Magnes um
2019 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 .................................................................................................................... 8
Auditor’s Independence Declaration .................................................................................... 15
Directors’ Declaration ........................................................................................................... 16
Statement of Profit or Loss and Other Comprehensive Income ............................................ 17
Statement of Financial Position ............................................................................................ 18
Statement of Changes in Equity ........................................................................................... 19
Statement of Cash Flows ..................................................................................................... 20
Notes to the Financial Statements ........................................................................................ 21
Independent Auditor’s 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 Pty Ltd
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 40
1 Farrer Place
Sydney NSW 2000
Share Registry
Computershare Investor Services Pty Ltd
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:
• Redesigning, testing and evaluating of the fast cycle retort furnace (FCR).
• achieving positive results on processing Yallourn fly ash.
•
completing feasibility study using Yallourn fly ash; and
• granting of the Indian patent;
2. Magnesium Markets
In the calendar year ended 31 December 2018, the primary world production of magnesium increased
to 974,000 tonnes. China’s estimated primary production for the calendar year 2018 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-19
2,650
30-Jun-18
2,550
Owing to United States anti-dumping duties, the annual delivered price for 2018 was in the order of
US$5,071 per tonne.
In China, the operating costs of production stayed within the range between US$2,000 to US$2,500 per
tonne. However, a number of China plants were either closed or scaled back production due to this low
magnesium price.
With the adoption of light-weighting of motor vehicles and the legislated emission standards in many
countries in the World, there is a growing demand by car companies to use more magnesium and
aluminium sheet in cars. The car business has adopted aluminium sheet in outside panels and with this
sheet there is up to 6 percent of magnesium. With the development of new magnesium alloys and new
production techniques, the use of magnesium car parts and sheet provides many exciting opportunities.
3.
Feasibility Study
On 28 November 2018, Latrobe Magnesium Limited’s (ASX:LMG) Board announced that it will finalise
a feasibility study for its 3,000 tonnes per annum magnesium plant in the Latrobe Valley based upon
Yallourn feed stock and an automated horizontal retort smelter.
LMG has been trialling its fast cycle retort (FCR) furnace for the past two years. Latest test work did not
provide results necessary to complete a study using FCR. While the potential benefits of the FCR are
substantial, the Board has decided to construct the initial plant using proven smelter automated
horizontal technology.
LMG has conducted its prefeasibility and adjustment studies using automated horizontal retort
technology and the results of those studies were positive.
4
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
LMG completed its Yallourn feasibility study using Yallourn fly ash at the end of August 2019. The
estimated capital costs of the plant will be in the order of $54 million. The earnings before interest and
tax estimated to be generated from this plant when working at its optimal capacity is up to $5.6 million
per annum. The planned commencement of construction on site in the Latrobe Valley is expected to
start in December 2019.
4.
Latrobe Valley 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.
In July 2018, LMG announced the successful results of the test work it completed with Monash
University. This test work showed that the magnesioferrite, the most abundant mineral in the Yallourn
fly ash, can be broken down and the magnesium oxide (MgO), calcium oxide and iron oxide extracted
separately. The recovery rates achieved for each material was over 90%.
As a feed stock for LMG’s retorts, the MgO grade is some 25% higher than 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.
LMG is currently finalising its Ash Supply Agreement with Energy Australia, the owners of the Yallourn
Power Station and expects this to be completed by the end of next month.
5.
Hambach Project
On 18 December 2017, LMG announced that they had signed a term sheet with RWE Power AG that
details how both parties will proceed with the development of a new Germany-based magnesium plant.
LMG is currently producing a large sample of supplementary cement material from its beneficiated RWE
fly ash so that the Verein Deutscher Zementwerke e.V. in Düsseldorf may analyse the product to ensure
it meets EU Standards. This confirmatory work will take about 3 months to complete.
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.
5
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
Since 2000, RWE Power has invested more than €4 billion into the only brown coal super critical power
stations 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.
Supplementary Cementitious Material
There is a major shortage of fly ash in Victoria. Victoria users used to import up to 300,000 tonnes per
annum from South Australia, New South Wales and Queensland. With the closure of power stations,
black coal fly ash is becoming harder to source locally and some users are now starting to import fly ash
from overseas.
7.
International Patents
LMG’s unique alkali 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 Australian, EU, USA, China, Indonesian and Indian patents have been granted for 20 years starting
from 25 August 2011. The process is 100% owned by LMG.
All the above countries are known to have large lignite / brown coal deposits.
Country/Region
Number
Australia
2011293107
United States
9139892 (13/818788)
China
Indonesia
Europe
India
201180040099.2
W00201300844
11819208.7
577/MUMNP2013
Status
Granted
Granted
Granted
Granted
Granted
Granted
Date of grant
26 September 2013
22 September 2015
23 September 2015
22 August 2016
21 March 2018
11 January 2019
LMG has had to develop a new acid process to treat the Yallourn fly ash. This process uses HCl to
dissolve the magnesioferrite and precipitate the material into a MgCl2 which is then converted to MgO
and processed in the normal manner.
