ANNUAL REPORT
2019/20
Kalium Lakes Limited
ABN 98 613 656 643
Kalium
LAKES
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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CORPORATE DIRECTORY
AUDITORS
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade
Perth WA 6000
GPO Box R1253
Perth WA 6844
SHARE REGISTRY
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth WA 6000
Phone (within Australia): 1300 850 505
Phone (outside Australia): +61 3 9415 4000
SOLICITORS
DLA Piper Australia
Level 21, 240 St Georges Terrace,
Perth WA 6000
Thomson Geer
Level 27, Exchange Tower, 2 The Esplanade,
Perth WA 6000 Australia
HOME EXCHANGE
Australian Securities Exchange
Level 40, Central Park,
152-158 St Georges Terrace
Perth WA 6000
ASX CODE
KLL
COMPANY
Kalium Lakes Limited (ABN: 98 613 656 643)
DIRECTORS
Stephen Dennis Chairman
Mal Randall
Non-Executive Director
Dale Champion Non-Executive Director
Mark Sawyer
Non-Executive Director
Brent Smoothy Non-Executive Director
Sam Lancuba
Non Executve Director
CHIEF EXECUTIVE OFFICER
Rudolph van Niekerk
CHIEF FINANCIAL OFFICERS
Chris Achurch
Antony Beckmand (commences November 2020)
JOINT COMPANY SECRETARIES
Chris Achurch
Gareth Widger
REGISTERED OFFICE
Unit 1, 152 Balcatta Road
Balcatta WA 6021
PO Box 610
Balcatta WA 6021
Phone: +61 8 9240 3200
PRINCIPLE PLACE OF BUSINESS
Unit 1, 152 Balcatta Road
Balcatta WA 6021
PO Box 610
Balcatta WA 6021
Phone: +61 8 9240 3200
WEBSITE AND EMAIL
Email: info@kaliumlakes.com.au
www.kaliumlakes.com.au
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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CONTENTS
CHAIRMAN’S LETTER
CEO’S MESSAGE
OVERVIEW
PROJECT UPDATE
COMPANY ACTIVITIES
COMPANY SUMMARY
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
FINANCIAL REPORT
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
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6
8
12
16
26
38
55
56
93
94
ADDITIONAL INFORMATION FOR PUBLIC LISTED COMPANIES
97
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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CHAIRMAN’S LETTER
Dear Shareholder,
On behalf of the Board and
Management, I am pleased to present
the Annual Report of Kalium Lakes
Limited, my first as Chairman.
This was, without doubt, a difficult year for the
Company, although I am pleased to say that the
challenges we faced are now behind us, and we are now
back on track to commission the Beyondie Sulphate of
Potash Project in the third quarter next year.
Following our decision to commence development
of the project late last year, it was disappointing to
identify a number of projected capital cost overruns
which would necessitate additional funding. Several
factors contributed to these forecast overruns,
including the requirement for additional bore capacity
at Ten Mile, incremental works in the process plant to
ensure Beyondie SOP will meet product specification,
and costs associated with complying with Covid19
restrictions during construction.
A decision to suspend trading in the Company’s
securities was taken in February to enable the
Company to resolve this funding deficit.
The four-month period during which Kalium shares
remained suspended from trading proved challenging
for the Company, and without additional funding there
was a strong likelihood Kalium would not have been
able to continue as a going concern. During this time,
all aspects of the Project’s development strategy
and budget were reassessed, and a recapitalisation
plan formulated to meet the anticipated financial
shortfall. Our project execution strategy was revised,
and wherever possible we looked to de-risk future
development of the Project. Construction of the
processing plant was transitioned to a lump sum EPC
arrangement with DRA Global, and our owners’ team
was strengthened.
The equity component of our refinancing resulted in
Kalium Lakes’ shares suffering a significant loss of
value through the inevitable dilution which comes with
any large capital raising and the Board is disappointed
for our shareholders to see the impact on our share
price. However, I can assure you this refinancing
was the only realistic option available to the Board
and it was pleasing that our external financiers, and
shareholders continued to support us. I am confident
that as the Project moves forward, we will see a
sustained recovery in the Kalium Lakes’ share price.
In response to the events which led to increase
in capital cost, we initiated a process in July to
review our Board and Management composition
and structure, assisted by independent third-party
advisers. There have subsequently been changes at
both Board and Management level, including my own
appointment as Chairman. To the Board, we have
welcomed representatives of the Company’s two
largest shareholders, Mark Sawyer and Brent Smoothy,
along with Dale Champion and, you will have seen we
recently appointed Sam Lancuba as an independent
non-executive director. Sam is a recognised fertiliser
industry expert and he will add considerable technical
expertise at Board level. We will also be looking to
appoint at least one additional independent non-
executive director, as we are committed to ensuring
that our Board comprises a majority of independent
directors.
Our management team has also been strengthened
considerably, including the appointments of Rudolph
van Niekerk as Chief Executive Officer and Tony
Beckmand as Chief Financial Officer. We are confident
that Rudolph and his team will execute the Project
within the revised budget and schedule.
I must also take this opportunity to formally thank
Brett Hazelden, as one of the founders of Kalium Lakes
Limited and the Managing Director of the Company up
until his departure in late July. Brett worked tirelessly
to build the platform from which the Company can
deliver success and his record will show that he is
indeed a pioneer in the Australian SOP space.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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I would also like to recognise the vital contribution
of my predecessor as Chairman, Mal Randall, who will
retire as a Non-Executive Director at the conclusion of
this year’s Annual General Meeting. Mal’s experience
and guidance, since the public company was formed
in 2016, has ensured that the Group is well placed to
realise it full potential.
Having overcome our early challenges, development of
the Beyondie SOP Project is progressing rapidly, and at
the time of writing it is 63 per cent complete. We are on
track to commence production in the third quarter of
the next calendar year, and I encourage you to follow
this development progress via our ASX announcements
and on our website.
Importantly, the Beyondie SOP Project remains a
financially attractive project which will benefit from
a long life, low operating cost, and strong product
margins. We are convinced that the long term outlook
for SOP remains positive, with predictions of demand
for premium fertiliser continuing to show an increase
as the world’s population grows, and the many
developing nations drive consumption of various meat
and food crops.
We are now looking forward with confidence, and with
your continued support and patience we will continue
to strive to ensure that the Project will deliver long
term investment returns to our shareholders and
stakeholders.
Yours faithfully
Stephen Dennis
Chairman
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CEO’S MESSAGE
Working to establish a new Australian industry and being a first mover in SOP in
this country has undoubtedly presented some development challenges for the
team at Kalium Lakes Limited. The Company is now refreshed and strong, with
the BSOPP 63% complete and less than 12 months from first production.
This financial year in particular has been a difficult
year, as the Company moved from the confidence of
the major milestones achieved during 2019, to the
difficult decisions and change of momentum that
occurred as the result of the forecast cost overrun
identified in late February 2020.
Fortunately, having openly addressed a significant
challenge, with the support of our employees,
contractors, suppliers, lenders and shareholders, the
Beyondie SOP Project (BSOPP) is now back on track
and everything we have worked so hard to achieve
during the past four years is becoming a reality.
Having been involved in the Project from inception as
one of the founders, I remain excited about leading
this company and this Project through to completion
and then into operations.
Changes introduced over the past few months leave
Kalium Lakes with a very strong owners’ team to
manage the BSOPP with good contractual mechanisms,
including performance guarantees and penalties, to
align contractors with the objective of successfully
completing the Project on time and on budget, in
accordance with our revised forecasts.
Our team’s sole focus is to now deliver a complete,
comprehensive project that will not only meet
construction targets, but also meet expectations for
production ramp-up and achieve the forecast SOP
production numbers. Plans for the commissioning
of the processing facilities are well advanced and I
remain confident that we will produce high quality
Australian SOP in the third quarter of calendar 2021.
2019 / 2020 ASX Significant Announcement Timeline
KfW IPEX Bank
Credit Approval
Major
Project Status
Purification
Plant Construction
Contract
KLL EcoMag
Investigate HV
Magnesium
Stage 2
Consistent
High Grades
Successful
$72M
Capital Raise
BSOPP
Construction
Approvals
WA Government
Green Light
Financial Close
Achieved
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
German Export
Credit Agency Cover
Final Investment
Decision
Lake Sunshine
Acquifer
Thickness
Increase
Westpac Working
Capital Hedging Facilities
Gas Supply
Infrastructure
Contracts
10 Mile
West Highest
Grades
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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As one of the founders of Kalium Lakes, I am both
honoured and thankful to be given the opportunity
to lead this team and remain committed to achieve
the Company’s goal of assisting Australian and
New Zealand farmers through the delivery of an
agronomically superior product, while ensuring a
satisfactory return to our shareholders for several
decades into the future.
Rudolph van Niekerk
Chief Executive Officer
20 October 2020
During the next financial year Kalium will be focusing
on completion of construction of the BSOPP, ready for
commissioning and commencement of production in
the third quarter of 2021. Some of the more significant
milestones to look forward to include:
► Completion of the gas pipeline construction
► Commissioning of the gas supply infrastructure
► Commissioning of the power station
► Completion of delivery of key equipment for the
SOP purification plant
► Completion of construction of the SOP
purification plant
► Commencement of harvesting activities of
potassium salts to feed into the SOP purification
plant for commissioning and production activities
Further to the development of the BSOPP, the Company
will also continue to work on other value adding
activities, including accelerating the development of the
next Phase of the Beyondie Sulphate of Potash Project,
during which we will aim to double production.
Beyondie Works
Recommenced
Major Maiden
10 Mile West
Resource
Brine Extraction
Achieves Nameplate
Flow Rate
Project Update
and $61M
Equity Raise
Salt
Harvester
Commissioned
Gas Pipeline
Construction
Commences
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
Suspension
from Official
Quotation
First Equipment
for SOP Purification
Plant Shipped
Reinstatement to
Official Quotation
BSOPP Passes
50% Complete
Milestone
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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OVERVIEW
Review Of Operations
KLL is an exploration and development company focused on developing the 100% owned Beyondie Sulphate Of
Potash Project (BSOPP) in Western Australia with the aim of commencing production at 90ktpa of Sulphate Of Potash
(SOP) before ramping up to 180ktpa of SOP for domestic and international sale.
The Company holds rights to granted tenure of approximately 2,316 square kilometres, as well as further tenement
applications covering approximately 2,719 square kilometres at the eastern margin of the East Pilbara region of
Western Australia, as shown in the map below.
Kalium Lakes Potash Tenement Portfolio
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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Sulphate Of Potash Project Production Process
Sulphate of Potash (SOP) is a widely-used agricultural fertiliser with annual global consumption of ~ 7Mtpa.
Australia currently imports 100% of its potash requirements from overseas producers.
SOP can be produced by extracting brine (hypersaline water) from underground, then evaporating the water to
precipitate mixed potassium salts which are, in turn, purified to produce the SOP fertiliser, as illustrated in the
flow diagram below:
(a) Brine Pumping: brine is extracted from basal sands (or the lower aquifer) using submersible bores, as well as
pumping of trenches from the upper aquifer;
(b) Brine Solar Evaporation: brine is pumped to solar evaporation ponds where it sequentially precipitates calcium,
sodium, potassium and magnesium mixed salts in separate ponds;
(c) Salt Harvesting: the mixed potassium salts that have crystallized from the solar evaporation ponds are
mechanically harvested and stockpiled;
(d) Purification Processing: the mixed potassium salts are fed into a purification plant facility where the potassium
salts are converted into schoenite through a conversion and recycling process and are then separated from
halite via flotation. The resultant schoenite slurry undergoes thermal decomposition into SOP; and
(e) SOP Fertiliser: after drying and compaction in a purification plant, the SOP is ready to be sold and used
as a final product.
SOP Production Process
Bores and Trenches
Brine Pumping
Brine Solar Evaporation
Salt Harvesting
Agriculture Production
Premium SOP Fertiliser
Purification Processing
1
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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OVERVIEW
KLL is currently constructing the BSOPP, based solely on Stage 1 of the Project which covers 6,369 hectares or 21%
of the 30,225 hectares of total available lake surface area.
The remaining 23,856 hectares or 79% of the total available lake surface area and palaeovalley sequence, represents
the expansion phase and is anticipated to deliver considerable benefits in terms of increased production volumes
and potential extension to the life of the Project.
BSOPP STAGES AND PHASES
The current 31.4 million tonne Total SOP Mineral Resource includes both Stage 1 and Stage 2 (see map below).
Beyondie Sulphate Of Potash Project, Stage 1 and Stage 2 Areas
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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The 5.1Mt SOP Ore Reserve is related to Stage 1 only, with that stage covering 35 kilometres in length and including
two lakes.
There are two separate phases within the Stage 1 Approval Footprint, Phase 1 containing the construction and
operation of a 90 ktpa SOP Demonstration Scale Project Development, with Phase 2 containing the ramping up to a
180 ktpa SOP Full Scale Project Development, to minimise operational and financial risk.
BSOPP PHASE 1 PROJECT FOOTPRINT
230000
240000
250000
260000
Transfer Pump Station
Brine Filled Evaporation Ponds
0
0
0
0
7
2
7
0
0
0
0
6
2
7
0
0
0
0
7
2
7
0
0
0
0
6
2
7
Basemap: Sentinel 2, September 2020
11
00
Rev
UPDATED BRINE LAYER
UPDATED BRINE LAYER
ISSUED FOR INFORMATION
ISSUED FOR INFORMATION
HRHR
HRHR
RvNRvN
RvNRvN
Descrip�on
Drn
Chk
App
Datum: GDA2020
Projection: MGA51
Scale at A3:
Beyondie Sulphate Of Potash Project
Project Brine Production Layout
KL_20088
KL_20088
30/9/2020
Stage 2 is 180 kilometres in length and includes 12 lakes, with similar high grades to the Stage 1 lakes also found in
the Stage 2 lakes. The total length of the palaeochannel running through both Stages, represents the same driving
distance as travelling from Perth to Busselton, in Western Australia.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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PROJECT UPDATE
Project update
At the date of this Annual Report the overall Project is on track to commence SOP production by Q3 2021 and is now
63% complete (under the Project development schedule) with approximately $166 million incurred to date:
Beyondie SOP Project - Completion Process
Beyondie SOP Project - Completion Progress
Commencement
63% Complete
at 30 September 2020
Target Production
Target Production
Q3 2021
September 2021
Non-Process and Production
Infrastructure
Gas and Power
SOP Plant
100%
100%
48%
70%
Complete
57%
Complete
120%
100%
80%
60%
40%
20%
0%
Brine
Extraction
Infrastructure
Evaporation
Ponds
Non-Process
Infrastructure
4 Production bores and trenches
4 Brine pump stations and transfer piping
● Primary evaporation ponds
● Recycle evaporation ponds
4 Mine site non-process infrastructure
4 Accommodation village
● APA Metering Facility
● Kalium owned gas inlet station
● Kalium owned gas pipeline
● Kalium owned gas delivery
station
● Kalium owned power station
● Standard grade SOP plant
● Granulation plant
● Product storage
● Product coating and out-loading
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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Capital Cost Adjustment
In late February 2020, Kalium Lakes identified forecast
capital cost overruns which would have been incurred
had the Company continued with development of the
BSOPP and available project funding at the time. This
resulted in the Company’s securities voluntarily being
suspended from trading on the ASX from 24 February
2020 through to 1 June 2020. During this time, senior
management and various other external advisors
completed work to reassess the Project’s development
strategy and budget, as well as formulating a
recapitalisation plan to fund the shortfall to complete
development of the Project.
The Company, with the assistance of various third
party specialists, identified that the forecast capital
cost overruns at the time were driven by a range of
factors, including:
► design changes on the Project processing plant
made to accommodate performance guarantees
required by the Company’s Senior Lenders;
► design changes due to additional final product
storage and treatment to meet product integrity
specifications;
► the Company underestimating the complexity in
applying a German based design to the desert like
conditions prevalent in the locality of the BSOPP;
► the consequential flow on impacts of design
changes to supply and construction costs of
processing plant and site manning costs;
Construction Timetable
► the actual operating bore performance initially
demonstrating brine extraction rates that were
lower than expected resulting in the requirement for
additional bores, pumps, pipelines and trenches;
► an increase in the gas pipeline cost between the
front-end engineering design (FEED) estimate and
entering into the actual contract, due to geotechnical
risk allocation and underestimation; and
► adverse foreign exchange movements, weather
impacts (including two cyclone events) and
underestimated insurance costs.
Following identification of the forecast capital cost
overrun and in light of the COVID-19 pandemic, the
Company’s senior management team undertook a
process of reassessing the development strategy and
the development budget for the Project. The result of
this review concluded that an additional $61 million
was required to complete the Project.
The above updated forecast capital cost estimate:
► was reviewed and verified by an independent
technical expert; and
► resulted in a total funding deficit of $61 million
(taking into account, amongst other things,
additional contingencies, costs associated
with delays and COVID-19, as well as those
costs associated with the Offers and proposed
recapitalisation).
The Project suffered approximately six months delay in the overall project timetable due to the voluntary suspension
and optimisation period.
Months from FID
Engineering
Procurement and Delivery
Pond construction and
liner installation
Plant construction
Plant commissioning
Gas pipeline & Power Station
Installation
Operational readiness
Milestones
9
1
t
c
O
9
1
v
o
N
9
1
c
e
D
0
2
n
a
J
0
2
b
e
F
0
2
r
a
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0
2
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p
A
0
2
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a
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0
2
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J
0
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0
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A
0
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S
0
2
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0
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0
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D
1
2
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a
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1
2
b
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F
1
2
r
a
M
1
2
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A
1
2
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1
2
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1
2
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1
2
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A
1
2
p
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S
1
2
t
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O
Final Investment
Decision (FID)
Placement and Insto
Offer Complete
Retail Offer
Complete
Gas Pipeline
Construction
Complete
Power Station
Commissioned
Construction
Complete
Lenders
Practical
Completion
Gas Supply
Infrastructure
Commissioned
First
Product
Ramp Up
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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PROJECT UPDATE
Operating Cost Update
In addressing the forecast capital cost overrun,
the Company also commissioned an independent
technical review of the estimated operating costs of
the Project as previously outlined in the FEED. This
review concluded that there were no expected material
impacts to estimated operating costs of the Project as
a result of the forecast capital cost overrun.
De-risking / Mitigation Strategy
The Company developed a revised development
strategy taking learnings from the issues identified to
date in order to seek to de-risk future development
of the Project. Key de-risking strategies or factors
included:
► increased knowledge around key cost parameters,
due to the overall Project being approximately
40% complete at that time (under the Project
development schedule);
► conversion of the process plant part of construction
to a “lump sum” EPC contract;
► increased key contractor alignment through payments
to certain contractors in Shares in lieu of cash;
► development of an optimised execution strategy,
construction schedule and site manning levels to
reduce risk, and to allow construction activities
where all materials and supplies already delivered,
minimising supply risk;
► an increased understanding and certainty around
brine flow characteristics, yield and grade following
completion of all production bores and trenches; and
► de-risking of commissioning through continuation
of operating bores and trenches during the capital
cost adjustment period to maximise salt availability
during ramp-up.
