Magnes um
2018 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 ............................................................................................... 44
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
Registered Office and
Principal Place of Business
Suite 307
16-20 Barrack Street
Sydney NSW 2000
Telephone: (02) 8097 0250
Facsimile: (02) 9279 3854
Auditors
Nexia Sydney Partnership
Level 16
1 Market Street
Sydney NSW 2000
Chief Executive Officer
David Paterson
Secretary
John Lee
Bankers
National Australia Bank Limited
Mezzanine Level
255 George Street
Sydney NSW 2000
Solicitors
Minter Ellison
Level 19
88 Philip Street
Sydney NSW 2000
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Stock Exchange
Australian Securities Exchange
20 Bridge Street
Sydney NSW 2000
Telephone: 1 300 850 505
ASX CODE: LMG
www.latrobemagnesium.com
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:
signing of term sheet with RWE Power to develop new German magnesium plant;
• designing and commissioning of the fast cycle retort furnace (FCR).
•
• granting of the European Union patent;
•
• achieving positive results on processing Yallourn fly ash.
signing of MoU with EnergyAustralia Yallourn for fly ash supply; and
2. Magnesium Markets
In the calendar year ended 31 December 2017, the primary world production of magnesium increased
to 974,000 tonnes. China’s estimated primary production for the calendar year 2017 was approximately
86% 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-18
2,550
30-Jun-17
2,175
Owing to United States anti-dumping duties, the annual delivered price for 2017 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.
Fast Cycle Reduction Furnace
LMG and its engineers have designed a new vertical retort and furnace system to improve the capital
and operating cost of the magnesium reduction step.
A prototype retort, furnace and all necessary ancillary equipment has been designed, built and installed
at a CSIRO facility in Melbourne. Commissioning of the FCR commenced in December last year.
Problems included a leak in the vacuum system and some damage (cracking) and corrosion to the
internal silicon carbide lining of the retort.
4
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
Developments have resolved issues involving the cracking and corrosion related to the silicon carbide
(SiC) lining and the operational performance of the FCR condenser train that collects liquid magnesium
and sodium.
Since the beginning of May the FCR furnace has been heated up seven times, nearly on a weekly basis.
These runs were mainly to optimise the operating performance of the furnace and the condenser train.
Simultaneously LMG also investigated the performance of SiC and alumina tiles lining the retort. LMG
built a small retort approximately 0.6m high for this testing.
In the case of the SiC lining, the retort was heated up to 1250°C and vacuum was applied. It was then
allowed to cool. Upon opening the retort, extensive corrosion was apparent owing to the SiC liners.
In addition, 92% and 99% alumina tiles (150mm*100mm*12mm) were tested under various conditions
with both types of alumina tiles performing well without cracking or corrosion issues.
A replacement retort has been designed using alumina tiles and has been built in July 2018. Some
parts of the existing retort were reused. By the end of August the rebuilt retort was inserted into the
FCR and the hot commissioning commenced with magnesia briquettes. Following the successful
commissioning a number of dolime runs have been conducted in September.
The condenser train in the FCR has been designed to capture liquid magnesium and sodium. Capturing
the magnesium in a liquid form and transporting it to the refinery section of the plant saves energy
otherwise required to re-smelt solid magnesium crowns, and reduces the size and capital cost of the
refinery.
The desired operating conditions for the metal vapour passing through the condenser train are
summarised:
• Furnace is heated to 1180°C
• Magnesium begins condensing at 720-730°C, mainly to a solid at >650°C
• Operating the magnesium portion of the condenser train down to 460°C, only 0.2% of the
magnesium remains in the vapour
• Sodium begins condensing at 430-445°C
• Sodium is all condensed by 190°C
• Potassium begins to condense at 250°C
• Still a tiny amount of potassium left at 100°C, at the end of the condenser train
Recent FCR test runs have achieved these desired temperature levels through the condenser train.
A large sample of RWE Power’s fly ash has been prepared and is ready to be processed through the
FCR to produce magnesium and supplementary cementitious material. This activity is expected to take
place in September and October 2018.
LMG believes its FCR will be superior to the horizontal retorts currently used for the Pidgeon Process
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 use of better quality material in the retort should greatly increase retort life
• The FCR offers a competitive advantage over other vertical retort designs. These benefits should
produce reduced capital and operating costs for the project.
5
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
4.
Hambach Project
On 18 December 2017, LMG announced that they had signed a term sheet with RWE Power AG that
detailed how both parties will proceed with the development of a new Germany-based magnesium plant.
The up to 30,000 tonnes per annum plant is unique as the magnesium will come from the brown coal
fly ash from coal mined at RWE’s Hambach mine and processed through their supercritical brown coal
power station near Cologne, Germany.
