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2023 ReportRegistered number: 05389216 FINNAUST MINING PLC ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 FINNAUST MINING PLC CONTENTS Company Information Chairman’s Report Group Strategic Report Directors’ Report Statement of Directors’ Responsibilities Corporate Governance Report Independent Auditor’s Report Consolidated and Company Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated and Company Statements of Cash Flows Notes to the Financial Statements Page 2 3 5 7 9 10 11 12 13 14 15 16 17 18 FINNAUST MINING PLC COMPANY INFORMATION Directors Daniel Lougher (Non-Executive Chairman) Graham Marshall (Non-Executive Director) Gregory Kuenzel (Non-Executive Director) Alastair Clayton (Executive Director) - Resigned 3 June 2015 Company Secretary Garth Palmer CA Registered Office 47 Charles Street London W1J 5EL Company Number 05389216 Bankers Nominated Adviser & Broker Independent Auditor Solicitors HSBC Bank plc 129 New Bond Street London W1J 2JA S.P. Angel Corporate Finance LLP Prince Frederick House 35-39 Maddox Street London W1S 2PP PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD Kerman & Co LLP 200 Strand London WC2R 1DJ 2 FINNAUST MINING PLC CHAIRMAN’S REPORT Hammaslahti With three highly prospective licence areas, we have established a solid footprint within a mineral rich region. To date, we have drilled a total of 15,000m across our Finnish portfolio. Our Hammaslahti Copper Project (‘Hammaslahti’) has been the focus of the majority of this work, with 45 holes drilled over 10,366m. This has led to the discovery of a shallow multi-metal lode, which contains high-grade copper with zinc, lead and silver. This is located directly below the northern zinc/gold open pit of the historical Hammaslahti mine. Drilling has successfully extended this mineralised zone, with a strike length of over 500m north to south and over 125m east to west now identified. It is our belief that this lode is one of four southerly plunging multi-metal lodes, all of which appear open at depth, which are part of a relatively continuous north to south plunging lode system, transitioning from shallow zinc and gold in the north, to copper as it deepens in the south. These additional lodes exist to the north, south and east of the old mine and underground workings. This location, together with the shallow nature of the mineralisation, offers significant capex and opex benefits, as the mineralisation is proximal to the historical mine infrastructure. The Company is currently evaluating the significance of these results to determine the best value outcome for shareholders. Kelkka At our Kelkka Nickel-Copper Project (‘Kelkka’) (previously called Enonkoski), we have drilled a total of 3,570m across 21 holes, with the objective of identifying mineralisation of a similar style to the previously producing Enonkoski nickel-copper mine (‘Enonkoski’). This historical mine, which is located within our Kelkka licence area, reportedly produced 6.7Mt at an average grade of 0.8% Ni between 1984 and 1994. Drilling has consequently been conducted close to the old mine, and we were pleased to discover a short, shallow interval of remobilised nickel/copper sulphides at the Laukunlampi intrusion (‘Laukunlampi’) 1km southeast of Enonkoski. Whilst these grades are low, the presence of these remobilised veins is very encouraging and suggests that Laukunlampi is capable of hosting nickel/copper mineralisation. It is our belief that the potential still exists to identify massive sulphide ore bodies. Indeed, within the Kelkka licence area, historical drill intercepts have returned results of 15m at 6.9% Ni and 2.0% Cu, and with modern exploration techniques such as ZTEM geophysical technology now available to us, we believe commercial discoveries can still be made. Anglo American highlighted the resource potential of the country, with the 2006 world-class discovery of the Sakatti nickel-copper-platinum group elements deposit in northern Finland. Although this project is still in its early phase of exploration, a sulphide body in excess of 1,500m long has been identified to-date, underpinning the potential for commercial discoveries to be made. Outokumpu At our Outokumpu Copper Project (‘Outokumpu’), we have conducted on-ice drilling at Lake Juojärvi to test for massive copper and polymetallic mineralisation. Four holes have been drilled across a previously undrilled 5km section of the renowned Outokumpu Belt, which hosted the world famous Outokumpu Copper Mine, which produced ~42Mt at 3.1% copper between 1908-1999. The holes, which are along strike from the old mine, all intercepted varying thicknesses of known Outokumpu geology; one drill hole intercepted approximately 50m of iron sulphides. Whilst not a discovery in itself, we believe that this may represent some kind of feeder structure or sulphidic "tail" that may be part of a larger multi metal system. We are also currently assessing a number of additional ways in which to develop this project, which includes potential joint venture opportunities; we will update the market on these developments when practicable. Mitterberg Aside from our Finnish portfolio, we hold an 80% interest in the previously producing Mitterberg Copper Project in Austria. We continue to assess the best way in which to realise value from this asset. Corporate Update FinnAust continues to benefit from the cornerstone investment and support of ASX major Western Areas Limited (‘Western Areas’). The Company not only benefits from access to funding, but also gains the experience of a proven management and technical team; Western Areas successfully identified from greenfield exploration and put into production two high grade nickel mines and is now one of the leading nickel producers in Australia. I am Managing Director and Chief Executive Officer of Western Areas, and my fellow FinnAust Board member Graham Marshall is General Manager-Commercial of Western Areas, thus strongly demonstrating Western Areas’ commitment to FinnAust. During the period Alastair Clayton an Executive Director of the Company, resigned from the Board of Directors and from his employment with the Company. We are grateful for Alastair's contributions in supporting our admission to AIM and initial exploration efforts of the Company, and wish him well for the future as we look to develop our exploration activity. 3 FINNAUST MINING PLC CHAIRMAN’S REPORT Post-period end, we were delighted to announce that Roderick McIllree ('Rod') joined the Company as interim Chief Executive Officer ('CEO'). Rod’s extensive experience in both mining and finance will be extremely valuable in not only determining future exploration activity at our Finnish assets but also supporting the Company’s continued expansion within Europe and Scandinavia. Financial Review The loss before taxation of the Group for the year ended 30 June 2015 amounted to £561,381 (30 June 2014: £2,394,934). The Group’s cash position at 30 June 2015 was £795,368 (30 June 2014: £1,706,137) and currently stands at approximately £640,032. Outlook We have established a solid portfolio of assets and through our targeted exploration programmes are well placed for future growth. Our focus going forward will be on furthering our understanding of the resource potential of our three Finnish licence areas. We are currently finalising our next phase of exploration; initial activity will focus on Outokumpu and will include mapping, sampling and reinterpretation of new geophysical data. Further updates regarding this proposed exploration, work at Hammaslahti and across our wider portfolio, will be made as soon as practicable. Additionally, we maintain an active growth strategy and in line with this will continue to assess additional prospective opportunities both in Finland and across the wider Scandinavian region in order to leverage our established regional presence in what is a very favourable mining location. Finally, I would like to take this opportunity to thank our shareholders, advisers and management team for their continued support and hard work. Daniel Lougher Chairman 19 August 2015 4 FINNAUST MINING PLC GROUP STRATEGIC REPORT The Directors of the Company and its subsidiary undertakings (which together comprise the “Group”) present their Strategic Report on the Group for the year ended 30 June 2015. Strategic Approach The Group’s aim is to create value for shareholders through the discovery and development of economic mineral deposits. The Group’s strategy is to continue to progress the development of its existing projects in Europe and to evaluate its existing and new mineral resource opportunities with a view to potential joint venture arrangements and/or other corporate activities. Organisation Overview The Group’s business is directed by the Board and is managed on a day-to-day basis by the interim Chief Executive Officer who was appointed on 22 July 2015. The Board monitors compliance with objectives and policies of the Group through monthly performance reporting, budget updates and periodic operational reviews. The Board comprises the three Non-Executive Directors. The Corporate Head Office of the Group is located in London, UK, and provides corporate support services to the overseas operations. Overseas operations are managed out of the Group’s office in Outokumpu, Finland. Review of Business To date, the Company has drilled a total of 15,000m across our Finnish portfolio. Our Hammaslahti Copper Project (‘Hammaslahti’) has been the focus of the majority of this work, with 45 holes drilled over 10,366m. This has led to the discovery of a shallow multi-metal lode, which contains high-grade copper with zinc, lead and silver. This is located directly below the northern zinc/gold open pit of the historical Hammaslahti mine. Drilling has successfully extended this mineralised zone, with a strike length of over 500m north to south and over 125m east to west now identified and the Company is currently evaluating the significance of these results to determine the best value outcome for shareholders. At our Kelkka Nickel-Copper Project (‘Kelkka’) (previously called Enonkoski), we have drilled