8.
Funding
In May 2018, two Directors of the Company provided an unsecured lending facility to the Company of
up to $200,000. To date some $100,000 of these facilities have been drawn. The repayment of this
loan has been extended to 31 December 2020.
In September 2018, the Company executed agreements with RnD Funding to provide up to $2.15 million
to assist with financing its 2019 activities. To date $2.14 million of these facilities have been drawn.
The R&D loan facility of $673,620 as at 30 June 2019 plus financial costs of $21,524.06 accrued to 19
August 2019 has been repaid by the research and development tax rebate of $705,429.93 received on
19 August 2019.
6
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
REVIEW OF OPERATIONS
The Company has received an offer to refinance the amount owing under its Warrant Loan Facility as
at 15 October 2019 of $1,842,363 on the same terms and conditions as detailed in Note 9iii to the
financial accounts. This facility will mature on 15 October 2020 under this offer. The Company will issue
20 million warrants with an exercise price of $0.03 for a period of three years on 15 October 2019. The
offer is subject to entering into the necessary loan documentation.
9.
Capital Issue
The Company has alternatives available to it in relation to future equity raisings which may be required
to provide working capital funding for the 2019 year.
10. Warrant Issue
Under the 2018 funding agreements mentioned above with RnD Funding Pty Ltd, LMG has issued
12,495,000 unlisted warrants. The warrants have an exercise price of $0.02 and are exercisable for a
period up to 3 years post the drawdown dates but not before 15 October 2019.
7
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 2019 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:
redesigning, testing and evaluating of the fast cycle vertical retort furnace;
•
• achieving positive test result of the Yallourn fly ash.
•
• granting of the Indian patent;
finalising feasibility study using proven automatic horizontal retort technology;
OPERATING RESULTS
The consolidated net loss of the Group after providing for income tax amounted to $1,515,472 compared
to a net loss of $1,729,833 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 7 of this report.
Dividends
The Directors have not recommended the payment of a final dividend.
Significant Changes in the State of Affairs
The significant change in the state of affairs of the Group during the financial year is an increase in the
contributed equity of $319,234 from $33,243,049 to $33,562,283 as a result of issuing the following fully
paid ordinary shares:
Date
Purpose
Shares Issues
$/Share
Amount
10 December
2018
convert outstanding fees owing to
Directors and officer into securities
39,904,250
$0.008
$319,234
MATTERS SUBSEQUENT TO BALANCE DATE
Since the Balance date the Group has repaid one of its debt facilities and refinanced the other two
facilities for a further 12 months.
On 27 September 2019, the financial report was authorised to be signed by a resolution of Directors.
8
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 held numerous directorships including non-
executive chairman of Omni Tanker Holding Pty Ltd for 8 years 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
16,351,923 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. 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.
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.
9
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
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
123,095,740 ordinary shares in Latrobe Magnesium Limited, of which
17,888,400 are held as a direct interest and 105,207,340 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
102,450,189 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.
Special Responsibilities
None
Interests in Securities
12,853,622 ordinary shares in Latrobe Magnesium Limited, of which 704,250
are held as direct interest and 12,149,372 are registered in the name of Diazill
Pty Limited as trustee for the PB Superannuation Fund.
10
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ REPORT
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
6,461,933 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 2019 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
6
6
1
6
6
6
6
6
6
6
-
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 K A Torpey and Mr J R Lee are the Directors retiring by rotation at the next Annual General Meeting
of the Company. Mr Torpey and Mr Lee being eligible in accordance with Article 12.2 of the Company’s
constitution offer themselves for re-election. Their background, experience and qualification are detailed
on Pages 10 and 11.
11
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 include 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.
2019
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
2018
Directors
J S Murray
D O Paterson
K A Torpey
P F Bruce
J R Lee
Base
Emoluments
$
52,500
311,604
24,306
24,306
24,306
437,022
Base
Emoluments
$
60,000
311,604
21,804
21,804
21,804
437,016
Equity Options
Total
$
-
-
-
-
-
-
$
52,500
311,604
24,306
24,306
24,306
437,022
Equity Options
Total
$
-
-
-
-
-
-
$
60,000
311,604
21,804
21,804
21,804
437,016
Performance
Related
%
-
-
-
-
-
-
Performance
Related
%
-
-
-
-
-
-
12
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 2018
Acquired under
Share Purchase
Plan for
Shareholders
Acquired
Under Debt
Conversion to
Equity
Net
Change
Other
Balance at
30 June 2019
J S Murray
D O Paterson
K A Torpey*
P F Bruce
J R Lee
11,976,923
100,374,615
100,860,314
11,263,747
4,872,058
-
-
-
-
-
4,375,000
22,721,125
1,589,875
1,589,875
1,589,875
-
16,351,923
- 123,095,740
- 102,450,189
12,853,622
-
6,461,933
-
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 2019
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.
