Kingston Resources Limited
Annual Report 2018

Plain-text annual report

KINGSTON RESOURCES LIMITED & its Controlled Entities KINGSTON RESOURCES LIMITED ABN 44 009 148 529 2018 Annual Financial Report For the year ended 30 June 2018 CONTENTS Contents KINGSTON RESOURCES LIMITED & its Controlled Entities Page No. Corporate Directory ...................................................................................................................................... 2 Chairman’s Letter ......................................................................................................................................... 3 Directors’ Report .......................................................................................................................................... 4 Lead Auditor’s Independence Declaration ................................................................................................. 20 Consolidated Statement of Financial Position ............................................................................................ 21 Consolidated Statement of Profit or Loss and Other Comprehensive Income ........................................... 22 Consolidated Statement of Changes in Equity ........................................................................................... 23 Consolidated Statement of Cash Flows ...................................................................................................... 24 Notes to the Financial Statements .............................................................................................................. 25 Directors’ Declaration ................................................................................................................................ 48 Independent Auditor’s Report .................................................................................................................... 49 Corporate Governance Statement .............................................................................................................. 54 Additional Information ............................................................................................................................... 55 CORPORATE DIRECTORY KINGSTON RESOURCES LIMITED & its Controlled Entities Corporate Directory DIRECTORS Anthony Wehby, (FCA, MAICD) Non-Executive Chairman Andrew Corbett, (B Eng (Mining, Hons), MBA) Managing Director Mick Wilkes (B Eng (Hons), MBA, GAICD) Non-Executive Director Stuart Rechner, (BSc, LLB, MAIG, GAICD) Non-Executive Director Andrew Paterson, (MAIG, GAICD) Executive Director COMPANY SECRETARY Rozanna Lee REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Suite 205, 283 Alfred Street North North Sydney NSW 2060 AUSTRALIA Telephone Email Website (02) 8021 7492 info@kingstonresources.com.au www.kingstonresources.com.au AUDITORS Hall Chadwick Chartered Accountants SHARE REGISTRY Link Market Services Pty Ltd BANKERS Australia & New Zealand Banking Group Limited SOLICITORS & CORPORATE ADVISERS STOCK EXCHANGE Cowell Clarke Commercial Lawyers Ashurst Australia Listed on the Australian Securities Exchange The home exchange is in Perth, Western Australia ASX CODE KSN – fully paid ordinary shares - 2 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Chairman’s Letter Dear Stakeholders You will be aware that a significant change in focus and clarity of vision has emerged from the work undertaken during the past two years. In the Annual Report last year we noted our objectives as being to assess our lithium exploration tenements and to expand our asset base. In the period since that report we have substantially disposed of our lithium assets, recovering approximately $2m, and completed a transformational acquisition. That acquisition, along with continuing work on the project since, will deliver to KSN a 70% interest in the Misima Joint Venture. We also continued exploration on the Livingstone Gold Project during the year. The exercise of our option to move to 75% ownership reflects the results of work to date and the expansion of that opportunity. These two gold projects (Misima and Livingstone) are the foundation on which we are planning to build KSN into a successful exploration and development company. We do not, however, underestimate the challenges that always accompany exploration, even in such well recognised gold domains as these. I recently visited Misima and, despite all my prior knowledge, the wealth of exploration targets within our tenement was beyond my expectations. The KSN team has done an outstanding job in reigniting this project. Progress is evident in all aspects of management and operations from logistics, work force recruitment and training, community and landowner engagement and execution of drilling and trenching programs. It has been an impressive ramp up in just nine months since the acquisition was completed! As a company we are conscious of both the opportunities and obligations we have on Misima Island and understand that success relies on the correct balance in our activities. Andrew Corbett has again led the KSN team through an intense year and I offer him and his team thanks for their efforts and congratulations for the achievements. We were pleased to welcome Mick Wilkes to the Board as a non-executive director in early July. The appointment of such an experienced and well-respected mining executive to the board reflects our need for the skills Mick brings and his confidence in our projects. Shareholder support during this year of transition has been greatly appreciated. We look forward to a year in which we build value into our assets for the long term benefit of all. Your sincerely Anthony S Wehby Non-Executive Chairman 6 September 2018 - 3 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Directors’ Report The Directors present their report together with the financial report of the Consolidated Entity (or ‘Group’), being Kingston Resources Limited (‘Kingston” or the “Company’) and its subsidiaries, for the financial year ended 30 June 2018 and the independent auditor’s report thereon. PRINCIPAL ACTIVITIES The Company is an Australian-based Company listed on the ASX. The principal activity of the Group during the period was mineral exploration. OPERATING RESULTS AND REVIEW OF OPERATIONS FOR THE YEAR Operating Results Kingston reported a statutory after tax loss of $5,750,302 (2017: $1,153,471). The increase in the FY18 loss compared to FY17 is largely the result of the $3,552,901 impairment to the Company’s remaining lithium exploration assets and the $408,444 loss on the sale of the Mt Cattlin lithium tenements. Review of Operations Kingston has had a transformational year to 30 June 2018. A number of significant events during the year have set the course for Kingston in FY19 and beyond. Of most importance was the acquisition of WCB Resources Limited, which brought with it a 49% interest in the exciting 2.8Moz Misima Gold Project in Papua New Guinea. Following this, Kingston exercised its option to acquire 75% of the Livingstone Gold Project in December 2017. With focus turning to the Misima Gold Project, a strategic review was undertaken to assess alternatives for the lithium exploration portfolio. This process successfully concluded in June 2018 with the sale of the Mt Cattlin lithium assets for $600,000, and then shortly after year end the agreed sale of Kingston’s Bynoe and Arunta lithium assets for a further $1,800,000. With the strategy turning towards the Misima Gold Project, Kingston conducted an equity placement in February 2018, successfully raising $4.3m, alongside which an SPP raised a further $255,000. These funds enabled Kingston to move forward with drilling at Misima which, following several months of mobilisation, commenced in early May only six months post the acquisition of WCB Resources. Summary of Acquisitions  WCB Resources Limited (WCB): On 7 November 2017 WCB shareholders voted overwhelmingly in favour of the merger with KSN. On 17 November 2017, KSN issued 302,601,971 shares to WCB shareholders in exchange for their WCB shares, acquiring 100% of the company. WCB was subsequently delisted from the TSX.  Livingstone Gold Project: On 8 December 2017, KSN issued 16,413,039 shares to Trillbar Resources to acquire 75% of the project as per the terms of the option agreement entered into with Trillbar in December 2016. Misima Gold Project Misima Island is located 625km east of Port Moresby in the Solomon Sea. Gold was discovered on the island in 1888 with small scale underground mining continuing until WWII. Placer Dome Inc (Placer) commenced exploration in 1977, with production beginning in 1989. Misima was operated as an open pit gold mine from 1989 to 2001, with stockpiled ore treated for the final three years of the operation until 2004. - 4 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities The operation was a success for Placer. It mined 87.5Mt at 1.46g/t Au producing 3.7Moz of gold and 22Moz of silver. In 1990 the reserve grade stood at 1.26g/t Au, however, the average grade of all ore mined from then until the completion of milling was 1.56g/t Au, a reserve grade reconciliation of 124%. The mill had nameplate capacity of 5.5Mtpa, easily workable ore saw a maximum throughput of 6.9Mtpa achieved. Gold recoveries averaged 91.5% and costs averaged US$218/oz, resulting in an average margin of US$128/oz (37%). At the time the decision was made to close the mine, the gold price was below US$ 300/oz. The mill was subsequently decommissioned and removed by 2005. The site has since been rehabilitated, with the PNG Mineral Resource Authority signing off on the successful rehabilitation in 2012. Following Kingston’s acquisition of the project, it shifted focus away from the copper potential targeted by WCB towards the existing gold resource and exploration potential on the island. In November 2017, Kingston announced a 2.8Moz JORC resource (82.3Mt at 1.1g/t Au), an increase on the existing NI43-101 resource of 2.3Moz (73Mt @ 1.0g/tAu) and by early December 2017, it had field teams back on the ground. Kingston’s field work delivered early success with the discovery of Ginamwamwa in January 2018, with a best channel sample of 14m at 12.2g/t and a number of high grade soil samples. Field work remains ongoing at Ginamwamwa alongside a number of other prospective areas, with a view to preparing them for future drilling. Following the successful equity raising in February 2018, Kingston commenced mobilisation for its maiden 10,000m drilling campaign. Drilling commenced in early May 2018. Kingston is very excited to be the first to carry out exploration drilling for gold on Misima in almost 20 years. Livingstone Gold Project Livingstone, located northwest of Meekatharra in Western Australia, is a large exploration project with an existing JORC2004 Inferred mineral resource of 49,900 ounces of gold and a number of high-grade drilling intersections that indicate excellent potential for additional discoveries. The project area spans over 30km of prospective geological strike on the western limb of the highly prospective Bryah Basin. In FY18, Kingston completed its second drill program at Livingstone targeting the large, previously untested soil anomaly in the Livingstone’s Find – Stanley area. 152 air-core holes were drilled for a total of 5,836m during April and May 2018, targeting mineralisation beneath geochemical anomalies identified by auger sampling in 2017. 77 holes intersected grades in excess of 100ppb Au, of which 18 holes intersected 0.5g/t or more. Drilling was designed to achieve a quick, first-pass test for primary mineralisation beneath the strongest soil anomaly areas. Drilling has highlighted the potential of the main line of historic workings, with mineralisation defined over a strike length of 2.2km. Early results suggest potential for two or more sub-parallel zones of mineralisation including the structure previously mined by historic workings and a second, newly discovered zone slightly further south. Importantly, gold has been identified up to 850m west of the historic shafts and the prospect remains open along strike, greatly increasing the possible size of the mineralised zone. This prospect area, which was previously known as Mt Seabrook 1 and 2, has been renamed Kingsley. Best intersections identified at the Kingsley prospect include1:  5m @ 6.56g/t Au from 49m in KLAC008  3m @ 5.82g/t Au from 8m in KLAC006  5m @ 2.73g/t au from 13m in KLAC030. 