Magnes um
2017 Annual Report
Latrobe Magnesium Limited and its Controlled Entities
ABN 52 009 173 611
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
INDEX
Page
Company Directory ................................................................................................................................... 3
Review of Operations .............................................................................................................................. 4
Directors’ Report ....................................................................................................................................... 9
Auditor’s Independence Declaration .....................................................................................................16
Directors’ Declaration .............................................................................................................................17
Statement of Profit or Loss and Other Comprehensive Income.............................................................18
Statement of Financial Position ..............................................................................................................19
Statement of Changes in Equity .............................................................................................................20
Statement of Cash Flows .......................................................................................................................21
Notes to the Financial Statements .........................................................................................................22
Independent Auditors’ Report .................................................................................................................45
Additional Information .............................................................................................................................48
2
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
COMPANY DIRECTORY
Directors
Jock Murray, Chairman
David Paterson, CEO
Kevin Torpey
Philip Bruce
John Lee
Chief Executive Officer
David Paterson
Secretary
John Lee
Registered Office and Principal Place of Business
Bankers
Suite 307
16-20 Barrack Street
Sydney NSW 2000
Telephone: (02) 8097 0250
Facsimile: (02) 9279 3854
Auditors
Nexia Australia
Level 16
1 Market Street
Sydney NSW 2000
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Telephone: 1 300 850 505
www.latrobemagnesium.com
National Australia Bank Limited
Mezzanine Level
255 George Street
Sydney NSW 2000
Solicitors
Minter Ellison
Level 19
88 Philip Street
Sydney NSW 2000
Stock Exchange
Australian Securities Exchange
20 Bridge Street
Sydney NSW 2000
ASX CODE: LMG
3
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
LATROBE MAGNESIUM PROJECT
1. Overview
During the year, the Company has made significant progress with its Latrobe Magnesium Project in the following
areas:
•
•
•
•
•
completing its preliminary feasibility study;
acquisition of the remaining 50% interest in its hydromet process;
granting of the hydromet patents in Indonesia;
execution of American distribution agreement; and
progressing the detailed engineering and design of the experimental plant in the Latrobe Valley.
The Company plans to use its hydromet process together with the proven thermal reduction process to extract
magnesium, char and to make a supplementary cementitious material (SCM) from the Latrobe Valley brown coal
fly ash. The first stage of the project is planned to produce magnesium metal at 3,000 tonnes per annum then
expand to 40,000 tonnes per annum.
2. Magnesium Markets
In the calendar year ended 31 December 2016, the primary world production of magnesium increased slightly to
900,000 tonnes. China’s estimated primary production for 2016 was approximately 85% of the world’s production.
Some 50% of China’s production is used locally. World growth in demand is expected to continue at an annual rate
between 6% and 7% until 2024 when it is projected the market will produce some 1.7 million tonnes.
Australian and New Zealand consumption of magnesium has been recorded in the range between 7,000 tonnes to
10,000 tonnes per annum. All this magnesium is imported.
During the year, the magnesium price traded at a three year high in line with the rebound in many commodities.
The spot prices as at 30 June were, as follows:
FOB China
US$ per tonne
30-Jun-17
2,175
30-Jun-16
2,100
Owing to United States anti-dumping duties, the annual delivered price for 2016 was in the order of US$3,750 per
tonne.
In China, the operating costs of production stayed within the range between US$2,000 to US$2,500 per tonne.
However, a number of China plants were either closed or scaled back production due to this low magnesium price.
With the adoption of light-weighting of motor vehicles and the legislated emission standards in many countries in
the World, there is a growing demand by car companies to use more magnesium and aluminium sheet in cars. The
car business has adopted aluminium sheet in outside panels and with this sheet there is up to 6 percent of
magnesium. With the development of new magnesium alloys and new production techniques, the use of
magnesium car parts and sheet provides many exciting opportunities.
3. Feasibility Study.
In January 2017 LMG announced that it had successfully completed its preliminary feasibility study (PFS) of a plant
to produce 3,000 tonnes of magnesium a year.
The PFS estimates the capital cost to be in the order of $37 million which includes contingencies of $4.5 million,
and working capital requirements of $3 million. LMG intends to fund the project in the following manner:
R&D funding
Victorian Government grant
Equity raising
Total
$m’s
16
12
12
-----
40
===
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
On 9 August 2016, LMG received a certificate for Advance Finding under Section 28A of the Industry Research and
Development Act 1986 (Act). Under the Act, LMG has been registered for the next three years (2016, 2017 and
2018) and it is entitled to receive a cash rebate for 43.5% of all eligible expenditure on eleven activities that have
been registered and its operating costs for the first 12 months of its operations. The total rebate is estimated to be
in the order of $16 million.
During the last quarter of 2017, LMG and its engineers designed a fast cycle vertical retort and furnace (FCR). It
is believed that this FCR will be superior to existing horizontal retorts in the following areas:
• The retort charge will be larger;
• The reduction time will be greatly reduced;
• The energy usage will be less due to more efficient heat transfer within the retort;
• The retort will be made out of better quality material which will greatly increase the retort’s life; and
• The FCR offers a competitive advantage over other vertical retort designs.
These benefits should produce reduced capital and operating costs for the project.
The test furnace which houses the retort has been built and was delivered to CSIRO in the week commenced 16
July 2017. The furnace has been reassembled, tested and the other equipment and retorts which are currently
being made will be connected. The FCR should be fully operational by the end of August.
In August 2016, LMG produced a large sample of dolomite and RWE Power fly ash to put through the FCR in
September 2017 with the results being available a month later.
With the successful completion of the FCR test work, LMG’s engineers will be in the position to finalise the bankable
feasibility study.
4. Hydromet acquisition
On 1 July 2016, LMG acquired the remaining 50% of the hydromet process by issuing 30 million LMG ordinary
shares. These shares were escrowed for a period of six months until 31 December 2016.
Patents have been granted for the hydromet process in Australia, USA, China and Indonesia and patents are
pending for India and EU. These patents are expected to be granted by the end of the 2017 calendar year.
In addition, Dr. Steve Short entered into a consultancy agreement so that LMG may retain his services to adapt the
current hydromet process to process other brown coal fly ashes both in Victoria and overseas.
5.
Indonesian Patents
In October 2016, LMG was informed that the Indonesian patent for its unique hydromet process was granted on 22
August 2016. The process involves the treatment of the spent fly ash from brown coal-powered electricity
generation using chemicals to reduce sulphur, iron and silicon to acceptable levels so that the beneficiated material
can be used as a feedstock in the thermal reduction process.
The Australian patent was granted on 26 September 2013 for 20 years starting from 27 August 2010. The United
States and Chinese patents were granted in September 2015.
The progress of the patent applications in each of these countries is summarised in the table below:
Country/Region
Number
Status
Expected date of grant
Australia
2011293107
Granted
United States
9139892 (13/818788) Granted
201180040099.2
W00201300844
Granted
Granted
China
Indonesia
Europe
India
26 September 2013
22 September 2015
23 September 2015
22 August 2016
11819208.7
Response filed to Search Opinion
Estimated end 2017
577/MUMNP2013
Examination requested
Estimated end 2017
5
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
6. Distribution Agreement
In May 2017, LMG signed an American distribution agreement with Metal Exchange Corporation (MEC) to sell its
magnesium into North, Central and South America and the Caribbean in the aluminium market. MEC has
committed to purchase a minimum tonnage of magnesium a year from LMG’s planned production facility in Morwell
Victoria. The deal will deliver excellent prices to LMG due to an anti-dumping duty payable on Chinese imports into
US markets.
MEC is headquartered in St. Louis, Missouri. Founded in 1974, it has grown from a regional aluminium scrap
company to a global trader with offices in Switzerland and China. In the USA, MEC has six manufacturing plants
employing over 700 people. With a unique blend of marketing expertise and deep manufacturing excellence, MEC
provides its customers an unparalleled array of products and services, directly supplying scores of aluminium and
magnesium ingots under short and long term agreements.
North and Central America currently uses 160,000 tonnes of magnesium a year and this is projected to increase
with greater use of aluminium sheet and magnesium by the motor vehicle industry. There is only one magnesium
producer in North and Central America, with most magnesium imported from China.
In the USA, there is an anti-dumping duty payable on imported China magnesium. The result of this duty is that
the spot magnesium price in the USA is currently US$1.50 per lb or in the order of US$3,308 per tonne, whereas
the FOB China magnesium price is currently US$2,150 per tonne.
Under the USA-Australia fair trade agreement, magnesium produced in Australia is exempt from this import duty.
LMG proposes to sell more than 50% of its production into the US market at this higher price.
MoU Agreement
In March 2016, LMG signed a Memorandum of Understanding with a Japan-based company, Advanced Material
Corporation of Japan (AMCJ), committing to purchase magnesium from the LMG planned production facility in
Morwell Victoria. AMCJ is the largest titanium and magnesium trading house in Tokyo.
Japan currently uses some 40,000 tonnes of magnesium per annum and this is projected to increase with greater
use of magnesium by the motor vehicle industry. Currently most of this magnesium is imported from China. The
Japanese Magnesium Association has a stated objective to diversify their magnesium supply chain.
7. Supplementary Cementitious Material
There is a major shortage of fly ash in Victoria. Victorian users import up to 300,000 tonnes per annum from New
South Wales and Queensland and some users are starting to import fly ash from overseas.
In the next six months LMG will be completing a significant amount of larger scale test work. A large quantity of
supplementary cementitious material (SCM) will be produced from the FCR work which will allow the properties of
LMG’s SCM to be analysed further.
LMG is in discussions with a number of major Australian cement companies in relation to selling them this material.
These companies require their individual samples to conduct their own analysis before they will commit to any
agreements.
8. RWE Power
In June, 2016 LMG signed a MoU with RWE Power AG to continue to develop a magnesium plant capable of
producing approximately 30,000 tonnes per annum of magnesium from brown coal fly ash from its Hambach mine
near Cologne, Germany.
The project involves four stages of development, being:
• Conduct process test work on the RWE fly ash
• Completion of a feasibility study
• Completion of engineering, procurement and permitting
• Construction and commissioning
6
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
Each stage is conditional on the successful completion of the preceding stage.
In June 2017, LMG carried out a number of bench scale hydromet tests on RWE Power’s Hambach brown coal fly
ash. The results of these tests were very encouraging.