13
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 Sydney Partnership Pty Ltd for services provided during
the year are set out below:
Audit and Review of Financial Reports
Taxation Services
$
36,000
7,000
---------
43,000
=====
The Board of Directors ensure that the provision of the non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001.
AUDITORS’ INDEPENDENT DECLARATION
A copy of the auditors’ independence declaration as required under Section 307C of the Corporations
Act 2001 is set out on Page 15 and forms part of this report.
This report is made in accordance with a resolution of the Directors.
J S Murray
Chairman
Sydney
27 September 2019
D O Paterson
Chief Executive Officer
14
To the Board of Directors of Latrobe Magnesium Limited
Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
As lead audit partner for the audit of the financial statements of Latrobe Magnesium Limited for the
financial year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(b)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Sydney Partnership
Joseph Santangelo
Partner
Dated: 27 September 2019
Sydney
15
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
DIRECTORS’ DECLARATION
In the directors' opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 1 to the financial
statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's
financial position as at 30 June 2019 and of its performance for the financial year ended on that date;
and
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 directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
On behalf of the directors
J S Murray
Chairman
Sydney
27 September 2019
D O Paterson
Chief Executive Officer
16
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 2019
Revenue
Finance income
Other income
Expenses
Administration expenses
Finance cost
Research and evaluation expenses
Total expenses
Income tax expense
Note
GROUP
2019
$
2018
$
4,352
6,219
705,430
996,194
3
709,782
1,002,413
(943,775)
(996,027)
(311,714)
(92,913)
(969,765)
(1,643,306)
(2,225,254)
(2,732,246)
-
-
3
4
Loss attributable to members of the parent entity
(1,515,472)
(1,729,833)
Other Comprehensive Income
Other Comprehensive Income for the year
-
-
Total Comprehensive Income
(1,515,472)
(1,729,833)
Basic and diluted loss per share (cents per share)
18
(0.12)
(0.14)
GROUP
Note
2019
2018
The above statement should be read in conjunction with the accompanying notes.
17
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
STATEMENT OF FINANCIAL POSITION
For the year ended 30 June 2019
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
TOTAL ASSETS
CURRENT LIABILITIES
Borrowings
Trade and other payables
Total Current Liabilities
Note
GROUP
2019
$
2018
$
5
6
6
7
8
401,750
51,087
839,848
1,080,168
1,241,598
1,131,255
16,993
2,270
16,993
3,492
6,891,729
6,869,467
6,910,992
6,889,952
8,152,590
8,021,207
9
10
2,471,710
274,285
725,887
742,688
2,745,995
1,468,575
TOTAL LIABILITIES
2,745,995
1,468,575
NET ASSETS
EQUITY
Issued capital
Warrant Reserves
Accumulated losses
TOTAL EQUITY
5,406,595
6,552,632
11
12
33,562,283
33,243,049
50,201
-
(28,205,889)
(26,690,417)
5,406,595
6,552,632
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 CHANGES IN EQUITY
For the year ended 30 June 2019
GROUP
Note
Issued
Capital
Warrant Accumulated
Reserves
Losses
Total
$
$
$
$
Balance at 1 July 2017
33,243,049
Total comprehensive income
Shares issued during the period
11
-
-
-
-
-
(24,960,584)
8,282,465
(1,729,833)
(1,729,833)
-
-
Balance at 1 July 2018
33,243,049
-
(26,690,417)
6,552,632
Warrants Issued
50,201
50,201
Total comprehensive income
-
Shares issued during the period
11
319,234
-
-
(1,515,472)
(1,515,472)
-
319,234
Balance at 30 June 2019
33,562,283
50,201
(28,205,889)
5,406,595
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 CASHFLOWS
For the year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from operations
Payments to suppliers and employees
Interest and other financial costs paid
Interest received
GROUP
2019
$
2018
$
Note
996,194
932,118
(2,106,713)
(2,136,101)
(95,691)
(37,494)
2,185
4,137
Net cash used in operating activities
17b
(1,204,025)
(1,237,340)
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
Net cash from financing activities
-
(214)
(25,312)
(18,272)
(25,312)
(18,486)
(660,000)
(485,000)
2,240,000
660,000
1,580,000
175,000
Net increase / (decrease) in cash and cash equivalent
held
350,663
(1,080,826)
Cash and cash equivalent at beginning of the financial year
51,087
1,131,913
Cash and cash equivalent at end of financial year
17a
401,750
51,087
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
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for
the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced 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 that are solely principal and interest. A debt
investment shall be measured at fair value through other comprehensive income if it is held within a
business model whose objective is to both hold assets in order to collect contractual cash flows which
arise on specified dates that are solely principal and interest as well as selling the asset on the basis of
its fair value. All other financial assets are 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 or contingent consideration recognised in a business
combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may
be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or
eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss,
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 use an 'expected credit loss' ('ECL') model to
recognise an allowance. Impairment is measured using 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. For receivables, a simplified approach to measuring expected credit losses
using a lifetime expected loss allowance is available.