a total of 3,570m across 21 holes, with the objective of identifying mineralisation of a similar style to the previously producing Enonkoski nickel-copper mine (‘Enonkoski’). Although this project is still in its early phase of exploration, a sulphide body in excess of 1,500m long has been identified to-date, underpinning the potential for commercial discoveries to be made. At our Outokumpu Copper Project (‘Outokumpu’), we are also currently assessing a number of additional ways in which to develop this project, which includes potential joint venture opportunities. Financial Performance Review The loss of the Group for the year ended 30 June 2015 before taxation amounts to £561,381 (30 June 2014: £2,394,934). The Board monitors the activities and performance of the Group on a regular basis. The Board uses financial indicators based on budget versus actual to assess the performance of the Group. The indicators set out below will continue to be used by the Board to assess performance over the period to 30 June 2016. The three main KPIs for the Group are as follows. These allow the Group to monitor costs and plan future exploration and development activities: KPI Cash and cash equivalents Administrative expenses as a percentage of total assets Exploration costs capitalised 2015 2014 £795,368 £1,706,137 6.04% 12.03% £1,080,814 £1,280,107 Cash has been used to fund the Group’s operations and facilitate its investment activities (refer to the Statements of Cash Flows on page 17). Exploration costs capitalised consist of exploration expenditure on the Group’s exploration licences net of foreign exchange rate movements. Principal Risks and Uncertainties 5 FINNAUST MINING PLC GROUP STRATEGIC REPORT The management of the business and the execution of the Group’s strategy are subject to a number of risks. The key business risks affecting the Group are set out below. Risks are formally reviewed by the Board, and appropriate processes are put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group. Exploration risks The exploration and mining business is controlled by a number of global factors, principally supply and demand which in turn is a key driver of global mineral prices; these factors are beyond the control of the Group. Exploration is a high-risk business and there can be no guarantee that any mineralisation discovered will result in proven and probable reserves or go on to be an operating mine. At every stage of the exploration process the projects are rigorously reviewed to determine if the results justify the next stage of exploration expenditure ensuring that funds are only applied to high priority targets. The principal assets of the Group comprising the mineral exploration licences are subject to certain financial and legal commitments. If these commitments are not fulfilled the licences could be revoked. They are also subject to legislation defined by the Government; if this legislation is changed it could adversely affect the value of the Group’s assets. Dependence on key personnel The Group and Company is dependent upon its executive management team and various technical consultants. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on its ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions. On 3 June 2015 Alastair Clayton the Executive Director resigned and on 22 July 2015 the Group appointed Roderick McIllree in the capacity of interim Chief Executive Officer. Uninsured risk The Group, as a participant in exploration and development programmes, may become subject to liability for hazards that cannot be insured against or third party claims that exceed the insurance cover. The Group may also be disrupted by a variety of risks and hazards that are beyond control, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupation and health hazards and weather conditions or other acts of God. Funding risk The only sources of funding currently available to the Group are through the issue of additional equity capital in the parent company or through bringing in partners to fund exploration and development costs. The Company’s ability to raise further funds will depend on the success of the Group’s exploration activities and its investment strategy. The Company may not be successful in procuring funds on terms which are attractive and, if such funding is unavailable, the Group may be required to reduce the scope of its exploration activities or relinquish some of the exploration licences held for which it may incur fines or penalties. Financial Risks The Group’s operations expose it to a variety of financial risks that can include market risk (including foreign currency, price and interest rate risk), credit risk, and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and, as such, no hedge accounting is applied. Details of the Group’s financial risk management policies are set out in Note 3 to the Financial Statements. The Group Strategic Report was approved by the Board on 19 August 2015. Greg Kuenzel Director 6 FINNAUST MINING PLC DIRECTORS’ REPORT The Directors present their annual report on the affairs of FinnAust Mining Plc together with the audited Consolidated Financial Statements for the year ended 30 June 2015. Principal Activity The principal activity of the Company is to make investments and/or acquire projects in the natural resources and mineral sectors as a whole. The principal activity of the Group is to implement its mineral exploration strategy to advance projects towards defining a sufficient in-situ mineral resource to support a detailed feasibility study towards mine development and production. Dividends The Directors do not recommend the payment of a dividend for the year (Company 30 June 2014: £nil; Group 30 June 2014: £nil). Directors & Directors’ Interests The Directors who served during the year ended 30 June 2015 are shown in the Company Information on page 2 and had, at that time the following beneficial interests in the shares of the Company: Alastair Clayton (1) Greg Kuenzel (2) Daniel Lougher Graham Marshall 30 June 2015 30 June 2014 Ordinary Shares Options Ordinary Shares Options n/a n/a 800,000 8,000,000 30,000 3,600,000 30,000 3,600,000 - - - - - - - - (1) Alastair Clayton’s shares are held by Valzina Global Limited. Alastair Clayton resigned on 3 June 2015. (2) Greg Kuenzel’s shares are held by Fitel Nominees Limited. 3,000,000 of Greg Kuenzel’s options are held by Heytesbury Corporate LLP of which Greg is a partner. Further details on options can be found in Note 14 to the Financial Statements. Corporate Responsibility Environmental FinnAust undertakes its exploration activities in a manner that minimises or eliminates negative environmental impacts and maximises positive impacts of an environmental nature. FinnAust is a mineral explorer, not a mining company. Hence, the environmental impact associated with its activities is minimal. To ensure proper environmental stewardship on its projects, FinnAust conducts certified baseline studies prior to all drill programmes and ensures that areas explored are properly maintained and conserved. Health and safety FinnAust operates a comprehensive health and safety programme to ensure the wellness and security of its employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best practices in health and safety management. This programme is regularly updated to incorporate employee suggestions, lessons learned from past incidents and new guidelines related to new projects with the aim of identifying areas for further improvement of health and safety management. This results in continuous improvement of the health and safety programme. Employee involvement is regarded as fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents. Internal Controls The Board recognises the importance of both financial and non-financial controls and has reviewed the Group’s control environment and any related shortfalls during the year. Since the Group was established, the Directors are satisfied that, given the current size and activities of the Group, adequate internal controls have been implemented. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of the current activity and proposed future development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective. Further details of corporate governance can be found in the Corporate Governance Report on page 10. 7 FINNAUST MINING PLC DIRECTORS’ REPORT Going Concern The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, therefore, continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. Further details on their assumptions and their conclusion thereon are included in the statement on going concern included in Note 2.4 to the Financial Statements. Directors’ and Officers’ Indemnity Insurance The Group has made qualifying third-party indemnity provisions for the benefit of its Directors and Officers. These were made during the year and remain in force at the date of this report. Events after the reporting period Events after the reporting period are set out in Note 25 to the Financial Statements. Policy and Practice on Payment of Creditors The Company and its subsidiary undertakings agree terms and conditions for their business transactions with suppliers. Payment is then made in accordance with these terms, subject to the terms and conditions being met by the supplier. As at 30 June 2015, the Company had an average of 12 days (2014: 0.5 days) purchases outstanding in trade payables. The Group average was 59 days (2014: 5 days). Future Developments Details of future developments for the Group are disclosed in the Chairman’s Report on page 3. Provision of Information to Auditor So far as each of the Directors is aware at the time this report is approved: • • there is no relevant audit information of which the Company's auditor is unaware; and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Auditor PKF Littlejohn LLP has signified its willingness to continue in office as auditor. This report was approved by the Board on 19 August 2015 and signed on its behalf. Greg Kuenzel Director 8 FINNAUST MINING PLC STATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations, including the AIM Rules for Companies. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Parent Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company, and of the profit or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and accounting estimates that are reasonable and prudent; and • state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company, and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions. The Company is compliant with AIM Rule 26 regarding the Company’s website. The Directors confirm that they have complied with the above requirements in preparing the Financial Statements. This statement was approved by the Board on 19 August 2015 and signed on its behalf. Greg Kuenzel Director 9 FINNAUST MINING PLC CORPORATE GOVERNANCE REPORT The Board of Directors currently comprises three Non-Executive Directors, one of whom is the Chairman. The Company is not required to comply with the UK Corporate Governance Code or the Corporate Governance Code for Small and Mid-Size Quoted Companies 2013, as published by the Quoted Companies Alliance. However, the Directors recognise the importance of sound corporate governance and the Board intends, to the extent they consider appropriate in light of the Group’s size, stage of development and resources, to implement certain corporate governance recommendations. The Directors have responsibility for the overall corporate governance of the Group and recognise the need for the highest standards of behaviour and accountability. The Board has a wide range of experience directly related to the Group and its activities and its structure ensures that no one individual or group dominates the decision making process. Board Meetings The Board meets regularly throughout the year. The Board is responsible for formulating, reviewing and approving the Group's strategy, financial activities and operating performance. Board Committees The Group has established an Audit Committee and a Remuneration Committee. In light of the size of the Board, the Directors do not consider it necessary to establish a Nomination Committee. However, this will be kept under regular review. Audit Committee The Audit Committee, comprising Daniel Lougher, Graham Marshall and Greg Kuenzel, reviews the Group's annual and interim financial statements before submission to the Board for approval. The Committee also reviews regular reports from management and the external auditor on accounting and internal control matters. Where appropriate, the Committee monitors the progress of action taken in relation to such matters. The Committee also recommends the appointment, and reviews the fees, of the external auditor. The Committee keeps under review the cost effectiveness and the independence and objectivity of the external auditor. A formal statement of independence is received from the external auditor each year. Remuneration Committee The Remuneration Committee, comprising Daniel Lougher, Graham Marshall and Greg Kuenzel, is responsible for reviewing the performance of the interim Chief Executive Officer and for setting the scale and structure of his remuneration, determining the payment of bonuses, considering the grant of options under any share option scheme and, in particular, the price per share and the application of performance standards which may apply to any such grant, paying due regard to the interests of shareholders as a whole and the performance of the Group. Internal Controls The Directors acknowledge their responsibility for the Group’s systems of internal controls and for reviewing their effectiveness. These internal controls are designed to safeguard the assets of the Group and to ensure the reliability of financial information for both internal use and external publication. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of the increased activity and further development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective. Risk Management The Board considers risk assessment to be important in achieving its strategic objectives. Project milestones and timelines are regularly reviewed. Securities Trading The Group has adopted a share dealing code for dealings in shares by directors and senior employees which is appropriate for an AIM quoted company. The Directors will comply with Rule 21 of the AIM Rules for Companies relating to Directors’ dealings and will take all reasonable steps to ensure compliance by the Group’s applicable employees. Relations with Shareholders The Board is committed to providing effective communication with the Shareholders of the Group. Significant developments are disseminated through stock exchange announcements and regular updates of the Group’s website. The Board views the AGM as a forum for communication between the Group and its shareholders and encourages their participation in its agenda. 10 FINNAUST MINING PLC INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FINNAUST MINING PLC We have audited the Financial Statements of FinnAust Mining Plc for the year ended 30 June 2015 which comprise the Group Strategic Report, the Directors’ Report, Consolidated and Company Statements of Financial Position, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Statements of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company Financial Statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditor As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed, the reasonableness of significant accounting estimates made by the Directors and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on Financial Statements In our opinion: • the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2015 and of the Group’s loss for the year then ended; the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the Parent Company Financial Statements for the 12 months ended 30 June 2015 have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006. • • • Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial period for which the Financial Statements are prepared is consistent with the Financial Statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company Financial Statements are not in agreement with the accounting records and returns; or • • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Alistair Roberts (Senior statutory auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 19 August 2015 1 Westferry Circus Canary Wharf London E14 4HD 11 FINNAUST MINING PLC STATEMENTS OF FINANCIAL POSITION As at 30 June 2015 Non-Current Assets Property, plant and equipment Intangible assets Trade and other receivables Investment in subsidiaries Current Assets Trade and other receivables Cash and cash equivalents Note 6 7 9 8 9 10 Company number: 05389216 Consolidated Company 30 June 2015 £ 30 June 2014 £ 30 June 2015 £ 30 June 2014 £ 12,327 16,322 812 1,145 8,432,062 - 8,101,446 20,069 - - - - - - 10,971,654 9,577,636 8,444,389 8,137,837 10,972,466 9,578,781 79,178 100,952 38,526 77,093 795,368 1,706,137 715,583 1,666,932 874,546 1,807,089 754,109 1,744,025 Total Assets 9,318,935 9,944,926 11,726,575 11,322,806 Current Liabilities Trade and other payables Borrowings Total Liabilities 11 12 198,800 62,500 239,192 125,000 261,300 364,192 261,300 364,192 49,664 35,007 - 49,664 49,664 - 35,007 35,007 Net Assets 9,057,635 9,580,734 11,676,911 11,287,799 Equity attributable to owners of the Parent Share capital Share premium Deferred shares Reverse acquisition reserve Other reserves Retained losses Total Equity 13 13 5,919,731 4,941,953 5,919,731 4,941,953 14,274,528 14,188,311 14,274,528 14,188,311 1,825,104 (8,071,001) 1,825,104 (8,071,001) 1,825,104 - 1,825,104 - 15 (974,504) 51,209 398,010 398,010 (3,916,223) (3,354,842) (10,740,462) (10,065,579) 9,057,635 9,580,734 11,676,911 11,287,799 The Financial Statements were approved and authorised for issue by the Board of Directors on 19 August 2015 and were signed on its behalf by: Greg Kuenzel Director The Notes on pages 18 to 39 form part of these Financial Statements. 12 FINNAUST MINING PLC CONSOLIDATED INCOME STATEMENT For the year ended 30 June 2015 Continued operations Revenue Cost of sales Gross profit Administrative expenses Foreign exchange Impairment of intangibles Operating Loss Finance income Loss Before Income Tax Income tax expense Loss for the Year Loss attributable to Owners of the Parent Note 21 7 18 19 Year ended 30 June 2015 Year ended 30 June 2014 £ 1,028 - 1,028 (563,340) - - (562,312) 931 (561,381) - £ - - - (1,196,222) - (1,199,636) (2,395,858) 924 (2,394,934) - (561,381) (2,394,934) (561,381) (2,394,934) Basic and Diluted Earnings Per Share attributable to owners of the parent during the year (expressed in pence per share) 20 (0.201) p (1.352) p The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement and Statement of Comprehensive Income. The loss for the Company for the year ended 30 June 2015 was £674,883 (year ended 30 June 2014: £1,203,743). The Notes on pages 18 to 39 form part of these Financial Statements. 13 FINNAUST MINING PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2015 Loss for the year Other Comprehensive Income: Items that may be subsequently reclassified to profit or loss Currency translation differences Other comprehensive income for the year, net of tax Year ended 30 June 2015 Year ended 30 June 2014 £ £ (561,381) (2,394,934) (1,025,713) (344,305) (1,587,094) (344,305) Total Comprehensive Income for the Year Attributable to Owners of the Parent (1,587,094) (2,739,239) Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income, where relevant, is disclosed in Note 19. The Notes on pages 18 to 39 form part of these Financial Statements. 