Commitment to the Future
2018
Annual Report
CORPORATE
DIRECTORY
LEPIDICO LTD
ABN: 99 008 894 442
DIRECTORS
Gary Johnson (Non-Executive Chairman)
Julian (Joe) Walsh (Managing Director)
Tom Dukovcic (Director Exploration)
Mark Rodda (Non-Executive Director)
Cynthia Thomas (Non-Executive Director)
Brian Talbot (Non-Executive Director)
JOINT COMPANY SECRETARIES
Alex Neuling
Shontel Norgate
REGISTERED OFFICE
Level 1, 254 Railway Parade
West Leederville, WA, Australia, 6007
Telephone: +61 (0)8 9363 7800
Facsimile: +61 (0)8 9363 7801
info@lepidico.com
Email:
PRINCIPAL PLACES OF BUSINESS
Level 1, 254 Railway Parade
West Leederville, WA, Australia, 6007
PO Box 1245 West Leederville WA 6901
Suite 200, 55 University Avenue
Toronto, ON, M5J 2H7, Canada
Website: www.lepidico.com
COUNTRY OF INCORPORATION
Australia
AUDITORS
Moore Stephens Chartered Accountants
Level 15, Exchange Tower
2 The Esplanade
PERTH WA 6000
Telephone: (08) 9225 5355
(08) 9225 6181
Facsimile:
SHARE REGISTRY
Security Transfer Australia Pty Ltd
Suite 913, Exchange Tower
530 Little Collins Street
MELBOURNE VIC 3000
PO Box 52 Collins Street West VIC 8007
Telephone: 1300 992 916
Facsimile:
Email:
(08) 9315 2233
registrar@securitytransfer.com.au
HOME EXCHANGE
Australian Securities Exchange Limited
Level 40, Central Park,
152-158 St George’s Terrace,
Perth WA 6000
ASX CODE: LPD
CONTENTS
2018 HIGHLIGHTS
CHAIRMAN’S AND MANAGING DIRECTOR’S LETTER
LITHIUM INDUSTRY AND MARKET
BUSINESS DEVELOPMENT
TECHNOLOGY
PROJECTS
EXPLORATION OVERVIEW
SUSTAINABLE DEVELOPMENT
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
FINANCIAL REPORT
DIRECTORS’ REPORT
INDEPENDENT AUDITOR’S REPORT
ASX ADDITIONAL INFORMATION
3
4
6
8
10
12
14
16
20
23
33
74
75
80
2018 LEPIDICO ANNUAL REPORT
1
LEPIDICO’S VISION
IS TO WORK
TOGETHER WITH
STAKEHOLDERS
TO MAKE A BETTER
FUTURE FOR ALL
2
2018 LEPIDICO ANNUAL REPORT 2018 HIGHLIGHTS
2018 was incident free, continuing Lepidico’s zero-harm health
safety and environment track-record since records began in
September 2016
Equity issues for Phase 1 L-Max® Plant Feasibility Study successfully
raised $7.6M in November 2017 and was heavily over-subscribed
Galaxy Resources Ltd became a substantial shareholder with an
initial 12% interest
Ms Cynthia Thomas and Mr Brian Talbot appointed as
Non-Executive Directors to the Board
Maiden JORC Code compliant Inferred Mineral Resource of 1.5Mt
grading 1.1% Li2O estimated at Alvarrões, Portugal. A conceptual
mine plan was developed for the Block 1 and 2 area, to support a
plus ten year project life for the Phase 1 Plant
Preliminary engineering for Phase 1 L-Max® Plant Feasibility Study
completed by Lycopodium
Capacity optimisation program completed for upgrade of Phase 1
L-Max® Plant from 3,000tpa to 5,000tpa of battery grade lithium
carbonate
Sudbury, Canada identified as preferred location for Phase 1 L-Max®
Plant
Baseline environmental studies and community consultation
commenced for the preferred Phase 1 Plant site
Lithium carbonate grading 99.8% produced using L-Max®, from
lepidolite contained in tailings sourced from Galaxy Resources’
Mt Cattlin spodumene operations
National patent application phase for the L-Max® technology
progressing in key strategic jurisdictions
Provisional patent application lodged for S-MaxTM, a
hydrometallurgical process that produces an amorphous silica
from concentrates sourced from a range of mica minerals,
including lithium micas
Marketable quality samples of feldspar and quartz concentrates for
ceramics use generated from Alvarrões lepidolite mineralised zone
STRATEGIC OBJECTIVE:
THROUGH CREATIVE
RESOURCE LEADERSHIP
FAST TRACK THE BUSINESS
TO FREE CASH FLOW
GENERATION, DEMONSTRATE
THE COMMERCIAL VIABILITY
OF L‐MAX® AND BECOME
A GLOBALLY SIGNIFICANT
LITHIUM CHEMICAL
PRODUCER.
3
2018 LEPIDICO ANNUAL REPORT CHAIRMAN’S
AND
MANAGING
DIRECTOR’S
LETTER
In its second year as a publicly listed company Lepidico made significant advances towards
achieving its strategic goals as identified in its five-year strategic plan, in particular to become a
globally significant lithium chemical producer.
Fair market conditions for both equities and the lithium market prevailed during the second half of
the 2017 calendar year, which provided a supportive environment for Lepidico to raise the
$7.6 million required to complete the feasibility Study for its Phase 1 L-Max® Project.
The equity issues were supported by Galaxy Resources Ltd, who we welcomed to the Lepidico share
register. The entitlements offer, launched in October 2017 received overwhelming support with 92%
of eligible shareholders taking up their entitlements. Subsequently the Company’s stock was rerated
in the market, at a time when the spot lithium price was posting new highs and sentiment towards
lithium equities was strong.
The first half of calendar year 2018 proved to be a more challenging period for lithium equities with
(at the time of writing) the spot lithium carbonate price in Asia losing around a third of its value
from the high posted in early 2018. As a result, sentiment towards lithium companies deteriorated
and share prices, including Lepidico’s came under significant pressure. Lepidico is determined to
maximise the value of the business by being disciplined in delivering on long-term goals, particularly
during such periods of heightened market volatility.
In late 2017 the engineering for the Phase 1 L-Max® Plant was completed by Lycopodium Ltd, on
schedule and within budget. This work revealed that the vendors for the major equipment in the
plant could only provide broad ranges for the capacity of each piece of equipment in this particular
application. This led to a vendor testwork programme being undertaken in collaboration, with
equipment suppliers, to more precisely determine equipment capacity and the optimal throughput
for the Phase 1 Plant Project. This work took six months to complete and while it caused a delay in
the project schedule, it led to important findings for optimising the plant collaboration with most
equipment in the plant upscaled for production of 5,000 tonnes per year of lithium carbonate.
Lepidico’s consultants and management team have continued to exhibit great skill and creativity
in both improving the L-Max® design criteria and developing new potential products from the
lithium mica concentrate feed. During the course of the feasibility study amorphous silica has been
identified as an alternative product to sodium silicate, which led to a provisional patent application
being lodged for the S-MaxTM process. Further work is planned to evaluate a variety of potential
applications for silica products derived from lithium micas. Favourable results from market studies in
Canada allowed sodium sulphate to be added to the by-product suite and most recently caesium is
being evaluated as a potential further product from the Phase 1 Plant.
4
2018 LEPIDICO ANNUAL REPORT
The unique composition of Lepidico’s preferred mica, lepidolite, continues to generate opportunities
through development work that enhances the product suite.
A critical task for the Phase 1 Project is to secure offtake agreements for the various L-Max® products.
Feedback from prospective customers and financiers suggests that considerable confidence will be
gained from the development and operation of an L-Max® pilot plant. To this end, during the first half
of calendar 2018 Lepidico commissioned the design of a small scale research and development plant
that will employ similar industrial equipment to that planned for the Phase 1 Plant. It is envisaged
that the pilot plant will provide a demonstration facility for prospective offtake and finance partners
to conduct their due diligence on, once the Phase 1 Plant feasibility study is complete in early 2019.
Furthermore, the pilot plant will be an important tool for the development of the L-Max® by-product
suite as well as provide large scale product samples for third party assessment.
Another major achievement in the 2018 fiscal year was the delineating of the first JORC Code
compliant lithium mica Mineral Resource estimate at the Alvarrões Lepidolite Mine in Portugal,
in collaboration with the owner Grupo Mota. At 1.5 million tonnes grading 1.1% Li2O this Inferred
Resource offers the potential to provide lithium-mica concentrate feed to the Phase 1 L- Max® Plant
Project for in excess of 10 years from just the Blocks 1 and 2 mining area. Further work is planned
in fiscal year 2019 to infill drill the existing Resource area and in collaboration with Grupo Mota to
explore a highly prospective area of outcropping lithium mica bearing pegmatites adjacent to the
existing mine which has yet to be drill evaluated.
A disciplined approach to exploration continued in 2018 with the Company withdrawing from two
properties that were subject to farm-in arrangements after drilling didn’t generate results worthy of
follow up. Lepidico entered into a new farm-in arrangement with Venus Metals Corporation Limited
over the lithium rights at its Youanmi property in Western Australia. Initial drill results in September
2018 appear encouraging and further work is planned for the 2019 fiscal year.
Lepidico has also continued to evaluate other properties for their lithium mica potential under
confidentiality, with the objective of gaining access to a portfolio of quality lithium mica assets,
capable of not just providing further concentrate feed to the planned Phase 1 Plant but also an
envisaged full-scale L-Max® plant, which is currently the subject of a scoping study. It is important
that Lepidico learns to walk before it runs. However, it is also important that a project pipeline is
developed to support the long-term growth objectives of the Company. The dedicated focus on the
Phase 1 Plant Project coupled with the measured activities on the full-scale plant scoping study strike
this balance between near term objectives and longer-term priorities.
Looking forward, activities during the 2019 fiscal year will focus on securing offtake and financing
for the Phase 1 Project along with the requisite permits and approvals, to make a final investment
decision and transition the business onto a development footing. Considerable preparatory work
has already been undertaken to develop human resources and other business systems to facilitate
this transformational advancement in our business.
Lepidico is dedicated to developing a sustainable, clean-tech business that is synonymous with
quality. To this end Lepidico’s Sustainable Development credentials are presented for the first time
in this Annual Report, along with a commitment for continual improvement in all aspects of the
business. We extend our sincere gratitude to all stakeholders that are supporting the company on
this exciting journey to becoming a new sustainable lithium chemical producer.
Yours Faithfully
Gary Johnson, Chairman and Joe Walsh Managing Director
5
2018 LEPIDICO ANNUAL REPORT
LITHIUM INDUSTRY
AND MARKET
Review
Strong demand growth for battery grade lithium chemicals drove the market into deficit in 2017,
causing the spot price for battery grade lithium carbonate in Asia to appreciate rapidly in the second
half of the calendar year to over US$20,000/t. Subsequent incremental supply growth from existing
operations coupled with new sources of supply coming on line in the first half of 2018 forced prices
to retreat, particularly in China. Although pricing pressures are expected to continue into the second
half of calendar year 2018 as new spodumene supplies from Western Australia continue to ramp
up, support is seen as prices approach cost levels for higher-cost converters in China, resulting in
price stabilisation.
Li2CO3 cif Asia US$/t
22000
21000
20000
19000
18000
17000
16000
15000
14000
Jan 2017
Apr 2017
July 2017
Oct 2017
Jan 2018
Apr 2018
July 2018
Source: Benchmark Mineral Intelligence
Lepidico received a substantial rerating of its equity in the 2017 quarter, when the Company completed
an equity issue that provided funds for the Phase 1 L-Max® Plant Feasibility Study and Galaxy
Resources Ltd came onto the share register with an initial 12% holding. Subsequently, during the first
half of 2018 the share price came under pressure from the decline in the spot lithium carbonate price
and a deterioration in investor sentiment towards lithium equities.
Lepidico share price and volume
Volume
Close
0.090
0.080
0.070
0.060
0.050
0.040
0.030
0.020
0.010
0.000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
Jan 2017
Apr 2017
July 2017
Oct 2017
Jan 2018
Apr 2018
July 2018
Source: CommSec
6
2018 LEPIDICO ANNUAL REPORT
Outlook
Fundamentals for the lithium market in the medium to longer term continue
to be favourable, fuelled by forecasts of massive demand growth as
electric vehicle adoption gathers pace around the globe. Many industry
commentators forecast that lithium demand will rise four to five fold from
calendar year 2017 levels, to between 800,000tonnes and one million
tonnes in the ten years to 2026. To satisfy such demand growth numerous
new sources of lithium supply will be required in addition to that from the
inevitable expansion of existing operations.
FUNDAMENTALS FOR
THE LITHIUM MARKET IN
THE MEDIUM TO LONGER
TERM CONTINUE TO BE
FAVOURABLE, FUELLED BY
FORECASTS OF MASSIVE
DEMAND GROWTH
AS ELECTRIC VEHICLE
ADOPTION GATHERS PACE
AROUND THE GLOBE.
Supply
Approximately half the world’s lithium chemical production comes from pegmatites – often referred
to as hard rock sources – and in particular the mineral spodumene. The second main source of
current lithium chemical supply are brine deposits, mostly located in South America and China.
Lithium mica and phosphate minerals such as lepidolite and amblygonite respectively can also
occur within pegmatite rocks but until recently have rarely been of commercial interest. The advent
of Lepidico’s L-Max® process provides a new hydrometallurgical solution for extracting lithium
carbonate from these hitherto, overlooked lithium bearing minerals. As a result of its proprietary
technology, Lepidico is operating in a much less contested space for mineral feed sources versus
spodumene and brine producers. Furthermore, L-Max® is not an energy intensive process as it
operates at atmospheric pressure and moderate temperature, and also benefits from a suite of
valuable by-products. As a result, capital and operating costs are expected to be competitive.
Demand
Numerous sources of new lithium supply will be required over the next five to ten years to satisfy
the huge demand growth that many lithium commentators now predict. Global lithium carbonate
consumption jumped to over 200,000 tonnes in 2017, of which approximately 60,000 tonnes was
consumed in lithium-ion batteries (LIBs). Between 2010 and 2017 the compound annual growth rate
(CAGR) for lithium chemical demand was 11.7%. However, the CAGR for electric vehicle batteries
was a massive 60.2% over the same period, albeit from a relatively low base. Many lithium chemical
commentators and producers predict that lithium chemical demand will continue to grow at between
16% and 18% annually from 2017 to 2030, with LIBs accounting for the majority of this growth. This
being the case, by 2025 lithium demand would be between 630,000 tonnes and 860,000 tonnes of
lithium carbonate equivalent (LCE) and by 2030 demand would rise to between 1.4 million tonnes and
1.9 million tonnes of LCE.
Around the globe countries and corporations are embracing clean energy initiatives to improve
the environment that we live in, in particular air quality, with EVs playing an important role. China is
spearheading the electrification of the world’s automobile industry, as motor vehicles are among the
largest source of pollution in many cities. New energy vehicle (NEV) adoption in China is proving
to be rapid, in part due to government incentives but as more model options become available and
NEV’s become more affordable such incentives are expected to become unnecessary.
While other lithium applications grow at a slow but steady rate, projected demand growth in
batteries, especially for use in electric vehicles EVs and other forms of mobile energy storage is much
higher. Furthermore, LIBs are gaining popularity in secondary storage applications which is forecast
to become another area of strong demand growth.
7
2018 LEPIDICO ANNUAL REPORT BUSINESS
DEVELOPMENT
To deliver on its stated objective of becoming a globally significant lithium chemical producer
Lepidico has developed a series of strategic goals. The first of these is to develop an operating
business. This will be achieved by completing the Phase 1 L-Max® Plant Feasibility Study and
subsequently developing the company’s first lithium chemical plant, with a target date of calendar
year 2020. The Phase 1 Plant is designed as a demonstration scale facility, to prove commercial
viability of the L-Max® process while being of sufficient scale to provide attractive economic returns.
During 2018 it became apparent that to secure the most favourable finance and offtake terms for
the Phase 1 Plant project a pilot plant would be of significant benefit. In collaboration with lead
metallurgical consultant, Strategic Metallurgy, an L-Max® plant was designed utilising small scale
industrial equipment, similar to that planned to be employed in the Phase 1 Plant. The process design
pack was completed in July 2018 for a pilot plant capable of processing 15 kilograms per hour of
concentrate feed, a ten-fold increase from the mini-plant trial undertaken in 2016, which relied on
predominantly laboratory equipment.
The pilot plant will provide a demonstration facility for prospective offtake/finance partners with
operation timed to coincide with completion of the Phase 1 Plant feasibility study in the first quarter
of 2019, allowing interested parties to conduct comprehensive due diligence. The pilot plant will
reduce scale-up to nominal Phase 1 Plant throughput to approximately 240 times versus previous
mini-plant trials, and will provide operating experience to facilitate ramp-up to full production. Of
further benefit, pilot operations will generate significant quantities of materials that can be used to
further develop the quality and value of the L Max® by-product suite.
To become a globally significant producer a larger production facility will be required to that of the
Phase 1 Plant. To this end, Lepidico commenced preliminary scoping study activities during the
2018 fiscal year for a full-scale L-Max® plant. The purpose of the study is to capture valuable data
from other study works – such as that generated from testwork undertaken with major equipment
vendors – that can at modest cost inform a study for a larger plant. The scoping study represents a
longer term initiative that is planned to ultimately provide Lepidico with a project pipeline.
The Feasibility Study contemplates that concentrate feed to the Phase 1 Plant Project will be
sourced from the Alvarrões lepidolite mine in Portugal. However, it is expected that further Mineral
Resources will be required to support a second larger plant development. It is envisaged that this will
be achieved by strategic partnership, acquisition and exploration. Gaining access to sizable, quality
lithium mica Resources is another of Lepidico’s strategic goals.
8
ALVARROES MINE
ORE
CONCENTRATOR
LEPIDOLITE
CONCENTRATE
FELDSPAR
CONCENTRATE
LOCAL
MARKET
›
L-MAX®
PROCESSING
TRANSPORT TO
SUDBURY
LITHIUM
CARBONATE
AMORPHOUS
SILICA
SOP
(FERTILIZER)
OTHER
BY-PRODUCTS
RESIDUE
PRODUCT
SULPHURIC ACID
LIME
STEAM
2018 LEPIDICO ANNUAL REPORT
SCHEMATIC OF FLOW OF MATERIALS THROUGH THE VALUE CHAIN
FROM MINE TO PRODUCT GENERATION
FELDSPAR
CONCENTRATE
LOCAL
MARKET
›
ALVARROES MINE
ORE
CONCENTRATOR
LEPIDOLITE
CONCENTRATE
LITHIUM
CARBONATE
AMORPHOUS
SILICA
SOP
(FERTILIZER)
OTHER
BY-PRODUCTS
RESIDUE
PRODUCT
L-MAX®
PROCESSING
TRANSPORT TO
SUDBURY
SULPHURIC ACID
LIME
STEAM
9
2018 LEPIDICO ANNUAL REPORT TECHNOLOGY
L-Max®
L-Max® is a low energy consumption hydrometallurgical process which employs low cost,
conventional reagents along with industry standard equipment. The process involves a saturation
sulphuric acid leach of a lithium mica slurry at atmospheric pressure and modest temperature,
followed by a series of impurity removal steps at progressively higher pH levels and the subsequent
precipitation of lithium carbonate. The process contrasts with the energy intensive processing of
spodumene concentrates, which requires high temperature roasting prior to lithium recovery.
The patent registered L-Max® technology is owned 100% by Lepidico’s subsidiary Li-Technology
Pty Ltd. It is protected by an International Patent Application and a granted Certification Report
of Innovation Patent in Australia. These Applications have progressed to the national and regional
phase in jurisdictions where L-Max® may be optimally and strategically deployed.
The attractions of L-Max® are numerous and complementary.