LMG completed a concept study on the Hambach fly ash in 2014 and concluded that the project was economically
viable and worth developing further. German labour and gas costs are considerably lower than those currently in
the Latrobe Valley.
LMG made a 100kg sample so that it had sufficient ash to process the sample through both its hydromet and
reduction process and produce magnesium and supplementary cementitious material. This work was successful.
LMG has made a large bulk sample to process through its newly constructed FCR in September. LMG will have
the results a month later.
Under the MoU with RWE Power, the next step, following the successful completion of the above test work, in the
development of the Hambach project, is the formulation of a cooperation agreement between the parties.
Europe imports in excess of 150,000 tonnes of magnesium per annum. There is currently no producer in Europe
and magnesium metal has been listed as the fourth most critical raw material in the EU list of 20 metals.
RWE Power AG and LMG have identified the brown coal fly ash from RWE’s Hambach mine as being the most
suitable to commercially extract magnesium. RWE Power mines produce approximately 100 million wet tonnes of
brown coal per annum (from which approximately 35 to 40 million tonnes per annum are produced from its Hambach
mine) compared to some 50 million wet tonnes per annum from the two Latrobe Valley mines.
RWE Power AG is part of the RWE Generation SE. Since 1 January 2013, all generation in the RWE Group has
been steered by RWE Generation SE, enabling the pooling of the generation and engineering expertise of RWE
Power in Germany, RWE Essent in the Netherlands, and RWE Generation UK in the UK. RWE has some 14,000
employees in its generation business and more than 40,000 MW of power generation capacity.
9. Fund Raising
In October 2015, LMG raised $600,000 of debt funding from Platinum Road Pty Ltd to progress the development
of its Latrobe Valley magnesium project. The key terms of the facility are:
Loan Amount:
Interest Rate:
Term:
Repayment:
Conversion:
$600,000 including capitalised interest
15% per annum.
12 months to 16 October 2016.
Cash in full from the 2016 R&D tax rebate refund.
The lenders have the right to convert any part of their loan to ordinary shares at $0.015
per share.
During the 12 months to 16 October 2016, all the lenders elected loan conversions and the total debt was converted
into ordinary shares. The Company was therefore able to utilise the R&D tax incentive payment of $560,453 as it
sees fit.
In December 2016, LMG secured a loan facility of up to $1,000,000 from Innovation Structured Finance Co LLC of
New York, USA to assist with the funding of its detailed engineering and design work for its feasibility study and the
initial plant in the Latrobe Valley. The key terms are:
Loan drawdown ratio Maximum 85% of the estimated R&D tax rebate
Annual Interest Rate
Repayment
Maturity Date:
First drawdown:
12.95%
Cash in full from the 2017 R&D tax rebate
30 November 2017
1 May 2017
First drawdown
Interest at 12.95%
Amount repayable
$485,000
$31,404
------------
$516,404
=======
The estimated research and development tax rebate for 2017 is $932,118.
7
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
10. Capital Raising
In July 2016, the Company raised $1,000,000 through a private placement to sophisticated and professional
investors at an issue price of $0.026. In August 2016, LMG raised a further $1,800,000 from a Share Purchase
Plan from existing shareholders at the same price.
The total funds raised was $2.8 million which was and is being used to complete the vertical retort testing, bankable
feasibility study and provide working capital.
8
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
The Directors present their report together with the financial report of Latrobe Magnesium Limited (“Company”) and
of the Group, being the Company and its subsidiaries for the financial year ended 30 June 2017 and the auditor’s
report thereon.
DIRECTORS
The following persons were Directors of Latrobe Magnesium Limited during the financial year and up to the date of
this report.
Chairman
Jock Murray
David Paterson CEO
K A Torpey
P F Bruce
J R Lee
PRINCIPAL ACTIVITIES
During the year the principal continuing activities of the Group consisted of:
•
•
•
•
•
completing the preliminary feasibility study and the design and testing of the vertical retorts;
acquiring the remaining 50% interest in the hydromet process;
signing a MoU with RWE Power for the development of a project in Germany and subsequent test work;
signing an American distribution agreement for the sale of magnesium; and
raising $2.8 million to develop the project further.
OPERATING RESULTS
The consolidated net loss of the Group after providing for income tax amounted to $1,819,585 compared to a net
loss of $1,087,123 for the previous corresponding period. The loss was mainly due to the costs of conducting the
test work, feasibility study on the Latrobe Magnesium project and the engineering and design of the magnesium
pilot plant in the Latrobe valley.
Further information on review of operations of the Group is shown separately in the Directors’ Review of Operations
on Page 4 to 8 of this report.
Dividends
The Directors have not recommended the payment of a final dividend.
Significant Changes in the State of Affairs
The significant change in the state of affairs of the Group during the financial year is an increase in the contributed
equity of $4,257,428, from $28,985,621 to $33,243,049 as a result of issuing the following fully paid ordinary shares:
Date
July 2016
July 2016
August 2016
August 2016
September 2016
October 2016
December 2016
Purpose
Acquire remaining 50% of the Hydromet process
Private Placement
Placement fees
Share Purchase Plan
Convert unlisted convertible securities to shares
Convert unlisted convertible securities to shares
Convert unlisted convertible securities to shares
Exercise of unlisted options
Shares Issued
30,000,000
38,461,538
$/share
$0.036
$0.026
70,353,862
6,497,585
10,000,000
5,717,601
5,000,000
166,030,586
$0.026
$0.015
$0.015
$0.015
$0.015
Amount
$1,080,000
$1,000,000
($60,000)
$1,829,200
$97,464
$150,000
$85,764
$75,000
$4,257,428
MATTERS SUBSEQUENT TO BALANCE DATE
There is no matter or circumstance that has arisen since 30 June 2017 that has significantly affected or may
significantly affect:
(a) the operations, in financial years subsequent to 30 June 2017, of the Group;
(b) the results of those operations; or
9
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
(c) the state of affairs, in financial years subsequent to 30 June 2017, of the Group.
On 1 September 2017, the financial report was authorised to be signed by a resolution of Directors.
LIKELY DEVELOPMENTS
Except for information disclosed on certain developments and the expected results of those developments included
in this report under review of operations, further information on likely developments in the operations of the Group
and the expected results of those operations have not been disclosed in this report because the Directors believe
it would be likely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATIONS
The Group’s operations will be subject to normal State and Federal Environmental Regulations. There were no
breaches of these regulations during the year or to the date of this report.
INFORMATION ON DIRECTORS
John Stephen Murray – Non Executive Chairman
Experience and Expertise
Mr Murray studied economics and history with the Royal Military College at Duntroon before studying engineering
management at the Royal Military College of Science in the UK. He also holds qualifications in international politics
from Deakin University.
Roles currently held by Mr Murray include strategic adviser for law firm, King & Wood Mallesons in the government
infrastructure sector. He managed numerous large projects in his role with NSW Department for Transport including
the production of a 10 year development plan for the State's transport infrastructure and services as well as chairing
the $2 billion Parramatta Rail Link Company project. He acted as an adviser for operational planning and
infrastructure for the Sydney, Beijing and London Olympic Games. In addition to these roles he has held numerous
directorships including non-executive chairman of Omni Tanker Holding Pty Ltd for 8 years until retirement in July
2017 and for The Hills Motorway (M2) Limited prior to its takeover by Transurban in 2005 and also the non-executive
chairman for Country Pipelines Pty Ltd for 3 years prior to its takeover by APA in 2008. He was on the board of
Terminals Australia for five years up until its sale to Asciano in 2008.
Prior to his foray into business, Mr Murray had a distinguished military career over almost 30 years before retiring
as a Colonel in 1994. He brings a wealth of senior management and directorship experience with a particular focus
on infrastructure, project management and freight logistics.
Appointed as a Director on 1 May 2015
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
None
Special Responsibilities
Chairman of the Board of Directors
Interests in Securities
11,976,923 ordinary shares in Latrobe Magnesium Limited, these shares are registered in the name of MurraySetter
Pty Limited as trustee for the MurraySetter Trust.
David Oliver Paterson – Chief Executive Officer
Experience and Expertise
Mr Paterson is a qualified non-practising Chartered Accountant and a graduate from the University of Queensland.
He is the founding director of Europacific Corporate Advisory Pty Ltd and has held an Investment dealers licence
since 1990. Prior to forming Europacific in 1990, he was a group manager of the Corporate Services Division of
Tricontinental Corporation Limited responsible for NSW and Queensland. He also worked for Coopers & Lybrand
in Brisbane and Sydney in their Corporate Services Division. He has been involved in a wide range of corporate
advisory assignments and underwritings for both debt and equity for a number of public and private companies.
10
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Mr Paterson has experience in the property and mining industries, in relation to:
Project financing;
Financial analysis;
Valuations; and
The raising of debt and equity.
Appointed as a Director on 23 August 2002
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
None
Special Responsibilities
Chief Executive Officer
Member of Audit Committee
Interests in Securities
100,374,615 ordinary shares in Latrobe Magnesium Limited, of these shares 1,417,275 are held as a direct interest
and 98,957,340 are registered in the name of Rimotran Pty Limited as trustee for the David Paterson Super Fund.
Kevin Anthony Torpey – Non Executive Director
Experience and Expertise
Mr Torpey is a chartered professional engineer and a graduate from Sydney University. Over the last 40 years he
has been involved in the development of many diverse major projects involving oil, iron ore, aluminium, nickel,
lead/zinc, uranium, magnesite, coal and gold, located locally, in Ireland and Indonesia. Generally these projects
have been associated with major companies such as Consolidated Goldfields, EZ Industries, Alcan, International
Nickel, Tara Minerals Limited (Ireland), Noranda, Denison Mines (Canada), Toyota, Mitsubishi and Iwatani. For the
last 20 years his association has mainly been as a corporate officer initially as managing director of Denison Mines
(Australia) and then managing director of Devex Limited. Over the last few years he has acted as a consultant to
a number of companies involved in mining projects and new technologies.
Appointed as a Director on 11 April 2002
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
Empire Energy Group Ltd.
Special Responsibilities
None
Interests in Securities
100,610,314 ordinary shares in Latrobe Magnesium Limited, these shares are held by Famallon Pty Ltd and
Famallon Pty Ltd ATF Famallon No.2 Super Fund. Mr Torpey is a principal of Famallon Pty Ltd and a beneficiary
of the fund.