14 FINNAUST MINING PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2015 Attributable to owners of the parent Share capital £ Share premium Deferred shares £ £ Note Reverse acquisition reserve £ Other reserves Retained losses Total equity £ £ £ Balance as at 1 July 2013 141,180 8,500,753 - - - - - - (2,496) (959,908) 7,679,529 - (2,394,934) (2,394,934) Loss for the year Other comprehensive income for the year Items that may be subsequently reclassified to profit or loss Currency translation differences Total comprehensive income for the year Proceeds from share issue Issue costs Reverse acquisition Issued options Total transactions with owners, recognised in equity Balance as at 30 June 2014 Balance as at 1 July 2014 Loss for the year Other comprehensive income Items that may be subsequently reclassified profit or loss Currency translation differences Total comprehensive income for the year Proceeds from share issue Issue costs Reverse acquisition Issued options Total transactions with owners, recognised in equity Balance as at 30 June 2015 - - - - 4,482,000 6,823,000 - (72,625) - - - - - - - - 318,773 (1,062,817) 1,825,104 (8,071,001) 391,231 - - - - 6,779 (344,305) - (344,305) (344,305) (2,394,934) (2,739,239) - - - 11,305,000 - - - (72,625) (6,598,710) 6,779 13 13 14 4,800,773 5,687,558 1,825,104 (8,071,001) 398,010 - 4,640,444 4,941,953 14,188,311 1,825,104 (8,071,001) 51,209 (3,354,842) 9,580,734 - - - - - - - 4,941,953 14,188,311 1,825,104 (8,071,001) 51,209 (3,354,842) 9,580,734 - - - - (561,381) (561,381) - - 13 13 14 977,778 122,222 - - - (36,005) - - 977,778 86,217 - - - - - - - - (1,025,713) - (1,025,713) - - - - - - (1,025,713) (561,381) (1,587,094) - - - - - - - - - 1,100,000 (36,005) - - - 1,063,995 5,919,731 14,274,528 1,825,104 (8,071,001) (974,504) (3,916,223) 9,057,635 - - - The Notes on pages 18 to 39 form part of these Financial Statements. 15 FINNAUST MINING PLC COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2015 Attributable to equity shareholders Share capital £ Share premium Deferred shares £ £ Other reserves £ Retained losses £ Total equity £ Note Balance as at 1 March 2013 459,953 7,437,936 1,825,104 779,970 (9,250,575) 1,252,388 Loss for the period Total comprehensive income for the year - - - - Proceeds from share issues Issue costs Issued options Expired options 13 13 14 4,482,000 - 6,823,000 (72,625) - - - - Total transactions with owners, recognised in equity 4,482,000 6,750,375 - - - - - - - - - - - (1,203,743) (1,203,743) (1,203,743) (1,203,743) - - 11,305,000 (72,625) 6,779 (388,739) - 388,739 6,779 - (381,960) 388,739 11,239,154 Balance as at 30 June 2014 4,941,953 14,188,311 1,825,104 398,010 (10,065,579) 11,287,799 Balance as at 1 July 2014 4,941,953 14,188,311 1,825,104 398,010 (10,065,579) 11,287,799 Loss for the year Total comprehensive income for the year Proceeds from share issues Issue costs Issued options Expired options Total transactions with owners, recognised in equity - - - - 13 13 14 977,778 - - - 122,222 (36,005) - - 977,778 86,217 - - - - - - - - - - - - - - (674,883) (674,883) (674,883) (674,883) - - - - - 1,100,000 (36,005) - - 1,063,995 Balance as at 30 June 2015 5,919,731 14,274,528 1,825,104 398,010 (10,740,462) 11,676,911 The Notes on pages 18 to 39 form part of these Financial Statements. 16 FINNAUST MINING PLC STATEMENTS OF CASH FLOWS For the year ended 30 June 2015 Consolidated Company Year ended Year ended 30 June 2015 30 June 2014 Year ended 30 June 2015 Period ended 30 June 2014 Note £ £ £ £ Cash flows from operating activities Loss before taxation Adjustments for: Depreciation Impairment of intangibles Other gains or losses Finance income Share based payments Intercompany management fees Foreign exchange Changes in working capital: Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Net cash generated from operating activities Cash flows from investing activities Finance income Proceeds from sale of available for sale financial assets Purchase of property, plant and equipment Loans granted to subsidiary undertakings Acquisition of subsidiary, net of cash acquired Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Transaction costs of share issue Proceeds from borrowings Repayment of borrowings 6 7 21 18 14 9 11 18 6 7 13 13 12 12 (561,381) (2,394,934) (674,883) (1,203,743) 2,335 - - (931) - - 2,729 1,199,636 (74,816) (924) 6,779 - 86,070 (582,450) 333 - - (875) - (181,129) 306,883 842 - (37,500) (1,120) 6,779 - 81,799 (1,452) (37,019) 481,433 5,338 (1,177) 14,476 (28,660) (244,669) (512,378) (1,357,209) (536,372) (1,426,272) 931 924 - - - - - - - 509,806 (1,080,814) (1,280,107) 875 - - 1,120 412,500 (1,665) (1,519,772) (1,342,953) - - - - (1,079,883) (769,377) (1,518,897) (930,998) 1,139,925 3,605,000 1,139,925 3,605,000 (36,005) - (72,625) 324,816 (62,500) (125,000) (36,005) (72,625) - - - - Net cash generated from financing activities 1,041,420 3,732,191 1,103,920 3,532,375 Net increase/(decrease) in cash and cash equivalents (550,841) 1,605,605 (951,349) 1,175,105 Cash and cash equivalents at beginning of period Exchange (loss)/gain on cash and cash equivalents 1,706,137 (359,928) 101,551 (1,019) 1,666,932 491,827 - - Cash and cash equivalents at end of period 10 795,368 1,706,137 715,583 1,666,932 At 30 June 2015, £92,003 of exploration and evaluation additions remained outstanding and unpaid. The Notes on pages 18 to 39 form part of these Financial Statements. 17 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 1. General information The principal activity of FinnAust Mining Plc (the “Company”) and its subsidiaries (together the “Group”) is the exploration and development of precious and base metals. The Company’s shares are listed on the AIM of the London Stock Exchange. The Company is incorporated and domiciled in England. The address of its registered office is 47 Charles Street, London, W1J 5EL. 2. Summary of Significant Accounting Policies The principal Accounting Policies applied in the preparation of these Consolidated Financial Statements are set out below. These Policies have been consistently applied to all the periods presented, unless otherwise stated. 2.1. Basis of Preparation of Financial Statements The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRIC”) as adopted by the European Union, the Companies Act 2006 that applies to Companies reporting under IFRS and IFRIC interpretations. The Consolidated Financial Statements have also been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets. The Financial Statements are presented in Pound Sterling rounded to the nearest pound. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Consolidated Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. 2.2. New and Amended Standards (a) New and amended standards mandatory for the first time for the financial periods beginning on or after 1 July 2014 The financial statements have been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of the accounting period. The following new standards, interpretations and amendments to published standards effective in the period have been adopted by the Group: Standard IAS 27 IAS 27 (Amendments) IAS 36 (Amendments) IFRS 10 (Amendments) IFRS 10 (Amendments) IFRS 12 (Amendments) IFRS 12 (Amendments) IFRS 12 (Amendments) Impact on initial application Separate Financial Statements Consolidated Financial Statements - Investment Entities Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets Consolidated Financial Statements Consolidated Financial Statements - Investment Entities Disclosure of Interests in Other Entities Disclosure of Interests in Other Entities Disclosure of Interests in Other Entities - Investment Entities Effective date 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 1 January 2014 The above pronouncements have been adopted for the first time this period and have not resulted in any material changes in the financial statements other than additional disclosures to the financial statements. (b) New standards, amendments and Interpretations in issue but not yet effective or not yet endorsed and not early adopted Standard IAS 1 (Amendments) IAS 16 (Amendments) IAS 16 (Amendments) IAS 19 (Amendments) IAS 27 (Amendments) IAS 28 (Amendments) IAS 28 (Amendments) Impact on initial application Presentation of Financial Statements - Disclosure Initiative Property, plant and equipment - Clarification of Acceptable Methods of Depreciation Property, plant and equipment - Bearer Plants Defined Benefits Plans - Employee Contributions Separate Financial Statements Investments in Associates and Joint Ventures Accounting Exception Investments - Applying the Consolidation for Effective date *1 January 2016 *1 January 2016 *1 January 2016 1 February 2015 *1 January 2016 *1 January 2016 *1 January 2016 18 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 IAS 38 (Amendments) IAS 41 (Amendments) IFRS 9 (Amendments) IFRS 10 (Amendments) IFRS 10 (Amendments) IFRS 11 (Amendments) IFRS 12 (Amendments) IFRS 14 (Amendments) IFRS 15 (Amendments) Annual Improvements Annual Improvements Annual Improvements *1 Subject to EU endorsement Intangible Assets - Clarification of Acceptable Methods of Amortisation Agriculture - Bearer Plants Financial Instruments Consolidated Financial Statements - Investments in Associates and Joint Ventures Consolidated Financial Statements: Applying the Consolidation Exception Joint Arrangements - Accounting for Acquisition of Interests in Joint Operations Disclosure of Consolidation Exception Regulatory Deferral Accounts Revenue from Contracts with Customers 2012 - 2014 Cycle 2010 - 2012 Cycle 2011 - 2013 Cycle in Other Entities: Applying Interests the *1 January 2016 *1 January 2016 *1 January 2018 *1 January 2016 *1 January 2016 *1 January 2016 *1 January 2016 *1 January 2016 *1 January 2018 *1 January 2016 1 February 2015 1 January 2015 The Group is evaluating the impact of the new and amended standards above. The Directors believe that these new and amended standards are not expected to have a material impact on the Group’s results or shareholders’ funds. 2.3. Basis of Consolidation The consolidated financial statements consolidate the financial statements of the Company and its subsidiaries made up to 30 June each year. Subsidiaries are entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee; • • Rights arising from other contractual arrangements; and The Group's voting rights and potential voting rights • The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Investments in subsidiaries are accounted for at cost less impairment within the parent company financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation. 