• Proprietary: The Australian Patent Office declared L-Max® to be “novel, inventive, industry applicable
and patentable” for production of lithium carbonate
• Efficiency: L-Max® leaches lithium from non-conventional and relatively uncontested mineral sources;
lithium micas and phosphates, and achieves high extraction rates
• Health & Safety: L-Max® reagents and operation have straightforward occupational health and safety,
and environmental characteristics
• Conventional: L-Max® utilises common use, inexpensive reagents, is energy efficient and utilises
conventional equipment operated at atmospheric pressure and modest temperature
• By-products: include potassium sulphate fertiliser (SOP), amorphous silica, sodium sulphate and
potentially tantalum, tin, caesium and rubidium
• Sustainable: steam is the only material L-Max® emission and the process residue is being evaluated
as an environmental remediation product
• Scalable: scoping study for a full scale plant will contemplate output of 15,000t to 25,000t pa LCE
• Successful operation of the Phase 1 plant will almost entirely eliminate the technical scale up risk to a
full scale plant.
10
2018 LEPIDICO ANNUAL REPORT S-MAX™
Lepidico continues to expand its technology base. In May 2018 a provisional patent application
was lodged for the hydrometallurgical process, S-Max™, which produces an amorphous silica from
concentrates sourced from a range of mica minerals, including lithium micas. The purified amorphous
silica may be sold directly or used as a feed to produce a variety of other marketable silica products.
The S-Max™ technology is held in a wholly owned Lepidico subsidiary: Silica Technology Pty Ltd.
S-Max™ employs three stages; grinding, sulphuric acid leach regimes at atmospheric pressure,
followed by differential classification and flotation streams. All equipment is industry standard
and common use reagents are employed. Occupational health and safety requirements will be
straightforward. Importantly, S-Max™ can be used as a standalone process, or be integrated with
Lepidico’s proprietary L-Max® process.
11
2018 LEPIDICO ANNUAL REPORT
PROJECTS
THE PHASE 1 PLANT IS NOW
BASED ON A NOMINAL
DEBOTTLENECKED
THROUGHPUT RATE OF
APPROXIMATELY SEVEN
TONNES PER HOUR TO
PRODUCE 5,000 TONNES PER
ANNUM OF LCE.
Phase 1 L-Max® Plant Feasibility Study
Preliminary engineering for the Phase 1 L-Max® Plant was completed by Lycopodium Minerals Pty
Ltd in late 2017 based on a nominal throughput rate of 3.6 tonnes per hour, for annual output –
depending on the concentrate feed grade – of between 2,500 tonnes and 3,000 tonnes of lithium
carbonate. To more precisely determine the capacity of major equipment for the Phase 1 L-Max®
Plant a vendor testwork program was subsequently undertaken and completed in mid-2018. The
objective of the vendor program was to precisely determine the capacity of the major equipment
employed in the Plant. The findings of this work coupled with ongoing process optimisation
testwork resulted in a number of plant design modifications that simplify the process flowsheet,
with positive implications for both capital and operating costs. These improvements, which include
the S-MaxTM circuit design, were incorporated into the final design for the Phase 1 Plant, which is
based on a nominal debottlenecked concentrate throughput rate of approximately seven tonnes per
hour to produce approximately 5,000 tonnes per annum of LCE. Final engineering is scheduled for
completion in December 2018.
Environmental baseline activities for both the plant site and associated residue storage facility
commenced in September 2017 at one of the Company’s preferred locations for the Phase 1 Plant
in Sudbury, Canada. This work is scheduled for completion during the December 2018 quarter. The
two sites short listed have excellent existing infrastructure including road, rail, power, gas, water and
town sewer. These sites also represent options for locating a future full-scale plant development.
Following receipt of favourable geochemical, geotechnical and material characterisation testwork
Lepidico committed to a three month research collaboration with the Department of Earth and
Environmental Sciences at the University of Waterloo in Ontario and Knight Piésold Ltd. The
purpose of the project is to characterise samples of the blended residue streams from the L-Max®
process and assess this material as a by-product for use in land reclamation applications.
The Phase 1 Plant feasibility study continues to contemplate the development of a Residue Storage
Facility (RSF). However, assuming the land reclamation residue project is successful, the need to
have a dedicated RSF on site may be eliminated, thereby making the Phase 1 Plant a “zero waste”
facility, and result in further capital and operating cost savings.
12
2018 LEPIDICO ANNUAL REPORT Alvarrões Lepidolite Mine
Lepidico has an ore access agreement with Grupo Mota, operator of the Alvarrões lepidolite mine
located in Goncalo, Portugal. The current Mineral Resource has the potential to provide ten years
feed to the proposed Phase 1 Plant. The current Mineral Resource is open and further development
work is planned for late 2018 (see Mineral Resource and Exploration Overview).
A preliminary mine plan has been developed based on an ore mining rate of up to 150,000 tonnes
per year. It is planned that the mined ore will be processed on site by a new flotation plant with
nominal annual output of 50,000 tonnes of lithium mica concentrate. The concentrate is to be
containerised and transported to port for shipping to the Phase 1 plant in Sudbury.
Feasibility study level process design criteria for the upstream concentrator is being developed
by Strategic Metallurgy in Perth. This work is founded on the Outotec cPlant design. The cPlant
Concentrator offers a cost effective, flexible solution, ideal for projects with modest capacity
needs and/or in remote locations. The plant is based on pre-fabricated and functionally tested
modules inside container-sized steel frames that can be easily transported and installed, and quickly
connected. Some of the stated benefits of cPlant include: reduced EPC project costs compared to a
conventional flotation plant; up to 20% lower capital investment; requires 30% less labour resources;
95% of installation and pre-commissioning done prior to delivery; minimal civil engineering work
required; and ease of relocation.
Flotation testwork using Alvarrões ores successfully separated a high quality lithium mica
concentrate as well as separate feldspar and quartz concentrates that may be sold by Grupo Mota to
the local ceramics industry. It is anticipated the volume of residual waste from the concentrator will
be modest allowing for co-disposal of concentrator fines with mine waste.
Source: Outotec
13
2018 LEPIDICO ANNUAL REPORT MINERAL RESOURCES &
EXPLORATION OVERVIEW
Alvarrões Lepidolite Project
The Alvarrões property is located 10 km south of the city of Guarda in northeast Portugal. The
Project area comprises an extensive system of flat-lying lepidolite-bearing pegmatite sills intruded
into a granite host over an 8 km by 2 km corridor.
Lepidico completed a diamond drilling program at Alvarrões totalling 19 holes for 1,240 m of HQ core
in mid-2018. This work resulted in an inaugural Mineral Resource estimate for Alvarrões, completed
by AMC Consultants Pty Ltd (AMC). AMC reported a JORC Code-compliant Inferred Mineral
Resource of 1.5 Mt @ 1.1% Li2O. Within this estimate, 1.1 Mt @ 1.1% Li2O is contained over approximately
400 m of strike at Blocks 1 and 2.
Drilling at Alvarrões has identified 13 stacked sub-horizontal mineralised pegmatite sills, confirmed
to extend over a 900 m by 500 m area and that which range in thickness from 0.5 m to over 4.0 m,
with 15% to 30% lepidolite content. The system remains open in all directions.
The Mineral Resource estimate is based on the geological interpretation by Lepidico of just three
of the thicker pegmatite sills, where continuity across the deposit was established by drilling,
designated Sill M, Sill N and Sill O.
The work at Alvarrões is part of Lepidico’s Mineral Resource definition program to establish a multi-
deposit inventory of high-quality lithium mica Mineral Resources to provide feedstock for not just the
proposed Phase 1 L-Max® Plant but also conceptual larger-scale L-Max® plants.
Alvarrões diamond drill hole ALVD13, Sill M, Block 2.3m @
1.38% Li2O from 45.9m; 30% lepidolite (estimated).
14
2018 LEPIDICO ANNUAL REPORT Youanmi Lepidolite Project
The Youanmi property comprises one exploration licence, E57/983, covering 98 km2
of Archaean greenstone terrain in the Murchison Province of Western Australia,
approximately 560 km northeast of Perth. Lepidico is earning an 80% interest in
the lithium rights over the tenement from holder Venus Metals Corporation Limited
(ASX:VMC). Venus is free carried through to a decision to mine.
The Youanmi region is known to contain a belt of lepidolite-bearing pegmatites
within which lepidolite is often the only, or dominant, lithium mineral species.
E57/983 encompasses 4 km of strike of this belt, which is unexplored specifically
for lepidolite.
Reconnaissance mapping by Lepidico in mid-2018 identified three initial areas of
lepidolite-bearing pegmatites with lepidolite content in rock chips ranging from
5% to 35% and commensurate Li2O contents of 0.25% to 1.71%. Subsequently,
Lepidico undertook an initial reverse circulation drilling program over the three
targets completing 38 holes for a total of 936 metres of drilling.
Geological logging shows that lepidolite-bearing pegmatites were intersected at
each target, with a thickest intercept of 9m with an estimated 20% lepidolite at
Target 2.
Best results stemmed from the Target 1 area, which hosts a 4m to 5m thick
pegmatite, dipping 45o to the north and extending for over 250 m along strike
and at least 40m down dip. This pegmatite averages 15% to 20% lepidolite and
remains open in all directions. Further work is planned in fiscal year 2019.
Y V C 0 32
Y V C 0 31
Y V C 0 01
m
0
1
m
0
2
12m
21m
Pegmatite
Greenstone
5m
Pegmatite
lepidolite >10%
YOUANMI
Section 662180mE
30m
Youanmi, “Target 1” cross section at 662180 mE showing 4m – 5m thick lepidolite
pegmatite open 40m down dip. Lepidolite in hole YVC001, 4m @ 15%; hole 031, 5m @
15%; hole 032, 3 m @ 3% + 1m @40%.
Other exploration
Lepidico is committed to building a portfolio of quality lithium mica Mineral
Resources. Assets are critically assessed at each stage of exploration to
ensure subsequent expenditure is warranted, with those that don’t meet the
Company’s criteria relinquished. During fiscal year 2018 Lepidico divested its
Gobbos Cu-Mo project in Western Australia and terminated its involvement
in the Lemare spodumene project in Quebec, Canada. Two lepidolite projects
were evaluated during the year, Peg 9 and Moriarty, both in Western Australia.
The Company withdrew from both these farm-ins following the first phase of
drill evaluation.
SIGNIFICANT PROGRESS
WAS MADE IN FISCAL
YEAR 2018 IN SECURING
QUALITY LITHIUM MICA
ASSETS, THE AIM OF
WHICH IS TO BUILD A
MINERAL RESOURCE
INVENTORY, INITIALLY TO
SUPPLY CONCENTRATE
FEED TO THE PROPOSED
PHASE 1 L-MAX® PLANT
BUT ALSO TO ENVISAGED
SUBSEQUENT LARGER
DEVELOPMENTS.
The information in this report that relates
to Exploration Results is based on
information compiled by Mr Tom Dukovcic,
who is an employee of the Company
and a member of the Australian Institute
of Geoscientists and who has sufficient
experience relevant to the styles of
mineralisation and the types of deposit
under consideration, and to the activity
that has been undertaken, to qualify as
a Competent Person as defined in the
2012 edition of the “Australasian Code for
Reporting of Exploration Results, Mineral
Resources and Ore Reserves.” Mr Dukovcic
consents to the inclusion in this report of
information compiled by him in the form
and context in which it appears.
The information in this report that
relates to Mineral Resources is based
on information compiled by Mr Dean
Carville, who is a full-time employee of
AMC Consultants Pty Ltd. Mr Carville is
a Member of the Australasian Institute of
Mining and Metallurgy and has sufficient
experience relevant to the styles of
mineralisation and the types of deposit
under consideration, and to the activity
that has been undertaken, to qualify as
a Competent Person as defined in the
2012 edition of the “Australasian Code for
Reporting of Exploration Results, Mineral
Resources and Ore Reserves.” Mr Carville
consents to the inclusion in this report of
information compiled by him in the form
and context in which it appears.
15
2018 LEPIDICO ANNUAL REPORT SUSTAINABLE
DEVELOPMENT
Lepidico is committed to developing a sustainable lithium business providing high quality products
whilst minimising environmental and social impacts. We have a strong strategic approach to operating
in a corporately responsible manner in a rapidly changing and challenging global environment.
As a modern company that is quickly moving forward to complete the feasibility study on the Phase 1
L-Max® Plant in Sudbury, we have embraced the challenge to integrate social, economic, environmental
and health and safety opportunities into project design criteria while also minimising business risks.
This first report has been developed to discuss management’s approach to sustainable development
and how social responsibility initiatives are being integrated into the company ethos. This report is not
a full sustainability report, but rather an insight into the initiatives Lepidico is taking as it transitions,
from an exploration and development company, into a future lithium producer.
We have not yet captured the detailed sustainability performance data metrics from our operations
or contractors and believe the appropriate timing for full disclosure will be the year following the
commissioning of the Phase 1 Plant, currently scheduled for 2020. We expect that our understanding
of the material issues will become clearer for each business unit as we progress regulatory approval
processes and input from our stakeholders, especially as their expectations for the management of
issues evolves and becomes more complex. Our goal is to be able to report our future activities against
the Global Reporting Initiative (GRI) Standards and in the intervening years we will be improving our
systems to collect the necessary data.
This report provides commentary on our Corporate Social Responsibility (CSR) systems development
commensurate with our risks and opportunities. We look forward to sharing our experiences to date
in this report, and further disclosure in future reports, as we continue on our sustainability journey. We
undertake to further engage with a wide group of stakeholders and community groups at our key
project sites, and we welcome their input and feedback on our CSR reporting.
Corporate Governance
Lepidico has recently implemented a number of improvements to our Corporate Governance system
as the company grows in complexity to meet our development program.
In 2018, the Board was strengthened with the appointments of Ms. Cynthia Thomas and Mr. Brian
Talbot as Non-Executive Directors to the Company. Ms. Thomas brings over 30 years of banking and
mine financing experience and is currently the Principal of Conseil Advisory Services Inc. Mr. Talbot
is a chemical engineer with over 35 years’ experience in mine management and processing of lithium
ores. Mr Talbot is currently the Chief Operating Officewr of Galaxy Resources Ltd, and was formerly
responsible for Bikita Minerals plant expansion and metallurgical improvements.
Our Board composition brings together a balanced team of experienced financial, technical and
operations expertise. The board works very closely with the Lepidico management team to guide the
company and has oversight of our CSR mandate. Refer to the Corporate Governance Statement for
further detail.
16
2018 LEPIDICO ANNUAL REPORT
Sustainability Policy and Risk
The Lepidico Board recently endorsed our Sustainability Policy which provides guidance on how the
company will integrate its business values of sustainable economic growth with its environmental
and social responsibilities. The Policy covers key aspects including governance, transparency, risk
management, environmental stewardship, human and traditional rights, responsible supply chain,
stakeholder communication and reporting. The Policy and supporting systems will be implemented to
manage sustainability issues as the company grows.
The company has developed a corporate risk register which covers corporate activities, exploration
and project development. The register is reviewed annually, and major risks and management plans are
reviewed at Board meetings. The major risks that the company manages include; ongoing financing
for project development, timely conversion of exploration targets to JORC reserves and project
development implementation.
Environmental Initiatives
Partnership to Investigate Waste Re-use Opportunities: Lepidico has established a partnership with
the University of Waterloo in Ontario to undertake characterisation studies of the potential waste
streams from the Phase 1 L-Max® Plant to determine if the waste can be used either directly or as a
blended material for soil amelioration.
Since the turn of the century, more than 100 million tonnes of sulphur dioxide have been released
from the Sudbury basin due to the mining and smelting of sulphur bearing copper/nickel ores
resulting in deforestation and acidification of soils and waterways. Following the roaster technology
abatement program in 1972 and implementation of stringent emission standards in the late 1990’s,
sulphur dioxide emissions decreased to low levels meeting the Ministry of Environment standards.
However, the long-term emissions resulted in acidification of over 1,300 km2 of surrounding soils and
waterways. The City of Greater Sudbury and Partners have been undertaking extensive remediation
works including lime addition to soils, re-establishing suitable conditions for revegetation and the
planting of well over 10 million new trees. The interventions have enabled the Sudbury area to be
transformed from its infamous barren landscape to a ‘re-greened’ environment.
Lepidico and the University researchers will determine if the L-Max® residue (which has a high
gypsum content and benign chemical composition) can be used to aid in the restoration of the
landscape. If this is achievable, in addition to the sale of several by-products, then the Phase 1 Plant
will become a zero-waste facility. This may then lead to significant community environmental
benefits including; improving revegetation outcomes in the Sudbury region, reduction of the Phase 1
Plant footprint as well as reduced capital and operating costs.
17
2018 LEPIDICO ANNUAL REPORT Ore Concentrator Waste Minimisation and Co-product Studies: Lepidico announced its maiden
inferred Mineral Resource estimate for the Alvarrões Lepidolite project in late 2017. Ore will be
mined, crushed and concentrated to produce a high grade lithium mica concentrate suitable for
the Phase 1 plant feed. The reject material would normally be disposed of in a conventional tailings
storage facility (TSF). Laboratory studies in partnership with the Alvarrões operator, Grupo Mota,
have investigated further treatment and separation of the reject material into feldspar and quartz
co-products that may be marketed through the Grupo Mota supply chain for ceramics use. This
modification to the process could result in additional revenue, reduced waste, and potentially negate
the requirement for a TSF.
Environmental Baseline Studies for the Phase 1 L-Max® Proposed Plant site: Lepidico completed
logistics trade-off studies to decide that Sudbury, Ontario is the preferred location to construct the
Phase 1 Plant. A number of short listed sites including industrial parks, old mine areas and greenfield
locations were reviewed, with the preferred locations identified within existing industrial parks. The
sites are well serviced with road and rail access and utilities.
Lepidico has commenced environmental approvals and baseline monitoring for one of the proposed
plant sites and residue storage facility. Work commenced in 2017 including baseline review of surface
and ground waters, fauna and flora, geotechnical, emissions and waste management studies. These
will be finalised in late 2018 coinciding with completion of the engineering definitive plant design
studies. It is anticipated the necessary environmental documents supporting an environmental
licence application will be able to be lodged with the Ontario authorities upon completion of the
requisite works.
Stakeholder Consultation
Lepidico commenced comprehensive stakeholder consultation with Ontario and Sudbury stakeholders
in August 2017. Consultation is imperative across a wide community cross section in order that the
project is understood, including associated risks and opportunities. Lithium processing is a new
industry for Sudbury, which has traditionally processed nickel and copper ores for over 100 years.
Sudbury is actively seeking new industry and diversification. With fast moving technology advances
and universal adoption of lithium based energy storage as a clean energy replacement, Lepidico has
been welcomed as a new business opportunity for the City.
Company representatives have completed presentations on the proposed project to the Mayor and
Officials from the City of Greater Sudbury, Provincial Ministries and other Departments. Both formal
and informal presentations will continue to be made in Toronto and Sudbury as the project develops.
Meetings have been conducted with the Wahnapitae, Atikameksheng Anishnawbek (formerly known
as the Whitefish Lake) and Sagamok First Nation representatives. The meetings have been used
as a forum to introduce the company and project. A register has been established to document all
of the community meetings and issues raised from discussions. Ongoing consultation will continue
throughout the life of the project.
In 2018, Lepidico strengthened its operating management systems and commenced setting internal
goals. These have focused on governance, occupational health and safety and the environment. Both
the exploration and project development groups have commenced reporting against these indicators
and a summary is tabulated opposite.
Shareholder engagement
The executive management team regularly engage with the investment community in Australia and
in other major financial centres globally. There is ongoing dialogue with shareholders, brokers, financial
analysts, prospective institutional investors, family offices, private equity and sovereign wealth funds
and prospective strategic investors around the world. We believe that Lepidico has international
investment appeal. The company is committed to enhancing its investment appeal by delivering on its
stated strategy from its platform on the Australia Securities Exchange (ASX).
Lepidico has established a suite of Corporate Governance documents and Charters to meet ASX
standard disclosure requirements. These are available at the company’s website.