1 ASX announcement 21 August 2018 - 5 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Northwest of Kingsley, a new area of gold mineralisation has been confirmed by drilling at the Dampier prospect. Dampier, first identified in auger sampling by Kingston, is now approximately 500m long with mineralisation open along strike to the west and east. Kingston is now preparing to conduct another drilling program at Livingstone following up on these results. A track-mounted rig capable of drilling RC and Air-core holes will be used for the program. MINERAL RESOURCES TABLE Livingstone Gold Project (WA) Deposit Resource Cut-off Tonnes Gold Category (g/t Au) (g/t Au) Au (oz) Homestead Inferred 0.5 989,000 1.57 49,900 Table 1: Livingstone Gold Project mineral resource summary. This resource estimate is from a JORC2004 resource report prepared by Mr H. Cornelius for Talisman Mining Ltd in February 2007. Kingston Resources has not completed sufficient validation work for this resource estimate to meet JORC2012 compliance and it is reported on the basis that the information has not materially changed. Rounding errors may occur. Misima Gold Project (PNG) Deposit Material Resource Cut-off Tonnes Gold Silver Au Moz Ag Moz Category (g/t Au) (Mt) (g/t Au) (g/t Ag) Umuna Oxide Indicated Inferred Primary Indicated Inferred Sub-total Indicated Total Oxide Primary Sub-total Ewatinona Misima Total Total Misima Mineral Resource Inferred Combined Inferred Inferred Inferred Indicated Inferred 0.5 0.5 0.5 0.5 0.5 0.5 3.2 5.7 34.0 32.7 37.2 38.4 75.7 1.0 5.6 6.6 37.2 45.0 82.3 0.9 1.0 1.1 1.1 1.1 1.0 1.1 0.9 1.0 1.0 1.1 1.0 1.1 11.7 13.6 4.2 4.7 4.9 6.1 5.5 3.4 3.1 3.2 4.9 5.6 5.3 0.1 0.2 1.2 1.1 1.3 1.3 2.6 0.03 0.2 0.22 1.3 1.5 2.8 1.2 2.5 4.6 5.0 5.8 7.5 13.3 0.1 0.6 0.7 5.8 8.1 13.9 Table 2: Misima Gold Project mineral resource summary, prepared by Mr S. McManus of Skandus Pty Ltd. Rounding errors may occur. COMPETENT PERSON’S STATEMENT The information in this report that relates to Exploration Results, Minerals Resources or Reserves for the Livingston Gold Project is based on information compiled by Mr Andrew Paterson, who is a member of the Australian Institute of Geoscientists. Mr Paterson is a full-time employee of the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a competent person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Paterson consents to the inclusion in this report of the matters based upon the information in the form and context in which it appears. - 6 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities The information in this report that relates to Exploration Results for the Misima Gold Project, PNG, is based on information compiled by Mr Andrew Paterson, who is a member of the Australian Institute of Geoscientists. Mr Paterson is a full-time employee of the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a competent person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Paterson consents to the inclusion in this report of the matters based upon the information in the form and context in which it appears. The information in this report that relates to Minerals Resources or Reserves for the Misima Gold Project is based on information compiled by Mr Scott McManus, who is a member of the Australian Institute of Geoscientists. Mr McManus is an independent consultant to the Company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a competent person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr McManus consents to the inclusion in this report of the matters based upon the information in the form and context in which it appears. FINANCIAL POSITION On 13 February 2018, the Company completed a capital raising via placement issuing a total of 194 million shares at $0.022 raising $4.3m, alongside this a Share Purchase Plan raised a further $255,000 through the issuance of 11,590,897 shares at $0.022. At the end of the financial year, the Consolidated Entity had net assets of $15,039,902 (2017: $9,740,370) and held $4,379,799 in cash (2017: $3,877,551). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Other than reported above in the Review of Results and Operations, noting in particular the acquisition of WCB Resources Ltd, there were no significant changes in the state of affairs of the Company during the reporting period. MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR On 5 July 2018, the Company announced it had entered into an agreement to sell its Bynoe and Arunta Northern Territory lithium assets for a total of $1,800,000 to an Australia private company, Lithium Plus Pty (see ASX Announcement 5 July 2018, “Kingston Sells NT Lithium Tenements for $1.8m Cash”). On 10 July 2018, the Company announced the appointment of Mick Wilkes as Non-Executive Director. On 19 July 2018, Kingston issued senior management 8,237,357 shares on the vesting of FY18 STI Performance rights (8,237,357 lapsed). On 29 August 2018, the sale of the NT Lithium tenements (announced by the Company on 5 July 2018) was completed, with the $1,800,000 settlement proceeds transferred to KSN. Other than the above, there has been no other matter or circumstance which has arisen since 30 June 2018 that has significantly affected or may significantly affect: a) b) c) Kingston Resources Limited’s operations in future financial years; or the results of those operations in future financial years; or Kingston Resources Limited’s state of affairs in future financial years. - 7 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities DIVIDENDS OR DISTRIBUTIONS No dividends were paid during the financial year and the directors do not recommend the payment of a dividend. FUTURE DEVELOPMENTS AND EXPECTED RESULTS The Group will continue its evaluation of its mineral projects and undertake generative work to identify and potentially acquire new resource projects. Due to the nature of the business, the result is not predictable. ENVIRONMENTAL REGULATIONS The mineral tenements granted to the Company pursuant to the Western Australia Mining Act 1978, Northern Territory Mineral Titles Act 2010 and the Papua New Guinea Mining Act 1992, are granted subject to various conditions which include standard environmental requirements. The Company adheres to these conditions and the directors are not aware of any environmental laws that are not being complied with. INFORMATION ON THE DIRECTORS The Directors of the Company at any time during or since the end of the financial year are:      Anthony Wehby – Chairman (Non-Executive) Andrew Corbett – Director (Managing) Stuart Rechner - Director (Non-Executive) Andrew Paterson – Director (Executive) Mick Wilkes - Director (Non-Executive), appointed 6 July 2018 Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Anthony Wehby, Chairman (FCA, MAICD) Term of Office: Non-Executive Chairman of Kingston Resources Limited since 4 July 2016. Skills and Experience: Mr Wehby is a highly experience board member and chairman. He is also a Director of Ensurance Ltd (ASX:ENA) and Royal Rehab and was previously Chairman of Tellus Resources Limited, Non-Executive Chairman of Aurelia Metals Limited and a Director of Harmony Gold (Aust) Pty Ltd. Since 2001, Mr Wehby has maintained a financial consulting practice, focusing on strategic advice to companies including investments, divestments and capital raisings. Prior to 2001, Mr Wehby was a partner in PricewaterhouseCoopers Australia (Coopers & Lybrand) for 19 years. Mr Wehby is a Fellow of the Institute of Chartered Accountants in Australia and a Member of the Australian Institute of Company Directors. Andrew Corbett, Managing Director (B Eng (Mining, Hons), MBA) Term of Office: Managing Director of Kingston Resources Limited since 4 July 2016. Skills and Experience: Mr Corbett has been appointed as Managing Director and CEO of the Company. Andrew is a highly experienced mining engineer and has operated in the mining industry for over 24 years. Mr Corbett has senior corporate, operational and mine management experience combined with an in-depth understanding of global equity markets, business development and corporate strategy within the mining sector. His prior roles include General Manager at Orica Mining Services based in Germany and Portfolio Manager of the Global Resource Fund at Perpetual Investments as well as - 8 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities mine management and operations roles with contractor and owner-mining operations. Stuart Rechner, Non-Executive Director (BSc, LLB, MAIG, GAICD) Term of Office: Executive Director of Kingston Resources Limited since 23 February 2015, Non- Executive Director from 4 July 2016. Skills and Experience: Mr Rechner is an experienced company director and geologist with a background in project generation and acquisition in Australia and overseas. Mr Rechner holds degrees in both geology and law and is a member of the Australian Institute of Geoscientists and the Australian Institute of Company Directors. For over ten years Mr Rechner was an Australian diplomat responsible for the resources sector with postings to Beijing and Jakarta. Mr Rechner has been a Director of Strategic Energy Limited (ASX:SER) since 12 September 2014 and was a Director of GB Energy Limited (ASX:GBX) from 20 November 2013 until 28 September 2017. He has held no other listed directorships in the past three years. Andrew Paterson, Executive Director (MAIG, GAICD) Term of Office Executive Director of Kingston Resources Limited since 1 March 2017, Chief Geological Officer from 3 June 2016. Skills and Experience: Mr Paterson is a highly-experienced geologist with a track record of creating value in resources projects. He has held corporate, executive and operational roles in the gold, nickel sulphide and iron ore industries, including four years managing the exploration and resource teams for Atlas Iron Limited during its rapid growth phase between 2008 and 2012. More recently he established a successful consultancy practice, providing geological expertise to a number of companies in the WA gold sector. Mr Paterson has a Bachelor of Engineering in Geology and a Graduate Diploma in Mining, both from the Western Australian School of Mines. Mick Wilkes, Non-Executive Director (B Eng (Hons), MBA, GAICD) Term of Office Non-Executive Director of Kingston Resources Limited since 6 July 2018. Skills and Experience: Mr Wilkes is a mining engineer with 35 years of broad international experience with a strong emphasis on operations management and new mine development, predominantly in precious and base metals across Asia and Australia. He has been the President and CEO of OceanaGold Corporation (ASX:OCG) since 2011. In previous roles he was the Executive General Manager of Operations at OZ Minerals responsible for the development of the Prominent Hill copper/gold project in South Australia and General Manager of the Sepon gold/copper project for Oxiana based in Laos. His earlier experience included 10 years in various project development roles in Papua New Guinea. Mr Wilkes holds a Bachelor of Engineering from the University of Queensland, a Master of Business Administration from Deakin University, and is a member of both the Australian Institute of Mining and Metallurgy, and the Australian Institute of Company Directors. - 9 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities COMPANY SECRETARY Rozanna Lee has acted as Company Secretary since 29 July 2016. She holds both commerce and law degrees from the University of Queensland and is an Associate Member of the Governance Institute of Australia. DIRECTORS’ INTERESTS As at the date of this report the relevant interests of each of the Directors, held either directly or indirectly through their associates, in the securities of Kingston are as follows: Director Anthony Wehby² Andrew Corbett³ Andrew Paterson Stuart Rechner ⁴ Michael Wilkes Fully Paid Ordinary Shares (KSN) Unlisted LTI Options1 3,062,770 14,692,259 4,294,282 1,002,161 - 2,000,000 5,000,000 4,000,000 - - ¹ Unlisted Long Term Incentive (LTI) Options exercisable at $0.07 each and expiring on 30 June 2019 ² Anthony Wehby holds a relevant interest in shares and options as he is a related party to Mrs Rosemary Wehby, who is the registered holder of the options and shares. ³ Andrew Corbett holds a relevant interest in the specified number of Shares and Options as a result of being a director of Milamar Group Pty Ltd as trustee of Milamar Family Trust, which is the registered holder of those Shares and Options ⁴ Stuart Rechner holds a relevant interest in the specified number of Shares as a result of being a director of Osmium Holdings Pty Limited as trustee of Ferndale Superannuation Fund MEETINGS OF DIRECTORS The following table sets out the number of meetings of Kingston’s Directors held during the year ended 30 June 2018 and the number of meetings attended by each Director. There were a total of eleven Directors’ meetings for the financial year. Director Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner Michael Wilkes Number Eligible to Attend Number Attended 11 11 11 11 0 11 11 11 11 0 - 10 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities REMUNERATION REPORT (AUDITED) This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group for the year ended 30 June 2018 in accordance with the requirements of the Corporations Act 2001 and its Regulations. (a) Key management personnel disclosed in this report For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including a director (whether executive or otherwise) of the Company. Details of key management personnel: Non-Executive Chairman (appointed 4 July 2016) A Wehby A Corbett Managing Director (appointed 4 July 2016) S Rechner Non-Executive Director (transitioned to Non-Executive Director on 4 July 2016) A Paterson Executive Director (appointed 1 March 2017, Chief Geological Officer from 3 June 2016) M Wilkes J Davies Y Cai Non-Executive Director (appointed 6 July 2018) Non-Executive Chairman (resigned 4 July 2016) Non-Executive Director (resigned 30 November 2016) (b) Remuneration Philosophy The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to confirm to the market best practice for the delivery of reward. Since the end of the year, the Board has established a separate Remuneration and Nomination committee. The Remuneration and Nomination Committee will meet as required to review remuneration, recruitment, retention and termination procedures and to evaluate senior executives remuneration packages and incentives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. All matters of remuneration will continue to be in accordance with the Corporations Act requirement, especially with regard to related party transactions. That is, none of the directors participate in any deliberations regarding their own remuneration or related issues. Independent external advice is sought from remuneration consultants when required. In FY18 Kingston engaged remuneration consultants to benchmark board and executive management pay for FY19. The Corporate Governance Statement provides further information on the Company’s remuneration governance. (c) Executive remuneration policy and framework In determining executive remuneration, the Remuneration and Nomination Committee aims to ensure that remuneration practices are:  Competitive and reasonable, enabling the Company to attract and retain key talent;  Aligned to the Company’s strategic and business objectives and the creation of shareholder value;  Transparent and easily understood; and  Acceptable to shareholders. The Remuneration and Nomination Committee reviews executive packages annually by reference to the executive’s performance and comparable information from industry sectors and other listed companies