Latrobe Magnesium’s project is a world-first in developing a magnesium production plant from brown
coal fly ash in Victoria's Latrobe Valley using its patented hydromet extraction process and its own newly
developed fast cycle vertical retort furnace (FCR).
The project involves four stages of development:
• Conduct the vertical retort test work using the RWE fly ash
• Completion of a feasibility study
• Completion of engineering, procurement and permitting
• Construction and commissioning.
From June to October 2017, LMG conducted a number of successful small-scale tests using its unique
hydromet process on the RWE fly ash producing magnesium and supplementary cementitious material
(SCM). From this work, LMG was able to ascertain that the RWE fly ash delivered the best economic
outcome of any of the fly ashes tested by LMG to date. This result was achieved mainly due to:
•
•
•
the treatment of dry precipitator ash versus ash dam material thereby requiring less energy;
the elimination of dolomite as a consumable thereby reducing process costs; and
the lower cost of energy and labour in Germany as compared to the Latrobe Valley.
LMG has recently produced a large scale beneficiated sample of RWE fly ash to process through its
FCR, currently being commissioned at CSIRO in Melbourne. The furnaces are expected to complete
the processing of this RWE fly ash in October 2018.
From the FCR test work, LMG will produce a SCM sample to send to Germany for testing. It will then
collect the necessary German site specific information so that it can complete a feasibility study on this
project. This is expected to take up to 6 months.
Europe imports over 160,000 tonnes of magnesium per annum. There is currently no producer in the
EU and magnesium metal has recently been listed among the most critical raw materials in the EU’s list
of 27 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 about 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 45 million tonnes per annum in the two Latrobe Valley
mines. It operates about 10,000 MW of lignite capacity in the Rhenish lignite area with about 10,000
employees. In addition, RWE Power belongs to the RWE Power Group which is focussed on electricity
in Germany, the Netherlands and UK as well as energy trading in its subsidiary RWE Supply and
Trading.
Since 2000 RWE Power has invested more than €4 billion into the only brown coal super critical power
station in Neurath and Niederaubem, with highest efficiency for lignite power stations in the world
(greater than 43%) to ensure stable and secure power supply for the German electricity grid.
6
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
5.
Latrobe Valley - Yallourn Project
On 16 January 2018, LMG and Energy Australia Yallourn Pty Ltd signed a Memorandum of
Understanding for Yallourn power station to supply its fly ash to LMG’s proposed 3,000 tonnes per
annum magnesium plant in the Latrobe Valley. The MoU allows for the expansion of the plant to 40,000
tonnes per annum.
The project involves four stages of development:
• Conduct testing of Yallourn fly ash using LMG hydromet process and Monash University’s ash
leaching and precipitation process
• Complete a feasibility study
• Construct a 3,000tpa magnesium plant
• Expand to a 40,000tpa magnesium plant.
Since January 2018 LMG has been working with Monash University, which has been performing
laboratory scale tests on the Yallourn fly ash. This test work has shown that it can breakdown the
magnesioferrite, the most abundant mineral in the Yallourn fly ash and extract the magnesium oxide
(MgO), calcium oxide and iron oxide separately. The recovery rates achieved for each material is over
90%.
As a feed stock for LMG’s fast cycle retort, the MgO grade is some 25% higher that beneficiated fly ash
produced by alternative methods. This result is achieved mainly by the effective reduction in the high
iron content in the Yallourn fly ash as well as the specific targeting of the minerals by this process.
This Monash process will replace the iron removal stage in LMG’s normal hydrometallurgical process.
LMG owns the intellectual property developed during this project with Monash University. Monash
University owns the background IP.
There is some follow-up test work required to verify a few assumptions and conditions. Once this work
has been successfully completed, LMG will produce a large scale beneficiated sample of Yallourn fly
ash to process through its FCR. From the FCR test work, LMG will then be in a position to complete a
feasibility study using Yallourn fly ash.
6.
Feasibility Study
With the successful completion of the FCR test work, ash test work and receipt of site specific
information, LMG’s engineers will be in the position to finalise LMG’s bankable feasibility study on its
two projects.
7.
International Patents for the Hydromet Process
This unique Hydromet 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 result is an efficient and novel means of producing magnesium and supplementary cementitious
material production extracted from voluminous tailings of industrial fly ash from some of the world’s
brown coal electricity generators.
The process is owned 100% by LMG. A patent for all countries in the European Union was granted on
21 March 2018 and the national recordal procedure has been completed in Germany, Poland and Czech
Republic. The Australian, USA, China and Indonesian patents have already been granted for 20 years
starting from August 2011.
7
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
Patent applications were lodged in March 2013 for India. The patent for this area is expected to be
granted later this year.
The patent application in each of these countries is summarised in the table below:
Country/Region
Number
Status
Date of grant
Australia
2011293107
Granted
United States
9139892 (13/818788) Granted
China
Indonesia
Europe
India
201180040099.2
W00201300844
11819208.7
Granted
Granted
Granted
26 September 2013
22 September 2015
23 September 2015
22 August 2016
21 March 2018
577/MUMNP2013
Examination requested
Estimated end 2018
8.