Philip Francis Bruce – Non Executive Director
Experience and Expertise
Mr Bruce is a director of P F Bruce & Associates, which provides corporate and project management services. He
is a mining engineer with over thirty years resource industry experience in Australia, South Africa, West Africa,
South America and Indonesia in operations, project development and corporate management. He was the CEO of
PT BHP Indonesia, managing director of Triako Resources Limited and was the general manager – development
for Plutonic Resources Limited, where he was technically responsible for acquisition and development of resource
projects during the Company’s period of growth from $35 million to over $1 billion in market capitalisation.
Appointed as a Director on 4 September 2003
Other Current Public Company Directorships
Managing Director / Chairman of Hill End Gold Limited
Director of Bassari Resources Limited
11
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Former Public Company Directorships in Last 3 Years
Brimstone Resources Limited.
Special Responsibilities
None
Interests in Securities
11,263,747 ordinary shares in Latrobe Magnesium Limited, of these shares 704,250 are held as direct interest and
10,559,497 are registered in the name of Diazill Pty Limited as trustee for the PB Superannuation Fund.
John Robert Lee – Non Executive Director
Experience and Expertise
Mr Lee has a broad range of commercial skills and experiences in both the public and private sectors. He has held
senior management roles in the Federal Department of Employment and Industrial Relations. He was also senior
private secretary and principal adviser to Tony Street, a senior federal cabinet minister. In the private sector, Mr
Lee has held a number of senior management positions with a number of major corporations including Henry Jones
IXL, Elders Building Supplies and Woolworths Limited. He is the founder of Stockholder Relations Pty Ltd, a
management consultancy specialising in corporate advisory, investor relations and corporate governance.
Appointed as a Director on 10 December 2010
Other Current Public Company Directorships
None
Former Public Company Directorships in Last 3 Years
Mongolian Resources Corporation Limited
Special Responsibilities
Chairman of Audit Committee
Interests in Securities
4,872,058 ordinary shares in Latrobe Magnesium Limited, these shares are registered in the name of Stockholder
Relations Pty Limited of which Mr Lee is a Director.
Company Secretary
Mr John Lee who has been a Director to the Company since 10 December 2010 became Company Secretary on 1
July 2013.
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year
ended 30 June 2017 and the number of meetings attended by each Director was:
Director
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Directors’ Meetings
Audit Committee Meetings
Attended
Held Whilst in Office
Attended
Held Whilst in Office
7
8
8
8
6
8
8
8
8
8
-
2
-
-
2
-
2
-
-
2
The Board has yet to appoint a Nomination and a Remuneration Committee. The matters that would normally be
the responsibility of these committees are dealt with by the full Board of Directors.
Retirement, Election and Continuation in Office of Directors
Mr P F Bruce is the Director retiring by rotation at the next Annual General Meeting of the Company. Mr Bruce
being eligible in accordance with Article 12.2 of the Company’s constitution offers himself for re-election. His
background, experience and qualification are detailed on Pages 11.
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LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
This report outlines the Remuneration Arrangements in place for each key management person of Latrobe
Magnesium Limited. Principles used to determine the nature and amount of remuneration are:
Competitiveness and reasonableness
Acceptability to shareholders
Performance linkage / alignment of executive compensation
Appropriateness for level of operations
Transparency
Remuneration Committee
The Board has not yet formed a separate Remuneration Committee and all matters that would normally be the
responsibility of a Remuneration Committee are dealt with by the full Board of Directors.
Key Management Personnel
The full Board of Directors sets remuneration policies and practices generally and makes specific recommendations
on remuneration packages and other terms of employment for Executive Directors, other Senior Executives and
Non-Executive Directors.
Executive remuneration and other terms of employment are reviewed annually having regard to performance
against goals set at the start of the year, relevant comparative information and independent expert advice. As well
as basic salary, remuneration packages including superannuation.
Directors and executives are also able to participate in an Employee Share Acquisition Plan. Remuneration
packages are set at levels that are intended to attract and retain executives capable of managing the Group’s
operations.
Remuneration of Non-Executive Directors is determined by the Board within the maximum amount approved by
shareholders from time to time.
The Board undertakes an annual review of its performance and the performance of the Board Committees against
goals set at the start of the year.
Details of the nature and amount of each element of the emoluments of each Director of Latrobe Magnesium Limited
and each specified officer of the Company and the Group receiving the highest emoluments are set out in the
following tables.
The information which follows through to the section titled “Share Options Granted to Key Management Personnel”
is subject to audit by the external auditors.
2017
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
2016
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Base
Emoluments
$
60,000
303,270
21,804
21,804
21,804
428,682
Base
Emoluments
$
60,000
261,600
35,427
21,804
21,804
400,635
Super
Contributions
$
-
-
-
-
-
-
Super
Contributions
$
-
-
-
-
-
-
Equity
Options
$
-
-
-
-
-
-
Equity
Options
$
-
-
-
-
-
-
Total
$
60,000
303,270
21,804
21,804
21,804
428,682
Total
$
60,000
261,600
35,427
21,804
21,804
400,635
Performance
Related
%
-
-
-
-
-
-
Performance
Related
%
-
-
-
-
-
-
There are no additional executives employed by Latrobe Magnesium Limited other than those already disclosed.
13
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Service Agreements
There are currently no service agreements in place formalising the terms of remuneration of Directors or other key
management personnel of the Company and the Group. The increase in D O Paterson’s emoluments during the
year was approved by Board after conducting a detailed review and after taking into consideration that the CEO’s
salary had not been increased for over 4 years. It was agreed by the Board to review all Directors’ emoluments
once the project moved into the construction phase.
Shareholdings
Number of shares held by Directors and Other Key Management Personnel of Parent Entity.
Directors & Other Key
Management Personnel
Balance at
beginning of
date of
appointment
Acquired under
Share Purchase Plan
for Shareholders
Net Change
Other
Acquired Under
Debt Conversion
to Equity
Balance at 30
June 2017
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
11,400,000
35,933,333
65,333,334
3,441,490
-
576,923
11,717.948
-
6,412,399
8,160,256 10,092,595
1,692,308
1,692,308
-
-
46,310,935
17,024,129
6,129,949
3,179,750
11,976,923
100,374,615
100,610,314
11,263,747
4,872,058
Share Options Granted to Key Management Personnel
Granted -
No options were granted to key management personnel over unissued shares during the financial
year.
Exercised - No options were exercised by key management personnel during or in the period since the end of the
financial year and up to the date of this report.
Expiry -
No options expired during or since the end of the financial year.
END OF AUDITED REMUNERATION REPORT
UNLISTED CONVERTIBLE SECURITIES
On 16 October 2015, the Company raised a debt facility of $600,000 including 12 months interest. On 20 October
2015, the Company issued up to 40,000,000 Unlisted Convertible Securities convertible at $0.015 at any time prior
to 16 October 2016 should the lenders wish to convert into ordinary shares. Under the loan agreement, adjustments
were made to interest owing on securities converted before 16 October 2016. The total debt was converted into
ordinary shares prior to loan expiry date of 16 October 2016 as below.
20 October 2015 Unlisted Convertible Securities issued
27 April 2016 Conversion @ $0.015 per shares
7 June 2016 Conversion @ $0.015 per shares
23 June 2016 Conversion @ $0.015 per shares
9 August 2016 Conversion @ $0.015 per shares
8 September 2016 Conversion @ $0.015 per shares
28 September 2016 Conversion @ $0.015 per shares
16 October 2016 Conversion @ $0.015 per shares
Total shares converted from debt
Interest reduction due to early conversion, hence reduction in shares issued
There were no unlisted convertible securities on issue as at 30 June 2017.
Shares
Shares
40,000,000
5,000,000
5,000,000
6,671,063
6,497,585
5,000,000
5,000,000
5,717,601
38,886,249
1,113,751
14
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
UNLISTED OPTIONS
On 20 October 2015 the Company issued 5,000,000 Unlisted Options exercisable at $0.015 at any time prior to 16
December 2016 in respect of professional services provided for raising $600,000 loan under the terms of the loan
facility. The value of the Options using the Black Scholes Option Value method is $7,633. The 5,000,000 unlisted
options were exercised on 16 December 2016 at $0.015.
INDEMNIFICATION
During or since the end of financial year, the Company has not been indemnified or made a relevant agreement to
indemnify an officer or auditor of the Company or any related body corporate against liability incurred as such an
officer or auditor. The Company maintains a Directors and Officers Liability Insurance, including company securities
cover.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings. The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to Nexia Australia for services provided during the year are set out below:
Audit and Review of Financial Reports
Assurances and Taxation Services
$
32,000
10,000
---------
42,000
=====
The Board of Directors ensure that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001.
AUDITORS’ INDEPENDENT DECLARATION
A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act 2001 is
set out on Page 16 and forms part of this report.
This report is made in accordance with a resolution of the Directors.
J S Murray
Chairman
Sydney
1 September 2017
D O Paterson
Chief Executive Officer
15
To the Board of Directors of Latrobe Magnesium Limited
Auditor’s Independence Declaration under section 307C of
Corporations Act 2001 to the Directors of Latrobe Magnesium Limited
the
As lead audit partner for the audit of the financial statements of Latrobe Magnesium Limited for the
financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(b)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Sydney Partnership
Joseph Santangelo
Partner
Sydney
Dated: 1 September 2017
16
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ DECLARATION
The Directors of the company declare that:
1.
In the Directors’ opinion, the consolidated financial statements and accompanying notes set out on Pages 18
to 44 are in accordance with the Corporations Act 2001 and:
(a)
(b)
comply with Australian Accounting Standards and the Corporations Regulations 2001; and
give a true and fair view of the company’s financial position as at 30 June 2017 and of its performance
for the year ended on that date.
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB).
In the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable.
The remuneration disclosures included in Page 13 and 14 of the Directors’ report (as part of the audited
Remuneration Report), for the year ended 30 June 2017, comply with section 300A of the Corporations Act
2001.
2.
3.
4.
