L E I G H C R E E K E N E RGY L I M I T E D A N N UA L R E P O RT 2 0 1 9
1 , 1 5 3 P J 2P RESERVE
TE L F O R D B A S
I
N
E a s t e r n Australia’s largest undeve l o p e d
a nd uncontracted gas reserve s
LEIGH CREEK ENERGYLimited
For personal use only 2
For personal use only Reserve (PJ)
2P
1,153.2
3P
1,608.3
Achievements
Environment
Activity notification approval –
Pre-Commercial Demonstration
Facility (PCD) operations
Completed PCD operations and
decommissioned
Continuous groundwater and soil
vapour monitoring
Ongoing flora and fauna studies
No reportable environmental incidents
and all government requirements met
Community benefit
Room nights
Copley + Leigh Creek: 1,075
PCD Plant
Total hours worked onsite: 31,333
Economic benefit
to local community: $785,000
Economic benefit for
South Australia: $12 million
Safety
PCD safely operated
No reportable safety incidents
Lost time incidents/injuries: 0
Corporate overview
Listed on the Australian Stock Exchange - ASX code: LCK
Licence: Petroleum Exploration Licence 650 (PEL 650)
Head Office: Adelaide, South Australia
Project Location: Telford Basin, Leigh Creek Coalfield - Leigh Creek, South Australia
Operation: Leigh Creek Energy Project
Project Stage: Stage 2 — Leigh Creek Energy Project
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
I
M
I
L
Y
G
R
E
N
E
K
E
E
R
C
H
G
I
E
L
3
Company snapshot+++Eastern Australia’s largest undevelopedand uncontracted gas reservesFor personal use only
Leigh Creek Energy (LCK) is an ASX listed energy
company focussed on developing its Leigh Creek
Energy Project (LCEP), located 550km north of the
capital city of Adelaide in the state of South Australia.
The project is located on Petroleum Exploration
Licence 650 (PEL 650), which covers an area of
93 km2 over the Leigh Creek Coalfield, and Gas
Storage Exploration Licence (GSEL) 662 which
covers the same area.
The Leigh Creek Coalfield was quickly identified as
a highly favourable location for In-Situ Gasification
(ISG) development using criteria that covered
environmental, technical and commercial aspects. The
coal resource is technically suitable for ISG, it is well
serviced by local infrastructure and most importantly,
the site is suitable for undertaking ISG in a manner
that is safe and minimises environmental impact.
Other favourable factors that influenced the location
of the Leigh Creek Energy Project include:
• high quality existing infrastructure (road, rail,
water and power)
• nearby service centre at Leigh Creek township
• strong local community and potential workforce
• extensive information base for the Leigh Creek
Coalfield
• existing disturbed mine site (minimising
disturbance footprint)
• distant from environmentally sensitive areas or
conservation reserves.
The ISG process converts coal from its solid state
into a gaseous form, resulting in the production of
synthesis gas (syngas) containing methane, hydrogen
and carbon monoxide. The syngas can either be used
to produce electricity directly or further refined into
a variety of products including synthetic natural gas,
ammonia, urea or methanol.
LCK’s pathway to development of the LCEP is entering
the third and final stage. Each stage requires careful
planning and engineering, in addition to the necessary
regulatory assessments and approvals:
Characterisation Phase - Investigate cultural,
environmental, geological, geotechnical, hydrogeological
and social characteristics of the site.
Demonstration Phase - A Pre-Commercial
Demonstration Facility (PCD) demonstrated ISG at
the Telford Basin of the Leigh Creek Coalfield. The
series of controlled tests provided environmental and
gas quality data to inform regulators and stakeholders
that the process can be managed safely with minimal
impact to the environment. The findings have helped to
determine the Commercial Project design and
feasibility study direction.
Commercial Phase - Conduct engineering and
feasibility studies to support Demonstration Phase data
for the deployment of a Commercial Operation.
Options include; electricity production or further
refining of syngas into a variety of products including
synthetic natural gas, ammonia, urea, or methanol.
LCK is committed to developing the LCEP using a best
practice approach to mitigate the environmental, social,
technical and financial project risks.
As part of the second stage of the LCEP’s pathway to
commercial development, LCK obtained information to
inform the design for a potential commercial facility.
This involved the establishment of a below ground
single ISG gasifier chamber and the construction of
an above ground plant. The PCD plant was
commissioned and operated for just over three months,
producing syngas and technical and environmental
performance data for analysis, and was in the process
of decommissioning at the end of the 2018/19
financial year.
The information from the PCD will be used in
LCK’s feasibility studies for the commercial phase of
the project.
4
Leigh Creek Energy ProjectFor personal use only Company snapshot
Leigh Creek Energy Project
Chairman’s letter
Managing Director’s report
2018/19 achievements
Tenement schedule
Directors’ Report
Auditor’s Independence
Corporate Governance Statement
Directors’ Declaration
Auditor’s Independence Declaration
Financial Information
Consolidated Statement of Profit or Loss and other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditor’s Report
Shareholder information
Facts: The in situ gasification (ISG) process
3
4
6
8
10
12
16
27
27
28
29
32
33
34
35
36
61
64
66
Corporate directory
inside back cover
Telford Basin — a huge reserve to hinge our future operations
Aboveground demonstration
plant (PCD) at Leigh Creek.
5
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019ContentsFor personal use only
It is with great pleasure that I can provide
our shareholders with a summary of the
past financial year, a year which has been
a milestone year for Leigh Creek Energy.
Our investment profile is changing and our company
is becoming an attractive investment prospect for
institutional, larger and long-term shareholders, as
we have achieved all our commitments. As a result
greater interest has been sparked with major gas
companies and institutional investors as we
continuously reach ever more important milestones.
After clearing the way to commence the PCD, and the
successful initiation of the PCD the mood and energy at
LCK was once again very positive with both our
Leigh Creek operational and Adelaide teams. However,
as is the case with In-Situ Gasification operations, the
process of producing syngas would and did take time,
but with careful attention to process and detail we met
all of our objectives.
Over the past year, we have supported businesses at
Leigh Creek, Copley, Port Augusta and Adelaide. The
accommodation, food and logistical requirements meant
that business in Leigh Creek and Copley in particular
1 , 1 5 3 P J 2P RESERVE
benefitted from what has so far been
the busiest period for the Company
in the area.
TE L F O R D B A S
E a s t e r n Australia’s largest undeve l o p e d
a nd uncontracted gas reserve s
I
N
LCK had the opportunity to continue
building our valued relationship with
China New Energy Ltd (CNE) our
major shareholder, with a site visit and
negotiations and now a recent HoA
with CNE where we will take ISG to
China. This is an exciting development and one which
has huge potential for LCK. We have also been working
closely with and proposed Chinese strategic partners in
Australia namely China Communications Construction
Company (CCCC) and Shanghai Electric (SEC).
As I mentioned at the time, to have such large
internationally renowned companies in Adelaide was a
great opportunity for LCK and the state to showcase the
project and demonstrates how significant world players
are excited about our project, technology and potential.
The company has well positioned itself for
the future having unveiled the path towards
commercial operation, a template for the
ISG safety and environmental regulatory
approval process and a huge gas reserve to
underwrite our future operations.
We are very close to reaping the hard
earned and richly deserved success.
This is as a result of many years of
hard work and having the
determination to overcome any and all
obstacles thrown at us in the last few
years. As a result, we now find
ourselves in the envious position of
having a very large gas reserve which
we will endeavour to monetise.
Leigh Creek Energy’s (LCK) completion of the
Pre-Commercial Demonstration Facility (PCD) and
the subsequent large 2P reserve is generating great
interest across both the resource and investment
sectors. LCK’s development of this proven
technology now has eyes focused on our Company
from all around the globe.
There still remains challenges and obstacles for LCK
to deal with, but our track record in dealing with
those challenges and obstacles, combined with a year
of success means that we have what it takes to
achieve the ultimate goal of long- term commercial
ISG operations both in South Australia and
internationally.
After an extraordinarily busy financial year began
with all hands on deck, we received our final
government approvals to begin our PCD operations.
Whilst our focus was firmly set on beginning our
90-day trial, as is the case with many mining and
resource companies, a final-hour court injunction
from the NSW Environmental Defenders Office on
behalf of the Adnyamathanha Traditional Lands
Association ultimately delayed initiation. Thankfully,
the expertise, planning and risk mitigation from our
legal team and staff saw the injunction quickly
dismissed, and we were free to go ahead with
operations.
LCK’s achievements and
growing status saw
media attention over the
past 12 months.
6
Chairman’s letterFor personal use only Then, as we entered Q4 2018, LCK reached its most
significant achievement to date in producing its first
gas at our PCD. The next step for operations on site
was to produce quality syngas – a product with a
chemical makeup offering potential for low-cost
feedstock for high-value ammonia, urea products and
pipeline gas.
We achieved this, followed soon after with
confirmation that the gas was also being produced in
commercial quantities. The validation of the
technology on site unlocked a very productive
quarter for LCK, which featured a Heads of
Agreement with Africary for potential leasing of the
PCD plant once decommissioned, and an
oversubscribed rights issue.
The beginning of 2019 marked another significant
achievement for LCK, when the company announced
the PCD’s success in accomplishing all five pre-
operational objectives – produce syngas consistently,
produce over 1m cubic feet/day, capture information
required for PRMS 2P reserve upgrade, demonstrate
safe and environmentally responsible ISG operations,
and provide key data for commercial project
development. All these objectives were achieved.
This was vital for securing the Company’s 1153 PJ
2P reserve certification, validated by Denver-based
MHA Petroleum Consultants, unequivocally
representing Eastern Australia’s largest undeveloped
and uncontracted gas reserves. It cannot be
understated how important the PCD’s success was for
the future of LCK. The 2P reserve, interest by
Africary, invitation to the Shanghai Energy Exchange,
HoA with China New Energy, an agreed pathway to
commercial approvals with the regulator, were all
dependant on the success of the PCD.
The company has now positioned itself for the future
having unveiled the path towards commercial
operation, a template for the ISG safety and
environmental regulatory approval process and a
huge reserve that supports a commercial project.
The achievement of a large 2P reserve of quality syngas
has allowed LCK to push forward with negotiations with
our potential strategic joint venture partners and has also
allowed us to commence negotiation on gas offtake
agreements in Australia.
LCK’s past financial year has featured our greatest
achievements to date and our most significant steps
towards realising a goal set almost a decade ago.
Those of us at LCK who were here at the beginning
understood the enormity of the challenge we faced trying
to commercialise an ISG project in Australia. But seeing
the growth of the company and the high calibre of our
people working towards the common goal, I am
very comfortable in stating that we are closer than ever
to achieving something significant and special for
our company.
It certainly makes us excited.
I want to thank the dedicated employees at LCK, who
continue to go above and beyond what they are required
to do, taking this company forward. We move forward
with great confidence and even more resolute to make
the most of the opportunities we’ve created for LCK and
the global ISG industry. Finally, I want to thank our
shareholders, whose support has been vital in the past
and remains vital for our company to go forward.
We believe more than ever that your loyalty and our
hard work will see us all enjoy the benefits of success.
Mr Daniel Justyn Peters
Executive Chairman
LCK’s valued relationship with key
stakeholder China Communications
Construction Company (CCCC)
continued with a site visit and
collaboration talks during 2018.
7
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
The past 12 months saw many years’ of
hard work coming to fruition, with the
most notable achievement being the
successful operation of our
Pre-Commercial Demonstration Facility
(PCD) at Leigh Creek followed by
the booking of the maiden 2P gas reserve
of 1,153PJ.
Year of achievements
The PCD was initiated for the first time in October.
The following months’ saw us successfully achieve
all the objectives of the PCD.
The outcome was made all the sweeter when
reflecting on the hurdles our company has had to
jump over to get to this point, and the hard work
and dedication from everyone behind the scenes.
But the success also paved the way for our other
major achievement of the year.
Perhaps the most significant moment for the
company to date was the confirmation of our
PRMS certification of 1,153 PJ 2P Reserve, and it
came shortly after and as a direct result of the
PCD’s success.
This reserve has led to substantial excitement around
the company knowing it bridges the gap between
LCK’s exploratory status and becoming a fully-fledged
developed/crucial energy company.
The size of our reserve and the resulting advantage
LCK has over other junior gas and energy companies
through SA and around the nation is obvious.
What next?
On the back of successful PCD operations, and
substantial PRMS 2P reserve upgrade, LCK is now in
a strong position to focus wholly on commercialising
the Leigh Creek Energy Project (LCEP).
The PCD justified environmental and geographical
approvals from the state government regulator, which
releases the shackles of what is arguably perceived as
one of the most challenging aspects of taking the
LCEP to the commercial stage.
Our 1,153 PJ of 2P reserves means we have an
embarrassment of riches, and the potential to commit
to multi-billion-dollar decisions in the coming
months.
LCK now has Australia’s largest
uncontracted 2P gas reserve available to
Australia’s East Coast market.
The Company’s early plans outlined the
importance of receiving a gas reserve certification
at our Leigh Creek Energy Project. This we
have achieved.
8
Managing Director’s reportFor personal use only
We are now moving forward with commercial
agreements, JV partners, offtake and financing.
I understand the frustration that some shareholders
feel, but these are multi billion dollar decisions. They
take time. We will make the decisions in a mature
way. We will make the right decisions with the right
partners and the right product. We will get it right
for the benefit of all shareholders.
These decisions will be made after the outcomes of
competing options analysis over the course of
2019/2020 become clearer, which will determine our
preferred commercial pathway between pipeline
domestic gas, urea fertiliser, or both.