18
2018 LEPIDICO ANNUAL REPORT Summary of 2018 Sustainability Outcomes
Goal
Outcome
Comments
Governance
Occupational Health & Safety
Zero Fatalities
Zero Lost Time Incidents
Zero Medical Aid incidents
OHS Management System
Environment
Zero Major Incidents
Environmental Management
System
Yes
Yes
Yes
Yes
Yes
Environmental Baseline
Studies
Ongoing
Metallurgical Studies
Metallurgical Studies
(waste minimisation)
Ongoing
Communities
Ongoing
In compliance with all exploration licence
conditions in Portugal and Western Australia.
No Fatalities
No LTI
No MAI
Draft OHS Policy and OHS Management Plan
No major spills at managed sites
Draft SD policy
Commenced Phase 1 Plant studies in Sudbury
Preliminary review of environmental requirements
for Alvarrões mine and concentrator. Engagement
of Knight Piesold to commence studies when
contractual arrangements in place.
Vegetation assessment completed in Western
Australia at Pioneer Resources – Peg 9 Prospect
to support the exploration drilling application.
Work completed on sodium silicate by-product
using new S-MaxTM technology to produce
amorphous silica, a value added product.
Studies commenced in partnership with Waterloo
University on using processing waste products
as a potential soil ameliorant, which could
significantly reduce waste reporting to tailings.
Investigation of ore concentrator waste products
to identify opportunities to produce value add
products that can be sold into the industrial
minerals industry.
Consultation with Sudbury First Nations
representatives regarding the P1P project.
Consultation with Ontario and Sudbury
Government officials.
19
2018 LEPIDICO ANNUAL REPORT Mr Gary Johnson
Chairman (Non-executive)
Qualifications - MAusIMM, MTMS, MAICD
Mr Johnson has over 30 years’ experience in the mining industry as a
metallurgist, manager, owner, director and managing director possessing
broad technical and practical experience of the workings and strategies
required by successful mining companies. Gary operates his own consulting
business, Strategic Metallurgy Pty Ltd, specialising in high-level metallurgical
and strategic consulting. He has been a Director of the Company since
9 June 2016.
Special responsibilities:
Member of Audit and Risk Committee
Member of the Remuneration and Nomination Committee
Other Current Directorships of listed public companies:
Director of Antipa Minerals Ltd (ASX listed)
Director of St-Georges Platinum and Base Metals Ltd
(CSE listed Company)
Former Directorships of listed public companies in the last 3 years:
Potash West NL (resigned 26 September 2014)
Hard Creek Nickel Corporation (TSX listed) (resigned 30 June 2015)
Mr Julian “Joe” Walsh
Managing Director (Executive)
Qualifications - BEng, MSc
Mr Walsh is a resources industry executive, mining engineer and
geophysicist with over 28 years’ experience working for mining and
exploration companies, and investment banks in mining related roles.
Joe joined Lepidico as Managing Director in 2016. Prior to this he was
the General Manager Corporate Development with PanAust Ltd and was
instrumental in the evolution of the company from an explorer in 2004 to
a US$2+billion, ASX 100 multi-mine copper and gold company. Joe has
extensive equity capital market experience and has been involved with the
technical and economic evaluation of many mining assets and companies
around the world.
Other Current Directorships of listed public companies:
None
Former Directorships of listed public companies in the last 3 years:
None
Mr Mark Rodda
Non-Executive Director
Qualifications - BA, LLB
Mr Rodda is a lawyer and consultant with over 20 years’ private practice,
in-house legal, company secretarial and corporate experience. Mr Rodda
has considerable practical experience in the management of local and
international mergers and acquisitions, divestments, exploration and
project joint ventures, strategic alliances, corporate and project financing
transactions and corporate restructuring initiatives. Mark currently manages
Napier Capital Pty Ltd, a business established in 2008 to provide clients
with specialist corporate services and assistance with transactional or
strategic projects. Prior to its 2007 takeover by Norilsk Nickel for in excess
of $6 billion, Mark held the position of General Counsel and Corporate
Secretary for LionOre Mining International Ltd, a company with operations
in Australia and Africa and listings on the TSX, LSE and ASX.
Special responsibilities:
Member of Audit and Risk Committee
Chair of the Remuneration and Nomination Committee
Other Current Directorships of listed public companies:
Director of Antipa Minerals Ltd
Former Directorships of listed public companies in the last 3 years:
Coalspur Mines Pty Ltd (formerly Coalspur Mines Limited) ceased being a
listed public company on 20 November 2015.
BOARD OF
DIRECTORS
MR GARY JOHNSON
MR JOE WALSH
MR MARK RODDA
20
2018 LEPIDICO ANNUAL REPORT
Mr Tom Dukovcic
Director Exploration (Executive)
Qualifications - BSc(Hons), MAIG, MAICD
Mr Dukovcic is a geologist with over 30 years’ experience in exploration
and development. He has worked on a range of commodities in diverse
regions throughout Australia and internationally and has been directly
involved with the management of gold discoveries in Australia and Brazil.
Tom is a Member of the Australian Institute of Geoscientists and a
Member of the Australian Institute of Company Directors. He has been
a Director of the Company since 22 April 1999 and brings valuable
geological, exploration and management experience to the Board.
Other Current Directorships of listed public companies:
None
Former Directorships of listed public companies in the last 3 years:
None
Ms Cynthia Thomas
Non-Executive Director
Appointed 10 January 2018
Qualifications – B.Com, MBA
Ms Thomas has over 30 years’ of banking and mine finance experience,
and is currently the Principal of Conseil Advisory Services Inc. (“Conseil”),
an independent financial advisory firm specialising in the natural resource
industry which she founded in 2000. Prior to founding Conseil, Cynthia
worked with Bank of Montreal, Scotiabank and ScotiaMcLeod in the
corporate and investment banking divisions. Cynthia holds a Bachelor
of Commerce degree from the University of Toronto and a Masters in
Business Administration from the University of Western Ontario.
Special responsibilities:
Chair of Audit and Risk Committee
Member of the Remuneration and Nomination Committee
Other Current Directorships of listed public companies:
Director and Chair of Victory Nickel Inc. (CSE listed)
Former Directorships of listed public companies in the last 3 years:
KWG Resources Inc. (resigned September 2016)
Nautilus Minerals Inc. (resigned 7 December 2016)
Mr Brian Talbot
Non-Executive Director
Appointed 10 January 2018
Qualifications – B.Sc Eng. (Hons)
Mr Talbot is the Chief Operating Officer of Galaxy Resources Ltd, which
holds an 11.6% interest in the Company. He has over 25 years’ experience
in mining and minerals processing operations. Prior to joining Galaxy
Brian was General Manager Operations at Bikita Minerals, a lithium mine in
Zimbabwe where he achieved increased product yield and capacity. Brian
has also held the positions of mining company director, general manager
and metallurgist at various mine operations in Egypt and South Africa
with diverse experience in designing, planning and managing profitable
mining operations.
Special responsibilities:
None
Other Current Directorships of listed public companies:
None
Former Directorships of listed public companies in the last 3 years:
None
MR TOM DUKOVCIC
MS CYNTHIA THOMAS
MR BRIAN TALBOT
21
2018 LEPIDICO ANNUAL REPORT MANAGEMENT
TEAM
MS SHONTEL NORGATE
CHIEF FINANCIAL OFFICER AND
JOINT COMPANY SECRETARY
Ms Shontel Norgate
Qualifications: CA, AGIA ACIS
Ms Norgate is a Chartered Accountant with over 20 years’ experience
in the resources industry including debt and equity finance, financial
reporting, project management, corporate governance, commercial
negotiations and business analysis experience in finance and
administration. Prior to joining Lepidico Shontel was CFO for ten years
with TSX-listed resources company, Nautilus Minerals Inc. Prior to her
appointment at Nautilus Minerals, Ms Norgate was Financial Controller with
Macarthur Coal Ltd and Southern Pacific Petroleum NL, both listed on the
ASX and commenced her career as an auditor with Price Waterhouse (now
PricewaterhouseCoopers)
JOINT COMPANY SECRETARY
Mr Alex Neuling
Qualifications: BSc, FCA (ICAEW), ACIS
Mr Neuling has extensive corporate and financial experience including as
director, chief financial officer and/or company secretary of various ASX-
listed companies in the mineral exploration, mining, oil and gas and other
sectors. Alex is principal of Erasmus Consulting, which provides company
secretarial and financial management consultancy services to ASX-listed
companies. In addition to his professional qualifications, Alex also holds a
degree in Chemistry from the University of Leeds in the United Kingdom.
MR ALEX NEULING
Mr Peter Walker
General Manager
Qualifications BScENG, CENG, ARSM
Peter Walker is a metallurgist with more than 30 years’ experience in the
design, commissioning and operation of processing plants and general
management of operations, with experience in Europe, Africa, Asia,
Australasia, and South America.
Peter has managed several feasibility studies encompassing a range of
commodities and countries. In recent years Peter has been responsible
for the feasibility and development of green and brown field projects in
Thailand, Laos, and Chile.
Peter has worked for a number of engineering groups as well major and
mid-tier operating companies. Commodities include lead/zinc, uranium,
coal, nickel, copper, lithium, and precious metals.
MR PETER WALKER
22
2018 LEPIDICO ANNUAL REPORT
CORPORATE
GOVERNANCE
STATEMENT
The Board of Directors of Lepidico Ltd (the “Company”) is responsible for the corporate governance of the Company.
The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are
elected and to whom they are accountable.
This statement sets out the main corporate governance practices in place throughout the financial year in accordance
with the 3rd edition of the ASX Principles of Good Corporate Governance and Best Practice Recommendations.
This Statement was approved by the Board of Directors and is current as at 18 October 2018.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
1.1: A listed entity should
establish the functions
reserved to the Board and
those delegated to senior
executives and disclose those
functions.
1.2: A listed entity should
undertake appropriate
checks before appointing a
person or putting forward to
security holders a candidate
for election as a Director
and provide security holders
with all material information
relevant to a decision on
whether or not to elect or re-
elect a Director.
1.3: A listed entity should
have a written agreement
with each director and senior
executive setting out the
terms of their appointment.
1.4: The company secretary
of a listed company should
be accountable directly to
the Board, through the chair,
on all matters to do with the
proper functioning of the
Board.
The Company has complied with this recommendation.
The Board has adopted a formal charter that details the respective Board and
management functions and responsibilities. A copy of this Board charter is available in
the corporate governance section of the Company’s website at www.lepidico.com.
The Company has complied with this recommendation.
The Company appointed Ms Thomas and Mr Talbot on 10 January 2018.
Information in relation to Directors seeking election and re-election is set out in the
Directors report and Notice of Annual General Meeting.
The Company has complied with this recommendation.
The Company has in place written agreements with each Director and
Senior Executive.
The Company has complied with this recommendation.
The Board Charter provides for the Company Secretary to be accountable directly to
the Board through the Chair.
23
2018 LEPIDICO ANNUAL REPORT ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
1.5: A listed entity should:
The Company has partly complied with this recommendation.
The Company has adopted a Diversity Policy which is available in the corporate
governance section of the Company’s website at www.lepidico.com.
The Board considers that, due to the size, nature and stage of development of the
Company, setting measurable objectives for the Diversity Policy at this time is not
practical. The Board will consider setting measurable objectives as the Company
increases in size and complexity.
There is one woman currently on the Board. The Company has three full-time
employees which includes one woman in a senior management position.
The Company has complied with this recommendation.
The Company’s Board charter outlines the process for evaluating the performance of
the Board and its Committees.
This provides that, once a year, the Board shall review and discuss the performance
of the Board as a whole, its Committees and individual Directors. If it is apparent that
there are problems which cannot be satisfactorily considered by the Board itself, the
Board may decide to engage an independent adviser to undertake this review.
The Company’s Nomination and Remuneration Committee is also required review the
performance of the Board, its committees and individual Directors.
A performance review was undertaken for the reporting period.
The Company has complied with this recommendation.
The Company has in place procedures for evaluating the performance of its senior
executives overseen by the Nomination and Remuneration Committee. This evaluation
is based on specific criteria, including the business performance of the Company and
its subsidiaries, whether strategic objectives are being achieved and the development
of management and personnel.
A performance review was undertaken for the reporting period.
• Have a diversity policy
which includes the
requirement for the
Board to set measurable
objectives for achieving
gender diversity and
assess annually the
objectives and the entity’s
progress to achieving
them;
• disclose the policy or a
summary of it;
• disclose the measurable
objectives and progress
towards achieving them;
and
• disclose the respective
proportions of men and
women on the Board
and at each level of
management and the
company as a whole.
1.6: A listed entity should
disclose the process for
evaluating the performance
of the Board, its committees
and individual Directors.
1.7: A listed entity should
have and disclose a process
for periodically evaluating
the performance of its senior
executives and disclose in
relation to each reporting
period where a performance
evaluation was undertaken in
accordance with a process.
.
24
2018 LEPIDICO ANNUAL REPORT PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
2.1: The Board of a listed
entity should establish a
Nomination Committee:
• With at least three
members the majority of
which are independent
Directors;
• chaired by an independent
director; and
• disclose the charter of the
committee, the members
of the committee and
the number of times the
committee met throughout
the period and member
attendance at those
meetings.
2.2: A listed entity should
have and disclose a Board
skills matrix setting out the
mix of skills and diversity
that the Board currently has
or is looking to achieve in its
membership.
The Company has complied with this recommendation.
The Board has established a Nomination and Remuneration Committee. The current
members of the Nomination and Remuneration Committee are:
• Mr Mark Rodda (Chair) - Independent
• Ms Cynthia Thomas - Independent
• Mr Gary Johnson
The qualifications of the members of the committee are set out in the Directors’
Report.
The Board will reassess the composition of the committee upon future changes to the
size and composition of the Board.
A copy of the Committee’s charter is available in the corporate governance section of
the Company’s website at www.lepidico.com. Details of the number of meetings of the
committee and attendance at those meetings are set out in the Directors’ Report.
The Company has complied with this recommendation.
The Board has established a skill matrix. On a collective basis the Board has the
following skills:
Strategic expertise: Ability to identify and critically assess strategic opportunities and
threats and develop strategies.
Specific Industry knowledge: Geological and metallurgical qualifications are held
by Board members and all members of the Board have a general background and
experience in the resources sector including exploration, mineral resource project
development, mining and mineral processing.
Accounting and finance: The ability to read and comprehend the Company’s
accounts, financial material presented to the Board, financial reporting requirements
and an understanding of corporate finance.
Legal: Overseeing compliance with numerous laws, ensuring appropriate legal and
regulatory compliance frameworks and systems are in place and understanding an
individual Director’s legal duties and responsibilities.
Risk management: Identify and monitor risks to which the Company is, or has the
potential to be exposed to.
Experience with financial markets: Experience in working in or raising funds from the
equity or other capital markets.
Investor relations: Experience in identifying and establishing relationships with
Shareholders, potential investors, institutions and equity analysts.
25
2018 LEPIDICO ANNUAL REPORT ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
2.3: A listed entity should
disclose the names of the
Directors considered by the
Board to be independent
Directors and provide details
in relation to the length of
service of each Director.
2.4: The majority of the
Board of a listed entity
should be independent
Directors.
The Company has complied with this recommendation.
Mr Mark Rodda and Ms Cynthia Thomas are non-executive Directors and considered
to be independent Directors.
Mr Gary Johnson is a non-executive Director and is an associate of Strategic
Metallurgy Pty Ltd (Strategic Metallurgy), a substantial shareholder of the Company.
Mr Johnson, through his interest in Strategic Metallurgy controls 361,952,111 shares in
Lepidico Ltd. In addition to its shareholding Strategic Metallurgy also receives fees
on normal commercial terms for technical services in relation to the development of
the L-Max® technology and as such is not considered independent. Where the Board
considers matters relating to Strategic Metallurgy, Mr Johnson does not participate.
Mr Brian Talbot is a non-executive Director as is the Chief Operating Officer of Galaxy
Resources Limited (Galaxy), a substantial shareholder of the Company, as is not
considered independent. Where the Board considers matters relating to Galaxy, Mr
Talbot does not participate.
Mr Joe Walsh and Mr Tom Dukovcic are Executive Directors and are not considered
independent Directors as they are employed in an executive capacity.
The appointment date of current Directors is set out in the Directors’ Report.
The Company has not complied with this recommendation.
As in ASX recommendation 2.3, the majority of the Board is not considered to be
independent.
The Board considers that its current composition is appropriate given the current size
and stage of development of the Company and allows for the best utilisation of the
experience and expertise of its members.
Directors having a conflict of Interest in relation to a particular Item of business must
absent themselves from the Board meeting before commencement of discussion on
the topic.
2.5: The Chair of a listed
entity should be an
independent Director and, in
particular, should not be the
same person as the CEO of
the entity.
The Company has not complied with this recommendation.
The Chairperson, Mr Gary Johnson is not considered to be an independent Director.
Notwithstanding this the Directors believe that Mr Johnson is able to, and does make,
quality and independent judgement in the best interests of the Company on all
relevant issues before the Board.
2.6: A listed entity should
have a program for inducting
new Directors and provide
appropriate professional
development opportunities.
Mr Joe Walsh is Managing Director of the Company.
The Company has complied with this recommendation.
The Nomination and Remuneration Committee has responsibility for the approval and
review of induction procedures for new appointees to the Board to ensure that they
can effectively discharge their responsibilities which will be facilitated by the Company
Secretary.
The Nomination and Remuneration Committee is also responsible for the program
for providing adequate professional development opportunities for Directors and
management.
26
2018 LEPIDICO ANNUAL REPORT PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
3.1: A listed entity should
establish a code of conduct
and disclose the code or a
summary of the code.
The Company has complied with this recommendation.
The Company has established a code of conduct that sets out the principles covering
appropriate conduct in a variety of contexts and outlines the minimum standard of
behaviour expected from Directors and employees.
A copy of the Company’s code of conduct is available in the corporate governance
section of the Company’s website at www.lepidico.com.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
The Company has complied with this recommendation.
The Board has established an Audit and Risk Committee. The current members of the
Audit and Risk Committee are:
• Ms Cynthia Thomas (Chair) - Independent
• Mr Mark Rodda - Independent
• Mr Gary Johnson
The role of the Audit and Risk Committee is to assist the Board in monitoring and
reviewing any matters of significance affecting financial reporting, risk management
and compliance.
The qualifications of the members of the Audit and Risk committee are set out in the
Directors report. Although all members of the committee do not hold accounting
or finance qualifications they do have an understanding of financial reporting
requirements and experience in ensuring that these requirements are met and that
relevant controls are in place to ensure the integrity of the financial statements and
reports.
The Board will reassess the composition of the committee upon future changes to the
size and composition of the Board.
A copy of the charter of the Audit and Risk Committee is available in the corporate
governance section of the Company’s website at www.lepidico.com.
Details of the number of meetings of the committee and attendance at those
meetings are set out in the Directors’ Report.
The Company has partly complied with this recommendation.
The Board has received the assurance required by ASX Recommendation 4.2 in
respect of the financial statements for the half year ended 31 December 2017 and the
full year ended 30 June 2018. Given the size and nature of the Company’s operations
the Board has not received the assurance in respect of the quarterly cash flow
statements believing that the provision of the assurance for the half and full year
financial statements is sufficient.
4.1: The Board of a listed
entity should establish an
audit committee:
•
•
•
With at least three
members, all of whom
are non-executive
Directors and a majority
of which are independent
Directors;
chaired by an
independent Director; and
disclose the charter of the
committee, the members
of the committee and
the number of times
the committee met
throughout the period
and member attendance
at those meetings.
4.2: The Board of a listed
entity should, before it
approves the entity’s financial
statements for a financial
period, receive from its CEO
and CFO a declaration that,
in their opinion, the financial
records of the entity have
been properly maintained
and that the financial
statements comply with
the appropriate accounting
standards and give a true
and fair view of the financial
position and performance
of the entity and that the
opinion has been formed on
the basis of a sound system
of risk management and
internal control which is
operating effectively.
27
2018 LEPIDICO ANNUAL REPORT ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
4.3: A listed entity should
ensure that the external
auditor attends its Annual
General Meeting and is
available to answer questions
from security holders
relevant to the audit.