The Company also committed to Board and
Management changes following the equity raising to
ensure that the owners team (being responsible for
the Project development) has the right skill-set and
the Company has appropriate governance systems
in place to support development of the Project going
forward. In addition, the Company is also planning
existing operations and future construction to mitigate
COVID-19 risk as much as possible to ensure the safety
of all employees and contractors, plus protect the
Project schedule and cost, including:
► enhancing temperature and questionnaire
screening;
► establishing flexible and remote working plans;
► identifying mandatory self-quarantine, and isolation
areas on site;
► optimising site works to manage within COVID-19
limitations;
► managing site manning levels to limit COVID-19 risk
and optimising usage of installed accommodation;
and
► working to the “Framework for COVID-19 in the
Resources sector” guidelines.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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In addition to the above, the Company had also
retained various other key miscellaneous contracts (or
contract variations) in respect to the construction of
the Project including:
► gas supply and related infrastructure – the
Company had entered into two contracts, being:
i. for the inlet and delivery stations: a design and
construct contract on a “lump sum” basis; and
ii. for the pipeline: a construct only contract on a
“lump sum” and schedule of rates basis;
► power station – the Company had entered into a
design and construct contract for a “lump sum”
price;
► pond liner supply and installation – the Company
had entered into a supply and installation contract
on a schedule of rates basis; and
► earthworks construction – the Company had
entered into a works contract on a schedule of rates
basis.
“Lump sum” contracts that have been entered into by
the Company are subject to increases if the costs to
perform increases due to matters beyond the relevant
contractor’s control.
Revised Contracting Delivery Model
As a result of the cost overrun, the Company had
implemented a significant change in the contracting
delivery model for the Project whereby the EPCM
contract and the construct only contract for the
construction of the processing plant was replaced
by one engineering, procurement and construction
contract (EPC Contract). The key changes were as
follows:
► replacing the engineering, procurement and
construction contract for a lump sum price - in
accordance with the normal market position, the
lump sum price is subject to increases if the cost
to perform increases due to matters beyond the
contractor’s control (e.g change in law, COVID-19,
force majeure events, any act, default of omission
of the Company);
► commissioning services are performed on a rates
basis;
► the Company only has contracts with less than 20
contractors and vendors (as opposed to more than
80 contractors and vendors) with the remaining
contractors and vendors now engaged under the
EPC Contract as subcontractors; and
► reduction of construction interfaces between the
various major construction components of the
Project via the engagement of less contractors
and vendors, thereby minimising the risk that the
components being designed and constructed by
separate contractors and vendors do not technically
interface correctly.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
17
COMPANY ACTIVITIES
Key Project Developments
10 Mile West Delivers Highest Grades Recorded
Kalium Lakes reported, on 19 November 2019, the
initial brine analysis results for drill holes recently
completed at its recently acquired 10 Mile West
tenement at the BSOPP. The brine assay results were
presented with exploration drill hole data in tables
contained in the announcement.
It was notable that some of these grades are the
highest ever recorded at 10 Mile with potassium grades
up to 12,900 mg/L, equivalent to a SOP grade of 28,750
mg/L. Further, the brine has Low Impurity Levels with
Na:K ratios averaging around 7.4. This figure is key, as it
means less Sodium Chloride (NaCl or table salt) is being
produced and will result in lower waste salt disposal
requirements.
10 Mile West is strategically located next to a granted
Mining Lease, purification facilities and infrastructure,
allowing future potential to extend the trench and bore
network for brine extraction at the BSOPP.
Extensive Increase in Aquifer Thickness
at Lake Sunshine
On 17 December 2019, the Company reported brine
analysis results for recent drilling activities completed
at Lake Sunshine as part of the Beyondie Sulphate
of Potash Project. The brine assay results were
presented in tables in that announcement together
with drill hole locations.
Lake Sunshine has existing Indicated and Measured
Mineral Resources and Ore Reserves for the lake
surface and shallow sediments associated with the
palaeovalley and weathered bedrock. The drilling
results tested the Jilyili Sandstone Formation below
the palaeovalley for brine grade and drainable porosity
with the sandstone being contiguous with the current
Mineral Resources and Ore Reserves.
Results show the sandstone extending down to a depth
of up to 196 m with interbedded friable and cemented
sandstone bands and minor siltstone. Brine samples
were obtained at regular intervals throughout the
profile with airlifts rates typically only restricted by
the anulus of the drilling system. Borehole magnetic
resonance (BMR) logs have been run in the open holes
to measure drainable porosity.
It is notable that some of the grades are the highest
ever recorded at Lake Sunshine with potassium grades
up to 9,360 mg/L, equivalent to a SOP grade of 20,872
mg/L. The drill holes had been completed in the
location of the Stage 1 production borefield at Lake
Sunshine. These results meant that future production
bore designs can be optimised to include the deeper
higher-grade brine.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
17
Beyondie Eastern Lakes Consistent High Grade
Results - Four Year Comparison
On 29 January 2020 Kalium Lakes advised that additional
assay results from the BSOPP had been finalised. These
results were from auger holes located in the eastern
tenements Resource Area. Importantly, the potassium
grades are consistent with results obtained from the
same locations two and four years ago.
The ongoing sampling program reflected KLL’s strategy,
where a staged development approach provides initial
production from the western areas of the project
(Stage 1 currently under construction) then expands
production to include the eastern areas.
High Potassium Grades Continue at 10 Mile West
The Company reported the remaining brine analysis
results for drill holes completed on its 10 Mile West
tenement (E69/3594) at the BSOPP on 4 February 2020.
These remaining results from the 2019 drill and auger
program provided even higher grades and lower
impurity levels than previously reported. The highest
potassium grades had been measured up to 14,200
mg/L equivalent to 31, 644 mg/L SOP. The average
impurity levels of Na:K ratios from these results are 6.9.
Major Maiden Ten Mile West Resource
On 1 July 2020 Kalium Lakes announced the maiden
Mineral Resource for Ten Mile West following initial
exploration in 2019. The Ten Mile West tenement is
located directly adjacent to the existing Ten Mile
operations. Key points included:
► A maiden Mineral Resource of 5.95 Mt @ 17,490 mg/L
SOP estimated at Ten Mile West tenement:
– Measured Resource of 0.10 Mt @ 25,630 mg/L SOP
–
–
Indicated Resource of 0.31 Mt @ 25,830 mg/L SOP
Inferred Resource of 5.54 Mt @ 17,080 mg/L SOP
► This represents the highest reported grade SOP
Resource in Australia directly adjacent to the
current Ten Mile operations.
► Total Resource increase to 25.37 Mt @ 13,375 mg/L
SOP from 18.67 Mt @ 12,388 mg/L,
► a 36% increase in tonnage and 8% increase in grade
across the Beyondie SOP Project.
► Ten Mile Lake trench operations performed better
than anticipated with 35% higher grade and higher
flow rates than predicted, reducing pumping
requirements from the borefield.
Ten Mile West is considered analogous with
the existing Ten Mile Lake deposit. With similar
lake surface and palaeovalley aquifer style SOP
mineralisation. Reported grades to date at Ten Mile
West suggest the brine grades in these areas is the
highest at the BSOPP.
Significant Increase in Resources at Lake Sunshine
On Thursday 27 August 2020 Kalium Lakes announced
the updated Mineral Resource for the BSOPP after
additional drilling and test work supported a threefold
increase in Mineral Resources at Lake Sunshine.
The result represents an increase in Total Mineral
Resources of 6.05 Mt SOP in the Stage 1 area of the
Project which holds only 21% of the total lake surface
area included within the Project’s tenement package.
The work was undertaken as part of optimisation of
the brine production borefield and has delivered an
increased total drainable Mineral Resource figure of
31.42 Mt at 13,151 mg/L SOP for the Project.
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COMPANY ACTIVITIES
Key Corporate Developments
Final Investment Decision – Beyondie SOP Project
WA Government Gives Green Light
On 3 October 2019 Kalium Lakes advised that the
Company’s Board had approved the full development
of its 100% owned Beyondie Sulphate of Potash
Project. The development of this world class, long life,
high margin and low operating cost Sulphate of Potash
(SOP) Project will see Kalium Lakes become one of only
a handful of primary SOP producers globally.
This decision followed the successful completion of
the Company’s A$72 million capital raise in August
in conjunction with the loan facilities to be provided
by KfW IPEX-Bank (approximately A$102 million) and
Northern Australia Infrastructure Facility (A$74 million)
plus a working capital facility from Westpac Banking
Corporation (A$15 million).
The Final Investment Decision (FID) allowed the
acceleration of activities from the approved Early
Works program to Full Scale Construction. As a result,
the Company began the process of finalising the
remaining key construction contracts.
Kalium Lakes was also happy to confirm the support
and consent of the Traditional Owners from the
Gingirana and Birriliburu People who, on 2 October
2019 participated in a Welcome To Country ceremony
on site, as part of the Company’s strong relationship
with local indigenous communities.
These joint activities continue to increase the cultural
awareness between the Company’s team and the
Traditional Owners of the area. Following the ceremony,
guests were able to view the recently completed
infrastructure and facilities, as well as gaining an
appreciation of the scale of the preparations for the
brine extraction and evaporation pond
system at the BSOPP site.
The Premier of Western Australia, Hon. Mark McGowan
MLA, endorsed a Northern Australia Infrastructure
Facility (NAIF) loan to assist in developing infrastructure
for the BSOPP, on Thursday 14 November 2019.
Financial Close Achieved
Kalium Lakes announced that it had reached Financial
Close, under its facility agreements, on 9 December
2019 and advised that it was able to proceed with first
drawdown on its Project Debt Facilities underpinning
the ongoing development of the BSOPP.
Financial Close followed the satisfaction of all required
Conditions Precedent under the Project Debt Facilities.
10 Mile Lake West Tenement Granted
On 1 August 2019, Kalium Lakes advised of the grant
of 10 Mile Lake West Exploration Licence (E69/3594)
which now forms part of the BSOPP. The Company had
previously announced, on 29 October 2018, that it had
entered into an agreement with AIC Resources Limited
(AIC) to acquire a portion of AIC’s tenements which now
forms the newly granted E69/3594.
The new tenement is strategically located adjacent
to the Company’s current BSOPP Mining Leases,
processing facilities and infrastructure, allowing future
potential to extend the trench and bore network for
brine extraction. Importantly, the new tenement is
contiguous with the current delineated lake surface
and paleochannel Mineral Resources and Ore Reserves
with SOP Concentrations increasing to the west of
the current Mining Lease area. The tenement had
also been granted with the consent of the Traditional
Owners of the area, the Gingirana People.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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Australian Federal Government Grants Major
Project Status
Investigation with EcoMag into Sustainable
Extraction of High Value Magnesium
On 6 September 2019, the Company announced that the
Australian Federal Government had recognised the
Beyondie Sulphate of Potash Project’s strategic
significance to Australia by granting it Major Project
Status.
Major Project Status is the Australian Government’s
formal recognition of the national strategic significance
of a project, through its contribution to economic
growth, employment, or contribution to regional
Australia. In addition, Major Project Status provides
coordination and facilitation support, as well as a single
entry point to a coordinated approvals process.
Research and Development – Tax Offset
The Company’s 2018/19 Research and Development
(R&D) Tax Incentive claim was announced as being
completed on 24 October 2019. Under the self-
assessment program, Kalium Lakes has registered
eligible Australian R&D activities for the Beyondie
Sulphate Of Potash Project.
The Company is also eligible to claim R&D tax offsets
for overseas R&D expenditure, on R&D activities
described in the approved Overseas Findings
application, from the beginning of the 2015/16 income
year until completion, which occurred during the
2018/19 period.
Kalium Lakes had received a total of A$1,387,425 in
R&D tax offsets for the 2018/19 income year for both
Australian and approved overseas R&D activities in
relation to the BSOPP.
On 26 November 2019, the Company announced that
together with unlisted, emerging magnesium producer
EcoMag Limited (EcoMag) it had signed a term sheet
committing both companies to jointly undertake
a feasibility study to evaluate the commercial
extraction of magnesium from residual brines
produced at the BSOPP, for sale into international
speciality chemical markets.
On confirmation that the extraction of magnesium
is financially viable, the parties propose to negotiate
a formal joint venture arrangement. KLL has already
identified 8.52 Mt of existing Magnesium (Mg) JORC
defined Mineral Resource.
The Term Sheet followed successful pilot scale trials
by EcoMag of the residual brines from the BSOPP’s
pilot evaporation ponds during 2018 and 2019. The
trials utilised a high magnesium content (up to 9%)
feed brine to produce 99.5% pure hydrated magnesium
carbonate (HMC) with relatively low levels of impurities
and an overall recovery rate in excess of 95%.
As a result, the potential Joint Venture is proposed to
extract very high purity HMC as a precursor compound
to producing magnesium oxides and hydroxides, which
have current market prices between US$1,000 and
US$2,000 per tonne.
Business Development
Work in relation to increased SOP production from the
BSOPP has re-commenced, to assess:
► Increased production potential through de-
bottlenecking activities from the infrastructure and
facilities being currently constructed to produce
90ktpa of SOP (Phase 1).
► Timing, capital requirements, funding sources and
off-take opportunities for doubling of Phase 1
production to in excess of 180 ktpa of SOP (Phase 2).
20
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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COMPANY ACTIVITIES
Key Corporate Developments
Board Changes
On 6 April 2020 the Company announced the
appointment of Mr Dale Champion as a Non-Executive
Director.
On 1 May 2020 the Company announced the
appointment of Mr Brent Smoothy and Mr Mark Sawyer
as Non-Executive Directors.
Following the completion of the formal process to
appoint Mr Smoothy and Mr Sawyer as Directors, Mr
Rudolph van Niekerk advised the Board of his decision
to step down from his role as an Executive Director.
The Company advised on 20 August 2020 that its
chairman, Mr Malcolm Randall, will retire as a director
of the Company at or before its next Annual General
Meeting in November 2020. To allow for an orderly
transition, Mr Randall immediately stepped down from
the role of chairman of the Company and remained as
a non-executive director.
Following that decision, the Board has resolved to
appoint Mr Stephen Dennis, a non-executive director
of the Company, as Chairman.
Mr Dennis is an experienced and well-regarded
company director, with a successful career in the
Australian and international resources sector spanning
more than 35 years. During this time he has been
appointed to a number of senior resource company
boards, several of which he serves as chairman. Having
joined the Kalium Lakes board in April last year, as
the nominee of the Company’s major Shareholder,
Greenstone Resources, Mr Dennis ceased to be
Greenstone’s nominee to the KLL Board and was
replaced in that capacity by current non-executive
director, Mr Mark Sawyer, who is a Senior Partner of
Greenstone Resources.
On 14 October 2020, the Company announced the
appointment of Mr Sam Lancuba as a non-executive
director of the Company. Mr Lancuba is a recognised
expert in the global fertliser industry, with extensive
technical and market experience of fertiliser
processing operations and products throughout
the world.
Sam Lancuba
Non-Executive Director (appointed 14 October 2020)
Mr Lancuba is a chemical engineer with more than 42 years’ experience in the global
fertiliser industry. During his career in the industry, Sam has worked in areas of research
and development, process engineering, manufacturing and management.
Following 27 years at Incitec Pivot Limited, an ASX top 50 company, he moved to providing
expert consulting services for industry clients in Australia, New Zealand, USA, South
America, Europe, India and China.
Sam currently advises fertiliser industry clients in a range of areas including plant design
and maintenance, project management, project evaluation and marketing strategies for
fertiliser products.
20
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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Management Changes
The Company also advised that on 30 April 2020, it had
received a notice of resignation from its Chief Financial
Officer, Mr Chris Achurch, who provided his three
month notice period and agreed to continue in his role
as CFO and Joint Company Secretary, on a contract
basis, until the incoming CFO commences..
On 27 July 2020 the Company advised that Mr Brett
Hazelden ceased his employment with the Company, as
Managing Director and CEO, effective from 24 July 2020.
The Board then resolved to appoint the Chief
Development Officer, Rudolph van Niekerk, as the
Interim Chief Executive Officer and later confirmed his
permanent appointment to the role on 6 October 2020.
The Company announced the appointment of Mr
Antony Beckmand as Chief Financial Officer and Mr
Robert Mencel as General Manager Operations on
29 September 2020.
Rudolph van Niekerk
Chief Executive Officer
Rudolph van Niekerk (B.Eng. Mechanical GAICD) is a professional in the mining and resources
industry with more than 16 years’ experience in project and business management.
During his career Rudolph van Niekerk has held a range of different roles in the management
of projects and operations. His various responsibilities have included financial evaluation,
risk review and management, project management, development of capital and operating
cost estimates, budget development and cost control, design management, planning,
reporting, contract administration, quality control, expediting, construction, commissioning
and production ramp-up.
Antony Beckmand
Chief Financial Officer
Antony Beckmand is a qualified Certified Practicing Accountant with a Bachelor of Commerce
from the University of Western Australia and holds a Graduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia. Antony has more than 20 years’ experience
in the mining industry in Australia and overseas with a background in iron ore, mineral sands,
base metals and gold.
He has held executive management positions with Sydvaranger, Northern Iron and Minas
de Alquife, as well as financial roles with Exxaro Resources, Perilya Ltd and Robe River Iron
Associates. Antony is also a non-executive director of Nordic Mining ASA.
22
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
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COMPANY ACTIVITIES
Key Corporate Developments
Robert Mencel
General Manager Operations
Robert Mencel is a highly proficient engineering and mining executive with more than 25
years’ experience developing and operating a wide range of mining, mineral processing and
engineering operations.
Robert was previously the Chief Executive Officer for RONPHOS Corporation, the Republic of
Nauru’s Phosphate company, where he was responsible for production and export of phosphate
to customers throughout Asia and the Indian Pacific region.
Dayle Pascoe
Project Manager
Dayle Pascoe is a recognised project specialist with extensive project delivery experience in,
minerals processing, materials handling and water projects across Australia, Europe, Asia,
the Middle East and Africa.
His previous project engineering and management roles with major organisations include the
United Group, Laing O’Rourke, Petrosea (Clough), FLSmidth and Lycopodium.
Gareth Widger
Joint Company Secretary and Corporate Affairs Manager
Gareth (BA, GIA (Cert)) has more than 30 years’ experience in senior roles managing
corporate administration and strategic communication activities for public and private
companies within the agriculture, industrial chemical, mining, civil engineering, retail
and wholesale sectors. His responsibilities have included corporate/investor relations,
stakeholder engagement, marketing and media liaison.
Chris Achurch
Chief Financial Officer and Joint Company Secretary
Chris Achurch (B Com, CA), has worked with a number of major businesses across the
construction, exploration, mining and agricultural sectors. Having spent 10 years in public
practice with RSM Australia based in Perth, Dallas and New York, Chris has a comprehensive
understanding of commercial accounting, audit functions and corporate finance. Chris provided
his three month notice period to the Company on 30 April 2020, and agreed to continue in his
role as CFO and Joint Company Secretary on a contract basis until the incoming CFO commences
his formal employment with the Company.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
23
Kalium Lakes undertook the offer to fund (in
conjunction with the Loan Facilities) the construction
of the BSOPP and to provide anticipated working
capital until first production.