Unique brand, unique opportunities.
Our growing status as an emerging Australian energy
company understates LCK’s larger-scale increasing
standing as an ISG world leader.
We are compiling the blueprint for commercial success
using the technology we have developed in Australia,
and as is often the case with new and unconventional
technology, we must often face and solve issues
subsequent developers don’t have to deal with.
Perhaps most importantly, we have proven to the world
that we have the technical skillset and unique approach
to make ISG technology work on a commercial scale,
which cement’s our company’s status as a world-leader
and places us firmly on the global stage.
This is witnessed by the numerous approaches we have
had from overseas. Whilst these projects may appear
exciting in themselves we retain our absolute focus on
the LCEP. The best identified site in the world.
Our management resources are limited and we will
deploy them to be successful at the LCEP before we turn
our attention to other opportunities.
People focus
People are what make this happen. It will continue to be
so as we aim to achieve more significant milestones on
the way to commercialisation. I look forward to
celebrating even more significant achievements with the
team, our shareholders and supporters in the near future.
Mr Phil Staveley
Managing Director
Pathway to Commercial
2020
EIS submitted.
Pre-feasibility
study completed.
2021+
EIS approval.
FEED. Feasibility
completed.
2022
FID & commence
commercial
project
construction.
2023+
Commercial
project operation
2019–H2
Complete
options analysis.
Geotechnical
investigation.
Commercial
arrangement
settled.
PCD Operations
2P Reserve
Fertiliser Production
and/or Gas Sales
Australian East Coast Gas 2P Reserves
5202
4802
4802
6,000
)
J
P
(
4,000
s
e
v
r
e
s
e
R
P
2
2000
0
3201
2677
2001
These gas reserves are primarily
contracted to LNG export projects
1153
1153
1100
660
567
305
126
c
e
p
o
n
i
S
s
o
t
n
a
S
c
e
p
o
n
i
S
n
i
g
i
r
O
a
n
i
h
C
o
r
t
e
P
s
p
i
l
l
i
h
P
o
c
o
n
o
C
i
d
e
t
i
Y
G
m
R
L
E
N
E
K
E
E
R
C
H
G
E
L
I
P
H
B
n
o
x
x
E
x
e
n
e
S
y
g
r
e
n
E
h
c
a
e
B
y
g
r
e
n
E
r
e
p
o
o
C
m
u
e
l
o
r
t
e
P
l
a
r
t
n
e
C
9
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
Regulatory Approvals
• Final Activity Notification for PCD Operations
recieved third quarter 2018
Operations
• PCD initiated on 10 October 2018
• PCD successfully completed
Project Financing
• $3.86m Rights Issue to existing shareholders
• $3.0m Issue of Convertible Notes
• $1.25m Placement to existing shareholders
• $3m Share Purchase Plan with existing
shareholders
Environment
• Continuous air quality monitoring throughout the
PCD with no adverse findings
• Baseline flora and fauna studies to continue in 2019
for future studies
• PCD groundwater monitoring program was
conducted throughout the trial with no adverse
findings
• Groundwater and soil vapour monitoring continues
through to 2022
LCK had the opportunity to continue
building our valued relationship with key
stakeholder China Communications
Construction Company (CCCC)
during the year with a site visit and
collaboration talks.
LCK signed a Heads of Agreement with
African energy company Africary for
potential leasing of the PCD plant once
decommissioned.
10
It was a breakout year of achievements
for our operations team on the ground
at site, which oversaw the successful
Pre-Commercial Demonstration.
2018/19 achievementsFor personal use only
Stakeholder Relations
• Leigh Creek medical service funding
• Northern Flinders netball scholarship
• Copley & Districts Gymkhana sponsorship
• Copley Cricket Club sponsorship
• Blinman Gymkhana sponsorship
• Aroona Council Copley Christmas party
sponsorship
• Continued maintaining relationships with all
stakeholders
Procurement
LCK managed PCD project costs by sound
procurement and contract management governance
and practices to:
• Ensure local construction contractors were used
for the main PCD plant activities
• Develop local businesses’ systems and processes to
meet our contractual and operational standards
• Maintain a local team during operations and post
PCD monitoring
• Record a 100% DIFOT (Delivery In Full On
Time) with zero logistics non-productive time
(NPT) to operations
Government Relations
• Continue maintaining relationships with the
government
Leigh Creek Energy committed
$60,000 to Dr Clive Hume to keep his
vital Leigh Creek doctor and pharmacy
service operating during the year.
Leigh Creek Energy was a major
sponsor for one of the region’s only
sporting club’s, Copley Cricket Club,
during its 2018/19 season.
11
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Eastern Australia’s largest undevelopedand uncontracted gas reservesEastern Australia’s largest undevelopedand uncontracted gas reservesFor personal use only Petroleum and Mineral Tenement Schedule
Tenement
Percentage Interest
Grant Date
Location
Petroleum Exploration Licence 650
100%
18 November 2014
Leigh Creek
Petroleum Exploration Licence Application 582
100%
Application Approved
Finniss Springs
Petroleum Exploration Licence Application 643
100%
Application Approved
Callabonna
Petroleum Exploration Licence Application 644
100%
Application Approved
Roxby Downs
Petroleum Exploration Licence Application 647
100%
Application Approved
Leigh Creek
Petroleum Exploration Licence Application 649
100%
Application Approved
Oakdale
Gas Storage Exploration Licence 662
100%
5 February 2016
Leigh Creek
PEL 650 ISG suitable Coal Resource Analysis
Working
section
Resource
Category
Tonnage
(mt)
Thickness
(m)
Relative
Density
(g/cc ad)
Raw Ash
(%ad)
Total
Moisture
(%ad)
Seam
FGH
I
K
Q
V
W
FG
FH
G
I
I1
K
K12
K2
Q
Q
V
V1
W
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Indicated
Inferred
Inferred
Inferred
Inferred
9.1
28.9
7.7
22.7
1.0
14.8
4.6
4.8
93.0
73.4
34.0
1.0
6.2
10.74
20.86
5.29
5.78
2.36
7.01
5.78
3.15
12.08
9.24
5.29
2.41
7.37
8.41
1.62
1.69
1.65
1.67
1.43
1.69
1.66
1.60
1.45
1.44
1.67
1.48
1.76
1.54
37.68
43.00
40.74
40.94
17.66
42.50
40.00
36.36
18.11
17.88
40.75
22.23
49.80
28.73
22.99
22.53
23.37
23.37
29.05
22.56
22.22
24.29
26.88
26.82
22.67
23.55
21.06
24.94
ISG Project Total
301.2
12
Tenement scheduleFor personal use only
Coal and Gas Resources
The Company’s Coal Resource and equivalent Syngas Resource as at 30 June 2019, reported in accordance with 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) guidelines and the 2018 Society
of Petroleum Engineers (SPE) Petroleum Resources Management System (PRMS) guidelines (respectively), are:
Tenement
Location
Coal Resource Coal Resources Coal Resources Syngas Resource
Classification
Category
(Mt) 2019
(Mt) 2018
Syngas Energy Syngas Energy
(Pj) 2018
(Pj) 2019
Petroleum
Leigh Creek
Indicated
Exploration
Licence 650
Inferred
–
376.6
186.6
114.6
1P Reserves
2P Reserves
3P Reserves
1C Resources
2C Resources
3C Resources
–
–
–
2,747.7
2,963.9
3,303.1
–
1,153.2
1,608.3
–
1,469.0
2,126.6
Notes of Gas Resources: For the purposes of ASX Listing Rule
5.43, Leigh Creek Energy confirms that it is not aware of any
new information or data that materially affects the information
included in the 29 March 2019 PRMS ISG Gas Reserve and
Resources Certification and that all material assumptions and
technical parameters underpinning the estimates in the PRMS
certification continue to apply and have not materially changed.
The Gas Resource estimates stated herein are based on, and
fairly represent, information and supporting documentation
prepared by Timothy Hower of MHA Petroleum Consultants
LLC, Denver USA. Mr Hower is a member of the Society of
Petroleum Engineers and has consented to the use of the
Resource estimates and supporting information contained
herein in the form and context in which it appears. All estimates
are based on the deterministic method for estimation of
petroleum resources.
Mineral Resource and Syngas Resource
Governance and Disclosures
Mineral Resources estimated in accordance with the
requirements of the JORC Code, by qualified competent persons
who are consultants to Leigh Creek Energy.
Syngas Resources are estimated in accordance with the
requirements of the Petroleum Resources Management System
(PRMS) approved by the Society of Petroleum Engineers, by
qualified petroleum reserves and resources evaluators who are
consultants to Leigh Creek Energy.
The Minerals Resource and Syngas Resource Statements in the
2019 Annual Report are reviewed by qualified consultants
described below. For Mineral Resources, this is the qualified
competent person, and for the Syngas Resources, the qualified
petroleum reserves and resource evaluator.
Notes on Coal Resources: For the purposes of ASX Listing Rule
5.23, Leigh Creek Energy confirms that it is not aware of any
new information or data that materially affects the information
included in the 18 March 2019 Resources Statement and that
all material assumptions and technical parameters underpinning
the estimates in the Resources Statement continue to apply and
have not materially changed.
The coal resources reported herein, insofar as they relate to
mineralisation, are based on information compiled by Mr
Warwick Smyth & Lynne Banwell of GeoConsult Pty Ltd. Mr
Smyth is a Member of the Australasian Institute of Mining and
Metallurgy and the Australian Institute of Geoscientists, who
has more than 25 years’ experience in the field of activity being
reported. Lynne Banwell is a member of the Australian Instititue
of Mining and Metallurgy and the Geological Society of
Australia and has over 30 years experience in this style of
mineralisation. Both Mr Smyth and Mrs Banwell have sufficient
experience which is relevant to the style of mineralisation and
type of deposit under consideration and to the activity he is
undertaking to qualify as a Competent Person as defined in the
2012 Edition of the “Australasian Code for Reporting
Exploration Results, Mineral Resources and Ore Reserves”.
Mr Smyth consents to the inclusion in the report of coal
resources estimates based on his information in the form and
14 context in which it appears.
13
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
14
For personal use only 9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
I
M
I
L
Y
G
R
E
N
E
K
E
E
R
C
H
G
I
E
L
15
Directors’ ReportFor personal use only
Leigh Creek Energy Limited is a public
company incorporated and domiciled
in Australia and listed on the Australian
Securities Exchange.
The directors present their report together
with the financial statements of the
consolidated entity, being Leigh Creek
Energy Limited (“the Company” or
“Leigh Creek Energy”) and its controlled
entities (“the Group”) for the year ended
30 June 2019.
Directors
The names of the directors in office at any
time during or since the end of the year are:
Daniel Justyn Peters
(appointed 28 November 2014)
Phillip Staveley
(appointed 5 December2017)
Gregory English
(appointed 22 September 2015)
Murray Chatfield
(appointed 30 June 2016)
Zhe Wang
(appointed 1 July 2017)
Zheng Xiaojiang
(appointed 5 December 2017)
Information on continuing Directors
Daniel Justyn Peters LLB, BA (Politics/Jurisprudence) GDLP
Executive Chairman
Audit and Risk Committee Member
Director since 2014
Experience & expertise
Mr Peters joined Linc Energy soon after its listing on the ASX
when Linc Energy was considered a world leader in
underground coal gasification. In his six years at Linc Energy
Mr Peters held the positions of General Manager Environment
and Government Relations, General Manager Business
Development, Executive General Manager North Asia and
finished as Executive General Manager of Investor Relations.
Prior to joining Linc Energy Mr Peters was employed as
National Property and Environment Manager and head of
North Asia for Airservices Australia, and prior to his time with
Airservices Australia Mr Peters was employed at the
Queensland Environmental Protection Authority (EPA) as
head of Investigations and Compliance and as acting Director
of Central and Northern Regions. He managed the integration
of the environmental regulation of the Queensland Mining
Industry into the EPA. His experience across a broad range of
business units from both government and private sector will
prove invaluable in developing the Leigh Creek Energy project.
Other current listed directorships: None
Previous listed directorships (last three years)
Emperor Energy Ltd – resigned 27 March 2019
Directors have been in office since the start
of the financial year to the date of this report
unless otherwise stated.
Phillip Staveley CPA, BA (Acc) (Hons), Dipl Btr
Managing Director
Director since 2017
Experience & expertise
Mr Staveley is a qualified Accountant who has 30 years’
experience working in the resources sector.
He started his career in the oil and gas sector working for
Schlumberger in London, followed by a number of years with
SAGASCO and SAOG (South Australian Oil and Gas
Company). He spent almost ten years with Normandy Mining
Ltd. Whilst with Normandy he fulfilled a number of planning,
finance, M&A and commercial roles, including the
establishment of a Group Supply Function and three years
based in Rio de Janeiro as the CFO of TVX Normandy
Americas.
Since 1998 he has been involved in mining and contracting
companies in the position of CFO and more latterly, CEO
roles with an emphasis on strategy and corporate finance.
Other current listed directorships: None
Previous listed directorships (last three years)
Oakdale Resources Limited
16
Directors’ ReportFor personal use only
Gregory D English LLB, B.Eng (Mining)
Zhe Wang B.Sc (Thermal Dynamics), M.Eng (Energy Engineering
Non-Executive Director
Audit and Risk Committee Member
Director since 2015
and Thermal Physics)
Non-Executive Director
Director since 2017
Experience & expertise
Zheng is a senior finance executive and brings wide
experience in the finance sector in both Australia and
China. His experience includes having been a senior
official for The People’s Bank of China in Australia
and New Zealand. Zheng was responsible for
facilitating the investment in LCK by China New
Energy, LCK’s largest shareholder.