in similar industries. The terms and conditions for the Managing Director are considered appropriate for the current exploration phase of the Group’s development. - 11 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Options and performance rights may be issued to directors subject to approval by shareholders. All remuneration paid to directors is valued at the cost to the Group and expensed. Options are valued using the Black-Scholes methodology. (d) Relationship between remuneration and the Group’s performance Directors’ remuneration is set by reference to other companies of similar size and industry, and by reference to the skills and experience of directors. Fees paid to directors are not linked to the performance of the Group. This policy may change once the exploration phase is complete and the Company is generating revenue. At present the existing remuneration policy is not impacted by the Group’s performance including earnings and changes in shareholder wealth (dividends, changes in share price or returns of capital to shareholders). The Remuneration and Nomination Committee has not set long-term and short-term performance indicators for the determination of director remuneration as the Board believes this may encourage performance which is not in the long term interests of the Company and its shareholders. The Board has structured its remuneration arrangements in such a way it believes is in the best interests of building shareholder wealth in the longer term. The following table shows the net loss, loss per share and share price for the last three financial years. Net Loss ($5,750,302) ($1,153,471) ($4,587,718) ($2,391,602) 2018 2017 2016 2015 2014 ($483,015) Diluted loss per share (cents/share) (0.646) (1.777) (2.702) (2.004) (0.578) Share price at year end (cents) 2 2 2 2 2 Long-term (LTI) and short-term (STI) incentives may be provided to KMP in the form of Performance Rights and Options over ordinary shares of the Company and are considered to promote continuity of employment and provide additional incentive to recipients to increase shareholder wealth. Performance Rights and Options may only be issued to directors subject to approval by shareholders in general meeting. There were no unlisted Options issued during the year as LTI or STI (2017: 27,000,000) . There were 16,474,707 Performance Rights issued during the year as STI and 12,813,661 Performance Rights issued during the year as LTI (2017: STI .8,280,938, LTI: 5,520,625) (e) Non-Executive Directors remuneration policy On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms including remuneration, relevant to the office of director. The Board policy is to remunerate non-executive directors at commercial market rates for comparable companies for their time, commitment and responsibilities. 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 and is currently set at $250,000 per annum. Fees may also be paid to non-executive directors for additional consulting services provided to the Company. Fees for non-executive directors are not linked to the performance of the Group. Non-executive directors’ remuneration may also include an incentive portion consisting of options, subject to approval by shareholders. (f) Voting and comments made at the Company’s 2017 Annual General Meeting Kingston received 99% of “yes” votes (0.1% of “no” votes) on its remuneration report for the 2017 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. - 12 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities (g) Remuneration Details for the Year Ended 30 June 2018 The following table of benefits and payments details, in respect to the financial year, the components of remuneration for each member of the KMP of the Group. S hort-term Benefits Post-employment Benefits Long-term Benefits Equity-settled S hare-based Payments S alary, Fees and Leave Director $ Profit S hare and Bonuses $ Non- monetary Other $ $ Pension and S uper- annuation $ Other Incentive Plans LSL Performance Rights/S hares Options $ $ $ $ $ Cash- settled S hare- based Payments $ Termination Benefits Total $ $ Anthony Wehby¹ 2018 2017 Andrew Corbett² 2018 2017 Andrew Paterson³ 2018 2017 Stuart Rechner⁴ 2018 2017 Yafeng Cai⁵ 2018 2017 M atthew Whyte⁶ 2018 2017 Jonathan Davies⁷ 2018 2017 Total 2018 2017 50,000 - - - 4,750 - - - - - - - 54,750 50,000 - - - 4,750 - - - - 32,328 - - 87,078 246,750 - - - 23,441 - - - 43,657 - - - 313,848 235,500 - - - 22,235 - - - 9,660 80,820 - - 348,215 210,000 - - - 19,950 - - - 37,155 - - - 267,105 229,351 - - - 9,500 - - - 8,221 64,656 - - 311,728 47,400 - - - - - - - - - - - 47,400 57,705 - - - - - - - - - - - 57,705 - - - - - - - - - - - - - 8,581 - - - - - - - - - - - 8,581 - - - - - - - - - - - - - 42,420 - - - - - - - - - - - 42,420 - - - - - - - - - - - - - - - - - - - - - - - - - - 554,150 623,557 0 0 0 0 0 0 48,141 36,485 0 0 0 0 0 0 80,812 17,881 0 177,804 0 0 0 0 683,103 855,727 ¹ Anthony Wehby was appointed Non-Executive Chairman on 4 July 2016 ² Prior to his appointment on 4 July 2016, Andrew Corbett received consultancy payments from the Company ³ Andrew Paterson was appointed Executive Director on 1 March 2017 ⁴ Stuart Rechner transitioned from an Executive Director to Non-Executive Director on 4 July 2016. He is remunerated through a related entity. Refer Note 21 for details on related party transactions. During 2018, Mr Rechner received consultancy payments through a related entity ⁵ Yafeng Cai resigned as Non-Executive Director on 30 November 2016 ⁶ Mathew Whyte resigned as Company Secretary on 29 July 2016 ⁷ Jonathan Davies resigned as Non-Executive Chairman on 4 July 2016 (h) Service Agreements Remuneration and other terms of employment for KMP are formalised in service agreements. The service agreements specify the components of remuneration, benefits and notice periods. Anthony Wehby Mr Wehby was appointed Non-Executive Chairman on 4 July 2016. The appointment is contingent upon satisfactory performance and successful re-election by shareholders of the Company as and when required by the constitution of the Company and the Corporations Act. Mr Wehby is not entitled to any termination benefits unless paid at the discretion of directors. Andrew Corbett Mr Corbett was appointed as Executive Director on 4 July 2016. Mr Corbett is remunerated pursuant to the terms and conditions of an employment agreement entered into with Mr Corbett on 4 July 2016 and has no fixed term. The agreement may be terminated by either party on the giving on three months’ notice by Mr - 13 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Corbett or six months’ notice by the Company. Mr Corbett is not entitled to any termination benefits other than accrued pay, leave entitlement or other statutory payments unless paid at the discretion of directors. Stuart Rechner Mr Rechner was appointed as Executive Director on 23 February 2015 and transitioned to a non-executive role on 4 July 2016. Mr Rechner was remunerated pursuant to the terms and conditions of a consultancy agreement entered into with Diplomatic Exploration Pty Ltd on 30 March 2015. The consultancy agreement was terminated with the provision of 12 weeks’ notice. Mr Rechner is not entitled to any termination benefits unless paid at the discretion of directors. Andrew Paterson Mr Paterson was appointed as Executive Director on 1 March 2017 (has been in the role of Chief Geological Officer since 3 June 2016). Mr Paterson is remunerated pursuant to the terms and conditions of an employment agreement entered into with Mr Paterson on 3 June 2016 and has no fixed term. The agreement may be terminated by either party on the giving on three months’ notice by Mr Paterson or 6 months’ notice by the Company. Mr Paterson is not entitled to any termination benefits other than accrued pay, leave entitlement or other statutory payments unless paid at the discretion of directors. Michael Wilkes Mr Wilkes was appointed a Non-Executive Director on 6 July 2018. The appointment is contingent upon satisfactory performance and successful re-election by shareholders of the Company as and when required by the constitution of the Company and the Corporations Act. Mr Wilkes is not entitled to any termination benefits unless paid at the discretion of directors. Jonathan Davies Mr Davies was appointed a Non-Executive Director on 7 December 2012 and resigned on 4 July 2016. Mr Davies was not entitled to any termination benefits. Yafeng Cai Mr Cai was appointed a Non-Executive Director on 7 December 2012. The appointment is contingent upon satisfactory performance and successful re-election by shareholders of the Company as and when required by the constitution of the Company and the Corporations Act. Mr Cai was not entitled to any termination benefits. Mathew Whyte Mr Whyte was appointed as Company Secretary on 5 September 2011 and resigned on 29 July 2016. Mr Whyte was also a Director of the Company until his resignation on 21 July 2015. He was renumerated pursuant to a corporate consultant agreement with Mathew Whyte trading as Whypro Corporate Services (ABN 53844 654 790) to act as Company Secretary of the Company. The terms included the fee for the provision of the services (including company secretarial) on arms-length rates. The corporate consultant agreement was terminated with the provision of 12 weeks’ notice. (i) Equity Interests of KMP Options holdings of KMP The number of options over ordinary shares held by each KMP of the Group during the 2017 and 2018 reporting periods is as follows: - 14 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities 2018 Balance at Beginning of Year Issue Date No. Value No. Value No. Vested and Exercisable at End of Year Vested and Unexercisable at End of Year Grant Details Exercised Lapsed Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner STI¹ LTI² STI¹ LTI² STI¹ LTI² STI LTI 2,000,000 2,000,000 4-Jul-16 4-Jul-16 2,000,000 2,000,000 $ 16,657 15,671 - - $ - - 2,000,000 - No. - 2,000,000 No. 5,000,000 5,000,000 4-Jul-16 4-Jul-16 5,000,000 41,642 39,178 5,000,000 - - - - 5,000,000 - - 5,000,000 4,000,000 4,000,000 4-Jul-16 4-Jul-16 4,000,000 4,000,000 33,313 31,343 - - - - 4,000,000 - - 4,000,000 - - - - - - - - - - - - - - 22,000,000 22,000,000 177,804 - - 11,000,000 11,000,000 - - - - - - - - - ¹ Unlisted STI Options (issued 4 July 2016) exercisable at 4c - expired on 30 June 2018 ² Unlisted LTI Options (issued 4 July 2016) exercisable at 7c - expiry on 30 June 2019 2017 Balance at Beginning of Year Issue Date No. Value No. Value No. Grant Details Exercised Lapsed - - 4-Jul-16 4-Jul-16 $ 16,657 2,000,000 2,000,000 15,671 - - $ - - - - Vested and Exercisable at End of Year No. 2,000,000 2,000,000 Vested and Unexercisable at End of Year No. Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner Jonathan Davies³ Mathew Whyte³ Yafeng Cai³ STI¹ LTI² STI¹ LTI² STI¹ LTI² STI LTI STI LTI STI LTI STI LTI - - 4-Jul-16 4-Jul-16 5,000,000 41,642 5,000,000 39,178 - - - - - - 5,000,000 5,000,000 - - 4-Jul-16 4-Jul-16 4,000,000 33,313 4,000,000 31,343 - - - - - - 4,000,000 4,000,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 22,000,000 177,804 - - - 22,000,000 ¹ Unlisted STI Options (issued 4 July 2016) exercisable at 4c - expiry on 30 June 2018 ² Unlisted LTI Options (issued 4 July 2016) exercisable at 7c - expiry on 30 June 2019 ³ Jonathan Davies resigned as Non-Executive Chairman on 4 July 2016, Mathew Whyte resigned as Director on 21 July 2015 and Company Secretary on 29 July 2016 and Yafeng Cai resigned as Non-Executive Director on 30 November 2016 Performance Rights Holdings of KMP The number of performance rights in the Company held by each KMP of the Group during the 2017 and 2018 reporting periods is as follows: - 15 - - - - - - - - - - - - - - - - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities 2018 Balance at Beginning of Year Issue Date No. Value $ No. Value Grant Details Vested Lapsed No. Balance at End of Year - 6,000,000 - - - - $ - - - - - 6,000,000 Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner STI LTI³ STI¹ STI² LTI³ LTI⁴ LTI⁵ STI¹ STI² LTI³ LTI⁴ LTI⁵ STI LTI 0 6,000,000 3,216,563 0 10,000,000 2,144,375 0 2,737,500 0 8,000,000 1,825,000 0 0 0 15-Jul-16 19-Dec-16 1-Dec-17 15-Jul-16 19-Dec-16 1-Dec-17 19-Dec-16 1-Dec-17 15-Jul-16 19-Dec-16 1-Dec-17 3,216,563 6,399,266 10,000,000 2,144,375 4,977,207 3,264 12,798 - 5,397 30,859 1,287,000 - - - - 19,305 - - - - 1,929,563 - - - - - 6,399,266 10,000,000 2,144,375 4,977,207 2,737,500 5,446,184 8,000,000 1,825,000 4,235,921 2,778 10,892 - 5,444 26,263 1,095,000 - - - - 16,425 - - - - 1,642,500 - - - - - 5,446,184 8,000,000 1,825,000 4,235,921 - - - - - - - - - - - - 33,923,438 54,982,016 97,695 2,382,000 35,730 3,572,063 49,027,953 ¹ STI Performance Rights issued on 19 December 2016 - partially vested and new shares issued on 31 July 2017. Remained lapsed ² STI Performance Rights issued on 1 December 2017 will be vest as follows: (a) Up to 50% of the STI Performance Rights will automatically vest if, the 30 day VWAP at 30 June 2018 is between 150% and 200% of $0.019 per Share (see full terms and conditions) (b) Up to 25% of the STI Performance Rights will vest, at the Board’s discretion, upon the achievement of business development measures, including the delivery of the Company’s Business Development Plan for 30 June 2018. (c) Up to 25% of the STI Performance Rights will vest, at the Boards discretion, upon the achievement of operational and management objectives measured against the Company’s Operational Plan by 30 June 2018. ³ LTI Performance Rights issued on 15 July 2016 will be granted in 2 tranches as follows: - Tranche 1 comprises 5,000,000 Performance rights, and will vest on the establishment by the Company of a JORC Compliant 5 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%; and - Tranche 2 comprises 5,000,000 Performance Rights, and will vest on the establishment by the Company of a JORC Compliant 15 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%. ⁴ LTI Performance Rights issued on 19 December 2016 will vest if the Company achieves a market capitalisation greater than $50 million