Supplementary Cementitious Material
There is a major shortage of fly ash in Victoria. Victorian users import up to 300,000 tonnes per annum
from South Australia, New South Wales and Queensland and some users are now 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.
9.
Loan Funding
In October 2017, LMG executed a $660,000 lending facility with RnD Funding Pty Ltd for a period of 12
months. The loan was repaid from its Research and Development rebate which it has received from
the Commonwealth Government based upon LMG’s research and development expenditure for the year
ending 30 June 2018.
RnD Funding Pty Ltd has offered the Company a similar R&D facility of $650,000 for the 2019 year
which the company has executed.
RnD Funding Pty Ltd has also offered the Company an additional project finance facility of $1.5 million.
These two facilities will be sufficient to finance the Company’s operation for the next twelve months.
The Company has yet to complete the project finance facility agreement.
In April 2018, a standby facility for $200,000 was offered by two directors of the Company and a loan
agreement was executed, to assist with the funding of the commissioning of the fast cycle reduction
furnace.
10.
Capital Issue
During the year, the Directors and the Project Director have provided loans to the Company which
equated to their fees. The Directors and Project Director have agreed to convert these loans into
ordinary shares at the volume weighted average price of the first five trading days of October 2018 being
approximately some 7 weeks prior to the Company’s AGM. The conversion of these loans will be subject
to a resolution being passed by LMG’s shareholders at the AGM.
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 2018 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 design and commissioning of the fast cycle vertical retort furnace;
•
• granting of patent for all countries of the European union;
•
•
signing a term sheet with RWE Power for the development of a magnesium plant in Germany;
signing a MoU with EnergyAustralia Yallourn for fly ash supply to Latrobe Valley magnesium plant;
and
• achieving positive test result of the Yallourn fly ash.
OPERATING RESULTS
The consolidated net loss of the Group after providing for income tax amounted to $1,729,833 compared
to a net loss of $1,819,585 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 design and
commissioning of the fast cycle vertical retort furnace.
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
There is no significant change in the state of affairs of the Group during the financial year. The
contributed equity remains at $33,243,049.
MATTERS SUBSEQUENT TO BALANCE DATE
There is no matter or circumstance that has arisen since 30 June 2018 that has significantly affected or
may significantly affect:
(a)
(b)
(c)
the operations, in financial years subsequent to 30 June 2018, of the Group;
the results of those operations; or
the state of affairs, in financial years subsequent to 30 June 2018, of the Group.
On 14 September 2018, the financial report was authorised to be signed by a resolution of Directors.
9
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
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 AO – Non-Executive Chairman
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. 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.
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 ten-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.
Date of appointment as Director
1 May 2015
Other Current Public Company
Directorships
Former Public Company
Directorships in Last 3 Years
None
None
Special Responsibilities
Chairman of the Board of Directors
Interests in Securities
11,976,923 ordinary shares in Latrobe Magnesium Limited, which
are registered in the name of MurraySetter Pty Limited as trustee
for the MurraySetter Trust.
David Oliver Paterson – Chief Executive Officer
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.
Date of appointment as Director
23 August 2002
Other Current Public Company
Directorships
Former Public Company
Directorships in Last 3 Years
Special Responsibilities
Interests in Securities
None
None
Chief Executive Officer
Member of Audit Committee
100,374,615 ordinary shares in Latrobe Magnesium Limited, of
which 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
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. 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.
Date of appointment as Director
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
100,860,314 ordinary shares in Latrobe Magnesium Limited,
which 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
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.
Date of appointment as Director
4 September 2003
Other Current Public Company
Directorships
Director of Bassari Resources Limited
Former Public Company
Directorships in Last 3 Years
Managing Director / Chairman of Hill End Gold Ltd
Brimstone Resources Limited.
11
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
Special Responsibilities
None
Interests in Securities
11,263,747 ordinary shares in Latrobe Magnesium Limited, of
which 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
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.
Date of appointment as Director
10 December 2010
Other Current Public Company
Directorships
Former Public Company
Directorships in Last 3 Years
None
None
Special Responsibilities
Chairman of Audit Committee
Interests in Securities
4,872,058 ordinary shares in Latrobe Magnesium Limited, which
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 2018 and the number of meetings attended by each Director was:
Director
Attended
Held Whilst in Office
Attended
Held Whilst in Office
Directors’ Meetings
Audit Committee Meetings
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
7
7
3
5
7
7
7
7
7
7
-
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 J S Murray is the Director retiring by rotation at the next Annual General Meeting of the Company.
Mr Murray 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 10.
12
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
Transparency
Appropriateness for level of operations
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.