The offer comprised of:
► an institutional placement of up to 35 million
new fully paid ordinary shares to raise up to
approximately A$17.5 million; and
► a 1 for 2.19 accelerated pro rata non-renounceable
entitlement offer of up to 109 million new fully paid
ordinary shares to raise up to approximately A$54.6
million.
All New Shares offered under the Offer were to be
issued at a price of A$0.50 per new share.
Successful Completion of Placement and
Institutional Entitlement Offer
The successful completion of the Company’s
institutional placement and the institutional
component of its 1 for 2.19 accelerated non-
renounceable pro-rata entitlement offer was
announced on 26 July 2019.
The placement and institutional entitlement offer
raised a total of A$55.6 million at A$0.50 per new
share. This equity raise resulted in the addition of a
number of new high quality institutional investors to
Kalium Lakes’ register. The retail component of the
entitlement offer then sought to raise approximately
A$16.4 million through a 1 for 2.19 non-renounceable
entitlement offer.
Finance
KfW IPEX-Bank Credit Approval Major Milestone
On 2 July 2019, Kalium Lakes announced that it had
received a credit-approved offer of finance from
German KfW IPEX-Bank for the US / Euro dollar
equivalent of A$102 million of senior debt funding
w(KfW IPEX-Bank Debt Facilities) for the development
of the BSOPP.
These facilities formed part of the overall funding
package for the BSOPP, which included the previously
announced A$74M funding package provided by the
Northern Australia Infrastructure Facility (NAIF).
The KfW IPEX-Bank Debt Facilities are comprised
of two parts:
► Part A - US$ equivalent of €33 million facility
guaranteed by the German Government export
credit agency Euler Hermes, with a final maturity
of approximately 10 years after completion of
construction (the Hermes-Guaranteed Facility); and
► Part B – US$37 million facility, secured against the
BSOPP, with a final maturity of approximately 10
years after completion of construction.
The KfW IPEX-Bank Debt Facilities were subject
to securing a positive decision from the German
Government Inter-Ministerial Committee for the export
credit agency Euler Hermes and the execution of
formal documentation.
German Government Euler Hermes Export Credit
Cover Positive Decision
Kalium Lakes announced on 19 July 2019 that it had
been advised that the German Government Inter
Ministerial Committee (IMC) had reached a positive
decision on its application for the Euro / US dollar
equivalent of approximately A$50 million of project
finance export cover.
Equity raising to fund the development of the
Beyondie SOP Project
On 24 July 2019, the Company informed the market that
it was conducting an institutional placement and an
accelerated non-renounceable entitlement offer to
raise approximately A$72 million.
24
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
25
COMPANY ACTIVITIES
Finance
Successful Completion of Retail Entitlement Offer
As the final component in the equity raise, on 19 August
2019 Kalium Lakes announced the successful completion
of the retail component of its 1 for 2.19 accelerated non-
renounceable pro-rata entitlement offer.
Together with the earlier institutional placement and
institutional component of the entitlement offer, the
total amount raised was approximately A72 million.
Applications equivalent to approximately A$12.1 million
were received under the retail entitlement offer, resulting
in a take-up rate (including additional new shares applied
for in excess of entitlements) of approximately 73%.
Approximately 8.8 million new shares that were not taken
up were allotted to sub-underwriters of the entitlement
offer at the offer price in accordance with the terms of
sub-underwriting agreements.
Westpac to Provide Working Capital and
Hedging Facilities
On 27 August 2019 KLL announced that it had received
a credit-approved offer from Westpac Banking
Corporation (Westpac) for a A$15 million working
capital facility and a hedging facility. Together, these
facilities support prudent capital and risk management
during construction, commissioning and operations of
the Beyondie SOP Project.
The working capital facility is an 18-month revolving
facility with a A$15 million limit that becomes available
from Practical Completion of the Beyondie SOP Project.
The hedging facility is used to hedge risk in accordance
with the hedging policy of the Beyondie SOP Project.
Both facilities are senior secured. The working
capital and hedging facilities were both subject to
the execution of formal documentation and other
customary conditions precedent.
A$61 million Equity Raising
On 21 May 2020, Kalium Lakes Limited announced that,
as a result of identifying a forecast capital cost overrun
to complete Stage 1 of the BSOPP, it was conducting
an institutional placement and a fully underwritten
accelerated non-renounceable entitlement offer
(Offer) to raise approximately A$61 million, to fund the
completion of construction of the BSOPP and to provide
anticipated working capital until first production.
The announcement (Project Update and A$61 million
Equity Raising) contained (among other matters) the
following key points:
► The Offer was comprised of a ~A$19 million
institutional placement (Placement) and a ~A$42
million fully underwritten 5 for 7 accelerated non-
renounceable entitlement offer (Entitlement Offer)
to raise approximately A$61 million.
► This additional capital requirement for the BSOPP
had been reviewed and verified by independent
engineering specialists.
► Major shareholder Greenstone (20.1%) committed to
subscribe for approximately A$12 million under the
Placement and the Entitlement Offer and to sub-
underwrite up to A$2 million of any retail shortfall
(a total commitment of ~A$14m).
► Kalium Lakes’ Board and Senior Management
committed to take up approximately ~A$5.8 million
of the Offer via their pro-rata entitlement and
sub-underwriting the Offer.
► At the time, the overall project was 40% complete
with ~A$100 million of costs incurred and ~23kt
equivalent SOP pumped as at end of April 2020
► Learnings from development challenges were
applied to de-risk the go-forward strategy, including
the processing plant construction contract, now
converted to a lump sum EPC contract.Prospectus
Kalium Lakes lodged a Prospectus, on 21 May 2020,
in respect to the Entitlement Offer to raise up to
approximately $42 million (before costs).
Settlement of Placement and Institutional
Entitlement Offer
On the last trading day of May (29 May 2020) Kalium
Lakes announced the settlement of the Placement
to sophisticated and institutional investors and the
institutional component of the Entitlement Offer.
The Placement and institutional component of the
Entitlement Offer raised a total of $48.8 million at
$0.15 per new share (Offer Price). The Placement and
institutional component of the Entitlement Offer saw
strong support from both existing shareholders and
new investors and resulted in the addition of a number
of new high quality institutional investors to Kalium
Lakes’ share register.
24
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
25
Financial Position
The Company had $54.6 million cash on hand as
at 30 June 2020.
Securities on Issue
The Company had 802,257,785 ordinary shares on issue
as at 30 June 2020.
As at the date of this report the Company has
839,161,349 ordinary shares on issue. The following is a
list detailing other securities on issue on issue, as at the
date of this report:
► 10,000,000 performance rights
► 12,218,987 nil exercise price options expiring
16 June 2023
► 17,667,493 nil exercise price options expiring
16 June 2023
► 1,182,639 options exercisable at
$0.55 each, expiring 16 June 2022
► 1,750,000 options exercisable at
$0.625 each, expiring 16 June 2022
► 5,000,000 options exercisable at
$0.36 each, expiring on 30 June 2025
Dividends
The extent, timing and payment of any dividends in the
future will be determined by the Directors based on a
number of factors, including future earnings and the
financial performance and position of the Company.
In undertaking the Placement, the Company, together
with Morgans Corporate Limited (Lead Manager),
sought to prioritise the participation of existing
shareholders of the Company who are sophisticated
and institutional investors (to the extent, where
possible, to maintain their pro-rata holding). The
Company was reinstated to trading on the ASX on
Monday, 1 June 2020.
Successful Completion of Retail Entitlement Offer
On 11 June 2020, the Company announced the
successful completion of the retail component of
Entitlement Offer.
Applications equivalent to approximately A$7.8 million
at the Offer Price were received under the retail
component of the Entitlement Offer, resulting in a
take-up rate (including additional new shares applied
for in excess of entitlements) of approximately 64%.
Contingent Placement Update
Kalium Lakes released an update in respect to its
contingent placement on 16 June 2020 advising that
approximately 29.4 million new shares, at $0.15 per share
valued at $4.41 million, that were not taken up under
the retail component of the Entitlement Offer, were to
be allotted to the underwriter and sub-underwriters
of the Retail Entitlement Offer at the Offer Price in
accordance with the terms of the underwriting and sub-
underwriting agreements.
The Company advised that related entities had been
issued new hares pursuant to their sub-underwriting
arrangements with the Company and accordingly,
the number of new shares to be issued under
the contingent placement (which was subject to
shareholder approval at the general meeting)
will be reduced.
26
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
27
COMPANY SUMMARY
Safety
At Kalium Lakes the safety, health and wellbeing
of its employees and contractors is of paramount
importance, where no task is so important that it
cannot be done safely. Personal health and safety
performance is considered integral to an efficient and
successful company.
Kalium Lakes also recognises that people are its
greatest asset and encourages a culture of innovation
and creativity in the way it does business.
With the commencement of construction, there was
a rapid increase of personnel both in the Kalium
Lakes’ Operations and Projects teams along with a
major increase in ponds installation and construction
contractors. This increase and the remote nature of
the site led to an increase in the Total Recordable
Injury Frequency Rate (TRIFR) to 35.1 in December 2019
following two vehicle incidents. As a result of focussed
efforts during the second half of the financial year the
TRIFR rate decreased to 20.1 and continues to fall.
A total of 192,422 man hours were recorded for
Beyondie SOP Project site during the Financial Year to
30 June 2020. Two Lost Time Injuries and no Medical
Treatment Injuries were recorded during this period.
Kalium Lakes continues to develop its Health Safety
and Environmental Systems as the environment
evolves from exploration to construction and then
forward into operations.
Sustainability
Native Title and Heritage
Kalium Lakes recognises the importance of country,
law and culture to the Traditional Owners of the
land in which they operate. Through developing and
implementing an Indigenous Engagement Strategy,
Kalium Lakes is committed to engaging with and
fostering relationships with Indigenous People that
are inclusive, respectful and make a lasting and
positive contribution.
Kalium Lakes is committed in ensuring early and
transparent engagement and is actively working with
the relevant native title parties and knowledge holders
to implement the Land Access Agreements to support
project development and operations.
Kalium Lakes also expects its managers to be educated
and active in fostering long-term relationships
with both Indigenous People and the Community
surrounding their operations.
The Company recognises that culturally significant
sites and issues may from time to time be identified
on its leases. Its management, employees, contractors
and associates undertake to comply with the
requirements of the Aboriginal Heritage Act 1972 and
in accordance with the Cultural Heritage Management
Plans in recognising these sites and places.
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
27
Environment
Key Risks
Kalium Lakes Limited is committed to responsible
environmental management and environmental
performance as an essential attribute of an efficient
and successful company. This will be achieved through
leadership and the use of reliable systems that provide
timely and accurate information, in a transparent
manner to support effective decision making.
Community
Kalium Lakes strives to maintain integrity while
upholding positive and cooperative relationships with
its stakeholders. In doing so, it will continually work
to build trust and respect, as well as ensuring that
key stakeholders are informed in a timely, open and
transparent manner.
The Company will maintain a clear and concise
approach to consultation and negotiations with
landholders, adhere to acceptable protocols that are
endorsed by local community representatives and
establish mutually beneficial long term relationships,
employment and contracting opportunities as part of a
culturally aware workplace.
The key Risks for the BSOPP are set out in the
comprehensive list published on pages 65-72 in
Prospectus lodged with the ASX on 21 May 2020.
ASX Corporate Governance Council’s
Corporate Governance Principles and
Recommendations
The Company has adopted comprehensive systems
of control and accountability as the basis for the
administration of corporate governance. The Board is
committed to administering the Company’s policies
and procedures with openness and integrity, pursuing
the true spirit of corporate governance commensurate
with the Company’s needs.
To the extent applicable, the Company has adopted
the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations
(Recommendations).
The Board considers that, due to the Company’s
size and nature, the current Board composition and
structure is a cost effective and practical method
of directing and managing the Company. As the
Company’s activities develop in size, nature and
scope, the size of the Board and the implementation
of additional corporate governance policies and
structures will be reviewed.
The Company’s Corporate Governance Statement
is available on the Company’s website at
www.kaliumlakes.com.au
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K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
29
COMPANY SUMMARY
Comprehensive BSOPP Key Construction Approvals Obtained
Legislation
Nature of Approval
Part IV - EPA Approval (early works)
Part IV - EPA Approval (full project)
Approval Status
Secured May 2018
EPA recommended approval April
2019. Ministerial Statement June 2019.
Tecticornia Monitoring and Management Plan
Secured September 2019
Environmental
Protection Act 1986
Compliance Assessment Plan
Part V - Works Approval – Pilot Scale Evaporation Ponds
Secured July 2019
Secured August 2019
Part V - Works Approval Amendment; Evaporation Ponds (full project)
Secured January 2016
Part V – Works Approval - Waste Water Treatment Plant / Sewage
Secured October 2018
Part V - Works Approval; Landfill
POW - Exploration Proposal – Pilot Ponds & Infrastructure
POW - Camp upgrade and communication towers
Secured June 2019
Secured April 2016
Secured July 2018
Mining Proposal and Closure Plan – Camp, Workshop and Comms Tower (early works)
Secured August 2018
Mining Proposal and Closure Plan (full project)
Secured September 2019
Registration of Exploration Manager and nominated site safety representatives
Completed August 2015
Registration of Construction Manager, Electrical Supervisor, Site Manager
Completed May 2019
Project Management Plan (early works)
Project Management Plan (full project)
26D Bore construction (early works)
5C Licence for 1.5Glpa pilot works (early works)
Secured February 2018
Secured February 2019
Secured June 2015
Secured August 2016
5C licences for production (brine) and supply (fresh) bores (full project)
Secured July 2019
26D Licence for production (brine) and supply (fresh) bores construction (full project)
Secured June 2019
Mining Act 1978
Mines Safety and
Inspection Act 1994
Rights in Water and
Irrigation Act 1914
Environment Protection
and Biodiversity
Conservation Act 1999
EPBC Act approval
Night Parrot Management Plan
Groundwater Monitoring and Management Plan
Native Title Act 1993
Mining Land Access Agreements
Exploration Heritage Agreements
Heritage Surveys
Aboriginal Heritage
Act 1972
Excess Tonnage Consent Letter
Section 18 Clearance
Cultural Heritage Management Plans
Pipeline Licence to Construct
Secured January 2019
Secured July 2019
Secured June 2019
Secured March 2016 Gingirana
Secured January 2018 MNR
Secured March 2015
Completed during 2015/16/18/19
Secured December 2015
Not required for the BSOPP
Secured March 2016 Gingirana
Secured January 2018 MNR
Secured November 2018
Petroleum Pipelines
Act 1969
Health (Miscellaneous
Provisions) Act 1911
Dangerous Goods
Safety Act 2004
Medicines and
Poisons Act 2014
Construction Safety Case – Gas Pipeline Construction
Secured September 2019
Approval to construct or install an apparatus for sewage treatment
Secured September 2018
Certificate of Construction – Permit to Use (sewage)
Secured September 2019
Main Roads Act 1930
Great Northern Hwy Intersection Approval
Building Act 2011
Shire Building Permit for Camp
Dangerous Goods Site Licence
Secured April 2019
Secured July 2019
Secured October 2019
Poisons Permit (For Site Medic)
Secured November 2019
28
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
29
Beyondie Sulphate Of Potash Project - Tenement Interests
Tenement
Name
Holder
State
Status
Grant Date
Interest
Exploration Licences
E69/3306
Yanneri-Terminal
E69/3309
10 Mile Beyondie-
E69/3339
West Central
E69/3340
White
E69/3341
West Yanneri
E69/3342
Aerodrome
E69/3343
T Junction
E69/3344
Northern
E69/3345
Wilderness
E69/3346
NE Beyondie
E69/3347
10 Mile South
E69/3348
North Yanneri-Terminal
E69/3349
East Central
E69/3351
Sunshine
E69/3352
Beyondie Infrastructure
E69/3594
10 Mile West
Miscellaneous Licences
L52/162
L52/186
L52/187
L52/193
L69/28
L69/29
L69/30
L69/31
L69/32
L69/34
L69/35
L69/36
L69/38
L69/40
L69/41
Access Road
G N Hwy Access Road
Comms Tower 2
Kumarina FW 2
Access Road Diversion
Access Road Village
Comms Tower 1
Sunshine Access Road
10MS FW A
10MS FW B
10MS FW C
10MS FW D
Access Road “S” Bend
10 Mile Airstrip
10 Mile Village
Mining Licences
M69/145
M69/146
10 Mile
Sunshine
Gas Pipeline
PL117
Gas Pipeline
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLP
KLI
KLI
KLI
KLP
KLI
KLI
KLI
KLP
KLP
KLP
KLP
KLP
KLI
KLI
KLI
KLP
KLP
KLI
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
WA
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
Granted
17-3-2015
17-4-2015
22-6-2015
22-6-2015
11-8-2015
22-6-2015
22-5-2015
22-5-2015
22-5-2015
11-8-2015
11-8-2015
11-8-2015
22-6-2015
31-8-2015
31-8-2015
26-07-2019
30-3-2016
30-5-2018
30-5-2018
13-8-2018
7-8-2018
7-8-2018
30-5-2018
7-8-2018
14-8-2018
14-8-2018
17-12-2018
17-12-2018
30-1-2019
8-2-2019
8-2-2019
6-6-2018
6-6-2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Granted
7-11-2018
100%
Note: Kalium Lakes Potash Pty Ltd (KLP) and Kalium Lakes Infrastructure Pty Ltd (KLI) are wholly owned subsidiaries of Kalium Lakes Limited (KLL).
30
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
31
COMPANY SUMMARY
Annual Mineral Resources and Ore Reserves Statement - Resources Tables as at 8 October 2020
JORC / CIM Resources: Beyondie Sulphate of Potash Project
JORC / CIM
Resource
Drainable
Brine Volume
(M m3)
K Grade
(mg/L)
Measured Resource
Indicated Resource
Combined Measured
and Indicated
Inferred Resource
353
1,048
1,401
988
Total Mineral Resource
2,389
5,489
5,647
5,607
6,309
5,897
K
(Mt)
1.93
5.92
7.85
6.24
14.09
So4
(Mt)
5.83
17.12
22.95
19.02
41.97
Mg
(Mt)
1.99
5.64
7.63
5.85
13.48
Drainable
Brine Volume
SOP (Mt)
Total Brine
Volume SOP
(Mt)
4.32
13.19
17.51
13.91
31.42
11.35
41.43
52.78
99.57
152.35
Exploration Target^
919 - 2,937
1,800 - 3,300
1.6 - 9.8
5.1 - 26.8
1.9 – 10.9
3.7 – 21.7
44 - 243
^ The BSOPP Exploration Target is based on a number of assumptions and limitations and is conceptual in nature. There has been insufficient
exploration to estimate a Mineral Resource for the Exploration Target. It is not an indication of a Mineral Resource Estimate in accordance with the
JORC Code (2012) and it is uncertain if future exploration will result in the determination of a Mineral Resource.
