance with both the Energy Efficiency Opportunity Act 2006 and the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The Directors have assessed that there are no current reporting requirements for the year ended 30 June 2017, however reporting requirements may change in the future. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 41 DIRECTORS’ REPORT (CONTINUED) INFORMATION ON DIRECTORS Peter Unsworth Qualifications Experience and expertise (Non-Executive Chairman), Director since 28 April 2006 B.Com Mr Unsworth, formerly a chartered accountant, has more than 35 years’ experience in the corporate finance, investment, and securities industries and has a wealth of management experience with both public and private companies. A former Executive Director with a leading Western Australian stockbroking company, Mr Unsworth has been a Director of a number of public exploration and mining companies. He is a Director of the Western Australian Government owned Gold Corporation (operator of The Perth Mint), having previously been a Director and Chairman from 1996 to 2008. Other current directorships None Former directorships in last 3 years Invictus Gold Limited (delisted 10 January 2014 following the merger with Impact Minerals Limited) Special responsibilities Chair of the Board Interests in shares and options Ordinary Shares – Impact Minerals Limited Listed Options – Impact Minerals Limited Unlisted Options – Impact Minerals Limited 15,994,098 3,333,335 8,000,000 Michael Jones Qualifications Experience and expertise (Managing Director), Director since 31 March 2006 PhD, MAIG Dr Jones completed undergraduate and post-graduate studies in Mining and Exploration Geology at Imperial College, London. His Ph.D. work on gold mineralisation saw him move to Western Australia in 1988 to work for Western Mining Corporation exploring for gold and nickel deposits in the Yilgarn. From 1994 he consulted to the exploration and mining industry specialising in the integration of geological field mapping and the interpretation of geochemical, geophysical and remotely sensed data for target generation. Dr Jones has worked on over 80 projects both in Greenfields and near mine exploration in a wide variety of mineralised terrains and was the founding Director of Lithofire Consulting Geologists in Perth, Australia. He was also the team leader during the discovery of a significant gold deposit at the Higginsville Mining Centre, near Kalgoorlie and an iron ore deposit near Newman, both in Western Australia. Other current directorships None Former directorships in last 3 years Invictus Gold Limited (delisted 10 January 2014 following the merger with Impact Minerals Limited) Special responsibilities Managing Director Interests in shares and options Ordinary Shares – Impact Minerals Limited Listed Options – Impact Minerals Limited Unlisted Options – Impact Minerals Limited 7,715,025 1,250,001 20,000,000 42 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Paul Ingram Qualifications Experience and expertise Other current directorships Former directorships in last 3 years (Non-Executive Director), Director since 27 September 2009 B.AppSc, AIMM, MICA Mr. Ingram is a geologist with extensive experience in managing major mineral exploration programs for several publicly listed companies and has been involved in the mining sector for over forty years. He has designed and implemented innovative techniques for exploration in remote areas, and has managed projects in countries throughout Australia and east Asia. A-Cap Resources Limited (Director since June 2009) Consolidated Global Investments Limited since September 2006 Australian Pacific Coal Limited (resigned 30 October 2015) Special responsibilities None Interests in shares and options Ordinary Shares – Impact Minerals Limited Unlisted Options – Impact Minerals Limited 580,680 4,000,000 Markus Elsasser Qualifications Experience and expertise (Non-Executive Director), Director since 9 August 2012 PhD Dr. Markus Elsasser is a German financier and investor in the mineral resources industry. He is Head of the Elsasser family office ‘M. Elsasser & Cie AG 1971’ in Dusseldorf, Germany. Dr. Elsasser has previously been Director of Finance at the Dow Chemical Company in Germany. He has extensive General Management experience with former appointments as Managing Director in Australia and Singapore in the chemical and food industries. Other current directorships None Former directorships in last 3 years Stellar Resources Limited (resigned 3 February 2016) Special responsibilities None Interests in shares and options Ordinary Shares – Impact Minerals Limited Unlisted Options – Impact Minerals Limited 23,310,402 4,000,000 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 43 DIRECTORS’ REPORT (CONTINUED) Felicity Gooding Qualifications Experience and expertise (Non-Executive Director), Director since 18 February 2016 B.Com, CA Ms Gooding is the Chief Operating Officer and Chief Financial Officer of the Minderoo Group, the philanthropic and private business holdings of Mr and Mrs Andrew and Nicola Forrest. A Chartered Accountant with more than 15 years’ experience, Ms Gooding has specialised in due diligence, mergers and acquisitions, and equity and debt financing across various sectors in Washington DC, Singapore and London. Ms Gooding has held senior positions at PwC, Diageo Plc and Fortescue Metals Group Ltd where she was instrumental in the raising of more than A$5 billion for project expansion financing. Prior to joining Minderoo, Ms Gooding was an executive at potash development company, Sirius Minerals Plc. Other current directorships None Former directorships in last 3 years Vimy Resources Limited (resigned 26 May 2016) Special responsibilities None Interests in shares and options Ordinary Shares – Impact Minerals Limited Unlisted Options – Impact Minerals Limited Nil Nil COMPANY SECRETARY Bernard Crawford, B.Com, CA, MBA, ACIS (appointed 4 April 2016) Mr Crawford is a Chartered Accountant with over 20 years’ experience in the resources industry in Australia and overseas. He has held various positions in finance and management with NYSE, TSX and ASX listed companies. Mr Crawford is the CFO and/or Company Secretary of a number of public companies. He holds a Bachelor of Commerce degree from the University of Western Australia, a Master of Business Administration from London Business School and is a Member of Chartered Accountants Australia and New Zealand and the Governance Institute of Australia. MEETINGS OF DIRECTORS The numbers of meetings of the Company’s board of Directors held during the year ended 30 June 2017, and the numbers of meetings attended by each Director were: Number of meetings attended 5 Number of meetings eligible to attend 5 5 5 5 5 5 5 4 5 Peter Unsworth Michael Jones Paul Ingram Markus Elsasser Felicity Gooding 44 | IMPACT MINERALS LTD ANNUAL REPORT 2017 RETIREMENT, ELECTION AND CONTINUATION IN OFFICE OF DIRECTORS Mr Unsworth, being a Director retiring by rotation who, being eligible, will offer himself for re-election at the Annual General Meeting. REMUNERATION REPORT (AUDITED) The Directors present the Impact Minerals Limited 2017 Remuneration Report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report contains the following sections: (a) Key management personnel (KMP) covered in this report (b) Remuneration governance and the use of remuneration consultants (c) Executive remuneration policy and framework (d) Relationship between remuneration and the Group’s performance (e) Non-executive Director remuneration policy (f) Voting and comments made at the Company’s 2016 Annual General Meeting (g) Details of remuneration (h) Service agreements (i) Details of share-based compensation and bonuses (j) Equity instruments held by key management personnel (k) Loans to key management personnel (l) Other transactions with key management personnel (a) Key management personnel covered in this report Non-Executive and Executive Directors (see pages 42 to 44 for details about each Director) Peter Unsworth Michael Jones Paul Ingram Markus Elsasser Felicity Gooding Other key management personnel Name Bernard Crawford Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Position Company Secretary (b) Remuneration governance and the use of remuneration consultants The Company does not have a Remuneration Committee. Remuneration matters are handled by the full Board of the Company. In this respect the Board is responsible for: • • operation of the incentive plans which apply to Executive Directors and senior executives (the executive the over-arching executive remuneration framework; team), including key performance indicators and performance hurdles; remuneration levels of executives; and • • Non-Executive Director fees. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 45 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) The objective of the Board is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Company. In addition, all matters of remuneration are handled in accordance with the Corporations Act requirements, especially with regard to related party transactions. That is, none of the Directors participate in any deliberations regarding their own remuneration or related issues. Independent external advice is sought from remuneration consultants when required, however no advice has been sought during the period ended 30 June 2017. Executive remuneration policy and framework (c) In determining executive remuneration, the Board aims to ensure that remuneration practices are: • competitive and reasonable, enabling the Company to attract and retain key talent; • aligned to the Company’s strategic and business objectives and the creation of shareholder value; • • acceptable to shareholders. transparent and easily understood; and All executives receive consulting fees or a salary, part of which may be taken as superannuation, and from time to time, options. The Board reviews executive packages annually by reference to the executive’s performance and comparable information from industry sectors and other listed companies in similar industries. All remuneration paid to specified executives is valued at the cost to the Group and expensed. Options are valued using a Black-Scholes option pricing model. (d) Relationship between remuneration and the Group’s performance Emoluments of Directors are set by reference to payments made by other companies of similar size and industry, and by reference to the skills and experience of Directors. Fees paid to Directors are not linked to the performance of the Group. This policy may change once the exploration phase is complete and the Group is generating revenue. At present the existing remuneration policy is not impacted by the Group’s performance including earnings and changes in shareholder wealth (e.g. changes in share price). The Board has not set short term performance indicators, such as movements in the Company’s share price, for the determination of Director emoluments as the Board believes this may encourage performance which is not in the long term interests of the Company and its shareholders. The Board has structured its remuneration arrangements in such a way it believes is in the best interests of building shareholder wealth in the longer term. The Board believes participation in the Company’s Incentive Option Scheme motivates key management and executives with the long term interests of shareholders. (e) Non-executive director remuneration policy The Board policy is to remunerate Non-Executive Directors at commercial market rates for comparable companies for their time, commitment and responsibilities. Non-executive Directors receive a Board fee but do not receive fees for chairing or participating on Board committees. Board members are allocated superannuation guarantee contributions as required by law, and do not receive any other retirement benefits. From time to time, some individuals may choose to sacrifice their salary or consulting fees to increase payments towards superannuation. 46 | IMPACT MINERALS LTD ANNUAL REPORT 2017 REMUNERATION REPORT (AUDITED) (CONTINUED) The maximum annual aggregate Non-executive Directors’ fee pool limit is $250,000 as approved by shareholders at the Company’s 2016 Annual General Meeting (“AGM”) held on 9 November 2016. Fees for Non-Executive Directors are not linked to the performance of the Group. Non-executive Directors’ remuneration may also include an incentive portion consisting of options, subject to approval by shareholders. Voting and comments made at the Company’s 2016 Annual General Meeting (f) Impact Minerals Limited received more than 89% of “yes” votes on its Remuneration Report for the 2016 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices (g) Details of remuneration The following tables show details of the remuneration received by the Group’s key management personnel for the current and previous financial year. 2017 Short-term benefits Post- employment benefits Share-based payments Salary and fees $ Non- Monetary Benefit $ Super- annuation $ Shares $ Options $ Total $ % of Remuner- ation to total from Shares and Options % Name Directors P Unsworth M Jones P Ingram M Elsasser F Gooding (1) Executives B Crawford 65,000 265,217 25,000 27,375 25,000 103,275 Totals 510,867 - - - - - - - 6,175 - 2,375 - - - 8,550 - - - - - - - 38,228 109,403 95,571 360,788 19,114 19,114 - - 46,489 46,489 25,000 103,275 172,027 691,444 - - - - - - (1) Ms Gooding’s fees are payable to Squadron Resources Pty Ltd No components of remuneration are linked to the performance of the Group. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 47 % of Remuner- ation to total from Shares and Options % DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) 2016 Short-term benefits Post- employment benefits Share-based payments Salary and fees $ Non- Monetary Benefit $ Super- annuation $ Shares $ Options $ Total $ 65,000 223,550 25,000 27,375 10,417 12,500 30,300 132,987 527,129 - - - - - - - - - 6,175 - 2,375 - - - - 12,634 21,184 - - - - - - - - - 60,163 131,338 150,407 373,957 30,081 30,081 - - - 57,456 57,456 10,417 12,500 30,300 46% 40% 52% 52% - - - 22,171 167,792 13% 292,903 841,216 Name Directors P Unsworth M Jones P Ingram M Elsasser F Gooding (1) A Hood (2) Executives B Crawford (3) J Cooper-Jones (4) Totals (1) Appointed 18 February 2016, Ms Gooding’s fees are payable to Squadron Resources Pty Ltd (2) Appointed 5 August 2015, resigned 18 February 2016, Mr Hood’s fees were paid to Squadron Resources Pty Ltd (3) Appointed 4 April 2016 (4) Resigned 3 March 2016 No components of remuneration are linked to the performance of the Group. (h) Service agreements M Jones, Managing Director Mr Jones is remunerated pursuant to an ongoing Consultancy Services Agreement. Mr Jones was paid fees of $265,217 for the year ended 30 June 2017. The notice period (other than for gross misconduct) is three months. B Crawford, Chief Financial Officer and Company Secretary Mr Crawford is remunerated pursuant to the terms of a Consultancy Agreement to fulfil the duties of the Company Secretarial and Chief Financial Officer. Fees paid during the year totalled $103,275 and were charged at usual commercial rates on a daily basis. The agreement may be terminated by either party on one months’ written notice. 48 | IMPACT MINERALS LTD ANNUAL REPORT 2017 REMUNERATION REPORT (AUDITED) (CONTINUED) (i) Details of share-based compensation and bonuses Options Options over ordinary shares in Impact Minerals Limited are granted under the Employee Option Acquisition Plan (“Option Plan”). Participation in the scheme and any vesting criteria are at the Board’s discretion and no individual has a contractual right to participate in the scheme or to receive any guaranteed benefits. Any options issued to Directors of the Company are subject to shareholder approval. No options were provided as remuneration to Directors and senior management during the current year. Value of options issued to directors and executives The following table summarises the value of options granted, exercised or lapsed to key management personnel during the current financial year: Value of options granted at the grant date (i) $ Value of options exercised at the exercise date $ Value of options lapsed at the date of lapse (ii) $ - - - - - - - - (30,897) (77,242) (15,448) (15,448) Total $ (30,897) (77,242) (15,448) (15,448) Name Directors P Unsworth M Jones P Ingram M Elsasser (i) The value of options granted during the financial year is calculated as at the grant date using a Black- Scholes option pricing model. This grant date value is allocated to remuneration of key management personnel on a straight-line basis over the period from grant date to vesting date. (ii) The value of options lapsing during the period reflects the total fair value determined at time of lapse. Further information on the fair value of share options and assumptions is set out in note 24 to the financial statements. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 49 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) Equity instruments held by key management personnel (j) The following tables detail the number of fully paid ordinary shares and options over ordinary shares in the Company that were held during the financial year and the previous financial year by key management personnel of the Group, including their close family members and entities related to them. Options Opening Balance 1 July No. Granted as remun- eration No. Options exer- cised No. Net change other No. Balance at 30 June No. Vested but not exercis- able No. Vested and exercis- able No. Vested during the year No. 2017 Directors P Unsworth M Jones P Ingram 10,000,000 25,000,000 5,000,000 M Elsasser 5,000,000 45,000,000 - - - - - - - - - - 1,333,335(1) 11,333,335 (3,749,999)(1) 21,250,001 (1,000,000) 4,000,000 (1,000,000) 4,000,000 (4,416,664) 40,583,336 - - - - - 7,333,335 11,250,001 2,000,000 2,000,000 22,583,336 - - - - - 1) Includes options acquired pursuant to the Share Purchase Plan Opening Balance 1 July No. Granted as remun- eration No. Options exer- cised No. Net change other No. Balance at 30 June No. Vested but not exercis- able No. Vested and exercis- able No. Vested during the year No. 2016 Directors P Unsworth M Jones P Ingram 4,008,000 8,000,000 10,008,000 20,000,000 2,000,000 4,000,000 M Elsasser 2,000,000 4,000,000 Executives J Cooper- Jones 1,500,000 6,000,000 19,516,000 42,000,000 - - - - - - (2,008,000) 10,000,000 (5,008,000) 25,000,000 (1,000,000) 5,000,000 (1,000,000) 5,000,000 (6,500,000) 1,000,000 (15,516,000) 46,000,000 - - - - - - 2,000,000 5,000,000 1,000,000 1,000,000 - 9,000,000 - - - - - - During the year, no ordinary shares in the Company were issued as a result of the exercise of remuneration options. 50 | IMPACT MINERALS LTD ANNUAL REPORT 2017 REMUNERATION REPORT (AUDITED) (CONTINUED) Shareholdings Opening Balance 1 July No. 13,771,875 6,881,718 580,680 23,310,402 44,544,675 12,771,875 6,800,000 438,635 22,543,357 2017 Directors P Unsworth M Jones P Ingram M Elsasser 2016 Directors P Unsworth M Jones P Ingram M Elsasser Granted as remuneration No. Options exercised No. Net change Other No. Balance at 30 June No. - - - - - - - 142,045(1) 142,045(1) - - - - - - - - - - 2,222,223 15,994,098 833,334 - - 7,715,052 580,680 23,310,402 3,055,557 47,600,232 1,000,000 13,771,875 81,718 - 6,881,718 580,680 625,000 23,310,402 1,706,718 44,544,675 42,553,867 284,090 (1) These shares were in respect of remuneration for the year ended 30 June 2015 but were issued in July 2015. The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, (and the amount included in the remuneration tables above). Fair values at grant date are determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. As at the date of this report the shareholdings of key management personnel were the same as at 30 June 2017. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 51 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) Loans to key management personnel (k) There were no loans to individuals or members of key management personnel during the financial year or the previous financial year. Other transactions with key management personnel (l) There were no other transactions with key management personnel during the financial year or the previous financial year. End of Remuneration Report (Audited) SHARES UNDER OPTION Expiry Date 7 August 2018 Issue price of shares $0.0325 Number under option 45,000,000 29 September 2018 $0.0367 27,000,000 Date options granted 7 August 2015 29 September 2015 and 13 May 2016 21 October 2015 29 September 2015 and 13 May 2016 21 October 2018 29 September 2019 21 June 2017 (listed) 15 June 2020 29 September 2015 and 13 May 2016 29 September 2020 $0.0325 $0.045 $0.04 $0.07 26,428,572 15,500,000 89,497,590 15,500,000 218,926,162 No option holder has any right under the options to participate in any other share issue of the Company or any other entity. SHARES ISSUED ON THE EXERCISE OF OPTIONS There were no shares issued on the exercise of options during the year and up to the date of this report. CORPORATE GOVERNANCE STATEMENT The Company’s 2017 Corporate Governance Statement has been released as a separate document and is located on the Company’s website at http://impactminerals.com.au/corporate-governance/. PROCEEDINGS ON BEHALF OF THE CONSOLIDATED ENTITY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. 52 | IMPACT MINERALS LTD ANNUAL REPORT 2017 INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year, the Company paid a premium to insure the Directors and officers of the consolidated entity against any liability incurred as a Director or officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits the disclosure of the nature of the liabilities covered or the amount of the premium paid. The Group has not entered into any agreement with its current auditors indemnifying them against claims by a third party arising from their position as auditor. NON-AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (Bentleys Audit and Corporate (WA) Pty Ltd) for audit and non-audit services provided during the year are set out in note 19. During the year ended 30 June 2017 no fees were paid or were payable for non-audit services provided by the auditor of the consolidated entity (2016: $Nil). AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. Signed in accordance with a resolution of the Directors Peter Unsworth Chairman Perth, 14 September 2017 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 53 To The Board of Directors Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 As lead audit director for the audit of the financial statements of Impact Minerals Limited for the financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours faithfully BENTLEYS Chartered Accountants MARK DELAURENTIS CA Director Dated at Perth this 14th day of September 2017 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Notes 3 (a) 3 (a) 3 (b) 10 14 5 Interest income Other income Corporate and administration expense Depreciation expense Employee benefits expense Impairment of exploration expenditure Occupancy expense Financing costs Loss from continuing operations before income tax Income tax expense Loss after income tax for the period attributable to the owners of Impact Minerals Limited Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translating foreign controlled entities Other comprehensive income for the period, net of tax Total comprehensive loss for the period attributable to the owners of Impact Minerals Limited Consolidated 2017 $ 2016 $ 24,001 49,804 1,076,238 1,212,888 (688,165) (1,967) (779,896) (101,406) (48,912) (201,457) (721,564) (937,224) (1,535) (875,402) (186,489) (58,742) (181,035) (977,735) - - (721,564) (977,735) 708 708 16,234 16,234 (720,856) (961,501) Cents per share Cents per share Loss per share attributable to the owners of Impact Minerals Limited - basic loss per share 18 0.09 0.15 This Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes IMPACT MINERALS LTD ANNUAL REPORT 2017 | 55 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other current assets Consolidated Notes 2017 $ 2016 $ 6 7 8, 14 1,917,206 3,929,972 37,619 201,457 70,279 201,457 Total Current Assets 2,156,282 4,201,708 Non-Current Assets Property, plant and equipment Exploration expenditure Other non-current assets 9 10 11, 14 4,635 12,585,274 193,445 2,435 9,749,914 277,349 Total Non-Current Assets 12,783,354 10,029,698 TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Short-term provisions Financial liabilities Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Option reserve Foreign currency translation reserve Transactions with non-controlling interest Accumulated losses TOTAL EQUITY 14,939,636 14,231,406 462,313 229,246 463,122 78,345 2,000,000 2,000,000 2,691,559 2,541,467 2,691,559 2,541,467 12,248,077 11,689,939 36,933,610 35,950,384 1,297,282 (503,894) 1,222,765 (504,602) (1,161,069) (1,161,069) (24,317,852) (23,817,539) 12,248,077 11,689,939 12 13 14 15 16 16 16 17 This Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 56 | IMPACT MINERALS LTD ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 Attributable to the owners of Impact Minerals Limited Issued Capital $ Options Reserve $ Foreign currency translation reserve $ Trans- actions with non- controlling interest $ Accum- ulated losses $ Total Equity $ At 1 July 2015 31,245,003 736,506 (520,836) (1,161,069) (23,366,786) 6,932,818 Total comprehensive loss for the period Other comprehensive income Exchange differences on translating foreign controlled entities Total comprehensive loss for the period net of tax Transactions with owners in their capacity as owners Shares issued - - - 4,911,631 Share issue costs (206,250) - - - - - Fair value of options issued Fair value of options expired - - 1,013,241 (526,982) - - (977,735) (977,735) 16,234 16,234 - - - - - - - - - - - 16,234 (977,735) (961,501) - - - 4,911,631 (206,250) 1,013,241 526,982 - At 30 June 2016 35,950,384 1,222,765 (504,602) (1,161,069) (23,817,539) 11,689,939 This Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 57 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) Attributable to the owners of Impact Minerals Limited Issued Capital $ Options Reserve $ Foreign currency translation reserve $ Trans- actions with non- controlling interest $ Accum- ulated losses $ Total Equity $ At 1 July 2016 35,950,384 1,222,765 (504,602) (1,161,069) (23,817,539) 11,689,939 Total comprehensive loss for the period Other comprehensive income Exchange differences on translating foreign controlled entities Total comprehensive loss for the period net of tax Transactions with owners in their capacity as owners Shares issued - - - 1,073,971 Share issue costs (90,745) - - - - - Fair value of options issued Fair value of options expired - - 295,768 (221,251) - - (721,564) (721,564) 708 708 - - - - - - - - - - - 708 (721,564) (720,856) - - - 1,073,971 (90,745) 295,768 221,251 - At 30 June 2016 36,933,610 1,297,282 (503,894) (1,161,069) (24,317,852) 12,248,077 This Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 58 | IMPACT MINERALS LTD ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017 Consolidated Notes 2017 $ 2016 $ Cash flows from operating activities Payments to suppliers and employees Interest received Research and development tax rebate received Net cash flows from/(used in) operating activities 25 Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for exploration activities Net cash flows used in investing activities Cash flows from financing activities Proceeds from issue of shares Share issue costs Proceeds from borrowings Net cash flows from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 6 (1,050,247) (1,429,291) 24,001 1,073,788 47,542 49,804 1,205,223 (174,264) (4,167) - (1,000) 7 (3,039,367) (3,043,534) (3,165,883) (3,166,876) 1,073,971 (90,745) - 983,226 (2,012,766) 3,929,972 1,917,206 4,900,381 (201,250) 2,000,000 6,699,131 3,357,991 571,981 3,929,972 This Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes IMPACT MINERALS LTD ANNUAL REPORT 2017 | 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 1. CORPORATE INFORMATION The consolidated financial report of Impact Minerals Limited for the year ended 30 June 2017 was authorised for issue in accordance with a resolution of the Directors on 14 September 2017. Impact Minerals Limited is a for profit company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The nature of the operation and principal activities of the consolidated entity are described in the attached Directors’ Report. The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below and have been applied consistently to all periods presented in the consolidated financial statements and by all entities in the consolidated entity. 2. STATEMENT OF COMPLIANCE These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Compliance with IFRS The consolidated financial statements of Impact Minerals Limited also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). New and amended accounting standards and interpretations adopted by the Group The following standards relevant to the operations of the Group and effective from 1 July 2016 have been adopted. The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. • AASB 2014-9: Amendments to Australian Accounting Standards Amendments to – Equity Method in Separate Financial Statements • AASB 2015-1: Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012 – 2014 • AASB 2015-2: Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101 New accounting standards and interpretations The following new and amended accounting standards and interpretations relevant to the operations of the Group have been published but are not mandatory for the current financial year. The Group has decided against early adoption of these standards, and has not yet determined the potential impact on the financial statements from the adoption of these standards. The key new standards which may impact the Group in future years are detailed below: 60 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) New or revised requirement AASB 9: Financial Instruments AASB 9 replaces AASB 139: Financial Instruments: Recognition and Measurement. The objective of this Standard is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. Application date of standard 1 Jan 2018 Application date for Group 1 Jul 2018 AASB 15: Revenue from Contracts with Customers 1 Jan 2018 1 Jul 2018 The objective of this Standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. AASB 2016-5: Amendments to Australian Accounting Standards - 1 Jan 2018 1 Jul 2018 Classification and Measurement of Share-based Payment Transactions This Standard amends AASB 2: Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: • The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments • Share-based payment transactions with a net settlement feature for withholding tax obligations • A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. AASB 16: Leases 1 Jan 2019 1 Jul 2019 This Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of an entity. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) (a) Basis of measurement Historical Cost Convention These consolidated financial statements have been prepared under the historical cost convention, except where stated. Critical Accounting Estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’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 where appropriate. (b) Going Concern These consolidated financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The Consolidated Group incurred a loss of $721,564 (2016: $977,735) and net cash inflows from operating activities of $47,542 (2016: cash outflows of $174,264). As at 30 June 2017 the Consolidated Group had a cash balance of $1,917,206 (2016: $3,929,972). The Group has a working capital surplus of $1,263,266 (2016: $3,458,784) which excludes the convertible notes of $1,798,543 (net of current transaction costs) on the basis the convertible notes are required to be settled in the Group’s equity instruments as detailed in note 14. As disclosed in note 21, the Group raised $2,927,429 (before costs) subsequent to year end as part of its Share Purchase Plan. The Directors have prepared a cash flow forecast which indicates the Consolidated Group will have sufficient cash flows to meet all commitments and working capital requirements for the 12 month period from the date of signing this financial report. (c) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2017 and the results of all subsidiaries for the year then ended. The Company and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its investment with the entity and has the ability to affect those returns through its power to direct the activities of the entity. The acquisition method of accounting is used to account for business combinations by the Group. 62 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position and the consolidated statement of changes in equity respectively. Joint arrangements Under AASB 11: Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint venturers. (d) Critical accounting judgements and key sources of estimation uncertainty The application of accounting policies requires the use of judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes option pricing model. Exploration and evaluation costs carried forward The recoverability of the carrying amount of exploration and evaluation costs carried forward has been reviewed by the Directors. In conducting the review, after impairment indicators are identified, the recoverable amount has been assessed by reference to the higher of “fair value less costs to sell” and, if applicable, “value in use”. In determining value in use, future cash flows are based on estimates of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction, production and sales levels, future commodity prices, future capital and production costs and future exchange rates. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) Variations to any of these estimates, and timing thereof, could result in significant changes to the expected future cash flows which in turn could result in significant changes to the impairment test results, which in turn could impact future financial results. (e) 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 of Impact Minerals Limited. (f) Functional and presentation of currency The consolidated financial statements are presented in Australian dollars, which is the Group’s functional and presentational currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss and other comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss and other comprehensive income on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. (g) Revenue recognition Revenue is measured at fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Interest income is recognised as it accrues. (h) Income tax The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 64 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Impact Minerals Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (i) Leases Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. (j) STATEMENT OF COMPLIANCE (CONTINUED) Impairment of assets Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (k) 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 six 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. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. (l) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the profit or loss. (m) Exploration and evaluation expenditure Exploration and evaluation expenditure, including the costs of acquiring licences and permits, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the statement of profit or loss and other comprehensive income. 66 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either: (i) the expenditures are expected to be recouped through successful development and exploitation or from sale of the area of interest; or (ii) activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest. Once the technical feasibility and commercial viability of the extraction of minerals in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mineral property and development assets within property, plant and equipment. When an area of interest is abandoned or the Directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. (n) Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The cost of self- constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. 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 Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives, or in the case of certain leased plant and equipment, the shorter lease term as follows: Motor vehicles • Office and computer equipment • Furniture, fittings and equipment • 5 – 7 years 3 – 5 years 3 – 5 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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 are included in profit or loss. When re-valued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. (o) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. (p) Employee benefits Short–term Obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months after the end of the period in which the employees render the related service, are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee benefits. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. All other short-term employee benefit obligations are presented as payables. The obligations are presented as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. Other Long-term Obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. 68 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) Share-Based Payments The Group provides benefits to employees of the Company in the form of share options. The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, on a straight line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number that vest. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. Termination Benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. No termination benefits, other than accrued benefits and entitlements, were paid during the period. (q) Equity 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. (r) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing: • • the profit attributable to owners of the Group, 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 and excluding treasury shares. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. • IMPACT MINERALS LTD ANNUAL REPORT 2017 | 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) (s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. 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 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 flows. (t) Financial Instruments Initial Recognition and Measurement Financial instruments, including financial assets and financial liabilities, are recognised when the Group becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transaction costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Classification and Subsequent Measurement Finance instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. 70 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. (i) (ii) Financial assets at fair value through profit or loss Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. Loans and receivables are included in current assets except those which are expected to mature within 12 months after the end of the reporting period. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group‘s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method. Held to maturity investments are included in non-current assets where they are expected to mature within 12 months after the end of the reporting period. All other investments are classified as current assets. (iv) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with changes in such fair value (i.e. gains or losses) recognised in other comprehensive income (except for impairment losses and foreign exchange gains and losses). When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. Available for sale financial assets are included in non-current assets except those which are expected to mature within 12 months after the end of the reporting period. All other financial assets are classified as current assets. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) (v) Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the profit or loss. Also, any cumulative decline in Fair Value previously recognised in other comprehensive income is reclassified to profit or loss at this point. De-recognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Financial Guarantees Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118. The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on: • • the likelihood of the guaranteed party defaulting in a year period; the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and the maximum loss exposed if the guaranteed party were to default. • (u) Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or nonrecurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not 72 | IMPACT MINERALS LTD ANNUAL REPORT 2017 2. STATEMENT OF COMPLIANCE (CONTINUED) traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share- based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 2. STATEMENT OF COMPLIANCE (CONTINUED) Fair value hierarchy AASB 13 - Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. (ii) When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. 74 | IMPACT MINERALS LTD ANNUAL REPORT 2017 3. REVENUE AND EXPENSES (a) Revenue from operating activities Interest income Other income Research and development tax rebate Consolidated 2017 $ 2016 $ 24,001 2,450 49,804 7,665 1,073,788 1,205,223 Total revenue from operating activities 1,100,239 1,262,692 (b) Employee benefits expense Wages, salaries and other remuneration expenses Directors fees Superannuation fund contributions Share-based payments expense 323,075 142,375 18,678 295,768 293,333 140,292 33,458 408,319 Total employee benefits expense 779,896 875,402 4. SEGMENT INFORMATION Identification of reportable segments The Group 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 Group is managed primarily on the basis of exploration opportunities within Australia and Africa. Operating segments are therefore determined on this basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar geographic characteristics. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 4. SEGMENT INFORMATION (CONTINUED) Australia $ Africa $ Corporate $ Consolidated $ - 101,406 (101,406) - 60,424 (60,424) 1,100,239 1,659,973 (559,734) 1,100,239 1,821,803 (721,564) 12,585,274 276,859 12,308,415 18,898 3,411 15,487 2,335,464 2,411,289 14,939,636 2,691,559 (75,825) 12,248,077 2017 Segment performance Segment income Segment expense Profit / (loss) before tax Segment assets and liabilities Assets Liabilities Net assets 2016 Segment performance Segment income Segment expense Profit / (loss) before tax (186,489) (133,549) - 186,489 7,665 141,214 1,255,027 1,912,724 (657,697) 1,262,692 2,240,427 (977,735) Segment assets and liabilities Assets Liabilities Net assets 9,749,914 255,589 9,494,325 30,964 9,283 21,681 4,450,528 2,276,595 2,173,933 14,231,406 2,541,467 11,689,939 76 | IMPACT MINERALS LTD ANNUAL REPORT 2017 5. INCOME TAX (a) Major components of income tax expense are as follows: Current income tax expense / (benefit) Deferred income tax expense / (benefit) Income tax expense reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated 2017 $ 2016 $ - - - - - - (b) The prima facie tax on loss from ordinary activities before income tax is reconciled to the income tax as follows: Profit from ordinary activities before income tax expense (721,564) (977,735) Prima facie tax benefit on profit from ordinary activities before income tax at 27.5% (2016: 30%) Tax effect of permanent differences: Share based payments Non-deductible expenses Government grant received Tax losses not recognised Foreign tax rate difference Income tax expense/(benefit) on pre-tax profit (c) Deferred tax assets and (liabilities) are attributable to the following: Accrued expenses Capital raising costs Exploration expenditure Plant and equipment Provision for employee entitlement Other Tax losses (198,430) (293,321) 81,336 69,041 (295,292) 340,022 3,323 - 122,496 35,094 (361,166) 490,191 6,706 - 6,429 57,557 6,976 52,080 (2,797,320) (2,843,856) 6,325 52,128 4,211 8,517 22,684 9,053 2,670,670 2,744,546 - - IMPACT MINERALS LTD ANNUAL REPORT 2017 | 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 5. INCOME TAX (CONTINUED) (d) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items as the Directors do not believe it is appropriate to regard realisation of future tax benefits as probable: Tax losses Capital losses 6. CASH AND CASH EQUIVALENTS Cash at bank and on hand Cash at bank - on call Consolidated 2017 $ 2016 $ 3,376,557 651,887 4,028,444 3,698,096 711,150 4,409,246 1,917,206 3,929,972 - - 1,917,206 3,929,972 The weighted average interest rate for the year was 1.19% (2016: 1.95%). The Group’s exposure to interest rate risk is set out in note 23. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. 7. TRADE AND OTHER RECEIVABLES Current GST / VAT Other 35,358 2,261 68,071 2,208 37,619 70,279 The amounts held in trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of these trade and other receivables, it is expected that these amounts will be received when due. The Group’s financial risk management objectives and policies are set out in note 23. Due to the short term nature of these receivables their carrying value is assumed to approximate their fair value. 78 | IMPACT MINERALS LTD ANNUAL REPORT 2017 8. OTHER CURRENT ASSETS Consolidated 2017 $ 2016 $ Current portion of unamortised option cost 201,457 201,457 201,457 201,457 Refer to note 14 for details of the transaction costs related to the issue of options to Squadron Resources Pty Ltd. 9. PROPERTY, PLANT AND EQUIPMENT Leasehold improvements - - At cost Accumulated depreciation Total leasehold improvements Office equipment - - At cost Accumulated depreciation Total office equipment Site equipment - - At cost Accumulated depreciation Total site equipment Computer equipment - - At cost Accumulated depreciation Total computer equipment Total property, plant and equipment 7,400 (6,612) 7,400 (5,872) 788 1,528 67,076 (65,813) 65,488 (65,488) 1,263 - 26,621 (26,089) 36,035 (35,128) 532 907 139,777 (137,725) 138,675 (138,675) 2,052 4,635 - 2,435 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Movement in carrying amounts Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year: 2017 Consolidated: Balance at the beginning of the year Additions Depreciation expense Carrying amount at the end of the year 2016 Consolidated: Balance at the beginning of the year Additions Disposals Depreciation expense Carrying amount at the end of the year Leasehold Improvements $ Office Equipment $ Site Equipment $ Computer Equipment $ Total $ 1,528 - (740) - 1,588 (325) 907 - (375) - 2,579 (527) 2,435 4,167 (1,967) 788 1,263 532 2,052 4,635 2,268 - - (740) 1,528 18 - (8) (10) - 1,000 - (93) 692 - - 2,978 1,000 (8) (692) (1,535) - 907 - 2,435 80 | IMPACT MINERALS LTD ANNUAL REPORT 2017 10. EXPLORATION AND EVALUATION Opening balance Impairment expense Exploration expenditure incurred during the year Closing balance Consolidated 2017 $ 2016 $ 9,749,914 (101,406) 2,936,766 6,526,545 (186,489) 3,409,858 12,585,274 9,749,914 Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. 11. OTHER NON-CURRENT ASSETS Non-current portion of unamortised option cost Deposits paid Other non-current assets 20,973 163,068 9,404 222,430 45,486 9,433 193,445 277,349 Refer to note 14 for details of the transaction costs related to the issue of options to Squadron Resources Pty Ltd. 12. TRADE AND OTHER PAYABLES Trade creditors Other payables and accruals 403,597 58,716 347,980 115,142 462,313 463,122 Trade creditors are non-interest bearing and are normally settled on 30 day terms. The Group’s financial risk management objectives and policies are set out in note 23. Due to the short term nature of these payables their carrying value is assumed to approximate their fair value. 13. PROVISIONS Short-term Employee entitlements 229,246 78,345 229,246 78,345 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 14. FINANCIAL LIABILITIES Convertible notes Consolidated 2017 $ 2016 $ 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 convertible notes were issued to Squadron Resources Pty Ltd on 7 August 2015 at an issue price of $1 per note. Each note entitles the holder to convert to one ordinary share. The notes are convertible in to ordinary shares of Impact at the lower of: • 2.1 cents per share; and • 80% of the volume weighted average sale price of shares sold on the ASX during the 30 consecutive business days prior to the date of the conversion notice. Conversion may occur at any time between 7 August 2015 and 7 August 2018. The convertible notes do not carry interest and can only be redeemed through the issue of shares, except in remote circumstances that are not at the discretion of the note holder. As part of the agreement, Squadron Resources Pty Ltd has requested a security interest over certain tenements held within the Broken Hill and Commonwealth projects. Included in other assets are transaction costs relating to the convertible notes and represent the fair value of the attaching 45,000,000 options issued which are convertible at 3.25 cents per option and deemed to have a fair value of 1.34 cents per option. These transaction costs are amortised over the life of the convertible notes. Transaction costs Share based payment - options granted Option cost unwound during the period 604,922 (382,492) 604,922 (181,035) Total transactions costs to be amortised over the life of the convertible note 222,430 423,887 This balance has been classified as follows: Other current assets (refer note 8) Other non-current assets (refer note 11) 201,457 20,973 201,457 222,430 222,430 423,887 82 | IMPACT MINERALS LTD ANNUAL REPORT 2017 15. CONTRIBUTED EQUITY a) Share capital Ordinary shares fully paid Consolidated 2017 $ 2016 $ 36,933,610 35,950,384 Consolidated Number $ b) Movements in ordinary shares on issue Balance at 1 July 2015 566,339,070 31,245,003 Shares issued during the year: Shares issued to Directors in lieu of fees – July 2015 Rights issue and shortfall issue - September 2015 Issue of shares to Squadron Resources - October 2015 Share purchase plan – May 2016 Placements – May 2016 Transaction costs 284,090 94,437,193 47,619,048 45,166,683 34,925,001 - 6,250 1,983,181 1,000,000 1,084,000 838,200 (206,250) Balance at 30 June 2016 788,771,085 35,950,384 Shares issued during the year: Share purchase plan and shortfall offer - June 2017 Transaction costs 59,665,051 - 1,073,971 (90,745) Balance at 30 June 2017 848,436,136 36,933,610 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 upon on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 15. CONTRIBUTED EQUITY (CONTINUED) c) Movements in options on issue Balance at beginning of the financial year Options issued pursuant to the share purchase plan (listed) Options granted Options expired Options cancelled / lapsed Consolidated 2017 Number 2016 Number 141,828,572 42,150,000 89,497,590 - - 134,428,572 (12,400,000) (26,700,000) - (8,050,000) Balance at end of the financial year 218,926,162 141,828,572 16. RESERVES Option reserve Opening balance Fair value of options issued Transfer to retained earnings upon expiry/lapse of options Consolidated 2017 $ 2016 $ 1,222,765 295,768 (221,251) 736,506 1,013,241 (526,982) Balance at the end of the financial year 1,297,282 1,222,765 The options reserve is used to recognise the fair value of options issued to employees and contractors. Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Transactions with non-controlling interest The transactions with non-controlling interest reserve records items related to the acquisition of shares in Invictus Gold Limited. 17. ACCUMULATED LOSSES Balance at the beginning of the financial year Net loss attributable to members Transfer from share option reserve upon lapse of options (23,817,539) (23,366,786) (721,564) 221,251 (977,735) 526,982 Balance at the end of the financial year (24,317,852) (23,817,539) 84 | IMPACT MINERALS LTD ANNUAL REPORT 2017 18. EARNINGS PER SHARE - basic loss per share The following reflects the income and share data used in the calculation of basic loss per share: 2017 cents 0.09 2016 cents 0.15 $ $ Profits / (losses) used in calculating basic and diluted earnings per share (721,564) (977,735) Weighted average number of ordinary shares used in calculating basic loss per share 790,242,278 671,145,118 2017 Number 2016 Number 19. AUDITOR’S REMUNERATION Audit services Bentleys Audit and Corporate (WA) Pty Ltd - Audit and review of the financial reports Total remuneration Consolidated 2017 $ 2016 $ 32,000 33,000 32,000 33,000 20. CONTINGENT ASSETS AND LIABILITIES The Group had contingent liabilities at 30 June 2017 in respect of : Future royalty payments In March 2016 Impact completed the acquisition of tenement E7390 from Golden Cross Resources Limited (“Golden Cross”) for $60,000 cash. Golden Cross retains a royalty equal to 1% of gross revenue on any minerals recovered from the tenement. At its election, Impact has the right to buy back the royalty for $1.5 million cash at any time up to a decision to mine, or, leave the royalty uncapped during production. 21. EVENTS OCCURRING AFTER THE REPORTING PERIOD On 7 September the Company announced that it had placed all of the shortfall from the Share Purchase Plan (“SPP”) completed in June 2017. The aggregate amount raised from the shortfall was $2,927,429 (before costs), comprising the issue of 162,634,949 shares (“Shares”) and 243,952,410 free attaching listed options (“Options”). The Shares and Options were issued on the same terms and conditions as those under the SPP, being $0.018 for each Share, with Options exercisable at $0.04 on or before 15 June 2020 for every two new Shares subscribed for. There have been no other events subsequent to reporting date which are sufficiently material to warrant disclosure. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 22. COMMITMENTS In order to maintain an interest in the exploration tenements in which the Group is involved, the Group is committed to meet the conditions under which the tenements were granted. The timing and amount of exploration expenditure commitments and obligations of the Group are subject to the minimum expenditure commitments required as per the Mining Act 1978 (Western Australia), the Mining Act 1992 (New South Wales) and the Mineral Resources Act 199 (Queensland) and may vary significantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest. As at balance date, total exploration expenditure commitments on granted tenements held by the Group that have not been provided for in the financial statements and which cover the following twelve month period amount to $867,020 (2016: $682,594). For the period greater than twelve months to five years commitments amount to $2,174,567 (2016: $621,397). There are no commitments greater than five years. These obligations are also subject to variations by farm-out arrangements, or sale of the relevant tenements. Commitments in relation to the lease of office premises are payable as follows: Within 1 year Later than one year but not later than five years Later than five years Consolidated 2017 $ 2016 $ 39,600 - - 43,200 39,600 - 39,600 82,800 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Financial Risk Management Overview The Group has exposure to the following risks from their use of financial instruments: • • Credit risk • Liquidity risk • Commodity risk Interest rate risk This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. 86 | IMPACT MINERALS LTD ANNUAL REPORT 2017 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group’s principal financial instruments are cash, short-term deposits, receivables and payables. Interest rate risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from fluctuations in interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. It is the Group’s policy to settle trade payables within the credit terms allowed and therefore not incur interest on overdue balances. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Consolidated – 2017 Financial assets Cash and cash equivalents Trade and other receivables Weighted average interest rate Financial liabilities Trade and other payables Financial liabilities Weighted average interest rate Consolidated – 2016 Financial assets Cash and cash equivalents Trade and other receivables Weighted average interest rate Financial liabilities Trade and other payables Financial liabilities Weighted average interest rate Floating interest rate $ 1,917,206 - 1,917,206 1.19% - - - - Floating interest rate $ 3,929,972 - 3,929,972 1.95% - - - - Fixed interest rate maturing in Over 1 to 5 years $ More than 5 years $ 1 Year or Less $ - - - - - - - - - - - - - - - - - - - - - - - - Fixed interest rate maturing in Over 1 to 5 years $ More than 5 years $ 1 Year or Less $ - - - - - - - - - - - - - - - - - - - - - - - - Non interest bearing $ Total $ - 1,917,206 37,619 37,619 37,619 1,954,825 - - 462,313 462,313 2,000,000 2,000,000 2,462,313 2,462,313 - - Non interest bearing $ Total $ - 3,929,972 70,279 70,279 70,279 4,000,251 - - 463,122 463,122 2,000,000 2,000,000 2,463,122 2,463,122 - - 88 | IMPACT MINERALS LTD ANNUAL REPORT 2017 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below: Consolidated - 2017 Financial assets Cash and cash equivalents Profit or loss Equity Carrying value at period end $ 100 bp increase $ 100 bp decrease $ 100 bp increase $ 100 bp decrease $ 1,917,206 20,088 (20,088) 20,088 (20,088) Cash flow sensitivity (net) 20,088 (20,088) 20,088 (20,088) Consolidated - 2016 Financial assets Cash and cash equivalents 3,929,972 25,533 (25,533) 25,533 (25,533) Cash flow sensitivity (net) 25,533 (25,533) 25,533 (25,533) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. The Group trades only with recognised, creditworthy third parties. It is the Group policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. The maximum exposure to credit risk is the carrying value of the receivable, net of any provision for doubtful debts. With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. This risk is minimised by reviewing term deposit accounts from time to time with approved banks of a sufficient credit rating which is AA and above. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Exposure to credit risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Trade & other receivables Consolidated 2017 $ 2016 $ 1,917,206 3,929,972 37,619 70,279 1,954,825 4,000,251 Foreign currency risk Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the company’s measurement currency (namely $USD and Botswana Pula). The Group’s exposure to foreign currency risk is minimal at this stage of its operations. Commodity price risk The Group’s exposure to commodity price risk is minimal at this stage of its operations. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s objective is to maintain a balance between continuity of funding and flexibility. The following are the contractual maturities of financial liabilities: Consolidated - 2017 Trade and other payables Trade and other receivables Carrying amount $ 462,313 462,313 37,619 37,619 Contractual cash flows $ 6 months or less $ - - - - 462,313 462,313 37,619 37,619 90 | IMPACT MINERALS LTD ANNUAL REPORT 2017 23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Consolidated - 2016 Trade and other payables Trade and other receivables Carrying amount $ 463,122 463,122 70,279 70,279 Contractual cash flows $ 6 months or less $ - - - - 463,122 463,122 70,279 70,279 Fair value of financial assets and liabilities The fair value of cash and cash equivalents and non-interest bearing financial assets and financial liabilities of the Group is equal to their carrying value. Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Group’s capital is performed by the Board. The capital structure of the Group consists of net debt (trade payables, provisions and financial liabilities detailed in notes 12, 13, & 14 offset by cash and bank balances) and equity of the Group (comprising issued capital, reserves, offset by accumulated losses detailed in notes 15, 16 & 17). The Group is not subject to any externally imposed capital requirements. None of the Group’s entities are subject to externally imposed capital requirements. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 24. SHARE BASED PAYMENTS Share option plan The Group has a Director and Employee Option Acquisition Plan (“Option Plan”) for Directors, employees and contractors of the Group. In accordance with the provisions of the Option Plan, as approved by shareholders at the 2015 Annual General Meeting, executives and employees may be granted options at the discretion of the Directors. Options issued to Directors are subject to approval by shareholders. Each share option converts into one ordinary share of Impact Minerals Limited on exercise. No amounts are paid or are payable by the recipient on receipt of the option. The options carry neither rights of dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The following share-based payment arrangements were in existence during the reporting period: Option series 19 (1) 21 (1) 23 (1) 25 (2) 26 27 28 29 (3) 30 31 32 33 (4) Number 9,000,000 Grant date 20-Dec-12 Expiry date Vesting date 30-Nov-14 30-Nov-16 2,250,000 16-Jan-13 30-Nov-16 30-Nov-14 1,150,000 14-Nov-13 30-Nov-16 30-Nov-14 45,000,000 07-Aug-15 07-Aug-18 Immediate 26,000,000 29-Sep-15 29-Sep-18 29-Sep-16 12,500,000 29-Sep-15 29-Sep-19 29-Sep-17 12,500,000 29-Sep-15 29-Sep-20 29-Sep-18 26,428,572 21-Oct-15 21-Oct-18 Immediate 1,000,000 13-May-16 29-Sep-18 29-Sep-16 3,000,000 13-May-16 29-Sep-19 29-Sep-17 3,000,000 13-May-16 29-Sep-20 29-Sep-18 89,497,590 21-Jun-17 15-Jun-20 Immediate Exercise price Fair value at grant date $0.10 $0.10 $0.10 $0.0325 $0.0367 $0.045 $0.07 $0.0325 $0.0367 $0.045 $0.07 $0.04 $0.0107 $0.0107 $0.0413 $0.0185 $0.0139 $0.0149 $0.0143 n/a $0.012 $0.0133 $0.0132 n/a (1) These options expired during the financial year (2) Options issued to Squadron Resources Pty Ltd (“Squadron”) as part of the Convertible Note issue and ratified by shareholders at the 2015 Annual General Meeting (3) Options issued to Squadron and approved by shareholders at the 2015 Annual General Meeting (4) Three free attaching listed options were issued for each two new shares subscribed for under the Share Purchase Plan concluded in June 2017. 92 | IMPACT MINERALS LTD ANNUAL REPORT 2017 24. SHARE BASED PAYMENTS (CONTINUED) Fair value of share options granted during the year The fair value of share options at grant date are determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share and the risk free rate for the term of the option. The fair value of share options issued during the year was $295,768 (2016: $408,319). Movements in share options during the year Movement in the number of share options on issue during the year: 2017 2016 Outstanding at the beginning of the year Issued pursuant to the share purchase plan (listed) Granted during the year Expired during the year Cancelled during the year No. of options 141,828,572 89,497,590 - (12,400,000) - Outstanding at the end of the year 218,926,162 Exercisable at the end of the year 187,926,162 Weighted average exercise price $ 0.04 0.04 - 0.10 - 0.04 0.04 Weighted average exercise price $ 0.10 - 0.04 0.10 0.07 0.04 0.04 No. of options 42,150,000 - 134,428,572 (26,700,000) (8,050,000) 141,828,572 83,828,572 The weighted average remaining contractual life of share options outstanding at the end of the year was 2.14 years (2016: 2.38 years). IMPACT MINERALS LTD ANNUAL REPORT 2017 | 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 24. SHARE BASED PAYMENTS (CONTINUED) Share options outstanding at the end of the year Share options issued and outstanding at the end of the year have the following exercise prices: Expiry Date 30 November 2016 7 August 2018 29 September 2018 21 October 2018 29 September 2019 15 June 2020 (listed) 29 September 2020 Exercise price $ 0.10 0.0325 0.0367 0.0325 0.045 0.04 0.07 2017 No. 2016 No. - 45,000,000 27,000,000 26,428,572 15,500,000 89,497,590 15,500,000 12,400,000 45,000,000 27,000,000 26,428,572 15,500,000 - 15,500,000 218,926,162 141,828,572 25. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Cash flows from operating activities Profit / (Loss) for the period Non-cash flows in profit/(loss): - Depreciation - Share based remuneration - Finance costs - Exploration expenditure write-off Changes in assets and liabilities - Decrease/(increase) in trade and other receivables - Decrease/(increase) in other non-current assets - - Increase/(decrease) in trade creditors and accruals Increase/(decrease) in provisions Consolidated 2017 $ 2016 $ (721,564) (977,735) 1,967 295,768 201,457 101,406 32,660 447 (15,500) 150,901 1,535 408,319 181,035 186,489 13,737 (22,070) 87,807 (53,381) Net cash from / (used in) operating activities 47,542 (174,264) Non-cash investing and financing activities There were no non-cash investing and financing activities during the year. 94 | IMPACT MINERALS LTD ANNUAL REPORT 2017 26. RELATED PARTY DISCLOSURE Class Country of incorporation Ownership 2017 % Ownership 2016 % a) Parent entity Impact Minerals Limited b) Subsidiaries Aurigen Pty Ltd Siouville Pty Ltd Drummond East Pty Ltd Seam Holdings Pty Ltd (i) Brentwood Investments (Pty) Ltd (ii) Icilion Investments (Pty) Ltd (iii) Xade Minerals (Pty) Ltd (iv) Invictus Gold Limited Drummond West Pty Ltd (v) Endeavour Minerals Pty Ltd (vi) Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord Ord Australia - - Australia Australia Australia British Virgin Islands Republic of Namibia Botswana Botswana Australia Australia Australia 100 100 100 100 n/a 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Seam Holdings Pty Ltd is a wholly owned subsidiary of Drummond East Pty Ltd Brentwood Investments (Pty) Ltd was deregistered on 12 May 2017 Icilion Investments (Pty) Ltd is a wholly owned subsidiary of Seam Holdings Pty Ltd (i) (ii) (iii) (iv) Xade Minerals (Pty) Ltd is a wholly owned subsidiary of Seam Holdings Pty Ltd (v) Drummond West Pty Ltd is a wholly owned subsidiary of Invictus Gold Limited (vi) Endeavour Minerals Pty Ltd is a wholly owned subsidiary of Invictus Gold Limited IMPACT MINERALS LTD ANNUAL REPORT 2017 | 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (CONTINUED) 26. RELATED PARTY DISCLOSURE (CONTINUED) c) Loans to and investments in controlled entities Loans are provided by the Parent Entity to its controlled entities for their respective operating activities. Amounts receivable from controlled entities are non-interest bearing with no fixed term of repayment. The carrying value of investments in controlled entities is recognised as an asset in the Parent Entity. The future successful commercial application of these projects or the sale to third parties supports the recognition and recoverability of these assets held in the Parent Entity. Aurigen Pty Ltd Siouville Pty Ltd Drummond East Pty Ltd Seam Holdings Pty Ltd Brentwood Investments (Pty) Ltd Icilion Investments (Pty) Ltd Drummond West Pty Ltd (i) (i) Loan from Invictus Gold Limited d) Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments 2017 $ 2016 $ 607,130 136,372 33,653 9,902 n/a 5,659,682 3,527,418 9,974,157 607,130 136,372 33,653 9,902 201 5,606,161 3,527,418 9,920,837 510,867 8,550 172,027 527,129 21,184 292,903 691,444 841,216 Detailed remuneration disclosures are provided in the Remuneration Report on pages 45 to 52. 96 | IMPACT MINERALS LTD ANNUAL REPORT 2017 27. PARENT ENTITY DISCLOSURE Financial Performance Profit / (loss) for the year Other comprehensive income 2017 $ 2016 $ (439,889) (1,656,090) - - Total comprehensive profit / (loss) (439,889) (1,656,090) Financial Position ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Option reserve Transactions with non-controlling interest Accumulated losses TOTAL EQUITY 2,137,384 11,308,419 4,173,905 8,498,081 13,445,803 12,671,986 2,685,269 2,529,306 - - 2,685,269 2,529,306 10,760,534 10,142,680 36,933,610 35,950,384 1,297,282 1,222,765 (1,161,069) (1,161,069) (26,309,289) (25,869,400) 10,760,534 10,142,680 No guarantees have been entered into by Impact Minerals Limited in relation to the debts of its subsidiaries. Impact Minerals Limited had no expenditure commitments as at 30 June 2017 other than the commitment in relation to the lease of office premises as disclosed in note 22. IMPACT MINERALS LTD ANNUAL REPORT 2017 | 97 DIRECTORS’ DECLARATION The Directors of Impact Minerals Limited declare that: (a) in the Directors’ opinion the financial statements and notes set out on pages 55 to 97 and the Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), Corporations Regulations 2001 and mandatory professional reporting requirements. (b) the financial statements also comply with International Financial Reporting Standards as disclosed in note 2; and (c) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. a. the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001, including: The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the Managing Director and Chief Financial Officer for the financial year ended 30 June 2017. (i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017 and of its financial performance for the year then ended; Signed in accordance with a resolution of the Directors. Peter Unsworth Chairman Perth, Western Australia 14 September 2017 98 | IMPACT MINERALS LTD ANNUAL REPORT 2017 Independent Auditor's Report To the Members of Impact Minerals Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Impact Minerals Limited (“the Company”) and its subsidiaries (“the Consolidated Entity”), which comprises the consolidated statement of financial position as at 30 June 2017, 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: (ii) complying with Australian Accounting Standards and the Corporations b. the financial report also complies with International Financial Reporting Standards and Regulations 2001. as disclosed in Note 2. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. 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 Consolidated Entity 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independent Auditor's Report To the Members of Impact Minerals Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Impact Minerals Limited (“the Company”) and its subsidiaries (“the Consolidated Entity”), which comprises the consolidated statement of financial position as at 30 June 2017, 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: a. the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. 