2.4. Going Concern The Group’s business activities together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Report on pages 3 and 4. In addition, Note 3 to the Consolidated Financial Statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to market, credit and liquidity risk. The Consolidated Financial Statements have been prepared on a going concern basis. Although the Group’s assets are not generating revenues and an operating loss has been reported, the Directors believe that the Group has sufficient funds to undertake its operating activities over the next 12 months including any additional payment required in relation to its current exploration projects. The Group has financial resources which, the Directors believe, will be sufficient to fund the Group’s committed expenditure both operationally and on various exploration projects for this time period. However, in order to 19 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 complete other exploration work over the life of existing projects and as additional projects are identified additional funding will be required. The amount of funding is unforeseen at the point of approval of these Financial Statements and the Group will be required to raise additional funds either via an issue of equity or through the issuance of debt. The Directors are confident that funds will be forthcoming if and when they are required. Should additional funding not be forthcoming the Directors have agreed, if circumstances require, to defer payment of their fees until such time as adequate funding is received. The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Group and Company financial statements. 2.5. 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 that makes strategic decisions. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 2.6. Foreign Currencies (a) Functional and presentation currency Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The functional currency of the UK parent entity and UK subsidiary is Pound Sterling and the functional currency of the Finnish and Austrian subsidiaries is Euros. The Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Company’s functional and Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. 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 the income statement. (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each year end date presented are translated at the closing rate at the date of the Statement of Financial Position; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the Income Statement as part of the gain or loss on sale. 2.7. Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash- generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. 20 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. Exploration and evaluation assets The Group recognises expenditure as exploration and evaluation assets when it determines that those assets will be successful in finding specific mineral resources. Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource. Capitalisation of pre-production expenditure ceases when the mining property is capable of commercial production. Exploration and evaluation assets are recorded and held at cost. Exploration and evaluation assets are not subject to amortisation, but are assessed annually for impairment. The assessment is carried out by allocating exploration and evaluation assets to cash generating units, which are based on specific projects or geographical areas. Whenever the exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to the income statement. 2.8. Investments in subsidiaries Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. 2.9. Property, Plant and Equipment Property, Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates: Office Equipment – 20% straight line Machinery and Equipment – 10% straight line 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 the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. 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 disposal are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains’ in the income statement. 2.10. Impairment of non-financial assets Assets that have an indefinite useful life, for example, intangible assets not ready to use, and goodwill, are not subject to amortisation and are tested annually for impairment. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 21 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 2.11. Financial Assets (a) Classification The Group classifies its financial assets in the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the Statement of Financial Position. (ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. (b) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Group commits to purchasing or selling the asset. Financial assets carried at fair value through profit or loss is initially recognised at fair value, and transaction costs are expensed in the Income Statement. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value unless the Group is precluded from doing so as, in the case of unlisted equity securities, the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. In such circumstances available-for-sale financial assets are held at cost and reviewed annually for impairment. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the Income Statement within ‘Other (Losses)/Gains – Net’ in the period in which they arise. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the Income Statement as “gains and losses from investment securities.” Interest on available-for-sale securities calculated using the effective interest method is recognised in the Income Statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the Income Statement as part of other income when the Group’s right to receive payments is established. (c) Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset, or a group of financial assets, is impaired. A financial asset, or a group of financial assets, is impaired, and impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: the disappearance of an active market for that financial asset because of financial difficulties; • significant financial difficulty of the issuer or obligor; • a breach of contract, such as a default or delinquency in interest or principal repayments; • • observable data indicating that there is a measureable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio; or • for assets classified as available-for-sale, a significant or prolonged decline in fair value of the security below its cost. For loans and receivables, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced, and the loss is recognised in the Income Statement. 22 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the Income Statement. For assets classified as available-for-sale, the Group assesses at each reporting period whether there is objective evidence that a financial asset is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below it cost is one example that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the financial previously recognised in profit or loss, is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the Income Statement. 2.12. Financial Liabilities Financial liabilities comprise trade and other payables and borrowings in the Statement of Financial Performance, and are held at amortised cost. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. Borrowings in the statement of financial position are also classified as financial liabilities and are held at amortised cost. Borrowings are classified as current liabilities if repayment is due within one year or less. If not, they are presented as non- current liabilities. 2.13. Cash and Cash Equivalents Cash and cash equivalents comprise cash at bank and in hand. 2.14. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability in cash for at least 12 months after the end of the reporting period. 2.15. Equity Equity comprises the following: • • • • “Share capital” represents the nominal value of the Ordinary shares; “Share Premium” represents consideration less nominal value of issued shares and costs directly attributable to the issue of new shares; “Other reserves” represents the merger reserve, foreign currency translation reserve, redemption reserve and share option reserve; “Retained earnings” represents retained losses. 2.16. Share capital, share premium and deferred shares 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 provided there is sufficient premium available. Should sufficient premium not be available placing costs are recognised in the Income Statement. Deferred shares are classified as equity. Deferred shares have no rights to receive dividends, or to attend or vote at general meetings of the Company and are only entitled to a return of capital after payment to holders of new ordinary shares of £100,000 per each share held. 2.17. Share Based Payments The Group operates a number of equity-settled, share-based schemes, under which the entity receives services from employees or third party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third party suppliers’ services received in exchange for the grant of the options is recognised as an expense in 23 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 the Income Statement or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the Income Statement and its value is determined by reference to the fair value of the options granted: • • • including any market performance conditions; excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity. When the options are exercised, the Group issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options are exercised. 2.18. Taxation Current tax is the tax currently payable based on the taxable profit for the year. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or recognised in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Current tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position date in the respective countries where the tax liability is realised and settled. Deferred tax is recognised for using the liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is 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. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets (including those arising from investments in subsidiaries), are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be used. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply to the period when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted. 2.19. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods or services supplied in course of ordinary business, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for the Group’s activities described below. 24 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 Revenue is recognised in respect of amounts recharged to project strategic partners in accordance to their contractual terms. 2.20. Operating leases Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to the income statement on a straight-line basis over the period of the respective leases. 2.21. Finance income Interest income, relating to cash and cash equivalents, is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable. Interest income in relation to interest earned on available for sale financial assets is recognised in the Income Statement on an effective interest basis. 2.22. Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 3. Financial Risk Management 3.1. Financial Risk Factors The Group’s activities expose it to a variety of financial risks: market risk (foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. None of these risks are hedged. Risk management is carried out by the London based management team under policies approved by the Board of Directors. Market Risk (a) Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro and the British Pound. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group negotiates all material contracts for activities in relation to its subsidiaries in either British Pounds or Euros. The Group does not hedge against the risks of fluctuations in exchange rates. The volume of transactions is not deemed sufficient to enter into forward contracts as most of the foreign exchange movements result from the retranslation of inter company loans. The Group has not sensitised the figures for fluctuations in foreign exchange rates as the Directors are of the opinion that these fluctuations, apart from the retranslation of intercompany loans at the closing rate, would not have a significant impact on the financial statements of the Group. However, the Directors acknowledge that, at the present time except, the foreign exchange retranslations have resulted in a rather higher than normal fluctuations which are separately disclosed, and is predominantly due to the exceptional nature of Euro exchange rate in the last couple of years or so in the current economic climate. The Directors will continue to assess the effect of movements in exchange rates on the Group’s financial operations and initiate suitable risk management measures where necessary. One measure may include the presentation currency of future financial statements being shown in Euros, which is the Group’s functional currency, as this may reduce the presentation fluctuations that have arisen in the last couple of years. (b) Price risk The Group is not exposed to commodity price risk as a result of its operations, which are still in the exploration phase. The only revenue relates to intra group revenue in respect of recharges which are eliminated on consolidation. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature. The Group has no exposure to equity securities price risk, as it has no listed or unlisted equity investments other than investments in wholly owned subsidiaries. (c) Interest rate risk 25 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 As the Group’s borrowings are non-interest bearing it is not exposed to interest rate risk on financial liabilities. The Group’s interest rate risk arises from its cash held on short-term deposit, which is not significant. Credit Risk Credit risk arises from cash and cash equivalents as well as outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board. The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. Liquidity Risk In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital. The Directors are confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed. Financial liabilities are all due within one year. 3.2. 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 enable the Group to continue its exploration and evaluation activities, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts. At 30 June 2015 the Group had borrowings of £62,500 (30 June 2014: £125,000) and defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time. Given the Group’s level of debt versus its cash at bank and cash equivalents, the gearing ratio is immaterial. 4. Critical Accounting Estimates and Judgements The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these Financial Statements. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Items subject to such estimates and assumptions, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial years, include but are not limited to: Impairment of intangible assets – exploration and evaluation costs Exploration and evaluation costs have a carrying value at 30 June 2015 of £8,432,062 (2013: £8,101,446). Such assets have an indefinite useful life as the Group has a right to renew exploration licences and the asset is only amortised once extraction of the resource commences. Management tests for impairment annually whether exploration projects have future economic value in accordance with the accounting policy stated in Note 2.7. Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine if the exploration results returned during the year warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long term metal prices, anticipated resource volumes and supply and demand outlook. In the event that a project does not represent an economic exploration target and results indicate there is no additional upside a decision will be made to discontinue exploration; an impairment charge will then be recognised in the Income Statement. The Directors have reviewed the estimated value of each project prepared by management and have concluded that no impairment is necessary for the year ended 30 June 2015. Share based payment transactions The Group has made awards of options and warrants over its unissued share capital to certain Directors as part of their remuneration package. Certain warrants have also been issued to shareholders as part of their subscription for shares and suppliers for various services received. 26 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 14. 5. Segment Information Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the year the Group had interests in three geographical segments; the United Kingdom, Austria, and Finland. Activities in the UK are mainly administrative in nature whilst the activities in Austria and Finland relate to exploration and evaluation work. The Group had no turnover during the year. 2015 Revenue Administrative expenses Austria £ - (12,281) Finland £ 1,028 (154,528) UK £ - (396,531) Total £ 1,028 (563,340) Loss from operations per reportable segment (12,281) (153,500) (396,531 (562,312) (Reductions)/additions to non-current assets Reportable segment assets Reportable segment liabilities 2014 Administrative expenses Impairment of intangibles Loss from operations per reportable segment Additions to non-current assets Reportable segment assets Reportable segment liabilities 6. Property, Plant and Equipment Group Cost As at 1 July 2013 Acquired through reverse acquisition Exchange differences As at 30 June 2014 As at 1 July 2014 Exchange differences As at 30 June 2015 (61,033) 519,312 441 Austria £ (16,336) - (16,336) 578,891 579,652 840 367,918 8,033,086 147,814 Finland £ (829,161) (312,831) (1,141,992) 331,636 7,620,104 328,345 (333) 766,537 113,045 306,552 9,318,935 261,300 UK £ (350,725) (886,805) (1,237,530) 1,145 1,745,170 35,007 Total £ (1,196,222) (1,199,636) (2,395,858) 911,672 9,944,926 364,192 Machinery & equipment Office equipment £ £ Total £ 22,504 3,124 (813) 24,815 24,815 (3,124) - 3,124 - 3,124 3,124 - 3,124 21,691 22,504 - (813) 21,691 21,691 (3,124) 18,567 27 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 Depreciation As at 1 July 2013 Acquired through reverse acquisition Charge for the year Exchange differences As at 30 June 2014 As at 1 July 2014 Charge for the year Exchange differences As at 30 June 2015 Net book value as at 30 June 2014 Net book value as at 30 June 2015 4,370 - 1,887 257 6,514 6,514 2,002 (1,464) 7,052 15,177 11,515 - 1,137 842 - 1,979 1,979 333 4,370 1,137 2,729 257 8,493 8,493 2,335 - (1,464) 2,312 1,145 9,364 16,322 812 12,327 Depreciation expense of £2,335 (30 June 2014: £2,729) for the Group has been charged in administration expenses. Company Cost As at 1 March 2013 Additions As at 30 June 2014 As at 1 July 2014 Additions As at 30 June 2015 Depreciation As at 1 March 2013 Charge for the year As at 30 June 2014 As at 1 July 2014 Charge for the year As at 30 June 2015 Net book value as at 30 June 2014 Net book value as at 30 June 2015 Office equipment £ 1,459 1,665 3,124 3,124 - 3,124 1,137 842 1,979 1,979 333 2,312 1,145 812 Depreciation expense of £333 (30 June 2014: £842) for the Company has been charged in administration expenses. 28 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 7. Intangible Assets Intangible assets comprise exploration and evaluation costs and goodwill. Exploration and evaluation assets are all internally generated. Exploration & Evaluation Assets - Cost and Net Book Value As at 1 July Additions Acquired through reverse acquisition (at fair value) Exchange differences Impairments As at 30 June Group 30 June 2015 £ 8,101,446 1,080,814 - (750,198) - 8,432,062 30 June 2014 £ 7,190,919 1,280,107 571,703 (628,452) (312,831) 8,101,446 Exploration projects in Finland and Austria are at an early stage of development and no JORC (Joint Ore Reserves Committee) or non-JORC compliant resource estimates are available to enable value in use calculations to be prepared. The Directors therefore undertook an assessment of the following areas and circumstances that could indicate the existence of impairment: • The Group’s right to explore in an area has expired, or will expire in the near future without renewal; • No further exploration or evaluation is planned or budgeted for; • A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial level of reserves; and • Sufficient data exists to indicate that the book value will not be fully recovered from future development and production. Following their assessment the Directors concluded that no impairment charge was necessary for the year ended 30 June 2015. In the prior year, the Directors concluded that an impairment charge of £321,831 was necessary as a result of certain Finnish exploration licences not being renewed. Goodwill - Cost and Net Book Value As at 1 July Acquired through business combinations Impairment losses As at 30 June Group 30 June 2015 £ - - - - 30 June 2014 £ - 886,805 (886,805) - The Directors did not consider goodwill reflected an increase in the Group’s assets and therefore impaired goodwill in full in the prior period. 