on or before 30 June 2020. Market capitalisation means the price of the Company’s shares as quoted on ASX multiplied by the total number of Shares on issue. ⁵ LTI Performance Rights issued on 1 December 2017 will be granted if the Company achieves a market capitalisation greater than $70 million on or before 30 June 2021. Market capitalisation means the price of the Company’s shares as quoted on ASX multiplied by the total number of Shares on issue. ⁶ Jonathan Davies resigned as Non-Executive Chairman on 4 July 2016, Mathew Whyte resigned as Director on 21 July 2015 and Company Secretary on 29 July 2016 and Yafeng Cai resigned as Non-Executive Director on 30 November 2016 2017 Balance at Beginning of Year Issue Date No. Value $ No. Value Grant Details Vested Lapsed No. Balance at End of Year - - 15-Jul-16 - 6,000,000 - - - - $ - - - - - 6,000,000 Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner Jonathan Davies⁴ Mathew Whyte⁴ Yafeng Cai⁴ STI LTI² STI¹ LTI² LTI⁴ STI¹ LTI² LTI³ STI LTI STI LTI STI LTI STI LTI - - - 19-Dec-16 15-Jul-16 19-Dec-16 3,216,563 10,000,000 2,144,375 3,264 - 6,397 - - - - - - - - - 3,216,563 10,000,000 2,144,375 - - - 19-Dec-16 15-Jul-16 19-Dec-16 2,737,500 8,000,000 1,825,000 2,778 - 5,444 - - - - - - - - - 2,737,500 8,000,000 1,825,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 33,923,438 17,883 - - - 33,923,438 - 16 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities ¹ STI Performance Rights issued on 19 December 2016 will be granted in 3 tranches as follows: - Up to 30% of the STI Performance Rights will automatically vest if, the Share price as quoted on ASX at the close of trading on 30 June 2017 is equal to or greater than $0.028 per Share, shares will vest on a sliding scale with 6% vesting at 2.8c, and a maximum of 30% STI Performance Rights vesting if the share price exceeds 3.8 c - up to 50% of the STI Performance Rights will vest, at the Board’s discretion, upon the achievement of operational performance measures, including the delivery of the Company’s Operational Plan for 30 June 2017 -Up to 20% of the STI Performance Rights will vest, at the Boards discretion, upon the achievement of business development objectives measured against the Company’s business development plan by 30 June 2017. ² LTI Performance Rights issued on 15 July 2016 will be granted in 2 tranches as follows: - Tranche 1 comprises 5,000,000 Performance rights, and will vest on the establishment by the Company of a JORC Compliant 5 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%; and - Tranche 2 comprises 5,000,000 Performance Rights, and will vest on the establishment by the Company of a JORC Compliant 15 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%. ³ LTI Performance Rights issed on 19 December 2016 will vest if the Company achieves a market capitalisation greater than $50 million on or before 30 June 2020. Market capitalisation means the price of the Company’s shares as quoted on ASX multiplied by the total number of Shares on issue. ⁴ Jonathan Davies resigned as Non-Executive Chairman on 4 July 2016, Mathew Whyte resigned as Director on 21 July 2015 and Company Secretary on 29 July 2016 and Yafeng Cai resigned as Non-Executive Director on 30 November 2016 Share holdings of KMP The number of ordinary shares in the Company held by each KMP of the Group during the 2017 and 2018 reporting periods is as follows: 2018 Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner Balance at Beginning of Year Granted as Remuneration during the Year Issued on Exercise of Options/Vesting of Performance Rights during the Year Other Changes during the Year Balance at End of Year 2,380,952 9,523,808 476,190 - - - 681,818 3,062,770 - 1,287,000 681,818 11,492,626 - 1,095,000 - 1,571,190 - - 1,002,161 1,002,161 12,380,950 - 2,382,000 2,365,797 17,128,747 2017 Anthony Wehby Andrew Corbett Andrew Paterson Stuart Rechner Jonathan Davies¹ M athew Whyte¹ Yafeng Cai¹ Balance at Beginning of Year Granted as Remuneration during the Year Issued on Exercise of Options/Vesting of Performance Rights during the Year Other Changes during the Year Balance at End of Year 2,380,952 291,971 - - 2,088,981 9,523,808 1,167,883 - - 8,355,925 58,394 - - 417,796 476,190 - - - - - - 1,270,813 - - - 1,587,591 - - - 520,813 - - 12,380,950 4,897,465 (1,270,813) (1,587,591) (520,813) - - 7,483,485 ¹ Changes during the year represent holding at the time of ceasing to be a KMP and not necessarily disposed (j) Loans to key management personnel There were no loans to individuals or members of KMP during the financial year or the previous financial year. (k) Other KMP transactions There have been no other transactions involving equity instruments other than those described in the tables above. For details of other transactions with KMP, refer to Note 21 Related Party Transactions. END OF AUDITED REMUNERATION REPORT - 17 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities SHARE OPTIONS At the date of this report the unissued ordinary shares of the Company under option are as follows: Grant Date Date of Expiry Exercise Price Held at 01 July 17 Issued Lapsed / Cancelled Held at 30 June 2018 28 Aug 15 30 June 19 3 cents 7,058,823 8 July 16 26 Oct 16 30 June 19 30 June 19 7 cents 7 cents 11,000,000 2,500,000 22 Dec 16 22 Dec 19 2.5 cents 5,000,000 23 Aug 18 30 June 21 2.7 cents 7,375,909 - - - - - - - - - - 7,058,823 11,000,000 2,500,000 5,000,000 0 During the year ended 30 June 2017 and 30 June 2018 no ordinary shares in the Company were issued pursuant to the exercise of options. Apart from as described above, there have been no conversions to, calls of, or subscriptions for ordinary shares of issued or potential ordinary shares since the reporting date and before the completion of these financial statements. No person entitled to exercise an option had or has any right by virtue of the option to participate in any share issue of any other body corporate. PROCEEDINGS ON BEHALF OF THE GROUP No person has applied to any court pursuant to section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. INDEMNITIES GIVEN AND INSURANCE PREMIUMS PAID TO AUDITORS AND OFFICERS The Company has entered into Deeds of Access, Indemnity and Insurance with each Director. Under these deeds, the Company has undertaken, subject to the restrictions in the Corporations Act, to: a) b) c) d) indemnify each Director from certain liabilities incurred from acting in that position under specified circumstances; maintain directors’ and officers’ insurance cover (if available) in favour of each Director whilst that person maintains such office and for seven years after the Director has ceased to be a director; cease to maintain directors’ and officers’ insurance cover in favour of each Director if the Company reasonably determines that the type of coverage is no longer available. If the Company ceases to maintain directors’ and officers’ insurance cover in favour of a Director, then the Company must notify that Director of that event; and provide access to any Company records which are relevant to the Director’s holding of office with the Company, for a period of seven years after the Director has ceased to be a Director. During the year, the Company paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all directors and the company secretary. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited under the terms of the contract. - 18 - DIRECTORS’ REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor. AUDIT COMMITTEE During the year, the Company was not of a size nor were its financial affairs of such complexity to justify a separate audit committee of the board of directors. All matters that might properly be dealt with by such a committee were the subject of scrutiny at full board meetings. Since the end of the year, the Board has established a separate Audit and Risk Management Committee to assist the Board to discharge its corporate governance duties in relation to implementing and maintaining appropriate policies and procedures relating to risk management, financial reporting, external and internal control and auditing. NON AUDIT SERVICES During the year the Company’s auditor provided taxation services to the Company at a total cost of $4,301. AUDITORS’ INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required by section 307C of the Corporations Act 2001 is included in this Annual Report. Hall Chadwick continues in office in accordance with section 327 of the Corporations Act 2001. Pursuant to section 298(2) Corporations Act, this Directors’ Report: a) b) c) is made in accordance with a resolution of the Directors; and is dated 6 September 2018; and is signed by Mr Anthony Wehby . ANTHONY WEHBY Non-Executive Chairman Sydney, New South Wales 6 September 2018 - 19 - KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF KINGSTON RESOURCES LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2018 there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Hall Chadwick Level 40, 2 Park Street Sydney NSW 2000 DREW TOWNSEND Partner Date: 6 September 2018 SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Consolidated Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Financial assets Other current assets Total current assets Non-current assets Non-current assets held for sale Property, plant and equipment Capitalised exploration expenditure Other non-current assets Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Provisions Total current liabilities Non-current liabilities Interest bearing liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Share based payment reserve Foreign currency translation reserve Total equity Notes Consolidated Group 2018 $ 2017 $ 8 9 10 11 13 22 14 15 16 4,379,799 136,965 284,243 4,361 4,805,368 1,800,000 188,172 8,839,290 41,536 10,868,998 15,674,366 386,007 59,357 64,921 510,285 124,179 124,179 634,464 15,039,902 3,877,551 92,142 1,944 - 3,971,637 - 1,312 6,230,407 - 6,231,719 10,203,356 399,474 - 63,512 462,986 - 462,986 9,740,370 69,244,553 (54,427,748) 267,218 (44,121) 15,039,902 58,262,992 (48,790,572) 267,950 - 9,740,370 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. - 21 - CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income Notes Consolidated Group 2018 $ 2017 $ Continuing Operations Other income Administration expenses Employee benefits Consultant and legal fees Depreciation and amortisation expenses Director fees Share based payments expense Gain/(Loss) on revaluation of assets at market value through profit and loss Impairment of exploration expenditure Loss on sale of tenements Other expenses Foreign Exchange Gain/(Loss) Loss before income tax expense Income tax expense Loss for the year Other comprehensive income/(loss) Other comprehensive income/(loss) – net of tax Total comprehensive loss for the year 2 3 3, 22 4 Basic loss per share (cents) Diluted loss per share (cents) 116,635 (568,643) (613,202) (412,543) (1,312) (102,150) (268,672) (17,701) (3,552,901) (408,444) (8,774) 87,405 (5,750,302) - (5,750,302) 210,671 (271,147) (489,735) (210,845) (875) (102,372) (228,667) - - - (60,501) - (1,153,471) - (1,153,471) - (5,750,302) - (1,153,471) (0.646) (0.177) (0.646) (0.177) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. - 22 - CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Consolidated Statement of Changes in Equity Attributable to the shareholders of Kingston Resources Limited Ordinary Shares $ Accumulated Losses $ Foreign Exchange Reserves Share based payment Reserve $ Total Equity $ Balance at 1 July 2016 48,435,160 (47,637,101) Loss for the year Other comprehensive income Issue of Shares Cost of share issue Share based payments Additions to reserves - - (1,153,471) - 48,435,160 (48,790,572) 10,228,500 (400,668) - - - - - - Balance at 30 June 2017 58,262,992 (48,790,572) Balance at 1 July 2017 58,262,992 (48,790,572) Loss for the half year Other comprehensive income - - (5,750,302) - 58,262,992 (54,540,874) Issue of Shares Cost of share issue 11,284,574 (303,013) Share based payments Transfer from Option Reserve on Expiry of Options Additions to reserves - - - - - - 113,126 - Balance at 30 June 2018 69,244,553 (54,427,748) - - - - - 267,950 - 798,058 (1,153,471) - (355,413) 10,228,500 (400,667) 267,950 - 267,950 9,740,370 267,950 - - 9,740,370 (5,750,302) - 267,950 3,990,068 - - 112,394 (113,126) 11,284,574 (303,013) 112,394 - - - - - - - - - - - - - - - - - (44,121) (44,121) - (44,121) 267,218 15,039,902 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. - 23 - CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Consolidated Statement of Cash Flows Cash flows from operating activities Continued operations Interest received Receipts from other income Research and development credit Payments to suppliers and employees Net cash used in operating activities Notes Consolidated Group 2018 $ 2017 $ 56,956 59,679 - (1,603,072) (1,486,437) 106,377 20,000 83,509 (1,019,237) (809,351) 19 Cash flows from investing activities Payment for exploration and evaluation Payment for acquisition of exploration assets* Payment for acquisition of property, plant and equipment Payment for funds held on deposit Proceeds from sale of exploration assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares and options Transaction costs related to issue of shares, convertibles, or options Proceeds from borrowings Repayment of borrowings Net cash provided by financing activities Net change in cash and cash equivalents held Cash and cash equivalents at beginning of financial year Cash contribution from acquisitions Effect of movement in exchange rate on cash held Cash and cash equivalents at end of financial year 8 (2,208,900) (393,690) - - 300,000 (2,302,590) (1,228,288) (304,907) - (35,805) 1,300 (1,567,700) 4,522,995 (303,013) - (15,499) 4,204,483 415,456 3,877,551 84,098 2,695 4,379,799 6,010,000 (400,668) - - 5,609,332 3,232,281 645,270 - - 3,877,551 * Acquisitions during the period included non–cash transactions in the form of shares. $6,052,039 worth of shares issued to shareholders of WCB Resources Ltd in relation to the merger with WCB Resources; $328,260 worth of shares paid to the Livingstone Vendors in relation to the acquisition of 75% of the Livingstone Gold project. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. - 24 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Notes to the Financial Statements This financial report includes the consolidated financial statements and notes of Kingston Resources Limited and controlled entities (‘Consolidated Group’ or ‘Group’). For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity. Note 1: Statement of Significant Accounting Policies The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The consolidated financial statements are presented in the currency of Australian dollars. Statement of Compliance Compliance with Australian Accounting Standards ensures that the financial statements and notes of Kingston Resources Limited and its controlled entities comply with International Financial Reporting Standards (IFRS). The financial statements were authorised for issue by the directors on 6 September 2018. Basis of Preparation The financial statements have been prepared on an accrual basis and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Significant Accounting Policies a) Principles of Consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2018. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. A list of controlled entities is contained in Note 12 to the financial statements. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. b) New Accounting Standards and Interpretations Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: – AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting periods beginning on or after 1 July 2018). The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and includes revised requirements for the classification and measurement of financial instruments requirements for financial instruments and hedge accounting. - 25 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities The key changes that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting requirements of the Standard, the application of such accounting would be largely prospective. Based on a preliminary assessment performed over each line of business and product type, the effects of AASB 9 are not expected to have a material effect on the Group. – AASB 2014-7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) AASB 2014-7 (issued December 2014) gives effect to the consequential amendments to Australian Accounting Standards (including Interpretations) arising from the issue of AASB 9: Financial Instruments (December 2014). More significantly, additional disclosure requirements have been added to AASB 7: Financial Instruments: Disclosures regarding credit risk exposures of the entity. This Standard also makes various editorial corrections to Australian Accounting Standards and an Interpretation. AASB 2014-7 mandatorily applies to annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted, provided AASB 9 (December 2014) is applied for the same period. – AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 July 2019). When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new Standard are as follows: recognition of a right-of-use asset and lease liability for all leases (excluding short- term leases with a lease term 12 months or less of tenure and leases relating to low- value assets); depreciation of right-of-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components; inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using the index or rate at the commencement date; application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for all components as a lease; and inclusion of additional disclosure requirements. The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. The Group has established an AASB 16 project team and is in the process of completing its impact assessment of AASB 16. Based on a preliminary assessment performed over each line of business and lease type, the effect of AASB 16 is not expected to have a material effect on the Group. - 26 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities c) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current and deferred income tax expense (income) is charged or credited directly to other comprehensive income instead of the profit or loss when the tax relates to items that are credited or charged directly to other comprehensive income. Current tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and its intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation Kingston Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liability (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The Group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 1 July 2003. d) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss on the statement of profit or loss and other comprehensive income. Depreciation The depreciable amount of all fixed assets is depreciated using the diminishing value method commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable asset are: - 27 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Class of Fixed Assets Office, furniture and equipment Depreciation Rate 5-40% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. The gains and losses are included in profit or loss in the statement of profit or loss and other comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. e) Financial Instruments Initial recognition and measurement Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instrument classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Classification and subsequent measurement Financial assets at fair value through profit and loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in profit or loss in the period in which they arise. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available-for-sale financial assets include any financial assets that are either designated as such or that are not classified in any of the categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are held at fair value with changes in fair value taken through the financial assets reserve directly to other comprehensive income. Financial liabilities Non-derivative financial liabilities (excluding financial guarantee) are subsequently measured at amortised cost using the effective interest rate method. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in profit or loss in the statement of profit or loss and other comprehensive income. - 28 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in the financial assets reserve in other comprehensive income. f) Impairment of Non-Financial Assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. g) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge in which case they would be recognised in other comprehensive income. h) Employee Benefits Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled wholly within one year have been measured at the amounts expected to be paid when the liability is settled plus related on costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Equity-settled compensation The Group operates a share-based compensation plan which includes a share option arrangement. The bonus element over the exercise price of the employee’s services rendered in exchange for the grant of options is recognised as an expense in the statement of profit or loss and other comprehensive income, with a corresponding increase to an equity account. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted. The fair value of options is ascertained using a Black-Scholes pricing model which incorporates all market vesting conditions, the fair value of Performance Rights is ascertained using the Monte Carlo method. i) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. k) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. l) Revenue and Other Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. - 29 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Research and development credits are treated as Other Income and recognised to the extent that the related expenditure has been expensed in the Statement of Profit and Loss and Other Comprehensive Income. Research and development credits that pertain to expenditure on any capitalised amounts remaining on the Statement of Financial Position are deferred accordingly to be recognised in-line with expensing of those items. All revenue is stated net of the amount of goods and services tax (GST). m) Exploration and Development Expenditure Exploration, evaluation and development expenditures incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest. Costs of site restoration are provided over the life of the project from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with local laws and regulations and clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. n) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. p) Going Concern The consolidated entity has incurred operating losses of $5,750,302 (2017: $1,153,471) and negative operating cash flows of $1,486,437 (2017: $809,351) for the year ended 30 June 2018. The consolidated entity’s net current asset position as at 30 June 2018 was $4,295,083 (2017: $3,508,650). During the financial year, on 13 February 2018, the Company completed a placement of shares raising $4.3m, alongside this a Share Purchase Plan raised a further $255,000. Details to this placement are described in Note 15. The entity has planned to use these funds largely on exploration activities, the expenditure of which can be varied and applied discretionarily. The nature of an exploration company is to be loss making, as such the Company considers it likely that it may need to raise equity from time to time as successfully demonstrated in February 2018. However, the Company’s 30 June 2018 cash balance of $4,379,799 leaves it with sufficient funding to continue to meet operational expenditure requirements, including minimum exploration commitments across its tenement portfolio. Taking into account the current cash reserves of the Company, the Directors are confident the Company has adequate resources to continue in its main business activity for the foreseeable future. As a result, the financial statements have been prepared on the basis of going concern which contemplates continuity of normal business - 30 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities activities and the realisation of assets and settlement of liabilities in the ordinary course of business and at the amounts stated in the financial report. q) Joint arrangements and associates Associates are those entities over which the Group is able to exert significant influence but which are not subsidiaries. A joint venture is an arrangement that the Group controls jointly with one or more other investors, and over which the Group has rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligations for underlying liabilities. A joint arrangement in which the Group has direct rights to underlying assets and obligations for underlying liabilities is classified as a joint operation. Investments in associates and joint ventures are accounted for using the equity method. Interests in joint operations are accounted for by recognising the Group’s assets (including its share of any assets held jointly), its liabilities (including its share of any liabilities incurred jointly), its revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation and its expenses (including its share of any expenses incurred jointly). Any goodwill or fair value adjustment attributable to the Group’s share in the associate or joint venture is not recognised separately and is included in the amount recognised as investment. The carrying amount of the investment in associates and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment. Critical Accounting Estimates and Judgements The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates – Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by management review using Black Scholes, Monte Carlo, or an agreed fair value. The related assumptions are detailed in Note 20. 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 expenses and equity. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience and manufacturers’ warranties (for plant and equipment). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. Exploration and evaluation of expenditure Costs arising from exploration and evaluation activities are carried forward provided the rights to tenure of the area of the interest are current and such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not, at reporting date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves. Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which the decision to abandon is made. The carrying value of the capitalised exploration and evaluation expenditure is assessed for impairment whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. Such capitalised exploration expenditure is carried at the end of the reporting period at $8,839,290 (see Note 22). - 31 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities The Group has applied AASB 6 Exploration for and Evaluation of Mineral Resources. Treatment of acquisitions The two acquisitions completed in FY17 have been treated as an acquisition of assets rather than a business combination. This is a result of both Slipstream WANT and Livingstone failing to meet the AASB3 definition of a business, in particular there were no employees, exploration work underway, or plans to commence exploration. As a result of this treatment, the acquisition price has been allocated across the assets acquired. Impairment The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. An impairment exists when the carrying amount of an asset or cash generating unit exceeds its estimated recoverable amount. The asset or cash generating unit is then written down to the recoverable amount. Any impairment losses are recognised in profit or loss on the statement of profit or loss and other comprehensive income. - 32 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Consolidated Group 2018 $ 2017 $ 2. OTHER INCOME Other income Interest from bank DMIRS EIS funding Research and development tax credit Profit on sale of fixed asset Other income Total income 3. RESULT FOR THE YEAR Depreciation and amortisation of non-current assets Depreciation of: - plant and equipment Total depreciation and amortisation Impairments 56,956 59,679 - - - 116,635 1,312 1,312 Impairment of exploration expenditure – Note 22 Total impairments 3,552,901 3,552,901 106,377 - 83,509 785 20,000 210,671 875 875 - - 4. (a) INCOME TAX Income tax recognised in profit and loss The prima facie tax expense (benefit) on operating result is reconciled to the income tax provided in the statement of profit or loss and other comprehensive income as follows: Consolidated Group 2018 $ 2017 $ Accounting loss before income tax (5,570,302) (1,153,471) Income tax benefit calculated at 30% (1,581,333) (346,041) Non-deductible expenses Movement in unrecognised temporary differences Unused tax losses and temporary differences not recognised as deferred tax assets Income tax expense (benefit) 137,527 (195,677) 1,639,483 - 398,096 (524,015) 471,960 - The tax rate used in the above reconciliation is the corporate tax rate of 27.5% payable by Australian corporate entities on taxable profits under Australian tax law. In 2017 the tax rate was 30%. (b) Analysis of deferred tax asset No deferred tax assets have been recognised as yet, other than to offset deferred tax liabilities, as it is currently not probable that future taxable profit will be available to realise the asset. Potential deferred tax asset on carry forward losses amount to $2,952,081 (2017: $1,650,475). - 33 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Tax Consolidation Effective 1 July 2003, for the purposes of income taxation, the Company and its 100% wholly-owned subsidiaries formed a tax consolidated group; the head entity of the tax consolidated group is Kingston Resources Limited. 5. INTERESTS OF KEY MANAGEMENT PERSONNEL (a) Key management personnel compensation Key management personnel (KMP) remuneration has been included in the Remuneration Report section of the Directors’ Report. The totals of remuneration paid to KMP of the Group during the 2018 and 2017 reporting periods are as follows. Short-term employee benefits Post- employment benefits Equity-settled share-based payments Total Consolidated Group 2018 $ 2017 $ 553,750 48,141 80,812 682,703 623,557 36,485 195,685 855,727 Consolidated Group 2018 $ 2017 $ 6. AUDITOR REMUNERATION Remuneration of the auditor of the Company for: - auditing or reviewing the financial statements - non-audit services Total 51,628 4,301 55,929 53,500 - 53,500 7. LOSS PER SHARE (a) Basic loss per share (cents per share) (b) Diluted loss per share (cents per share) (c) Weighted average number of ordinary shares on issue used in the calculation of basic loss per share Loss used in calculation of basic loss per share (d) (0.646) (0.646) (0.177) (0.177) 890,463,527 653,455,155 ($5,750,302) ($1,153,471) There are no dilutive potential ordinary shares as the exercise of options to ordinary shares would have the effect of decreasing the loss per ordinary share and would therefore be non-dilutive. Consolidated Group 2018 $ 2017 $ 8. CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits Total 512,379 3,867,420 4,379,799 47,746 3,829,805 3,877,551 - 34 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Cash at bank earns interest at floating rates based on daily deposit rates. The carrying amounts of cash and cash equivalents represent fair value. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rate of between 1.5% and 2.3% per annum depending on term (2017: 1.6%). 9. TRADE AND OTHER RECEIVABLES Current Other receivables Total current trade and other receivables Credit Risk – Trade and Other Receivables Consolidated Group 2018 $ 2017 $ 136,965 136,965 92,142 92,142 The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties other than those receivables specifically provided for as mentioned within this note. The class of assets described as Other Receivables is considered to be the main source of credit risk related to the Group. The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided thereon. Amounts are considered to be “past due” when the debt has not been settled within the terms and conditions agreed. Past due but not impaired (days overdue) Gross amount Past due and impaired <30 31 - 60 61 - 90 > 90 $ $ $ $ $ $ Consolidated Group 2018 Other receivables Total 2017 Other receivables Total 136,965 136,965 92,142 92,142 - - - - - - - - - - - - - - - - Within initial trade terms $ - - - - 136,965 136,965 92,142 92,142 10. FINANCIAL ASSETS Financial assets at fair value through profit and loss: At fair value Shares in listed entities Consolidated Group 2018 $ 2017 $ 284,243 284,243 1,944 1,944 Financial assets at fair value through profit and loss consist of investments in ordinary shares. - 35 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (i) Listed shares The fair value of listed shares has been determined directly by reference to published price quotations in an active market. Consolidated Group 2018 $ 2017 $ 11. NON CURRENT ASSETS HELD FOR SALE Non-current Assets Held for Sale Capitalised Exploration Total current trade and other receivables 1,800,000 1,800,000 - - Kingston agreed the sale of its Northern Territory lithium assets on 28 June 2018, in order to focus on exploration activity at Misima and Livingstone. 12. CONTROLLED ENTITIES Name Country of Incorporation Principal Activity Beneficial Percentage Interest Held By Economic Entity 2017 % 2018 % Slipstream WANT Pty Ltd Universal Rare Earths Pty Ltd Fleurieu Mines Pty Ltd Westernx Pty Ltd Centex Resources Ltd (formerly U Energy Pty Ltd) WCB Resources Limited WCB Pacific Pty Limited WCB Australia Pty Limited WCB PNG Limited Australia Australia Australia Australia Australia Canada Australia Australia Mineral Exploration Mineral exploration Mineral exploration Mineral exploration Mineral exploration Mineral exploration Mineral exploration Mineral exploration Papua New Guinea Mineral exploration WCB PNG Exploration Limited Papua New Guinea Mineral exploration 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 0- - - - - 13. PROPERTY, PLANT AND EQUIPMENT Plant and equipment – at cost Acquisitions for the year Disposals Closing balance Accumulated depreciation Opening balance Depreciation for the year Accumulated Depreciation on disposal Closing balance – accumulated depreciation Net book value – computing plant and equipment Total property, plant and equipment, net - 36 - Consolidated Group 2018 $ 2017 $ 253,441 199,273 - 452,714 252,129 12,413 - 264,542 188,172 188,172 260,586 - (7,145) 253,441 257,884 875 (6,630) 252,129 1,312 1,312 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (a) Movements in carrying amounts Balance at 1 July 17 Acquisitions Disposals Depreciation Balance at 30 June 18 Balance at 1 July 16 Acquisitions Disposals Depreciation Balance at 30 June 17 14. TRADE AND OTHER PAYABLES Trade payables – unsecured Other payables and accruals Total Plant and equipment $ Total $ 1,312 199,273 - 12,413 188,172 2,702 - (515) (875) 1,312 1,312 199,273 - 12,413 188,172 2,702 - (515) (875) 1,312 Consolidated Group 2018 $ 2017 $ 195,684 190,323 386,007 301,230 98,244 399,474 Given the short term nature of these amounts, their carrying value approximates their fair value. - 37 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities ISSUED CAPITAL 15. (a) Movements in contributed equity for the year Balance at the beginning of the year - 31 July 2017 - 17 November 2017 - 17 November 2017 - 17 November 2017 - 8 December 2017 - 13 February 2018 - 8 March 2018 Shares issued during the previous financial year: - 7 July 2016 - 8 July 2016 - 22 December 2016 Consolidated Group 30 June 2018 30 June 2017 Number of Fully Paid Ordinary Shares $ Number of Fully Paid Ordinary Shares $ 665,769,985 3,312,751 302,601,971 15,220,351 6,052,035 16,413,039 194,000,000 11,590,897 58,262,992 41,289 6,052,039 225,000 114,989 328,261 4,267,996 255,000 209,079,509 48,435,160 286,190,476 165,000,000 5,500,000 6,010,000 4,125,000 93,500 Less capital raising costs Total contributed equity 1,214,961,029 (303,013) 69,244,553 - 665,769,985 (400,668) 58,262,992 The Company has issued share capital amounting to 1,214,961,029 (2017: 665,769,985) fully paid ordinary shares of no par value. At shareholders’ meetings each fully paid ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. On 13 February 2018, the Company raised $4.3m through the placement of 194,000,000 shares at 2.2c. On 8 March 2018, a further 11,590,897 shares were issued at 2.2c under a Share Purchase Plan announced concurrently with the placement. For details on the remaining shares issued during the year see Note 20. No unlisted options were issued during the year. During the financial year no fully paid ordinary shares were issued as a result of the exercise of options. No ordinary shares have been issued since the end of the financial year as a result of the exercise of options. - 38 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (c) Options (i) For information relating to the Company’s employee and consultant option scheme, including details of options issued, exercised and lapsed during the financial year and the options outstanding at year end, refer to Note 20 Share-based Payments. (ii) For information relating to share options issued to key management personnel during the financial year, refer to the Directors’ Report. (d) Capital Management Management controls the capital of the Group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing its financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management debts levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. 16. RESERVES (a) Share-based Payment Reserve The share-based payment reserve records items recognised as expenses on valuation of unlisted employee and consultant option incentive scheme options and performance rights. Refer to Note 20 Share-based Payments for further details. 17. COMMITMENTS AND CONTINGENCIES The Group has certain obligations to perform minimum exploration work and to expend minimum amounts of money on such work on mining tenements. These obligations may be varied from time to time subject to approval and are expected to be fulfilled in the normal course of the operations of the Group. These commitments have not been provided for in the financial report. Due to the nature of the Group’s operations in exploring and evaluating areas of interest, it is difficult to accurately forecast the nature and amount of future expenditure beyond the next year. Expenditure may be reduced by seeking exemption from individual commitments, by relinquishing of tenure or by new joint venture arrangements. Kingston notes that of the commitments not later than one year, $396,400 relates to minimum expenditure requirements on the Northern Territory lithium tenements for which it has agreed but not yet completed the sale; for expenditure later than one year and less than five years these tenements comprise $1,194,485 of the total commitment. Expenditure may be increased when new tenements are granted or joint venture agreements amended. The minimum expenditure commitment on the tenements is: Exploration commitment Consolidated Group 2018 $ 2017 $ Not later than one year Later than one year and less than five years 464,400 1,358,803 522,950 1,621,011 The Group has entered into a three year finance lease for the purchase of exploration equipment on Misima Island. The future minimum lease payments are as follows: - 39 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Finance lease commitment Consolidated Group 2018 $ 2017 $ Not later than one year Later than one year and less than five years 59,357 124,179 - - The Group is a party to rental leases for its office premises. The future minimum lease payments are as follows: Operating lease commitment Consolidated Group 2018 $ 2017 $ Not later than one year Later than one year and less than five years 37,125 13,600 14,742 16,725 18. SEGMENT REPORTING The Group has identified that it has no operating segments disaggregated within the consolidated entity. This has been determined based on the fact that the board of directors (chief operating decision makers) assesses performance of the consolidated entity with no further review at a disaggregated level. The Group operates in one segment being Exploration and Evaluation of Minerals. Thus, segmented disclosures are not required. 19. CASH FLOW INFORMATION (a) Reconciliation to Statement of Cash Flows For the purposes of the Statement of Cash Flows, cash and cash equivalents are as reported above. Consolidated Group 2018 $ 2017 $ (5,750,302) (1,153,471) 1,312 268,672 3,552,901 17,701 408,444 (87,406) (19,909) 13,144 27.222 81,595 169 (1,486,437) 875 228,667 - - (785) 71 - 51,779 63,513 - (809,351) Reconciliation of Loss from Ordinary Activities to Net Cash Flows from Operating Activities Loss for the year Non-cash flows in loss Depreciation Share-based payments Impairment of exploration expenditure Revaluation of assets at FVTPL Loss on sale Unrealised fx (gain)/losses Changes in assets and liabilities Decrease/(increase) in trade and other receivables Decrease in prepayments (Decrease) in trade payables (Decrease)/increase in other payables and accruals Exchange rate impact on balances Net cash flows from operating activities - 40 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (b) Non-cash Investing Activities During the year Kingston acquired WCB Resources Limited and exercised its option to acquire 75% of the Livingstone Gold Project. See Note 20 for details of the share based consideration provided for these acquisitions. 