The Company has complied with this recommendation.
The external auditor attends the Annual General Meeting and is available to answer
questions from shareholders relevant to the audit and financial statements. The
external auditor will also be allowed a reasonable opportunity to answer written
questions submitted by shareholders to the auditor as permitted under the
Corporations Act.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
5.1: A listed entity should
establish written policies
designed to ensure
compliance with ASX
Listing Rules disclosure
requirements and to ensure
accountability at a senior
executive level for that
compliance and disclose
those policies or a summary
of those policies.
The Company has complied with this recommendation.
The Company has established a continuous disclosure policy which is designed to
guide compliance with ASX Listing Rules disclosure requirements and to ensure that
all Directors, senior executives and employees of the Company understand their
responsibilities under the policy.
The Board has designated the Chairman, Managing Director and the Company
Secretary as the persons responsible for ensuring that this policy is implemented and
enforced and that all required price sensitive information is disclosed to the ASX as
required.
In accordance with the Company’s continuous disclosure policy, all information
provided to ASX for release to the market is posted to its website at www.lepidico.
com after ASX confirms an announcement has been made.
A copy of the continuous disclosure policy is available in the corporate governance
section of the Company’s website at www.lepidico.com.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
6.1: A listed entity should
provide information about
itself and its governance to
investors via its website.
6.2: A listed entity should
design and implement an
investor relations program
to facilitate effective two-
way communication with
investors.
The Company has complied with this recommendation.
The Company’s website at www.lepidico.com contains information about the
Company’s projects, Directors and management and the Company’s corporate
governance practices, policies and charters. All ASX announcements made to the
market, including annual and half year financial results are posted on the website as
soon as they have been released by the ASX. The full text of all notices of meetings
and explanatory material, the Company’s Annual Report and copies of all investor
presentations are posted on the website.
The Company has complied with this recommendation.
The Company’s Managing Director and Director Exploration are the Company’s
main contacts for investors and potential investors and make themselves available to
discuss the Company’s activities when requested. In addition to announcements made
in accordance with its continuous disclosure obligations, the Company, from time to
time, prepares and releases general investor updates about the Company.
Contact with the Company can be made via an email address provided on the
website and investors can subscribe to the Company’s email contact list.
6.3: A listed entity should
disclose the policies and
processes it has in place
to facilitate and encourage
participation at meetings of
security holders.
The Company has complied with this recommendation.
The Company encourages participation of shareholders at any general meetings and
its Annual General Meeting each year. Shareholders are encouraged to lodge direct
votes or proxies subject to the adoption of satisfactory authentication procedures if
they are unable to attend the meeting.
The full text of all notices of meetings and explanatory material are posted on the
Company’s website at www.lepidico.com.
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2018 LEPIDICO ANNUAL REPORT ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
6.4: A listed entity should
give security holders
the option to receive
communications from, and
send communications to, the
entity and its security register
electronically.
The Company has complied with this recommendation.
Contact with the Company can be made via an email address provided on the
website and investors can subscribe to the Company’s email contact list.
The Company’s share register provides a facility whereby investors can provide email
addresses to receive correspondence from the Company electronically and investors
can contact the share registry via telephone, facsimile or email.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
7.1: The Board of a listed
entity should have a
committee to oversee risk:
•
•
•
With at least three
members, all of whom
are non-executive
Directors and a majority
of which are independent
Directors;
chaired by an
independent director; and
disclose the charter of the
committee, the members
of the committee and
the number of times
the committee met
throughout the period
and member attendance
at those meetings.
7.2: The Board or a
committee of the Board,
of a listed entity should
review the entity’s risk
management framework
at least annually to satisfy
itself that it continues to be
sound and disclose in relation
to each reporting period
whether such a review was
undertaken.
7.3: A listed entity should
disclose if it has an internal
audit function and if it does
not have an internal audit
function that fact and the
processes it employs for
evaluating and continually
improving the effectiveness
of risk management and
internal control processes.
The Company has complied with this recommendation.
The Board has established an Audit and Risk Committee and adopted a charter that
sets out the committee’s role and responsibilities, composition and membership
requirements.
The current members of the Audit and Risk Committee are:
• Ms Cynthia Thomas (Chair) - Independent
• Mr Mark Rodda - Independent
• Mr Gary Johnson
The role of the Audit and Risk Committee is to oversee the Company’s risk
management systems, practices and procedures to ensure effective risk identification
and management and compliance with internal guidelines and external requirements.
A copy of the charter of the Audit and Risk Committee is available in the corporate
governance section of the Company’s website at www.lepidico.com.
Details of the number of meetings of the committee and attendance at those
meetings are set out in the Directors’ Report.
The Company has complied with this recommendation.
The charter of the Audit and Risk Committee provides that the committee will
annually review the Company’s risk management framework to ensure that it remains
sound.
The Board conducted such a review for the reporting period.
The Company has complied with this recommendation.
Given the Company’s current size and level of operations it does not have an
internal audit function. The Audit and Risk Committee oversees the Company’s risk
management systems, practices and procedures to ensure effective risk identification
and management and compliance with internal guidelines and external requirements
and monitors the quality of the accounting function.
29
2018 LEPIDICO ANNUAL REPORT ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
7.4: A listed entity should
disclose whether it has
any material exposure to
economic, environmental
and social sustainability risks
and if it does how it manages
or intends to manage those
risks.
The Company has complied with this recommendation.
The Company has exposure to economic risks, including general economy wide
economic risks and risks associated with the economic cycle which impact on
the price and demand for minerals which affects the sentiment for investment in
exploration companies.
There will be a requirement in the future for the Company to raise additional funding
to pursue its business objectives.
The Company’s ability to raise capital may be effected by these economic risks.
The Company has in place risk management procedures and processes to identify,
manage and minimise its exposure to these economic risks where appropriate.
The operations and proposed activities of the Company are subject to International,
Federal and State laws and regulations concerning the environment. As with most
exploration projects and mining operations, the Company’s activities are expected
to have an impact on the environment, particularly if advanced exploration or mine
development proceed.
It is the Company’s intention to conduct its activities to the highest standard of
environmental obligation, including compliance with all environmental laws.
The Board currently considers that the Company does not have any material exposure
to social sustainability risk.
The Company’s Corporate Code of Conduct outlines the Company’s commitment to
integrity and fair dealing in its business affairs and to a duty of care to all employees,
clients and stakeholders. The code sets out the principles covering appropriate
conduct in a variety of contexts and outlines the minimum standard of behaviour
expected from employees when dealing with stakeholders.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
ASX RECOMMENDATION
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
The Company has complied with this recommendation.
The Board has established a Nomination and Remuneration Committee and adopted
a charter that sets out the remuneration and nomination committee’s role and
responsibilities, composition and membership requirements.
The current members of the Nomination and Remuneration Committee are:
• Mr Mark Rodda (Chair) - Independent
• Ms Cynthia Thomas - Independent
• Mr Gary Johnson
A copy of the Committee’s charter is available in the corporate governance section of
the Company’s website at www.lepidico.com.
Details of the number of meetings of the committee and attendance at those
meetings are set out in the Directors’ Report.
The Company has complied with this recommendation.
The Non-Executive Directors are paid a fixed annual fee for their service to the
Company as a Non-Executive Directors. Non-Executive Directors may, subject to
shareholder approval, be granted equity based remuneration.
Executives of the Company typically receive remuneration comprising a base salary
component and other fixed benefits based on the terms of their employment
agreements with the Company and potentially the ability to participate in short term
incentives and may, subject to shareholder approval and if appropriate, be granted
equity based remuneration.
The Company has complied with this recommendation.
Participants in any Company equity based remuneration scheme are not permitted to
enter into transactions which limit the economic risk of participating in the scheme.
8.1: The Board of a listed
entity should establish a
remuneration committee:
•
•
•
With at least three
members the majority of
which are independent
Directors;
chaired by an
independent Director; and
disclose the charter of the
committee, the members
of the committee and
the number of times
the committee met
throughout the period
and member attendance
at those meetings.
8.2: A listed entity should
separately disclose its
policies and practices
regarding the remuneration
of non-executive Directors
and the remuneration of
executive Directors and other
senior executives.
8.3: A listed entity which
has an equity based
remuneration scheme should
have a policy on whether
participants are permitted to
enter into transactions which
limit the economic risk of
participating in the scheme
and disclose the policy or a
summary of that policy.
30
2018 LEPIDICO ANNUAL REPORT FINANCIAL REPORT
TABLE OF CONTENTS
DIRECTORS’ REPORT
AUDITORS INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOW
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
32
44
45
46
47
48
49
74
75
2018 LEPIDICO ANNUAL REPORT
31
The Directors of Lepidico Ltd (“Directors”) present their report on the Consolidated
Entity consisting of Lepidico Ltd (“the Company” or “Lepidico”) and the entities
it controlled at the end of, or during, the year ended 30 June 2018 (“Consolidated
Entity” or “Group”).
DIRECTORS
The names of the Directors in office and at any time during, or since the end of, the
year are:
Non-executive Chairman
Mr Gary Johnson
Managing Director
Mr Joe Walsh
Director Exploration
Mr Tom Dukovcic
Mr Mark Rodda
Non-executive Director
Ms Cynthia Thomas Non-executive Director
Non-executive Director
Mr Brian Talbot
(appointed 10 January 2018)
(appointed 10 January 2018)
Directors have been in office since the start of the financial year to the date of this
report unless otherwise stated.
PRINCIPAL ACTIVITIES
The principal activity of the Consolidated Entity during the financial year
was mineral exploration and the development and licensing of the L-Max®
Technology.
DIVIDENDS PAID OR RECOMMENDED
The Directors recommend that no dividend be paid for the year ended 30 June
2018, nor have any amounts been paid or declared by way of dividend since the end
of the previous financial year.
SUMMARY REVIEW OF OPERATIONS
For the financial year ending 30 June 2018 the Group recorded a net loss of
$7,219,713 (2017: $5,357,243) and a net cash outflow from operations of $3,038,346
(2017: $2,669,730).
The net assets of the Group increased to $24,499,573 at 30 June 2018
(2017: $20,629,913).
OPERATIONS
PHASE 1 L-MAX® PLANT PROJECT
a) Feasibility Study
Key activities on the Phase 1 L-Max® Plant Feasibility Study (the “Study”)
continued during the year, including: process design and engineering;
optimisation of the L-Max® process through vendor testwork; selection of
preferred sites within Sudbury for the location of the L-Max® Plant; Mineral
Resource definition and mine planning at Alvarrões; logistics trade-off studies to
finalise site selections; permitting and regulatory approvals; design optimisation
for silica production; and option assessments for product offtake and finance.
In December 2017, Lycopodium Minerals Pty Ltd, a subsidiary of Lycopodium
Limited (ASX:LYL) (“Lycopodium”) completed the engineered design for a
Phase 1 L-Max® Plant. Subsequent design review identified areas where trade-
off evaluations were warranted between reduced capital cost and realising
higher installed plant capacity, to provide an optimal plant design for long
term operation.
Following the design review a vendor testwork program was conducted to
precisely determine the capacity of major equipment for the Phase 1 L-Max®
Plant. The findings of this work coupled with process optimisation testwork
resulted in a number of plant design modification that simplify the process
flowsheet, with positive implications for both capital and operating costs. These
improvements, which include the S-MaxTM circuit design refer below), will be
incorporated into the final design for the Phase 1 Plant, which will be based on
DIRECTORS’
REPORT
32
2018 LEPIDICO ANNUAL REPORT
a nominal concentrate throughput rate of approximately seven tonnes per hour to produce approximately 5,000 tpa of
lithium carbonate equivalent (LCE). This compares with the production rate contemplated in the pre-feasibility study of
2,500 tpa to 3,000 tpa LCE. Definitive engineering works are scheduled to commence in August 2018 that will allow the
final capital cost and project implementation schedule for the Phase 1 Plant to be estimated.
It was also identified during the engineering design phase that sodium sulphate may represent another valuable
L-Max® by-product, in addition to amorphous silica and sulphate of potash (SOP) fertilizer. A preliminary design for the
production of sodium sulphate was included by Lycopodium for the Phase 1 Plant.
Confidentiality regimes have been entered into with various industry participants for the quality assessment and
marketability of the main L-Max® products. Product samples of the highest possible purity were generated during the
year for third party evaluation.
Leach optimisation tests undertaken during the year yielded excellent results and are expected to lead to a material
reduction in certain consumable consumption rates and to higher lithium recoveries from the L-Max® process. These
improvements will be incorporated into the final design for the Phase 1 Plant.
Completion of logistics trade-off studies during the period resulted in Sudbury, Ontario being selected as an optimal
location for the Phase 1 Plant with a preferred site identified within an exisiting industrial park. Environmental baseline
work commenced and is on schedule for completion by the end of of December 2018. This preferred site has excellent
existing infrastructure including power, gas, water and sewer, as well as road and rail access. The owner of the industrial
park and Lepidico are working together to assess available incentives to upgrade the power and gas services at this
preferred location.
Knight Piésold Consulting (KP Consulting) were appointed during the year to undertake the permitting and residue storage
facility engineering work-streams for the Phase 1 L-Max® Plant Project including residue characterisation work. However, KP
Consulting, Lepidico and Waterloo University, in consultation with the City of Greater Sudbury are collaborating on possible
commercial uses for the benign L-Max residue. If successful, the need to store residue on site may be eliminated, thereby
making the Phase 1 Plant a “zero waste” facility, and result in further capital and operating cost savings.
Engagement with various Provincial Ministries and other potential key stakeholders including local First Nations groups
was undertaken during the year, with the objective of ensuring ongoing support for the development of the Phase 1 Plant
Project in Sudbury. The project is expected to employ approximately 70 people and be the first lithium chemical facility
built in a region that already produces significant quantities of both nickel and cobalt, key ingredients in the manufacture
of many lithium-ion battery cathode chemistries.
Feasibility study level process design criteria for the upstream concentrator commenced during the period and is
expected to be concluded by the end of 2018. This work is planned to be based on the Outotec cPlant design. The cPlant
Concentrator offers a cost effective, flexible solution, ideal for projects with modest capacity needs and/or in remote
locations. The plant is based on pre-fabricated and functionally tested modules inside container-sized steel frames that
can be easily transported and installed, and quickly connected. Some of the benefits of cPlant include: reduced EPC
project costs compared to a conventional flotation plant; up to 20% lower capital investment; requires 30% less labour
resources; 95% of installation and pre-commissioning done prior to delivery; minimal civil engineering work required; and
ease of relocation.
The Feasibility Study for the Phase 1 L-Max® Plant is scheduled to be completed during the March 2019 quarter, based on
a revised nominal production rate of 5,000 tpa LCE. Depending on the initial assessment of the L-Max® residue product
project there may be a requirement to integrate this workstream into the Feasibility Study and to secure the requisite
permits for using the residue in this application. Permitting and approvals processes remain on the critical path for a final
investment decision for the Phase 1 Project.
b) Alvarrões Lepidolite Mine (Gonçalo), Portugal 1
On 7 December 2017 Lepidico announced its maiden Mineral Resource estimate for the Alvarrões Lepidolite Project in
Portugal, which hosts an extensive system of stacked lithium-mineralised pegmatite sills.
The estimate was completed by AMC Consultants Pty Ltd (“AMC”) and was based on the results of 17 diamond core holes
drilled by Lepidico between May and September 2017. AMC reports a JORC Code-compliant maiden Inferred Resource at
Alvarrões of 1.5 Mt @ 1.1% Li2O. Within this estimate is 1.1 Mt @ 1.1% Li2O over approximately 400m of strike at Blocks 1 and 2.
1 Lepidico announced on 9 March 2017 that it had signed a binding term sheet for ore off-take from the Alvarrões lepidolite
mine with Grupo Mota, the 66% owner and operator of Alvarrões.
33
2018 LEPIDICO ANNUAL REPORT
Drilling at Alvarrões has so far identified 13 stacked sub-horizontal mineralised pegmatite sills, confirmed to extend over
a 900m by 500m area and ranging in thickness from 0.5m to over 4.0m, with 15% to 30% lepidolite content. The system
remains open in all directions.
A conceptual mine plan has been developed for the Block 1 and 2 area, to support a plus ten year project life for the Phase
1 Plant. One objective of the development plan is to minimise the operations footprint and maximise the use of the current
area of disturbance. This will be achieved via in-pit disposal of mine waste, in-pit crushing using mobile crusher and co-
disposal of the relatively modest quantity of benign concentrator tailings with mine waste. The Alvarrões Mining Lease
area covers 634 hectares. However, based on the mine plan only a fraction of this will be required to be developed for the
Phase 1 Project and multiple locations have been identified for siting the concentrator.
Flotation testwork on Alvarrões pegmatite mineralisation successfully generated separate feldspar and quartz
concentrates, in addition to a quality lithium mica concentrate suitable for Phase 1 Plant feed. Aside from the additional
revenue potential, the large increase in product mass means that co-disposal of only relatively small quantities of plant
fines with mine waste can be considered, thereby negating the requirement for a tailing storage facility. Advantages of
this approach include a significantly reduced footprint at Alvarrões along with the option to employ modular concentrator
technology, reduced capital and operating costs, and maximisation of the mineral potential of the pegmatite.
Grupo Mota is an established supplier of feldspar and quartz products to the substantial ceramics industry in the Iberian
Peninsula and has advised that concentrate samples produced by Lepidico are of marketable quality.
Grupo Mota commenced work on an Environmental Impact Study at Alvarrões in May 2018. The Study is scheduled
for completion in the March 2019 quarter. A permitting and approvals schedule has also been developed following
consultation with regulators. This represents the critical path for the project. Based on the prescribed process timeframes
it is estimated that the requisite project permits would be received during the second half of 2019. First production
continues to be targeted for calendar year 2020, based on an early works program for Alvarrões that is being developed
as part of the integrated Phase 1 Project Feasibility Study.
Lepidico has designed a reverse circulation and diamond core drill program to increase the Mineral Resource data density
and to test for extensions of the mineralisation to the north and west of the current Alvarrões Resource. The objective
of this program will be to upgrade the existing Mineral Resource within Blocks 1 and 2 to Measured and Indicated
categories and establish the resource potential for the pegmatite sills across Block 3. This work is planned to commence
once commercial terms are finalised with Grupo Mota based on the existing ore offtake agreement. Under certain
circumstances it is envisaged that these terms will convert to a joint venture arrangement. A scout drill program is also
planned in collaboration with Grupo Mota to further evaluate the lepidolite potential within the greater mining lease area,
termed the Phase 2 Area.
The work at Alvarrões is part of Lepidico’s Mineral Resource definition program to establish a multi-deposit inventory of
high-quality lithium mica Mineral Resources to provide feedstock for not just the proposed Phase 1 L-Max® Plant but also
conceptual larger-scale L Max® plants.
c) Mt Cattlin Operations, Western Australia2
During the year the Company produced battery grade lithium carbonate grading 99.8%, using its L-Max® process
technology from a tailings stream sourced from the Galaxy Resources Ltd (“Galaxy”) Mt Cattlin spodumene operations.
A standard suite of L-Max® by-products was also generated as part of the program, which was jointly commissioned by
Galaxy and Lepidico.
Further collaborative work will be considered once the L-Max® amenable lithium minerals at Mt Cattlin have
been delineated.
d) Separation Rapids Lithium Project, Ontario, Canada3
As previously reported, Avalon and Lepidico entered into a non-binding letter of intent (“LOI”) in February 2017 under
which it is contemplated that Avalon would sell a minimum of 15,000 tonnes per annum of lepidolite concentrate –
produced from its planned demonstration-scale pilot flotation plant – to Lepidico for processing at its planned Phase 1
commercial lithium carbonate plant in Sudbury. Avalon is currently undertaking metallurgical studies and preliminary
engineering work on its Separation Rapids Lithium Project.
2 The Mt Cattlin operations are 100% owned and operated by Galaxy Resources Limited (ASX: GXY) (“Galaxy”), which holds a
11.8% equity interest in Lepidico Ltd.