Other current listed directorships: None
Previous listed directorships (last three years): None
Zheng Xiaojiang BCom
Non-Executive Director
Director since 2017
Experience & expertise
Zheng is a senior finance executive and brings wide
experience in the finance sector in both Australia and
China. His experience includes having been a senior
official for The People’s Bank of China in Australia
and New Zealand. Zheng was responsible for
facilitating the investment in LCK by China New
Energy, LCK’s largest shareholder.
Other current listed directorships: None
Previous listed directorships (last three years): None
Experience & expertise
Mr English is an experienced and qualified mining
engineer and lawyer with over 25 years of
involvement in the resources industry. As a mining
engineer he has worked on underground and open pit
coal mines, including working as a mining engineer at
the Leigh Creek Coalfield where he lived in the Leigh
Creek town. As a lawyer Greg has acted for numerous
oil and gas companies and advised on numerous gas
marketing, gas transportation and similar transactions.
Greg’s experience in the coal industry, and in
particular his knowledge of the Leigh Creek Coalfield,
and experience and contacts in the oil and gas industry
is a significant asset to the Company.
Other current listed directorships
Archer Exploration Limited and Core Exploration
Limited
Previous listed directorships (last three years): None
Murray K Chatfield B Com Ag (Economics and Marketing),
MBA, ACT, MAICD
Non-Executive Director
Audit and Risk Committee Chair
Director since 2016
Experience & expertise
Mr Chatfield has extensive experience within finance
with nearly 30 years’ experience within investment
banking, hedge funds and corporate finance both in
Australia and internationally. He was a senior
Economist with the New Zealand government before
joining Bankers Trust in London. He then moved into
Hedge Funds initially as European Treasurer and then
as a Partner and COO in a Relative Value Hedge Fund.
He was the COO and Partner in an Australian based
fund focussed on Global Macro events. He has been
and is still, actively involved as a Director of several
unlisted companies in the Commodity and Marketing
areas. Mr Chatfield’s career covers finance, treasury,
accounting, operational efficiency, risk management
(business, market, tax and regulatory), legal and
regulatory compliance and direct financial market
interaction.
Other current listed directorships: None
Previous listed directorships (last three years): None
17
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
Company Secretary
The PCD operation was able to:
Jordan Mehrtens is a qualified lawyer, and has other
qualifications in finance and urban and regional
planning. Jordan has worked with Leigh Creek
Energy since its commencement, providing regulatory,
compliance and other analytical advice. Jordan is a
member of the Governance Institute of Australia and
performs the secretarial role in the Company. Jordan
has been the Company Secretary of Leigh Creek
Energy Limited since 2015.
Principal activities
The principal activity of the Group was advancing the
development of its Leigh Creek Energy Project (LCEP).
1. Produce syngas comprising Methane, Hydrogen,
Carbon Monoxide and Nitrogen
2. Produce syngas at over 1 million cubic feet
per day
3. Capture information required to upgrade the SPE-
PRMS 2C resource to 2P reserve
4. Demonstrate that LCK can operate the gasifier
safely and in an environmentally responsible
manner
5. Provide key data and information for the
development of the commercial project.
Review of operations and financial results
Leigh Creek Energy Project:
The Company continued its progress towards full
regulatory approval, above and underground
construction and subsequent operation of the
Pre-Commercial Demonstration Facility (PCD)
at the LCEP. PCD operation commenced in October
2018 and was completed and decommissioned by
June 2019.
On 3 September 2018, the Company received its final
Activity Notification approval for PCD operations,
allowing the Company to commence operation,
decommissioning and monitoring of the PCD.
Following this approval, on 7 September 2018 the
Company was served legal documents on behalf of the
Adnyamathanha Traditional Lands Association seeking
judicial review of government approval and seeking an
injunction to prevent commencement of the PCD. On
19 September 2018 the South Australian Supreme
Court dismissed the application for an injunction and
the Company was able to proceed with the project. The
application for judicial review was also dismissed and
announced to the market on 17 October 2018.
On 11 October 2018, the Company announced the
successful initiation of the gasifier and the production
of first syngas at the PCD, and announced successful
production of commercial syngas on 18 February 2019,
with the objectives of the PCD having been achieved.
The Company then announced the receipt of a PRMS
certification of 1,153 PJ 2P on 27 March 2019.
On 25 June 2019, the Company announced the
completion of the process to cease operations,
shutdown and preserve the plant and facilities
associated with the PCD. On completion of shutdown
the Company confirmed that there were no reportable
incidents at the site, confirming that the process was
operated and shutdown in a safe, regulated and
controlled manner. The Company’s monitoring
regime commenced and to date also confirms no
environmental impacts or safety issues from the PCD
within its zone of operation.
Finance and Corporate:
The consolidated operating loss of the financial year
to 30 June 2019 was $9,534,857 (2018:
($6,018,850)). Expenditure incurred on the LCEP
capitalised as Exploration expenditure, net of
2017/18 R&D tax offset rebates received
($9,010,220) and R&D rebates receivable for
2018/19 ($6,363,118) was $8,625,766 (2018:
$10,414,426).
The Company has a working capital facility with the
Commonwealth Bank of Australia (CBA) to bring
forward access to refundable R&D tax concessions
(refer Note 10 for Borrowings). This has provided
LCK with the flexibility to bring forward its tax
offsets by providing a draw down on eligible
expenditure and for CBA to be repaid from the
company’s taxation return rebate. In June 2018 LCK
extended the Facility to December 2019 and the
facility limit was increased to $10.5m. Following
receipt of the 2017/18 ATO rebate and clean down
of the Facility the limit decreased to $4m to match
anticipated 2018/19 tax rebates. A total of
$3,870,000 was drawn under the extended facility
as at 30 June 2019.
18
Directors’ ReportFor personal use only Dividends
The Directors do not recommend the payment of a
dividend and no amount has been paid or declared
since the end of the previous financial year.
Significant changes in state of affairs
No significant change in the state of affairs of the
Group occurred during the financial year, other than
as already referred to in this report.
Likely developments, prospects and business
strategies
The Company continues to progress its
commercialisation plans and is in negotiation with
several strategic partners.
After reporting date events
On 1 August 2019 the Company completed a
$3.2 million capital raise with professional,
sophisticated and institutional investors, with
14,322,222 ordinary shares issued on that day at a
price of $0.225 per share.
On 13 August 2019 the Company signed a Heads of
Agreement with China New Energy Group Limited to
develop in-situ gasification in China. The agreement
establishes the process to develop a full commercial
agreement, with a view to forming a joint venture
company.
In July 2018, the Company completed a Share
Purchase Plan, offering eligible shareholders the
opportunity to purchase up to $15,000 of shares at
$0.16 per share. On 20 July 2018 the Company
issued 9,510,000 new ordinary shares in accordance
with the Share Purchase Plan, and the unsubscribed
balance of 9,240,000 ordinary shares was placed and
issued to shareholders on 30 July 2018.
On 17 December 2018, the Company announced a
$5.14m capital raise consisting of a $1.28m placement
and a non-renounceable rights issue providing eligible
shareholders with the opportunity to by one new
share in the Company for every fifteen shares held, at
12 cents per share. On 7 February 2019, the
Company announced additional funding to the rights
issue, with the issue of convertible notes with a face
value of $3,000,000 and fixed conversion price of
12 cents per share. Following successful PCD
operations, the rights issue closed on 28 February
2019, and 15,535,591 shares were issued on 7 March
2019 under the offer, and 16,610,133 oversubscribed
shortfall shares were issued on 19 March 2019. The
convertible notes were converted and issued as shares
on 3 April 2019, which included interest payable as
shares totalling $1,818,013, in addition to a placement
fee payable in shares worth $397,500.
On 16 January 2019 the Company announced the
execution of a Heads of Agreement with African
Carbon Energy Pty Ltd, providing the framework for
agreements to enable the Company’s PCD plant and
equipment to be leased by Africary, an option to
purchase, and for the Company to provide advisory
services to Africary.
Following successful operations of the PCD, the
Company advanced negotiations with potential
strategic partners.
The Chairman’s report contains further
information on the detailed operations of the Group
during the year.
19
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only Options forfeited during the period up to and
including the date of this report include 8,708,750
options.
Options granted during the period up to and including
the date of this report to employees and consultants
include 25,790,000 all with different expiry dates
listed below.
Grant Date
Date of
expiry
Exercise Number
under
option
price
17 July 2018
16 July 2022
$0.25 5,790,000
18 April 2018
17 April 2023
$0.35 5,000,000
4 July 2018
3 July 2022
$0.25 5,000,000
1 November 2018 31 October 2021
$0.20 1,500,000
1 November 2018 31 October 2021
$0.22 1,500,000
1 November 2018 31 October 2021
$0.24 1,500,000
1 November 2018 31 October 2021
$0.26 1,500,000
11 February 2019 31 December 2020
$0.25 4,000,000
During the year ended 30 June 2019, and to the date
of this report 470,000 shares of Leigh Creek Energy
Limited were issued on the exercise of options.
None of the options on issue entitles the holders to
participate, by virtue of the options, in any dividend
or share issue of the Company.
Meetings of Directors
During the financial year, the number of meetings
held at which a director was eligible to attend and the
number actually attended by each director were:
Board Meetings
Audit & Risk
Committee
Director
D J Peters
P J Staveley
G D English
M K Chatfield
Z Wang
Z Xiaojiang
Meetings Meetings Meetings Meetings
attended
attended
held
held
13
13
13
13
13
13
13
12
13
13
12
12
5
-
5
5
-
-
5
-
5
5
-
-
Unissued shares under options
Unissued ordinary shares of Leigh Creek Energy
Limited under option at the date of this report are:
Grant Date
Date of
expiry
Exercise Number
under
option
price
14 October 2015
14 October 2019
$0.21 1,000,000
14 October 2015
14 October 2020
$0.25 1,000,000
1 December 2015 31 July 2020
$1.50 1,000,000
1 December 2015 30 November 2020
$0.30 7,340,000
11 July 2016
30 November 2020
$0.49
27,500
15 July 2016
8 May 2021
$0.30
800,000
4 October 2016
10 October 2021
$0.35 2,000,000
4 October 2016
10 October 2021
$0.45 2,000,000
10 July 2017
30 November 2020
$0.30
306,000
17 July 2018
16 July 2022
$0.25 5,790,000
18 April 2018
17 April 2023
$0.35 5,000,000
4 July 2018
3 July 2022
$0.25 5,000,000
1 November 2018 31 October 2021
$0.20 1,500,000
1 November 2018 31 October 2021
$0.22 1,500,000
1 November 2018 31 October 2021
$0.24 1,500,000
1 November 2018 31 October 2021
$0.26 1,500,000
11 February 2019 31 December 2020
$0.25 4,000,000
Total
41,263,500
20
Directors’ ReportFor personal use only
Auditor’s independence declaration
The Auditor’s Independence Declaration for the year
ended 30 June 2019 can be found on page 29 and
forms part of the Directors’ Report.
Proceedings on behalf of the company
No person has applied to the Court under section 237
of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene
in any proceedings to which the Company is a party,
for the purpose of taking responsibility on behalf of
the Company for all or part of those proceedings.
Proceedings
The Company is not currently a party to legal
proceedings brought against it or initiated by it at the
date of this report.
Environmental issues
The Company and subsidiaries are required to
comply with various Commonwealth and State
environmental legislation in relation to its planned
exploration activities and future development at the
Leigh Creek site. No notification of any breach of any
environmental regulation has been received in respect
of any of the Company’s exploration activities during
the year.
Indemnities given to, and insurance premiums
paid for, officers
During the year, the company paid a premium to
insure officers of the Group. The officers of the Group
covered by the insurance policy include all Directors.
The liabilities insured are legal costs that may be
incurred in defending civil or criminal proceedings
that may be brought against the officers in their
capacity as officers of the Group, and any other
payments arising from liabilities incurred by the
officers in connection with such proceedings, other
than where such liabilities arise out of conduct
involving a willful breach of duty by the officers or
the improper use by the officers of their position or of
information to gain advantage for themselves or
someone else to cause detriment to the Group.
Details of the amount of the premium paid in respect
of insurance policies are not disclosed as such
disclosure is prohibited under the terms of the
contract.
The Group has not otherwise, during or since the end
of the financial year, except to the extent permitted by
law, indemnified or agreed to indemnify any current
or former officer of the Group against a liability
incurred as such by an officer.
21
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only 1. Principles used to determine the nature and
amount of remuneration
The remuneration policy is designed to align the
objectives of the Key Management Personnel with
shareholder and business objectives by providing
a fixed remuneration package to non-executive
Directors and time based remuneration to
Executive Directors. The Board of Leigh Creek
Energy believes the policy to be appropriate and
effective in attracting and retaining the best
Directors and Executives to manage and direct
the Group, as well as create goal congruence
between Directors, Executives and shareholders.
The Company’s policy for determining the nature
and amounts of emoluments of board members
and other Key Management Personnel of the
Company is as follows.
The Company’s Constitution specifies that the
total amount of remuneration of non-executive
Directors shall be fixed from time to time by a
general meeting. The current maximum aggregate
remuneration of non-executive Directors has
been set at $750,000 per annum (as approved by
shareholders on 22 August 2018). Directors may
apportion any amount up to this maximum
amount amongst the non-executive Directors as
they determine. Directors are also entitled to be
paid reasonable travelling, accommodation and
other expenses incurred in performing their
duties as Directors.