20. SHARE-BASED PAYMENTS (i) Share options and performance rights are granted to employees and directors of the Company, or any Associated Body Corporate of the Company. The following employee share-based payment arrangements existed at 30 June 2018. Share options: Date of grant Share-based payment Number granted Value 8 July 2016 26 Oct 2016 LTI Options LTI Options Performance Rights: 11,000,000 2,500,000 $86,192 $12,882 $203,7984 Share price on issue $0.019 $0.021 Exercise Price $0.07 $0.07 Expiry 30 June 2019 30 June 2019 Date of grant Share-based payment 15 July 2016 20 Nov 2016 19 Dec 2016 1 Dec 2017 1 Dec 2017 LTI Performance Rights¹ LTI Performance Rights¹ LTI Performance Rights2 STI Performance Rights3 LTI Performance Rights4 Number granted 24,000,000 5,000,000 5,520,625 16,474,707 12,813,661 Value - - $16,468 $32,949 $79,445 Expiry 30 June 2019 30 June 2019 30 June 2020 31 July 2018 30 June 2021 1 These Performance Rights will be granted in 2 tranches as follows: - - Tranche 1 comprises 5,000,000 Performance rights, and will vest on the establishment by the Company of a JORC Compliant 5 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%; Tranche 2 comprises 5,000,000 Performance Rights, and will vest on the establishment by the Company of a JORC Compliant 15 million tonne inferred Mineral Resource (or greater) of Li2O of a grade of at least 1%. 2 These Performance Rights will be granted if the Company achieves a market capitalisation greater than $50 million on or before 30 June 2020. Market capitalisation means the price of the Company’s shares as quoted on ASX multiplied by the total number of Shares on issue 3 These Performance Rights will be granted in 3 tranches as follows (subject to satisfaction of the applicable Performance Hurdles and Vesting Conditions): - Up to 50% of the STI Performance Rights will vest if, the share price as quoted on ASX at the close of trading on 30 June 2018 is 150% to 200% of $0.019 per share. Shares will vest on a sliding scale with 8.5% vesting at 150% ($0.0285), and the maximum of 50% vesting at 200% ($0.038) or greater. Up to 25% of the STI Performance Rights will vest, at the Board’s discretion, upon the achievement of operational performance measures, including the delivery of the Company’s Operational Plan for 30 June 2018. Up to 25% of the STI Performance Rights will vest, at the Boards discretion, upon the achievement of business development objectives measured against the Company’s Business Development Plan by 30 June 2018. - - 4 These Performance Rights will be granted if the Company achieves a market capitalisation greater than $70 million on or before 30 June 2021. Market capitalisation means the price of the Company’s shares as quoted on ASX multiplied by the total number of Shares on issue The principal assumptions used in estimating the value of the STI and LTI options include volatility of 85% determined with reference to the Company’s historic volatility and the volatility of peer group companies, and a risk free interest rate of 1.9%. On 31 July 2017 Kingston issued senior management 3,312,751 shares on the vesting of FY17 STI Performance rights (4,968,187 lapsed). - 41 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities The number and weighted average exercise prices of share options granted to employees and directors is as follows: Outstanding at the beginning of the period Issued during the period Expired during the period Outstanding at year-end Exercisable at year-end 2018 2017 Number of Options 27,000,000 Weighted Average Exercise Price $ $0.06 Number of Options Weighted Average Exercise Price $ 13,500,000 13,500,000 13,500,000 $0.04 $0.07 $0.07 27,000,000 - 27,000,000 27,000,000 $0.06 - $0.06 $0.06 (ii) Other share-based payments granted to third parties. Share options: Date of grant Share-based payment 28 Aug 2015 22 Dec 2016 Shareholder option Options on acquisition1 Number granted 7,058,823 5,000,000 Value - 39,282 39,282 Share price on issue $0.017 $0.017 Exercise Price $0.03 $0.025 Expiry 30 June 2019 22 Dec 2019 Milestone shares: Date of grant Share-based payment 15 July 2016 Milestone shares2 Number granted 180,000,000 Value Exercise Price Expiry - - Nil (Vesting Conditions) 30 June 2019 1 On 22 December 2016, Kingston granted Trillbar Resources Pty Ltd 5,000,000 options (exercisable at 2.5c, expiry 22 December 2019) in partial consideration for an option over the Livingstone Gold Project. 2 On 15 July 2016, Kingston granted Slipstream Resources Pty Ltd, 180,000,000 Milestone Shares in partial consideration for the acquisition of Slipstream WANT. There were no options exercised during the year ended 30 June 2018 (2017: nil). Ordinary shares: - - - - On 17 November 2017 Kingston granted 15,220,351 Kingston shares in settlement of WCB Resources liabilities. The shares were valued at $0.015 per share (total value of $225,000). On 17 November 2017 Kingston granted 6,052,035 Kingston shares as advisor fees in the merger with WCB Resources. The shares were valued at $0.019 per share (total value $114,989). On 17 November 2017 Kingston granted 302,601,971 Kingston shares to shareholders of WCB Resources Limited to acquire the shares in WCB Resources Limited. The shares were valued at $0.02 per share (total value $6,052,039. On 8 December 2017 Kingston granted 16,413,039 Kingston shares to Trillbar Resources to acquire a 75% interest in E52/3403 (the Livingston Gold Project). The shares were valued at $0.02 per share (total value $328,261). 21. RELATED PARTY TRANSACTIONS (a) Key Management Personnel Key management personnel compensation and transactions have been included in the Remuneration Report section of the Directors’ Report and Note 5 Interests of Key Management Personnel. Other transactions include: – A consulting fee of $2,400 was paid to S. Rechner, a Director of the company, for geological and legal services provided. - 42 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (b) Directors’ Interests As at 30 June 2018 the relevant interests of each of the Directors, held either directly or indirectly through their associates, in the securities of Kingston are as follows: Fully Paid Ordinary Shares (KSN) 3,062,770 14,692,259 4,294,282 1,002,161 - Director Unlisted LTI Options1 Anthony Wehby² Andrew Corbett³ Andrew Paterson Stuart Rechner ⁴ Michael Wilkes⁵ ¹ Unlisted Long Term Incentive (LTI) Options exercisable at $0.07 each and expiring on 30 June 2019 ² Anthony Wehby holds a relevant interest in shares and options as he is a related party to Mrs Rosemary Wehby, who is the registered holder of the shares and options. ³ Andrew Corbett holds a relevant interest in the specified number of Shares and Options as a result of being a director of Milamar Group Pty Ltd as trustee of Milamar Family Trust, which is the registered holder of those Shares and Options 2,000,000 5,000,000 4,000,000 - - ⁴ Stuart Rechner holds a relevant interest in the specified number of Shares as a result of being a director of Osmium Holdings Pty Limited as trustee of Ferndale Superannuation Fund ⁵ Michael Wilkes appointed on 6 July 2018 22. CAPITALISED EXPLORATION EXPENDITURE Notes Consolidated Group 2018 $ 2017 $ Opening Balance Transfer from other non-current assets Acquisition of Slipstream WANT Acquisition of Livingstone Gold Project Acquisition of WCB Resources Foreign exchange adjustment Exploration assets sold Impairment of assets Transfer to non-current assets held for sale Capitalised exploration expenditure Total exploration expenditure capitalised 6,230,407 328,261 6,453,600 75,489 (1,008,444) (3,552,901) (1,800,000) 2,112,878 8,839,290 - 208,811 4,425,000 132,783 - - - - - 1,463,813 6,230,407 A review of the Group’s exploration assets was undertaken at the end of FY18 and directors decided to impair the carrying value of capitalised exploration expenditure in the amount of $3,552,901. This brings the value of the Northern Territory lithium assets to market value as reflected by the agreed sale price and eliminates the carrying value of the Greenbushes tenement. 23. FINANCIAL INSTRUMENTS The Group’s principal financial instruments comprise receivables, payables, FVTPL financial assets, cash and short-term deposits and a finance lease. The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The Company uses different methods to measure and manage different types of risks to which it is exposed. These included monitoring levels of exposure to interest rate and market forecasts for interest rate. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The Board reviews and agrees policies for managing each of these risks are summarised below. - 43 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (a) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit risk arises from cash and cash equivalents, trade and other receivables and FVTPL financial assets. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount net of any provisions for these assets as disclosed in the statement of financial position and notes to the financial statements. The Group has adopted a policy of only dealing with creditworthy counter parties as a means of mitigating the risk of financial loss from defaults. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit evaluations including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the Board. These risk limits are regulatory monitored. The Group does not require collateral in respect of financial assets. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. At the reporting date there were no significant concentrations of credit risk. Refer to Note 9 for further information on impairment of financial assets that are past due. (b) Liquidity risk Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long- term funding and liquidity management. The Group manages the liquidity risk by maintaining adequate cash reserves, and by continuously monitoring forecast and actual cash flows while matching the maturity profiles of financial assets and liabilities. There are no material financial assets or financial liabilities that are subjected to liquidity risk as at 30 June 2018 or 30 June 2017. (c) Interest rate risk The Group’s current exposure to the risk of changes in market interest rates relate primarily to cash assets rates. The Group does not account for fixed rate financial assets and liabilities at fair value through profit or loss. The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates the impact on how profit / (loss) and equity values reported at reporting date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. The Group’s main interest rate risk arises from cash and cash equivalents with variable interest rates. Financial assets Cash and cash equivalents Consolidated Group 2018 $ 2017 $ 4,379,799 4,379,799 3,877,551 3,877,551 Impact on post tax profit / (loss) and equity + 2% in interest rate - 2% in interest rate 87,596 (87,596) 77,551 (77,551) (d) Foreign currency risk The Group is not exposed to significant financial risks from movements in foreign exchange rates. The Group does not participate in any type of hedging transactions or derivatives. Therefore, no sensitivity analysis is required. (e) Price risk The Group’s exposure to commodity and equity securities price risk is minimal. Equity securities price risk arises from investments in equity securities. The majority of the equity investments are of a high quality and are publicly traded on the ASX. The price risk for both listed and unlisted securities is immaterial in terms of a possible impact on profit and loss or total equity and as such a sensitivity analysis has not been completed. - 44 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities (f) Fair value For the financial assets and liabilities disclosed in this note, the fair value approximates their carrying value. The aggregate fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and in the notes to and forming part of the financial statements. Consolidated Group Financial assets Cash and cash equivalents Trade and other receivables Financial assets at fair value Total financial assets Financial liabilities Trade and other payables Interest bearing liabilities Total financial liabilities 2018 2017 Footnote Net Carrying Value $ Fair Value $ Net Carrying Value $ Fair Value $ (i) (i) (ii) (i) 4,379,799 136,965 284,243 4,801,007 4,379,799 136,965 284,243 4,801,007 3,877,551 92,142 1,944 3,971,638 3,877,551 92,142 1,944 3,971,638 386,007 183,536 386,007 386,007 183,536 386,007 399,474 - 399,474 399,474 - 399,474 The fair values disclosed in the above table have been determined based on the following methodologies: (i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value. Trade and other payables exclude amounts provided for annual leave, which is not considered a financial instrument. (ii) For financial assets at fair value through profit and loss, closing quoted bid prices at the end of the reporting period used. These listed investments are included within level 1 of the hierarchy of financial assets. (iii) Interest bearing liabilities are carried at amortised cost. - 45 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities 24. PARENT COMPANY INFORMATION Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Accumulated losses Reserves Share-based payments Total equity Financial performance Loss for the year Other comprehensive income / (loss) Total comprehensive loss Contractual commitments Parent Entity 2018 $ 2017 $ 4,495,353 10,986,926 15,482,279 3,969,693 6,197,829 10,167,522 428,239 - 428,239 462,987 - 462,987 69,244,554 (54,457,732) 58,262,994 (48,826,409) 267,218 15,054,040 267,950 9,704,535 (5,744,449) - (5,744,449) (1,152,973) - (1,152,973) There is no contractual commitments for the parent entity during the financial year. Refer to note 17 for exploration commitments. 25. BUSINESS COMBINATIONS On 17 November 2017, the Group acquired 100% of the issued capital of WCB Resources Limited, a gold and copper exploration Company based in Papua New Guinea, for a purchase consideration of $6,052,039 and settlement of a pre-existing relationship amounting to $545,219. The consideration paid was mainly allocated to an exploration asset which was acquired. Net assets acquired totalled $6,921,508 Purchase consideration (KSN shares): Less: Current Assets Exploration expenditure Payables Non Current liabilities Identifiable assets acquired and liabilities Goodwill Fair Value $ 6,052,039 168,703 7,323,069 (25,045) (545,219) 6,921,508 (869,469) The acquisition is part of the Group’s overall strategy to enhance its minerals exploration and development portfolio. - 46 - NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 KINGSTON RESOURCES LIMITED & its Controlled Entities Through acquiring 100% of the issued capital of WCB Resources Limited, the Group has obtained control of the company. The purchase was satisfied by the issue of 302,601,971 ordinary shares at an issue price of $0.02 each. The issue price was based on the market price on the date of purchase. 