2019 Annual Report FOUNDATIONS FOR A FULLY INTEGRATED BUSINESS DIRECTORSGary Johnson (Non-Executive Chairman)Julian (Joe) Walsh (Managing Director)Tom Dukovcic (Geology Director)Mark Rodda (Non-Executive Director)Cynthia Thomas (Non-Executive Director)Brian Talbot (Non-Executive Director)JOINT COMPANY SECRETARIESAlex NeulingShontel NorgateREGISTERED OFFICE23 Belmont AvenueBelmont, WA, Australia, 6104 Telephone: +61 (0)8 9363 7800 Facsimile: +61 (0)8 9363 7801Email: info@lepidico.comPRINCIPAL PLACES OF BUSINESS23 Belmont AvenueBelmont, WA, Australia, 6104 PO Box 330 Belmont WA 6984 Suite 200, 55 University AvenueToronto, ON, M5J 2H7, CanadaWebsite: www.lepidico.com COUNTRY OF INCORPORATIONAustraliaLEPIDICO LTDABN: 99 008 894 442AUDITORSMoore Stephens Chartered AccountantsLevel 15, Exchange Tower2 The EsplanadePERTH WA 6000 Telephone: (08) 9225 5355Facsimile: (08) 9225 6181SHARE REGISTRYSecurity Transfer Australia Pty LtdSuite 913, Exchange Tower530 Little Collins StreetMELBOURNE VIC 3000PO Box 52 Collins Street West VIC 8007 Telephone: 1300 992 916Facsimile: (08) 9315 2233Email: registrar@securitytransfer.com.auHOME EXCHANGEAustralian Securities Exchange LimitedExchange Plaza2 The EsplanadePERTH WA 6000ASX CODE: LPDCORPORATEDIRECTORY CONTENTS
2019 HIGHLIGHTS
CHAIRMAN’S AND MANAGING DIRECTOR’S LETTER
LITHIUM INDUSTRY AND MARKET
TECHNOLOGY
BUSINESS DEVELOPMENT
PROJECTS
EXPLORATION
SUSTAINABLE DEVELOPMENT
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
FINANCIAL REPORT
DIRECTORS’ REPORT
INDEPENDENT AUDITOR’S REPORT
ASX ADDITIONAL INFORMATION
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2019 LEPIDICO ANNUAL REPORT
1
DRIVING
INNOVATION.
FROM MINE
TO LITHIUM
CHEMICAL.
2
2019 LEPIDICO ANNUAL REPORT
2019 HIGHLIGHTS
The year was incident free, continuing Lepidico’s zero-harm health,
safety and environment track-record since records began in
September 2016.
The Karibib Lithium Project in Namibia was acquired following the
successful off-market takeover of Desert Lion Energy Inc., giving
an 80% interest in Mineral Resources of 8.8 million tonnes grading
0.56% Li2O within a granted 68km2 Mining Licence.
In addition, the Karibib Lithium Project includes four granted
exploration tenements encompassing 1,054km2 of the prospective
Karibib Pegmatite Belt.
Global Mineral Resource tonnes at Alvarrões increased by 290% and
contained lithium rose by approximately 210%, versus the previous
estimate. The JORC 2012 Mineral Resource is estimated at 5.87Mt @
0.87% Li2O in Indicated and Inferred categories.
High purity lithium hydroxide was produced using a new proprietary
process, LOH-Max™, over which Lepidico has entered into a
worldwide exclusivity arrangement.
Considerable capital and operating cost savings were identified
associated with the integration of LOH-Max™ into the Phase 1
Plant design.
A Memorandum of Understanding was entered into with Gulf Fluor
LLC for: 1) the supply of sulphuric acid; 2) provision of land to
construct the Phase 1 Plant Project; and 3) the marketing of Phase 1
Plant by-products to be sold within the United Arab Emirates region.
Phase 1 Plant Feasibility Study design was adapted for lithium
hydroxide production, employing LOH-Max™ technology and for
location in Abu Dhabi, with engineering on-track for completion in
the December 2019 quarter.
Mine and concentrator design work commenced for both Karibib
and Alvarrões, to allow inaugural Ore Reserves to be estimated for
both Projects in fiscal year 2020.