29 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 8. Investments in Subsidiary Undertakings Shares in Group Undertakings At beginning of period Additions in period At end of period Loans to Group undertakings Total Company 30 June 2015 £ 7,700,002 30 June 2014 £ 2 - 7,700,000 7,700,002 7,700,002 3,271,652 1,877,634 10,971,654 9,577,636 Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision. Principal subsidiaries Group and Company: Name of subsidiary Country of incorporation and place of business Proportion of ordinary shares held by parent (%) Proportion of ordinary shares held by the Group (%) Centurion Mining Limited United Kingdom Centurion Universal Limited United Kingdom Centurion Resources GmbH Austria 100% 100% Nil Finland Investments Plc United Kingdom 100% FinnAust Mining Finland Oy FinnAust Mining Northern Oy Finland Finland Nil Nil 100% 100% 100% 100% 100% 100% All subsidiary undertakings are included in the consolidation. Nature of business Dormant Holding Exploration Holding Exploration Exploration The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. 9. Trade and Other Receivables Current portion Prepayments VAT receivable Other receivables Total current portion Non-current portion Other receivables Total non-current portion Total Group Company 30 June 2015 £ 29,781 27,483 735 30 June 2014 £ 30,275 30,752 39,925 30 June 2015 £ 26,277 12,249 - 57,999 100,952 38,526 20,069 20,069 - - 121,021 38,526 77,093 21,179 21,179 79,178 30 30 June 2014 £ 25,101 12,067 39,925 77,093 - - FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 The fair value of all receivables is the same as their carrying values stated above. Non-current receivables relate to security deposits held against service accounts and do not have a defined due date, they are receivable upon closure of the respective accounts. At 30 June 2015 all trade and other receivables were fully performing. No ageing analysis is considered necessary as the Group has no trade receivable receivables which would require such an analysis to be disclosed under the requirements of IFRS 7. The carrying amounts of the Group and Company’s trade and other receivables are denominated in the following currencies: UK Pounds Euros Group Company 30 June 2015 £ 38,526 40,652 79,178 30 June 2014 £ 77,093 43,928 121,021 30 June 2015 £ 28,526 - 38,526 30 June 2014 £ 77,093 - 77,093 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. 10. Cash and Cash Equivalents Group Company 30 June 2015 £ 30 June 2014 £ 30 June 2015 £ 30 June 2014 £ Cash at bank and in hand 795,368 1,706,137 715,583 1,666,932 All of the Group and Company’s cash at bank is held with institutions with an AA- credit rating. 11. Trade and Other Payables Trade payables Other creditors Accrued expenses Group Company 30 June 2015 £ 91,250 9,400 98,150 30 June 2014 £ 68,850 - 170,342 198,800 239,192 30 June 2015 £ 18,518 2 31,144 49,664 28 February 2014 £ 1,562 2 33,443 35,007 Trade payables include amounts due of £77,510 and accrued expenses £14,493 in relation to exploration and evaluation activities. 31 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 12. Borrowings Current Unsecured borrowings at amortised cost Non-interest bearing loan Group 30 June 2015 £ 62,500 62,500 30 June 2014 £ 125,000 125,000 Non-interest bearing loans arose during the prior period as unsecured cash advances to the Group from the ultimate controlling party Western Areas Limited (“Western Areas”) as disclosed in Note 24. The agreed facility was £250,000, denominated in Pound Sterling and the balance of the non-interest bearing loan is repayable upon demand by Western Areas. There are no undrawn borrowings as at the year end. The fair value of the borrowings as at the year end equates to its carrying value above. 13. Share capital and premium Company Issued and fully paid At 1 March 2013 Number of shares Ordinary shares £ Share premium £ Total £ 229,976,697 459,953 7,437,936 7,897,889 Issue of new shares – 2 July 2013 20,000,000 40,000 160,000 200,000 Share consolidation – 29 November 2013 Issue of new shares – 2 December 2013 (1) (224,979,027) - - - 222,100,000 4,442,000 6,590,375 11,032,375 At 30 June 2014 247,097,670 4,941,953 14,188,311 19,130,264 Issue of new shares – 29 October 2014 (2) 48,888,890 977,778 86,217 1,063,995 As at 30 June 2015 295,986,560 5,919,731 14,274,528 20,194,259 Group Issued and fully paid As at 1 July 2013 Number of shares Ordinary shares £ Share premium £ Total £ 82,500,000 141,180 8,500,753 8,641,933 Reverse acquisition – 2 December 2013 Issue of new shares – 2 December 2013 (1) (57,502,330) 222,100,000 358,773 4,442,000 (902,817) (544,044) 6,590,375 11,032,375 At 30 June 2014 247,097,670 4,941,953 14,188,311 19,130,264 Issue of new shares – 29 October 2014 (2) 48,888,890 977,778 86,217 1,063,995 As at 30 June 2015 295,986,560 5,919,731 14,274,528 20,194,259 (1) (2) Includes issue costs of £72,625 Includes issue costs of £36,005 On 29 October 2014 the Company raised £1,100,000 via the issue and allotment of 48,888,890 new ordinary shares of 2 pence each fully paid at a price of 2.25 pence per share. 32 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 14. Share Based Payments Share options and warrants outstanding and exercisable at the end of the period have the following expiry dates and exercise prices: Grant Date Expiry Date Exercise price in £ per share 12 November 2012 29 November 2013 12 November 2012 12 November 2015 29 May 2017 12 November 2017 29 November 2013 29 May 2019 0.67 0.15 0.10 0.20 Options & Warrants 30 June 2015 1,681,930 6,000,000 3,684,366 30 June 2014 1,681,930 6,000,000 3,684,366 6,000,000 6,000,000 17,366,296 17,366,296 The Company and Group have no legal or constructive obligation to settle or repurchase the options or warrants in cash. The fair value of the share options and warrants was determined using the Black Scholes valuation model. The parameters used are detailed below: 2013 Options 2013 Options 2012 Options & Warrants 2012 Warrants Granted on: 29/11/2013 29/11/2013 12/11/2012 12/11/2012 Life (years) Share price (pence per share) Risk free rate Expected volatility Expected dividend yield Marketability discount Total fair value (£000) 3.5 years 5.7p 2.25% 26.41% - 20% 3 5.5 years 5.7p 2.25% 26.41% - 20% 4 5 years 1.13p 2.25% 29.74% - 20% 117 3 years 1.13p 2.25% 29.74% - 20% 72 The expected volatility for the 2012 options & warrants was based on historical share price volatility of similar AIM listed entities for the 6 months prior to the date of granting. This was considered to be the most reasonable measure of expected volatility, given the relatively brief trading history of the Company available. The expected volatility of the 2013 options is based on historical volatility for the six months prior to the date of granting. The risk free rate of return is based on zero yield government bonds for a term consistent with the option life. A reconciliation of options and warrants granted over the year to 30 June 2015 is shown below: 2015 2014 Weighted average exercise price (£) Number Outstanding at beginning of year 17,366,296 0.1237 Expired Adjustment for share consolidation Granted Outstanding as at year end Exercisable at year end - - - - - - 17,366,296 17,366,296 0.1237 0.1237 Weighted average exercise price (£) 0.0300 1.8316 - 0.1750 0.1237 0.1237 Number 54,289,480 (626,524) (48,296,660) 12,000,000 17,366,296 17,366,296 33 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 2015 2014 of Range exercise prices (£) Weighted average exercise price (£) Number of shares Weighted average remaining life expected (years) Weighted average remaining life contracted (years) Weighted average exercise price (£) Number of shares Weighted average remaining life expected (years) Weighted average remaining life contracted (years) 0 – 0.05 0.00900 5,366,296 0.05 – 2.00 0.1750 12,000,000 2.37 2.92 2.37 2.92 0.00900 5,366,296 0.1750 12,000,000 3.37 3.92 3.37 3.92 No options or warrants were exercised during the year. The total fair value has resulted in a charge to the Income Statement for the year ended 30 June 2015 of £nil (2014: £6,779) and a charge to Share Premium of £nil (2013: £ nil). 15. Other Reserves At 1 July 2013 Reverse acquisition Options granted (Note 14) Currency translation differences Group Foreign currency translation reserve £ (2,496) - - (344,305) Merger reserve £ - 166,000 - - Redemption reserve Share option reserve £ - £ - Total £ (2,496) 36,463 188,768 391,231 - - 6,779 6,779 - (344,305) At 30 June 2014 166,000 (346,801) 36,463 195,547 51,209 Currency translation differences - (1,025,713) - - (1,025,713) At 30 June 2015 166,000 (1,372,514) 36,463 195,547 (974,504) At 28 February 2013 Options expired Options granted (Note 14) At 30 June 2014 At 30 June 2015 Company Merger reserve Redemption reserve Share option reserve £ £ £ Total £ 166,000 36,463 577,507 779,970 - - - - (388,739) 6,779 (388,739) 6,779 166,000 36,463 195,547 398,010 166,000 36,463 195,547 398,010 34 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 16. Employee benefit expense Staff costs (excluding Directors) Salaries and wages Social security costs Retirement benefit costs Group Year ended 30 June 2015 Year ended 30 June 2014 £ £ 310,175 55,892 12,203 328,411 58,577 10,773 378,270 397,761 The average monthly number of employees for the Group during the year was 6 (30 June 2014: 6). These were all employed in exploration & evaluation related roles. Of the above Group staff costs, £348,527 (30 June 2014: £213,168) has been capitalised in accordance with IFRS 6 as exploratory related costs and are shown as an intangible addition in the year. 17. Directors' Remuneration Company Executive Directors Alastair Clayton (1) Non-executive Directors Greg Kuenzel Daniel Lougher Graham Marshall No pension benefits are provided for any Director. (1) Alastair Clayton resigned on 3 June 2015. 