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 Consolidated Entity 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Key Audit Matters Key audit matter How our audit addressed the key audit matter 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. Key audit matter How our audit addressed the key audit matter Exploration and Evaluation Expenditure – $12,585,274 (Refer to Note 1(m) and Note 10) Exploration and evaluation is a key audit matter due to: The significance of the balance to the Consolidated Entity’s consolidated financial position. The level of judgement required by us in evaluating management’s application of the requirements of AASB 6 Exploration for and Evaluation of Mineral Resources. AASB 6 is an industry specific accounting standard requiring the application of significant judgements, estimates and industry knowledge. This includes specific requirements for expenditure to be capitalised as an asset and subsequent requirements which must be complied with for capitalised expenditure to continue to be carried as an asset. The assessment of impairment of exploration and evaluation expenditure being inherently difficult particularly in uncertain or depressed market conditions. Our procedures included, amongst others: Assessing management’s determination of its areas of interest for consistency with the definition in AASB 6. This involved analysing the tenements in which the consolidated entity holds an interest and the exploration programmes planned for those tenements. For each area of interest, we assessed the Consolidated Entity’s rights to tenure by corroborating to government registries and evaluating agreements in place with other parties as applicable; We tested the additions to capitalised expenditure for the year by evaluating a sample of recorded expenditure for consistency to underlying records, the capitalisation requirements of the Consolidated Entity’s accounting policy and the requirements of AASB 6; We considered the activities in each area of interest to date and assessed the planned future activities for each area of interest by evaluating budgets for each area of interest. We assessed each area of interest for one or more of the following circumstances that may indicate impairment of the capitalised expenditure: the licenses for the right to explore expiring in the near future or are not expected to be renewed; substantive expenditure for further exploration in the specific area is neither budgeted or planned decision or intent by the Consolidated Entity to discontinue activities in the specific area of interest due to lack of commercially viable quantities of resources; and data indicating that, although a development in the specific area is likely to proceed, the carrying amount of the exploration asset is unlikely to be recovered in full from successful development or sale. We assessed the adequacy of the disclosure in Note 10. Other Information The directors are responsible for the other information. The other information comprises the information included in the Consolidated Entity’s annual report for the year ended 30 June 2017, but does not include the financial report and our 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. 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 Note 2, the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability 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 Consolidated Entity or to cease operations, or has no realistic alternative but to do so. Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Key audit matter How our audit addressed the key audit matter decision or intent by the Consolidated Entity to discontinue activities in the specific area of interest due to lack of commercially viable quantities of resources; and data indicating that, although a development in the specific area is likely to proceed, the carrying amount of the exploration asset is unlikely to be recovered in full from successful development or sale. We assessed the adequacy of the disclosure in Note 10. Other Information The directors are responsible for the other information. The other information comprises the information included in the Consolidated Entity’s annual report for the year ended 30 June 2017, but does not include the financial report and our 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. 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 Note 2, the directors also state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Consolidated Entity’s ability 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 Consolidated Entity or to cease operations, or has no realistic alternative but to do so. Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Consolidated Entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated Entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain solely responsible for our audit opinion. Auditor’s Responsibilities for the Audit of the Financial Report Our responsibility is to express an opinion on the financial report based on our audit. 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 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Consolidated Entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated Entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Consolidated Entity audit. We remain solely responsible for our audit opinion. Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Independent Auditor’s Report To the Members of Impact Minerals Limited (Continued) Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from reasonably be thought to bear on our independence, and where applicable, related safeguards. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2017. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with s 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. Auditor’s Opinion In our opinion, the Remuneration Report of Impact Minerals Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. BENTLEYS Chartered Accountants MARK DELAURENTIS CA Director Dated at Perth this 14th day of September 2017 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 103 ADDITIONAL SHAREHOLDER INFORMATION AS AT 15 SEPTEMBER 2017 1. Distribution of Holders of Equity Securities Analysis of number of equity security holders by size of holding: Shares Held 1 1,001 5,001 - 1,000 - 1,000 - 1,000 10,001 - 1,000 100,001 and over Total Shareholders 123 111 112 834 701 1,881 The number of holders of less than a marketable parcel of ordinary fully paid shares is 672. 2. Substantial Shareholders Substantial shareholders (i.e. shareholders who hold 5% or more of the issued capital): MRS SUSANNE BUNNENEBERG ABC BETEILIGUNGEN AG 3. Voting Rights (a) Ordinary Shares Number of shares Percentage held 200,199,999 103,189,472 19.80 10.21 Each shareholder is entitled to receive notice of and attend and vote at general meetings of the Company. At a general meeting, every shareholder present in person or by proxy, representative of attorney will have one vote on a show of hands and on a poll, one vote for each share held. (b) Options No voting rights. 4. 5. Quoted Securities on Issue The Company has 1,011,071,085 quoted shares on issue. The Company has 333,450,000 quoted options on issue exercisable at $0.04 on or before 15 June 2020. On-Market Buy Back There is no current on-market buy back. 104 | IMPACT MINERALS LTD ANNUAL REPORT 2017 6. Unquoted Equity Securities Options exercisable at $0.0325 on or before 7 August 2018 Options exercisable at $0.0367 on or before 29 September 2018 Options exercisable at $0.0325 on or before 21 October 2018 Options exercisable at $0.045 on or before 29 September 2019 Options exercisable at $0.07 on or before 29 September 2020 7. Twenty Largest Holders of Quoted Ordinary Shares Shareholder J P MORGAN NOMINEES AUSTRALIA LIMITED ABC BETEILIGUNGEN AG SQUADRON RESOURCES PTY LTD HOSSEIN SABET AVIANA HOLDINGS PTY LTD ALLORA EQUITIES PTY LTD CHINA GROWTH MINERALS LIMITED YANARA NOMINEES PTY LTD P J ENTERPRISES PTY LIMITED SUTTON NOMINEES PTY LTD FORSYTH BARR CUSTODIANS LTD MRS MELISSA LOUISE CADDICK MR QINGTAO ZENG MR YUNG WING HO + MRS KATHERINE KAM LING HO SDG NOMINEES PTY LTD SPAR RESOURCES PTY LTD NETWEALTH INVESTMENTS LIMITED MR MARKUS ELSASSER IMAGE INTERPRETATION TECHNOLOGIES PTY LTD BALINTORE PTY LTD Number on issue 45,000,000 27,000,000 26,428,572 15,500,000 15,500,000 Number of holders 1 9 1 10 10 Number of shares 267,300,444 Percentage held 26.44 78,754,948 47,619,048 16,666,667 13,157,895 13,116,565 11,840,470 11,287,356 10,385,913 7.79 4.71 1.65 1.30 1.30 1.17 1.12 1.03 10,144,735 1.00 9,400,000 8,519,883 7,443,452 7,315,888 6,833,334 6,825,332 6,737,680 6,643,735 6,450,000 6,216,667 0.93 0.84 0.74 0.72 0.68 0.68 0.67 0.66 0.64 0.61 552,660,012 54.66 IMPACT MINERALS LTD ANNUAL REPORT 2017 | 105 ADDITIONAL SHAREHOLDER INFORMATION (CONTINUED) AS AT 15 SEPTEMBER 2017 8. Twenty Largest Holders of Quoted $0.04 Options exercisable on or before 15 June 2020 Optionholder ABC BETEILIGUNGEN AG HOSSEIN SABET MR MARK ANDREW TKOCZ TRINITY DIRECT PTY LTD 1215 CAPITAL PTY LTD YANARA NOMINEES PTY LTD KOJEN PTY LTD MR TERRENCE PETER WILLIAMSON + MS JONINE MAREE JANCEY GOFFACAN PTY LTD MR STACEY HUBERT CARTER JOHN STIL AWD CONSULTANTS PTY LTD BVB CUSTODIAN PTY LTD MR PAUL POLI MR GUY LEON BANDUCCI MANOTEL PTY LTD G & P REDFEARN INVESTMENTS P/L OCEANIC CAPITAL PTY LTD ST BARNABAS INVESTMENTS PTY LTD MR CHRISTOPHER LINDSAY BOLLAM Number of shares 118,132,402 25,000,001 8,333,334 8,333,334 6,133,334 5,833,334 4,500,000 4,500,000 4,162,000 4,125,000 3,900,000 3,750,000 3,750,000 3,750,000 3,700,000 3,333,335 3,333,333 3,315,000 3,315,000 3,166,667 Percentage held 35.43 7.50 2.50 2.50 1.84 1.75 1.35 1.35 1.25 1.24 1.17 1.12 1.12 1.12 1.11 1.00 1.00 0.99 0.99 0.95 224,336,074 67.28 106 | IMPACT MINERALS LTD ANNUAL REPORT 2017 TENEMENT SCHEDULE Location Western Australia Status Interest Project / Tenement Mulga Tank Project E39/988 E39/1072 E39/1439 E39/1440 E39/1441 E39/1442 E39/1513 E39/1761 E39/1766 E39/1767 E39/1768 E39/1997 Broken Hill Project EL7390 EL8234 EL8609 Commonwealth Project EL5874 EL8212 EL8252 EL8504 EL8505 EL8632 New South Wales New South Wales Clermont Project EPM14116 Queensland Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% IMPACT MINERALS LTD ANNUAL REPORT 2017 | 107 ABN: 52 119 062 261 26 Richardson Street West Perth Western Australia 6005 Phone: (61 8) 6454 6666 Facsimile: (61 8) 6454 6667 Email: info@impactminerals.com.au Website: www.impactminerals.com.au 

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