The design and construct phase of the L-Max® Pilot Plant was
completed on schedule and within budget before contingency. The
continuous operation phase for Campaign 1 completed in July 2019,
verifying the L-Max® process chemistry.
Preliminary assessment of L-Max® residue as a land reclamation
product completed with promising results that indicate the material
should be viable for industrial applications, with the objective of the
Phase 1 Chemical Plant being a zero-waste facility.
National patent applications for the L-Max® technology progressed in
key strategic jurisdictions with first patent granted in the USA and a
provisional patent application was lodged for LOH-Max™.
Equity issues for advancing Lepidico’s process technologies and
studies, and acquiring lepidolite Mineral Resources successfully raised
gross proceeds of over $19 million in two over-subscribed offerings.
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.
2019 LEPIDICO ANNUAL REPORT
3
CHAIRMAN’S
AND
MANAGING
DIRECTOR’S
LETTER
The 2019 year was transformational for Lepidico.
Acquisition of its first directly owned lepidolite
Mineral Resource at Karibib, development of a new
proprietary process technology for the production
of lithium hydroxide and the successful piloting of
L-Max® represent huge advancements in Lepidico’s
strategy to become a globally significant lithium
chemical producer.
Market conditions for both lithium chemical
prices and lithium equities continued to be weak
throughout fiscal 2019. Despite this Lepidico
successfully raised over $19 million, mainly
due to the overwhelming support that eligible
shareholders continue to show the Company.
Proceeds from these issues were deployed to
acquire the Karibib Lithium Project in Namibia,
build and operate an L-Max® Pilot Plant and to fund
the expanded Feasibility Study for its vertically
integrated Phase 1 mine, concentrator and chemical
plant Project.
In order to take advantage of new value add
opportunities Lepidico had to strike a balance
between business flexibility and locking down the
scope for the Phase 1 Project Feasibility Study.
This meant that the timing to complete the Study
needed to be extended to accommodate the
newly developed LOH-Max™ lithium hydroxide
technology, as well as the integration of the Karibib
Lithium Project as a lepidolite concentrate feed
source. Both these opportunities are expected
to enhance the economics and sustainability
characteristics of the Project when complete.
Electric vehicle manufacturers have in recent years
progressively moved towards higher nickel content
lithium-ion battery cathodes, which require lithium
hydroxide in their manufacture rather than lithium
carbonate. As a result most new lithium chemical
projects that were financed in 2018 and into 2019
are designed to produce lithium hydroxide.
Also, most hard rock lithium conversion processes
employ sulphur based chemistries that result
in a sodium sulphate by-product, irrespective
of the lithium chemical produced. The sodium
sulphate market is mature, yet supply is set to rise
dramatically as new hard rock sourced lithium
chemical capacity comes on stream over the next
ten or more years.
These two trends led Lepidico to seek an
alternative process for making more sought after
lithium hydroxide without a sodium sulphate by-
product. In early 2019 the LOH-Max™ process was
developed, which achieves this dual objective. As
part of Lepidico’s Phase 1 Plant Feasibility Study,
cost comparisons were conducted for LOH-Max™
versus the industry conventional process step to
convert lithium sulphate to either lithium carbonate
(employed by L-Max®) or lithium hydroxide. This
work indicates that material reductions in both
capital cost and operating cost should be achieved
using LOH-Max™ Lepidico has the right to use
LOH-Max™ and sole rights for marketing the
technology to third parties worldwide, in exchange
for funding its development.
Short logistics routes, affordable supply of key
consumables, established local markets for L-Max®
by-products and streamlined permitting processes
are important elements in the evaluation of a
strategic location for a lithium conversion plant. In
fiscal 2019 study work identified the United Arab
Emirates as having all of these attributes and more,
making it a favourable location for an L-Max®-LOH-
Max™ plant.
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2019 LEPIDICO ANNUAL REPORT
Subsequently, Lepidico entered into a
Memorandum of Understanding with Abu Dhabi
based Gulf Fluor LLC, the largest manufacturer
of sulphuric acid in the region. The Phase 1 Plant
Feasibility Study is now evaluating the building
of the chemical conversion plant adjacent to
Gulf Fluor’s facilities, allowing acid to be piped
directly to the L-Max® plant, thereby negating the
requirement for trucking. Gulf Fluor is also well
placed to support Lepidico in the marketing of
sulphate of potash and amorphous silica
by-products.