Non-executive Director remuneration is by way
of fees and statutory superannuation
contributions. Non-executive Directors do not
participate in schemes designed for remuneration
of executives but they may receive options or
bonus payments subject to shareholder approval
and are not provided with retirement benefits
other than salary sacrifice and statutory
superannuation.
The Company’s remuneration structure is based
on a number of factors including the particular
experience and performance of the individual in
meeting key objectives of the Company. The
Board is responsible for assessing relevant
employment market conditions and achieving the
overall, long term, objective of maximising
shareholder benefits through the retention of high
quality personnel.
The Board may approve the payment of cash
bonuses from time to time in order to reward
individual executive performance in achieving key
objectives as considered appropriate by the Board.
The Company also has an Employee Share
Option Plan, approved by shareholders, that
enables the Board to offer eligible employees
options to acquire ordinary fully paid shares in
the Company. Under the terms of the Plan,
options to acquire ordinary fully paid shares may
be offered to the Company’s eligible employees at
no cost unless otherwise determined by the Board
in accordance with the terms and conditions of
the Plan. The objective of the Plan is to align the
interests of employees and shareholders by
providing employees of the Company with the
opportunity to participate in the equity of the
Company as an incentive to achieve greater
success for the Company and to maximise the
long term performance of the Company, and can
also be used as a reward for performance.
As the Company is developing an energy asset
which is not yet in production, in the opinion of
the Board, the Company’s earnings and the
consequences of the Company’s performance on
shareholder wealth are not related to the
Company’s remuneration policy.
Voting at 2018 AGM
Of the total valid available votes lodged, Leigh
Creek Energy received 88.24% “yes” votes on its
remuneration report for the 2018 financial year
with the motion carried unanimously on a show
of hands as an ordinary resolution. The Company
did not receive any specific feedback at the AGM
on its remuneration practices.
Use of remuneration consultants
The Company has engaged and sought
benchmarking advice from remuneration
consultants. In 2018 independent consultants
were engaged to undertake market benchmarking
to provide information on KMP remuneration.
The Corporations Act 2001 requires companies
to disclose specific details regarding the use of
remuneration consultants. The mandatory
disclosure requirements only apply to those
advisors who provide a “remuneration
recommendation” as defined in the Corporations
Act 2001. The Remuneration Committee did not
receive any remuneration recommendations
during the reporting period.
22
Remuneration Report – auditedDirectors’ ReportFor personal use only
2. Details of remuneration
Details of the nature and amount of each element of the remuneration of each Key Management Personnel
(KMP) of the Group are shown in the table below:
Short term benefits
Post-employment
benefits
Share based
payments
Directors
Year Directors Salary &
Other
Fees
wages
Non-monetary Super
benefits1
contributions benefits
Termination Options2
Total
Executive Directors
D J Peters
2019
2018
P J Staveley
2019
2018
-
-
-
-
Non Executive Directors
G D English
2019
50,000
2018
50,000
M Chatfield
2019
50,000
2018
50,000
Z Wang
2019
54,750
2018
29,168
Z Xiaojiang
2019
50,000
2018
28,782
325,130 105,0957
3,713
20,155
- 190,4043
644,497
309,790
-
4,402
27,470
-
4,723
346,385
374,930
99,5927
-
19,555
- 190,4043
684,481
324,877
-
-
-
-
-
-
-
-
-
-
-
-
21,019
- 210,8334
- 115,0004
3,926
28,268
-
13,792
370,863
-
-
-
-
-
-
-
-
4,750
4,750
4,750
4,750
-
2,771
4,750
2,734
-
-
-
-
-
-
-
-
-
-
-
-
-
54,750
54,750
54,750
54,750
54,750
114,161
167,119
-
265,583
114,161
260,677
Other key management personnel
J Haines5
M Terry6
2019
2018
2019
2018
-
-
-
-
472,208
282,500
34,680
257,000
-
-
-
-
1,003
20,985
22,431
30,913
547,540
892
26,838
-
13,792
324,022
-
-
3,641
3,833
30,913
73,067
24,415
-
6,896
288,311
Total
2019 204,750 1,206,948
415,520
4,716
78,586
26,264
442,633
2,379,418
2018 157,950 1,174,167
136,019
9,220
121,996
-
267,525
1,866,877
Performance
based on % of
remuneration
46%
1%
42%
4%
-
-
-
-
-
68%
-
44%
51%
4%
42%
2%
Notes
(1) Non-monetary benefits include benefits provided to the KMP on which Fringe Benefits tax is paid.
(2) In accordance with the Accounting Standards, remuneration includes a proportion of the fair value of the options granted or outstanding
during the year. The notional value of options is determined as at the issue date and is progressively allocated over the vesting period.
The amount included as remuneration is not indicative of the benefit (if any) that the employee may ultimately realise should the option
vest. The notional value of the options as at the issue date has been determined in accordance with the accounting policy Employee
Remuneration Note 11.
(3) Options were granted to Executive Directors on 4 July 2018. The remuneration was approved by shareholders on 22 August 2018 at the
Annual General Meeting. Under accounting rules, the options were expensed in the financial year based on the provisional grant date
(4) Mr Xiaojiang provided consulting services during the year.
(5) Mr Haines resigned effective 5 April 2019.
(6) Mr Terry resigned effective 17 August 2018.
(7) The following Short Term Incentives were approved by the Board on 20 June 2019 in recognition of achievements for the year ended
30 June 2019; Mr Peters $105,095 and Mr Staveley $99,592 both payable in shares subject to shareholder approval.
23
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
3. Service agreements
Remuneration and other terms of employment for
the Executive Directors and other Key
Management Personnel are formalised in a
Service Agreement. The major provisions of
the agreement relating to remuneration are set
out below:
Employee
Salary & Super Term of agreement Notice period1
D J Peters
$345,285
Ongoing
P J Staveley $394,485
Ongoing
3 months
6 months
Notes
(1) Service agreements are presented as at 30 June 2019.
The options were provided at no cost to the
recipients. All options expire on the earlier of the
expiry date or cessation of the individual’s
employment (except retiring directors).
Options issued in previous financial years that lapsed
or were forfeited during the current financial year:
Name
Number of options forfeited Financial year in which
(lapsed) during the year
those options were granted
M Terry
1,000,000 1
2016
Notes:
(1) Mr Terry acquired 1,000,000 options with a grant date of
1 December 2015 with an employment condition, all of which
cancelled on his resignation 17 August 2018.
4. Share-based remuneration
Unlisted options are granted to Directors and Key
Management Personnel as part of their
remuneration. The options are not granted
subject to performance criteria, but are issued to
the relevant directors and Key Management
Personnel of the Group to increase goal
congruence between executives, directors and
shareholders. All options refer to options over
ordinary shares of the Company, which are
exercisable on a one-for-one basis under the
terms of the agreements. Options granted during
this financial year:
Name
Number Grant
granted
date
Number
vested
Last
Vesting &
first exercise exercise
date
date
D J Peters 1 2,500,000 22 August 2,500,000 22 August
2018
2018
P J Staveley 1 2,500,000 22 August 2,500,000 22 August
2018
2018
3 July
2022
3 July
2022
Total
5,000,000
Notes:
(1) Options were granted to Executive Directors on 22 August
2018. The remuneration was approved by shareholders on 22
August 2018 at the Annual General Meeting. Under accounting
rules, the options were expensed in the financial year based on
the provisional grant date.
24
Remuneration Report – auditedDirectors’ ReportFor personal use only
A U D I T O R ’ S I N D E P E N D E N C E
5. Other information
Number of Options held by Key Management Personnel
The number of options to acquire ordinary shares in the
Company held during the 2018 reporting period by
each of the Group’s Key Management Personnel,
including their related parties, is set out below:
Name
Balance at
start of year
Granted as
remuneration
Exercised
Other changes
Closing balance
Vested and
exercisable at
the end of the
reporting period
Vested and
unexercisable
at the end of the
reporting period
D J Peters 1
750,000
2,500,000
P J Staveley 1
2,000,000
2,500,000
G D English
2,000,000
M Chatfield
2,000,000
Z Wang 2
Z Xiaojiang 2
-
-
J Haines
2,000,000
M Terry 3, 4
1,000,000
-
-
2,000,000
2,000,000
400,000
400,000
Total
9,750,000
9,800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,250,000
3,000,000
4,500,000
4,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,400,000
1,900,000
(1,000,000)
400,000
400,000
(1,000,000)
18,550,000
17,300,000
-
-
-
-
-
-
-
-
-
Notes
(1) Options were granted to Executive Directors on 22 August 2018 and approved by shareholders on 22 August 2018 at the Annual
General Meeting. Under accounting rules, the options were expensed in the financial year based on the provisional grant date.
(2) Options that form part of Non-Executive Director remuneration package were granted and approved by shareholders on
22 August 2018 at the Annual General Meeting, the value of $114,161 recognised in 2018 Remuneration Report. Under
accounting rules, the options were expensed in the financial year based on the provisional grant date.
(3) Options were granted to Key Management Personnel on 18 July 2018. The remuneration was approved by shareholders on
22 August 2018 at the Annual General Meeting. Under accounting rules, the options were expensed in the financial year based on
the provisional grant date.
(4) Mr Terry acquired 1,000,000 options with a grant date of 1st December 2015 with an employment condition, all of which cancelled
on his resignation 17 August 2018.
Number of Shares held by Key Management Personnel
Name
D J Peters 4
P J Staveley 2
G D English
M Chatfield 2
Z Wang
Z Xiaojiang 3
J Haines
M Terry
Total
Balance at
start of year
Granted as
remuneration
Received on
exercise
Other changes1
Held at the end of
the reporting period
-
550,000
-
1,308,914
-
-
-
-
1,858,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
136,667
-
-
686,667
-
287,263
1,596,177
-
-
-
-
-
-
-
-
423,930
2,282,844
Notes
(1) Other changes include purchases, sales or transfers during the financial year.
(2) M Chatfield and P Staveley both acquired shares under the NRRI in March 2019.
(3) Z Xiaojiang has an interest in 45,831,347 shares held by Crown Ascent Development Limited due to having a 25% interest in Crown.
(4) Justyn Peters close family members hold 4,843,433 shares. Mr Peters does not have any interest in these shares.
25
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
Loans to Key Management Personnel
At balance date, the Group does not have any
outstanding receivables relating to loans to
employees or Key Management Personnel.
Related party transactions
During the reporting period:
Piper Alderman lawyers were paid $46,255
(2018: $82,909) for legal services rendered to
the Group. Greg English is a partner at Piper
Alderman lawyers;
ARK Energy Ltd had a service agreement in place
with the Company for facilities and accounting
services. Fees rendered to the Company were
$9,432 (2018: $14,700);
Investment Company Services Pty Ltd were paid
$45,509 (2018: $60,116) for providing investor
relations services to the Group. The party is
related to Mr Peters, Executive Chairman;
On 7 February 2019 the Company issued
convertible notes with a face value of $3m to
Crown Ascent Development Limited. The issue
price was $0.12 per note, convertible into a fully
paid share, with interest calculated at 12.2% per
annum (to be capitalised and paid in shares at
the conversion price), and early conversion
required full payment of interest over the 2 year
term of the notes. In April 2019, these
convertible notes were converted to shares
resulting in an interest charge of $1,818, 013. In
addition, Crown Ascent Development Limited
earned a 6% establishment fee which was paid in
shares at the conversion price, worth $397,500.
Mr Xiaojiang is a Director of Crown Ascent and
non-executive director of Leigh Creek Energy.
Mr Xiaojiang provided consulting services during
the year totalling $210,833.
END OF AUDITED REMUNERATION REPORT
26
Remuneration Report – auditedDirectors’ ReportFor personal use only
Grant Thornton Audit Pty Ltd continues in office
in accordance with Section 327 of the Corporations
Act 2001.
The auditor has not been engaged during the year for
any non-audit services which may have impaired the
auditor’s independence. The auditor’s independence
declaration for the year ended 30 June 2019 has been
received and is included in this report.
Signed in accordance with a resolution of the Board.
D J Peters
Director
Dated at Adelaide, South Australia this 28th day of
August 2019
The Board of Directors (the Board) of Leigh Creek
Energy Limited (the Company) is committed to
achieving and demonstrating the highest standard of
Corporate Governance.
The Board guides the affairs of the Company on
behalf of the shareholders by whom they are elected
and to whom they are accountable. The Board has
responsibility for the overall Corporate Governance of
the Company including its strategic direction,
establishment of goals for its management and
monitoring the achievement of those goals.
The individual Directors recognise that their primary
responsibility is to the owners of the Company, its
shareholders, while simultaneously having regard for
the interests of all stakeholders and the broader
community.
The statement outlines the Company’s Corporate
Governance Practices in place during the financial
year. The Company’s statement is made based on
the ASX Corporate Governance Councils Corporate
Governance Principles and Recommendations
(4th Edition).
Although the ASX Corporate Governance Council’s
Recommendations are not mandatory, under listing
rule 4.10.3 companies are required to provide a
statement disclosing the extent to which they have
followed the recommendations in the reporting
period, identifying any principles which have not been
followed with reasons for not having done so.
The statement of revised principles and the
Company’s compliance with each principle are set out
in the Company’s website www.lcke.com.au
27
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Auditor’s Independence Corporate Governance StatementFor personal use only D I R E C T O R S ’ R E P O R T
1. In the opinion of the Directors of Leigh Creek Energy Limited:
a. The consolidated financial statements and notes of the company are in
accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of the financial position as at 30 June 2019 and
of the performance of the Group for the year ended on that date; and
ii. Complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
b. There are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable.