2018
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
2017
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Base
Emoluments
$
60,000
311,604
21,804
21,804
21,804
437,016
Base
Emoluments
$
60,000
303,270
21,804
21,804
21,804
428,682
Equity Options
Total
$
-
-
-
-
-
-
$
60,000
311,604
21,804
21,804
21,804
437,016
Equity Options
Total
$
-
-
-
-
-
-
$
60,000
303,270
21,804
21,804
21,804
428,682
Performance
Related
%
-
-
-
-
-
-
Performance
Related
%
-
-
-
-
-
-
13
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
There are no additional executives employed by Latrobe Magnesium Limited other than those already
disclosed.
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. 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
1 July 2017
Acquired under
Share Purchase
Plan for
Shareholders
Acquired
Under Debt
Conversion to
Equity
J S Murray
D O Paterson
K A Torpey*
P F Bruce
J R Lee
11,976,923
100,374,615
100,610,314
11,263,747
4,872,058
-
-
-
-
-
-
-
-
-
-
Net
Change
Other
Balance at
30 June 2018
-
11,976,923
- 100,374,615
250,000 100,860,314
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.
Balance - No options outstanding as at 30 June 2018
END OF AUDITED REMUNERATION REPORT
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.
14
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
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
10,960
---------
42,960
=====
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
14 September 2018
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 2018, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(a)
(b)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Sydney Partnership
Joseph Santangelo
Partner
Dated: 14 September 2018
Sydney
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 2018 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 2018, 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
14 September 2018
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 2018
Revenue
Finance income
Other income
Expenses
Administration expenses
Finance cost
Research and evaluation expenses
Total expenses
Income tax expense
Note
GROUP
2018
$
2017
$
6,219
19,675
996,194
932,118
3
1,002,413
951,793
(996,027)
(1,285,919)
(92,913)
(80,687)
(1,643,306)
(1,404,772)
(2,732,246)
(2,771,378)
-
-
3
4
Loss attributable to members of the parent entity
(1,729,833)
(1,819,585)
Other Comprehensive Income
Other Comprehensive Income for the year
-
-
Total Comprehensive Income
(1,729,833)
(1,819,585)
Basic and diluted loss per share (cents per share)
18
(0.14)
(0.15)
GROUP
Note
2018
2017
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
For the year ended 30 June 2018
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total Current Assets
NON-CURRENT ASSETS
Trade and other receivables
Plant and equipment
Intangible assets
Total Non-Current Assets
Note
GROUP
2018
$
2017
$
5
6
6
7
8
51,087
1,131,913
1,080,168
1,077,913
1,131,255
2,209,826
16,993
3,492
16,993
5,158
6,869,467
6,848,180
6,889,952
6,870,331
TOTAL ASSETS
8,021,207
9,080,157
CURRENT LIABILITIES
Borrowings
Trade and other payables
Total Current Liabilities
9
10
725,887
742,688
495,468
302,224
1,468,575
797.692
TOTAL LIABILITIES
1,468,575
797,692
NET ASSETS
EQUITY
Issued capital
Accumulated losses
TOTAL EQUITY
6,552,632
8,282,465
11
33,243,049
33,243,049
(26,690,417)
(24,960,584)
6,552,632
8,282,465
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 2018
GROUP
Note
Issued
Capital
Accumulated
Losses
Total
$
$
$
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 1 July 2017
33,243,049
(24,960,584)
8,282,465
Total comprehensive income
Shares issued during the period
11
-
-
(1,729,833)
(1,729,833)
-
-
Balance at 30 June 2018
33,243,049
(26,690,417)
6,552,632
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 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from operations
Payments to suppliers and employees
Interest Paid
Interest received
GROUP
2018
$
2017
$
Note
932,118
560,453
(2,136,101)
(2,758,048)
(37,494)
-
4,137
17,675
Net cash used in operating activities
16b
(1,237,340)
(2,179,920)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment
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
Net cash from financing activities
(214)
-
(18,272)
(31,313)
(18,486)
(31,313)
(485,000)
-
660,000
485,000
-
-
2,904,200
(60,000)
175,000
3,329,200
Net increase / (decrease) in cash and cash equivalent held
(1,080,826)
1,117,967
Cash and cash equivalent at beginning of the financial year
1,131,913
13,946
Cash and cash equivalent at end of financial year
16a
51,087
1,131,913
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 2018
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 2018, 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.
22
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
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.
23
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
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.
24
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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.
(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.
25
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
Research and development tax rebate
Research and development tax rebate is recognised when it is received or when the right to
receive payment is established.
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.
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.
26
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
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.
27
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 2018 because:
1.
the Company's internal valuations indicate that the recoverable amounts of the assets are
greater than the book value of the assets;
2.
the magnesium price supports this valuation; and
3.
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:
• 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;
• magnesium metal price of US$3,466 per tonne is used which represents the current weighted
average price between China and the United States.