This declaration is made in accordance with a resolution of the Board of Directors pursuant to section 295(4) of the
Corporations Act 2001 and is signed for and on behalf of the Directors by:
J S Murray
Chairman
Sydney
1 September 2017
D O Paterson
Chief Executive Officer
17
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
Revenue
Finance Income
Other Income
Expenses
Administration expenses
Finance Cost
Research and evaluation expenses
Total expenses
Income tax expense
Note
GROUP
2017
$
2016
$
19,675
11,115
932,118
560,453
3
951,793
571,568
(1,285,919)
(922,849)
(80,687)
(60,228)
(1,404,772)
(675,614)
(2,771,378)
(1,658,691)
-
-
3
4
Loss attributable to members of the parent entity
(1,819,585)
(1,087,123)
Other Comprehensive Income
Other Comprehensive Income for the year
-
-
Total Comprehensive Income
(1,819,585)
(1,087,123)
Basic and diluted loss per share (cents per share)
18
(0.15)
(0.10)
GROUP
Note
2017
2016
The above statement should be read in conjunction with the accompanying notes.
18
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total Current Assets
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Borrowings
Trade and other payables
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Accumulated losses
TOTAL EQUITY
Note
GROUP
2017
$
2016
$
5
6
6
7
8
9
10
1,131,913
1,077,913
13,946
662,649
2,209,826
676,595
16,993
5,158
16,993
1,953
6,848,180
5,754,617
6,870,331
5,773,563
9,080,157
6,450,158
495,468
302,224
324,094
281,442
797.692
605,536
797,692
605,536
8,282,465
5,844,622
11
33,243,049
28,985,621
(24,960,584)
(23,140,999)
8,282,465
5,844,622
The above statement should be read in conjunction with the accompanying notes
.
19
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
GROUP
Note
Issued
Capital
$
Accumulated
Losses
Total
$
$
Balance at 1 July 2015
28,670,152
(22,053,876)
6,616,276
Total comprehensive income
-
(1,087,123)
(1,087,123)
Shares issued during the period
11
315,469
-
315,469
Balance at 1 July 2016
28,985,621
(23,140,999)
5,844,622
Total comprehensive income
-
(1,819,585)
(1,819,585)
Shares issued during the period
11
4,257,428
-
4,257,428
Balance at 30 June 2017
33,243,049
(24,960,584)
8,282,465
The above statement should be read in conjunction with the accompanying notes.
20
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF CASHFLOWS
For the year ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from operations
Payments to suppliers and employees
Interest received
GROUP
2017
$
2016
$
Note
560,453
421,651
(2,758,048)
(1,409,946)
17,675
9,193
Net cash used in operating activities
17b
(2,179,920)
(979,102)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of International Patent expenditure
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Borrowing
Proceeds from Borrowing
Proceeds from Issue of Shares
Placement Fees
(31,313)
(7,236)
(31,313)
(7,236)
-
485,000
2,904,200
(60,000)
(1,428)
386,957
-
-
Net cash from financing activities
3,329,200
385,529
Net increase / (decrease) in cash and cash equivalent held
1,117,967
(600,809)
Cash and cash equivalent at beginning of the financial year
13,946
614,755
Cash and cash equivalent at end of financial year
17a
1,131,913
13,946
The above statement should be read in conjunction with the accompanying notes.
21
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The financial report is a general purpose financial report and covers Latrobe Magnesium Limited and its controlled
Entities (the “Group”) and Latrobe Magnesium Limited as an individual parent entity. Latrobe Magnesium Limited
is a company limited by shares, incorporated in Australia, whose shares are publicly traded on the ASX.
The financial report has been prepared on an accruals basis and is based on historical costs and does not take into
account changing money values. Cost is based on the fair values of the consideration given in exchange for assets.
It is also recommended that the financial report be considered together with any public announcements made by
the Group during the year ended 30 June 2017, in accordance with continuous disclosure obligations arising under
both the Corporations Act 2001 and Australian Stock Exchange Listing Rules.
The financial report is presented in the Australian currency.
Statement of Compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standard (‘AIFRS’). Compliance with AIFRS ensures that the financial report,
comprising the financial statements and notes thereto, complies with International Financial Reporting Standards
(‘IFRS’) in their entirety.
A summary of significant accounting policies of the Group under AIFRS are disclosed below. The accounting
policies have been consistently applied, unless otherwise stated.
a.
Principles of Consolidation
The consolidated financial statements comprise the financial statements of Latrobe Magnesium Limited and
its subsidiaries at 30 June each year ("the Group"). Subsidiaries are entities over which the Group has the
power to govern the financial and operating policies generally accompanying a shareholding of more than
one half of the voting rights. Potential voting rights that are currently exercisable or convertible are
considered when assessing control. Consolidated financial statements include all subsidiaries from the date
that control commences until the date that control ceases. The financial statements of subsidiaries are
prepared for the same reporting period as the parent, using consistent accounting policies.
All inter-Company balances and transactions between entities in the Group, including any unrealised profits
or losses, have been eliminated on consolidation.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement and balance sheet respectively.
Subsidiaries are accounted for in the parent entity financial statements at cost.
A list of controlled entities is contained in Note 12 to the financial statements.
b.
Income Tax
The Group adopts the liability method of tax-effect accounting whereby the income tax expense is based on
the profit from ordinary activities adjusted for any non-assessable or disallowed items. It is calculated using
the tax rates that have been enacted or are substantially enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a
business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised
or liability is settled. Deferred tax is credited in the income statement except where it relates to items that
may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised. Deferred tax assets in relation to
tax losses are not brought to account unless there is convincing evidence of realisation of the benefit.
22
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income tax legislation and the anticipation that the Group will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
Latrobe Magnesium Limited and its wholly-owned Australian subsidiaries have formed an income tax group
under the Tax Consolidation Regime. Each entity in the Group recognises its own current and deferred tax
liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are
immediately assumed by the parent entity. The current tax liability of each Group entity is then subsequently
assumed by the parent entity. The Group notified the ATO on 2 January 2003 that it had formed an income
tax group to apply from 1 July 2002. The tax group has entered a tax sharing agreement whereby each
Company in the Group contributes to the income tax payable in proportion to their contribution to the net
profit before tax of the tax group.
c.
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. Foreign currency monetary items are translated at the year-end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of
the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date
when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement,
except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to
the extent that the gain or loss is directly recognised in equity otherwise the exchange difference is
recognised in the income statement.
d.
Plant and Equipment
Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of operating in the manner intended by
management, less depreciation and any impairment.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess
of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the assets employment and subsequent disposal. The
expected net cash flows have been discounted to their present value in determining recoverable amounts.
Depreciation
The depreciable amount of all fixed assets is depreciated on a diminishing value basis over their useful lives
to the Group commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Depreciation Rate
Plant and equipment - diminishing value
35%
The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet
date.
Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the
asset's carrying amount and are included in the income statement in the year that the item is derecognised.
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.
23
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
e.
Intangibles
Research and development
Research costs are expensed as incurred. Development expenditure incurred on an individual project is
capitalised only if the product or service is technically feasible, adequate resources are available to complete
the project, it is probable that future economic benefits will be generated and expenditure attributable to the
project can be measured reliably. Expenditure capitalised comprises costs of materials, services, direct
labour and an appropriate portion of overheads. Other development costs are expensed when they are
incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and any
impairment losses and amortised over the period of expected future sales. The carrying value of
development costs is reviewed annually when the asset is not yet available for use, or when events or
circumstances indicate that the carrying value may be impaired.
f.
Impairment of Non Financial Assets
At each reporting date the Group assesses whether there is any indication that individual assets are
impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are
recognised in the income statement where the asset's carrying value exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose
of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset.
Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is
determined for the cash-generating unit to which the asset belongs.
g.
Investments and other financial assets
The Group classifies its financial assets in the following categories:
•
•
financial assets at fair value through profit or loss;
loans and receivables;
The classification depends on the purposes for which the investments were acquired. Management
determines the classification of its investments at initial recognition and, in the case of assets classified as
held-to-maturity, re-evaluates this designation at the end of each reporting period.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified
as current assets.
(ii)
Loans and receivables
Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in active market. They are included in current assets, except for those with maturities greater than
12 months after the reporting period which are classified as non-current assets. Loans and receivables are
included in trade and other receivables (Note 6) in the balance sheet.
After initial measurement, loans and receivables are carried at amortised cost using the effective interest
method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans
and receivables are derecognised or impaired, as well as through amortisation process.
(iii) Recognition and de-recognition
Regular purchase and sales of financial assets are recognised on trade-date, the date on which the Group
commits to purchase or sell the assets. Investments are initially recognised at fair value plus transaction
costs for all financial assets not carried at fair value through profit and loss. Financial assets carried at fair
value through profit and loss are initially recognised at fair value and transaction costs are expenses in profit
and loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and rewards
of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised
in other comprehensive income are reclassified to profit or loss as gains and losses from investment
securities.
24
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(iv)
Subsequent measurement
Loans and receivables are carried at amortised cost using the effective interest method. Details on how the
fair value of financial instruments is determined are disclosed in Note 2d.
(v)
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial
asset or group of financial assets is impaired.
If there is evidence of impairment for any of the Group’s financial assets carried at amortised cost; the loss
is measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the
financial asset’s original effective interest rate. The loss is recognised in profit or loss.
h.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of assets that necessarily
take a substantial period of time to prepare for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale.
All other finance costs are recognised in income in the period in which they are incurred.
i.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are
shown within short-borrowings in current liabilities on the balance sheet.
j.
Revenue
Interest
Revenue is recognised as interest accrues using the effective interest method. The effective interest method
uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts
over the expected life of the financial asset.
Government Grants
Government grants are recognised at fair value where there is reasonable assurance that the grant will be
received and all grant conditions will be met. Grants relating to expense items are recognised as income
over the periods necessary to match the grant to the cost they are compensating.
k.
Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the year
end and which are unpaid. These amounts are unsecured and have up to 60 day payment terms.
l.
Interest bearing liabilities
All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in the income statement over the period of the loans and
borrowings using the effective interest method.
All borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
m.
Other liabilities
Other liabilities comprise non-current amounts due to related parties that do not bear interest and are
repayable in more than 366 days from balance sheet date. As these are non-interest bearing, fair value at
initial recognition requires an adjustment to discount these loans using a market-rate of interest for a similar
instrument with a similar credit rating (Group's incremental borrowing rate). The discount is credited to the
income statement immediately and amortised using the effective interest method.