2. The Directors have been given the declarations required by Section 295A of the
Corporations Act 2001 from the Chief Executive Officer and Chief Financial
Officer for the financial year ended 30 June 2019.
3. Note 1 confirms that the consolidated financial statements also comply with
International Financial Reporting Standards.
This declaration is made in accordance with a resolution of the Board of Directors.
D J Peters
Director
Dated at Adelaide, South Australia this 28th day of August 2019
28
Directors’ DeclarationFor personal use only
D I R E C T O R S ’ R E P O R T
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
F +61 8 8372 6677
E info.sa@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Leigh Creek Energy Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Leigh Creek
Energy Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been:
a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
I S Kemp
Partner – Audit & Assurance
Adelaide, 28 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
29
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Financial InformationAuditor’s Independence DeclarationFor personal use only
30
For personal use only 9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
D
E
T
I
M
I
L
Y
G
R
E
N
E
K
E
E
R
C
H
G
I
E
L
31
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Financial InformationFor personal use only
for the year ended 30 June 2019
Other income
Other expenses
Depreciation of property, plant and equipment
Notes
2a
2b
2019
$
13,455
2018
$
55,000
(3,054,725)
(2,711,097)
(59,116)
(39,951)
Employee benefits expense
11
(4,385,866)
(3,192,731)
Finance income
Finance costs
Loss before income tax
Income tax benefit
Loss for the year after income tax
Total other comprehensive income
Total comprehensive (loss) for the year
Earnings per share
Basic (cents per share)
Diluted (cents per share)
The accompanying notes form part of these financial statements.
(7,486,252)
(5,888,779)
114,430
180,645
(2,163,035)
(310,716)
(9,534,857)
(6,018,850)
-
-
(9,534,857)
(6,018,850)
-
-
(9,534,857)
(6,018,850)
(0.02)
(0.02)
(0.02)
(0.02)
3a
3b
4
20
20
32
Consolidated Statement of Profit or Loss and Other Comprehensive IncomeFor personal use only
as at 30 June 2019
Assets
Current
Cash assets
Trade and other receivables
Other financial assets
Total Current Assets
Non-current
Property, plant and equipment
Exploration and evaluation expenditure
Total Non-Current Assets
Total assets
Liabilities
Current
Trade and other payables
Borrowings
Employee entitlements
Total Current liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent:
Share capital
Share option reserve
Retained losses
Total equity
The accompanying notes form part of these financial statements.
Notes
2019
$
2018
$
5
6
7
8
9
10
11
3,057,383
9,323,648
6,524,077
9,359,171
-
142,434
9,581,460
18,825,253
412,699
282,658
25,025,917
16,400,151
25,438,616
16,682,809
35,020,076
35,508,062
767,908
5,757,263
3,989,012
3,830,000
517,416
538,584
5,274,336
10,125,847
5,274,336
10,125,847
29,745,740
25,382,215
12
13
71,000,050
58,327,054
2,581,728
1,802,721
(43,836,038)
(34,747,560)
29,745,740
25,382,215
33
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Consolidated Statement of Financial PositionFor personal use only
for the year ended 30 June 2019
Share
capital
$
Retained
losses
$
Share option
reserve
$
Total
equity
$
Balance 1 July 2018
58,327,054
(34,747,560)
1,802,721
25,382,215
Total comprehensive income
Total profit or (loss)
Other comprehensive income
Total comprehensive income
-
-
-
(9,534,857)
-
(9,534,857)
-
-
-
(9,534,857)
-
(9,534,857)
Transactions with members in their
capacity as owners:
Issued of share capital (net of costs)
10,457,483
Shares issued on convertible note – non-cash
2,215,513
Employee share based payment options
-
Transfer of lapsed options
Total transactions with owners
12,672,996
-
-
-
446,379
446,379
10,457,483
-
2,215,513
1,225,386
1,225,386
(446,379)
-
779,007
13,898,382
Balance at 30 June 2019
71,000,050
(43,836,038)
2,581,728
29,745,740
Balance 1 July 2017
41,100,034
(28,728,710)
1,456,144
13,827,468
Share
capital
$
Retained
losses
$
Share option
reserve
$
Total
equity
$
Total comprehensive income
Total profit or (loss)
Other comprehensive income
Total comprehensive income
Transactions with members in their
capacity as owners:
-
-
-
(6,018,850)
-
(6,018,850),
Issued of share capital (net of costs)
17,227,020
Employee share based payment options
-
Total transactions with owners
17,227,020
-
-
-
-
-
-
-
(6,018,850)
-
(6,018,850)
17,227,020
346,577
346,577
346,577
17,573,597
Balance at 30 June 2018
58,327,054
(34,747,560)
1,802,721
25,382,215
The accompanying notes form part of these financial statements.
34
Consolidated Statement of Changes in Equity For personal use only
for the year ended 30 June 2019
Cash flows from operating activities
Sundry income received
Interest paid
Interest received
R&D rebates received
Payments to suppliers and employees
Notes
2019
$
2018
$
10,000
55,000
-
-
136,203
180,610
9,010,220
2,173,372
(5,824,137)
(5,543,770)
Net cash (used in) operating activities
16(b)
(3,332,286)
(3,134,788)
Cash flows from investing activities
Purchase of property, plant & equipment
Proceeds from disposal of assets
Capitalised exploration costs
Net cash (used in) investing activities
Cash flow from financing activities
Issue of shares
Share issue transaction costs
Proceeds from borrowings
Payment of borrowing costs
(Repayments) of borrowings
Net cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
(189,158)
(110,637)
3,455
-
(20,081,822)
(15,394,967)
(20,267,525)
(15,505,604)
11,290,874
18,414,559
(435,891)
(1,187,540)
3,989,012
4,170,000
(345,022)
(240,766)
(3,830,000)
(1,950,000)
10,668,973
19,206,253
(6,266,265)
565,861
9,323,648
8,757,787
Cash and cash equivalents, end of year
16(a)
3,057,383
9,323,648
The accompanying notes form part of these financial statements.
35
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Consolidated Statement of Cash FlowsFor personal use only
1. Summary of significant accounting policies
The principal activity of the Group was pursuing
the development of its Leigh Creek Energy
Project.
a. General information and statement of compliance
The consolidated general purpose financial
statements have been prepared in accordance
with the Corporations Act 2001, Australian
Accounting Standards and other authoritative
pronouncements of the Australian Accounting
Standards Board (AASB). Compliance with
Australian Accounting Standards results in full
compliance with the International Financial
Reporting Standards (IFRS) as issued by the
International Accounting Standards Board
(IASB). Leigh Creek Energy is a for-profit entity
for the purposes of preparing the financial
statements. The financial report has been
presented in Australian dollars.
Leigh Creek Energy Limited is the Group’s
Ultimate Parent Company. Leigh Creek Energy
Limited is a listed public company, incorporated
and domiciled in Australia. The address of the
registered office and its principal place of
business is Level 11, 19 Grenfell Street,
Adelaide SA 5000.
The consolidated financial statements for the year
ended 30 June 2019 were approved and
authorised for issue by the Board of Directors on
28th August 2019.
b. Overall considerations
The consolidated financial statements have been
prepared on an accruals basis and are based on
historical costs modified by the revaluation of
selected non-current assets, financial assets and
financial liabilities for which the fair value basis
of accounting has been applied.
c. Basis of consolidation
The Group financial statements consolidate those
of the Parent Company and all of its subsidiaries
as of 30 June 2019. The Parent controls a
subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the
subsidiary and has the ability to affect those
returns through its power over the subsidiary. All
subsidiaries have a report date of 30 June. The
controlled entities are disclosed in Note 17 to the
financial statements.
All inter-company balances transactions and
balances between Group companies are
eliminated on consolidation. Amounts reported in
the financial statements of subsidiaries have been
adjusted where necessary to ensure consistency
with the accounting policies adopted by the
Group.
d. Changes in accounting policy
New and revised standards that are effective for
these financial statements
A number of new and revised standards became
effective for the first time to annual periods
beginning on or after 1 July 2018. Information
on the more significant standards is presented
below.
(i) AASB 15 Revenue from Contracts with Customers
AASB 15 provides new guidance for determining
when the Group should recognise revenue. The
new revenue recognition model provides a single
model for accounting for revenue arising from
contracts with customers and is effective for
annual periods beginning on or after 1 January
2018.
AASB 15 replaces AASB 118 Revenue and several
other revenue related interpretations:
• establishes a new revenue recognition model
• changes the basis for deciding whether revenue
is to be recognised over time or at a point in
time
• provides new and more detailed guidance on
specific topics (e.g. multiple element
arrangements, variable pricing, rights of return,
warranties and licensing)
• expands and improves disclosures about
revenue.
The new standard has been applied as at 1 July
2018. There is no impact to the Group’s
historical financial results given the Group is not
currently in production.
(ii) AASB 9 Financial Instruments
The AASB issued AASB 9 Financial Instruments,
which covers classification and measurement of
financial assets and financials liabilities and
introduces an ‘expected credit loss’ model for
impairment of financial assets.
AASB 9 replaces AASB 139 Financial
Instruments: Recognition and Measurement and
is effective for annual period beginning on or
after 1 July 2018.
36
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
1.
Summary of significant accounting policies continued
d. Changes in accounting policy continued
The table below shows the classification of each class of financial assets and liabilities under AASB 139
and AASB 9 as at 1 July 2018:
AASB 139 Carrying
classification
AASB 9 Carrying AASB 139 Carrying AASB 139 Carrying
Amount
$
Amount
$
classification
Financial assets
Trade and other receivables
Loans and receivables
Amortised cost
9,359,171
9,359,171
Financial liabilities
Borrowings
Amortised cost
Amortised cost
3,830,000
3,830,000
When adopting AASB 9, the Group has applied transitional relief and opted not to restate
prior periods.
Accounting standards issued but not yet effective and
not been early adopted by the Group
The accounting standards that have not been
early adopted for the year ended 30 June 2019,
but will be applicable to the Group in future
reporting periods are detailed below. Apart from
these standards, we have considered other
accounting standards that will be applicable in
future reporting periods, however they have been
considered insignificant to the Group.
Standard /
Interpretation change
Nature of
Effective for
annual periods
beginning on
or after
Expected to be
initially applied
in the financial
year ending
AASB 16
‘Leases’
Requires all leases 1 January 2019 30 June 2020
to be accounted for
‘on-balance sheet’
for lessees other
than short-term
and low value
asset leases.
The Group is yet to undertake a detailed
assessment of the impact of AASB 16. However,
based on the Group’s preliminary assessment, the
likely impact on the first time adoption of the
Standard for the year ending 30 June 2020
includes:
- there will be a minor increase in lease assets
and financial liabilities recognised on the
balance sheet
- the reported equity will reduce as the carrying
amount of lease assets will reduce more quickly
than the carrying amount of lease liabilities
- EBIT in the statement of profit or loss and
other comprehensive income will be higher as
the implicit interest in lease payments for
former off balance sheet leases will be
presented as part of finance costs rather than
being included in operating expenses
- operating cash outflows will be lower and
financing cash flows will be higher in the
statement of cash flows as principal repayments
on all lease liabilities will now be included in
financing activities rather than operating
activities.
As per Note 14, the Group’s commitments
relating to operating leases for the 2020 financial
year is $193,877 and $8,044 beyond 1 July 2020,
the group does not believe the adoption of this
standard will materially impact the financial
statements.
There are no other standards that are not yet
effective and that are expected to have a material
impact on the entity in the current or future
reporting periods and on foreseeable future
transactions.
e. Impairment of Assets
At each reporting date, the group reviews the
carrying values of its assets to determine whether
there is any indication that those assets have been
impaired. If such an indication exists, the
recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value
in use, is compared to the asset’s carrying value.
Any excess of the asset’s carrying value over its
recoverable amount is expensed to profit or loss.
Where it is not possible to estimate the
recoverable amount of an individual asset, the
group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
f. Segment reporting
The Board has considered the requirements of
AASB 8 Operating Segments and the internal
reports that are reviewed by the chief operating
decision maker (the Board) in allocating
resources and has concluded at this time that
there are no separately identifiable segments.
37
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
d) sufficient data exists to indicate that, although
a development in the specific area is likely to
proceed, the carrying amount of the
exploration and evaluation asset is unlikely to
be recovered in full from successful
development or by sale.
Management has made a judgement that,
given these factors, the balance of Exploration
and Evaluation assets is not impaired.
• Share based payments – Note 11
The valuation for accounting purposes of Share
Based Payments relies on a number of factors
that cannot be accurately measured. These
include:
a) the volatility of the LCK share value;
b) the probability that vesting conditions/
milestones will be met;
c) the probability that the employee will remain
employed with the company until the expiry
date of the options;
d) the probability that the employee will exercise
their options.
Final judgement about vesting of the options is
retained by the Board. Management has assessed
each of these factors and made judgements on
what factors are used for the calculation.
1. Summary of significant accounting policies continued
g. Goods and Services Tax (GST)
Income, expenses and assets are recognised net of
the amount of GST, unless the GST incurred is
not recoverable from the Australian Tax Office.
In these circumstances the GST is recognised as
part of the cost of acquisition of the asset or as
part of an item of the expense.
Receivables and payables in the statement of
financial position are shown inclusive of GST.
The net amount of GST recoverable from the
Australian Tax Office is included with other
receivables in the statement of financial position.