* SOP grade calculated by multiplying Potassium (K) by a conversion factor of 2.23. Note errors are due to rounding.
30
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
31
Annual Mineral Resources and Ore Reserves Statement - Resources Tables as at 8 October 2020
Aquifer Type
Volume
(106 m3)
Total
Porosity
(-)
Brine
Volume
(106 m3)
Specific
Yield
(-)
Drainable
Brine
Volume
(106 m3)
K
Grade
(mg/L)
K
Mass
(Mt)
SO4
Grade
(mg/L)
SO4
Mass
(Mt)
Mg
Grade
(mg/L)
Mg
Mass
(mg/L)
SOP
Grade
(kg/m3)
K2SO4
Mass
(Mt)
Measured Mineral Resources
Lake Surface Sediments
Alluvium
Palaeovalley Clay
Sand and Silcrete
Fractured and Weathered
Sandstone
Fractured / Weathered
Bedrock
221
251
833
203
0.47
0.31
0.36
0.32
1,423
0.16
782
0.24
Total Resources
3,713
104
78
300
65
228
188
963
38
30
50
43
0.17
0.12
0.06
0.21
0.08
7,142
0.27
19,764
0.75
6,667
0.25
15.93
3,125
0.09
10,556
0.32
4,379
4,491
0.22
14,350
0.72
4,109
5,306
0.23
16,562
0.71
4,905
0.13
0.21
0.21
0.61
0.21
6.97
10.01
0.50
11.83
0.51
114
6,148
0.70
18,832
2.15
6,532
0.74
13.71
1.56
0.10
78
5,368
0.42
15,150
1.18
5,817
0.45
11.97
0.93
353
5,489
1.93
16,504 5.83
5,664
1.99
12.24
4.32
Note: SOP grade calculated by multiplying Potassium (K) by a conversion factor of 2.23. Errors are due to rounding.
Indicated Mineral Resources (inclusive of the ore reserves)
Lake Surface Sediments
Alluvium
Palaeovalley Clay
Sand and Silcrete
Fractured and Weathered
Sandstone
Fractured / Weathered
Bedrock
651
1,542
1,455
273
0.46
0.34
0.34
0.32
299
524
495
87
0.12
0.12
0.07
0.21
78
185
102
57
7,379
0.58
20,972
1.64
6,521
4,520
0.84
13,159
2.43
4,068
0.51
0.75
16.46
10.08
5,711
0.58
16,577
1.69
5,370
0.55
12.74
4,811
0.27
14,110
0.80
4,298
0.24
10.73
1.28
1.86
1.30
0.61
4,859
0.16
777
0.08
389
5,960
2.32
17,064
6.64
6,107
2.38
13.29
5.17
4,745
0.23
1,091
0.05
237
5,617
1.33
16,549
3.92
5,113
1.21
12.53
2.97
Total Resources
13,525
3,273
1048
5,647
5.92
16,341
17.12
5,383
5.64
12.59
13.19
Note: SOP grade calculated by multiplying Potassium (K) by a conversion factor of 2.23. Errors are due to rounding.
Inferred Mineral Resources
Lake Surface Sediments
N/A
N/A
N/A
Alluvium
Palaeovalley Clay
Sand and Silcrete
Fractured and Weathered
Sandstone
Fractured / Weathered
Bedrock
272
1,352
14,508
0.47
0.43
0.35
128
581
5,078
0.03
N/A
0.13
0.11
80
35
149
435
5,373
0.43
16,986
1.36
3,632
0.29
11.97
0.96
11,735
0.41
31,405
1.10
7,969
0.28
26.17
0.92
5,884
0.88
17,939
2.67
5,899
0.88
13.12
5,898
2.57
17,929
7.80
6,171
2.68
13.15
1.96
5.72
608
0.31
188
0.21
128
5,435
0.70
16,611
2.13
5,569
0.71
12.12
1.55
5,350
0.21
1,124
0.03
161
7,791
1.25
24,625
3.96
6,263
1.01
17.37
2.80
Total Resources
19,252 19.02
Note: SOP grade calculated by multiplying Potassium (K) by a conversion factor of 2.23. Errors are due to rounding.
22,090
6,309
7,099
6.24
988
5,925
5.85
14.07
13.91
Geological
Layer
Maximum
Thickness
(m)
Coverage
(km2)
Sediment
Volume
(106 m3)
Total
Porosity
(-)
Total
Stored
Brine
(106 m3)
Specific
Yield
(-)
Drainable
Brine
Volume
(106 m3)
K
Grade
(mg/L)
K
Mass
(Mt)
SO4
Grade
(mg/L)
SO4
Mass
(Mt)
Mg
Grade
(mg/L)
Mg
Mass
(mg/L)
K2SO4
Mass
(Mt)
Exploration Target *
Alluvium
Palaeovalley Clay
Basal Sands
Total
Alluvium
Palaeovalley Clay
Palaeochannel Sand
Total
6
20
7
12
50
10
157
1,148
108
942
22,960
756
0.4
0.45
0.35
0.10
0.03
0.18
377
10,332
265
10,974
157
1,884
0.5
942
0.18
94
689
136
919
339
2,000
1,800
1,600
1,800
3,500
1,148
57,400
0.55
31,570
0.04
2,296
3,300
108
1,080
0.45
486
0.28
32,998
302
2,937
3,200
3,300
0.2
1.2
0.2
1.6
1.2
7.6
1.0
9.8
6,100
5,500
5,000
9,600
0.6
3.8
0.7
5.1
3.3
2,300
2,100
1,900
3,900
9,100
20.9
3,700
8,700
2.6
3,500
0.2
1.4
0.3
1.9
1.3
8.5
1.1
0.4
2.8
0.5
3.7
2.6
16.9
2.2
26.8
10.9
21.7
The BSOPP Exploration Target is based on a number of assumptions and limitations and is conceptual in nature. There has been insufficient
exploration to estimate a Mineral Resource for the Exploration Target. It is not an indication of a Mineral Resource Estimate in accordance with
the JORC Code (2012) and it is uncertain if future exploration will result in the determination of a Mineral Resource. Note: SOP grade calculated by
multiplying Potassium (K) by a conversion factor of 2.23. Errors are due to rounding.
32
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
33
COMPANY SUMMARY
Proved Ore Reserves
Aquifer Type
Production Bores
Total Proved Reserve
Note: Errors are due to rounding.
Probable Ore Reserves
Aquifer Type
Lake Surface Sediments
Production Bores
Total Probable Reserve
Note: Errors are due to rounding.
Ore Reserves Summary
Brine Volume
(106 m3)
119
119
K
(mg/L)
6,207
6,207
Brine Volume
(106 m3)
212
83
295
K
(mg/L)
4,755
6,713
5,306
K
Mass
(Mt)
0.74
0.74
K
Mass
(Mt)
1.01
0.56
1.57
SO4
(mg/L)
17,945
17,945
SO4
(mg/L)
13,669
18,867
15,129
SO4
Mass
(Mt)
2.14
2.14
SO4
Mass
(Mt)
2.90
1.56
4.46
SOP
Grade
(kg/m3)
13.83
13.83
SOP
Grade
(kg/m3)
10.60
14.96
11.82
K2SO4
Mass
(Mt)
1.65
1.65
K2SO4
Mass
(Mt)
2.25
1.24
3.49
Level
Proved Ore Reserve
Probable Ore Reserve
Total Ore Reserve
Drainable
Brine
Volume
(106 m3)
119
295
414
K
Grade
(mg/l)
6,207
5,306
5,565
K
(Mt)
0.74
1.57
2.30
SO4
(Mt)
2.14
4.46
6.60
K2SO4
Mass
(Mt)
1.65
3.49
5.13
Compliance Statement and Competent
Persons Statements
The information in this ASX announcement that relates
to Exploration Targets, Exploration Results, Mineral
Resources and Ore Reserves is based on information
compiled by Thomas Schicht, a Competent Person
who is a Member of a ‘Recognised Professional
Organisation’ (RPO), the European Federation of
Geologists, and a registered “European Geologist”
(Registration Number 1077) and Anke Schindler, a
Competent Person who is a Member of a RPO, the
European Federation of Geologists, and a registered
“European Geologist” (Registration Number 1152). The
potential quantity and grade of the Exploration Targets
is conceptual in nature and there has been insufficient
exploration to estimate a Mineral Resource in relation
to such Exploration Targets and it is uncertain if
further exploration will result in the estimation of a
Mineral Resource.
Certain information in this document is extracted
from the report titled “TECHNICAL REPORT FOR THE
BEYONDIE POTASH PROJECT, AUSTRALIA, JORC (2012) and
NI 43-101 Technical Report – Bankable Feasibility Study”
dated 17 September 2018 and the ASX announcements
titled “Lower Operating Cost and Increased Production
for BSOPP” dated 4 March 2019 and “Major Maiden
Ten mile West Resources” dated 1 July 2020, that
relates to Exploration Results, Exploration Targets,
Mineral Resources and Ore Reserves and is based
on and fairly represents information and supporting
documentation compiled by Thomas Schicht and
Anke Schindler. Kalium Lakes confirms that it is not
aware of any new information or data that materially
affects the information included in the original market
announcements and, in the case of estimates of Mineral
Resources, Ore Reserve Estimates or Exploration
Targets, that all material assumptions and technical
parameters underpinning the estimates in the relevant
market announcement continue to apply and have not
materially changed. The company confirms that the form
and context in which the Competent Person’s findings
are presented have not been materially modified from
the original market announcement.
Thomas Schicht and Anke Schindler are full-term
employees of K-UTEC AG Salt Technologies (K-UTEC).
K-UTEC, Thomas Schicht and Anke Schindler are not
associates or affiliates of Kalium Lakes or any of its
affiliates. K-UTEC has received a fee for their report
in accordance with normal professional consulting
32
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
33
practices. This fee is not contingent on the conclusions
of their report and K-UTEC, Thomas Schicht and
Anke Schindler will receive no other benefit for the
preparation of their report. Thomas Schicht and Anke
Schindler do not have any pecuniary or other interests
that could reasonably be regarded as capable of
affecting their ability to provide an unbiased opinion
in relation to the Beyondie Potash Project. K-UTEC
does not have, at the date of their report, and has not
had within the previous years, any shareholding in or
other relationship with Kalium Lakes or the Beyondie
Potash Project and consequently considers itself to be
independent of Kalium Lakes.
Thomas Schicht and Anke Schindler have sufficient
experience that is relevant to the style of mineralisation
and type of deposit under consideration and to the
activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the JORC
‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Thomas Schicht
and Anke Schindler consent to the inclusion in this
document of the matters based on their information in
the form and context in which it appears.
Forward looking statements
Certain information in this document refers to the
intentions of Kalium Lakes, but these are not intended
to be forecasts, forward looking statements or
statements about the future matters for the purposes
of the Corporations Act or any other applicable
law. The occurrence of the events in the future are
subject to risk, uncertainties and other actions that
may cause Kalium Lakes’ actual results, performance
or achievements to differ from those referred to
in this document. Accordingly Kalium Lakes and its
affiliates and their directors, officers, employees and
agents do not give any assurance or guarantee that
the occurrence of these events referred to in the
document will actually occur as contemplated.
Statements contained in this document, including
but not limited to those regarding the possible or
assumed future costs, performance, dividends, returns,
revenue, exchange rates, potential growth of Kalium
Lakes, industry growth or other projections and any
estimated company earnings are or may be forward
looking statements. Forward-looking statements
can generally be identified by the use of words such
as ‘project’, ‘foresee’, ‘plan’, ‘expect’, ‘aim’, ‘intend’,
‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or
similar expressions. These statements relate to future
events and expectations and as such involve known
and unknown risks and significant uncertainties, many
of which are outside the control of Kalium Lakes.
Actual results, performance, actions and developments
of Kalium Lakes may differ materially from those
expressed or implied by the forward-looking
statements in this document. Such forward-looking
statements speak only as of the date of this document.
There can be no assurance that actual outcomes
will not differ materially from these statements. To
the maximum extent permitted by law, Kalium Lakes
and any of its affiliates and their directors, officers,
employees, agents, associates and advisers:
► disclaim any obligations or undertaking to release
any updates or revisions to the information to
reflect any change in expectations or assumption;
► do not make any representation or warranty,
express or implied, as to the accuracy, reliability or
completeness of the information in this document,
or likelihood of fulfilment of any forward-looking
statement or any event or results expressed or
implied in any forward-looking statement; and
► disclaim all responsibility and liability for these
forward-looking statements (including, without
limitation, liability for negligence).
34
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
35
COMPANY SUMMARY
Other Potential Future Potash Prospects
Dora / Blanche (100% Owned)
The Company has applied for exploration licences that could, if granted, introduce a new prospective area, the Dora/
Blanche Prospect, for potassium exploration.
Carnegie Potash Project - Joint Venture
The Carnegie Joint Venture (CJV) is considering the exploration and development of the Carnegie Potash Project (CPP)
in Western Australia, which is located approximately 220 kilometres east-north-east of Wiluna. The CJV comprises one
granted exploration licence (E38/2995) and five (5) exploration licence applications (E38/2973, E38/2928, E38/3297,
E38/5296 and E38/3295) covering a total area of approximately 3,040 square kilometres.
The CJV is a Joint Venture between Kalium Lakes (KLL, 70% Interest) and BCI Minerals (BCI, 30% interest). Under the
terms of the agreement BCI can earn up to a 50% interest in the CJV by predominantly sole-funding exploration and
development expenditure across several stages. KLL is the manager of the CJV.
Tenement Interests – Dora / Blanche / Carnegie Potash Prospects (as at 30 September 2020)
Tenement
Name
Holder
State
Status
Grant Date
Interest
Dora / Blanche
E45/4436
Dora
E45/4437
Blanche
Carnegie
E38/2995
Carnegie East
E38/2973
Carnegie Central
E38/2982
Carnegie West
E38/3295
Carnegie South West
E38/3296
Carnegie South East
E38/3297
Carnegie North
E38/3547
Burnside
Rachlan
Rachlan
KLP
Rachlan
Rachlan
KLP
KLP
KLP
KLP
WA
WA
WA
WA
WA
WA
WA
WA
WA
Application
Application
-
-
Granted
31-7-2015
Application
Application
Application
Application
Application
Application
-
-
-
-
-
-
100%
100%
70%
70%
70%
70%
70%
70%
70%
Note: Kalium Lakes Potash Pty Ltd (KLP) entered into a declaration of trust with Rachlan Holdings Pty Ltd (Rachlan) where Rachlan will hold for the
benefit of KLP certain exploration licence applications and deal with the applications as directed by KLP (including transferring title).
34
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
35
Carnegie Potash Project - Resources Tables (as at 8 October 2020)
Geological
Layer
Maximum
Thickness
(m)
Coverage
(km2)
Sediment
Volume
(106 m3)
Total
Porosity
(P)
Total
Stored
Brine
(106 m3)
Specific
Yield
(-)
Drainable
Brine
(106 m3)
K
Grade
(mg/L)
K
Mass
(Mt)
SO4
Grade
(mg/L)
SO4
Mass
(Mt)
K2SO4
Mass
(Mt)
Inferred Mineral Resources
Lake Sediments
10
108
1,080
0.45
486
0.28
302
3,200
1.0
8,700
2.6
2.2
Exploration Target*
Alluvium
Clays
Basal Sands
Total
Alluvium
Clays
Basal Sands
Total
7
40
7
12
60
17
278
287
80
561
287
80
1,948
11,471
557
6,727
17,207
1,353
0.35
0.40
0.28
0.40
0.45
0.35
0.05
0.03
0.15
0.14
0.06
0.25
682
4,589
156
5,427
2,691
7,743
474
10,908
88
287
84
459
377
465
118
960
3,500
0.31
12,963
3,400
0.98 12,593
3,300
0.28 12,222
3,410
3,500
1.57
1.32
12,963
5.00
1.14
3.61
1.02
5.77
0.68
2.17
0.61
3.46
2.94
3,400
1.58
12,593
5.85
3.52
3,300
0.39
12,222
1.45
3,420 3.29
12.30
0.87
7.33
*The Carnegie Potash Project “Exploration Target” is based on a number of assumptions and limitations and is conceptual in nature. It is not
an indication of a Mineral Resource Estimate in accordance with the JORC Code (2012) and it is uncertain if future exploration will result in the
determination of a Mineral Resource or that the Exploration Target will add to the economics of the Carnegie Potash Project.
Forward-Looking Information
Certain information in this document refers to the
intentions of Kalium Lakes, but these are not intended
to be forecasts, forward looking statements or
statements about the future matters for the purposes
of the Corporations Act or any other applicable
law. The occurrence of the events in the future are
subject to risk, uncertainties and other actions that
may cause Kalium Lakes’ actual results, performance
or achievements to differ from those referred to
in this document. Accordingly Kalium Lakes and its
affiliates and its directors, officers, employees and
agents do not give any assurance or guarantee that
the occurrence of these events referred to in the
document will actually occur as contemplated.
Statements contained in this document, including
but not limited to those regarding the possible or
assumed future costs, performance, dividends, returns,
revenue, exchange rates, potential growth of Kalium
Lakes, industry growth or other projections and any
estimated company earnings are or may be forward
looking statements. Forward-looking statements
can generally be identified by the use of words such
as ‘project’, ‘foresee’, ‘plan’, ‘expect’, ‘aim’, ‘intend’,
‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or
similar expressions. These statements relate to future
events and expectations and as such involve known
and unknown risks and significant uncertainties, many
of which are outside the control of Kalium Lakes.
Actual results, performance, actions and developments
of Kalium Lakes may differ materially from those
expressed or implied by the forward-looking
statements in this document. Such forward-looking
statements speak only as of the date of this document.
There can be no assurance that actual outcomes
will not differ materially from these statements. To
the maximum extent permitted by law, Kalium Lakes
and any of its affiliates and their directors, officers,
employees, agents, associates and advisers:
► disclaim any obligations or undertaking to release
any updates or revisions to the information to
reflect any change in expectations or assumption;
► do not make any representation or warranty,
express or implied, as to the accuracy, reliability or
completeness of the information in this document,
or likelihood of fulfilment of any forward-looking
statement or any event or results expressed or
implied in any forward-looking statement; and
► disclaim all responsibility and liability for these
forward-looking statements (including, without
limitation, liability for negligence.
36
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
37
COMPANY SUMMARY
Compliance Statement
The information in this document is extracted from the
report titled “CARNEGIE POTASH PROJECT, AUSTRALIA,
JORC (2012) and NI 43-101 TECHNICAL REPORT” and
dated 30 June 2018 (Report), that relates to Exploration
Targets, Exploration Results and Mineral Resources
and is based on and fairly represents information
and supporting documentation compiled by Thomas
Schicht, a Competent Person who is a Member of a
‘Recognised Professional Organisation’ (RPO), the
European Federation of Geologists, and a registered
“European Geologist” (Registration Number 1077) and
Anke Penndorf, a Competent Person who is a Member
of a RPO, the European Federation of Geologists, and a
registered “European Geologist” (Registration Number
1152). Kalium Lakes confirms it is not aware of any
new information or data that materially affects the
information included in the original announcement
regarding the Report and, in the case of estimates of
Mineral Resources, which all material assumptions
and technical parameters underpinning the estimates
in the relevant announcement continue to apply and
have not materially changed. The potential quantity
and grade of the exploration targets is conceptual in
nature and there has been insufficient exploration
to estimate a mineral resource in relation to such
exploration targets and it is uncertain if further
exploration will result in the estimation of a mineral
resource. Kalium Lakes confirms that the form and
context in which the Competent Persons’ findings are
presented have not been materially modified from the
original announcement regarding the Report.