AASB 15 Revenue from Contracts with Customers
The consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single
comprehensive model for revenue recognition. The core principle of the standard is that an entity shall
recognise revenue to depict the transfer of promised goods or services to customers at an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The standard introduced a new contract-based revenue recognition model with a
measurement approach that is based on an allocation of the transaction price. This is described further
in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted
against revenue. Contracts with customers are 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. Customer acquisition costs and costs to fulfil a
contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract
period.
Impact of adoption
The impact on the change in Accounting Standards AASB 9 and AASB 15 for the year ended 30 June
2019 and the comparative year was immaterial.
21
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial
statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial
assets at fair value through other comprehensive income, investment properties, certain classes of
property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the consolidated entity's
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in note 1(u).
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in note 23.
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 13 to the financial statements.
b.
Income Tax
The Group adopts the liability method of tax-effect accounting whereby the income tax expense
is based on the profit from ordinary activities adjusted for any non-assessable or disallowed items.
It is calculated using the tax rates that have been enacted or are substantially enacted by the
balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in
the financial statements. No deferred income tax will be recognised from the initial recognition of
an asset or liability, excluding a business combination, where there is no effect on accounting or
taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset
is realised or liability is settled. Deferred tax is credited in the income statement except where it
relates to items that may be credited directly to equity, in which case the deferred tax is adjusted
directly against equity.
22
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
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 2019
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.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially
measured at their fair value at the date of the acquisition. Intangible assets acquired separately
are initially recognised at cost. Indefinite life intangible assets are not amortised and are
subsequently measured at cost less any impairment. Finite life intangible assets are subsequently
measured at cost less amortisation and any impairment. The gains or losses recognised in profit
or loss arising from the derecognition of intangible assets are measured as the difference between
net disposal proceeds and the carrying amount of the intangible asset. The method and useful
lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively by changing the amortisation method
or period.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are
capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity
has sufficient resources; and intent to complete the development and its costs can be measured
reliably. Capitalised development costs are amortised on a straight-line basis over the period of
their expected benefit, being their finite life of 10 years.
Patents
Significant costs associated with patents and trademarks are deferred and amortised on a
straight-line basis over the period of their expected benefit, being their finite life of 20 years.
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.
24
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
g.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are
included as part of the initial measurement, except for financial assets at fair value through profit
or loss. Such assets are subsequently measured at either amortised cost or fair value depending
on their classification. Classification is determined based on both the business model within which
such assets are held and the contractual cash flow characteristics of the financial asset unless,
an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have
been transferred and the consolidated entity has transferred substantially all the risks and rewards
of ownership. When there is no reasonable expectation of recovering part or all of a financial
asset, it's carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive
income are classified as financial assets at fair value through profit or loss. Typically, such
financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling
in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such
upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity investments
which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected
to classify them as such upon initial recognition.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets
which are either measured at amortised cost or fair value through other comprehensive income.
The measurement of the loss allowance depends upon the consolidated entity's assessment at
the end of each reporting period as to whether the financial instrument's credit risk has increased
significantly since initial recognition, based on reasonable and supportable information that is
available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition,
a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's
lifetime expected credit losses that is attributable to a default event that is possible within the next
12 months. Where a financial asset has become credit impaired or where it is determined that
credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected
credit losses. The amount of expected credit loss recognised is measured on the basis of the
probability weighted present value of anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss
allowance is recognised within other comprehensive income. In all other cases, the loss allowance
is recognised in profit or loss.
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 include 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 2019
j.
Revenue
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a
method of calculating the amortised cost of a financial asset and allocating the interest income
over the relevant period using the effective interest rate, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of the financial asset.
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.
26
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
Where the effect of the time value of money is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific to the liability.
o.
Share-based payments
For equity-settled share-based payment transactions, the Company measures the goods or
services received, and the corresponding increase in equity, directly, at the fair value of the goods
or services received.
p.
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial year.
q.
Contributed equity
Ordinary shares are classified as equity (refer Note 11).
Costs directly attributable to the issue of new shares or options are shown as a deduction from
the equity proceeds. Costs directly attributable to the issue of new shares or options associated
with the acquisition of a business are included as part of the purchase consideration.
r.
Dividends
Provision is made for dividends declared and no longer at the discretion of the Group, on or before
the end of the financial year but not distributed at balance date.
s.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to members of Latrobe
Magnesium Limited, adjusted for the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares during the year.
The weighted average number of issued shares outstanding during the financial year does not
include shares issued as part of the Employee Share Loan Plan that are treated as in-substance
options.