Since inception Lepidico’s business strategy has
acknowledged the merits of a vertically integrated
business, with quality lithium mica concentrate
feed sourced from a majority owned and Lepidico
operated upstream asset. The Rubicon and
Helikon deposits, situated within the Karibib Mining
Licence area, host JORC Code compliant lepidolite-
rich Mineral Resources that have been evaluated
as being capable of providing concentrate feed to
Lepidico’s planned Phase 1 Plant for approximately
14 years. Mineralisation outcrops at surface, which
should allow for a favourable strip ratio in the early
years of operation. Importantly these deposits
are covered by a granted Mining Licence for the
development of both mines and a concentrator,
allowing for rapid development. These deposits
have yet to be closed off by drilling and represent
excellent targets for expanding the Mineral
Resource base to support Lepidico’s growth
ambitions. Furthermore, numerous pegmatite
occurrences have been identified within the larger
1,054km2 land package, which will become the
focus of a regional exploration programme for its
lepidolite mica potential in fiscal 2020.
To become a globally significant lithium chemical
company a series of projects will be required,
in part to diversify business risk. The Alvarrões
Lepidolite Mine in Portugal represents an
opportunity for a separate source of lepidolite
concentrate feed. To this end, a more definitive
arrangement to the current ore offtake agreement
between Lepidico and Grupo Mota is being
developed, with the intention of providing a
sustainable framework for operations. Drilling at
Alvarrões met with considerable success this past
year, as Mineral Resource tonnes increased by
290% and contained lithium rose by approximately
210%, versus the previous estimate. Mining
studies are now focused on a modest scale open
pit operation complemented by underground
extraction of a newly discovered, deeper lepidolite-
rich pegmatite sill.
Another major achievement in fiscal 2019 was
the successful development of the L Max® pilot
plant, which was completed on schedule and
within budget before contingency. The continuous
operation phase for Campaign 1 on lepidolite
concentrate sourced from Alvarrões completed
in July 2019. The Campaign had to be adapted
from the original plan in order to stockpile lithium
sulphate intermediate as a feed source for the
planned LOH-MaxTM pilot plant circuit that is
scheduled to be constructed in the first half of
fiscal 2020. Importantly Campaign 1 confirmed
the chemistry underlying the L-Max® process
through to production of high purity lithium
carbonate, thereby achieving its primary objective.
Furthermore, average lithium extraction of 94%
to lithium sulphate was realised, an excellent
result, and opportunities for improvements were
also identified.
By-product SOP fertiliser and amorphous silica
were successfully produced from the pilot
plant providing the first samples for testing by
prospective customers. Of particular note, high
purity SOP grading 52.2% K2O was produced.
Research and development testwork is also
planned to manufacture a range of caesium and
rubidium products from one of the pilot plant
streams, for market evaluation.
Looking forward, priorities for fiscal 2020 are to
complete the integrated mine, concentrator and
chemical plant Phase 1 Project Feasibility Study, as
well as secure product offtake commitments and
financing for development. Considerable advances
have already been made in the permitting and
approvals required in Namibia and Abu Dhabi, and
other preparatory work that includes business
systems development will continue to transition the
business to construction.
We are committed to developing a sustainable
business that makes quality products for the
needs of the twenty first century. Implicit in this
are industry best practice protocols in the areas of
health, safety, the environment, human resources,
sustainability, and stakeholder engagement.
Lepidico is also striving to be an industry leader
in minimising waste generation and emissions,
with the objective of the Phase 1 chemical plant
ultimately being a zero-waste facility and the
Company’s mines not requiring dedicated tailings
storage facilities.
Finally, we thank shareholders for another year of
tremendous support on our quest to build a new
vertically integrated lithium chemical company
fuelled by non-traditional minerals.