Cash flows are presented in the cash flow
statement on a GST inclusive basis.
h. Comparative Figures
Unless otherwise required by an accounting
standard comparative information is disclosed in
respect of the previous corresponding period,
including for narrative and descriptive
information. To the extent that items are
amended or reclassified comparative amounts are
also amended or reclassified. Prior period errors
are retrospectively corrected in the next financial
report following discovery.
i. Significant management judgement in applying
accounting policies
When preparing the financial statements,
management undertake a number of judgements,
estimates and assumptions about the recognition
and measurement of assets, liabilities, income and
expenses. The areas involving significant estimates
and assumptions are listed below:
•
Exploration and Evaluation Expenditure
– Note 8
Judgement is required to ensure that the carrying
value of Exploration and Evaluation assets does
not exceed the recoverable amount. Factors
considered in this judgement are:
a) the period for which the entity has the right to
explore in the specific area has expired or will
expire in the near future;
b) substantive expenditure on further exploration
for and evaluation of mineral resources in the
specific area is neither budgeted nor planned;
c) exploration for and evaluation of mineral
resources in the specific area have not led to
the discovery of commercially viable quantities
of mineral resources and the entity has
decided to discontinue such activities;
38
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
2. Other income and expenses
Accounting policy – income and expenses recognition
Other income is recognised on an accruals basis and is recognised at the time the right to receive payment
is established.
Other expenses represent costs incurred for the administration of the business. Costs relating to the project
have been capitalised to Exploration and Evaluation expenditure (as shown in Note 8).
a) Other income
Grants
Tenement option
Disposal of fixed assets
Total other income
b) Other expenses
Accounting and audit
Communications costs
Corporate advisory
Software & other
Consulting and legal expense
Insurance
Investor relations
Listing & registry fees
Occupancy expense
Printing and office supplies
Travel and accommodation
Sundry
Total other expenses
2019
$
2018
$
-
55,000
10,000
3,455
13,455
185,384
51,680
591,815
54,176
524,357
123,136
178,829
143,788
375,985
47,838
334,429
443,308
-
-
55,000
164,948
52,292
574,330
47,619
428,627
110,704
259,169
118,708
358,753
52,840
298,503
244,604
3,054,725
2,711,097
39
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
3. Finance income and finance costs
Accounting policy – Finance income and finance costs
Finance income includes interest revenue which is recognised on an accruals basis taking into account the
interest rates applicable. It is recognised at the time the right to receive payment is established.
Finance costs include interest paid and amortised borrowing costs from financing arrangements. Costs
incurred in relation to the arrangement are amortised using the effective interest method, over the life of
the loan.
a) Finance income
Interest earned
Total finance income
b) Finance costs
Interest paid
Amortised borrowing costs 1
Total finance costs
2019
$
2018
$
114,430
114,430
-
2,163,035
2,163,035
180,645
180,645
-
310,716
310,716
1 The Convertible Note included interest payable as shares totalling $1,818,013, refer to Note18.
40
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
4. Income tax
Accounting policy – income taxes
Deferred taxes are not recognised in the accounts. As the Group has significant carried forward tax losses,
it does not have sufficient taxable temporary differences which will result in taxable amounts against which
the unused tax losses can be utilised.
The amount of benefits which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the economic entity will derive
sufficient future assessable income to enable the benefit to be realised and comply with the condition of
deductibility imposed by the law.
Tax consolidation
Leigh Creek Energy Limited and its wholly owned Australian subsidiaries are part of a tax-consolidated
group under Australian taxation law.
a) Numerical reconciliation of income tax expense to prima facie
tax payable
Loss before income tax
2019
$
2018
$
(9,534,857)
(6,018,850)
Prima facie tax (benefit) on loss before income tax at 27.5% (2018: 27.5%)
(2,622,086)
(1,655,184)
Permanent differences:
Entertainment non deductible
Share based payments
Fair value adjustment for investments
Movement in unrecognised tax assets and liabilities
Tax loss not recognisable
Under/(Over) provided in prior year
Aggregate income tax expense
b) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Revenue losses
Capital losses
13,899
203,812
-
(87,130)
2,491,505
-
-
16,687
95,309
-
666,949
804,335
71,904
-
17,736,240
16,775,866
78,404
50,729
The Group considers that in the future it will be generating taxable income to utilise carried forward tax
losses, however, it does not meet the recognition criteria. Additionally, the carried forward tax losses can
only be utilised in the future when taxable income is being generated, if the continuity of ownership test is
passed, or failing that, the same business test is passed.
41
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
5. Cash Assets
Accounting policy – Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call and term deposits with banks.
Cash and cash equivalents
Bank balances
Term deposits1, 2
2019
$
2018
$
324,259
1,087,392
2,733,124
8,236,256
Cash and cash equivalents in the statement of cashflows
3,057,383
9,323,648
Notes:
1 Includes $770,735 of restricted cash to support a bond and credit card facility.
2 Term deposits comprise cash balances with an original maturity of less than three months.
6. Trade and other receivables
Accounting policy – Trade and other receivables
Trade receivables are recognised initially at fair value. At balance date, no receivables were considered to be
outstanding or impaired.
Trade debtors
GST recoverable
Prepayments
R&D tax incentive receivable
Other debtors
Total Trade and other receivables
2019
$
12,032
52,030
78,589
2018
$
9,433
250,165
51,697
6,363,118
9,010,220
18,308
37,656
6,524,077
9,359,171
42
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
7. Property, Plant and Equipment
Accounting policy – Property, plant and equipment
Each class of property, plant and equipment is carried at cost, where applicable, less any accumulated
depreciation and impairment losses.
i) Plant and equipment
Plant and equipment are shown at historical cost less accumulated depreciation and accumulated
impairment. Cost includes expenditure that is directly attributable to the acquisition of the assets.
The carrying amount of plant and equipment is reviewed annually 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 asset’s employment and subsequent disposal. The expected net
cash flows have been discounted to their present values in determining recoverable amounts.
ii) Depreciation
Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful
lives, as follows:
• Plant and equipment
• Office equipment
• Motor vehicles
• Leasehold improvement
5-33%
10-50%
15%
45%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Gains and losses on disposal of property, plant and equipment are determined as the difference between the
disposal proceeds and the carrying amount of the assets (including impairment provision) and are
recognised in the profit or loss with Other Income or Other Expenses.
Cost
Balance at 1 July 2018
Additions
Transfers
Disposals
2019
$
2018
$
624,066
218,466
-
(53,523)
506,172
117,894
-
-
Balance at 30 June 2019
789,009
624,066
Accumulated depreciation & impairment
Balance at 1 July 2018
Impairment balance
Depreciation
Transfers
Impairment movement
Disposals
Balance at 30 June 2019
Carrying amounts
At 1 July 2018
At 30 June 2019
341,408
285,452
-
-
88,425
56,016
-
-
-
-
(53,523)
(60)
376,310
341,408
282,658
412,699
220,720
282,658
43
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
8. Exploration and Evaluation Expenditure
Accounting policy – Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of
interest. These costs are only carried forward to the extent that right of tenure is current and those costs
are expected to be recouped through the successful development of the area (or, alternatively by its sale) or
where activities in the area have not yet reached a stage which permits reasonable assessment of the
existence of economically recoverable reserves and operations in relation to the area are continuing.
When production commences, the accumulated costs for the relevant area of interest are amortised over the
life of the area according to the rate of depletion of the economically recoverable reserves.
Accumulated costs, in relation to an abandoned area, are written off in full against profit in the period in
which the decision to abandon the area is made.
Balance at opening
Licence fees
Costs capitalised for Feasibility Studies
Costs capitalised for LCEP
Less R&D tax concession rebates
Total exploration and evaluation expenditure
2019
$
2018
$
16,400,151
5,985,725
7,518
964,374
8,748
916,489
14,016,992
18,537,324
(6,363,118)
(9,048,135)
25,025,917
16,400,151
During the year the Company applied for R&D Tax Incentives through AusIndustry in relation to eligible
research expenditure incurred during 2018/19 for the Leigh Creek Energy Project. The tax incentive
received during the year is a refundable tax credit and has been credited to Exploration and Evaluation
capitalised expenditure ($9,010,135). Additionally, the Company has booked a receivable ($6,363,118)
in relation to eligible R&D expenditure for the period up to and including 30 June 2019 which has been
reviewed externally to ensure it is in accordance with the relevant criteria.
9. Trade and Other Payables
Trade and other payables consist of the following:
Trade payables
Other payables
Accruals
Total Trade and other payables
2019
$
2018
$
373,428
1,410,581
57,533
336,947
767,908
53,594
4,293,088
5,757,263
44
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
10. Borrowings
Accounting policy – Borrowings
Borrowings are recognised initially at fair value less attributable transaction and finance costs.
Subsequent to initial recognition, borrowings and loans are stated at amortised cost, with any difference
between cost and redemption value being recognised in the profit or loss over the period of the loan on an
effective interest basis. Loans with a determinable payment due less than twelve months from reporting
date are classified as current liabilities.
Transaction and finance costs include ancillary costs incurred in connection with the arrangement of loans,
interest payable and facility line fees payable on the loan.
Current
Loan
R&D working capital facility
Total current borrowings
Non-current
Loan
Total borrowings
Loans
R&D working capital facility – available
R&D working capital facility – undrawn
Loans - drawn
Less: unamortised transaction costs
Carrying amount at 30 June 2019
2019
$
2018
$
11,105
-
3,870,000
3,830,000
3,881,105
3,830,000
107,907
-
3,989,012
3,830,000
4,000,000
6,500,000
(130,000)
(2,670,000)
3,870,000
3,830,000
-
-
3,870,000
3,830,000
The Company has a working capital facility with the Commonwealth Bank of Australia (CBA) to bring
forward access to refundable R&D tax concessions. This has provided LCK with the flexibility to bring
forward its tax offsets by providing a draw down on eligible expenditure and for CBA to be repaid from
the company’s taxation return rebate. In June 2018 LCK extended the Facility to December 2019 and the
facility limit was increased to $10.5m. Following receipt of the 2017/18 ATO rebate and clean down of the
Facility the limit decreased to $4m to match anticipated 2018/19 tax rebates. A total of $3,870,000 was
drawn under the extended facility as at 30 June 2019. The receivable due from the R&D rebate is
$6,363,118 for the year.
45
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
11. Employee remuneration
Employee benefits expense
Wages, salaries (inc on-costs)
Superannuation
Share based payments
Total employee benefit expense
2019
$
2018
$
2,970,417
2,651,217
190,063
1,225,386
194,937
346,577
4,385,866
3,192,731
Under the Company’s Accounting for Exploration policy, labour costs relating to the LCEP are capitalised.
The total staff cost was $8,592,221 (2018 : $5,759,766).
Share based employee remuneration
Accounting policy – Share based payment plans
Share based compensation benefits are provided to employees of the Company. The fair value of the
options granted under the plan is recognised as an employee benefit expense with a corresponding increase
in equity (Share Option Reserve). The fair value is measured at grant date and recognised over the period
during which the employees become entitled to the underlying options.
The fair value at issue date is calculated using the Trinomial option pricing model that takes into account
the share price at issue date, the exercise price, the term until expiry, estimate of implied volatility, the
vesting and performance criteria and the non-tradeable nature of the option. At each balance sheet date, the
Company revises its estimate of the number of options that are expected to become exercisable.
(i) Number of options issued to employees during the year
Outstanding at beginning of the year
Forfeited
Issued 1
Exercised
Notes:
2019
2018
16,352,250
16,445,000
(1,678,750)
(728,750)
15,015,000
636,000
-
-
29,688,500
16,352,250
1 Excludes 4,000,000 director options and 1,000,000 company secretary options (related party) granted 18th April 2018, with issue
subject to shareholder approval on 22nd August 2018.
46
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
11. Employee remuneration continued
(ii) Valuation assumptions
Grant date
Number issued
Share price at grant date
Volatility (average)5
Fair value at issue date
Exercise price
Exercisable from
Exercisable to
Plan 1
Plan 2
Plan 3
15 October 2015 1 December 2015
1 December 2015
2,000,000
2,000,0000
10,250,000
$0.17
70%
$0.08
$0.211, $0.252
$0.23
70%
$0.02
$1.50
$0.23
70%
$0.04
$0.30
22 October 2015
31 July 20163
31 July 20163
14 October 20204
31 July 2020 30 November 2020
Notes:
1 Exercise price for Tranche 1 was the greater of $0.21 and 10% premium to the 5 day VWAP up to 26 May 2015.
2 Exercise price for Tranche 2 was the greater of $0.25 and 20% premium to the 5 day VWAP up to 26 May 2015.
3 Options vest at 25% per year on 31 July 2016, 31 July 2017, 31 July 2018 and 31 July 2019 if vesting conditions (milestones) are achieved.
4 Tranche 1 expiry date is 14 October 2019, and Tranche 2 expiry date is 14 October 2020.
5 A volatility curve was used for calculations.
Grant date
Number issued
Share price at grant date
Volatility (average)3
Fair value at issue date
Exercise price
Exercisable from
Exercisable to
Plan 4
Plan 5
Plan 6
11 July 2016
4 October 2016
10 July 2017
195,000
4,000,000
636,000
$0.19
70%
$0.04
$0.13
70%
$0.03
$0.49, $0.30
$0.35, $0.45
$0.11
70%
$0.02
$0.30
11 July 20161 10 October 2016
31 July 20182
30 November 2020 10 October 2021 30 November 2020
Notes:
1 Options vest at 25% per year on 31 July 2016, 31 July 2017, 31 July 2018 and 31 July 2019 if vesting conditions (milestones) are achieved.