26. SUBSEQUENT EVENTS On 5 July 2018, the Company announced it had entered into an agreement to sell its Bynoe and Arunta Northern Territory lithium assets for a total of $1,800,000 to an Australia private company, Lithium Plus Pty (see ASX Announcement 5 July 2018, “Kingston Sells NT Lithium Tenements for $1.8m Cash”). On 10 July 2018 the Company announced the appointment of Mick Wilkes as Non-Executive Director. On 19 July 2018 Kingston issued senior management 8,237,357 shares on the vesting of FY18 STI Performance rights (8,237,357 lapsed). On 29 August 2018 the sale of the NT Lithium tenements as announced by the Company on 5 July 2018 was completed, with the $1,800,000 settlement consideration subsequently transferred to KSN. Other than the above, there has been no other matter or circumstance which has arisen since 30 June 2018 that has significantly affected or may significantly affect: a) Kingston Resources Limited’s operations in future financial years; or b) c) Kingston Resources Limited’s state of affairs in future financial years. the results of those operations in future financial years; or - 47 - KINGSTON RESOURCES LIMITED & its Controlled Entities 2018 ANNUAL REPORT Directors’ Declaration The Directors of the Company declare that: 1. In the opinion of the Directors of the Company: (a) the financial statements and notes set out on page 21 to 47, and the Remuneration disclosures that are contained in page 11 to 17 of the Remuneration Report in the Directors’ Report, are in accordance with the Corporations Act 2001, including: (i) giving true and fair view of the Group’s financial position as at 30 June 2018 and of its performance, for the financial year ended on that date; (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (iii) complying with International Financial Reporting Standards as disclosed in Note 1. (b) (c) the remuneration disclosures that are contained in page 11 to 17 of the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures. the directors have been given the declaration required by s295A of the Corporations Act 2001 by the persons undertaking the roles of Executive Director and Company Secretary. 2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the Board of Directors. ANTHONY WEHBY Non-Executive Chairman Sydney, New South Wales 6 September 2018 - 48 - KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSTON RESOURCES LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Kingston Resources Limited and Controlled Entities (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion: a. the accompanying financial report of Kingston Resources Limited and Controlled Entities is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110: Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss after tax of $5,750,302 during the year ended 30 June 2018 and had net operating cash outflows of $1,486,437 for the year then ended. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. SYDNEY · PENRITH · MELBOURNE · BRISBANE · PERTH · DARWIN Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSTON RESOURCES LIMITED 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 for the year ended 30 June 2018. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How Our Audit Addressed the Key Audit Matter Capitalised Exploration Expenditure to Note 22 “Capitalised Exploration Refer Expenditure” At 30 June 2018, the Group had capitalised exploration assets of $8,839,290. The Group’s accounting policy in respect of exploration and evaluation assets is outlined in Note 1(m). This is a key audit matter because the carrying value of the assets are material to the financial statements and significant judgement is applied in determining whether an indicator of impairment exists in relation to capitalised exploration and expenditure assets in accordance with Australian Accounting Standard AASB 6 “Exploration for and Evaluation of Mineral Resources”. Our Procedures included, amongst others: • We confirmed the existence and tenure of the exploration assets in which the Group has a contracted interest by obtaining confirmation of title from the relevant government agency. • We obtained executed agreements evidencing the Group’s interest in those exploration assets and confirmed the currency and good standing of those agreements. In assessing whether an indicator of impairment exists in relation to the Group’s exploration assets in accordance with AASB 6 – Exploration for and Evaluation of Mineral Resources, we: • • • • examined the minutes of the Group’s board meetings and updates from the Group’s exploration partners; tested the significant inputs in the Group’s cash flow forecasts for consistency with their the exploration assets. future activity regarding discussed with management the Group’s ability and intention to undertake further exploration activities. • We tested a sample of additions of capitalised supporting expenditure to exploration documentation. KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSTON RESOURCES LIMITED Acquisition of WCB Resources Limited Refer to Note 25 “Business Combinations” During the year the Group acquired WCB Resources Limited (WCB) for gross purchase consideration of $6,052,039. This was considered a significant acquisition for the Group. Accounting for this transaction is a complex and judgemental exercise, requiring management to determine the fair value of acquired assets and liabilities, in particular determining the allocation of purchase consideration to goodwill and separately identifiable intangible assets. It is due to the size of the acquisition and the estimation process involved in accounting for it that this is a key area of audit focus. Our procedures included, amongst others: • We reviewed the sale and purchase terms and to understand key agreement conditions; • We assessed whether the acquisition met the in criteria of a business combination accordance with relevant accounting the standard; • Assessing the fair value of assets and liabilities recorded in the purchase price allocation by obtaining the closing balance sheet of the acquire as at the acquisition date. • Assessing the value of the consideration paid for the purchase • We assessed the adequacy of the Group’s disclosures in respect of business acquisitions. • We performed a Fair Value Assessment of Net Identifiable Assets using guidance per AASB 3 “Business Combinations: and AASB 138 “Intangible Assets” where we obtained a copy of WCB group’s balance sheet as at 30 November 2017 and reviewed the purchase consideration allocation. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In 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. KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSTON RESOURCES LIMITED 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: – – – – – – Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. KINGSTON RESOURCES LIMITED ABN 44 009 148 529 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSTON RESOURCES LIMITED From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the remuneration report included in pages 11 to 17 of the directors’ report for the year ended 30 June 2018. 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 Auditor’s Opinion In our opinion, the remuneration report of Kingston Resources Limited, for the year ended 30 June 2018, complies with s 300A of the Corporations Act 2001. Hall Chadwick Level 40, 2 Park Street Sydney, NSW 2000 DREW TOWNSEND Partner Dated: 6 September 2018 CORPORATE GOVERNANCE STATEMENT 2018 ANNUAL REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities CORPORATE GOVERNANCE STATEMENT The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such Kingston Resources Limited has adopted the third edition of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate Governance Council and became effective for financial years beginning on or after 1 July 2014. The Company’s Corporate Governance Statement for the financial year ending 30 June 2018 was approved by the Board on 6 September 2018. The Corporate Governance Statement can be located on the Company’s website www.kingstonresources.com.au 54 ADDITIONAL INFORMATION 2018 ANNUAL REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Additional Information required by the Australia Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report. This additional information was applicable as at 31 August 2018. SHAREHOLDER INFORMATION Distribution of Ordinary Shares at 31 August 2018 Distribution 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total No. of Shareholders (ASX code – KSN) 591 621 32 97 143 1,484 There are 318 holders of less than a marketable parcel of the Company’s fully paid ordinary shares. Statement of Top 20 Shareholders of the Quoted Equity Securities at 31 August 2018 Contributed Equity (ASX code – KSN) Name 1. 2. 3. 4. 5. 6. 7. 8. 9. SLIPSTREAM RESOURCES INVESTMENTS PTY LTD FARJOY PTY LTD SANDFIRE RESOURCES NL CITICORP NOMINEES PTY LIMITED JP MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR SCOTT ARCHIE FERGUSON CARPENTARIA CORPORATION PTY LTD WINCHESTER INVESTMENTS GROUP PTY LIMITED 10. MR JAMES BRUCE SIMPSON 11. TRILLBAR RESOURCES PTY LTD 12. SOARAWAY DEVELOPMENT PTY LTD 13. ALBIANO HOLDINGS PTY LTD 14. EQUITY TRUSTEES LIMITED 15. MILAMAR GROUP PTY LTD 16. TLG TRADING PTY LTD 17. YUCAI AUSTRALIA PTY LTD 18. DONE NOMINEES PTY LIMITED 19. MASALAI HOLDINGS PTY LTD 20. MRS LAURA LYNCH Top 20 Total Other Shareholders Total on Issue - 55 - Holding % 135,000,000 11.04 120,621,402 113,499,999 50,422,203 42,209,878 40,709,113 23,571,500 23,203,074 22,768,112 22,000,000 21,913,039 18,567,922 17,190,000 13,183,711 11,492,626 11,000,000 10,773,250 10,714,284 10,194,412 10,125,000 9.86 9.28 4.12 3.45 3.33 1.93 1.90 1.86 1.80 1.79 1.52 1.41 1.08 0.94 0.90 0.88 0.88 0.83 0.83 729,159,525 494,038,858 59.61 40.39 1,223,198,383 100.00 23,650,000 ADDITIONAL INFORMATION 2018 ANNUAL REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities Substantial Shareholders at 31 August 2018 The names of the substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: Farjoy Pty Ltd – 120,621,402 fully paid ordinary shares Slipstream Resources Investments Pty Ltd – 135,000,000 fully paid ordinary shares Sandfire Resources NL – 113,499,999 fully paid ordinary shares Number of Holders of Each Class of Securities at 31 August 2018 As at 31 August 2018, the Company had 1,223,198,383 fully paid ordinary shares held by 1,484 individual shareholders and: - - - - 7,058,823 unlisted options (KSNLTUO1) held by six individual option holders; 13,500,000 unlisted options (KSNLTUO2) held by five individual option holders; 5,000,000 unlisted options (KSNLTUO4) held by one individual option holder; 7,375,909 unlisted options (KSNLTUO6) held by three individual options holders. Voting Rights The Company’s share capital is of one class with the following voting rights: Ordinary shares a) b) c) each shareholder entitled to vote, may vote in person or by proxy, attorney or representative; on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held, or in respect of which he / she is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares shall have a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price for the share. 2. STATEMENT OF RESTRICTED SECURITIES The Company had 82,500,000 securities subject to voluntary escrow which were released from escrow on 8 July 2017. The Company has currently 6,862,645 restricted securities. 3. UNQUOTED SECURITIES Holder #Options over Ordinary Shares Expiry Date Exercise Price Shareholder Options 7,058,823 30 June 2019 $0.03 Director and Employee Options 13,500,000 30 June 2019 $0.07 Employee Options Shareholder Options 7,375,909 5,000,000 30 June 2021 $0.27 22 December 2019 $0.025 Performance Rights 29,000,000 30 June 2019 Nil (Vesting Conditions) Performance Rights Performance Rights 5,350,568 5,520,625 31 July 2019 Nil (Vesting Conditions) 30 June 2020 Nil (Vesting Conditions) Performance Rights 12,813,661 30 June 2021 Nil (Vesting Conditions) Performance Rights 5,530,568 30 June 2022 Nil (Vesting Conditions) Total Unlisted Securities on Issue 85,629,586 - 56 - ADDITIONAL INFORMATION 2018 ANNUAL REPORT KINGSTON RESOURCES LIMITED & its Controlled Entities 4. ON MARKET BUY BACK The Company does not currently have an on market buy back in operation. - 57 - ADDITIONAL INFORMATION 2018 ANNUAL REPORT 5. TENEMENT SCHEDULE KINGSTON RESOURCES LIMITED & its Controlled Entities Tenement Project/Name EL1747 Misima (earn in to 70%) Subtotals PNG Tenement Project/Name E 70/4822 Greenbushes E 52/3403 Livingstone E 52/3586 Livingstone Subtotals WA Status Live Status Pending Live Pending Ownership Area km2 49% 180 180 Ownership Area km2 100 % 75% 100% 6 203 17 226 Tenement Project/Name Status Ownership Area km2 EL 31091 EL 31092 EL 31132 EL 31133 EL 31134 Charlotte West Arm Wingate North Bynoe A Bynoe B EL 31136 Bynoe South C EL 31150 EL 31151 EL 31200 EL 31205 Bynoe South D Bynoe South A Bynoe SW A Bynoe SW BA EL 31206 Bynoe SW BB EL 31207 EL 31137 EL 31138 EL 31148 EL 31242 EL31212 EL31213 EL31214 EL31285 EL31419 EL31485 EL31534 EL31535 EL31553 Bynoe SW BC Utopia Spotted Wonder Barrow Ck A Barrow Ck Bundey Milton Powell Echo Dam Bynoe Bynoe Boxhole Trackrider Spotted Wonder Subtotals NT Total KSN tenure Live Live Live Live Pending Pending Live Live Live Pending Live Live Live Live Live Live Live Live Live Live Live Live Live Live LIve 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% 15 18 193 23 13 77 3 26 54 27 30 19 200 73 173 236 344 287 107 130 94 14 171 108 22 2,457 2,863 - 58 - 

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