Yours Faithfully
Gary Johnson, Chairman and Joe Walsh Managing Director
2019 LEPIDICO ANNUAL REPORT
5
LITHIUM INDUSTRY
AND MARKET
Review
Lithium chemical prices posted cycle highs on the back of strong demand growth during the
first half of the 2018 calendar year. Since then chemical prices have declined on the back of
new sources of supply coming on stream and concerns that electric vehicle purchase incentives,
particularly in China were being withdrawn. Lithium equity prices have suffered as a result and
Lepidico’s share price has not been immune. Lithium chemical price stabilisation is seen in
fiscal 2020 as margins for higher-cost converters in China come under pressure and incumbent
producers exercise growth discipline, evidenced by the deferral of many expansion plans.
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Lepidico
Share Price
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Outlook
Lithium is expected to remain an essential element for most battery formats used in both electric
vehicles and energy storage systems, for the foreseeable future. This, coupled with predictions
that electric vehicle adoption will broaden geographically and continue to accelerate globally
underpins many industry forecasts that annual lithium demand will rise to around one million
tonnes by 2025-26. Such demand growth will require numerous sources of new lithium supply
with compelling associated economics to be identified, evaluated, permitted, financed and brought
into production. Lepidico continues to navigate this path with the strategic objective of becoming
a sustainable integrated producer through the lithium chemical supply chain.
Supply
Lithium as an element is abundant. However, it is clear that not all lithium occurrences are equal
and the identification of lithium deposits of sufficient scale, concentration and quality to support
the delineation of economic mineral resources suitable for the production of battery grade
chemicals has considerable lead time and challenges. Be it brine or spodumene, most sources of
new supply over the past ten years were committed to when lithium prices were in the ascendant
and an incentive price prevailed.
6
2019 LEPIDICO ANNUAL REPORT
DEMAND FUNDAMENTS
REMAIN SUPPORTIVE
FOR SIGNIFICANTLY
HIGHER LITHIUM
CHEMICAL PRICES
IN THE EARLY 2020’S
TO INCENTIVISE NEW
SUPPLY GROWTH.
One lithium commentator believes that 90% of the price weakness in
calendar 2018 was in response to the new supply from the hard rock
producers that recently started up in Australia. As these operations
continued to ramp-up into calendar 2019 supply again increased faster than
demand. However, weaker lithium chemical prices have led to several large
scale new spodumene and conversion plant projects being deferred, and
many expansion plans postponed.
It is evident that lithium project developers and their financiers will need
confidence from the belief that the lithium price cycle has indeed turned back
up before committing to new projects. This will envitiably lead to a paucity of
future new supply just when demand growth once again accelerates.
Demand
Lithium chemical demand rose to an estimated 269,000 tonnes in calendar
2018, up 15% versus the previous year, on the back of a 64% jump in global
Electric Vehicle (EV) sales, which breached 2 million units for the first time. EV
adoption is in its infancy with sales positioned at the early stage of the S-curve
pattern for innovation. The small number of EV models available, particularly
in Europe and North America has to date limited consumer take-up. Here
however, the automotive industry is on the cusp of change, with at least twenty
new electric models planned to roll-off production lines in calendar 2019 and a
raft of further new model offerings in 2020.
Many battery materials commentators forecast that the demand outlook for
lithium chemicals is exceptionally strong and that annual demand will breach
one million tonnes of lithium carbonate equivalent (LCE) by 2025. The major auto manufacturers will
fuel this demand; Ford plans to have 40 hybrid and EV models and Renault 12 EV models by 2022,
GM 20 EV models by 2023 and VW expects to have developed 80 EV models by 2025. Many other
manufacturers have similar aspirations and Chinese autos are expected to comply with a 20% EV
penetration rate ruling by 2025. Such choice will undoubtably lead to greater consumer adoption of
the EV.
New developments in mobile batteries should continue to rely on the unique properties of lithium
and its chemical salts. Solid state batteries are seen as the most likely next generation technology,
which should deliver superior charge density and employ a lithium metal anode as well as a lithium
chemical based cathode.
Small, fast growing markets tend to exhibit amplified boom-bust cycles, evidenced by the sharp
lithium chemical price correction experienced since early calendar 2018, which in large part was in
anticipation that the market would transition into surplus. However, many industry commentators
and producers continue to predict that lithium chemical demand will continue to have a compound
annual growth rate of between 16% and 18% to 2030, with lithium-ion batteries accounting for the
majority of this growth. Such growth coupled with continued constraint in new supply shown by
incumbent producers is predicted to transition the lithium market back into deficit in the early
2020’s. Lepidico is well positioned to have its Phase 1 Project feasibility study complete for when
lithium market fundaments again become supportive for new developments.