3 Lepidico announced on 6 February 2017 that it had entered into a Letter of Intent with Avalon Advanced Materials Inc. (TSX:
AVL and OTCQX: AVLNF) (“Avalon”) for an integrated lepidolite mining and lithium carbonate production partnership
based on Avalon’s 100% owned Separation Rapids deposit and leveraging Lepidico’s L-Max® technology.
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2018 LEPIDICO ANNUAL REPORT
e) Full-scale L-Max® Plant Scoping Study
Various data have been gathered during the course of the demonstration scale Phase 1 Plant studies that will inform a
scoping level study for a conceptual full-scale L-Max® plant. Collation of these data has commenced and further work is
planned for the September 2018 quarter to evaluate the optimal scale and preferred locations for a larger chemical plant.
The Scoping Study will consider both a modular approach to development in 5,000 tpa and 10,000 tpa LCE plant lines as
well as a single larger scale development. Data collected from the final engineering work being undertaken for the Phase 1
Plant Feasibility Study will also be used in the full-scale plant scoping study.
L-Max® amenability testwork was undertaken under confidentiality during the year on lithium mica samples from a
previously untested deposit. Encouraging flotation and leach results were obtained and additional samples have been
received for further testing. Testwork is also planned to commence on two further lithium mica sources, under separate
confidentiality. Assuming positive results, these deposits have the potential to provide sufficient concentrate feed to
support the full-scale L-Max® plant scoping study.
PATENTS – L-MAX® AND S-MAX™
During the year the Company lodged a provisional patent application for a hydrometallurgical process, S-Max™, which
produces an amorphous silica from concentrates sourced from a range of mica minerals, including lithium micas. The purified
amorphous silica may be sold directly or used as a feed to produce a variety of other marketable silica products.
S-Max™ employs three stages; grinding, sulphuric acid leach regimes at atmospheric pressure, followed by differential
classification and flotation streams. All equipment is industry standard and common use reagents are employed. Occupational
health and safety requirements will be straightforward.
Importantly, S-Max™ can be integrated with Lepidico’s proprietary L-Max® process, employed for the production of lithium
carbonate and a suite of other by-products, including sulphate of potash (SOP) fertiliser, sodium sulphate, and potentially
caesium/rubidium and tantalum compounds. When lithium bearing mica concentrates are treated, the S-Max™ leach liquor
can feed directly into the first impurity removal stage of the L-Max® process. Furthermore, the leach liquor from non-lithium
bearing micas including muscovite and biotite may be treated to produce valuable by-products including sulphate of potash
(SOP) fertiliser. When combined with L-Max® silica production costs are expected to be competitive.
The Company currently holds International Patent Application PCT/AU2015/000608 and a granted Australian Innovation
Patent (2016101526) in relation to the L-Max® Process.
In 2017, the Company proceeded with the national and regional phase of patent applications in the main jurisdictions in which
L-Max® may operate in the future. This regional phase of the patent process is expected to continue into 2019.
EXPLORATION
a) Youanmi Lepidolite Project, Youanmi, Western Australia 4
During the year Lepidico evaluated the lepidolite prospectivity of ground held by Venus Metals Corporation Limited
(ASX:VMC) (“Venus”) in the Murchison District of Western Australia, approximately 20 km southwest of the historical
Youanmi gold mine. The property encompasses 4 km of strike of a lepidolite-bearing pegmatite belt within which
lepidolite is often the only, or dominant, lithium mineral species. Subsequent to the end of the year Lepidico entered into a
farm-in agreement with Venus to explore for lithium mica and phosphate minerals on its Youanmi tenements. Exploration
is scheduled to commence shortly.
b) PEG 9, Pioneer Dome, Norseman, Western Australia 5
Lepidico completed an RC drilling program at PEG 9 during the year. The program consisted of 13 holes for a total of 754
m of drilling targeting a 200 m long multi-element (including Li, Rb and Cs) soil anomaly associated with a sub-cropping
lepidolite-bearing pegmatite. In light of the low lepidolite content and commensurate low lithium grades, Lepidico has
withdrawn from the farm-in over PEG 9. The ground reverts fully to Pioneer Resources.
4 Lepidico announced on 26 July 2018 that it had entered into an option agreement with Venus Metals Corporation Limited
(ASX:VMC) to earn up to an 80% interest in lithium pegmatite rights within exploration licence E57/983.
5 Lepidico announced on 23 February 2017 that it had entered into a farm-in agreement to earn a 75% interest in the
“PEG009” lepidolite prospect located within Pioneer Resources Ltd’s (ASX: PIO) 100% owned Pioneer Dome project.
35
2018 LEPIDICO ANNUAL REPORT
c) Moriarty Lithium Project, Western Australia 6
On 21 August 2017 the Company announced that it signed a Binding Term Sheet with Maximus Resources Limited
(ASX:MXR) (“Maximus”) under which Lepidico can earn a 75% interest in Maximus’s lithium rights in the Spargoville Project,
located 70 km south of Kalgoorlie in Western Australia. These lithium rights are known as the Moriarty Lithium Project.
Exploration results from Moriarty indicated that this project would not meet Lepidico’s criteria as a prospective source of
lithium mica mineralisation. No further work is planned by Lepidico for this project.
d) Lemare Spodumene Project, Quebec, Canada7
The second stage of diamond drilling of the 600 metre long SW Extension of the Lemare spodumene pegmatite was
completed during the period with the results reported on 17 August 2017. Lemare is not considered prospective for
lithium mica minerals and as such is no longer deemed to be a strategic fit for the company. Accordingly, Lepidico has
moved to formally terminate the Lemare Option Agreement.
e) Other
The Gobbos Project, E45/3326, was no longer a strategic fit for Lepidico and the Company divested its 51% interest in this
project to a private buyer during the year.
The Euriowie exploration licence, EL 8468, in NSW was relinquished.
CORPORATE ACTIVITIES
a) Additional capital secured
Lepidico raised $7.0 million during the period through a new strategic alliance with Galaxy Resources Ltd (ASX:GXY)
and an Entitlement Offer to eligible shareholders. On 10 October 2017, the Company announced that one of the world’s
leading lithium mining companies, Galaxy Resources Limited, had subscribed for a 12% private placement in Lepidico for
approximately $2.9 million, comprising 291.75 million shares at $0.01 each.
In addition, the Company extended an opportunity to existing shareholders to participate on similar terms through a one
for six renounceable entitlement offer at $0.01 per share. The entitlement offer was heavily oversubscribed with valid
applications for more than 800 million new shares being received under the offer, consisting of approximately 372.75
million as entitlements, representing 92% of the total eligible amount, raising approximately $3.7 million and an additional
431.05 million as applications for any shortfall. The Company’s Underwriter, CPS Capital (“CPS”), also received interest in
more than $10 million from new investors. The shortfall of $0.3 million was placed by CPS and the excess application funds
were returned to applicants.
The proceeds of the offer, along with those raised from the Galaxy private placement, provide a full funding solution for
the Company’s integrated Phase 1 L-Max® Plant Feasibility Study, as well as further advancing the Company’s resource
development and exploration activities.
b) Non-executive Directors Appointed
During the year the Company strengthened the Board with the appointment of Ms Cynthia Thomas and Mr Brian Talbot
as Non-Executive Directors of the Company.
Ms Cynthia Thomas
Ms Thomas joins the Board as an independent Non-Executive Director with over 30 years of banking and mine finance
experience. Ms Thomas’ strong background in the capital markets and regulatory compliance will add to the Company’s
strong governance and improve board independence.
Mr Brian Talbot
Mr Talbot joins the Board as a Non-Executive Director and shareholder representative of Galaxy Resources Ltd, which
currently holds a 11.6% interest in the Company. Mr Talbot’s operational experience within the lithium industry will assist the
Company as it transitions from developer to producer.
6 Lepidico announced on 21 August 2017 that it had entered into a farm-in agreement to earn 75% of lithium rights for the
Moriarty Lithium Project from Maximus Resources Ltd (ASX: MXR).
7 Lepidico announced on 17 August 2017 drill results from Lemare and revised terms for its farm-in agreement to earn a 75%
interest in the Lemare spodumene project from 100% owner Critical Elements Corporation (TSX-V: CRE).
36
.
2018 LEPIDICO ANNUAL REPORT
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as mentioned in the Review of Operations, no significant changes in the state of affairs of the Consolidated Entity
occurred during the financial year.
SUBSEQUENT EVENTS
On 26 July 2018 the Company entered into an option agreement with Venus Metals Corporation Limited (ASX:VMC)
(“Venus”) to explore for lithium mineralisation on exploration licence E57/983 located in the Murchison District in Western
Australia, approximately 20 km southwest of the historical Youanmi gold mine.
The Company paid $50,000 cash and issued 3,619,254 fully paid ordinary Shares for a 12-month option to explore the
tenement. During the option period the parties intend to negotiate the terms of a farm-in and joint venture agreement where
the Company may earn up to an 80% interest in the tenement.
On 3 September 2018 the Company announced a pro-rata Renounceable Entitlements Offer (Entitlements Offer) of fully
paid ordinary shares (New Shares) on the basis of one (1) New Share for every seven (7) existing shares held at the record
date with 1 for 2 free attaching options (New Options) which closed on 25 September 2017. Shares under the Entitlements
Offer will be issued at $0.019 per New Share. New Options will have an exercise price of 4.5 cents, a term of two years and will
be listed. The New Options will be listed under the ASX code LPDOA.
The Company raised $7.9 million (before costs) and will issue 417,877,158 New Shares and 208,938,579 New Options. Due
to overwhelming demand, the Company has agreed to place a further 13,157,894 fully paid ordinary shares at $0.019 with
6,578,947 attaching LPDOA options to raise an additional $250,000 (“Placement”). .
It is intended that the proceeds of the Entitlements Offer will be prioritised to fund the Lepidico business, including to
build and operate a L-Max® pilot plant, and in so doing provide material for product development and evaluation purposes
with prospective strategic/offtake partners for the Phase 1 L-Max® Plant Project. Funds from the Placement will be used to
supplement working capital.
The new securities are expected to be issued on Monday, 1 October 2018, in accordance with the timetable in the prospectus.
Other than the matters discussed above there are no other matters or circumstances which have arisen since 30 June 2018
that have significantly affected or may significantly affect:
(a) the Consolidated Entity’s operations in future years, or
(b) the results of those operations in future financial years, or
(c) the Consolidated Entity’s state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS ON OPERATIONS
The Company plans to continue to implement its strategy of being commencing lithium carbonate production in 2020
through the commercialisation of its proprietary L-Max® technology and the ongoing growth, exploration and development of
its portfolio of lithium interests.
The nature of the Company’s business remains speculative and the Board considers that comments on expected results or
success of this strategy are not considered appropriate or in the best interests of the Company.
INFORMATION ON DIRECTORS’ INTERESTS IN SECURITIES OF LEPIDICO
As at the date of this report, the notifiable interests held directly and through related bodies corporate or associates of the
Directors in shares and options of Lepidico are:
Mr Gary Johnson
Mr Joe Walsh
Mr Tom Dukovcic
Mr Mark Rodda
Ms Cynthia Thomas
Mr Brian Talbot
Number of fully paid ordinary shares
Number of options
353,257,820
29,750,000
9,725,280
-
-
-
20,000,000
27,500,000
22,500,000
12,500,000
-
-
402,733,100
82,500,000
37
2018 LEPIDICO ANNUAL REPORT
REMUNERATION REPORT (AUDITED)
This remuneration report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service Agreements
D. Share Based Compensation
This remuneration report outlines the Director and Executive remuneration arrangements for the Company and Group in
accordance with the requirements of the Corporations Act 2001 (Cth) and its Regulations. For this report, key management
personnel (“KMP”) of the Group are defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of the Company and Group, directly or indirectly, including any director (whether executive or
otherwise) of the Parent Company, and includes the highest paid executives of the Company and Group.
The information provided in this remuneration report has been audited as required by section 308(3c) of the Corporations
Act 2001.
A. Principles Used To Determine The Nature And Amount Of Remuneration
The Company’s remuneration policy is designed to align director and executive objectives with shareholder and business
objectives by providing a fixed remuneration component and offering incentives based on the Group’s financial results. A
Remuneration Committee has been established which makes recommendations to the Board which aims to attract and retain
appropriate executives and directors to run and manage the Group, as well as create goal congruence between directors,
executives and shareholders.
The Remuneration Committee considers remuneration of Directors and the Executive and makes recommendations to the
Board. Remuneration is considered annually or otherwise as required.
The nature and amount of remuneration for an executive and non-executive director depends on the nature of the role and
market rates for the position, which are determined with the assistance of external advisors (where necessary), surveys and
reports, taking into account the experience and qualifications of each individual. The Board ensures that the remuneration
paid to KMP is competitive and reasonable.
During the financial year, Willis Tower Watson was engaged by the Remuneration Committee to review the elements of KMP
remuneration for the year commencing 1 July 2017 and provide recommendations including the provision of comparative
information relating to the KMP remuneration for the Company’s peers. The Company has not engaged Willis Tower Watson
to provide any other services and Board is satisfied that the remuneration recommendations were free from undue influence
by members of KMP to whom the recommendations relate.
The following were KMP of the Group during the financial year and unless otherwise indicated were KMP for the entire
financial year:
Non-Executive Directors
Mr Gary Johnson
Mr Mark Rodda
Ms Cynthia Thomas
Mr Brian Talbot
Non-executive Chairman
Non-executive Director
Non-executive Director (appointed 10 January 2018)
Non-executive Director (appointed 10 January 2018)
Executive Directors
Mr Joe Walsh
Mr Tom Dukovcic
Executives
Ms Shontel Norgate
Managing Director
Director Exploration
Chief Financial Officer
Mr Alex Neuling, Joint Company Secretary, is not employed or remunerated directly by Lepidico Ltd. Erasmus Consulting, a
controlled body corporate received fees of $33,621 (2017: $57,542)
In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is
separate and distinct.
Non-Executive Director Remuneration
The Directors have resolved that cash based directors’ fees for Non-Executive Directors are between $60,000 and $80,000
per annum for each Non-Executive Director. The Company’s policy is to remunerate Non-Executive Directors at market rates
(for comparable companies) which reflect the demands made and the responsibilities placed on the Non-Executive Directors.
Fees for Non-Executive Directors are not linked to the performance of the Company however, to align Directors’ interests with
shareholders’ interests are encouraged to hold equity securities in the Company. Non-executive Directors are also entitled to
participate in the Company long term incentive plan (refer “Long Term Incentives (“LTIs”) below).
38
2018 LEPIDICO ANNUAL REPORT In addition to Directors’ fees, Non-Executive Directors are entitled to additional remuneration as compensation for additional
specialised services performed at the request of the Board and reimbursed for reasonable expense incurred by directors on
Company business. Non-Executive Directors’ fees and payments are reviewed annually by the Board.
Retirement benefits
No retirement benefits or allowances are paid or payable to Non-Executive Directors of the Company other than
superannuation benefits.
Other benefits
No motor vehicle, health insurance or other similar allowances are made available to Non-Executive Directors.
Executive Director and Executive Remuneration
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate
for the results delivered. The remuneration framework aligns executive reward with the achievement of strategic and
operational objectives and the creation of wealth for shareholders. The Board ensures that the executive reward framework
satisfies the following key criteria in line with appropriate governance practices:
• attract, retain, motivate and reward executives;
•
•
reward executives for Company and individual performance against pre-determined targets/benchmarks;
link rewards with the strategic goals and performance of the Company;
• provide competitive remuneration arrangements by market standards (for comparable companies);
• align executive interests with those of the Company’s shareholders; and
• comply with applicable legal requirements and appropriate standards of governance.
The Company has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the organisation. Executive remuneration packages may comprise a mix of the following:
Fixed remuneration
Fixed remuneration comprises base salary and employer superannuation contributions. Salaries are reviewed on an annual basis
to ensure competitive remuneration is paid to executives with reference to their role, responsibility, experience and performance.
Salaries are reviewed on an annual basis. There are no guaranteed base pay increases included in any executive contracts.
Short-term incentives (“STIs”)
STIs comprise cash bonuses. The STIs are structured to provide remuneration for the achievement of individual and
Company performance targets linked to the Company’s strategic objectives across four areas of focus: Development,
Exploration, Financing/Shareholder Value and Governance. At the beginning of each year, performance targets are set by
the Board. Where possible, the performance targets are specific and measurable. At the end of each year the Company’s
performance against the KPIs are assessed by the CEO and presented to the N&R Committee and approved by the Board.
STIs may be adjusted up or down in line with under or over achievement relative to target performance levels at the discretion
of the Remuneration Committee.
During the year the Company achieved significant milestones with the completion of the preliminary engineering for the
Feasibility Study for the Phase 1 L-Max® Plant and site selction for the Phase 1 L-Max Plant in Sudbury, Canada. The Company
successfully raised over $7.0 million through a private placement to Galaxy Resources Ltd and a subsequent Entitlement Offer
ensuring the Company was fully funded to complete the Feasiblity Study. The Company implemented further corporate
governance initiatives including increasing the number of independent Directors. The Company’s share price outperformed
the S&P/ASX 300 Metals and Mining Index over the period.
For the year ended 30 June 2018, STIs of $222,347 (inclusive of superannuation) were payable to KMP of the Company or
Group (2017: $121,723)
Long term incentives (“LTIs”)
LTIs comprise options granted at the recommendation of the Remuneration Committee in order to align the objective of
Directors and Executives with shareholders and the Company (refer section D for further information). The issue of options
to Directors (Non-Executive and Executive) requires shareholder approval.
The grant of share options has not been directly linked to previously determined performance milestones or hurdles as
the current pre-development stage of the Group’s activities makes it difficult to determine effective and appropriate key
performance indicators and milestones.
Persons granted options are not permitted to enter into transactions (whether through the use of derivatives or otherwise)
that limit his or her exposure to the economic risk in relation to the securities.
39
2018 LEPIDICO ANNUAL REPORT Consequences of Performance on Shareholder Wealth
Executive remuneration is aimed at aligning the strategic and business objectives with the creation of shareholder wealth.
The table below shows measures of the Group’s financial performance over the last 5 years as required by the Corporations
Act 2001. However, these are not necessarily consistent with the measures used in determining the variable amounts of
remuneration to be awarded to KMP. Consequently, there may not always be a direct correlation between the statutory key
performance measures and the variable remuneration awarded.
2014
$
2015
$
2016
$
2017
$
2018
$
Net Profit/(Loss)
(3,615,617)
(1,044,346)
(2,263,225)
(5,357,243)
(7,219,713)
EPS
Share price at 30 June
(0.001)
0.001
(0.006)
0.010
(0.005)
0.017
(0.003)
0.013
(0.003)
0.037
B. Details Of Remuneration
Amounts of remuneration
Details of the remuneration of the directors and Key Management Personnel of the Group are set out in the following tables:
Share Based Payments
Under AASB 2 Share Based Payments, options issued to KMP are to be valued relative to the Company’s stock price on the
date of issue. The equity options issued to KMP immediately following shareholder approval at the 2017 AGM were issued
with an exercise price at a 50% premium to the 5 day Volume Weighted Average Price of LPD shares immediately prior to the
date of issue. The underlying share price on the date of issue was $0.067, an increase of approximately 150% from the date
that the options were announced in the Notice of Annual General Meeting issued on 24 October 2017. The increase occurred
following the announcement of a private placement in LPD by Galaxy Resources Ltd. This resulted in a high Black-Scholes
valuation for the options issued. The options valuation is not reflective of the likely market price that the equity options could
be traded at as at the date of this report and is not necessarily the market price for taxation purposes. As at the date of this
report, these options are significantly out-of-the-money, with an exercise price of $0.091. Consequently, no benefit is likely to
flow to the holders of these options in the absence of a greater than 250% appreciation in the LPD share price between the
date of this report and the expiry date of the options.