2 Options vest at 33% per year on 31 July 2018, 31 July 2019 and 31 July 2020 if vesting conditions are achieved.
3 A volatility curve was used for calculations.
Plan 7
Plan 8
Plan 9
22 August 2018
22 August 2018
18 July 2018
5,000,000
5,000,000
5,015,000
$0.17
70%
$0.06
$0.35
$0.17
70%
$0.08
$0.25
$0.19
70%
$0.07
$0.25
18 January 20191 18 January 20192
18 July 20183
17 April 2023
3 July 2022
15 July 2022
Grant date
Number issued
Share price at grant date
Volatility (average)3
Fair value at issue date
Exercise price
Exercisable from
Exercisable to
Notes:
1 Options vested at issue date.
2 Options vested at issue date.
3 Options vested at issue date.
4 A volatility curve was used for calculations.
47
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
11. Employee remuneration continued
Employee benefits
Accounting policy – Employee benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by
employees to reporting date. These benefits include wages, salaries and annual leave. Where these benefits
are expected to be settled within 12 months of the reporting date, they are measured at the amounts
expected to be paid when the liabilities are settled. The provision has been recognised at the undiscounted
amount expected to be paid.
In relation to employee benefits arising for employees directly involved in the exploration project, these
indirect costs have been capitalised to the project.
Liability for annual leave
Provision for bonus
Total employee benefit liability
12. Issued capital
Accounting policy – Issued capital
2019
$
312,729
204,687
517,416
2018
$
288,019
250,565
538,584
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares is
shown in equity as a deduction from the proceeds.
The company has granted unlisted options to employees in respect of their employment contracts. The fair
value of the options granted is recognised as an employee benefits expense with a corresponding increase in
equity (Share Option Reserve). The fair value is measured at grant date and recognised over the period
during which the employees become unconditionally entitled to exercise the option. Fair value is
determined by the use of a Trinomial option pricing model.
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 the shareholders’ meeting each ordinary share is entitled to one vote when
a poll is called, otherwise each shareholder has one vote on a show of hands. All issued shares are fully
paid. All unissued shares are ordinary shares of the Company.
548,143,421 (2018: 452,780,603)
Ordinary shares
Share issue costs
Total issued capital
2019
$
2018
$
74,930,077
61,423,690
(3,930,027)
(3,096,636)
71,000,050
58,327,054
48
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
12. Issued capital continued
Additional shares were issued during 2019 in relation to capital raising activities listed below.
Detailed table of capital issued during the year
Type of share issue
Date of issue
Opening balance 1 July 2018
No of ordinary
shares on issue
452,780,603
Issue price
$
Share issue
Share issue
Share issue
Share issue
Share issue
Convertible note
Options exercised
Share issue costs
Issued capital
Unlisted options
20 July 2018
9,510,000
30 July 2018
9,240,000
21 December 2018
10,636,668
7 March 2019
15,535,591
19 March 2019
16,610,133
3 April 2019
33,360,426
16 April 2019
470,000
548,143,421
$0.16
$0.16
$0.12
$0.12
$0.12
$0.15
$0.30
At the end of the financial year, unissued shares of the Group under option are:
Share capital
$
58,327,054
1,521,600
1,494,400
1,276,387
1,864,271
1,993,216
5,215,513
141,000
(833,391)
71,000,050
Expiry date
20 July 2019
14 October 2019
14 October 2020
31 July 2020
30 November 2020
30 November 2020
8 May 2021
10 October 2021
10 October 2021
30 November 2020
16 July 2022
17 April 2023
3 July 2022
31 October 2021
31 October 2021
31 October 2021
31 October 2021
31 December 2020
Total
Exercise price Number of shares
$0.30
$0.21
$0.25
$1.50
$0.30
$0.49
$0.30
$0.35
$0.45
$0.30
$0.30
$0.35
$0.24
$0.20
$0.22
$0.24
$0.26
$0.25
1,030,000
1,000,000
1,000,000
1,000,000
7,340,000
27,500
800,000
2,000,000
2,000,000
306,000
5,790,000
5,000,000
5,000,000
1,500,000
1,500,000
1,500,000
1,500,000
4,000,000
42,293,500
Options granted under the Employee Share Option Plan will typically expire on the earlier of the expiry date
or termination of the employee’s employment (unless the employee is a retiring director). For employees
that are made redundant, their future unvested tranches are still able to vest (if conditions are met).
49
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
12. Issued capital continued
Listed options
A number of listed options (17,687,463 at an exercise price of $0.50) were issued as part of the
prospectus for the capital raising finalised in May 2016. These options lapsed unexercised on the 6th June
2018 and as such there are nil listed options over shares of the Group at the end of the financial year.
Capital management
Management objectives when managing capital are to ensure that the Group can fund the development of
its operations.
The Group manages the capital structure and makes adjustments to it in light of the forecast cash
requirements of the development programme. To that end, internal capital rationing is complemented by
capital raising activities as required to ensure funding for development activities is in place.
There are no externally imposed capital requirements.
13. Reserves
Accounting policy - reserves
The share option reserve is used to recognise the fair value of options granted to employees and consultants
but not exercised. Upon exercise of the options, the proceeds are allocated to share capital.
Share option reserve
Total reserves
A breakdown of the share option reserve is as follows:
Directors
Employees
Former employees
Consultants
Total
2019
$
2018
$
2,581,728
1,802,721
2,581,728
1,802,721
No of Options
10,750,000
9,011,000
9,927,500
12,605,000
2019
$
630,010
681,018
478,966
753,860
42,293,500
2,543,854
50
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
14. Commitments for Expenditure
Accounting policy - operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,
are charged as expenses in the periods in which they are incurred. The Company does not have any leases
over property, plant or equipment where lease arrangements would be classed as finance leases.
Operating lease commitment
Not longer than 1 year
Longer than 1 year and not longer than 5 years
The Group has no contingent liabilities at the year end.
Accounting policy – capital commitments
2019
$
2018
$
193,877
8,044
249,261
12,529
Capital commitments relates to expenditure commitments for the Leigh Creek Energy Project (LCEP)
outstanding at balance date.
Leigh Creek Energy Project
2019
$
2018
$
93,720
1,037,042
The company held bank guarantees with the Minister for Mineral Resources and Energy of $184,000 dated
3 January 2018, and $170,000 dated 7 May 2018, the Department of State Development of $50,000 dated
13 July 2018, and Knight Frank of $71,160 dated 30 September 2019. Under the terms of tenement
registration and renewal, tenements have commitments to work requirements. The commitment to work
requirements at Leigh Creek is included above.
There are no other commitments at balance date for expenditure by the Group.
51
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
15. Financial assets & liabilities
Accounting policy – financial assets & liabilities
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs,
except for those carried at fair value through profit or loss, which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured
at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value
adjusted for transaction costs (where applicable)
For the purpose of subsequent measurement, financial assets other than those designated and effective as
hedging instruments are classified into the following categories upon initial recognition:
- amortised cost
- fair value through profit or loss (FVPL)
- equity instruments at fair value through other comprehensive income (FVOCI)
- debt instruments at fair value through other comprehensive income (FVOCI)
All income and expenses relating to financial assets that are recognised in profit or loss are presented
within finance costs, finance income or other financial items, except for impairment of trade receivables
which is presented within other expenses.
Classifications are determined by both:
The entities business model for managing the financial asset
The contractual cash flow characteristics of the financial assets
All income and expenses relating to financial assets that are recognised in profit or loss are presented
within finance costs, finance income or other financial items, except for impairment of trade receivables,
which is presented within other expenses.
Subsequent measurement financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVPL):
- they are held within a business model whose objective is to hold the financial assets and collect its
contractual cash flows
- the contractual terms of the financial assets give rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash
equivalents, trade and most other receivables fall into this category of financial instruments.
52
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
15. Financial assets & liabilities continued
Impairment of Financial assets
AASB 9’s impairment requirements use more forward looking information to recognize expected credit
losses – the ‘expected credit losses (ECL) model’. Instruments within the scope of the new requirements
included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade
receivables, contract assets recognised and measured under AASB 15 and loan commitments and some
financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
The Group considers a broader range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the
expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
financial instruments that have not deteriorated significantly in credit quality since initial recognition or
that have low credit risk (‘Stage 1’) and
financial instruments that have deteriorated significantly in credit quality since initial recognition and
whose credit risk is not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’
are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses
over the expected life of the financial instrument.
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely unchanged from AASB 139, the Group’s financial
liabilities were not impacted by the adoption of AASB 9. However, for completeness, the accounting policy
is disclosed below.
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial
instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs
unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except
for derivatives and financial liabilities designated at FVPL, which are carried subsequently at fair value with
gains or losses recognised in profit or loss (other than derivative financial instruments that are designated
and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in
profit or loss are included within finance costs or finance income.
53
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
15. Financial assets & liabilities continued
Categories of financial assets and liabilities
The carrying amount of financial assets and liabilities in each category are as follows:
Financial assets
Notes
Assets at fair
value through
profit or loss
Financial assets
at amortised cost
Total
30 June 2019
Trade and other receivables
Cash and cash equivalents
5
-
-
-
6,524,077
6,524,077
3,057,383
3,057,383
9,581,460
9,581,460
Financial liabilities
30 June 2019
Current borrowings
Trade and other payables
Notes Designated at fair
value through
profit or loss
Other liabilities
(amortised cost)
Total
10
9
-
-
-
3,870,000
3,870,000
767,909
767,909
4,637,909
4,637,909
Financial assets
Notes
Assets at fair
value through
profit or loss
Financial assets
at amortised cost
Total
30 June 2018
Trade and other receivables
Cash and cash equivalents
Financial liabilities
30 June 2018
Current borrowings
Trade and other payables
6
5
-
-
-
9,359,171
9,359,171
9,323,648
9,323,648
18,682,819
18,682,819
Notes Designated at fair
value through
profit or loss
Other liabilities
Total
10
9
-
-
-
3,830,000
3,830,000
5,757,263
5,757,263
9,587,263
9,587,263
54
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
15. Financial assets & liabilities continued
Measurement
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market and are stated at amortised cost.
i. Treasury Risk Management
The risk management of treasury functions is managed by the Audit and Risk Committee.
ii. Finance Risks
The Group’s financial instruments are exposed to a variety of financial risks, being Market risk
(Interest rate and Price risk), Credit risk and Liquidity risk. The Group operates mainly in Australia
and as such is not subject to foreign exchange risk.
Interest rate risk
The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of changes in market interest rates on classes of financial assets and liabilities, is
summarised in the table above.
Sensitivity: At June 30, 2019, if interest rates on cash and term deposits had changed by -/+ 10 basis
points from the year end rates with all other variables held constant post tax loss and total equity
would have been $15,363 more/less as a result of lower/higher interest income.
At June 30, 2019, if interest rates on borrowings had changed by -/+ 10 basis points from the year
end rates with all other variables held constant post tax loss and total equity would have been $954
more/less as a result of lower/higher interest expense
Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by
counterparties of contract obligation that could lead to a financial loss to the Group. The Group’s
maximum exposure to credit risk is its cash and cash equivalents and receivables as noted in the
table above. The group manages its credit risk by depositing with reputable licenced banks.
Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its
debts or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity
risk by monitoring forecast cash flows and ensuring that adequate sources of funding are available.
Maturity of the group’s financial liabilities is within 1 year.
55
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
16. Notes to the Statement of Cash Flows
(a) Reconciliation of cash
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments
in money market instruments. Cash at the end of the financial year as shown in the statement of cash flows
is reconciled to the related items in the statement of financial position as follows:
Bank balances and short term deposits
2019
$
2018
$
3,057,383
9,323,648
The weighted average effective interest rate on bank deposits is 1.19% (2018: 1.36%). All deposits are for
less than 12 months.
(b) Reconciliation of cash flow from operations with loss after tax
Loss after income tax
Cash flows excluded from loss attributable to operating activities:
Non-cash flows in operating loss
Depreciation expense
Share based payments
Other revenue
Interest
Change in assets and liabilities
2019
$
2018
$
(9,534,857)
(6,018,850)
59,116
1,225,386
(3,455)
2,163,035
39,951
346,577
-
-
Decrease/(Increase) in receivables / prepayments
9,340,645
(1,905,283)
Increase/(Decrease) in payables
Increase/(Decrease) in provisions
103,584
4,162,733
(21,167)
240,084
Net Cash (used in) / provided by operating activities
(3,332,286)
(3,134,788)
56
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
17. Parent Entity Disclosures
Investment in controlled entities
Entity
Country of
Class of share
Interest Held
Bonanza Gold Pty Ltd
Leigh Creek Operations Pty Ltd
Parent entity information
Parent Entity
Asset
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Share option reserve
Accumulated losses
Shareholder equity
Financial performance
Profit (loss) for the year
Other comprehensive income
Total comprehensive income
incorporation
Australia
Australia
Ordinary
Ordinary
2019
100%
100%
2019
$
2018
100%
100%
2018
$
8,847,931
18,086,987
25,199,744
11,560,147
34,047,675
29,647,134
4,935,623
4,996,516
107,907
-
5,043,530
4,996,516
69,390,809
56,717,813
2,581,728
1,802,721
(42,968,392)
(33,869,916)
29,004,145
24,650,618
(9,544,856)
(6,018,863)
-
-
(9,544,856)
(6,018,863)
The parent entity has not entered into a deed of cross guarantee nor are there any contingent liabilities
at the year end.
Accounting policy – capital commitments for parent
Capital commitments relates to expenditure commitments for the Leigh Creek Energy Project (LCEP)
outstanding at balance date.