Diluted earnings per share
Earnings used to calculate diluted earnings per share are calculated by adjusting the basic
earnings by the after-tax effect of dividends and interest associated with dilutive potential ordinary
shares. The weighted average number of shares used is adjusted for the weighted average
number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
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 2019
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 2019 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$4,829 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 and inputs based upon third party consultant’s estimates and the feasibility
study;
•
capital costs based upon the detailed 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 2019
NOTE 2: FINANCIAL RISK MANAGEMENT OBJECTIVES
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign
currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's
overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the consolidated entity. The
consolidated entity uses derivative financial instruments such as forward foreign exchange contracts to
hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading
or other speculative instruments. The consolidated entity uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest
rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect
of investment portfolios to determine market risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the
Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure
of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies,
evaluates and hedges financial risks within the consolidated entity's operating units. Finance reports to
the Board on a monthly basis.
(i)
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash or access to funds to allow it to
meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or
agreed facilities) to meet expected requirements for a period of at least 90 days.
The Group’s exposure to liquidity risk has been assessed as minimal. There are no past due payables
at balance date.
The Board receives cash flow projections on a bimonthly basis as well as information regarding cash
balances. At the balance sheet date, these projections indicated that the Group expected to have
sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
(ii)
Interest Rate Risk
The Group’s exposure to interest risk arises when the value of financial instruments fluctuates as a result
of changes in market interest rates and the effective weighted average interest rates on classes of
financial assets and financial liabilities.
The Group’s exposure to interest rate risk only extends to cash and cash equivalents at balance date.
The Group’s exposure to interest rate risk at 30 June 2019 and 30 June 2018 is set out in the following
tables:
CONSOLIDATED
Year ended
30 June 2019
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over
1 to 5
years
More
than 5
years
Non-
interest
bearing
Fixed Interest maturing in
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
%
1
4
12
$
$
350,077
-
-
55,344
350,077
55,344
$
-
-
-
-
-
(2,357,607) (114,103)
-
-
Net financial assets
350,077 (2,302,263) (114,103)
$
-
-
-
-
-
-
Total
$
$
51,673
784,504
401,750
839,848
836,177 1,241,598
-
(274,285)
(2,471,710)
(274,285)
561,892 (1,504,397)
29
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
Year ended
30 June 2018
Weighted
Average
Interest Rate
Floating
Interest
Rate
1 year or
less
Over
1 to 5
years
More
than 5
years
Non-interest
bearing
Fixed Interest maturing in
Financial assets
Cash and cash equivalents
Trade & other receivables
Total Financial Assets
Financial liabilities
Borrowings
Trade and other payables
%
1
4
12
$
$
$
$
$
Total
$
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
-
(742,688)
(725,887)
(742,688)
285,348
(337,319)
Net financial assets
50,043 (672,710)
(iii)
Foreign exchange currency risk
The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods
and services in currencies other than the Group’s measurement currency.
There was no exposure to foreign currency risk at balance date.
(iv) Share market risk
The Company relies greatly on equity markets to raise capital for its magnesium project development
activities, and is thus exposed to equity market volatility.
When market conditions require prudent capital management, in consultation with its professional
advisers, the Group looks to alternative sources of funding, including debt financing and joint venture
participation.
(v) Credit risk
Credit risk arises principally when the other party to a financial instrument fails to discharge its
obligations in respect of that instrument.
The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum
exposure equal to the carrying amount of these instruments.
Trade and receivable balances are monitored on an ongoing basis with the Group’s exposure to bad
debts minimal. There was no exposure to trade receivable credit risk at balance date.
The Group does not have any material credit risk exposure to any single receivable or Group of
receivables under financial instruments entered into by the Group.
Other receivables comprise GST. Credit worthiness of debtors is undertaken when appropriate.
(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.
30
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
As the financial assets held by the company as at 30 June 2019 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.
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 2019
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
2019
$
2018
$
4,352
6,219
705,430
996,194
709,782
1,002,413
1,222
969,765
437,022
1,880
1,643,306
437,016
GROUP
2019
$
2018
$
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
1,515,472
1,729,833
Prima facie tax benefit on loss from ordinary activities before income
tax at 27.5%
416,755.
475,704.
Permanent differences relating to R&D claim
(251,968)
(355,824)
Increase in income tax benefit due to timing differences
10,867.
6,054.
Tax losses not brought to account as future income tax benefit.
(175,654)
(125,934)
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 2019
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
2019
$
2018
$
2,261,488
750,305
2,085,325
750,305
3,011,792
2,835,629
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
2019
$
2018
$
401,750
51,087
GROUP
2019
$
2018
$
705,430
64,491
55,344
14,583
996,194
19,131
53,176
11,667
839,848
1,080,168
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 2019
NOTE 7: PLANT AND EQUIPMENT
Plant and equipment at cost
Accumulated depreciation
Total Plant and Equipment
Movements in Carrying Amounts
GROUP
2019
$
7,779.