Short-term Benefits
Cash Salary
and Fees
$
Other
$
Post-
employment
benefits
Superannuation
Benefits
$
80,000
81,410
60,000
51,154
21,462
-
23,519
-
243,985
170,285
183,267
157,534
207,545
126,666
819,778
587,049
-
-
-
-
-
-
-
-
110,390
54,144
44,749
31,963
62,957
25,055
218,096
111,162
7,600
7,734
5,700
4,860
2,039
-
-
-
-
21,321
21,661
18,003
12,667
14,413
49,667
66,331
Share-based
payments
Equity Options
Total
Vested
$
315,000
112,500
315,000
112,500
-
-
-
-
630,000
112,500
420,000
112,500
$
402,600
201,644
380,700
168,514
23,501
-
23,519
-
984,375
358,250
669,677
320,000
457,500
75,000
740,669
241,134
2,137,500
3,225,041
525,000
1,289,542
Non-Executive Directors
Mr Brian Talbot
Mr Mark Rodda
Mr Brian Talbot (1)
Ms Cynthia Thomas (2)
Executive Directors
Mr Joe Walsh
Mr Tom Dukovcic
Executives
Ms Shontel Norgate
Total Directors’ and KMP
remuneration
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
(1) Mr Brian Talbot was appointed Non-Executive Director on 10 January 2018
(2) Ms Cynthia Thomas was appointed Non-Executive Director on 10 January 2018
40
2018 LEPIDICO ANNUAL REPORT Loans to Key Management Personnel
There were no loans made to Directors or other KMP of the Group (or their personally related entities) during the current
financial period.
Other Transactions with Key Management Personnel
Payments to director-related entities(1)
2018
$
2017
$
857,219
1,072,521
(1) Payments were made to Strategic Metallurgy Pty Ltd, a company of which Mr Gary Johnson is a director and beneficial
shareholder. The payments were for development of L-Max® technology on an arm’s length basis. As at 30 June 2018
invoices totalling $89,617 (2017: $108,044) are payable.
C. Service Agreements
The remuneration and other terms of agreement for the Company’s Managing Director and other KMP are formalised in
employment contracts, as set out below.
Mr Joe Walsh, Managing Director (“MD”) has an employment agreement with the Group. The agreement specifies duties and
obligations to be fulfilled as MD and provides for an annual review of base remuneration taking into account performance. Mr
Walsh’s remuneration includes a salary of C$240,000 per annum. Mr Walsh did not receive an increase to base salary during
the reporting period; however, an increase in base salary to C$350,000 was awarded effective 1 July 2018. A monetary bonus
of C$107,520 has been awarded for the financial year ended 30 June 2018..
Termination of the employment agreement requires 6 months written notice. Upon termination, the MD is entitled to receive
from the Group all payments owed to him under the employment agreement up to and including the date of termination
and any payments due to him pursuant to any relevant legislation by way of accrued annual leave and long service leave. If
the Company terminates the agreement for any reason other than for cause the MD will receive 1 month’s salary at the time
of termination for every year of employment with the Company to a maximum of 6 months’ payment (extendable up to 12
months under certain prescribed events).
Mr Tom Dukovcic, Director Exploration (“DE”) has an employment agreement with the Group. The agreement specifies duties
and obligations to be fulfilled as DE and provides for an annual review of base remuneration taking into account performance.
Mr Dukovcic’s remuneration includes a salary of $175,000 per annum inclusive of superannuation. Mr Dukovcic did not
receive an increase to base salary during the reporting period; however, an increase in base salary to $200,000 was awarded
effective 1 July 2018. A monetary bonus of $49,000 (inclusive of superannuation) has been awarded for the financial year
ended 30 June 2018.
Termination of the employment agreement requires 6 months written notice. Upon termination, the DE is entitled to receive
from the Company all payments owed to him under the employment agreement up to and including the date of termination
and any payments due to him pursuant to any relevant legislation by way of accrued annual leave and long service leave. If
the Company terminates the agreement for any reason other than for cause the DE will receive 1 month’s salary at the time of
termination for every year of employment with the Company to a maximum of 6 months’ payment (extendable up to
12 months under certain prescribed events).
Ms Shontel Norgate, Chief Financial Officer (“CFO”) has an employment agreement with the Group. The agreement specifies
duties and obligations to be fulfilled as CFO and provides for an annual review of base remuneration taking into account
performance. Ms Norgate’s remuneration includes a salary of C$219,000 per annum. Ms Norgate did not receive an increase
to base salary during the reporting period; however an increase in base salary to C$245,000 was awarded effective 1 July
2018. A monetary bonus of C$61,320 has been awarded for the financial year 30 June 2018.
Termination of the employment agreement requires 3 months written notice. Upon termination, the CFO is entitled to receive
from the Company all payments owed to her under the employment agreement up to and including the date of termination
and any payments due to her pursuant to any relevant legislation by way of accrued annual leave and long service leave. If
the Company terminates the agreement for any reason other than for cause the CFO will receive 1 month’s salary at the time
of termination for every year of employment with the Company to a maximum of 6 months’ payment (extendable up to 12
months under certain prescribed events).
41
2018 LEPIDICO ANNUAL REPORT D. Share Based Compensation
Share Holdings
The number of shares and options over ordinary shares in the Group held during the financial year by each director of
Lepidico Ltd and other KMP of the Group, including their personally related parties, are set out below:
2018
Non-Executive Directors
Mr Gary Johnson
Mr Mark Rodda
Mr Brian Talbot
Ms Cynthia Thomas
Executive Directors
Mr Joe Walsh
Mr Tom Dukovcic
Executives
Ms Shontel Norgate
Balance at start
of year
Purchased/
Exercised
Options
Exercised
Options
Sold
Balance at end
of year
349,680,293
44,433,895
-
-
-
-
-
-
-
-
-
-
(30,856,368)
363,257,820
-
-
-
-
-
-
7,500,000
3,951,668
1,250,000
20,000,000
(9,000,000)
19,750,000
658,612
9,000,000
(3,885,000)
9,725,280
-
5,007,619
-
-
5,007,619
Total
361,131,961
51,350,126
29,000,000
(43,741,368)
397,740,719
Option Holdings
2018
Non-Executive Directors
Mr Gary Johnson
Mr Mark Rodda
Mr Brian Talbot
Ms Cynthia Thomas
Executive Directors
Balance
at start of
year
Granted during
the year as
remuneration
Exercised/
Expired
during year
Net other
change
Balance at
end of year
* Vested and
exercisable at
end of year
12,500,000
12,500,000
7,500,000
7,500,000
-
-
-
-
-
-
-
-
-
20,000,000
20,000,000
(7,500,000)
12,500,000
12,500,000
-
-
-
-
-
-
-
-
47,500,000
47,500,000
22,500,000
22,500,000
Mr Joe Walsh
52,500,000
15,000,000 (20,000,000)
Mr Tom Dukovcic
23,500,000
10,000,000
(11,000,000)
Executives
Ms Shontel Norgate
12,500,000
10,000,000
-
-
22,500,000
22,500,000
Total
113,500,000
50,000,000
(31,000,000)
(7,500,000)
125,000,000
125,000,000
Details of the share options granted during the year as remuneration are disclosed in Note 15(c) as approved by shareholders
at the Company’s Annual General Meeting in November 2017.
42
2018 LEPIDICO ANNUAL REPORT MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2018,
and the number of meetings attended by each director.
Full Board Meetings
Audit & Risk
Committee Meetings
Nomination & Remuneration
Committee Meetings
No. eligible
to attend
No. attended
No. eligible to
attend
No. attended
No. eligible
to attend
No. attended
Mr Gary Johnson
Mr Joe Walsh
Mr Tom Dukovcic
Mr Mark Rodda
Mr Brian Talbot
Ms Cynthia Thomas
5
5
5
5
2
2
5
5
5
5
2
2
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
2
-
-
INSURANCE AND INDEMNITY OF OFFICERS AND AUDITORS
During the year, the Company paid a premium in respect of a contract insuring the directors of the Company (named
above) and the Company Secretaries against liabilities incurred as such a director, secretary or executive officer to the extent
permitted by the Corporations Act 2001 (Cth). The contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium. The Company has not otherwise, during or since the financial year, indemnified or agreed to
indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer
or auditor.
OPTIONS
At the date of this report, the Company has the following options on issue:
Number
5,000,000
42,500,000
12,500,000
50,000,000
110,000,000
Exercise Price
Grant
Expiry
$0.015
$0.02500
$0.02500
$0.09100
9 November 2017
8 November 2019
25 November 2016
31 December 2019
30 November 2016
31 December 2019
24 November 2017
23 November 2020
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 (Cth) for the year
ended 30 June 2018 is included on page 44 of the Directors’ Report.
The Auditor did not provide any non-audit services for the year ended 30 June 2018 (2017: $Nil)
This report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the
Corporations Act 2001.
Joe Walsh
Managing Director
Dated this 28th day of September 2018
43
2018 LEPIDICO ANNUAL REPORT AUDITORS INDEPENDENCE DECLARATION UNDER SECTION
307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS
OF LEPIDICO LIMITED
I declare that to the best of my knowledge and belief, for the year ended 30 June 2018 there has been:
• no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.
Suan-Lee Tan
Partner
Moore Stephens
chartered accountants
Signed at Perth this 28th day of September 2018
Liability limited by a scheme approved under Professional Standards Legislation. Moore Stephens - ABN 16 874 357 907. An independent
member of Moore Stephens International Limited - members in principal cities throughout the world. The Perth Moore Stephens firm is not a
partner or agent of any other Moore Stephens firm.
44
2018 LEPIDICO ANNUAL REPORT
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
as at 30 June 2018
Revenue
Other income
Business development expenses
Administrative expenses
Employment benefits
Depreciation
Share based payments
Exploration and evaluation expenditure expensed
Realised Foreign Exchange Gain/(Loss)
Loss before income tax
Income tax expense
Loss from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Note
3
3
4
5
2018
$
61,170
179,952
2017
$
126,548
127,573
241,122
254,121
(492,003)
(325,214)
(1,550,458)
(1,753,598)
(1,103,365)
(912,444)
(6,230)
(6,098)
(2,137,500)
(1,736,391)
(2,170,815)
(877,619)
(464)
-
(7,219,713)
(5,357,243)
-
-
(7,219,713)
(5,357,243)
-
(17,141)
-
-
Total comprehensive loss for the year attributable to owners of the Group
(7,236,854)
(5,357,243)
Loss per share for the year attributable to the members of Lepidico Ltd
Basic and diluted loss per share
7
(0.003)
(0.003)
The accompanying notes form part of these financial statements.
45
2018 LEPIDICO ANNUAL REPORT Note
2018
$
2017
$
8
9
9
10
11
12
13
14
15
16
4,859,962
624,556
3,307,337
619,497
5,484,518
3,926,834
87,114
27,049
729,697
19,026,700
86,003
7,732
1,619,842
16,698,154
19,870,560
18,411,731
25,355,078
22,338,565
804,475
51,030
1,662,855
45,797
855,505
1,708,652
855,505
1,708,652
24,499,573
20,629,913
40,733,812
3,360,609
31,491,798
1,513,250
(19,594,848)
(12,375,135)
24,499,573
20,629,913
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Property, plant and equipment
Exploration and evaluation expenditure
Intangible asset
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Short-term provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
The accompanying notes form part of these financial statements.
46
2018 LEPIDICO ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the Year ended 30 June 2018
Issued Capital
Number of
shares
Amount
Options
Foreign
Currency
Translation
Accumulated
Losses
$
$
$
$
Total
$
Balance at 30 June 2016
1,729,443,773
27,274,170
555,750
Loss for the year
Options issued during the year
-
-
-
-
-
990,000
Options exercised during the year
2,578,879
32,500
(32,500)
Shares issued during the year
303,955,413
4,185,126
-
Balance at 30 June 2017
2,035,978,065
31,491,798
1,513,250
Loss for the year
Other comprehensive loss
Options issued during the year
-
-
-
-
-
-
-
-
2,307,500
Options exercised during the year
54,000,000
443,000 (443,000)
Shares issued during the year
811,542,832
8,799,014
-
-
-
-
-
-
-
-
(17,141)
-
-
-
(7,017,892)
20,812,028
(5,357,243)
(5,357,243)
-
-
-
990,000
-
4,185,128
(12,375,135)
20,629,913
(7,219,713)
(7,219,713)
-
-
-
-
(17,141)
2,307,500
-
8,799,014
Balance at 30 June 2018
2,901,520,897
40,733,812
3,377,750
(17,141)
(19,594,484)
24,499,573
The accompanying notes form part of these financial statements.
47
2018 LEPIDICO ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOW
For the Year ended 30 June 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from external parties
Payments to suppliers and employees
Interest received
Note
2018
$
2017
$
89,483
130,234
(3,196,592)
(2,837,046)
68,763
37,082
Net cash used in operating activities
20
(3,038,346)
(2,669,730)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation activities
Proceeds from sale of exploration assets
Payments for research and development activities
Proceeds from research and development tax credit
Payments for property, plant and equipment
Proceeds from sale of available for sale assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares (net of costs)
Proceeds from exercise of options
Net cash provided by financing activities
Net increase in cash held
Cash at beginning of financial year
(1,565,714)
(974,145)
110,000
-
(1,933,633)
(1,204,339)
467,718
(25,547)
-
353,506
(10,088)
122,286
(2,947,176)
(1,712,780)
6,517,288
1,038,000
7,011,826
27,761
7,555,288
7,039,587
1,569,766
2,657,077
3,307,337
650,260
Effect of foreign exchange rate changes
(17,141)
-
Cash at end of financial year
8
4,859,962
3,307,337
The accompanying notes form part of these financial statements.
48
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting
Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
The financial report covers Lepidico Ltd and its controlled entities (“the Group” or “Consolidated Entity” or “Economic
Entity”). Lepidico Ltd is a listed public company, incorporated and domiciled in Australia. The financial report of the Group
complies with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.
The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the
financial report. The accounting policies have been consistently applied, unless otherwise stated.
Basis of Preparation
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation
of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has
been applied.
The financial statements were authorised for issue on 28 September 2018 by the Directors of the Company. The Directors
have the power to amend and re-issue the financial report. The Group is a for-profit entity for financial reporting purposes
under Australian Accounting Standards.
Accounting Policies
(a) Going Concern
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and the settlement of liabilities in the normal course of business.
The Group incurred a net loss of $7,219,713 for the year to 30 June 2018 and had a net cash outflow from operations of
$3,038,346 for the year. Notwithstanding this, the financial report has been prepared on a going concern basis which the
Directors consider to be appropriate based upon the available net current assets of $4,629,013 as at 30 June 2018 and the
matters described below.
The ability of the Group to continue as a going concern is dependent on the Group being able to continue to raise
additional funds as required to meet ongoing exploration and development programs and for working capital. On 3
September 2018 the Company announced an Entitlements Offer which closed on 25 September 2017. The Offer was
oversubscribed and the Company raised $7.9 million (before costs). Due to overwhelming demand, the Company has
agreed to a private placement to raise an additional $250,000. The Directors believe that the Group will be able to raise
additional capital as required based on the successful outcome of the Entitlement Offer and ongoing interest in the
Company and the lithium industry generally.
(b) Principles of Consolidation
The consolidated financial statements incorporate all the assets, liabilities and results of the parent (Lepidico Ltd) and all
of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an
entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 2.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from
the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that
control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities
are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where
necessary to ensure uniformity of the accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling
interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries
and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-
controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling
interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling
interests are shown separately within the equity section of the statement of financial position and statement of
comprehensive income.
49
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(c) Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities
or businesses under common control. The business combination will be accounted for from the date that control is
attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed
is recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change
to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial
instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
(d) Goodwill
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
i)
ii)
iii) the acquisition date fair value of any previously held equity interest;
over the acquisition date fair value of net identifiable assets acquired
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair
value of any previously held equity interest shall form the cost of the investment in the separate financial statements.
Fair value re-measurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they
arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income,
such amounts are recycled to profit or loss. The amount of goodwill recognised on acquisition of each subsidiary in which
the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest.
The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value
(full goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets
(proportionate interest method).
In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the
respective notes to these financial statements disclosing the business combination. Under the full goodwill method, the
fair value of the non-controlling interests is determined using valuation techniques which make the maximum use of
market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised
in the consolidated financial statements.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in
investments in associates. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units
or groups of cash-generating units, representing the lowest level at which goodwill is monitored being not larger than an
operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the
entity disposed of. Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted
for as equity transactions and do not affect the carrying amounts of goodwill.
50
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(e) Income Tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed
items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will
be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect
on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in the statement of comprehensive income except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against
which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility
imposed by the law.
(f) Property, Plant and Equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and
impairment losses.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows
which will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been
discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the
financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets is depreciated on a straight-line basis
over their useful lives to the Consolidated Entity commencing from the time the asset is held ready for use. Leasehold
improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of
the improvements.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are
included in the statement of comprehensive income. When re-valued assets are sold, amounts included in the revaluation
reserve relating to that asset are transferred to retained earnings.
51
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(g) Exploration and Development Expenditure
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of
interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment
of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to
abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the
area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are included in
the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building
structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have
been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and
future legislation. Accordingly, the costs have been determined using estimates of future costs, current legal requirements
and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site
restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and
future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within
one year of abandoning the site.
(h) Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending
on the requirements of the applicable Accounting Standard.
Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e.
unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.
To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the
market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most
advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts
from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction
costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset
in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment
arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial
instrument, by reference to observable market information where such instruments are held as assets. Where this
information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective
note to the financial statements.
52
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(i) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related
contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.
Financial assets at fair value through profit and loss
A financial asset is classified in this category if acquired principally for selling in the short term or if so designated
by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments.
Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains
and losses arising from changes in the fair value of these assets are included in the statement of comprehensive income in
the period which they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are stated at amortised cost using the effective interest rate method.
Available-for-sale financial assets
The Group’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial
recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in other
comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the
cumulative gain or loss in equity is reclassified to profit or loss.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied
to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar
instruments and option pricing models.
Impairment
At each reporting date, the group assess whether there is objective evidence that a financial instrument has been
impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is
considered to determine whether impairment has arisen. Impairment losses are recognised in the consolidated statement
of comprehensive income.
(j) Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether
there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of
the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the assets carrying
value. Any excess of the assets carrying value over its recoverable amount is expensed to the consolidated statement of
comprehensive income.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. 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.
53
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(k) Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group’s entities is measured using the currency of the primary economic
environment in which that Entity operates. The consolidated financial statements are presented in Australian dollars which
is the Parent Entity’s functional and presentation currency.
Transaction and Balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of
the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items
measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items
measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive
income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising
on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly
recognised in equity; otherwise the exchange difference is recognised in the statement of comprehensive income.
Group companies
The financial results and position of foreign operations whose functional currency is different from the group’s
presentation currency are translated as follows:
(i) assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
(ii) income and expenses are translated at average exchange rates for the period; and
(iii) retained profits are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign
currency translation reserve in the statement of financial position. These differences are recognised in the statement of
comprehensive income in the period in which the operation is disposed.
(l) Employee Benefits
Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to
balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have
been measured at the present value of the estimated future cash outflows to be made for those benefits.
(m) Provisions
Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is
probable that an outflow of economic benefits will result and that outflow can be reliably measured.
(n) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-
term borrowings in current liabilities on the statement of financial position.
54
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(o) Revenue
Revenue from the sale of goods is recognised upon delivery of goods to customers.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the
financial assets.
Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from
associates are accounted for in accordance with the equity method of accounting.
Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
(p) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian 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.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
(q) Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and
best available current information. Estimates assume a reasonable expectation of future events and are based on current
trends and economic data, obtained both externally and within the group.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Key Sources of Estimation Uncertainty
The following key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting
date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year:
(i) Recoverability of Exploration and Evaluation Expenditure
The recoverability of the exploration and evaluation expenditure recognised as a non-current asset is dependent
upon the successful development, or alternatively sale, of the respective tenements which comprise the assets.