25
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
The component parts of compound instruments (convertible securities) issued by the Group are classified
separately as financial liabilities and equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and an equity instrument. A conversion option that
will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the
Company’s own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost
basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity
date.
The conversion option classified as equity is determined by deducting the amount of the liability component
from the fair value of the compound instrument as a whole. This is recognised and included in equity, net
of income tax effects, and is not subsequently remeasured.
n.
Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the Group
has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of
economic resources will be required to settle the obligation and the amount can be reliably estimated. For
service warranties, the likelihood that an outflow will be required to settle the obligation is determined by
considering the class of obligations as a whole. Provisions are not recognised for future operating losses.
Where the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
o.
Share-based payments
For equity-settled share-based payment transactions, the Company measures the goods or services
received, and the corresponding increase in equity, directly, at the fair value of the goods or services
received.
p.
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
q.
Contributed equity
Ordinary shares are classified as equity (refer Note 11).
Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity
proceeds. Costs directly attributable to the issue of new shares or options associated with the acquisition
of a business are included as part of the purchase consideration.
r.
Dividends
Provision is made for dividends declared and no longer at the discretion of the Group, on or before the end
of the financial year but not distributed at balance date.
s.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to members of Latrobe Magnesium
Limited, adjusted for the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares during the year.
The weighted average number of issued shares outstanding during the financial year does not include
shares issued as part of the Employee Share Loan Plan that are treated as in-substance options.
Diluted earnings per share
Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the
after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted
average number of shares used is adjusted for the weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
26
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
t.
Goods and Services Tax (GST)
Revenues, expenses are recognised net of GST except where GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which case the GST is recognised as part of the
cost of acquisition of the asset or as part of the expense item.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable
from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
u.
Critical Accounting Estimates and Judgments
The Directors evaluate, estimate and make judgements which are incorporated into the financial report
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.
Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that
may lead to an impairment of assets. Where an impairment trigger exists, the recoverable amount of the
asset is determined. Value in use calculations performed in recoverable amounts incorporate a number of
key estimates.
No impairment has been recognised in respect of the intangible assets for the year ended 30 June 2017
because:
1.
2.
3.
the Company's internal valuations indicate that the recoverable amounts of the assets are greater than
the book value of the assets;
the magnesium price supports this valuation; and
the Company is utilising the proven Thermal Reduction Process in its process with estimates of its
capital and operating costs which are based on its preliminary feasibility study and subsequent reports.
The key assumptions are adjusted to incorporate risks with a particular segment, and are summarised as
follows:
•
•
• magnesium metal price of US$3,346 per tonne is used which represents the current weighted average
budgeted cash flow period of 20 years, which approximates the project’s life, based on current inputs;
initial production of 3,000 tonnes increasing to 40,000 tonnes;
price between China and the United States.
• market information for forward exchange rates;
•
•
•
a pre-tax discount rate of 18%.
operating costs based upon third party consultant’s estimates;
capital costs based upon the preliminary feasibility study; and
27
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 2: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s risk management policy sets out the Company’s overall risk management framework and policies,
including regular reviews by the Board of the Company’s financial position and financial forecasts.
a.
Principal financial instruments
The principal financial instruments are as follows:
(i) Cash
(ii) Trade and other receivables
Inter Company balances
(iii)
(iv) Trade and other payables
(v) Borrowings
The Group does not use derivative financial instruments, and has no off-balance sheet financial assets
and liabilities at year-end.
b.
Financial instrument risk exposure and management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial
instruments. These main risks, arising from the Group’s financial instruments are interest rate risk, liquidity
risk, foreign exchange currency risk, share market risk, credit risk and commodity risk. This note describes
the Group’s objectives, policies and processes for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is presented throughout these financial
statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them from
previous periods unless otherwise stated in this note.
c.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies and has the responsibility for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group’s finance function. The Board receives
bimonthly reports through which it reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without
unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are
set out below:
(i) Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash or access to funds to allow it to meet
its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed
facilities) to meet expected requirements for a period of at least 90 days.
The Group’s exposure to liquidity risk has been assessed as minimal. There are no past due payables at
balance date.
The Board receives cash flow projections on a bimonthly basis as well as information regarding cash
balances. At the balance sheet date, these projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably expected circumstances.
(ii)
Interest Rate Risk
The Group’s exposure to interest risk arises when the value of financial instruments fluctuates as a result
of changes in market interest rates and the effective weighted average interest rates on classes of financial
assets and financial liabilities.
The Group’s exposure to interest rate risk only extends to cash and cash equivalents at balance date. The
Group’s exposure to interest rate risk at 30 June 2017 and 30 June 2016 is set out in the following tables:
28
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Net financial assets
1,121,016 (444,373)
CONSOLIDATED
Year ended 30 June 2017
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
Year ended 30 June 2016
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
Fixed Interest maturing in
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over 1 to
5 years
More than
5 years
%
1
4
13
$
$
1,121,016
-
-
51,095
1,121,016
51,095
- (495,468)
-
-
%
1
4
15
$
$
13,946
-
-
49,095
13,946
49,095
- (324,094)
-
-
Non-
interest
bearing
$
Total
$
10,897
1,026,818
1,131,913
1,077,913
1,037,715
2,209,826
-
(302,224)
(495,468)
(302,224)
735,491
1,412,134
Non-
interest
bearing
$
Total
$
-
613,554
13,946
662,649
613,554
676,595
-
(281,442)
(324,094)
(281,442)
332,112
71,059
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Fixed Interest maturing in
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over 1 to
5 years
More than
5 years
Net financial assets
13,946 (274,999)
(iii) Foreign exchange currency risk
The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods
and services in currencies other than the Group’s measurement currency.
There was no exposure to foreign currency risk at balance date.
(iv) Share market risk
The Company relies greatly on equity markets to raise capital for its magnesium project development
activities, and is thus exposed to equity market volatility.
When market conditions require prudent capital management, in consultation with its professional
advisers, the Group looks to alternative sources of funding, including debt financing and joint venture
participation.
(v) Credit risk
Credit risk arises principally when the other party to a financial instrument fails to discharge its obligations
in respect of that instrument.
The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum
exposure equal to the carrying amount of these instruments.
Trade and receivable balances are monitored on an ongoing basis with the Group’s exposure to bad debts
minimal. There was no exposure to trade receivable credit risk at balance date.
The Group does not have any material credit risk exposure to any single receivable or Group of receivables
under financial instruments entered into by the Group.
Other receivables comprise GST. Credit worthiness of debtors is undertaken when appropriate.
29
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(vi) Commodity risk
Commodity price risk arises when the fair value of future cash flows of a financial instrument will fluctuate
because of changes in commodity market prices.
The Group had no exposure to commodity price risk at balance date. The Group’s potential exposure to
commodity price risk will materialise in the event that development of the Group’s Latrobe Magnesium
Project proceeds.
(vii) Market risk
Market risk does not arise as the Group does not use interest bearing, tradeable or foreign currency
financial instruments.
As the financial assets held by the company as at 30 June 2017 were cash and cash equivalents and trade
and other receivables, and the value of these financial assets are not affected by the short-term movement
in interest rates, a market risk sensitivity has not been performed.
(viii) Equity price risk
Equity price risk arises from investments in equity securities and Latrobe Magnesium Limited’s issued
capital.
The Group had no exposure to investments in equity securities at balance date.
The capacity of the Company to raise capital from time to time may be influenced by either or both market
conditions and the price of the Company’s listed securities at that time.
d.
Fair value of financial assets and liabilities
The fair value of all monetary financial assets and financial liabilities of Latrobe Magnesium approximate
their carrying value.
There are no off-balance sheet financial asset and liabilities at year-end. All financial assets and liabilities
are denominated in Australian dollars.
NOTE 3: LOSS FROM ORDINARY ACTIVITIES
The following revenue and expense items are relevant in explaining the financial
performance for the period.
(i)
Revenue
Finance Income
Other Income
Research and development tax rebate
(ii)
Expenses
Depreciation
Research and evaluation expenses
Directors Fees
GROUP
2017
$
2016
$
19,675
11,115
932,118
560,453
951,793
571,568
1,021
1,404,772
428,682
1,051
675,614
400,635
30
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 4: INCOME TAX EXPENSE
GROUP
2017
$
2016
$
The prima facie tax on loss from ordinary activities before income tax is reconciled
to the income tax benefit as follows:
Loss from ordinary activities before income tax
1,819,585
1,087,123
Prima facie tax benefit on loss from ordinary activities before income tax at 27.5%
500,386
326,137
Permanent differences relating to R&D claim
Increase in income tax benefit due to timing differences
(332,938)
(205,499)
22,061
5,354
Tax losses not brought to account as future income tax benefit.
(189,509)
(125,992)
Income tax benefit attributable to loss from ordinary activities before
income tax
-
-
Net deferred tax asset not taken to account
The potential future income tax benefit arising from tax losses has not been taken to account because of the
absence of convincing evidence of the realisation of the benefit.
Benefit of tax losses carried forward:
Tax losses carried forward
Capital losses
GROUP
2017
$
2016
$
1,959,391
1,930,780
750,305
818,514
2,709,696
2,749,294
The deferred tax asset will only be released if:
i.
the Group derives future assessable income of a nature and an amount sufficient to enable the benefit to be
realised;
the Group continues to comply with the conditions for deductibility imposed by the law; and
ii.
iii. no changes in tax legislation adversely affect the Group in realising the benefit.
NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank
GROUP
2017
$
2016
$
1,131,913
13,946
31
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 6: TRADE AND OTHER RECEIVABLES
CURRENT
R&D tax concession
GST recoverable
Promissory Note
Prepayment
NON-CURRENT
Rent Bond held in bank deposit
GROUP
2017
$
2016
$
932,118
560,453
83,325
51,095
11,375
45,102
49,095
7,999
1,077,913
662,649
16,993
16,993
16,993
16,993
There are no balances within trade and other receivable that are impaired and are past due. It is expected these
balances will be received when due. Impaired assets are provided for in full.