• market information for forward exchange rates;
• operating costs based upon third party consultant’s estimates;
•
capital costs based upon the preliminary feasibility study; and
• a pre-tax discount rate of 15%.
28
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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:
Cash
Trade and other receivables
Inter Company balances
(i)
(ii)
(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.
29
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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 2018 and 30 June 2017 is set out in
the following tables:
CONSOLIDATED
Year ended
30 June 2018
Weighted
Average
Interest Rate
Floating
Interest
Rate
Fixed Interest maturing in
More
Over
than 5
1 to 5
years
years
1 year or
less
Non-
interest
bearing
$
$
$
$
$
Total
$
Net financial assets
50,043 (672,710)
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
%
1
4
12
Year ended
30 June 2017
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
%
1
4
13
50,043
-
-
53,177
50,043
53,177
-
-
(725,887)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,044
51,087
1,026,992 1,080,169
1,028,036 1,131,256
-
(725,887)
(742,688) (742,688)
285,348 (337,319)
Weighted
Average
Interest Rate
Floating
Interest
Rate
Fixed Interest maturing in
More
Over
than 5
1 to 5
years
years
1 year or
less
Non-
interest
bearing
$
$
$
$
$
Total
$
1,121,016
-
-
51,095
1,121,016
51,095
-
-
(495,468)
-
-
-
-
-
-
-
-
-
-
-
-
-
10,897 1,131,913
1,026,818 1,077,913
1,037,715 2,209,826
-
(495,468)
(302,224) (302,224)
735,491 1,412,134
Net financial assets
1,121,016 (444,373)
(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.
30
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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.
(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 2018 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.
31
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 3: LOSS FROM ORDINARY ACTIVITIES
The following revenue and expense items are relevant in explaining the
financial performance for the period.
(i)
(ii)
Revenue
Finance Income
Other Income
Research and development tax rebate
Expenses
Depreciation
Research and evaluation expenses
Directors and CEO fees
NOTE 4:
INCOME TAX EXPENSE
GROUP
2018
$
2017
$
6,219
19,675
996,194
932,118
1,002,413
951,793
1,880
1,643,306
437,016
1,021
1,404,772
428,682
GROUP
2018
$
2017
$
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
1,729,833
1,819,585
Prima facie tax benefit on loss from ordinary activities before income tax
at 27.5%
Permanent differences relating to R&D claim
Increase in income tax benefit due to timing differences
475,704
500,386
(355,824)
(332,938)
6,054
22,061
Tax losses not brought to account as future income tax benefit.
(125,934)
(189,509)
Income tax benefit attributable to loss from ordinary activities before
income tax
-
-
32
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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
2018
$
2017
$
2,085,325
750,305
1,959,391
750,305
2,835,629
2,709,696
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
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
2018
2017
$
$
51,087
1,131,913
GROUP
2018
$
2017
$
996,194
19,131
53,176
11,667
932,118
83,325
51,095
11,375
1,080,168
1,077,913
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.
33
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 7: PLANT AND EQUIPMENT
Plant and equipment at cost
Accumulated depreciation
Total Plant and Equipment
Movements in Carrying Amounts
GROUP
2018
$
7,779
2017
$
7,565
(4,287)
(2,407)
3,492
5,158
Between the beginning and the end of the current financial year, movements in the carrying amounts
for each class of plant and equipment are:
Balance at 1 July
Additions
Disposal
Depreciation expense
Carrying amount at 30 June
NOTE 8:
INTANGIBLE ASSETS
Acquired in-process research and development, at cost
Plant and
Equipment
2018
Plant and
Equipment
2017
$
5,158
214
-
$
1,953
4,369
(143)
(1,880)
(1,021)
3,492
5,158
GROUP
2018
$
5,684,000
2017
$
5,684,000
Acquired in 2017 with the Ecoengineers Pty Ltd acquisition
1,080,000
1,080,000
Closing balance
International Patent for the Hydromet Process.
Total Intangible Assets
6,764,000
6,764,000
105,467
84,180
6,869,467
6,848,180
Latrobe Magnesium Project is 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;
34
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
• magnesium metal price of US$3,466 per tonne is used which represents the weighted average price
between China and the United States;
• market information for forward exchange rates;
•
•
•
operating costs based upon third party consultant’s estimates;
capital costs based upon the preliminary feasibility study; and
a pre-tax discount rate of 15%.