(5,509)
2018
$
7,779.
(4,287)
2,270.
3,492.
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
Depreciation expense
Carrying amount at 30 June
NOTE 8:
INTANGIBLE ASSETS
Acquired in-process research and development, at cost
Acquired in 2017 with the Ecoengineers Pty Ltd acquisition
Closing balance
International Patent for the Hydromet Process.
Plant and
Equipment
2019
$.
3,492.
-.
(1,222)
Plant and
Equipment
2018
$.
5,158.
214.
(1,880)
2,270.
3,492.
GROUP
2019
$
5,684,000
1,080,000
6,764,000
127,729
2018
$
5,684,000
1,080,000
6,764,000
105,467
Total Intangible Assets
6,891,729
6,869,467
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;
•
• magnesium metal price of US$4,829 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 detailed feasibility study; and
a pre-tax discount rate of 15%.
34
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
NOTE 9: BORROWINGS
CURRENT
R&D Loan Facility
Warrant Loan Facility
Directors Loan Facility
Total
i. Balance of loan as at 30 June 2018
Accrued interest to October 2018
Repaid from receipt of 2018 R&D tax rebate of $996,194
GROUP
2019
$
2018
$
725,887
-
-
-----------
725,887
======
673,620
1,683,987
114,103
-------------
2,471,710
========
$725,887
29,804
-------------
$755,691
=======
ii. R&D loan facility from RnD Funding Pty Ltd
Interest Rate:
Maturity Date:
Repayment:
Loan drawdown in Oct-18 & Jun-19
Finance fee capitalised at 30-Jun-19
Interest accrued at 30-Jun-19
Loan as at 30 June 2019
$650,000
0.9375% per month
31 October 2019
Cash in full from the 2019 R&D tax rebate
$640,000
10,000
23,620
-------------
$673,620
=======
This loan was repaid on September 2019 upon receipt of the Research and
Development rebate.
iii. Project loan facility from RnD Funding Pty Ltd
Interest Rate:
Maturity Date:
Repayment:
$1,500,000
1.25% per month
15 October 2019
Cash in full or refinancing into a project finance facility
Loan drawdown in Oct-18, Dec-18 & Mar-19
Finance fee capitalised at 30-Jun-19
Interest accrued at 30-Jun-19
Warrant Reserves
$1,500,000
98,800
135,388
(50,201)
--------------
$1,683,987
========
The Company has signed a Term Sheet which refinances this loan for a further
12 months on similar terms and conditions.
Loan as at 30 June 2019
iv. Directors’ Loans
Interest Rate:
Maturity Date:
Repayment:
$200,000
1% per month
31 December 2020
Cash in full or by Issue of LMG shares
Loan drawdown in Jul-Sep 2018
Finance fee capitalised
Interest accrued at 30 June 2019
Loan as at 30 June 2019
$100,000
3,000
11,103
-------------
$114,103
=======
35
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
NOTE 10: TRADE AND OTHER PAYABLES
CURRENT
Trade creditors and accrued expenses
Loan from Directors and Consultant
Total
NOTE 11:
ISSUED CAPITAL
GROUP
2019
$
2018
$
274,285
547,016
-
195,672
274,285
742,688
GROUP
2019
$
2018
$
(a) Ordinary Shares Issued and Fully Paid
Balance at beginning of reporting period
33,243,049 33,243,049
10 Dec 2018
10 Dec 2018
31,865,750 shares issued at $0.008 to convert
outstanding fees owing to Directors.
8,038,500 shares issued at $0.008 to convert
outstanding fees owing to Project Director
254,926
64,308
-
-
(b) Shares on Issue
Balance at beginning of reporting period
Share on Issues:
•
•
10 December 2018
10 December 2018
33,526,283 33,243,049
No.
No.
1,256,598,819 1,256,598,819
31,865,750
8,038,500
-
-
Balance at end of reporting period
1,296,503,069 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 2019
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 2018, the Group secured a loan facility of $2.15 million, $2.14 million was drawn as at
30 June 2019. The Group has repaid one of its facilities and extended the warrant loan for a further
12 months.
In April 2018, the Group secured a loan facility of $200,000 from two Directors of the Group,
$100,000 was drawn down as at 30 June 2019. The repayment of the loan amount of $100,000
has been extended to 31 December 2020.
NOTE 12: UNLISTED WARRANTS
Under the funding agreements mentioned above with RnD Funding Pty Ltd, LMG has issued 12,495,000
unlisted warrants which have an exercise price of $0.02 and are exercisable for a period up to 3 years
post the drawdown dates but not before October 2019. A reconciliation of the warrants issued is as
below.
Total warrants outstanding at beginning of the period
Granted in the period
Exercised in the period
Lapsed in the period
Outstanding at the end of the period
0
12,495,000
0
0
12,495,000
The value of the warrants is estimated to be $50,201 using Black & Scholes valuation methodology.