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
Plant and equipment at cost
Accumulated depreciation
Total Property, Plant and Equipment
Movements in Carrying Amounts
GROUP
2017
$
7,565
2016
$
4,777
(2,407)
(2,824)
5,158
1,953
Between the beginning and the end of the current financial year, movements in the carrying amounts for each class
of property, plant and equipment are:
Balance at 1 July
Additions
Disposal
Depreciation expense
Carrying amount at 30 June
Plant and
Equipment
2017
Plant and
Equipment
2016
$
1,953
4,369
(143)
$
1,295
1,709
-
(1,021)
(1,051)
5,158
1,953
32
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 8: INTANGIBLE ASSETS
Acquired in-process research and development, at cost
Acquired during the year with the Ecoengineers Pty Ltd acquisition
Closing balance
Latrobe Magnesium Project based in the Latrobe Valley in Victoria. As the
project is not held ready for use, the Company is required to perform an annual
impairment test. The key assumptions underlying this impairment test have
been based on data provided in the Company’s preliminary feasibility study and
subsequent reports. The key assumptions are adjusted to incorporate risks
with a particular segment, and are summarised as follows:
•
budgeted cash flow period of 20 years, which approximates the project’s
life, based on current inputs;
•
initial production of 3,000 tonnes per annum increasing to 40,000 tonnes;
• magnesium metal price of US$3,346 per tonne is used which represents
the weighted average price between China and the United States;
GROUP
2017
$
5,684,000
1,080,000
2016
$
5,684,000
-
6,764,000
5,684,000
operating costs based upon third party consultant’s estimates;
• market information for forward exchange rates;
•
•
•
a pre-tax discount rate of 18%.
capital costs based upon the preliminary feasibility study; and
International Patent for the Hydromet Process.
Total Intangible Assets
84,180
70,617
6,848,180
5,754,617
NOTE 9: BORROWINGS
CURRENT
Secured Loan
GROUP
2017
$
2016
$
495,468
324,094
On 16 October 2015, the company raised a loan of $600,000 including capitalised interest for 12 months to progress
the Latrobe magnesium project. Repayment was to be made by R&D Tax Incentive refund. Under the loan
agreement, the lenders had the right to convert any part of their loan to shares at $0.015 per shares. On 16 October
2016, the total loan was repaid in full by conversion of loans to ordinary shares.
In December 2016, LMG secured a loan facility of up to $1,000,000 from Innovation Structured Finance Co LLC of
New York, USA to fund its feasibility study, detailed engineering and design work for the initial plant in the Latrobe
Valley, and provide working capital. The key terms are:
Loan drawdown ratio
Annual Interest Rate
Repayment
Maturity Date:
Maximum 85% of the estimated R&D tax rebate.
12.95%
Cash in full from the 2017 R&D tax rebate.
30 November 2017
First drawdown on 1 May 2017
Interest accrued at 30 June 2017
Loan as at 30 June 2017
$485,000
$10,468
------------
$495,468
=======
33
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 10: TRADE AND OTHER PAYABLES
CURRENT
Trade creditors and accrued expenses
302,234
281,442
GROUP
2017
$
2016
$
NOTE 11: ISSUED CAPITAL
(a) Ordinary Shares Issued and Fully Paid
Balance at beginning of reporting period
28,985,621 28,670,152
GROUP
2017
$
2016
$
09 Oct 2015
27 Apr 2016
6,540,300 shares issued at $0.010 to convert unlisted
convertible securities to shares
5,000,000 shares issued at $0.015 to convert unlisted
convertible securities to shares
08 & 23 Jun 2016 11,671,063 shares issued at $0.015 to convert unlisted
01 Jul 2016
14 Jul 2016
09 Aug 2016
09 Aug 2016
convertible securities to shares
30,000,000 shares issued at $0.036 to acquire the
remaining 50% of the Hydromet process
38,461,538 shares issued at $0.026 pursuant to a private
placement
Placement Fees
70,353,862 shares issued at $0.026 pursuant to a Share
Purchase Plant
6,497,585 shares issued at $0.015 to convert unlisted
convertible securities to ordinary shares
-
-
-
65,403
75,000
175,066
1,080,000
1,000,000
(60,000)
1,829,200
97,464
-
-
-
-
-
-
-
-
08 & 28 Sep 2016 10,000,000 shares issued at $0.015 to convert unlisted
150,000
17 Oct 2016
16 Dec 2016
convertible securities to ordinary shares
5,717,601 shares issued at $0.015 to convert unlisted
convertible securities to ordinary shares
5,000,000 shares issued at $0.015 pursuant to exercise of
unlisted options
85,764
75,000
(b) Shares on Issue
Balance at beginning of reporting period
Share on Issues:
•
•
•
•
•
•
•
•
•
•
09 October 2015
27 April 2016
08 & 27 June 2016
01 July 2016
14 July 2016
09 August 2016
09 August 2016
08 & 28 September 2016
16 October 2016
16 December 2016
Balance at end of reporting period
33,243,049 28,985,621
No.
1,090,568,232 1,067,356,869
No.
-
-
-
30,000,000
38,461,538
70,353,862
6,497,585
10,000,000
5,717,601
5,000,000
6,540,300
5,000,000
11,671,063
-
-
-
-
-
-
1,256,598,818 1,090,568,232
34
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Fully paid ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the
number of shares held.
At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
Options
The 5,000,000 unlisted options were exercised at $0.015 on 16 December 2016. At the date of this report, there
were no unissued shares under option.
Employee Share Plan Scheme
For information relating to the Latrobe Magnesium Limited Share Plan Acquisition Plan, refer to Note 20: Employee
Benefits. No shares were issued during the financial year.
Capital Management
The Group considers its capital to comprise its ordinary share capital and reserves.
In managing its capital, the Group’s primary objective as an explorer is to maintain a sufficient funding base to
enable the Group to meet its working capital and the development of its Latrobe magnesium project.
In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy,
new share issues, or consideration of debt, the Group considers not only its short-term position but also its long-
term operational and strategic objectives.
•
•
•
•
In July and August 2016, the Group raised a total of $2.8 million through private placement and share purchase
plan to fund the development of the Latrobe Magnesium Project and working capital.
In October 2016, the short-term loan of $600,000 was fully repaid by conversion to ordinary shares.
In October 2016, the company was able to utilise its R&D Tax Incentive refund of $560,453.
In December 2016, the Group secured a loan facility of up to $1 million including interest. As at balance date,
it had drawn $495,468 of this facility.
NOTE 12: CONTROLLED ENTITIES
Country of
Incorporation
Percentage Owned
2016
2017
Parent Entity:
Latrobe Magnesium Limited
Subsidiaries of Latrobe Magnesium Limited
Money Management WA Pty Ltd
Gold Mines of WA Pty Ltd
Magnesium Investments Pty Ltd
Ecoengineers Pty Ltd
Australia
Australia
Australia
Australia
Australia
NOTE 13: CAPITAL AND LEASING COMMITMENTS
Operating lease commitments
%
-
100
100
100
100
%
-
100
100
100
-
The Company’s office lease expired on 30 September 2016 and is currently on month to month basis. The
Company has been discussing with the property manager to renew the lease for a further 3 years at the current
rent. The monthly rent and outgoings of $4,992 is payable monthly in advance.
35
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Future non-cancellable operating lease rentals not provided for and payable:
Not later than one year
Later than one year and not later than five years
Later than five years
GROUP
2017
$
-
-
-
-
2016
$
14,976
-
-
14,976
The Company extended its option agreement to lease a property at 320 Tramway Road, Morwell, Victoria for a
further 4 months from May 2017. This agreement expires in September 2017. This site is intended for the
installation of the future magnesium plant and associated facilities.
NOTE 14: SEGMENT REPORTING
The Group has adopted AASB 8 Operating Segments with effect from 1 July 2009. AASB 8 requires operating
segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker in order to allocate resources to the segments and to assess their
performance. As a result, following the adoption of AASB 8, the Board of Directors believe there is only one
operating segment and this is reflected in managements reporting processes.
AASB 8 requires a management approach under which segment information is presented on the same bases as
that used for internal reporting purposes. The Group consist one business segment being the development of its
Latrobe magnesium project.
NOTE 15: REMUNERATION OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
Names and positions held of parent entity Directors at any time during the financial year are:
Jock Murray
David Paterson
Kevin Torpey
Philip Bruce
John Lee
Chairman - Non Executive
Chief Executive Officer
Director - Non Executive
Director - Non Executive
Director - Non Executive
Directors & Other Key
Management Personnel
Base Emolument
$
2017
2016
428,682
400,635
Superannuation
$
-
-
Total
$
Performance Related
%
428,682
400,635
-
-
Shareholdings
Number of shares held by Directors and Other Key Management Personnel of Parent Entity.
Directors & Other Key
Management Personnel
Balance at
beginning of
date of
appointment
Acquired under
Share Purchase Plan
for Shareholders
Net Change
Other
Acquired Under
Debt Conversion
to Equity
Balance at 30
June 2016
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
11,400,000
35,933,333
65,333,334
3,441,490
-
576,923
11,717,948
-
6,412,399
8,160,256 10,092,595
-
1,692,308
-
1,692,308
-
46,310,935
17,024,129
6,129,949
3,179,750
11,976,923
100,374,615
100,610,314
11,263,747
4,872,058
36
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Option holdings
There were no options over unissued shares in the Company held during the financial year by any Director or key
management personnel of the Company including their related entities.
NOTE 16: RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and conditions, no more favourable than
those available to other parties unless otherwise stated.
Transactions with and amounts receivable from and payable to Directors of related parties or their director related
entities which:
a.
b.
c.
(i)
(ii)
(iii)
(iv)
occur within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those which it is resonable to expect the entity would have adopted if dealing with the director
or director related entities at arms length in the same circumstances;
do not have the potential to adversely affect decisions about the allocations of scarce resources made by
users of the financial report, or the discharge of accountability by the director’s if disclosed in the financial
report only by general description; and
are trivial or domestic in nature must be excluded from the detailed disclosures required. Such transactions
and amounts receivable or payable shall be disclosed in the financial report by general description.
Other related entities
Director’s fees were paid to J S Murray Pty Ltd of which J S Murray is a
principal.
GROUP
2017
$
2016
$
60,000
60,000
Director’s fees were paid to Famallon Pty Ltd of which K A Torpey is a
principal.
21,804
35,427
Director’s fees were paid to Stockholders Relation Pty Ltd of which J R
Lee is a principal.
21,804
21,804
Administration and accounting fees were paid to Europacific Corporate
Advisory Pty Ltd of which D O Paterson is a principal.