NOTE 9: BORROWINGS
CURRENT
Secured Loan
GROUP
2018
$
2017
$
725,887
495,468
The loan of $495,468 + $27,026 interest = $522,494 was repaid in October 2017 from receipt of 2016-
17 R&D tax incentive payment of $932,118.
In November 2017, the Company obtained a new loan facility of $660,000 from RnD Funding Pty Ltd
secured by 2017-18 R&D tax incentive payment, keys terms are:
Interest Rate:
Maturity Date:
Repayment:
Principal Loan
Establishment fee
Interest accrued at 30-Jun-18
Loan as at 30 June 2018
1% per month
31 October 2018
Cash in full from the 2018 R&D tax rebate
$660,000
$ 19,800
$ 46,087
-------------
$725,887
=======
NOTE 10: TRADE AND OTHER PAYABLES
CURRENT
Trade creditors and accrued expenses
Loan from Directors and Consultant
Total
GROUP
2018
$
2017
$
547,016
302,234
195,672
-
742,688
302,234
35
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 11:
ISSUED CAPITAL
(a) Ordinary Shares Issued and Fully Paid
Balance at beginning of reporting period
01 Jul 2016
14 Jul 2016
09 Aug 2016
09 Aug 2016
08 & 28 Sep
2016
17 Oct 2016
16 Dec 2016
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
10,000,000 shares issued at $0.015 to convert
unlisted 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
(b) Shares on Issue
Balance at beginning of reporting period
Share on Issues:
•
01 July 2016
•
14 July 2016
•
09 August 2016
•
09 August 2016
•
08 & 28 September 2016
•
16 October 2016
•
16 December 2016
GROUP
2018
$
2017
$
33,243,049 28,985,621
1,080,000
-
-
-
-
-
-
-
-
1,000,000
(60,000)
1,829,200
97,464
150,000
85,764
75,000
33,243,049 33,243,049
No.
No.
1,256,598,819 1,090,568,232
-
-
-
-
-
-
-
30,000,000
38,461,538
70,353,862
6,497,585
10,000,000
5,717,602
5,000,000
Balance at end of reporting period
1,256,598,819 1,256,598,819
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
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.
36
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
Capital Management
The Group considers its capital to comprise its ordinary share capital and reserves.
In managing its capital, the Group’s primary objective 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 October 2017, the Group secured a loan facility of $660,000. An amount of $725,887 is payable
as at 30 June 2018.
In April 2018, the Group secured a loan facility of $200,000 from two Directors of the Group, which
was not drawn down as at 30 June 2018.
NOTE 12: CONTROLLED ENTITIES
Country of
Incorporation
Percentage Owned
2017
2018
Parent Entity:
Latrobe Magnesium Limited
Australia
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
NOTE 13: CAPITAL AND LEASING COMMITMENTS
Operating lease commitments
%
-
100
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.
Discussion with the property manager to renew the lease for a further 3 years at the current rent has
been delayed due to a change in the management of the property. The monthly rent and outgoings of
$4,992 is payable monthly in advance.
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
2018
$
-
-
-
-
2017
$
-
-
-
-
The Company extended its option agreement to lease a property at 320 Tramway Road, Morwell,
Victoria for one year from July 2018 to July 2019. This agreement is being prepared by the landlord’s
lawyer. This site is intended for the installation of the future magnesium plant and associated facilities.
37
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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: 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)
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
GROUP
2018
$
2017
$
Director’s fees were paid to J S Murray Pty Ltd of which J S
Murray is a principal.
60,000
60,000
Director’s fees were paid to Famallon Pty Ltd of which K A Torpey
is a principal.
21,804
21,804
(iii)
Director’s fees were paid to Stockholders Relation Pty Ltd of
which J R Lee is a principal.
21,804
21,804
38
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 16: CASH FLOW INFORMATION
GROUP
2018
$
2017
$
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
51,087
1,131,913
b. Reconciliation of cash flow from operating activities to operating
loss 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
(1,729,833)
(1,819,585)
1,880
-
-
1,021
143
9,134
(2,255)
492,868
(419,633)
49,000
Net Cash used in Operating Activities
(1,237,340)
(2,179,920)
c. Acquisition and Disposal of Entities
There was no acquisition of controlled entities during 2018 financial year. During 2017 financial
year, the Company acquired Ecoengineers Pty Ltd which owned 50% of the hydromet process. As
a result of this acquisition, the Company owns 100% of the hydromet process.
There was no disposal of controlled entities during the 2018 or 2017 financial years.
d. Non-cash Financing and Investing Activities
2017-18
Fully Paid Ordinary Share
None
2016-17
Fully Paid Ordinary Share
July 2016
30,000,000 issued at $0.036 to acquire remaining 50% of the Hydromet process
6,497,585 issued at $0.015 to convert unlisted convertible securities to shares
August 2016
September 2016 10,000,000 issued at $0.015 to convert unlisted convertible securities to shares
5,717,601 issued at $0.015 to convert unlisted convertible securities to shares
October 2016
39
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 17: LOSS PER SHARE
GROUP
2018
2017
Reconciliation of loss to net loss:
(a) Basic and diluted loss per share
cents per share
(0.14)
(0.15)
(b) Loss used in the calculation of EPS
$
(1,729,833)
(1,819,585)
(c) Weighted average number of ordinary shares
outstanding during the year used in calculation of
basic EPS
1,256,598,819 1,240,381,833
There were no unissued shares under option at 30 June 2018.