18. Finance Income Interest received from cash and cash equivalents Finance Income Directors’ Fees Options Issued Year ended 30 June 2015 Year ended 30 June 2014 £ £ 203,043 133,867 12,000 38,500 - - - - 215,043 172,367 Year ended 30 June 2015 Year ended 30 June 2014 £ - - - - - £ 3,954 1,695 - - 5,649 Group Year ended 30 June 2015 Year ended 30 June 2014 £ 931 931 £ 924 924 35 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 19. Income Tax Expense No charge to taxation arises due to the losses incurred. Income tax expense Analysis of tax charge Current tax charge for the year Deferred tax charge/(credit) for the year Income tax expense Group Year ended 30 June 2015 Year ended 30 June 2014 £ - - - £ - - - The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows: Loss before tax Tax at the applicable rate of 21.18% (2014: 20.55%) Effects of: Expenditure not deductible for tax purposes Depreciation in excess of/(less than) capital allowances Impairment of intangibles Net tax effect of losses carried forward Foreign tax payable Tax charge Group Year ended 30 June 2015 £ Year ended 30 June 2014 £ (561,381) (2,394,394) (118,900) (492,048) 9,953 2,335 - 106,612 - - 1,609 (823) 246,525 244,737 - - The weighted average applicable tax rate of 21.18% (2014: 20.55%) used is a combination of the 21% standard rate of corporation tax in the UK, 20% Finnish corporation tax and 25% Austrian corporation tax. The Group has a deferred income tax asset of approximately £1,381,961 (2014: £1,197,832) due to tax losses available to carry forward against future taxable profits. The Company has tax losses of approximately £4,145,017 (2014: £3,229,934) available to carry forward against future taxable profits. No deferred tax asset has been recognised on accumulated tax losses because of uncertainty over the timing of future taxable profits against which the losses may be offset. 20. Earnings per Share Group The calculation of the total basic earnings per share of (0.201) pence (30 June 2014: (1.352) pence) is based on the loss attributable to equity holders of the parent company of £561,381 (30 June 2014: £2,394,394) and on the weighted average number of ordinary shares of 279,913,500 (30 June 2014: 177,178,360) in issue during the year. Company The calculation of the total basic earnings per share of (0.241) pence (30 June 2014: (0.997) pence) is based on the loss attributable to equity holders of the company of £674,833 (30 June 2014: £1,203,743) and on the weighted average number of ordinary shares of 279,913,500 (30 June 2014: 120,720,668) in issue during the year. In accordance with IAS 33, basic and diluted earnings per share are identical for both the Group and Company as the effect of the exercise of share options would be to decrease the earnings per share. Details of share options that could potentially dilute earnings per share in future periods are set out in Note 14. 36 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 21. Expenses by nature Directors’ fees Employee salaries AIM related costs (including Public Relations) Establishment expenses Auditor remuneration Auditor fees for other services Travel & subsistence Professional & consultancy fees Insurance Depreciation Share based payments Write-off trade & other payables and borrowings Impairment of prepayments Other expenses Total administrative expenses Group Year ended 30 June 2015 £ Year ended 30 June 2014 £ 129,007 29,743 108,367 45,383 16,000 1,000 11,327 156,818 18,197 2,335 - - - 45,163 40,915 184,593 109,729 32,293 16,000 1,000 23,804 311,880 12,103 2,729 6,779 (111,249) 541,177 24,469 563,340 1,196,222 The above Directors’ fees are exclusive of £86,036 (30 June 2014: £65,053) which has been capitalised in accordance with IFRS 6 as exploratory related costs and are shown as an intangible addition in the year. Services provided by the Company’s auditor and its associates During the year, the Group (including overseas subsidiaries) obtained the following services from the Company’s auditors and its associates: Group Year ended 30 June 2015 Year ended 30 June 2014 £ £ Fees payable to the Company’s auditor and its associates for the audit of the Parent Company and Consolidated Financial Statements Fees payable to the Company’s auditor for tax compliance & other services 16,000 1,000 16,000 1,000 22. Commitments (a) Royalty agreements As part of the contractual arrangement with Thames Mining Limited (“Thames Mining”) the Group has agreed to pay a royalty on revenue from mineral sales arising from mines developed by Centurion Resources GmbH and covered by the Mitterberg Copper Exploration Licences (the “Licences”) acquired by the Company. Under the terms of the Royalty Agreement between Thames Mining and the Company, the Group shall pay a 2 per cent royalty on revenue from all mineral sales less permitted deductions generated from revenue in connection with the Licences. The royalty agreement includes a right of first refusal granted in favour of Thames Mining whereby it is given the opportunity to buy back the Licences in the event that it is proposed to be sold by the Company. As part of the contractual arrangement with Magnus Minerals Limited (“Magnus”) the Group has agreed to pay royalties on revenue from mineral sales arising from mines developed by the Group. Under the terms of the respective Royalty Agreements between Magnus and the Company, the Group shall pay the following: • 0.5% of net smelter returns over mineral production from the Kainuu Schist Belt tenements; 37 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 • • • 1.0% of net smelter returns over mineral production from the Outokumpu Savonara Mine Belt tenements; 1.5% of net smelter returns over mineral production from the Enonoski Area tenements; and 2.5% of net smelter returns over mineral production from the Hammaslahti Area tenements. The Enonoski and Hammaslahti Royalty Agreements further provide that royalty entitlements may be extended to future rights with the respective areas of influence defined with the agreements. Additionally, under the terms of the Kainuu Schist Belt Royalty Agreement and the Outokumpu Savonara Mine Belt Royalty Agreement the Group is obligated to pay SES Finland Limited a 0.5% net smelter royalty in respect of production from the associated tenements and Western Areas Limited (“Western Areas”) 0.5% of net smelter returns over mineral production of the tenements using a biological leaching technology owned by Western Areas. (b) Operating lease commitments The Group leases office premises under a non-cancellable operating lease agreement. The lease was on an initial fixed term of two years automatically renewable at the end of the lease period for a further two year fixed term, which occurred on 1 July 2014. The lease expenditure charged to the Income Statement during the year is disclosed in Note 21 and is included within establishment expenses. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Group 30 June 2015 £ 18,000 18,000 30 June 2014 £ 4,500 4,500 Not later than one year Total lease commitment 23. Related Party Transactions Loans to Group undertakings Amounts receivable as a result of loans granted to subsidiary undertakings are as follows: Centurion Universal Limited Centurion Resources GmbH Finland Investments Plc FinnAust Mining Finland Oy Centurion Mining Limited At 30 June (Note 8) Company 30 June 2015 £ 564,300 58,828 192,401 2,455,928 195 30 June 2014 £ 564,300 45,694 155,868 1,111,577 195 3,271,652 1,877,634 Loans granted to subsidiaries have increased during the year due to additional loans being granted to the subsidiaries, and foreign exchange losses charged to the Income Statement of £288,084, given that no loans were repaid during the year. These amounts are unsecured, interest free and repayable in Euros when sufficient cash resources are available in the subsidiaries. All intra Group transactions are eliminated on consolidation. Transactions with ultimate controlling party Western Areas Limited (“Western Areas”), the ultimate controlling party of FinnAust Mining Plc as disclosed in Note 24 and a company of which Daniel Lougher is a director, was paid £66,148 for exploration costs and related expenditure (2014: 38 FINNAUST MINING PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2015 £86,285) during the year. A further £11,863 (2014: £6,818) has been accrued at year-end. No balance, other than this accrual, was outstanding at the year-end. Western Areas granted loans to the Group during the prior period totalling £324,816, of which the Group has repaid £187,500 and Western Areas waived £74,816. The balance payable to Western Areas as at 30 June 2015 was £62,500 (30 June 2014: £125,000). Other Transactions The Group defines its key management personnel as the Directors of the Company as disclosed in the Directors Report. Heytesbury Corporate LLP, a limited liability partnership of which Gregory Kuenzel is a partner, was paid a fee of £84,000 (2014: £54,400) for the provision of corporate management and consulting services to FinnAust Mining Plc. No balance was outstanding at the year-end. Noricum Gold Limited, a company of which Greg Kuenzel is a Director, was paid a fee of £nil (2014: £12,990) for management consulting services provided to and exploration costs incurred on behalf of FinnAust Mining Plc. No balance was outstanding at the year-end (2014: £nil). 24. Ultimate Controlling Party The ultimate controlling party is Western Areas Limited, a company incorporated and registered in Australia, by virtue of its 60.34% holding. 25. Events after the Reporting Date There have been no events after the reporting date of a material nature. 39
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