Thomas Schicht and Anke Penndorf are full-term
employees of K-UTEC AG Salt Technologies (K-UTEC).
K-UTEC, Thomas Schicht and Anke Penndorf are not
associates or affiliates of Kalium Lakes or any of its
affiliates. K-UTEC has received a fee for the preparation
of the Report in accordance with normal professional
consulting practices. This fee is not contingent on the
conclusions of the Report and K-UTEC, Thomas Schicht
and Anke Penndorf will receive no other benefit for the
preparation of the Report. Thomas Schicht and Anke
Penndorf do not have any pecuniary or other interests
that could reasonably be regarded as capable of
affecting their ability to provide an unbiased opinion
in relation to Kalium Lakes and Carnegie Potash
Project.
K-UTEC does not have, at the date of the Report,
and has not had within the previous years, any
shareholding in or other relationship with Kalium
Lakes or the Carnegie Potash Project and consequently
considers itself to be independent of Kalium Lakes.
Thomas Schicht and Anke Penndorf have
sufficient experience that is relevant to the style
of mineralisation and type of deposit under
consideration and to the activity being undertaken to
qualify as a Competent Person as defined in the 2012
Edition of the JORC ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore
Reserves’. Thomas Schicht and Anke Penndorf consent
to the inclusion in the Report of the matters based on
their information in the form and context in which it
appears.
36
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38
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DIRECTORS’ REPORT
The Directors present their report, together with the financial statements, on the Consolidated Entity (referred to
hereafter as the ‘Consolidated Entity” or “Company”) consisting of Kalium Lakes Limited and the entities it controlled
at the end of, or during, the year ended 30 June 2020.
Directors
The names of Directors who held office during or since the end of the year:
Stephen Dennis
Non-Executive Chairman (appointed Chairman 20 August 2020)
Brett Hazelden
Managing Director (ceased employment 24 July 2020)
Malcolm Randall
Non-Executive Director (ceased as Chairman 20 August 2020)
Sam Lancuba
Non-Executive Director (appointed 14 October 2020)
Dale Champion
Non-Executive Director (appointed 6 April 2020)
Mark Sawyer
Non-Executive Director (appointed 1 May 2020)
Brent Smoothy
Non-Executive Director (appointed 1 May 2020)
Rudolph van Niekerk
Executive Director (resigned 1 May 2020)
38
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
39
Directors’ Qualifications and Experience
The Directors’ qualifications and experience are set out below:
Stephen Dennis
Non-Executive Chairman (appointed Chairman 20 August 2020)
Mr Stephen Dennis (B Com, BLL.B GDipAppFin (FINSIA)), has a career spanning more than 30
years as an experienced and well regarded company director and has been appointed on
a number of senior boards in the Australian and international resources sector.
Mr Dennis was the Managing Director and Chief Executive Officer of CBH Resources Limited
and is currently the non-executive chairman of several ASX listed resource companies.
Mr Dennis has also held senior operational and commercial positions at MIM Holdings
Limited, Minara Resources Limited, and Brambles Australia Limited.
Other current Directorships: Rox Resources Limited, LeadFX Limited, EHR Resources Limited,
Heron Resources, Graphex Limited
Former Directorships (last 3 years): Nil
Interest in shares: 1,333,334 (as at the date of this report)
Interest in options: Nil (as at the date of this report)
Malcolm Randall
Non-Executive Director (ceased as Chairman 20 August 2020)
Mr Malcolm Randall, (Dip. Applied Chem, Fellow of the Australian Institute of Company
Director), has more than 45 years’ of extensive experience in corporate, management and
marketing in the resources sector, including more than 25 years with the Rio Tinto group of
companies. His experience has covered a diverse range of commodities including iron ore,
base metals, uranium, mineral sands and coal. Mr Randall has held the position of chairman
and director of a number of ASX listed companies.
Other current Directorships: Ora Gold Limited, Magnetite Mines Limited, Argosy Minerals
Limited, Hastings Technology Metals Limited
Former Directorships (last 3 years): Summit Resources
Interest in shares: 3,342,363 (as at the date of this report)
Interest in options: Nil (as at the date of this report)
40
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DIRECTORS’ REPORT
Dale Champion
Non-Executive Director (appointed 6 April 2020)
Dale Champion’s (Bachelor of Business, GAICD) finance career spanned more than 25 years
and included extensive experience in institutional and corporate banking, together with
structured and international trade finance. Dale established Agrify, a private Australian
based advisory firm specialising in agricultural related industries, in 2010.
Other current Directorships: Nil
Former Directorships (last 3 years): Nil
Interest in shares: 3,749,061 (as at the date of this report)
Interest in options: Nil (as at the date of this report)
Mark Sawyer
Non-Executive Director (appointed 1 May 2020)
Mark Sawyer (LL.B.) is a co-founder of Greenstone Resources which he founded in 2013 after
a successful 16 year career in the resources sector. Prior to establishing Greenstone, Mark
was GM and Co-Head Group Business Development at Xstrata plc. Prior to Xstrata, he was a
founder and partner at Cutfield Freeman & Co, a boutique advisory firm. Mark is a corporate
finance Solicitor by training.
Other current Directorships: Heron Resources, Metro Mining Limited
Former Directorships (last 3 years): Nil
Interest in shares: Nil (as at the date of this report)
Interest in options: Nil (as at the date of this report)
Brent Smoothy
Non-Executive Director (appointed 1 May 2020)
Brent Smoothy is a successful business owner controlling multiple companies that undertake
pastoral, aviation, logistics, aggregate production and construction activities in Australia.
Brent is a co-founder of the Company, who retains pastoral leases in the Central and
Eastern Pilbara regions of Western Australia, a broadacre cropping and cattle property in
Central Queensland and a helicopter aviation business servicing the pastoral, mining and
government sectors.
Other current Directorships: Nil
Former Directorships (last 3 years): Nil
Interest in shares: 81,843,097 (as at the date of this report)
Interest in options: 7,300,000 (as at the date of this report)
40
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42
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DIRECTORS’ REPORT
DIRECTORS’ REPORT MEETINGS OF DIRECTORS The number of meetings for Kalium Lakes Limited held during the year and the number of meetings attended by each Director was as follows: Board Audit Committee Remuneration Committee Nomination Committee Number of Meetings Held 16 2 1 2 Number of Meetings Attended: Malcolm Randall 16 2 1 2 Brett Hazelden 16 - 1 2 Rudolph van Niekerk 13 1 - - Stephen Dennis 16 2 1 2 Dale Champion 7 - - - Mark Sawyer 3 - - - Brent Smoothy 3 - - - All Directors were eligible to attend all Board Meetings held. SHARE OPTIONS As at the date of this report the following unlisted options were on issue: Number under Option Exercise Price Expiry date 330,882 $0.425 29 September 2020 1,000,000 $0.525 17 May 2021 5,000,000 $0.3583 30 June 2025 12,218,987 $0.00 16 June 2023 17,677,493 $0.00 16 June 2023 1,666,667 $0.00 16 June 2023 1,000,000 $0.00 16 June 2022 1,182,639 $0.55 16 June 2022 1,750,000 $0.625 16 June 2022 SHARES ISSUED AS A RESULT OF THE EXERCISE OF OPTIONS 2,438,203 shares were issued as a result of the exercise of options during the financial year. There were no options or performance rights exercised into shares subsequent to the reporting date. 42
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
43
DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) Introduction The Directors present the Remuneration Report for the Consolidated Entity for the year ended 30 June 2020. This Remuneration Report forms part of the Directors’ Report in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, Key Management Personnel (“KMP”) of the Consolidated Entity are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Consolidated Entity, directly or indirectly, including any Director (whether executive or otherwise) of the Parent Entity. Remuneration Policy The remuneration policy has been designed to align KMP objectives with Shareholders’ interests and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Consolidated Entity’s financial results. The Board believes that the remuneration policy is appropriate and effective in its ability to attract and retain the best KMP to run and manage the Consolidated Entity, as well as create goal congruence between Directors, Executives and Shareholders. Executive Directors and Key Management Personnel The Board’s policy for determining the nature and amount of remuneration for Executive Directors and KMP of the Consolidated Entity was in place for the financial year ended 30 June 2020. Non-Executive Directors The Board’s policy is to remunerate Non-Executive Directors based on market practices, duties and accountability. Independent external advice is sought when required. The fees paid to Non-Executive Directors are reviewed annually. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by Shareholders at the Annual General Meeting (“AGM”) or any other General Meeting of Shareholders. The maximum aggregate amount of fees payable is currently $500,000. Use of Remuneration Consultants To ensure the Remuneration Committee is fully informed when making remuneration decisions, it may seek external remuneration advice. The Board did seek external remuneration advice in 2020. Remuneration Report Approval at FY2020 AGM The remuneration report for the year ended 30 June 2020 will be put to shareholders for approval at the Company’s AGM. The Company received 86.61% “for” votes on its Remuneration Report for the year ended 30 June 2019. 44
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
45
DIRECTORS’ REPORT
DIRECTORS’ REPORT Share Trading by Directors and Executives When dealing may occur • Subject to additional restriction set out below (“When dealing may not occur”), a Director, the Company Secretary or employee of the Company may deal in the Company securities provided that he or she does not have information that he or she knows, or ought reasonably to know, is inside information in relation to the Company securities. Prior to any dealing in the Company securities: • The Chairman must use reasonable endeavours to inform the Managing Director (“MD”) or Chief Executive Officer (“CEO”) (or if not available another Director): • A Director (other than the chairperson) and the Company Secretary must use reasonable endeavours to inform the Chairperson (or, if not available, the MD/CEO, or if neither are available another Director): • The MD/CEO must use reasonable endeavours to inform the Chairperson (or if not available another Director): and • Senior Managers must inform and receive approval from the MD/CEO (or, if not available the Company Secretary). When dealing may not occur • Dealing must not occur if Directors, the Company Secretary and employees are in possession of price sensitive information, or where the Company is in possession of price sensitive information, or the Company has notified a director, the Company Secretary and employee that they may not buy or sell securities; and • Directors, the Company Secretary and members of the Executive Team must not (subject to prior written clearance in accordance with clause 3.10 of the Company’s Security Trading Policy) buy or sell or otherwise deal in the Company securities within the following periods: o the period beginning on 1 January and ending at the close of trading on the day of release of the Company’s half yearly financial report to the ASX; o the period beginning on 1 July and ending at the close of trading on the day of the release of the Company’s Annual Financial Report to the ASX; o the period beginning on the date that is four weeks before a prospectus for the offer of equity securities in or other capital raising by the Company; and o any other period as the Board of Directors of the Company may decide, (“Closed Period”). 44
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
45
DIRECTORS’ REPORT A. Details of Remuneration Short-term benefits Post-employment benefits Share-based payments Year Cash salary, bonuses7, leave cash out and other benefits $ Superannuation $ Equity-settled shares $ Equity-settled options $ Total $ Non-Executive Directors Malcolm Randall 2020 88,699 8,426 - - 97,125 2019 65,000 6,175 - - 71,175 Brendan O’Hara1 2020 - - - - - 2019 39,583 3,761 - - 43,344 Stephen Dennis2 2020 64,132 6,093 - - 70,225 2019 8,840 840 - - 9,680 Brent Smoothy4 2020 7,917 752 - - 8,669 2019 - - - - - Dale Champion3 2020 11,875 1,128 - - 13,003 2019 - - - - - Mark Sawyer5 2020 7,917 - - - 7,917 2019 - - - - - Executive Directors Brett Hazelden10 2020 375,962 21,003 - - 396,965 2019 290,000 25,254 - - 315,254 Key Management Personnel Rudolph van Niekerk6&10 2020 343,844 21,003 - - 364,847 2019 267,366 25,000 - - 292,366 Chris Achurch9 2020 189,132 17,968 - 43,8878 250,987 2019 165,000 15,675 - 115,659 296,334 Total 2020 1,089,478 76,373 - 43,887 1,209,738 Total 2019 835,789 76,705 - 115,659 1,028,153 1 Brendan O’Hara resigned as Director on 26 April 2019 2 Stephen Dennis was appointed as Director on 26 April 2019 3 Dale Champion was appointed as Director 6 April 2020 4 Brent Smoothy was appointed as Director 1 May 2020 5 Mark Sawyer was appointed as Director 1 May 2020 6 Rudolph van Niekerk resigned as Director on 1 May 2020 7 Bonuses of $85,000 were paid during the period 8 On 17 May 2018 1,000,000 options with an 18-month vesting period and a total value of $173,488 were issued to the Chief Financial Officer. The amount recognised in this financial year is a representation of the vesting period elapsed during the reporting period. 9 Chris Achurch provided his 3 month notice period on 30 April 2020. At the date of this report, Mr Achurch continues as CFO on a contract basis and has agreed to do so until a suitable replacement is appointed. 10 On 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer. 46
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47
DIRECTORS’ REPORT
DIRECTORS’ REPORT The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration At risk – STI At risk - LTI 2020 2019 2020 2019 2020 2019 Non-Executive Directors Malcolm Randall 85% 100% 15% 0% 0% 0% Brendan O’Hara 0% 100% 0% 0% 0% 0% Stephen Dennis 86% 100% 14% 0% 0% 0% Brent Smoothy 100% 100% 0% 0% 0% 0% Dale Champion 100% 100% 0% 0% 0% 0% Mark Sawyer 100% 100% 0% 0% 0% 0% Executive Directors Brett Hazelden 94% 100% 6% 0% 0% 0% Key Management Personnel Rudolph van Niekerk 93% 100% 7% 0% 0% 0% Chris Achurch 79% 61% 4% 0% 17% 39% B. Service Agreements The Company has entered into executive service agreements with the Managing Director, Chief Development Officer and Chief Financial Officer as detailed below: Brett Hazelden in respect to his employment as the Managing Director of the Company. The principal terms are as follows: o An annual salary of $320,000 excluding superannuation for the financial year ended 30 June 2020; o Brett may terminate the agreement by giving 6 months’ notice in writing to the Company; o The Company may terminate the agreement (without cause) by giving 12 months’ notice in writing to Brett (or make payment in lieu of notice), unless the Company is terminating as a result of a serious misconduct (or on other similar grounds by Brett, in which case no notice is required). During this 12-month period, Brett cannot seek alternative employment, unless permission is granted by the Board; and o If Brett’s employment ends due to the position being made redundant, Brett will be entitled to a minimum of 12 months of base salary. As disclosed at events subsequent to reporting date, on 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer. Rudolph van Niekerk in respect to his employment as the Chief Development Officer of the Company. The principal terms are as follows: o An annual salary of $300,000 excluding superannuation for the financial year ended 30 June 2020; o Rudolph may terminate the agreement by giving 3 months’ notice in writing to the Company; o The Company may terminate the agreement (without cause) by giving 3 months’ notice in writing to Rudolph (or make payment in lieu of notice), unless the Company is terminating as a result of a serious misconduct (or on other similar grounds by Rudolph, in which case no notice is required); and o Rudolph is subject to non-compete restrictions during his employment and for a maximum period of 9 months following termination of his employment. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer on 24 July 2020. 46
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DIRECTORS’ REPORT Chris Achurch in respect to his employment as the Chief Financial Officer of the Company. The principal terms are as follows: o An annual salary of $180,000 excluding superannuation for the financial year ended 30 June 2020; o Chris may terminate the agreement by giving 3 months’ notice in writing to the Company; o The Company may terminate the agreement (without cause) by giving 3 months’ notice in writing to Chris (or make payment in lieu of notice), unless the Company is terminating as a result of a serious misconduct (or on other similar grounds by Chris, in which case no notice is required); o If Chris’s employment ends due to the position being made redundant, Chris will be entitled to a minimum of 6 months of base salary; and o Chris is subject to non-compete restrictions during his employment and for a maximum period of 9 months following termination of his employment. C. Share Based Compensation Issue of shares There were no shares issued to Directors and other key management personnel as part of compensation during the year ended 30 June 2020. Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of Directors and other key management personnel in this financial year of future reporting years are as follows: 1 On 17 May 2018 1,000,000 options with an 18-month vesting period and a total value of $173,488 were issued to the Chief Financial Officer. The amount recognised in this financial year is a representation of the vesting period elapsed during the reporting period. There were no options over ordinary shares granted to Directors and other key management personnel as part of compensation during the year ended 30 June 2020. Additional Information The earnings of the Consolidated Entity for the five years to 30 June 2020 are summarised below: 2020 $ 2019 $ 2018 $ 2017 $ 2016 $ Revenue 638,559 1,705,960 4,261,759 2,519,040 849,748 EBITDA (18,146,182) (11,469,093) (10,696,683) (5,917,009) (3,645,685) EBIT (18,892,617) (11,885,909) (10,900,473) (5,952,926) (3,647,069) Loss after income tax (18,892,617) (11,762,018) (10,757,324) (5,889,309) (3,647,069) The factors that are considered to affect total shareholders return (“TSR”) are summarised below: Share price at financial year end ($) 0.145 0.59 0.54 0.36 - Total dividends declared (cents per share) - - - - - Basic earnings per share (cents per share) (4.71) (6.15) (6.95) (5.40) (4.30) Name Number of options granted Grant date Vesting date Expiry date Exercise price Fair value per option Chris Achurch 1,000,0001 17/05/18 15/11/19 17/05/21 $0.525 $0.173 48
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DIRECTORS’ REPORT
DIRECTORS’ REPORT Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: 1 Dale Champion was appointed as Director on 6 April 2020. Opening shareholding is at date of appointment. 2 Brent Smoothy was appointed as Director on 1 May 2020. Opening shareholding is at date of appointment. 3 Mark Sawyer was appointed as Director on 1 May 2020. Opening shareholding is at date of appointment. 4 On 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer. Option holding The number of options over ordinary shares in the Company held during the financial year by each Director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Name Balance at the start of the year Received as part of remuneration Additions Disposals /other Balance at the end of the year Malcolm Randall 1,513,207 - 1,829,156 - 3,342,363 Stephen Dennis - - 1,020,791 - 1,020,791 Brent Smoothy2 69,373,129 - 6,666,667 (8,128,187) 67,911,609 Dale Champion1 3,749,061 - - - 3,749,061 Mark Sawyer3 - - - - - Brett Hazelden4 14,719,066 - 13,669,537 - 28,388,603 Rudolph van Niekerk4 3,615,600 - 6,874,896 (1,040,000) 9,450,496 Chris Achurch 2,000 - 35,715 - 37,715 Total 92,972,063 - 30,096,762 (9,168,187) 113,900,638 Name Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year Malcolm Randall 2,000,000 - (2,000,000) - - Stephen Dennis - - - - - Brent Smoothy - - - - - Dale Champion - - - - - Mark Sawyer - - - - - Brett Hazelden - - - - - Rudolph van Niekerk - - - - - Chris Achurch 1,000,000 - - - 1,000,000 Total 3,000,000 - (2,000,000) - 1,000,000 48
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DIRECTORS’ REPORT Performance shares holding The number of performance shares in the Company held during the financial year by each Director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: 1 Brent Smoothy was appointed as Director 1 May 2020. Opening holding is at date of appointment. 2 On 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development officer, Rudolph van Niekerk, as the interim Chief Executive Officer. Other transactions with key management personnel and their related parties During the financial year, payments for construction services from Smoothy Cattle Co Pty Ltd (Director-related entity of Brent Smoothy) of $4,323,731 were made. The current trade payable balance as at 30 June 2020 was $2,089,723. On 9 July 2020, the Company issued 13,931,488 shares at $0.15 in lieu of cash payment for the outstanding invoices owing ($2,089,723) in respect to construction services provided by Smoothy Cattle Co Pty Ltd. Payments of $4,901,101 were made during the financial year to Firm Construction Pty Ltd “FIRM” (under the FIRM contract Smoothy Cattle Co Pty Ltd was awarded the work as sole sub-contractor). No amounts were outstanding and payable at 30 June 2020 to FIRM Construction Pty Ltd. All transactions were made on normal commercial terms and conditions and at market rates. This concludes the remuneration report, which has been audited. PRINCIPAL ACTIVITIES The principal activity of the Consolidated Entity is the exploration and mining of mineral resources. REVIEW OF RESULTS The loss after tax for the year ended 30 June 2020 was $18,892,617 (2019: $11,762,018 loss). Name Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year Malcolm Randall - - - - - Stephen Dennis - - - - - Brent Smoothy1 7,300,000 - - - 7,300,000 Dale Champion - - - - - Mark Sawyer - - - - - Brett Hazelden2 3,150,000 - (1,050,000) - 2,100,000 Rudolph van Niekerk2 900,000 - (300,000) - 600,000 Chris Achurch - - - - - Total 11,350,000 - (1,350,000) - 10,000,000 50