(ii) Recoverability of Intangible Asset (Development Expenditure)
The recoverability of capitalised development expenditure recognised as a non-current asset is dependent upon
the successful development, or alternatively sale, of the respective intellectual property which comprise the
assets. Refer to Note 12 for details of how the development expenditure has been valued.
(iii) Share based payment transactions
The fair value of any options issued as remuneration is measured using the Black-Scholes model. Measurement
inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on
weighted average historic volatility adjusted for changes expected due to publicly available information (if any)),
weighted average expected life of the instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on government bonds).
55
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
(r) Intangibles Assets – Intellectual Property Development Expenditure
Such assets are recognised at cost of acquisition. Expenditure during the research phase of a project is recognised as an
expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project
is expected to deliver future economic benefits and these benefits can be measured reliably. Development costs have a
finite life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project.
An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and
only if, all the following are demonstrated:
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
•
•
the availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributed to the intangible asset during its development.
Capitalised development costs will be amortised over their expected useful life of the intangible asset once full
commercialisation or production commences.
(s) New and Amended Accounting Policies Adopted by the Group
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
(t) New Accounting Standards for Application in Future Periods
Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an
assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed
below:
AASB 9: Financial Instruments and associated Amending Standards
(applicable to annual reporting periods beginning on or after 1 January 2018).
The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and
includes revised requirements for the classification and measurement of financial instruments, revised recognition and
derecognition requirements for financial instruments, and simplified requirements for hedge accounting.
The key changes that may affect the Group on initial application include certain simplifications to the classification of
financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss,
and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for
trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater
flexibility in the ability to hedge risk, particularly with respect to the hedging of non-financial items. Should the Group elect
to change its hedge policies in line with the new hedge accounting requirements of the Standard, the application of such
accounting would be largely prospective.
The directors anticipate that the adoption of AASB 9 should not have a material impact on the Group’s financial instruments.
56
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
AASB 15: Revenue from Contracts with Customers
(applicable to annual reporting periods beginning on or after 1 January 2018, as deferred by AASB 2015-8: Amendments
to Australian Accounting Standards – Effective Date of AASB 15).
When effective, this Standard will replace the current accounting requirements applicable to revenue with a single,
principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15
will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business
to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
(i)
(ii)
(iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract(s); and
(v) recognise revenue when (or as) the performance obligations are satisfied.
This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue.
Tthe directors anticipate that the adoption of AASB 15 should not have a material impact on the Group’s financial statements.
AASB 16: Leases
(applicable to annual reporting periods beginning on or after 1 January 2019).
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases
and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for
leases to be classified as operating or finance leases.
The main changes introduced by the new Standard are as follows:
• recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months
of tenure and leases relating to low-value assets);
• depreciation of right-of-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
• inclusion of variable less payments that depend on an index or a rate in the initial measurement of the lease
liability using the index or rate at the commencement date;
• application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead
account for all components as a lease; and
• inclusion of additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line
with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the
date of initial application.
Although the directors anticipate that the adoption of AASB 16 may have an impact on the Group’s financial statements, it
is impracticable at this stage to provide a reasonable estimate of such impact.
57
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 1: Statement of Significant Accounting Policies
AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
(applicable to annual reporting periods beginning on or after 1 January 2018, as deferred by AASB2015-10: Amendments
to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128).
This Standard amends AASB 10: Consolidated Financial Statements with regards to a parent losing control over a
subsidiary that is not a “business” as defined in AASB 3: Business Combinations to an associate or joint venture, and
requires that:
•
•
•
a gain or loss (including any amounts in other comprehensive income (OCI) be recognised only to the extent of
the unrelated investor’s interest in that associate or joint venture;
the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint
venture; and
any gain or loss from remeasuring the remaining investment in the former subsidiary at fair value also be
recognised only to the extent of the unrelated investor’s interest in the associate or joint venture. The remaining
gain or loss should be eliminated against the carrying amount of the remaining investment.
The application of AASB 2014-10 will result in a change in accounting policies for transactions of loss of control over
subsidiaries (involving an associate or joint venture) that are businesses per AASB 3 for which gains or losses were
previously recognised only to the extent of the unrelated investor’s interest.
The transitional provisions require that the Standard should be applied prospectively to sales or contributions of
subsidiaries to associates or joint ventures occurring on or after 1 July 2018. The directors anticipate that the adoption of
AASB 2014-10 should not have a material impact on the Group’s financial statements.
(u) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation
in the current financial year.
Note 2: Controlled Entities
The legal corporate structure of the Consolidated Entity is set out below:
Country of
Incorporation
Interest as at
30 June
(%)
2018
2017
Principal Activity
Parent Entity:
Lepidico Ltd
Subsidiaries of Lepidico Ltd:
Ashburton Gold Mines NL
Trans Pacific Gold Pty Ltd
Transdrill Pty Ltd
Southern Pioneer Ltd
Platypus Resources Ltd
Lepidico Holdings Pty Ltd
Li Technology Pty Ltd
Silica Technology Pty Ltd
Mica Exploration Pty Ltd
Lepidico (Netherlands)
Coöperatief U.A.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Netherlands
Lepidico (Netherlands) B.V.
Netherlands
Lepidico (Canada) Inc
Canada
58
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
-
-
-
Dormant
Dormant
Dormant
Dormant
Dormant
Lithium Exploration and Investment
Holder of L-Max® Technology
Holder of S-Max™Technology
Lithium Exploration
Holding Company
Global Marketing Company
Developer & operator of Phase 1
L-Max® Plant
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 3: Revenue
Operating activities
Operating Income
Other activities
Interest
Profit on sale of available for sale financial assets
Break fee for sale of exploration tenement
Sale of interest in exploration tenement
Other
Other Income
Total Revenue
Note 4: Administrative Expenses
Office & general
Professional services
Compliance related
Travel
2018
$
2017
$
61,170
126,548
61,710
126,548
69,952
-
-
110,000
-
179,952
241,122
2018
$
299,890
515,602
312,190
404,436
1,532,117
37,673
22,287
66,364
-
1,249
127,573
254,121
2017
$
236,626
322,171
181,576
222,195
962,568
Other Significant Administrative Expenses
The following significant expenses were incurred during the period
and impacted the financial performance:
Legal Costs associated with settled dispute
Takeover Response
-
18,341
162,892
628,138
Total Administrative Expenses
1,550,458
1,753,598
59
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 5: Income Tax Expense
(a)
The components of tax expense comprise:
Current tax
Deferred tax
Losses recouped not previously recognised
Income tax expense reported in statement of comprehensive income
2018
$
2017
$
-
-
-
-
-
-
-
-
(b)
The prima facie tax benefit on loss from ordinary activities before income tax
is reconciled to the income tax as follows:
Prima facie tax benefit on loss from ordinary activities before income tax at
27.5% (2016: 30%)
(1,985,421)
(1,473,242)
Add tax effect of:
-
Losses not recognised
- Deferred tax balances not recognised
- Share based payments
- Foreign Expenditure
- Exploration expenditure written off
- Other non-allowable items
Less tax effect of:
- Deferred tax balances not recognised
-
Losses recouped not previously recognised
Income tax expense reported in statement of comprehensive income
(c)
Deferred tax recognised:
Deferred Tax Liabilities:
Exploration expenditure
L-Max® Technology
Other
Deferred Tax Assets:
Carry forward revenue losses
Net deferred tax
(d)
Unrecognised deferred tax assets:
Carry forward revenue losses
Carry forward capital losses
Capital raising and other costs
Provision and accruals
60
-
630,101
587,813
38,128
421,078
308,301
-
-
-
-
-
882,406
477,508
45,304
61,376
6,648
-
-
-
-
(1,141)
(362,873)
(24)
(9,994)
(239,392)
-
364,038
249,386
-
-
5,137,306
268,663
334,345
14,132
4,289,830
268,663
217,230
20,632
5,754,446
4,796,355
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
(e)
Tax consolidation:
Lepidico Ltd and its wholly owned Australian resident subsidiaries formed a tax consolidated group with effect from
1 July 2014. Lepidico Ltd is the head entity of the tax consolidated group.
The tax benefits of the above Deferred Tax Assets will only be obtained if:
a)
the Company derives future assessable income of a nature and of an amount sufficient to enable the benefits
to be utilised;
the Company continues to comply with the conditions for deductibility imposed by law; and
b)
c) no changes in income tax legislation adversely affect the company in utilising the benefits.
Note 6: Auditor’s Remuneration
Audit services
Taxation and other services
2018
$
34,789
-
2017
$
36,500
-
34,789
36,500
Note 7: Earnings per Share
The calculation of basic profit or loss per share for each year was based on the profit or loss attributable to ordinary
shareholders and using a weighted average number of ordinary shares outstanding during the year. The Company’s potential
ordinary shares were not considered dilutive as the Company is in a loss position.
2018
$
2017
$
Loss attributable to the ordinary equity holders of the Company
0.003
0.003
Loss from continuing operations
7,219,713
5,357,243
Weighted average number of ordinary shares
2,624,394,631
1,801,689,967
No.
No.
$
$
Note 8: Cash and Cash Equivalents
Cash at bank and in hand
2018
$
2017
$
4,859,962
3,307,337
4,859,962
3,307,337
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 22.
61
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 9: Trade and Other Receivables
Current
Trade receivables
Prepaid expenses
R&D tax rebate receivable
Goods and services tax receivable
Other receivables
2018
$
-
63,680
484,795
76,002
79
2017
$
28,313
41,417
467,718
81,458
591
Total Current Trade and Other Receivables
624,556
619,497
Non-Current
Cash backed guarantees
Total Non-Current Trade and Other Receivables
87,114
87,114
86,003
86,003
Total Trade and Other Receivables
711,670
705,500
2018
$
2017
$
80,054
25,547
-
75,841
10,088
(5,875)
105,601
80,054
72,322
6,230
-
78,552
72,098
6,098
(5,874)
72,322
27,049
7,732
Note 10: Property, Plant and Equipment
Furniture, Fittings and Equipment
At cost
Opening Balance
Additions
Disposals
Closing Balance
Accumulated depreciation
Opening Balance
Additions
Disposals
Closing Balance
Net Book Value
62
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 11: Exploration and Evaluation Expenditure
Exploration expenditure
2018
$
2017
$
729,697
1,619,842
The recoverability of the carrying amount of exploration assets is dependent on the successful development and commercial
exploitation or sale of the respective mining permits. Amortisation of the costs carried forward for the development phase
is not being charged pending the commencement of production. The impairment of exploration expenditure represents
projects that the company is no longer pursuing.
Reconciliation of movements during the year:
Balance at the beginning of year
Exploration and evaluation costs capitalised
Exploration and evaluation costs written off
2018
$
2017
$
1,619,842
1,280,670
(2,170,815)
614,797
1,882,664
(877,619)
Balance at the end of the year
729,697
1,619,842
Note 12: Intangible asset
L-Max® Technology
S-Max™ Technology
2018
$
2017
$
19,495,455
16,698,154
16,040
-
Balance at the end of the year
19,511,495
16,698,154
The recoverability of the carrying amount of the L-Max® Technology and the S-Max™ Technology is dependent of the
successful development and commercial exploitation or sale of the asset.
Capitalised development costs will be amortised over their expected useful life of the intangible asset once full
commercialisation of production commences.
Reconciliation of movements during the year:
Balance at the beginning of year
Development costs capitalised
Research and Development Tax Credit received/receivable
2018
$
16,698,154
2,813,341
(484,795)
2017
$
16,203,762
1,246,891
(752,499)
Research and Development Tax Credit received/receivable
19,026,700
16,698,154
63
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 13: Trade and Other Payables
Current
Trade payables
Sundry payables and accrued expenses
2018
$
406,527
397,948
2017
$
406,356
1,256,499
Total Current Trade and Other Payables
804,475
1,662,855
Note 14: Provisions
Current
Employee Provisions
Reconciliation of movements during the year:
Balance at the beginning of year
Additional provisions
Provisions used
2018
$
2017
$
51,030
45,797
2018
$
45,797
58,169
(52,936)
2017
$
22,294
44,490
(20,987)
Balance at the end of the year
51,030
45,797
Note 15: Contributed Equity
a) Share capital
Fully paid ordinary shares
Share Issue Costs
2018
2017
Number
$
Number
$
2,901,520,897
43,961,658
2,035,978,065
33,999,124
(3,227,846)
40,733,812
(2,507,326)
31,491,798
Ordinary shares have the right to receive dividends and, in the event of winding-up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
64
2018 LEPIDICO ANNUAL REPORT
Date
Number of
shares
Issue Price
$
1 July 2017
2,035,978,065
2 August 2017
45,000,000
18 August 2017
5 September 2017
6,333,432
52,195,175
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Movements in ordinary share capital
Description
Opening Balance
Shares issued to Lycopodium
Shares issued to Maximus Resources
Shares issued to Bacchus Capital
$0.0130
$0.0126
$0.0143
$0.0100
$0.0100
-
$0.0100
$0.0150
-
Shares issued to Galaxy Resources
12 October 2017
291,750,910
Exercise of options
Fair value of options exercised
Entitlement Offer
Exercise of options
25 October 2017
6,500,000
25 October 2017
-
8 November 2017
416,263,315
8 November 2017
3,500,000
Fair value of options exercised
8 November 2017
-
Exercise of options
8 December 2017
2,500,000
$0.0100
Fair value of options exercised
8 December 2017
-
-
Exercise of options
8 December 2017
12,500,000
$0.0250
Fair value of options exercised
8 December 2017
-
-
Exercise of options
14 December 2017
7,500,000
$0.0250
Fair value of options exercised
14 December 2017
-
-
Exercise of options
9 March 2018
1,500,000
$0.0150
Fair value of options exercised
9 March 2018
-
-
Exercise of options
7 May 2018
15,000,000
$0.01815
Fair value of options exercised
7 May 2018
-
-
Exercise of options
Fair value of options exercised
Less: Share issue costs
16 May 2018
5,000,000
$0.01815
16 May 2018
-
-
-
-
Closing Balance
30 June 2018
2,901,520,897
b) Share options
As at reporting date, Lepidico has the following options on issue:
31,491,798
585,000
80,000
746,391
2,917,509
65,000
13,000
4,162,633
52,500
59,500
25,000
5,000
312,500
112,500
187,500
67,500
22,500
25,500
272,250
120,000
90,750
40,000
(720,519)
40,733,812
Number
20,000,000
5,000,000
42,500,000
12,500,000
50,000,000
130,000,000
Exercise Price
$0.01815
$0.015
$0.02500
$0.02500
$0.09100
Grant
25 July 2016
Expiry
3 August 2018
9 November 2017
8 November 2019
25 November 2016
31 December 2019
30 November 2016
31 December 2019
24 November 2017
23 November 2020
Options carry no dividend or voting rights. Upon exercise, each option is convertible into one ordinary share to rank pari
passu in all respects with the Group’s existing fully paid ordinary shares.
65
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Movements in Options
Balance at 1 July 2016
Granted
Exercised
Expired
Balance at 30 June 2017
Granted
Exercised
Expired
Balance at 30 June 2018
c) Share Based Payments
Weighted
Average Exercise
Price
$
0.028
0.023
0.011
0.034
0.023
0.078
0.019
0.030
0.049
Number
66,562,816
115,000,000
(2,578,879)
(27,233,937)
151,750,000
60,000,000
(54,000,000)
(27,750,000)
130,000,000
On 2 August 2017 the Company issued 45,000,000 shares to Lycopodium Minerals Pty Ltd for engineering services to be
performed for the Phase 1 L-Max Plant Feasibility Study. The shares were issued at $0.013 per share being the closing price
on the day of issue.
On 21 August 2017, the Company issued 6,333,432 shares to Maximus Resources as the intial payment for farm-in on
Moriarty Lithium Rights. Under the terms of the farm-in, Maximus was issued with $80,000 in shares.
On 5 September 2017, the Company issued 52,195,175 shares for corporate services provided during the take-over response.
The shares were issued at $0.0143 per share, being the 5 day VWAP immediately before the take-over offer expired.
On 8 November 2017, the Company issued 5,000,000 options (valued at $0.017) to CPS Capital and Galaxy Resources
respectively as part of the the Underwriiting and Sub-underwriting Agreements for the Entitlement Offer. The option
exercise price was set at a 50% premium above the Entitlement Offer price. The options were valued using Black Scholes
with the following assumptions:
Number of options
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest Rate
Unlisted Options
10,000,000
$0.025
$0.015
111%
2 years
0.00%
1.93%
On 23 November 2017, the Company issued a total of 50,000,000 options (valued at $0.042) to Directors and Employees
under the Company’s Share Option Plan and were valued using Black Scholes with the following assumptions:
Number of options in series
50,000,000
Unlisted Options
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest Rate
$0.067
$0.091
111%
3 years
0.00%
1.90%
If the above options were valued using the share price as at 30 June 2018 they would be valued at $0.016.
66
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 16: Reserves
Option Reserve
Foreign Currency Translation Reserve
2018
$
3,377,750
(17,141)
2017
$
1,513,250
-
Total Reserves
3,360,609
1,513,250
Option Reserve
The options reserve is used to recognise the fair value of all options on issue but not yet exercised.
Opening Balance
Option expense for the year
Transfer of value on exercise of options
2018
$
1,513,250
2,307,500
(443,000)
2017
$
555,750
990,000
(32,500)
Closing Balance
3,377,750
1,513,250
Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries.
Opening Balance
Movement during the year
Closing Balance
Note 17: Contingent Liabilities and Contingent Assets
There are no contingent liabilities as at 30 June 2018.
2018
$
-
(17,141)
(17,141)
2017
$
-
-
-
67
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 18: Segment reporting
Reportable Segments
The Group has two reportable segments, being mineral exploration and development of its L-Max® technology, which reflects
the structure used by the Group’s management to assess the performance of the Group.
Mineral
Exploration
Technology
Corporate &
Unallocated items
$
$
$
Total
$
110,000
(2,060,815)
61,170
51,211
69,952
241,122
(5,210,109)
(7,219,713)
66,364
126,548
61,209
254,121
(812,935)
(86,290)
(4,458,018)
(5,357,243)
729,697
19,026,700
5,598,681
25,355,078
1,619,842
16,698,154
4,020,569
22,338,565
2018
$
2017
$
241,122
254,121
241,122
254,121
5,067,612
2,152,101
5,357,243
-
7,219,713
5,357,243
24,629,530
20,755,063
21,682
703,866
1,414,968
168,534
25,355,078
22,338,565
(i) Segment performance
Year ended 30 June 2018
Revenue
Total Profit/(Loss)
Year ended 30 June 2017
Revenue
Total Profit/(Loss)
(ii) Segment assets
As at 30 June 2018
As at 30 June 2017
Geographical Information
Australia
Total Revenue
Australia
Canada
Total Loss
Australia
Canada
Portugal
Total Assets
68
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Note 19: Commitments
Operating lease commitments
Not later than one year
After one year but less than two years
2018
$
100,746
50,251
150,997
2017
$
122,400
38,035
160,435
Exploration lease commitments
The Group must meet the following tenement expenditure commitments to maintain them in good standing until they
are farmed out, sold, reduced, relinquished, exemptions from expenditure are applied or are otherwise disposed of. These
commitments, net of farm outs, are not provided for in the financial statements and are:
Not later than one year
After one year but less than two years
Note 20: Cash Flow Information
Reconciliation of Cash Flow from Operations
with Loss after Income Tax
Loss after income tax
Adjustments items not impacting cash flow used in operations:
Depreciation and amortisation
Exploration expenditure written-off
Share based payments
(Profit)/Loss on sale of available for sale financial assets
(Profit)/Loss on break fee from tenement sale
(Profit)/Loss on sale of exploration asset
Changes in current assets and liabilities:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
2018
$
-
-
-
2018
$
2017
$
1,207,874
203,656
1,411,530
2017
$
(7,219,713)
(5,357,243)
6,230
2,170,815
2,137,500
-
-
(110,000)
10,907
(39,319)
5,233
6,098
877,619
1,736,391
(22,286)
(66,364)
-
(118,120)
250,672
23,503
Cash flow used in operations
(3,038,346)
(2,669,730)
69
2018 LEPIDICO ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2017
Note 21: Related Party Transactions
Key Management Personnel Remuneration
Salaries and other short-term benefits
Post employment benefits
Share based payments
Detailed remuneration disclosures are provided in the remuneration report on pages 38 to 42.