-
12,000
NOTE 17: CASH FLOW INFORMATION
a.
Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of cash flows
is reconciled to items in the statement of financial position as follows:
Cash at Bank
1,131,913
13,946
b. Reconciliation of cash flow from operating activities to operating loss
GROUP
2017
$
2016
$
after income tax:
Net loss
Adjustment of non cash items:
Depreciation
Loss on disposal of assets
Interest on loan paid by shares
Changes in Assets and Liabilities:
(Increase)/Decrease in receivables and other assets
Increase/(Decrease) in trade and other payables
Net Cash used in Operating Activities
(1,819,585)
(1,087,123)
1,021
143
9,134
1,051
-
23,778
(419,633)
49,000
(147,847)
231,039
(2,179,920)
(979,102)
37
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
c. Acquisition and Disposal of Entities
On 1 July 2016, the Company acquired Ecoengineers Pty Ltd which owned 50% of the hydromet process. As
a result of this acquisition, the Company now owns 100% of the hydromet process.
There was no disposal of controlled entities during the 2017 or 2016 financial years.
d. Non-cash Financing and Investing Activities
2016-17
Fully Paid Ordinary Share
July 2016
August 2016
September 2016
October 2016
30,000,000
6,497,585
10,000,000
5,717,601
issued at $0.036 to acquire remaining 50% of the Hydromet process
issued at $0.015 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
2015-16
October 2015
April 2016
June 2016
6,540,300
5,000,000
11,671,063
issued at $0.010 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
issued at $0.015 to convert unlisted convertible securities to shares
NOTE 18: LOSS PER SHARE
Reconciliation of loss to net loss:
(a) Basic and diluted loss per share
cents per share
(0.15)
(0.10)
(b) Loss used in the calculation of EPS
$
(1,819,585)
(1,087,123)
(c) Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
1,240,381,833 1,073,347,734
GROUP
2017
2016
There were no unissued shares under option at 30 June 2017.
NOTE 19: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities for the year ended 30 June 2017 (2016 : Nil).
NOTE 20: EMPLOYEE BENEFITS
Employees Share Acquisition Plan
The Directors have approved the implementation of a Share Acquisition Plan.
The Plan provides for eligible participants to purchase shares in the Company tax effectively through salary
sacrifice. Shares will be acquired on the Australian Stock Exchange at prevailing market prices on or about the first
trading day following the normal monthly pay day. The shares including transaction costs will be met by the pre-
tax remuneration forgone by the Plan participant. Administration costs of the Plan will be met by the Company.
The minimum contribution under the Plan is $2,400 per annum. Participants can allocate up to 100% of their gross
remuneration.
During the period under review and the previous corresponding period, there were no shares purchased in
accordance with the employee share acquisition plan.
38
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 21: UNLISTED CONVERTIBLE SECURITIES
On 16 October 2015, the Company raised a debt facility of $600,000 including 12 months interest. On 20 October
2015, the Company issued up to 40,000,000 Unlisted Convertible Securities convertible at $0.015 at any time prior
to 16 October 2016 should the lenders wish to convert into ordinary shares. Under the loan agreement, adjustments
were made to interest owing on securities converted before 16 October 2016. The total debt was converted into
ordinary shares prior to loan expiry date of 16 October 2016 as below.
Shares
Shares
20 October 2015 Unlisted Convertible Securities issued
27 April 2016 Conversion @ $0.015 per shares
7 June 2016 Conversion @ $0.015 per shares
23 June 2016 Conversion @ $0.015 per shares
9 August 2016 Conversion @ $0.015 per shares
8 September 2016 Conversion @ $0.015 per shares
28 September 2016 Conversion @ $0.015 per shares
16 October 2016 Conversion @ $0.015 per shares
Total shares converted from debt
Interest reduction due to early conversion, hence reduction in shares issued
5,000,000
5,000,000
6,671,063
6,497,585
5,000,000
5,000,000
5,717,601
40,000,000
38,886,249
1,113,751
There are no unlisted convertible securities on issue as at 30 June 2017.
NOTE 22: UNLISTED OPTIONS
On 20 October 2015, the Company issued 5,000,000 Unlisted Options exercisable at $0.015 at any time prior to 16
December 2016 in respect of professional services provided for raising $600,000 loan under the terms of the loan
facility. These Options were fully exercised on 16 December 2016.
NOTE 23: EVENTS SUBSEQUENT TO REPORTING DATE
There are no significant events subsequent to reporting date which will affect the operations and state of affairs of
the Group.
NOTE 24: GOING CONCERN
Notwithstanding the loss for the year, negative cash flow from operations and historical financial performance, the
financial report has been prepared on a going concern basis. The assessment is based on a cash on hand balance
at balance date, the collection of trade and other receivables after year end and the funding alternatives available
to the Company.
The Directors have performed a review of the cash flow forecasts and have considered the cash flow needs of the
company and consolidated group, including the ability to reduce the level of cash expenditure if required to do so.
Directors have initiated discussions with a number of parties that have expressed interest in supporting the
Company with its working capital requirements. At this time no financial commitment is contracted but discussions
are continuing. The Company does have the ability to raise extra funds through a placement if required. However,
should sufficient and appropriate capital not be available to the company on a timely basis the Directors will require
the cessation of the magnesium project and a further reduction in expenditure on staff and Directors. The business
would, under this scenario, continue to operate on existing capital reserves.
The Company has prepared cash flow forecasts for this base case scenario and the Directors are therefore satisfied
that the Company will be able to continue to operate as a going concern on this basis.
39
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 25:
PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2017 the parent entity of the Group was Latrobe Magnesium
Limited.
Result of parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of the financial entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Total equity of the parent entity comprising of
Issued capital
Accumulated Losses
Total equity
Parent entity contingencies
The parent entity has no significant contingent liabilities.
2017
$
2016
$
(1,819,585)
-
(1,819,585)
(1,087,123)
-
(1,087,123)
2,209,826
6,931,670
9,141,496
797,692
-
797,692
676,595
5,834,901
6,511,496
605,536
-
605,536
8,343,804
5,905,960
33,243,049
(24,899,245)
28,985,621
(23,079,661)
8,343,804
5,905,960
Parent entity capital commitments for the acquisition of property, plant or equipment.
The parent entity has not entered any contractual commitments for the acquisition of property, plant or equipment.
Parent entity guarantees in respect of the debts of the subsidiaries
The parent entity has entered into deed of guarantee with the effect that its subsidiaries guarantee the secured loan
detailed in Note 9, to Latrobe Magnesium Limited.
NOTE 26: AUDITOR’S REMUNERATION
Details of the amounts paid or payable to Nexia Australia for services provided during the year are set out below.
Audit and Review of Financial Reports
Assurances and Taxation Services
GROUP
2017
$
32,000
10,000
42,000
2016
$
32,000
3,000
35,000
The Board of Directors ensure that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001.
40
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 27: NEW AND REVISED STANDARDS THAT ARE EFECTIVE FOR THESE FINANCIAL STATEMENTS
The discussion of the initial application of AASBs / IFRSs needs to be disclosed only in the first financial
statements after the new or revised requirements have been adopted by the entity
A number of new and revised standards became effective for the first time to annual periods beginning on or
after 1 July 2016. Information on the more significant standard(s) is presented below.
AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of
Interests in Joint Operations
The amendments to AASB 11 Joint Arrangements state that an acquirer of an interest in a joint operation in
which the activity of the joint operation constitutes a ‘business’, as defined in AASB 3 Business Combinations,
should:
• apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting
Standards except principles that conflict with the guidance of AASB 11. This requirement also applies to
the acquisition of additional interests in an existing joint operation that results in the acquirer retaining joint
control of the joint operation (note that this requirement applies to the additional interest only, i.e. the
existing interest is not re-measured) and to the formation of a joint operation when an existing business is
contributed to the joint operation by one of the parties that participate in the joint operation; and
• provide disclosures for business combinations as required by AASB 3 and other Australian Accounting
Standards.
AASB 2014-3 is applicable to annual reporting periods beginning on or after 1 January 2016. The
adoption of these amendments has not had a material impact on the Group.
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable
Methods of Depreciation and Amortisation
The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property,
plant and equipment. Additionally, the amendments provide guidance in the application of the diminishing
balance method for property, plant and equipment.
The amendments to AASB 138 present a rebuttable presumption that a revenue-based amortisation
method for intangible assets is inappropriate. This rebuttable presumption can be overcome (i.e. a
revenue-based amortisation method might be appropriate) only in two (2) limited circumstances:
•
the intangible asset is expressed as a measure of revenue, for example when the predominant limiting
factor inherent in an intangible asset is the achievement of a revenue threshold (for instance, the right
to operate a toll road could be based on a fixed total amount of revenue to be generated from
cumulative tolls charged); or
• when it can be demonstrated that revenue and the consumption of the economic benefits of the
intangible asset are highly correlated.
AASB 2014-4 is applicable to annual reporting periods beginning on or after 1 January 2016. The
adoption of these amendments has not had a material impact on the Group.
AASB 2014-6 Amendments to Australian Accounting Standards – Agriculture: Bearer Plants
AASB 2014-6 defines bearer plants and requires bearer plants to be accounted for as property, plant and
equipment within the scope of AASB 116 Property, Plant and Equipment instead of AASB 141 Agriculture.
The produce growing on bearer plants will remain within the scope of AASB 141.
AASB 2014-6 is applicable to annual reporting periods beginning on or after 1 January 2016. The
adoption of these amendments has not had a material impact on the Group.
AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate
Financial Statements
The amendments introduce the equity method of accounting as one of the options to account for an
entity’s investments in subsidiaries, joint ventures and associates in the entity’s separate financial
statements.
AASB 2014-9 is applicable to annual reporting periods beginning on or after 1 January 2016. The
adoption of these amendments has not had a material impact on the Group.
41
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
AA0SB 2015-1 Amendments to Australian Accounting Standards - Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle
The Annual Improvements to Australian Accounting Standards 2012-2014 Cycle include a number of amendments
to various AASB’s, which are summarised below.
The amendments to AASB 5 introduce specific guidance in AASB 5 for when an entity reclassifies an asset (or
disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments clarify that
such a change should be considered as a continuation of the original plan of disposal and hence requirements set
out in AASB 5 regarding the change of sale plan do not apply. The amendments also clarify the guidance for when
held for distribution accounting is discontinued.