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DIRECTORS’ REPORT
DIRECTORS’ REPORT CORPORATE • In July 2019: o Kalium Lakes received a credit-approved offer of finance from German KfW IPEX-Bank for the US / Euro dollar equivalent of A$102 million of senior debt funding (KfW IPEX-Bank Debt Facilities) for the development of the Beyondie Sulphate of Potash Project (BSOPP); o Kalium Lakes awarded the evaporation pond liner, supply and install contract to Jaylon Environmental Systems Pty Ltd (Jaylon), with the contract including the management of delivery and installation of 1mm HDPE liner for a total of approximately 400ha of evaporation area for the Stage 1 BSOPP 90ktpa SOP facility; o the German government advised that its Inter-Ministerial Committee had reached a positive decision on its application for the Euro / US dollar equivalent of approximately A$50 million of project finance export cover; and o Kalium Lakes conducted an institutional placement and an accelerated non-renounceable entitlement offer to raise approximately A$72 million. The successful completion of Kalium Lakes’ institutional placement and the institutional component of its 1 for 2.19 accelerated non-renounceable pro-rata entitlement offer was announced on 26 July 2019. • In August 2019, the 10 Mile Lake West Exploration Licence (E69/3594) was granted to Kalium Lakes. Kalium Lakes had previously announced (October 2018) that it had entered into an agreement with AIC Resources Limited (AIC) to acquire a portion of AIC’s tenement. In addition that month, the retail component of its 1 for 2.19 accelerated non-renounceable pro-rata entitlement offer was successfully completed, bringing the total raised to approximately $72 million. • On 3 October 2019, the Kalium Lakes Board approved the Final Investment Decision for the full development of the BSOPP. • In October 2019: o Kalium Lakes awarded Clarke Energy the contract to design, supply, install and commission of Kalium Lakes’ 7.5MW gas fired power station for the BSOPP; o the contracts for design, supply and construction of Kalium Lakes fully owned gas lateral pipeline were awarded. The scope of the gas pipeline was divided into three major contracts which include manufacture and supply of the coated line pipe by Edgen Murray, installation of the pipeline by Pipecraft and design, supply and construction of the inlet and delivery stations, as well as the pipeline design by Primero; o the contract for construction of the SOP Purification Plant was awarded to G&S Engineering Services Pty Ltd, a wholly owned subsidiary of DRA Global Ltd; and o Kalium Lakes received its 2018/19 Research and Development (R&D) Tax Incentive claim, being a total of A$1,387,425 in R&D tax offsets for the 2018/19 income year for both Australian and approved overseas R&D activities in relation to the BSOPP. • On 14 November 2019, the Premier of Western Australia, Hon. Mark McGowan MLA, signed off on a Northern Australia Infrastructure Facility loan to assist in developing infrastructure for the BSOPP. • On 26 November 2019, Kalium Lakes and unlisted, emerging magnesium producer EcoMag Limited, signed a term sheet committing both companies to jointly undertake a feasibility study to evaluate the commercial extraction of magnesium from residual brines produced at the BSOPP, for sale into international speciality chemical markets. • On 9 December 2019, Kalium Lakes achieved Financial Close following the satisfaction of all required Conditions Precedent under the Project Debt Facilities. • On 29 January 2020 the Company announced additional assay results from auger holes located in the eastern tenements Resource Area, which comprise Stage 2 of the Project. Importantly, the potassium grades are consistent with results obtained from the same locations two and four years ago. 50
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DIRECTORS’ REPORT • On 4 February 2020 the remaining brine analysis results for drill holes were completed at its recently acquired 10 Mile West tenement (E69/3594) at the BSOPP. The assay results continue to demonstrate that the BSOPP has the highest grade potassium brine resource in Australia. • On 24 February 2020, Kalium Lakes identified a potential cost overrun in respect to the BSOPP and requested a voluntary suspension pending the release of an announcement in respect to an independent review of the Company’s capital expenditure costings and contingencies in respect to the BSOPP and future financing requirements. • Following the completion of an independent cost review, a funding shortfall was quantified and, as a result, Kalium Lakes undertook an equity capital raising to raise A$61 million through a placement, and a fully underwritten 5 for 7 accelerated non-renounceable entitlement offer at an issue price of A$0.15 per share. • On 6 April 2020, Kalium Lakes announced the appointment of Mr Dale Champion as a Non-Executive Director of the Company. • On 1 May 2020, Kalium Lakes announced the appointment of Mr Brent Smoothy and Mr Mark Sawyer as Non-Executive Directors of the Company. Following the completion of the formal process to appoint Mr Smoothy and Mr Sawyer as Directors, Mr Rudolph van Niekerk advised the Board of his decision to step down from his role as an Executive-Director. Mr van Niekerk, who is a co-founder of Kalium Lakes, continues with the Company in his role as Chief Development Officer. • On 29 May 2020, the Company announced the successful completion of Kalium Lakes’ institutional placement and the institutional component of its 5 for 7 accelerated non-renounceable pro-rata entitlement offer. • In June 2020: o the suspension of trading in the securities of Kalium Lakes Limited (‘KLL’) was lifted following the release by the Company of an announcement regarding the settlement of the placement and institutional component pursuant to the Company’s announcement dated 21 May 2020; o the retail component of the 5 for 7 accelerated non-renounceable pro-rata entitlement offer was successfully completed, bringing the total raised before costs to approximately $61 million; o successful on-site commissioning of the recently delivered salt harvester at the BSOPP. The commissioning allows the Company to confirm several operational paraments including salt pavement thickness, harvesting methodology, expected grain size and the estimated time frames to drain the evaporation pond of brine, harvest, refill with brine and recommence salt crystallisation. o German engineer and equipment supplier Ebtec GbR (Ebtec) commenced the shipment of specialised equipment for the BSOPP purification plant. This is the fist of a total of 10 planned shipments, with the last shipment planned to leave Germany by the end of October 2020. The June shipment includes flotation cells, agitators and cyclones. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the Company. LIKELY DEVELOPMENTS AND EXPECTECTED RESULTS OF OPERATIONS The Consolidated Entity intends to continue its development of the Beyondie Sulphate of Potash Project (BSOPP), of which construction continues as at the date of this report. In addition, the Consolidated Entity will continue to progress the development of the Carnegie Project, in accordance with the terms of the joint venture agreement. 52
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DIRECTORS’ REPORT
DIRECTORS’ REPORT ENVIRONMENTAL REGULATIONS The Consolidated Entity is subject to and is compliant with all aspects of environmental regulation of its exploration and mining activities. The Directors are not aware of any environmental law that is not being complied with. DIVIDENDS No dividends were paid during the financial year and no recommendation has been made as to payment of dividends. EVENTS SUBSEQUENT TO REPORTING DATE No matter or circumstance has arisen since the end of the financial year, which will significantly affect, or may significantly affect, the state of affairs or operations of the reporting entity in future financial periods other than the following: o On 1 July 2020, the Company announced to the market the maiden Mineral Resource for Ten Mile West following acquisition of the Ten Mile West tenement and subsequent initial exploration in 2019. o On 9 July 2020, following shareholder approval the Company issued 13,931,488 shares at $0.15 in lieu of cash payment for the outstanding invoices owing in respect to construction services provided by Smoothy Cattle Co Pty Ltd (Director-related entity of Brent Smoothy). o On 9 July 2020, following shareholder approval the Company issued 20,305,409 shares to Directors, Officers, and its cornerstone investor at $0.15 raising approximately $3 million. o On 9 July 2020, the Company advised that construction works for its fully owned gas pipeline had commenced on schedule at the Companies Beyondie Sulphate of Potash Project. o On 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer. o On 5 August 2020, the Company announced that the Beyondie Sulphate of Potash Project (BSOPP) was 52% complete and tracking ahead of its updated schedule. o The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the Consolidated Entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. INDEMNITY AND INSURANCE OF OFFICERS The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a Director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. 52
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DIRECTORS’ REPORT INDEMNITY AND INSURANCE OF AUDITOR The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 24 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 24 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF RSM AUSTRALIA PARTNERS There are no officers of the Company who are former partners of RSM Australia Partners. AUDITOR’S DECLARATION OF INDEPENDENCE A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors' report. AUDITOR RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. _________________ Mal Randall - Chairman 13 August 2020 54
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DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT The Board of Directors is responsible for the corporate governance of Kalium Lakes Limited (the Company). The Board of Directors has established a corporate governance framework which follows the recommendations as set out in the ASX Corporate Governance Council’s Principles and Recommendations 3rd edition (“Principles and Recommendations”). The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for the Company's corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime, where the Company's corporate governance practices do not follow a recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation. The Company’s corporate governance framework can be viewed on the Company’s website: www.kaliumlakes.com.au 54
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AUDITOR’S INDEPENDENCE DECLARATION
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 8 9261 9100
F +61 8 9261 9111
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Kalium Lakes Limited for the year ended 30 June 2020, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
Any applicable code of professional conduct in relation to the audit.
D J WALL
Partner
RSM Australia Partners
Perth, Western Australia
13 August 2020
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
56
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FINANCIAL REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME - FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Note 30 June 2020 $ 30 June 2019 $ Revenue Other income 5 638,559 1,705,960 Expenditure Accounting fees (169,724) (135,214) Compliance fees (283,111) (116,890) Depreciation (746,435) (416,816) Directors and executive remuneration 27 (1,165,851) (912,494) Employee expenses (3,226,584) (1,141,245) Site and exploration expenditure (6,798,079) (4,976,077) Legal fees (4,616,755) (1,209,522) Share based payment expense 6 (243,887) (2,954,557) Travel expenses (357,957) (441,189) Other expenses 7 (1,922,793) (1,163,974) Loss before tax (18,892,617) (11,762,018) Income tax expense 8 - - Net loss for the year from operations (18,892,617) (11,762,018) Other comprehensive income Items that may be reclassified subsequently to profit or loss - - Total comprehensive loss for the year (18,892,617) (11,762,018) Loss attributable to: Owners of the parent (18,892,617) (11,762,018) (18,892,617) (11,762,018) Total comprehensive loss attributable to: Owners of the parent (18,892,617) (11,762,018) (18,892,617) (11,762,018) Basic and diluted loss per share (cents) 23 (4.71) (6.15) The accompanying notes form part of these financial statements. 56
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
- FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Note 30 June 2020 $ 30 June 2019 $ ASSETS Current Assets Cash and cash equivalents 9 54,623,007 15,467,180 Trade and other receivables 10 1,594,745 2,717,996 Total Current Assets 56,217,752 18,185,176 Non-Current Assets Property, plant and equipment 11 6,828,145 2,061,425 Work in progress 12 118,957,531 6,947,206 Mine in development 13 14,754,721 643,725 Right-of-use assets 14 200,541 - Total Non-Current Assets 140,740,938 9,652,356 Total Assets 196,958,690 27,837,532 LIABILITIES Current Liabilities Trade and other payables 15 6,532,453 4,372,422 Provisions 16 208,809 128,429 Lease liabilities 17 105,020 - Total Current Liabilities 6,846,282 4,500,851 Non-Current Liabilities Provisions 18 4,166,074 553,347 Borrowings 19 50,472,783 - Total Non-Current Liabilities 54,638,857 553,347 Total Liabilities 61,485,139 5,054,198 Net Assets 135,473,551 22,783,334 EQUITY Contributed equity 20 179,614,646 53,053,533 Reserves 21 8,271,356 3,249,635 Accumulated losses 22 (52,412,451) (33,519,834) Total Equity 135,473,551 22,783,334 The accompanying notes form part of these financial statements. 58
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FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
- FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 Contributed equity $ Reserves $ Accumulated losses $ Total $ Balance at 1 July 2018 29,265,527 2,170,078 (21,757,816) 9,677,789 Loss for the year - - (11,762,018) (11,762,018) Other comprehensive income - - - - Total comprehensive loss for the year - - (11,762,018) (11,762,018) Transactions with owners in their capacity as owners: Shares issued during the year 23,620,913 - - 23,620,913 Security issue expenses (1,707,907) - - (1,707,907) Share based payments 1,875,000 1,079,557 - 2,954,557 Balance at 30 June 2019 53,053,533 3,249,635 (33,519,834) 22,783,334 Balance at 1 July 2019 53,053,533 3,249,635 (33,519,834) 22,783,334 Loss for the year - - (18,892,617) (18,892,617) Other comprehensive income - - - - Total comprehensive loss for the year - - (18,892,617) (18,892,617) Transactions with owners in their capacity as owners: Shares issued during the year 133,671,178 - - 133,671,178 Security issue expenses (8,103,560) - - (8,103,560) Share based payments 993,495 5,021,721 - 6,015,216 Balance at 30 June 2020 179,614,646 8,271,356 (52,412,451) 135,473,551 The accompanying notes form part of these financial statements. 58
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CONSOLIDATED STATEMENT OF CASH FLOWS
- FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Note 30 June 2020 $ 30 June 2019 $ Cash flows from operating activities Receipts from customers 1,491,660 3,994,886 Payments to suppliers and employees (10,318,880) (5,180,615) Payment for site and exploration expenditure (7,156,038) (8,250,977) Payment for mine development (108,397,268) (4,500,000) Net cash used in operating activities 25 (124,380,526) (13,936,706) Cash flows from investing activities Interest received 362,615 123,462 Payments for property, plant and equipment (1,791,014) (303,868) Net cash used in investing activities (1,428,399) (180,406) Cash flows from financing activities Proceeds from issue of shares 133,671,178 23,620,376 Share issue transaction costs (7,415,553) (1,707,370) Proceeds from borrowings 49,671,280 - Transaction costs related to borrowings (10,898,484) - Repayment of lease liabilities (63,669) - Net cash provided by financing activities 164,964,752 21,913,006 Net increase in cash and cash equivalents 39,155,827 7,795,894 Cash and cash equivalents at beginning of the financial year 15,467,180 7,671,286 Cash and cash equivalents at the end of the financial year 9 54,623,007 15,467,180 The accompanying notes form part of these financial statements. 60
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. Corporate information This annual report covers Kalium Lakes Limited (the “Company”), a Company incorporated in Australia, and the entities it controlled at the end of, or during, the year ended 30 June 2020 (the “Consolidated Entity”). The presentation currency of the Consolidated Entity is Australian Dollars (“$”). A description of the Consolidated Entity’s operations is included in the review and results of operations in the Directors’ report. The Directors’ report is not part of the financial statements. The Company is a for-profit entity limited by shares and incorporated in Australia whose shares are traded under the ASX code “KLL”. 2. Significant accounting policies Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Consolidated Entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity. AASB 16 Leases The Consolidated Entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Impact of adoption AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The impact of adoption on opening retained profits as at 1 July 2019 was as follows: 1 July 2019 Operating lease commitments as at 1 July 2019 (AASB 117) 433,750 Accumulated depreciation as at 1 July 2019 (AASB 16) (123,795) Right-of-use assets (AASB 16) 309,955 Lease liabilities - current (AASB 16) (117,837) Lease liabilities - non-current (AASB 16) (192,118) Reduction in opening accumulated losses as at 1 July 2019 - 60
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 When adopting AASB 16 from 1 July 2019, the consolidated entity has applied the following practical expedients: o excluding any initial direct costs from the measurement of right-of-use assets; o using hindsight in determining the lease term when the contract contains options to extend or terminate the lease; and o not apply AASB 16 to contracts that were not previously identified as containing a lease. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Consolidated Entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Consolidated Entity only. Supplementary information about the parent entity is disclosed in note 26. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kalium Lakes Limited ('Company' or 'parent entity') as at 30 June 2020 and the results of all subsidiaries for the year then ended. Kalium Lakes Limited and its subsidiaries together are referred to in these financial statements as the 'Consolidated Entity'. Subsidiaries are all those entities over which the Consolidated Entity has control. The Consolidated Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that control ceases. Intercompany transactions and balances between entities in the Consolidated Entity are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. Foreign currency translation The financial statements are presented in Australian dollars, which is Kalium Lakes Limited's functional and presentation currency. 62
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Consolidated Entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Consolidated Entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The Consolidated Entity has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications. Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Exploration, evaluation and development expenditure Exploration and evaluation are written off as incurred. The Consolidated Entity’s policy is that such costs will only be carried forward when development of the area indicates that recoupment will occur or where activities in the area have reached an advanced stage which permits reasonable assessment of the existence of economically recoverable reserves. Exploration, evaluation and development costs comprise acquisition costs, direct exploration and evaluation costs and an appropriate portion of related overhead expenditure but do not include general overhead expenditure which has no direct connection with a particular area of interest. Revenue received from the sale or disposal of product, materials or services during the exploration and evaluation phase of operation is offset against expenditure in respect of the area of interest concerned. 62
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 When an area of interest is abandoned or the Directors decide that it is not commercially viable, any accumulated costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Restoration costs arising from exploration activities are provided for at the time of the activities which give rise to the need for restoration. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Consolidated Entity for the annual reporting period ended 30 June 2020. The Consolidated Entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated Entity, are set out below. Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the Consolidated Entity has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the Consolidated Entity may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the Consolidated Entity's financial statements. 64