NOTE 18: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities for the year ended 30 June 2018 (2017: Nil).
NOTE 19: 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.
NOTE 20: 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 21: 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, the conversion of the Directors loans to equity and the funding alternatives available to the
Company.
40
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
The Company does have the ability to raise extra funds through a placement if required or debt funds.
The Directors have entered into binding documents showing that they will support the Company with an
equity and debt raising should it be required. However, should sufficient and appropriate capital not be
available to the Company on a timely basis the Directors may cause the cessation of the magnesium
project resulting in a reduction in expenditure on the project, staff and Directors. The business would,
under this scenario, continue to operate on existing capital reserves with further support from the
Directors.
The Company has prepared cash flow forecasts for this base case scenario. The Company is therefore
satisfied that it will be able to continue to operate as a going concern on this basis.
NOTE 22: PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2018 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.
2018
$
2017
$
(1,729,833)
-
(1,819,585)
-
(1,729,833)
(1,819,585)
1,131,256
6,951,290
8,082,546
1,468,575
-
1,468,575
2,209,826
6,931,670
9,141,496
797,692
-
797,692
6,613,971
8,343,804
33,243,049
(26,629,078)
33,243,049
(24,899,245)
6,613,971
8,343,804
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.
41
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 23: 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
2018
$
32,000
10,960
2017
$
32,000
10,000
42,960
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.
NOTE 24: NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY
OR EARLY ADOPTED
Australian Accounting Standards and Interpretations that have recently been issued or amended but
are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting
period ended 30 June 2018. The consolidated entity's assessment of the impact of these new or
amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set
out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial
Instruments: Recognition and Measurement'.
AASB 9 introduces new classification and measurement models for financial assets. A financial asset
shall be measured at amortised cost, if it is held within a business model whose objective is to hold
assets in order to collect contractual cash flows, which arise on specified dates and solely principal and
interest. All other financial instrument assets are to be classified and measured at fair value through
profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and
losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI').
For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New
simpler hedge accounting requirements are intended to more closely align the accounting treatment
with the risk management activities of the entity.
New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial
instrument has increased significantly since initial recognition in which case the lifetime ECL method is
adopted. The standard introduces additional new disclosures.
The Group will adopt this standard from 1 July 2018 and the impact of its adoption is expected to be
minimal on the Group’s financial assets and financial liabilities.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard provides a single standard for revenue recognition. The core principle of the standard is that
an entity will recognise revenue to depict the transfer of promised goods or services to customers in an
42
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services.
The standard will require contracts (either written, verbal or implied) to be identified, together with the
separate performance obligations within the contract; determine the transaction price, adjusted for the
time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance
obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the
performance obligation would be satisfied when the customer obtains control of the goods. For services,
the performance obligation is satisfied when the service has been provided, typically for promises to
transfer services to customers. For performance obligations satisfied over time, an entity would select
an appropriate measure of progress to determine how much revenue should be recognised as the
performance obligation is satisfied.
Contracts with customers will be presented in an entity's statement of financial position as a contract
liability, a contract asset, or a receivable, depending on the relationship between the entity's
performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgments made in applying
the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract
with a 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 will not have a material impact
on the amounts reported and disclosures made in the Group's consolidated financial statements.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The
standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating
leases and finance leases.
Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position,
measured at the present value of the unavoidable future lease payments to be made over the lease
term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets
(such as personal computers and small office furniture) where an accounting policy choice exists
whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as
incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future
restoration, removal or dismantling costs.
Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability
(included in finance costs). In the earlier periods of the lease, the expenses associated with the lease
under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating
expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For
classification within the statement of cash flows, the lease payments will be separated into both a
principal (financing activities) and interest (either operating or financing activities) component. For lessor
accounting, the standard does not substantially change how a lessor accounts for leases. 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.
43
Independent Auditor’s Report to the Members 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 2018, the
statement of profit or loss and other comprehensive income, consolidated statement of changes in equity
and 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 2018 and of its financial
performance for the year then ended; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the ‘auditor’s responsibilities for the audit of the financial report’ section
of our report. We are independent of the Group in accordance with the 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)
Refer to note 8 to the financial
report.
Included in the Group’s intangible
assets are capitalised
development costs of $6,764,000
Our audit procedures included, amongst others:
We assessed the development costs against the requirements
for capitalisation contained in AASB 138 Intangible Assets;
We assessed and challenged management's key assumptions
and estimates used to determine the recoverable amount of
the assets, including those relating to magnesium pricing,
44
Key audit matter
How our audit addressed the key audit matter
in respect of the acquired in-
process research and
development cost in relation to
extracting magnesium from fly
ash. The capitalised development
costs are considered to be a key
audit matter as they represent
84% 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.