Leigh Creek Operations Pty Ltd
2019
$
2018
$
93,720
1,037,042
57
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
18. Related Party Transactions
Transactions with key management personnel compensation
Key management of the Group are the executive members of the Group’s Board of Directors and members
of the management team. Key management personnel remuneration includes the following expenses:
Total short term employee benefits
Total post-employment benefits
Share based payments
Total Remuneration
2019
$
2018
$
1,831,935
1,477,356
104,850
442,633
121,996
267,525
2,379,418
1,866,877
The amounts disclosed in the table are the amounts recognised as an expense during the reporting year.
Other transactions with key management personnel
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those to other parties, unless otherwise stated:
i) Piper Alderman lawyers were paid $46,255 (2018: $82,909) for legal services rendered to the Group.
Greg English is a partner at Piper Alderman lawyers;
ii) ARK Energy Ltd had a service agreement in place with the Company for facilities and accounting
services. Fees rendered to the Company were $9,432 (2018: $14,700);
iii) Investment Company Services Pty Ltd were paid $45,509 (2018: $60,116) for providing investor
relations services to the Group. The party is related to Mr Peters, Executive Chairman.
iv) On 7 February 2019 the Company issued convertible notes with a face value of $3m to Crown Ascent
Development Limited. The issue price was $0.12 per note, convertible into a fully paid share, with
interest calculated at 12.2% per annum (to be capitalised and paid in shares at the conversion price),
and early conversion required full payment of interest over the 2 year term of the notes. In April 2019,
these convertible notes were converted to shares resulting in an interest charge of $1,818, 013. In
addition, Crown Ascent Development Limited earned a 6% establishment fee which was paid in shares
at the conversion price, worth $397,500. Mr Xiaojiang is a Director of Crown Ascent and non-
executive director of Leigh Creek Energy. Mr Xiaojiang provided consulting services during the year
totalling $210,833.
58
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
19. Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the Auditor of the Group:
Auditing and review services
Other services
2019
$
43,982
-
2018
$
43,856
55,750
During the year, Grant Thornton Audit Pty Ltd, the Company’s auditors, did not undertake any additional
services to their statutory audit duties.
20. Earnings Per Share
Accounting policy – Earnings per share
i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit (loss) attributable to equity holders
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the year.
ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the weighted average number of shares assuming conversion of all dilutive potential
ordinary shares.
The calculation of basic loss per share at 30 June 2019 was based on the loss attributable to ordinary
equity holders of $9,534,857 (2018: $6,018,850) and a weighted average number of ordinary shares
outstanding during the 12 months of 433,286,469 (2018: 392,533,489).
The calculation of diluted loss per share at 30 June 2019 is the same as basic diluted loss per share. In
accordance with AASB 133 Earning per share, as potential ordinary shares may result in a situation where
their conversion results in a decrease in the loss per share, no dilutive effect has been taken into account.
Potential ordinary shares relating to listed and unlisted options at 30 June 2019 totalled 42,293,500
(2018: 24,652,250).
Loss used to calculate basic EPS
Basic earnings per share – cents per share
Diluted earnings per share – cents per share
2019
$
2018
$
(9,534,857)
(6,018,850)
(0.02)
(0.02)
(0.02)
(0.02)
Weighted average number of shares used as denominator
Weighted average number of ordinary shares outstanding during the year
used in calculating basic EPS
433,286,469
392,533,489
Shares deemed to be issued for no consideration in respect of
share based payments
Listed options issued for no consideration
42,293,500
24,652,250
-
-
Weighted average number of shares used in diluted earnings per share
475,579,969
417,185,739
59
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
21. Matters Subsequent to the End of the Year
On 1 August 2019 the Company completed a $3.2 million capital raise with professional,
sophisticated and institutional investors, with 14,322,222 ordinary shares issued on that day
at a price of $0.225 per share.
On 13 August 2019 the Company signed a Heads of Agreement with China New Energy
Group Limited to develop in-situ gasification in China. The agreement establishes the process
to develop a full commercial agreement, with a view to forming a joint venture company.
22. Company Details
The registered office and principal place of business is:
Leigh Creek Energy Limited
Level 11, 19 Grenfell Street
Adelaide, South Australia 5000
60
Notes to the Consolidated Financial Statements for the year ending 30 June 2019For personal use only
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
F +61 8 8372 6677
E info.sa@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Leigh Creek Energy Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Leigh Creek Energy Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated 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:
a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
61
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Independent Audit ReportFor personal use only
Text to come
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
Exploration and evaluation assets – Note 8
At 30 June 2019, the carrying value of exploration and
evaluation assets was $25,025,917.
Our procedures included, amongst others:
obtaining the management reconciliation of capitalised
In accordance with AASB 6 Exploration for and Evaluation of
Mineral Resources, the Group is required to assess at each
reporting date if there are any triggers for impairment which
may suggest the carrying value is in excess of the recoverable
value.
exploration and evaluation expenditure and agreeing to the
general ledger;
reviewing management’s area of interest considerations
against AASB 6;
The process undertaken by management to assess whether
there are any impairment triggers in each area of interest
involves an element of management judgement.
This area is a key audit matter due to the significant
judgement involved in determining the existence of
impairment triggers.
conducting a detailed review of management’s
assessment of trigger events prepared in accordance with
AASB 6 including;
tracing projects to statutory registers, exploration
licenses and third party confirmations to determine
whether a right of tenure existed;
enquiry of management regarding their intentions to
carry out exploration and evaluation activity in the
relevant exploration area, including review of
management’s budgeted expenditure;
understanding whether any data exists to suggest that
the carrying value of these exploration and evaluation
assets are unlikely to be recovered through
development or sale;
evaluating the competence, capabilities and objectivity of
management’s experts in the evaluation of potential
impairment triggers; and
assessing the appropriateness of the related financial
statement disclosures.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
62
Independent Audit ReportFor personal use only
Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the 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 responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Leigh Creek Energy Limited, for the year ended 30 June 2019 complies with
section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
I S Kemp
Partner – Audit & Assurance
Adelaide, 28 August 2019
63
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Independent Audit ReportFor personal use only
Substantial shareholders at 7 August 2019
Name
Fully paid shares Ordinary shares %
Options
Options %
China New Energy Group Limited
Crown Ascent Development Limited
136,333,334
45,831,347
24.24
8.15
-
-
-
-
Distribution of shareholdings at 7 August 2019
Number of security holders by size of holding:
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Total holders
shares
Number of
shares
Total holders
listed options
Number of
listed options
461
963
627
213,678
2,726,432
4,976,257
1,605
57,689,289
557
496,859,987
4,213
562,465,643
-
-
-
-
-
-
-
-
-
-
-
-
The issued capital of the Company is fully paid ordinary shares (entitling the holders to participate in dividends
and proceeds on winding up of the Company in proportion to the number of shares held) and listed options. On a
show of hands every holder of the shares present at a meeting in person or by proxy is entitled to one vote and
upon a poll each share counts as one vote.
At 7 August 2019 a marketable parcel constituted 2,000 shares. The number of shareholders holding less than a
marketable parcel was 717 (593,208 shares).
64
Shareholder informationFor personal use only
Twenty largest shareholders at 7 August 2019
Name
China New Energy Group Limited
Crown Ascent Development Limited
Citic Australia Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
Rubi Holdings Pty Ltd
Fully paid
ordinary shares
% of issued
capital
136,333,334
24.24
45,831,347
15,470,000
14,540,588
13,516,584
Mr George Andrew Raftopulos + Mrs Elizabeth Athena Raftopulos
12,430,563
Bart Properties Pty Ltd
Slade Technologies Pty Ltd
One Design & Skiff Sails Pty Ltd
Littlejohn Embrey Engineering Pty Ltd
GS Group Australia Pty Ltd
River Property Investments Pty Ltd
Mr Bruce Warrington Holman
Hephzibah Pty Ltd
Mr Ryan Burke
Lawry Super Nominees Pty Ltd
Bart Properties Pty Ltd
Hephzibah Pty Ltd
Martin & Alison Cromme Pty Ltd
8,900,000
6,692,800
6,412,706
5,100,000
4,821,197
3,806,754
3,582,309
3,143,758
3,088,000
2,884,493
2,844,444
2,687,064
2,662,500
Mr Bruce Warrington Holman + Mrs Amanda Louise Holman
2,646,531
8.15
2.75
2.59
2.40
2.21
1.58
1.19
1.14
0.91
0.86
0.68
0.64
0.56
0.55
0.51
0.51
0.48
0.47
0.47
Totals top 20
Total remaining holders balance
Unissued equity securities
Unlisted options
Securities exchange
The Company is listed on the Australian Securities Exchange.
297,394,972
265,070,671
52.87
47.13
Number
42,293,500
LCK’s valued relationship with
major shareholders China
Communications Construction
Company (CCCC) continued with
a site visit and collaboration talks
during 2018.
65
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019For personal use only
The demonstration plant
was located in the
heavily modifed Telford
Basin in the former
Leigh Creek Coal field.
How does the ISG process work?
3) Initiation tool is placed down the
2
5
7
1
5
325m
The ISG process converts coal, through
a chemical reaction, from its solid state
into a gaseous form, resulting in the
generation of syngas.
Syngas comprises methane, hydrogen
and carbon monoxide energy gases with
variable amounts of inert gases, carbon
dioxide and nitrogen.
inlet well to heat the coal and starts
the gasification process.
4) Addition of air and water creates
a series of chemical conversions
transforming coal to syngas.
5) Process is controlled by using inlet
and outlet wells to manage the flow
of air and water.
1) Outlet well is drilled to intersect
coal seam.
6) Syngas will flow up through the outlet
well and is analysed on the surface.
4
500m
OVERBURDEN
(SEAL)
6
2) Inlet well is drilled and steered to
link up with Outlet well.
7) Process is stopped by turning off air
and water supply from the inlet well.
12m12m
MAIN SERIES
COAL SEAM
GASIFIER
CHAMBER
3
2
Diagram not to scale
30m
What is LCK’s Pre-Commercial Demonstration Facility?
LCK’s Pre-Commercial Demonstration Facility (PCD) commenced Q4 2018
and concluded Q1 2019 and had five main objectives:
1 Produce syngas comprising Methane (CH4), Hydrogen (H2), Carbon
Monoxide (CO) and Nitrogen (N2).
ISG of
1t LC coal
15 GJ
Syngas
2 Produce syngas at over 1 million cubic feet per day.
Why ISG?
The remaining resource in the
Telford Basin at Leigh Creek is deep
and no longer economic to mine
using open cut mining methods.
1,153 PJ 2P
RESERVE
E a s t e r n Australia’s largest undeve l o p e d
a nd uncontracted gas reserve s
TELFORD BASIN
What is a 2P Reserve?
The project has a PRMS reserve of
2P 1,153 PJ, which is now the largest
uncontracted gas reserve available to
eastern Australia and larger than what
is commercially available in the entire
Cooper Basin (ACCC, 2018).
LCK’s certifcation comes after having
successfully extracted gas at economic
flow rates at its PCD.
The size of the reserve indicates that
LCK has multiple commercailisation
paths, mainly the sale of synthetic
natural gas in the Australian East
Coast market and/or using the gas to
manufacture ammonia-based fertiliser
products.
66
3 Capture information required to upgrade the Petroleum Resources
ISG technology is able to access the deep
coal via a system of drilled linked wells.
309kg LPG
gas bottles
OR
OR
OR
OR
Management System (PRMS) 2C resource to 2P reserve.
4 Demonstrate safe and environmentally responsible ISG operations.
Syngas can be used to make
other products such as; electricity,
synthetic natural gas, ammonia
and derivatives (fertilisers or
explosives), methanol and diesel.
5 Provide key data and information for commercial project development.
gas to fuel a hot
water service
for 30mins/day
electricity to
run an average
household
1000
km of fuel for
an average car
200days of natural
20wheelbarrows
4days of
of fertilser
The PCD was deemed a success having met or exceeded all objectives, taking
the company another step closer to commercial operations.
1,153 PJ =
LCK’s syngas
could power all
9.9 million Australian
homes continuously
for 2.8 years
OR
OR
OR
865
petajoules
pipeline gas
31
million tonnes
of ammonia
CH4N2O
52
million tonnes
of urea
240,363
gigawatt hours
of electricity
Stats: ABS 2016 Census report
Facts: The in situ gasification (ISG) processFor personal use only
Directors
Executive Chairman
Daniel J Peters
Managing Director
Phillip Staveley
Non-Executive Director
Gregory D English
Non-Executive Director
Murray K Chatfield
Non-Executive Director
Zhe Wang
Non-Executive Director
Zheng Xiaojiang
Company Secretary
Jordan Mehrtens
Level 11, 19 Grenfell Street
Adelaide,
South Australia, 5000
Registered &
Principal Business Office
Level 11, 19 Grenfell Street
Adelaide,
South Australia, 5000
Bankers
Commonwealth Bank of Australia
96 King William Street
Adelaide, South Australia, 5000
Principal Lawyer
Piper Alderman
Level 16, 70 Franklin Street
Adelaide,
South Australia, 5000
Auditors
Grant Thornton Audit Pty Ltd
Level 3, 170 Frome Street
Adelaide, South Australia, 5000
Share Registrar
Computershare Registry Services Pty Ltd
Level 5, 115 Grenfell Street
Adelaide, South Australia, 5000
Investor enquiries:
1300 556 161
International:
+61 3 9415 4000
Leigh Creek Energy Limited
ABN 31 107 531 822
PO Box 12
Rundle Mall SA 5000
Phone: +61 8 81329100
Email: contactus@lcke.com.au
www.lcke.com.au
ASX: LCK
67
LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2019Corporate directoryFor personal use only
LEIGH CREEK ENERGYLimited
68
Reliable energy for South AustraliaFor personal use only