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Share-based payment transactions The Consolidated Entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model, taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Rehabilitation provision A provision has been made for the anticipated costs for future rehabilitation of land explored or mined. The Consolidated Entity's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. The Consolidated Entity recognises management's best estimate for assets retirement obligations and site rehabilitations in the period in which they are incurred. Actual costs incurred in the future periods could differ materially from the estimates. Additionally, future changes to environmental laws and regulations could affect the carrying amount of this provision. Mine in development & Work in progress These costs are capitalised to the extend they are expected to be recouped through the successful exploitation of the related mining leases. Once production commences, these costs are transferred to property, plant and equipment and mine properties, as relevant. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Consolidated Entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Consolidated Entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Consolidated Entity based on known information. This consideration extends to the nature of the supply chain, staffing and geographic regions in which the Consolidated Entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Consolidated Entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. 64
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 4. Operating segments The Consolidated Entity has considered the requirements of AASB 8 – Operating Segments and has identified its operating segments based on the internal reports that are reviewed and used by the board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Consolidated Entity operates as a single segment being the exploration for and development of minerals in Australia. The Consolidated Entity is domiciled in Australia. All revenue from external parties is generated from Australia only and all assets are located in Australia only. 30 June 2020 $ 30 June 2019 $ 5. Other income Foreign exchange gain - realised 323,322 35,331 Loss on derivative financial instruments (151,613) - Other income 104,235 159,313 Interest income 362,615 123,891 Research and development tax offset - International - 281,094 Research and development tax offset - Domestic - 1,106,331 638,559 1,705,960 Accounting policy: Research and development tax offset Research and development tax offset revenue is recognised when it is received or when the right to receive payment is established. Revenue is measured at the fair value of the consideration received or receivable. Interest Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. 66
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 6. Share based payment expense Unlisted options to executive – vesting over multiple periods1 43,887 115,659 Acquisition of tenements (options) - 963,898 Acquisition of tenements (shares) - 1,875,000 Issue of shares for services2 200,000 - 243,887 2,954,557 1 1,000,000 Options expiring on 17 May 2021 issued to KMP (CFO) in the 2018 financial year, with a fair value of $173,488 and a vesting period of 18 months. Amount recognised as an expense during the financial year ended 30 June 2020 was $43,887 (2019: $115,659). The options fully vested during the financial year ended 30 June 2020. 2 The Company issued 400,000 shares in August 2019. The fair value per share on grant date was $0.50 and this resulted in a share-based payment expense of $200,000. Other share-based payments which have been capitalised on the Consolidated Statement of Financial Position have been disclosed in notes 20 and 21. Accounting policy: Share based payments The Consolidated Entity provides benefits to employees (including Directors and Consultants) of the Consolidated Entity and other service providers or strategic equity partners in the form of share-based payment transactions, whereby employees or other parties render services or provide goods in exchange for shares or rights over shares (“equity-settled transactions”). The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using an option pricing method. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (“market conditions”). The cost of equity-settled transactions is recognised in the statement of comprehensive income, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects: o The extent to which the vesting period has expired; and o The number of awards that, in the opinion of the Directors of the Consolidated Entity, will ultimately vest. This opinion is formed based on the best available information at reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. Where shares are issued at a discount to fair value either by reference to the current market price or by virtue of the Consolidated Entity providing financing for the share purchase on favourable terms, the value of the discount is considered a share-based payment. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. 66
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 7. Other expenses Bank charges 4,320 4,245 Insurance 929,833 122,622 Subscriptions and licenses 114,035 16,125 Other consultants 98,707 397,989 Head office and administration 775,898 622,993 1,922,793 1,163,974 8. Income tax expense A reconciliation between the income tax expense and the product of accounting profit before income tax multiplied by the Consolidated Entity’s applicable income tax rate is as follows: 30 June 2020 $ 30 June 2019 $ Loss before Income tax (18,892,617) (11,762,018) Prima facie benefit on operating loss at 27.5% (2019: 27.5%) 5,195,470 3,234,555 Non allowable expenditure (277,895) (1,195,872) Unrecognised deferred tax assets attributable to tax losses (4,917,575) (2,038,683) Income tax expenses - - Tax losses available 33,405,913 15,523,825 A potential deferred tax asset, attributable to tax losses carried forward, amounts to approximately $9,186,626 (2019: $4,269,052) and has not been brought to account at reporting date because the Directors do not believe it is appropriate to regard realisation of the deferred tax asset as probable at this point in time. This benefit will only be obtained if: o the Consolidated Entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss incurred; o the Consolidated Entity continues to comply with the conditions for deductibility imposed by law; and o no changes in tax legislation adversely affect the Consolidated Entity in realising the benefit from the deductions for the loss incurred. 68
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Accounting policy: Income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets and liabilities are recognised for all taxable temporary differences: o Except for deferred income tax liabilities arising from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss; and o In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred income tax to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Goods and services and sales tax Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except: o Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of the asset or as part of an item of expense; or o For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. 68
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 9. Cash and cash equivalents Cash at bank 54,609,507 10,454,090 Cash on deposit 13,500 5,013,090 54,623,007 15,467,180 Accounting policy: Cash and cash equivalents Cash and cash equivalents include cash on hand and in the bank, and other short-term deposits. Bank overdrafts are shown separately in current liabilities on the Statement of Financial Position. For the purposes of the Statement of Cash Flows, cash and cash equivalents as defined above are net of outstanding bank overdrafts. 30 June 2020 $ 30 June 2019 $ 10. Trade and other receivables GST refundable 946,825 803,095 Prepayments 620,178 419,947 Research and development tax offset - 1,387,425 Accrued interest - 26,100 Fuel rebate 27,742 81,429 1,594,745 2,717,996 Accounting policy: Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Allowance for expected credit losses The Consolidated Entity has not recognised any loss (2019: $Nil) in respect of expected credit losses for the year ended 30 June 2020. 70
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Exploration Office Motor Leasehold Rehabilitation Computer Total & mining equipment Vehicles improvements asset software equipment $ $ $ $ $ $ $ Balance at 1 July 2018 1,482,226 14,321 117,647 6,832 244,378 - 1,865,404 Additions 125,722 4,976 71,811 - 308,969 101,359 612,837 Depreciation expense (361,140) (8,116) (40,728) (6,832) - - (416,816) Balance at 30 June 2019 1,246,808 11,181 148,730 - 553,347 101,359 2,061,425 Additions 1,352,764 54,930 334,400 - 3,612,727 48,920 5,403,741 Depreciation expense (517,343) (16,889) (74,396) - - (28,393) (637,021) Balance at 30 June 2020 2,082,229 49,222 408,734 - 4,166,074 121,886 6,828,145 30 June 2020 $ 30 June 2019 $ 11. Property, plant and equipment Carrying value Exploration & mining equipment 2,082,229 1,246,808 Office equipment 49,222 11,181 Motor vehicles 408,734 148,730 Rehabilitation asset 4,166,074 553,347 Computer software 121,886 101,359 6,828,145 2,061,425 70
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Accounting policy: Property, plant and equipment Property, plant and equipment is recorded at historical cost less accumulated depreciation and any impairment. The carrying value of assets are reviewed for impairment at the reporting date. An asset is immediately written down to its recoverable amount if the carrying value of the asset exceeds its estimated recoverable amount. The depreciation rates per annum for each class of fixed asset are as follows: Exploration equipment 20% Office equipment 33% Motor vehicles 20% Leasehold improvements 20% Computer software 20% Rehabilitation asset and the corresponding provision is undiscounted and has not been depreciated. Depreciation and corresponding finance charges incurred in the unwinding of the provision will be recognised from the commencement of production. Subsequent expenditure relating to an item of property, plant and equipment, that has already been recognised, is added to the carrying amount of the asset if the recognition criteria are met. All assets are depreciated over their anticipated useful lives, up to their residual values using a straight-line depreciation basis. These useful lives are determined on the day of capitalisation and are re-assessed annually by Management. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable or at least on an annual basis. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets or cash generating units are written down to their recoverable amount. 72
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 12. Work in progress Brine supply and ponds 37,247,365 2,702,415 Purification facility 38,332,187 2,302,125 Village accommodation 8,445,751 1,152,135 Access road 2,872,911 332,621 Gas pipeline & power station 18,166,630 188,080 Owners costs 5,152,390 135,104 Non process infrastructure 7,503,279 - Other infrastructure 1,237,018 134,726 118,957,531 6,947,206 30 June 2020 $ 30 June 2019 $ 13. Mine in development Mine in development 14,754,721 643,725 14,754,721 643,725 Accounting policy: Work in progress and Mine in development When proven mineral reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as assets under construction within property, plant and equipment. All subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied. The Consolidated Entity may use funds sourced from external parties to finance the acquisition and development of assets and operations. Finance costs are expensed as incurred, except where they relate to the financing of construction or development of qualifying assets. Borrowing costs directly attributable to acquiring or constructing a qualifying asset are capitalised during the development phase. Development expenditure is net of proceeds from the saleable material extracted during the development phase. On completion of development, all assets included in assets under construction are reclassified as either plant and equipment or other mineral assets and depreciation commences. 72
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 14. Right-of-use assets Head office space - right-of-use 309,955 - Less: Accumulated depreciation (109,414) - 200,541 - Accounting policy: Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever the shorter. Where the Company expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over the estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Company has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. 30 June 2020 $ 30 June 2019 $ 15. Trade and other payables Accounts payable 6,084,266 3,472,370 Derivative financial instruments 151,613 - Other payables 256,574 21,531 Accrued expenses 40,000 878,521 6,532,453 4,372,422 Accounting policy: Trade and other payables Trade and other payable amounts represent liabilities for goods and services provided to the entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 74
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 16. Current provisions Employee entitlements 208,809 128,429 208,809 128,429 Accounting policy: Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 30 June 2020 $ 30 June 2019 $ 17. Lease liabilities Head office space - lease liabilities 105,020 - 105,020 - Accounting policy: Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 74
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Debt facilities available (All secured and pledged against the assets of the Consolidated Entity): 1 The maturity dates are 14 and 9 years after the first repayment date. 30 June 2020 $ 30 June 2019 $ 18. Non-Current provisions Opening balance 553,347 - Additions 3,612,727 553,347 Closing balance 4,166,074 553,347 Accounting policy: Provisions A provision has been made for the anticipated costs for future rehabilitation of land explored or mined. Provisions are recognised when the Consolidated Entity has a present (legal or constructive) obligation as a result of a past event, it is probable the Consolidated Entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. 30 June 2020 $ 30 June 2019 $ 19. Non-Current borrowings Loan from KfW 13,467,527 - Loan from KfW/Euler Hermes 16,603,829 - Loan from NAIF 19,599,924 - 49,671,280 - Interest from KfW 52,695 - Interest from KfW/Euler Hermes 186,053 - Interest from NAIF 120,544 - Commitment fees from KfW/Euler Hermes 442,211 - 801,503 - 50,472,783 - Lender Borrower Facility Limit Maturity Date NAIF Kalium Lakes Infrastructure AUD$48,000,000 14 years1 NAIF Kalium Lakes Potash AUD$26,000,000 9 years1 KfW/Euler Hermes Kalium Lakes Potash EURO 32,487,268 9 years1 KfW Kalium Lakes Potash USD$37,000,000 9 years1 76
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 The first repayment date means the earlier of: a) the date falling six months after the starting point of credit1; and b) the long stop date2 1 The date of issue of the Provisional Acceptance Certificate by the Borrower in accordance with the EPS Contract. 2 The date falling 30 months after Financial Close (Financial close was achieved 9 December 2019). Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: 30 June 2020 $ 30 June 2019 $ Total facilities Bank loans1 179,156,779 - Used at the reporting date Bank loans 50,472,783 - Unused at the reporting date Bank loans 128,683,996 - 1 Converted using AUD-EURO at 0.63 and AUD-USD at 0.69. Total facility available includes principal, commitment fees and interest. Accounting policy: Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. 20. Contributed equity 2020 2019 2020 2019 Shares Shares $ $ Ordinary shares – fully paid 802,257,785 238,966,103 179,614,646 53,053,533 76
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Movements in ordinary share capital Details Date Shares Issue price $ Balance 1 Jul 2019 169,793,465 29,265,527 Conversion of performance rights 17 Oct 2018 5,000,000 - - Issue of shares for tenement acquisition 26 Oct 2018 5,000,000 0.375 1,875,000 Placement 21 Dec 2018 7,440,179 0.31 2,306,455 Placement 01 Mar 2019 1,612,904 0.31 500,000 Exercise of options 14 Mar 2019 254,110 - - Exercise of options 21 Mar 2019 240,017 - - Exercise of options 04 Apr 2019 704,036 - - Exercise of options 04 Apr 2019 754,326 - - Placement 09 Apr 2019 18,904,487 0.44 8,317,974 Exercise of options 19 Apr 2019 861,478 - - Placement 23 Apr 2019 28,401,101 0.44 12,496,484 Share issue costs - - - (1,707,907) Balance 30 Jun 2019 238,966,103 53,053,533 Placement 02 Aug 2019 76,248,464 0.50 38,124,232 Issue of shares for goods/services1 02 Aug 2019 470,000 0.50 235,000 Issue of shares for services2 02 Aug 2019 400,000 0.50 200,000 Placement 22 Aug 2019 65,398,806 0.50 32,699,403 Placement 03 Sep 2019 2,444,590 0.50 1,222,295 Exercise of options 07 Oct 2019 1,500,000 0.25 375,000 Placement 18 Nov 2019 500,000 0.50 250,000 Conversion of performance rights 13 Dec 2019 5,000,000 - - Exercise of options 13 Dec 2019 938,203 - - Placement and entitlement offer 01 Jun 2020 325,226,468 0.15 48,783,970 Entitlement offer 16 Jun 2020 81,441,851 0.15 12,216,278 Issue of shares to contractors3 09 Jun 2020 720,000 0.15 108,000 Issue of shares to contractors3 09 Jun 2020 666,667 0.15 100,000 Issue of shares to contractors3 09 Jun 2020 1,303,300 0.15 195,495 Issue of shares to advisors4 09 Jun 2020 1,033,333 0.15 155,000 Share issue costs - - - (8,103,560) Balance 30 Jun 2020 802,257,785 179,614,646 78
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1 Shares issued for goods and services relating to the BSOPP have been capitalised on the Consolidated Statement of Financial Position as non-current assets (270,000 shares at 0.50 cents a share $135,000). Shares issued for 2 years rent for the operations office has been capitalised on the Consolidated Statement of Financial Position as a reduction in current liabilities (200,000 shares at 0.50 cents a share $100,000). 2 Shares issued to consultants and contractors have been expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. 3 Shares issued for services relating to the BSOPP have been capitalised on the Consolidated Statement of Financial Position as non-current assets. 4 Shares issued to advisors have been capitalised on the Consolidated Statement of Financial Position as equity (share issue costs). Ordinary shares Ordinary shares have no par value and have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on the shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Capital management Management controls the capital of the Consolidated Entity in order to maintain a capital structure that ensures the lowest cost of capital available to the Consolidated Entity. Management’s objective is to ensure the Consolidated Entity continues as a going concern as well as to maintain optimal returns to shareholders. Accounting policy: Share capital Share capital represents the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Accumulated losses include all current and prior period retained profits. Dividend distributions payable to equity shareholders are included in ‘other liabilities’ when the dividends have been approved in a general meeting prior to the reporting date. All transactions with owners of the parent are recorded separately within equity. 78
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 21. Reserves Performance rights reserve 1,200,000 1,200,000 Options reserve 7,071,356 2,049,635 8,271,356 3,249,635 Movements in performance rights reserve Number $ Balance 1 July 2019 20,000,000 1,200,000 Conversion of performance rights (5,000,000) - Balance at 30 June 2019 15,000,000 1,200,000 Conversion of performance rights (5,000,000) - Balance at 30 June 2020 10,000,000 1,200,000 As at 30 June 2020 10,000,000 performance rights have been converted into shares (total performance rights at grant date 20,000,000). The Company has elected not to transfer the fair value of the performance rights from the performance rights reserve into contributed equity. As at the date of this report, there were no further conversions of performance rights into shares. 80
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Movements in options reserve Number $ Balance 1 July 2019 11,174,818 970,078 Unlisted options issued in a prior year vesting over multiple periods - 115,659 Issue of options for tenement acquisition on 26 October 2018 5,000,000 963,898 Exercise of options on 14 March 2019 (550,000) - Exercise of options on 21 March 2019 (500,000) - Exercise of options on 4 April 2019 (1,400,000) - Exercise of options on 4 April 2019 (1,500,000) - Exercise of options on 18 April 2019 (1,550,000) - Balance at 30 June 2019 10,674,818 2,049,635 Unlisted options issued in a prior year vesting over multiple periods10 - 43,887 Exercise of options by Directors on 13 December 20191 (2,000,000) - Exercise of options by Adviser on 16 December 20191 (1,500,000) - Options lapsed on 16 January 20201 (843,936) - Issue of options to contractors on 16 June 20202,8&11 12,218,987 1,832,848 Issue of options to contractors on 16 June 20203,8&11 17,677,493 2,651,624 Issue of options to contractors on 16 June 20204,8&11 1,666,667 250,000 Issue of options to contractors on 16 June 20205,8&11 1,000,000 150,000 Issue of options to advisors on 16 June 20206&9 1,182,639 40,160 Issue of options to advisors on 16 June 20207&9 1,750,000 53,202 Balance at 30 June 2020 41,826,668 7,071,356 1 The Company has elected not to transfer the fair value from the exercise and lapse of options from the options reserve to contributed equity. For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant Expiry Share Exercise Expected Dividend Risk-free Fair value date date price at price Volatility yield interest at grant grant rate date date 2 15/05/20 16/06/23 0.15 0.00 100% 0% 0.24% 0.15 3 15/05/20 16/06/23 0.15 0.00 100% 0% 0.24% 0.15 4 15/05/20 16/06/23 0.15 0.00 100% 0% 0.24% 0.15 5 15/05/20 16/06/22 0.15 0.00 100% 0% 0.22% 0.15 6 15/05/20 16/06/22 0.15 0.55 100% 0% 0.22% 0.0340 7 15/05/20 16/06/22 0.15 0.625 100% 0% 0.22% 0.0304 8 Options issued to contractors have been capitalised on the Consolidated Statement of Financial Position as non-current assets, within work in progress and mine in development assets. 9 Options issued to advisors have been capitalised on the Consolidated Statement of Financial Position as equity (share issue costs). 10 Options issued to key management personnel have been expensed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. 11 Probability of vesting conditions being met associated with the options issued to contractors used in the valuation model was 100%. 80