NOTE 13: CONTROLLED ENTITIES
Country of
Incorporation
Percentage Owned
2018
2019
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 14: 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
$5,371 is payable monthly in advance.
37
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
There are no other non-cancellable operating lease rentals.
The Company extended its option agreement to lease a property at 320 Tramway Road, Morwell,
Victoria for one year from July 2019 to November 2019. This option agreement has been signed
together with payment of $15,000 option fee. This site is intended for the installation of the future
magnesium plant and associated facilities.
NOTE 15: 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 16: RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and conditions, no more
favourable than those available to other parties unless otherwise stated.
Transactions with and amounts receivable from and payable to Directors of related parties or their
director related entities which:
a.
b.
c.
(i)
(ii)
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
2019
$
2018
$
Director’s fees were paid to J S Murray Pty Ltd of which J S
Murray is a principal.
52,500
60,000
Director’s fees were paid to Famallon Pty Ltd of which K A Torpey
is a principal.
24,306
21,804
(iii)
Director’s fees were paid to Stockholders Relation Pty Ltd of
which J R Lee is a principal.
24,306
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 2019
Directors Loans to the Company
In May 2018, two Directors of the Company provided an unsecured lending facility to the Company of
up to $200,000. To date $100,000 of these facilities have been drawn. The repayment of this loan has
been extended to 31 December 2020.
Directors’ Loans
Interest Rate:
Maturity Date:
Repayment:
Loan drawdown in Jul-Sep 2018
Finance fee capitalised
Interest accrued at 30 June 2019
Loan as at 30 June 2019
$200,000
1% per month
31 December 2020
Cash in full or by Issue of LMG shares
$100,000
3,000
11,103
-------------
$114,103
=======
NOTE 17: CASH FLOW INFORMATION
GROUP
2019
$
2018
$
a. Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of
cash flow flows is reconciled to items in the statement of financial
position as follows:
Cash at Bank
401,750
51,087
b. Reconciliation of cash flow from operating activities to operating
loss after income tax:
Net loss
Adjustment of non-cash items:
(1,515,472)
(1,729,833)
Depreciation
Convert Directors’ & Consultant’s outstanding fees to shares
1,222.
319,234.
1,880.
-.
Changes in Assets and Liabilities:
(Increase)/Decrease in receivables and other assets
Increase/(Decrease) in trade and other payables
290,522.
(299,531)
(2,255)
492,868.
Net Cash used in Operating Activities
(1,204,025)
(1,237,340)
c. Acquisition and Disposal of Entities
There was no acquisition and disposal of controlled entities during the 2019 or 2018 financial year.
d. Non-cash Financing and Investing Activities
2018-19
Fully Paid Ordinary Share
December 2018
39,904,250 shares issued at $0.008 to convert outstanding fees owing to
Directors and officer.
$319,234
Increase in issued capital
Decrease in trade and other payables $195,672
2017-18
Fully Paid Ordinary Share
None
39
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
NOTE 18: LOSS PER SHARE
GROUP
2019
2018
Reconciliation of loss to net loss:
(a) Basic and diluted loss per share
cents per share
(0.12)
(0.14)
(b) Loss used in the calculation of EPS
$
(1,515,472)
(1,729,833)
(c) Weighted average number of ordinary
shares outstanding during the year used in
calculation of basic EPS
1,279,010,795
1,256,598,819
There were no unissued shares under option at 30 June 2019.
NOTE 19: CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities for the year ended 30 June 2019 (2018: Nil).
NOTE 20: EMPLOYEE BENEFITS
Employees Share Acquisition Plan
The Directors have approved the implementation of a Share Acquisition Plan.
The Plan provides for eligible participants to purchase shares in the Company tax effectively through
salary sacrifice. Shares will be acquired on the Australian Stock Exchange at prevailing market prices
on or about the first trading day following the normal monthly pay day. The shares including transaction
costs will be met by the pre-tax remuneration forgone by the Plan participant. Administration costs of
the Plan will be met by the Company.
The minimum contribution under the Plan is $2,400 per annum. Participants can allocate up to 100% of
their gross remuneration.
During the period under review and the previous corresponding period, there were no shares purchased
in accordance with the employee share acquisition plan.
NOTE 21: 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 except the matter mentioned below.
Since the reporting date the Company has repaid one of its loan facilities and repayment of Directors
loans has been extended to 31 December 2020.
The Company has received an offer to refinance the amount owing under its Warrant Loan Facility as
at 15 October 2019 of $1,842,363 on the same terms and conditions as detailed in Note 9iii to the
financial accounts. This facility will mature on 15 October 2020 under this offer. The Company will issue
20 million warrants with an exercise price of $0.03 for a period of three years on 15 October 2019. The
offer is subject to entering into the necessary loan documentation.
40
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
NOTE 22: 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.
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 23: PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2019 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
Warrant Reserves
Accumulated Losses
Total equity
2019
$
2018
$
(1,515,472)
-.