Payments to director-related parties
2018
$
1,037,874
49,667
2,137,500
2017
$
698,211
66,331
525,000
3,225,041
1,289,542
2018
$
2017
$
Payments to director-related entities(1)
857,219
1,072,521
(1) Payments were made to Strategic Metallurgy Pty Ltd, a company of which Mr Gary Johnson is a director and beneficial
shareholder. The payments were in relation to the development of L-Max® technology on an arm’s length basis. As at 30
June 2018 invoices totalling $89,617 are payable (2017: $108,044).
Note 22: Financial Risk Management
The Group has exposure to the following risks:
(a) Credit Risk
(b) Liquidity Risk
(c) Market Risk
This note presents information on the Group’s exposure to each of the above risks, their objectives, policies and processes for
measuring risk, and management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Management is responsible for establishing procedures which provide assurance that major business risks are identified,
consistently assessed and appropriately mitigated.
The Group’s Audit & Risk Management Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks
faced by the Group.
(a) Credit Risk
Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy counter-parties and
obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from
defaults. The consolidated entity measures credit risk on a fair value basis. The consolidated entity does not have any
significant credit risk exposure to any single counter-party.
The Group’s cash and cash equivalents are held with ANZ Bank, and management consider the Group’s exposure to credit
risk is low.
70
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum
exposure to credit risk at the reporting date was:
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
(b) Liquidity Risk
Note
8
9
2018
$
2017
$
4,859,962
624,556
3,307,337
705,500
5,484,518
4,012,837
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by
continuously monitoring forecast and actual cash flows. The Group does not have any external borrowings.
The Company will need to raise additional capital to fund the development of the Phase 1 L-Max® Plant. The decision on
how and when the Company will raise future capital will largely depend on the market conditions existing at that time.
As at the reporting date the Group had the following financial liabilities comprised of non-interest bearing trade creditors
and accruals with a maturity of less than 6 months:
Financial liabilities
Trade and other payables
(c) Market Risk
Note
13
2018
$
2017
$
804,475
1,662,855
Market risk was the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposure within acceptable parameters, while optimising the return.
(i) Interest Rate Risk
As at and during the year ended on reporting date the Group had no significant interest-bearing assets or liabilities other
than liquid funds on deposit. As such, the Group’s income and operating cash flows (other than interest income from
funds on deposit) are substantially independent of changes in market interest rates. The Group’s exposure to interest rate
risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below:
Financial assets
Cash assets
Floating rate
1.41%
4,859,962
1.47%
3,307,337
%
2018
$
%
2017
$
The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in higher
interest-bearing cash management account.
The Group has performed a sensitivity analysis relating to its exposure to interest rate risk over the reporting period. The
sensitivity analysis demonstrates the effect on the current year’s results and equity values reported at the end of the reporting
period which would result from a 1% change in interest rates.
71
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
Change in Loss
Increase by 1%
Decrease by 1%
Change in Equity
Increase by 1%
Decrease by 1%
(ii) Currency Risk
2018
$
50,697
(50,697)
2017
$
25,642
(25,624)
50,697
(50,697)
25,642
(25,642)
The Group has potential exposure to foreign currency movements by virtue of its involvement in exploration tenements
in Portugal and Canada. At this time the currency risk is not considered significant. The Group has not entered into any
derivative financial instruments to hedge such transactions.
(iii) Commodity Price Risk
The Group is operating primarily in the exploration and evaluation phase and accordingly the Group’s financial assets and
liabilities are not yet subject to commodity price risk.
(iv) Capital Management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and
to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to
maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets.
There were no changes in the Group’s approach to capital management during the year. Risk management policies and
procedures are established with regular monitoring and reporting.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Note 23: Parent Entity Financial Information
The following information relates to the legal parent only.
(a) Summary of Financial Information
Assets
Current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Shareholders’ Equity
Issued capital
Reserves
Accumulated Losses
Total Shareholders’ Equity
Result of the parent entity
Loss for the year
Other comprehensive loss
2018
$
2017
$
5,397,312
3,430,116
34,157,254
28,957,151
619,478
619,478
1,398,168
1,398,168
76,257,812
3,997,433
67,025,800
1,740,074
(46,717,469)
(41,206,890)
33,537,776
27,558,983
(5,510,579)
(4,579,238)
(17,141)
-
Total comprehensive loss for the year
(5,527,720)
(4,579,238)
72
2018 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2018
(b) Contractual commitments for the acquisition of property, plant and equipment
As at 30 June 2018 the parent entity has no contractual commitments for the acquisition of property, plant or equipment.
(c) Guarantees and contingent liabilities
As at 30 June 2018 the parent entity has no guarantees or contingent liabilities other than as disclosed in Note 17.
Note 24: Events Subsequent to Reporting Date
(a) Youanmi Lepidolite Option Agreement
On 26 July 2018 the Company entered into an option agreement with Venus Metals Corporation Limited (ASX:VMC)
(“Venus”) to explore for lithium mineralisation on exploration licence E57/983 located in the Murchison District in Western
Australia, approximately 20 km southwest of the historical Youanmi gold mine.
The Company paid $50,000 cash and issued 3,619,254 fully paid ordinary Shares for a 12-month option to explore the
tenement. During the option period the parties intend to negotiate the terms of a farm-in and joint venture agreement on
the following indicative terms:
• Venus to receive $350,000, comprising 50:50 cash and shares; shares issued at 5 day VWAP. Lepidico will have a 4-year
period to complete a full Feasibility Study leading to a Decision to Mine (“DTM”) to earn an 80% interest in the Lithium
Rights. Venus will be free-carried to a DTM and Venus will be carried through project finance, with cost of finance to be
repaid from 100% of Venus’s share of production.
• On DTM, a joint venture commences. If Venus dilutes to below 5% it’s interests reverts to a 1.5% royalty on all concentrate
sold from the tenement.
• Venus is to receive a benefit linked to the price of lithium carbonate equivalent received by Lepidico on sale of L-Max®
products from material sourced from the Rights.
• If at any time in the 4-year period, Lepidico spends $2 million on project expenditure it will earn a 51% interest in
the Rights.
(b) Entitlements Offer
On 3 September 2018 the Company announced a pro-rata Renounceable Entitlements Offer (Entitlements Offer) of fully
paid ordinary shares (New Shares) on the basis of one (1) New Share for every seven (7) existing shares held at the record
date with 1 for 2 free attaching options (New Options) which closed on 25 September 2017. Shares under the Entitlements
Offer will be issued at $0.019 per New Share. New Options will have an exercise price of 4.5 cents, a term of two years and
will be listed. The New Options will be listed under the ASX code LPDOA.
The Company raised $7.9 million (before costs) and will issue 417,877,158 New Shares and 208,938,579 New Options. Due
to overwhelming demand, the Company has agreed to place a further 13,157,894 fully paid ordinary shares at $0.019 with
6,578,947 attaching LPDOA options to raise an additional $250,000 (“Placement”)
To reduce the risk of scale up to an expanded nominal throughput rate of approximately 7.0 tonnes per hour of
concentrate feed, the Lepidico Board has resolved, subject to securing sufficient funds, to develop a L-Max® pilot plant
for research and development purposes. Strategic Metallurgy Pty Ltd has completed the process design for a pilot plant
with nominal throughput rate of 15 kilograms per hour at a capital cost of approximately $3 million, including engineering
and contingency. Operating costs are expected to total a further $1.5 million. Pilot plant equipment will be similar to that
used in the Phase 1 Plant design albeit on a smaller scale. The pilot plant has a six month development timetable which is
planned to be implemented in parallel with the closing stages of Phase 1 Plant Project Feasibility Study.
It is intended that the proceeds of the Entitlements Offer will be prioritised to fund the Lepidico business, including to
build and operate a L-Max® pilot plant, and in so doing provide material for product development and evaluation purposes
with prospective strategic/offtake partners for the Phase 1 L-Max® Plant Project. Funds from the Placement will be used to
supplement working capital.
The new securities are expected to be issued on Monday, 1 October 2018, in accordance with the timetable in
the prospectus.
73
2018 LEPIDICO ANNUAL REPORT
DIRECTORS’
DECLARATION
In the opinion of the Directors of Lepidico Ltd (the “Company”):
1.
The financial statements and notes and the remuneration disclosures that are contained in the
Directors’ Report, are in accordance with the Corporations Act 2001, including:
a. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and
of its performance for the year ended on that date.
2.
There are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable.
3. 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
2018.
4. Note 1 confirms that the financial statements also comply with the International Financial Reporting
Standards as issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of the Board of Directors.
Joe Walsh
Managing Director
Dated this 28th day of September 2018
74
2018 LEPIDICO ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF LEPIDICO LTD
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Lepidico Limited (the Company) and its subsidiaries (the “Group”), which
comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for
the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
the directors’ declaration.
In our opinion:
a) the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
i.
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance
for the year then ended; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the “Code”) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
75
2018 LEPIDICO ANNUAL REPORT
Key Audit Matters
We have determined the matters described below to be the key audit matters to be communicated in our report. 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.
Carrying values of Exploration & Evaluation Expenditure and Intangible Assets
Refer to Notes 1 (g, r), Notes 11 Exploration & Evaluation Expenditure & 12 Intangible Asset
As at 30 June 2018 the Group had $729,697 in capitalised
exploration and evaluation expenditure and intangible
assets with a carrying value of $19,026,700.
The intangible asset includes the Group’s investment in the
L-Max® Technology and S-MaxTM Technology, including
the cost of acquisition of the technology, subsequent
development costs and patent fees capitalised. As part
of their annual impairment review, management prepared
an analysis of the recoverable amount of the technology
which was based on “fair value less costs to sell”. Note that
given the early stages of development of the technology,
we are unable to rely on forecast cash flows as a reliable
estimate of value-in-use.
The ability to recognise and to continue to defer
exploration-evaluation assets under AASB 6 is impacted
by the Group’s ability, and intention, to continue to explore
the tenements or its ability to realise this value through
development or sale.
The carrying values of the technology and capitalised
exploration-evaluation assets were key audit matters given
the significance of the technology and exploration activities
to the Group’s balance sheet, and the judgement involved
in the assessment of their values.
.
76
Our procedures included, amongst others:
•
•
•
•
•
Assessing the methodologies used by management
to estimate fair value of the technology asset including
challenging the methodology used, testing the
integrity of the information provided, and assessing the
appropriateness of the key assumptions based on our
knowledge of the technology and industry.
Reviewing minutes of Board meetings, ASX
announcements, professional technological and other
reports for evidence of any impairment indicators or
material adverse changes since completion of the Pre-
Feasibility Report and independent valuation report
(included in the target’s statement document) announced
in 2017. There were no such indicators during the year.
Testing expenditures related to the technology and
exploration-evaluation assets during the year on a sample
basis against supporting documentation such as supplier
invoices and various cost agreements and ensuring such
expenditures are appropriately recorded in accordance
with applicable accounting standards.
Reviewing the Group’s rights to tenure to its areas of
interest and commitment to continue exploration and
evaluation activities in these interests and ensuring
capitalised expenditures relating to areas of interest which
are being discontinued or no longer being budgeted for
are appropriately impaired.
Compared the Group’s market capitalisation as at 30 June
2018 ($107.4 million) to its net asset position ($24.5 million)
and noted that the market capitalisation at balance date
was significantly higher.
•
Assessing the appropriateness of the relevant disclosures
in the financial statements.
2018 LEPIDICO ANNUAL REPORT Key Audit Matters (continued)
Related Party Transactions and Share Based Payments to Key Management Personnel
Remuneration Report, Note 15c Share Based Payments, Note 21 Related Party Transactions
During the year ended 30 June 2018, the Group transacted
with Key Management Personnel and their related entities
including:
• Awarded share-based payments amounting to
$2,137,500, in the form of share options, to Key
Management Personnel
• Paid $857,219 in development and consulting costs
Our procedures included, amongst others:
• Enquiring and obtaining confirmations from Key
Management Personnel regarding related party
transactions occurring during the period.
• Reviewing minutes of meetings, ASX announcements and
agreements, and considered other transactions undertaken
during the financial year.
related to the L-Max Technology
• Reviewing payments, receipts and general journals
As these transactions are made with related parties,
there are additional inherent risks associated with these
transactions, including the potential for these transactions
to be made on terms and conditions more favourable than
if they had been with an independent third party.
The value of the share-based payments is a key audit
matter due to it being a key material transaction with
members of key management personnel, the valuation
of which involves significant judgement and accounting
estimation.
throughout the year, and examining transactions with
known related parties, or those that appear large or unusual
for the Group.
• Evaluating, based on supporting documentation, whether
related party transactions were on an arms-length basis.
• Assessing the valuation methodology used by
management to estimate fair value of share options issued,
including testing the integrity of the information provided,
assessing the appropriateness of the key assumptions input
into the valuation model and recalculating the valuation
using the Black Scholes Model.
• Assessing whether the share-based payments have been
appropriately classified and accounted for in the financial
statements.
Assessing the appropriateness of the relevant disclosures in
the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included in the Group’s
annual report for the year ended 30 June 2018 but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
77
2018 LEPIDICO ANNUAL REPORT Directors’ Responsibility for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or has 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, international omissions, misrepresentation, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance
of the Group audit. We remain solely responsible for our audit opinion.
78
2018 LEPIDICO ANNUAL REPORT Auditor’s Responsibilities for the Audit of the Financial Report (continued)
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report as included in the directors’ report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Lepidico Limited, for the year ended 30 June 2018 complies with section 300A of
the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Suan-Lee Tan
Partner
Moore Stephens
chartered accountants
Signed at Perth on the 28th day of September 2018
79
2018 LEPIDICO ANNUAL REPORT
SUPPLEMENTARY (ASX) INFORMATION
The Shareholder information set out below was applicable as at 11 October 2018.
FULLY PAID ORDINARY SHARES (ASX : LPD)
Top 20 Holders of Fully Paid Ordinary Shares
Shareholder
Galaxy Resources Ltd
Strategic Metallurgy Pty Ltd
JP Morgan Nominees Australia Ltd
Strategic Metallurgy Pty Ltd
Perth Capital Pty Ltd
HSBC Custody Nom Australia Ltd
Becker Gavin S B & W M
Bacchus Capital Advisers Ltd
Georgaklis Bill & G
Citicorp Nominees Pty Ltd
Invia Custodians Pty Ltd
Netwealth Inv Pty Ltd
Avalon Retmnt Inv Pty Ltd
Isaiah Sixty Pty Ltd
T&G Corp Pty Ltd
Rennie Jackson SMSF Pty Ltd
BNP Paribas Nom Pty Ltd
BNP Paribas Noms Pty Ltd
Vadzis Ivars
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Erfanul Haque Pty Ltd
Number
389,001,214
292,924,098
118,717,499
50,000,134
48,428,572
43,909,033
41,142,858
40,894,371
40,468,389
38,597,230
30,250,000
29,674,010
29,461,610
22,000,000
21,000,000
20,234,287
19,262,317
18,872,584
18,366,250
13,430,858
%
11.59%
8.73%
3.54%
1.49%
1.44%
1.31%
1.23%
1.22%
1.21%
1.15%
0.90%
0.88%
0.88%
0.66%
0.63%
0.60%
0.57%
0.56%
0.55%
0.40%
Total Top 20
1,326,635,314
39.54%
Substantial Shareholding
The following shareholders held a substantial interest, being 5.0% or greater, in the issued capital of the Company:
Shareholder
Galaxy Resources Ltd
Strategic Metallurgy Pty Ltd
Number of Shares
389,001,214
361,952,211
%
11.59%
10.78%
Distribution of Shares
The distribution of members and their shareholding was as follows:
Number Held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Number of Shareholders
895
298
533
3,438
2,660
Total number of shareholders
7,824
80
2018 LEPIDICO ANNUAL REPORT LISTED OPTIONS EXPIRING 30 SEPTEMBER 2020 AT $0.045 (ASX : LPDOA)
Top 20 Holders of Listed Options
Shareholder
Galaxy Resources Ltd
Isaiah Sixty Pty Ltd
JP Morgan Nom Australia Ltd
Ruan Xiaoling
Pershing Australia Nom Pty Ltd
Spreadborough Ryan
Soucik Michael & Heather
Perth Capital Pty Ltd
Strategic Metallurgy Pty Ltd
Rae Michael
Carson Darryl R & L A
Rookharp Inv Pty Ltd
Cameron Sarah
Rowe Ryan James
Becker Gavin S B & W M
Yin Xin
Boss John Robert & L M
Cheung & Nguyen Prop Mgn
Zhang Luyu
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Pulmano Denton Quinones
Number
24,312,576
5,785,710
5,661,194
5,000,000
3,781,579
3,500,000
3,445,119
3,214,286
3,157,895
2,974,999
2,695,000
2,631,579
2,631,579
2,631,578
2,571,429
2,500,000
2,494,132
2,492,525
2,324,898
2,000,000
%
11.03%
2.62%
2.57%
2.27%
1.71%
1.59%
1.56%
1.46%
1.43%
1.35%
1.22%
1.19%
1.19%
1.19%
1.17%
1.13%
1.13%
1.13%
1.05%
0.91%
Total Top 20
85,806,078
38.90%
Distribution of Listed Options
The distribution of members and their option holding was as follows:
Number Held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Number of Shareholders
119
424
250
684
301
Total number of shareholders
1,778
81
2018 LEPIDICO ANNUAL REPORT UNLISTED OPTIONS
Unlisted Option holdings as at 11 October 2018
The company has 110,000,000 unlisted options with varying expiry and exercise price on issue.
5,000,000 options expiring 8 November 2019 with an exercise price of 1.5c (“A”), all of which were issued to the underwriter
pursuant to the Entitlement Prospectus dated 10 October 2017.
42,500,000 options expiring 31 December 2019 with an exercise price of 2.5c (“B’), which were issued to the Company’s
Directors.
12,500,000 options expiring 31 December 2019 with an exercise price of 2.5c (“C”), which were issued under the Company
Employee Share Plan.
40,000,000 options expiring 23 November 2020 with an exercise price of 9.1c (“D’), which were issued to the Company’s
Directors.
10,000,000 options expiring 23 November 2020 with an exercise price of 9.1c (“E”), which were issued under the Company
Employee Share Plan.
1 – 1,000
1,001 – 5,000
5,001 – 10,000
101,000 and above
Total number of holders
A
-
-
-
1
1
B
-
-
-
4
4
C
-
-
-
1
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VOTING RIGHTS
Lepidico Ltd ordinary shares carry voting rights of one vote per share. There are no voting rights attaching to any other class
of security.
UNMARKETABLE PARCELS
Minimum $500.00 parcel at $0.019 per share
Minimum Parcel Size
26,315
Holders
2,981
Shares
28,183,416
RESTRICTED AND ESCROWED SECURITIES
3,647,768 shares are currently held under voluntary escrow until completion of the engineering work for the Phase 1 L-Max®
Plant Feasibility Study.
ON-MARKET BUY-BACK
There is no current on-market buy-back.
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2018 LEPIDICO ANNUAL REPORT
TENEMENT INFORMATION
AUSTRALIAN OPERATIONS
The Company currently holds interests in tenements as set out below.
Farm-in Agreements
Project/
Tenement ID
Youanmi Lepidolite
Project (E57/983)
Youanmi, WA
Registered Holder
Venus Metals Corporation Limited
Lepidico Interest in
tenement
Earning up to
80% of lithium
pegmatite rights
Expiry Date
Area
3 February 2020
29 blocks
* Mica Exploration Areas Pty Ltd is a wholly owned subsidiary of the Company
2018 LEPIDICO ANNUAL REPORT
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2018 LEPIDICO ANNUAL REPORT
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www.lepidico.com