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 22. Accumulated losses Accumulated losses at the beginning of the financial year (33,519,834) (21,757,816) Loss after income tax expense for the year (18,892,617) (11,762,018) Accumulated losses at the end of the financial year (52,412,451) (33,519,834) 30 June 2020 $ 30 June 2019 $ 23. Earnings/(loss) per share Loss after income tax (18,892,617) (11,762,018) Loss after income tax attributable to the owners of Kalium Lakes Limited used in calculating diluted earnings per share (18,892,617) (11,762,018) Basic earnings per share (4.71) (6.15) Diluted earnings per share (4.71) (6.15) Number Number Weighted average number of ordinary shares used in calculating basic and diluted earnings per share 400,814,955 191,370,743 Accounting policy: Earnings per share Basic earnings per share is calculated as net profit/(loss) attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. The diluted earnings per share is calculated as net profit or loss attributable to members of the parent divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. The weighted average number of shares was based on the consolidated weighted average number of shares in the reporting period. The net profit or loss attributable to members of the parent is adjusted for: o Costs of servicing equity (other than dividends) and preference share dividends; o The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and o Other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares. 82
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2020 $ 30 June 2019 $ 24. Auditor’s remuneration Audit and review of the financial report 65,936 40,250 Research and development tax 40,976 53,503 Investigative accountants report 19,943 - Taxation and technical advice services 75,747 41,461 202,602 135,214 30 June 2020 $ 30 June 2019 $ 25. Reconciliation of cashflows from operating activities Loss after income tax expense for the year (18,892,617) (11,762,018) Adjustments for: Depreciation 746,435 416,816 Share based payment expense 243,887 2,954,557 Interest income - (123,462) Loss on derivative financial instruments 151,613 - Change in operating assets and liabilities: Trade & other receivables 1,086,191 1,512,162 Trade & other payables 2,564,349 656,170 Work in progress (96,169,388) (6,947,206) Mine development (14,110,996) (643,725) Net cash used in operating activities (124,380,526) (13,936,706) 82
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 26. Parent entity information Set out below is the supplementary information about the parent entity. 30 June 2020 $ 30 June 2019 $ Statement of profit or loss and other comprehensive income Loss after income tax (29,629,117) (11,762,018) Total comprehensive loss (29,629,117) (11,762,018) Statement of financial position Total current assets 6,743,107 16,131,454 Total assets 136,176,199 22,973,133 Total current liabilities (702,648) (189,799) Total liabilities (702,648) (189,799) Net assets 135,473,551 22,783,334 Guarantees Kalium Lakes Limited is a guarantor under the KLP Facility Agreement, KLI Facility Agreement, Security Trust Deed, Intercreditor Deed, Working Capital Facility Agreement, and the Offtake Agreement. Other Commitments and Contingencies Kalium Lakes Limited has no other commitments and contingencies. Plant and Equipment Commitments Kalium Lakes Limited has no commitments to acquire property, plant and equipment. Significant Accounting Policies Kalium Lakes Limited accounting policies do not differ from the Consolidated Entity as disclosed in the notes to the financial statements. 84
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 27. Key management personnel disclosure The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: 30 June 2020 $ 30 June 2019 $ Short-term employee benefits 1,089,478 835,789 Post-employment benefits 76,373 76,705 1,165,851 912,494 Share-based payments 43,887 115,659 1,209,738 1,028,153 28. Related party transactions Parent entity Kalium Lakes Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 30. Key management personnel Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the directors' report. The following transactions occurred with related parties: 30 June 2020 $ Payment for services: Payment for employee services from Tanya Hazelden (Director related entity of Brett Hazelden) 90,820 Payment for construction services from Smoothy Cattle Co Pty Ltd (Director related entity of Brent Smoothy) 4,323,731 Payment for construction services from FIRM Construction Pty Ltd1 4,901,101 1 Smoothy Cattle Co Pty Ltd (Director related entity of Brent Smoothy) was awarded the sub-contractor works under the FIRM Construction Pty Ltd contract. Amounts paid during the year to FIRM Construction Pty Ltd disclosed above relate to work performed by Smoothy Cattle Co Pty Ltd. 84
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Receivables from and payables to related parties 30 June 2020 $ Current payables: Payment for construction services from Smoothy Cattle Co Pty Ltd (Director related entity of Brent Smoothy) 2,089,7231 1On 9 July 2020, the Company issued 13,931,488 shares at $0.15 in lieu of cash payment for the outstanding invoices owing ($2,089,723) in respect to construction services provided by Smoothy Cattle Co Pty Ltd. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 29. Financial instruments The Consolidated Entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity. The Consolidated Entity uses derivative financial instruments such as forward foreign exchange contracts and options to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. The risks to which the Consolidated Entity is exposed are described below. Credit risk Credit risk arises from the financial assets of the Consolidated Entity, which comprise cash and cash equivalents and trade and other receivables. Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contractual obligations that could lead to a financial loss to the Consolidated Entity. The Consolidated Entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Consolidated Entity based on recent sales experience, historical collection rates and forward-looking information that is available. 86
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Liquidity Risk Vigilant liquidity risk management requires the Consolidated Entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Consolidated Entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements Unused borrowing facilities at the reporting date: 30 June 2020 $ 30 June 2019 $ Unused at the reporting date Bank loans1 128,683,996 - 1 Refer to note 19. Remaining contractual maturities The following tables detail the Consolidated Entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. 30 June 2020 Weighted average interest rate 1 year or less Between 1 and 5 years Over 5 years Remaining contractual maturities % $ $ $ $ Non-derivates Non-interest bearing Trade payables - 6,124,266 - - 6,124,266 Other payables - 232,567 - - 232,567 Lease liability - 105,020 - - 105,020 Interest bearing Bank loans 3.64% - 50,472,7831 - 50,472,7831 Total non-derivatives 6,461,853 50,472,783 - 56,934,636 Derivatives Forward foreign exchange contracts and options net settled - 151,613 - - 151,613 Total derivatives 151,613 - - 151,613 1 Refer to note 19. 86
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 30 June 2019 Weighted average interest rate 1 year or less Between 1 and 5 years Over 5 years Remaining contractual maturities % $ $ $ $ Non-derivates Non-interest bearing Trade payables - 3,472,370 - - 3,472,370 Lease liability - - - - - Interest bearing Bank loans - - - - - Total non-derivatives 3,472,370 - - 3,472,370 Derivatives Forward foreign exchange contracts net settled - - - - - Total derivatives - - - - - The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Consolidated Entity is exposed to interest rate movements through term deposits and online savers at fixed and variable rates of between 0.2% and 2.2% per annum, dependent on market rates on the day of investment and the length of the investment. The following table sets out the variable interest bearing and fixed interest-bearing financial instruments of the Consolidated Entity: Financial assets Year end Variable interest $ Fixed interest $ Cash and cash equivalents 30 June 2020 54,623,007 - Cash and cash equivalents 30 June 2019 10,454,090 5,013,090 The following table illustrates the estimated sensitivity to a 1% increase and decrease to fixed, variable interest rate fluctuations. Impact on pre-tax profit Year end Interest rates +1% Interest rates - 1% Cash and cash equivalents 30 June 2020 546,230 (546,230) Cash and cash equivalents 30 June 2019 154,671 (154,671) 88
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 The Consolidated Entity is also exposed to interest rate risk arising from long-term borrowings. Borrowings obtained at variable rates expose the Consolidated Entity to interest rate risk. Borrowings obtained at fixed rates expose the Consolidated entity to fair value risk. The Consolidated Entity's bank loans outstanding, totalling $50,472,783 (2019: $Nil), are principal and interest payment loans. An official increase/decrease in interest rates of 100 (2019: 100) basis points would have an adverse/favourable effect on profit before tax of $504,728 (2019: $Nil) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Principal repayments of $Nil are due during the year ending 30 June 2021. Foreign currency risk The Consolidated Entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. In order to protect against exchange rate movements, the Consolidated Entity has entered into forward foreign exchange contracts and options. These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. The maturity, settlement amounts and the average contractual exchange rates of the Consolidated Entity's outstanding forward foreign exchange contracts and options at the reporting date were as follows: Sell USD dollars Average exchange rates 2020 2019 2020 2019 Buy AUD dollars Maturity: 0-6 months 22,331,111 - 0.690 - 6-12 months 9,204,328 - 0.693 - Sell USD dollars Capped EURO to USD rate 2020 2019 2020 2019 Buy Euros1 Maturity: 0-6 months 15,753,779 - 1.15 - 6-12 months 46,794 - 1.15 - The amounts in the above table are presented in AUD. 1 The Company has Euro call options with a cap of 1.15 (Euro to USD). The Consolidated Entity had net liabilities denominated in foreign currencies in Euro (AUD equivalent $176,708) and USD (AUD equivalent $25,521,990) totalling $25,698,698 (AUD) as at 30 June 2020. Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% against these foreign currencies with all other variables held constant, the Consolidated Entity's loss before tax for the year would have been $2,569,870 lower/$1,284,935 higher and equity would have been $2,569,870 lower/$1,284,935 higher. The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. The actual foreign exchange gain for the year ended 30 June 2020 was $323,322 (2019: $35,331). 88
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 The Consolidated Entity had net assets denominated in foreign currencies in Euro (AUD equivalent $41,075) as at 30 June 2019. If the EUR/AUD rates had changed by 10% with all other variables held constant, the Consolidated Entity’s loss before tax for the year would have been AUD $4,107 lower/higher. Accounting Policy Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. 90
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1 Magnesium Lakes Pty Ltd was incorporated on 9 June 2020. The company was dormant at the reporting date. 30. Interest in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly owned subsidiaries in accordance with the accounting policy described in the notes to the financial statements. Incorporation % of Equity Interest 30 June 2020 % 30 June 2019 % Kalium Lakes Potash Pty Ltd Australia 100 100 Kalium Lakes Infrastructure Pty Ltd Australia 100 100 Carnegie Potash Pty Ltd Australia 100 100 Magnesium Lakes Pty Ltd1 Australia 100 - 31. Contingent liabilities and assets The Consolidated Entity has no contingent liabilities and assets as at 30 June 2020 (2019: Nil). 32. Commitments 30 June 2020 $ 30 June 2019 $ Committed at the reporting date but not recognised as liabilities, payable: Rental, rates and expenditure commitments relating to tenements 1,124,496 2,438,611 Construction of the Beyondie Sulphate of Potash Project (BSOPP) 155,186,218 12,034,097 156,310,714 14,472,708 90
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 33. Interests in joint operations On 1 March 2017, the Consolidated Entity and BC Potash Pty Ltd announced that the companies had entered into a joint operation over Kalium’s 100% owned Carnegie Project. The Carnegie Joint Operation (CJO) is focussed on the exploration and development of the Carnegie Potash Project (CPP) in Western Australia, which is located approximately 220 kilometres east-north-east of Wiluna. The CJO comprises one granted exploration licence and five exploration licence applications, covering a total area of approximately 3,081 square kilometres. Under the terms of the agreement BC Potash Pty Ltd can earn up to a 50% interest in the CJO by predominantly sole-funding exploration and development expenditure across several stages. Kalium Lakes Potash Pty Ltd is the manager of the CJO and will leverage its existing Intellectual Property to fast track work. The CJO Companies have endorsed proceeding to a staged Pre-Feasibility Study, with an initial focus on securing tenure and access to all required tenements. The Consolidated Entity has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications. Kalium Lakes Limited ownership interest is set out below: Incorporation % of Interest 30 June 2020 % 30 June 2019 % Carnegie Joint Operation Australia 70% 70% 92
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FINANCIAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- FOR THE YEAR ENDED 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 34. Events after reporting date No matter or circumstance has arisen since the end of the financial year, which will significantly affect, or may significantly affect, the state of affairs or operations of the reporting entity in future financial periods other than the following: o On 1 July 2020, the Company announced to the market the maiden Mineral Resource for Ten Mile West following acquisition of the Ten Mile West tenement and subsequent initial exploration in 2019. o On 9 July 2020, following shareholder approval the Company issued 13,931,488 shares at $0.15 in lieu of cash payment for the outstanding invoices owing in respect to construction services provided by Smoothy Cattle Co Pty Ltd (Director-related entity of Brent Smoothy). o On 9 July 2020, following shareholder approval the Company issued 20,305,409 shares to Directors, Officers, and its cornerstone investor at $0.15 raising approximately $3 million. o On 9 July 2020, the Company advised that construction works on its fully owned gas pipeline have commenced on schedule at the Beyondie Sulphate of Potash Project. o On 24 July 2020, Mr Brett Hazelden ceased his employment with the Company, as Managing Director and CEO. The Board resolved to appoint the current Chief Development Officer, Rudolph van Niekerk, as the interim Chief Executive Officer. o On 5 August 2020, the Company announced that the Beyondie Sulphate of Potash Project (BSOPP) was 52% complete and tracking ahead of its updated schedule. o The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the Consolidated Entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. 92
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DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION The Directors of the Company declare that: a. the financial statements and notes are in accordance with the Corporations Act 2001; b. comply with Accounting Standards; c. are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in Note 2 to the financial statements; and d. give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that date of the Company and the Consolidated Entity; The Chief Executive Officer and Chairman have each declared that: a. the financial records of the Company for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with the Accounting Standards; and c. the financial statements and notes for the financial year give a true and fair view; In the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is signed in accordance with a resolution of the Board of Directors. ____________________ Mal Randall Chairman 13 August 2020 94
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INDEPENDENT AUDITOR’S REPORT
RSM Australia Partners
Level 32, Exchange Tower
2 The Esplanade Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Kalium Lakes Limited
Opinion
We have audited the financial report of Kalium Lakes Limited (Company) and its subsidiaries (Group), which
comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) Giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the audit of the financial report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (Code) that are relevant to our audit of the financial report
in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
94
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Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed this matter
Impairment of non-current asset
The carrying value of the Group’s non-current assets
amounted to $140,740,938 as at 30 June 2020 and is
comprised of:
Work in progress
$118,957,531
Mine in development
$14,754,721
Our audit procedures included:
significant
Reviewing and performing sensitivity analysis on
by
the
management when preparing the discounted
cash flow model, such as WACC, commodity
prices, capital expenditure, operating expenses
and foreign exchange rates;
assumptions
used
Property, plant and
equipment
$6,828,145
Reviewing the management expert’s report on
internal consistency and integrity of the model;
internal
Involving our
financial modelling
specialists to assess the integrity of the model
and reasonableness of management’s key
assumptions;
Checking the mathematical accuracy of the cash
flow model; and
Assessing the appropriateness of the disclosures
in the financial statements.
Right-of-use assets
$200,541
these non-current assets
Recoverability of
is
dependent on macro-economic assumptions about
commodity prices, discount and exchange rates as
well as internal assumptions relating to future mine
development
expenses,
production levels, operating costs and the weighted
average cost of capital (WACC).
rehabilitation
costs,
Management performed an impairment assessment
over the carrying value of non-current assets by:
Calculating the value-in-use using a discounted
cash flow model. The model used projected
cash flows (revenues, expenses and capital
expenditure) over the estimated life of the mine.
The projected cash flow was discounted to net
present value by applying
the Group’s
estimated WACC; and
Comparing the resulting value-in-use with the
carrying value of non-current assets.
Management has ascertained that there are no
indicators of impairment.
We determined this area to be a key audit matter due
to the material size of the carrying value and the
involved
significant management
in
assessing whether
impairment are
present.
indicators of
judgement
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INDEPENDENT AUDITOR’S REPORT
Other information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2020, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This
description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Kalium Lakes Limited, for the year ended 30 June 2020, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
D J WALL
Partner
RSM Australia Partners
Perth, Western Australia
13 August 2020
96
K ALIUM LAKES LIMITED I CONSOLIDATED ANNUAL REPORT 2019/20
97
ADDITIONAL INFORMATION
FOR PUBLIC LISTED COMPANIES
ADDITIONAL INFORMATION FOR PUBLIC LISTED COMPANIES Issued Securities as at 30 June 2020 Quoted on ASX Unlisted Total Fully paid ordinary shares 802,257,785 - 802,257,785 $0.425 unlisted options expiring 29-Sep-20 - 330,882 330,882 $0.525 unlisted options expiring 17-May-21 - 1,000,000 1,000,000 $0.00 unlisted options expiring 16-Jun-22 - 1,000,000 1,000,000 $0.55 unlisted options expiring 16-Jun-22 - 1,182,639 1,182,639 $0.625 unlisted options expiring 16-Jun-22 - 1,750,000 1,750,000 $0.00 unlisted options expiring 16-Jun-23 - 12,218,987 12,218,987 $0.00 unlisted options expiring 16-Jun-23 - 17,677,493 17,677,493 $0.00 unlisted options expiring 16-Jun-23 - 1,666,667 1,666,667 $0.3583 unlisted options expiring 30-Jun-25 - 5,000,000 5,000,000 Performance rights - 10,000,000 10,000,000 Total 802,257,785 51,826,668 854,084,453 Distribution of Listed Ordinary Fully Paid Shares as at 30 June 2020 Spread of Holdings Number of Holders Number of Units % of Total Issued Capital 1 - 1,000 249 136,954 0.02 1,001 - 5,000 1,253 3,440,025 0.43 5,001 - 10,000 747 5,918,492 0.74 10,001 - 100,000 2,010 77,236,011 9.63 100,001 - and over 707 715,526,303 89.18 Total 4,966 802,257,785 100 Top 20 Listed Ordinary Fully Paid Shareholders as at 30 June 2020 Rank Shareholder Shares Held % Issued Capital 1. GREENSTONE RESOURCES II (AUSTRALIA) HOLDINGS L P 84,801,857 10.57 2. GREENSTONE MANAGEMENT (DELAWARE) II LLC 78,673,124 9.81 3. VINCE SMOOTHY SUPER PTY LTD 40,339,800 5.03 4. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 33,389,224 4.16 5. BIGA NOMINEES PTY LTD 24,296,755 3.03 6. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 20,174,956 2.51 7. THOMAS CHUTE ELLIS + SALLY ANNE ELLIS 19,199,159 2.39 8. KUMARINA HOLDINGS PTY LTD 18,818,187 2.35 9. CITICORP NOMINEES PTY LIMITED 17,866,710 2.23 10. BNP PARIBAS NOMINEES PTY LTD 15,670,475 1.95 11. HAZELDEN CORPORATE PTY LTD 12,619,537 1.57 12. MR STACEY RADFORD 10,686,254 1.33 13. HAZELDEN CORPORATE PTY LTD 9,378,452 1.17 14. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSI EDA 8,785,987 1.10 15. CS THIRD NOMINEES PTY LIMITED 7,284,669 0.91 16. KUMARINA HOLDINGS PTY LTD 6,666,667 0.83 17. MR PHILIPPUS RUDOLPH VAN NIEKERK + MRS JEAN-MARIE VAN NIEKERK 6,574,896 0.82 18. MR BRETT WILLIAM HAZELDEN + MS TANYA PHYLLIS BOZIKOVIC 6,390,614 0.80 19. VALDARNO PTY LTD 5,960,491 0.74 20. ANDIUM PTY LIMITED 5,521,569 0.69 Total 433,099,383 53.99 NOTES
KALIUM LAKES LIMITED
Office Address
Unit 1, 152 Balcatta Road
Balcatta WA 6021
Postal Address
PO Box 610
Balcatta WA 6914
Telephone: +61 (0)8 9240 3200
Email: info@kaliumlakes.com.au
www.kaliumlakes.com.au
ABN 98 613 656 643