(1,729,833)
-.
(1,515,472)
(1,729,833)
1,241,598
6,972,331
1,131,256
6,951,290
8,213,929
8,082,546
2,745,995
-
1,468,575
-
2,745,995
1,468,575
5,467,934
6,613,971
33,562,283
50,201.
(28,144,550)
33,243,049.
-
(26,629,078)
5,467,934.
6,613,971.
41
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
Parent entity contingencies
The parent entity has no significant contingent liabilities.
Parent entity capital commitments for the acquisition of property, plant or equipment.
The parent entity has not entered any contractual commitments for the acquisition of property, plant or
equipment.
Parent entity guarantees in respect of the debts of the subsidiaries
The parent entity has entered into deed of guarantee with the effect that its subsidiaries guarantee the
secured loan detailed in Note 9, to Latrobe Magnesium Limited.
NOTE 24: AUDITOR’S REMUNERATION
Details of the amounts paid or payable to Nexia Partnership Pty Ltd for services provided during the
year are set out below.
Audit and Review of Financial Reports
Taxation Services
GROUP
2019
$
36,000
7,000
2018
$
32,000
10,960
43,000
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.
NOTE 25: 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 2019. 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 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.
42
LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
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 will have an
insignificant impact on the amounts reported and disclosures made in the Group’s consolidated financial
statements.
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 2019, 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 2019 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
reviewed
the company’s externally commissioned
Feasibility Study and tested, where appropriate, the capital
investment and chemical components amounts concluded in
this report for consistency with the “value in use” calculations.
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 83% 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.
Funding and liquidity
Refer to note 22 in the financial
report.
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.
We assessed and challenged management's key assumptions
and estimates used to determine the recoverable amount of
the assets, including those relating to output pricing, input
costs, growth assumptions 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;
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.
We evaluated the Group’s funding and liquidity position 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:
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.
45 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 2019, 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 12 to 13 of the directors’ Report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of Latrobe Magnesium Limited for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
46 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: 27 September 2019
Sydney
47 LATROBE MAGNESIUM LIMITED and its Controlled Entities
ABN 52 009 173 611
ADDITIONAL INFORMATION
The following additional information is required by the Australian Securities Exchange Ltd in respect of
listed public companies only.
SHAREHOLDING
a.
Distribution of Shareholders as at 26 September 2019.
Range
Total holders
Units
% Units
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
205
291
217
697
771
86,399
949,409
1,845,584
32,454,977
1,261,166,700
0.01
0.07
0.14
2.50
97.28
Total
2,181
1,296,503,069
100.00
b.
Unmarketable Parcels as at 26 September 2019.
Minimum Parcel Size
Holders
Units
Minimum $500.00 parcel at
$0.012 per unit
41,667
1,113
12,768,767
c.
Substantial Shareholders as at 26 September 2019.
No.
Shareholder Name
1 Rimotran Pty Ltd
10 David Oliver Paterson
Total
2
Famallon Pty Ltd
106 Famallon Pty Ltd
7
Famallon Pty Ltd
Total
d.
Voting Rights
Number of Fully Paid
Ordinary Shares Held
Interest
(%)
105,207,340
17,888,400
123,095,740
80,194,358
2,339,875
19,915,956
102,450,189
8.11
1.38
9.49
6.19
0.18
1.54
7.90
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
a.
Twenty largest shareholders as at 26 September 2019:
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
105,207,340
80,194,358
46,603,873
4. Gibbs Plumbing Services Pty Ltd
36,000,000
5.
JJ Wolfe Holdings Pty Limited
25,020,969
6 Ableside Pty Ltd
7. Famallon Pty Ltd
23,685,730
19,915,956
8.11
6.19
3.59
2.78
1.93
1.83
1.54
Arco Four Investments Pty Ltd
19,893,534
1.53
8.
9.
Mr Brett Roy Morrison + Mrs Donna-Maree Earle Morrison
10. David Oliver Paterson
11 Murraysetter Pty Ltd
12 HSBC Custody Nominees (Australia) Limited
13
Mr Neville Masterton Hall + Mrs Gwenda Aileen Hall
14 Diazill Pty Limited
15 Mrs Robyn Ann Lys
16 Lyndcote Super Pty Ltd
17 Mrs Carmela Adele Murray
18 Mr Antonino Galipo
19 Fantapants Pty Ltd
19 Mr Neville Masteron Hall
18,075,683
1.39
17,888,400
16,351,923
13,409,925
1.38
1.26
1.03
12,500,000
0.96
12,149,372
11,559,096
10,961,538
10,580,777
10,310,000
10,000,000
10,000,000
0.94
0.89
0.85
0.82
0.80
0.77
0.77
19
Mr Leslie Robert Knight + Mrs Heather Margery Knight + Mr
Timothy Paul Knight
10,000,000
0.77
520,308,474
40.13
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