The amendments to AASB 7 provide additional guidance to clarify whether a servicing contract is continuing
involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.
The amendments to AASB 119 clarify that the rate used to discount post-employment benefit obligations should be
determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The
assessment of the depth of a market for high quality corporate bonds should be at the currency level (i.e. the same
currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality
corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that
currency should be used instead.
The amendments apply to annual periods beginning on or after 1 January 2016. The adoption of these
amendments has not had a material impact on the Group.
AASB 2015-2 Amendments
Amendments to AASB 101
to Australian Accounting Standards – Disclosure
Initiative:
The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s
Disclosure Initiative project.
The amendments:
• clarify the materiality requirements in AASB 101, including an emphasis on the potentially detrimental effect
of obscuring useful information with immaterial information
• clarify that AASB 101’s specified line items in the statement(s) of profit or loss and other comprehensive
income and the statement of financial position can be disaggregated
• add requirements for how an entity should present subtotals in the statement(s) of profit and loss and
other comprehensive income and the statement of financial position
• clarify that entities have flexibility as to the order in which they present the notes, but also emphasise that
understandability and comparability should be considered by an entity when deciding that order
•
remove potentially unhelpful guidance in AASB 101 for identifying a significant accounting policy.
AASB 2015-2 is applicable to annual reporting periods beginning on or after 1 January 2016. The adoption
of these amendments has not had a material impact on the Group.
NOTE 28:
ACCOUNTING STANDARDS NOT YET EFFECTIVE AND NOT BEEN ADOPTED EARLY BY THE
GROUP
A number of Australian Accounting Standards and Interpretations are in issue but are not effective for the current
year end. The following existing group accounting policies will change on adoption of these pronouncements:
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to
AASB 107
Amends AASB 107 ‘Statement of Cashflows’ to require entities to provide disclosures that enable users of financial
statements to evaluate changes in liabilities arising from financing activities, including both changes arising from
cash flows and non-cash changes.
The amendments apply to annual periods beginning on or after 1 January 2017. The directors of the Company do
not anticipate that the application of these amendments to will have a material impact on the Group's consolidated
financial statements.
42
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
AASB 9 Financial Instruments, and the relevant amending standards
AASB 9 issued in December 2009 introduced new requirements for the classification and measurement of financial
assets. AASB 9 was subsequently amended in December 2010 to include requirements for the classification and
measurement of financial liabilities and for derecognition, and in December 2013 to include the new requirements
for general hedge accounting. Another revised version of AASB 9 was issued in December 2014 mainly to include
a) impairment requirements for financial assets and b) limited amendments to the classification and measurement
requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category
for certain simple debt instruments.
Key requirements of AASB 9:
• All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured
at amortised cost or fair value. Specifically, debt investments that are held within a business model whose
objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments
of principal and interest on the principal outstanding are generally measured at amortised cost at the end of
subsequent accounting periods. Debt instruments that are held within a business model whose objective is
achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms
that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments
are measured at their fair value at the end of subsequent accounting periods. In addition, under AASB 9,
entities may make an irrevocable election to present subsequent changes in the fair value of an equity
investment (that is not held for trading) in other comprehensive income, with only dividend income generally
recognised in profit or loss.
• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, AASB
9 requires that the amount of change in fair value of the financial liability that is attributable to changes in the
credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of
changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting
mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not
subsequently reclassified to profit or loss. Under AASB 139 ‘Financial Instruments: Recognition and
Measurement’, the entire amount of the change in the fair value of the financial liability designated as fair value
through profit or loss is presented in profit or loss.
•
•
In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model, as opposed
to an incurred credit loss model under AASB 139. The expected credit loss model requires an entity to account
for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes
in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred
before credit losses are recognised.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms
currently available in AASB 139. Under AASB 9, greater flexibility has been introduced to the types of
transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for
hedging instruments and the types of risk components of non-financial items that are eligible for hedge
accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an
‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required.
Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.
AASB 9 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate
that the application of AASB 9 in the future may have a material impact on amounts reported in respect of the
Group's financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of
the effect of AASB 9 until the Group undertakes a detailed review.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. AASB 15 will supersede the current revenue recognition guidance including AASB 118
‘Revenue,’ AASB 111 ‘Construction Contracts’ and the related interpretations when it becomes effective.
The core principle of AASB 15 is that an entity should recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue
recognition:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
43
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
• Step 4: Allocate the transaction price to the performance obligations in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’
of the goods or services underlying the particular performance obligation is transferred to the customer.
AASB 15 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate
that the application of AASB 15 in the future may have a material impact on the amounts reported and disclosures
made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable
estimate of the effect of AASB 15 until the Group performs a detailed review.
AASB 16
Leases
AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the
financial statements of both lessees and lessors.
The accounting model for lessees will require lessees to recognise all leases on balance sheet, except for short-
term leases and leases of low value assets.
AASB 16 applies to annual periods beginning on or after 1 January 2019. The directors of the Company anticipate
that the application of AASB 16 in the future may have a material impact on the amounts reported and disclosures
made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable
estimate of the effect of AASB 16 until the Group performs a detailed review.
44
Independent Auditor’s Report to the Directors of Latrobe Magnesium Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Latrobe Magnesium Limited (the Company and its subsidiaries (the
Group)), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the ‘auditor’s responsibilities for the audit of the financial report’ section
of our report. We are independent of the entity in accordance with 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Capitalised Development Costs ($6,764,000)
Our audit procedures included, amongst others:
Refer to note 8 (Intangible Assets) to the financial
report.
Included in the Group’s intangible assets are
capitalised development costs of $6,764,000 in
respect of the acquired in-process research and
to extracting
development cost
capitalised
from
magnesium
in
relation
fly ash. The
We assessed the development costs against
the requirements for capitalisation contained
in AASB 138 Intangible Assets.
We tested material additions acquired during
the year and checked
they were
appropriately allocated to the development
cost asset.
that
45
Key audit matter
How our audit addressed the key audit matter
development costs are considered to be a key audit
matter as they represent 74% of the total assets of
the Group and the determination of whether the
costs can be capitalised in accordance with AASB
138 - Intangible Assets and/or if an impairment
charge is necessary involves significant estimates
and judgments made by Management, including
estimating future cash flows.
We evaluated management's key assumptions
and estimates used to determine the
recoverable amount of the assets, including
those relating to magnesium pricing, input
costs, production volumes, growth
assumptions, capital expenditure, and
discount rates.
We performed sensitivity analysis in relation
to all the significant inputs to assess whether
the
capitalised
development costs exceeded its recoverable
amount.
carrying value of
the
We checked the mathematical accuracy of the
cash flow models.
Assessing whether appropriate disclosure
regarding significant areas of uncertainty has
been made in the financial report.
Other information
The directors are responsible for the other information. The other information comprises the information in
Latrobe Magnesium Limited’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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 the other
information we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility 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 entity’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the entity or to cease operations, or have
no realistic alternative but to do so.
46
Auditor’s responsibility for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at The Australian
Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 14 of the directors’ Report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of Latrobe Magnesium Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
Nexia Sydney Partnership
Joseph Santangelo
Partner
Dated: 1 September 2017
Sydney
47
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
ADDITIONAL INFORMATION
The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public
companies only.
SHAREHOLDING
a. Distribution of Shareholders as at 31 August 2017.
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Total holders
Units % of Issued Capital
198
294
218
723
798
85,971
964,134
1,858,437
33,524,605
1,220,165,672
0.01
0.08
0.15
2.67
97.09
Total
2,231
1,256,598,819
100.00
b. The number of shareholdings held in less than $500 unmarketable parcels is 1,067.
c. Substantial Shareholders
The names of the substantial shareholders listed in the holding Company’s register as at 31 August 2017
No. Shareholder Name
2
Famallon Pty Ltd
284 Famallon Pty Ltd
8
Famallon Pty Ltd
Total
1
Rimotran Pty Ltd
159 David Oliver Paterson
Total
d. Voting Rights
Number of Ordinary
Interest
Fully Paid Shares Held
(%)
80,194,358
750,000
19,915,956
100,860,314
98,957,340
1,417,275
100,374,615
6.38
0.06
1.59
8.03
7.88
0.11
7.99
The voting rights attached to each class of equity security are as follows:
Ordinary shares
(i)
(ii)
(iii)
At meetings of members each member is entitled to vote in person or by proxy or attorney or, in the
case of a member which is a body corporate, by representative duly authorized.
On a show of hands every member entitled to vote and be present in person or by proxy or attorney or
representative duly authorized shall have one (1) vote.
On a poll every member is entitled to vote and be present in person or by proxy or attorney or
representative duly authorized shall have one (1) vote for each fully paid share of which they are a
holder.
48
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
ADDITIONAL INFORMATION
e. Twenty largest shareholders as at 31 August 2017:
Rank Top Shareholders – Ungrouped
Number of Ordinary Fully
Paid Shares Held
Holding
%
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Rimotran Pty Ltd
Famallon Pty Ltd
CSH Engineering Pty Ltd
98,957,340
80,194,358
47,283,873
Gibbs Plumbing Services Pty Ltd
36,000,000
S A Short Pty Ltd
JJ Wolfe Holdings Pty Limited
29,000,000
25,020,969
Arco Four Investments Pty Ltd
21,650,000
Famallon Pty Ltd
19,915,956
7.88
6.38
3.76
2.86
2.31
1.99
1.72
1.58
Mr Brett Roy Morrison + Mrs Donna-Maree Earle Morrison
18,020,283
1.43
Ableside Pty Ltd
Stefan Group Pty Ltd
Murraysetter Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mrs Robyn Ann Lys
Lyndcote Super Pty Ltd
Mrs Carmela Adele Murray
Diazill Pty Limited
15,647,230
14,660,794
11,976,923
11,559,925
11,559,096
10,961,538
10,580,777
10,559,497
1.25
1.17
0.95
0.92
0.92
0.87
0.84
0.84
Mr Neville Masterton Hall + Mrs Gwenda Aileen Hall
10,038,445
0.80
Mr Leslie Robert Knight + Mrs Heather Margery Knight + Mr Timothy
Paul Knight
10,000,000
0.80
20.
Wiljoeana Pty Ltd
9,063,333
0.72
502,650,337
40.00
49