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 carrying value of the
capitalised development costs exceeded its recoverable
amount;
We compared the net assets of the Group to the Group’s
market capitalisation at year-end;
We checked the mathematical accuracy of the cash flow
models;
We tested the mathematical accuracy of the underlying ‘value
in-use’ calculations; and
Assessed whether appropriate disclosure regarding significant
areas of uncertainty has been made in the financial report.
Funding and liquidity
Refer to note 21 in the financial
report.
We evaluated the Group’s funding and liquidity position at 30 June
2018 and its ability to repay its debts as and when they fall due for a
minimum of 12 months from the date of signing the financial report.
In doing so, we:
The Group is currently in the
development phase, and is
therefore not yet in a position to
generate revenue. Accordingly,
the Group is reliant on external
funding and research and
development claims to develop its
operations and progress to
extracting Magnesium on a
commercial scale.
The adequacy of funding and
liquidity, in addition to the
relevant impact on the going
concern assessment is a key audit
matter due to the inherent
uncertainties associated with the
future development of the Group’s
operations and the level of
funding required to support that
development.
Obtained management’s cash flow forecast, checking the
mathematical accuracy of the forecast and agreeing the
opening cash balance to bank statements;
We assessed and challenged the reliability and completeness
of management’s assumptions by comparing the forecast cash
flows to those of current and previous years, in addition to our
understanding of the company’s future plans and operating
conditions;
We considered the historical accuracy of the company’s cash
flow forecasts by comparing forecasts used in prior years to
the actual cash flows in the current year;
We evaluated the company’s financing options included
executed agreements and its ability to place shares in the
future ; and
Considered events subsequent to year end to determine
whether any additional facts or information have become
available since the date on which management made its
assessment.
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 2018, 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 Group’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 Group or to cease
operations, or have no realistic alternative but to do so.
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_files/ar2.pdf. This
description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 14 of the directors’ Report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Latrobe Magnesium Limited for the year ended 30 June 2018,
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: 14 September 2018
Sydney
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 13 September 2018.
Range
Total holders
Units
% Units
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
206
292
215
715
802
86,399
958,634
1,832,319
33,627,111
1,220,094,356
0.01
0.08
0.15
2.68
97.08
Total
2,230
1,256,598,819
100.00
b.
Unmarketable Parcels as at 12 September 2018.
Minimum Parcel Size
Holders
Units
Minimum $500.00 parcel at
$0.008 per unit
62,500
1,231
18,583,149
c.
Substantial Shareholders as at 13 September 2018.
No.
Shareholder Name
Number of Fully Paid
Ordinary Shares Held
Interest
(%)
2
Famallon Pty Ltd
289 Famallon Pty Ltd
6
Famallon Pty Ltd
Total
1 Rimotran Pty Ltd
168 David Oliver Paterson
Total
d.
Voting Rights
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)
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.
(ii) 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.
(iii) 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 13 September 2018:
Rank
Top Shareholders – Ungrouped
Number of Fully Paid
Ordinary Shares Held
Holding
%
1. Rimotran Pty Ltd
2. Famallon Pty Ltd
3. CSH Engineering Pty Ltd
98,957,340
80,194,358
44,463,873
4. Gibbs Plumbing Services Pty Ltd 36,000,000
5.
JJ Wolfe Holdings Pty Limited
25,020,969
6. Famallon Pty Ltd
19,915,956
7.88
6.38
3.54
2.86
1.99
1.58
7.
8.
Arco Four Investments Pty Ltd
19,500,000
1.55
Mr Brett Roy Morrison + Mrs Donna-Maree Earle Morrison
18,075,683
1.44
9 Ableside Pty Ltd
10 HSBC Custody Nominees (Australia) Limited
11 Murraysetter Pty Ltd
12 Mrs Robyn Ann Lys
13 Lyndcote Super Pty Ltd
14 Stefan Group Pty Ltd
15 Mrs Carmela Adele Murray
16 Diazill Pty Limited
17 Mr Antonino Galipo
15,647,230
13,659,925
11,976,923
11,559,096
10,961,538
10,660,794
10,580,777
10,559,497
10,310,000
1.25
1.09
0.95
0.92
0.87
0.85
0.84
0.84
0.82
18
Mr Neville Masterton Hall + Mrs Gwenda Aileen Hall
10,200,000
0.81
19 Fantapants Pty Ltd
10,000,000
0.80
20
Mr Leslie Robert Knight + Mrs Heather Margery Knight + Mr
Timothy Paul Knight
10,000,000
0.80
478,243,959
38.06
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement can be viewed at the following location on the Company’s website:
http://latrobemagnesium.com/company/corporate-governance
49