2019 LEPIDICO ANNUAL REPORT
7
TECHNOLOGY
Central to Lepidico’s strategy to become a globally significant lithium chemical producer are its
proprietary process technologies. In fiscal 2019 LOH-MaxTM was added to the technology suite;
a hydrometallurgical solution for producing lithium hydroxide from intermediate lithium sulphate
without generating by-product sodium sulphate.
Why Lithium Hydroxide?
Feedback from a number of lithium chemical consumers revealed that they now favour lithium
hydroxide rather than lithium carbonate for their products. Furthermore, most new lithium projects
that were financed in calendar 2018 are designed to produce lithium hydroxide. These, amongst
other factors led Lepidico to evaluate the process technology developed by the owners of Strategic
Metallurgy for producing lithium hydroxide directly from lithium sulphate, an intermediate product
of Lepidico’s proprietary L-Max® process. Lithium carbonate however, is expected to continue to be
used extensively within the industry and as such Lepidico will continue to evaluate new cost effective
lithium carbonate processes that do not result in by-product sodium sulphate, as part of its research
and development activities.
Why avoid producing sodium sulphate?
Much of the world’s new lithium chemical capacity, both committed and under study, sourced
from either hard rock or sedimentary hosted deposits, employ sulphur based process chemistries
that result in a sodium sulphate by-product. The sodium sulphate market is mature with annual
demand growth estimated at just over 1% over the next five years, with most of this growth in China.
Demand in many other parts of the world is in decline, in large part due to the shift from powdered
to liquid detergents, and demand for pulp and paper waning. Worryingly, against this backdrop
global sodium sulphate supply is set to rise significantly as new lithium chemical capacity comes
on stream over the next decade. A risk assessment for Lepidico’s Phase 1 Plant Project identified
sodium sulphate as a material exposure should demand growth remain stagnant and global
production materially increase, thereby necessitating a contingency disposal method be found.
This led Lepidico to seek alternative process routes to making lithium chemicals from the L-Max®
intermediate product, lithium sulphate.
Why LOH-MaxTM?
LOH-MaxTM provides an elegant solution to produce lithium hydroxide from lithium sulphate, using
conventional industrial equipment and without the production of sodium sulphate. As part of
Lepidico’s Phase 1 Plant Feasibility Study, cost comparisons were conducted for LOH-MaxTM versus the
industry conventional process step to convert lithium sulphate to either lithium carbonate or lithium
hydroxide. This work indicates that material reductions in both capital cost and operating cost should
be achieved using LOH-MaxTM. Such cost advantages mean that LOH-MaxTM has application in the
final processing of a broad range of lithium concentrates from hard rock sources including spodumene
and sedimentary hosted deposits. Accordingly, Lepidico sees opportunity for licensing this process
technology to a growing number of lithium chemical producers.
The LOH-MaxTM technology is held within a special purpose vehicle owned by the principals of
Strategic Metallurgy that developed the process. A provisional patent application for this process was
filed in February 2019 with the Australia Patent Office. Lepidico has entered into a worldwide, binding
exclusivity arrangement for LOH-MaxTM in exchange for it funding the development of the process.
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2019 LEPIDICO ANNUAL REPORT
L-Max®
L-Max® continues to be the core process technology to Lepidico’s
development plans and is compatible with the company’s other processes
including LOH-MaxTM. L-Max® is owned 100% by the Lepidico 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.
L-Max® leaches lithium from non-conventional and relatively uncontested
mineral sources; lithium micas and phosphates, and achieves high extraction
rates. The process utilises common use, inexpensive reagents, is energy
efficient and utilises conventional equipment operated at atmospheric
pressure and modest temperature; and has straightforward occupational
health and safety, and environmental characteristics. L-Max® by-products:
include potassium sulphate fertiliser (SOP), amorphous silica and potentially
tantalum, tin, caesium and rubidium. Finally, L-Max® is a sustainable process,
as steam is the only material emission and the gypsum rich benign process
residue is being evaluated as an environmental remediation product.
S-Max™
A provisional patent application was lodged for S-Max™ in May 2018. S-Max™
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™ is compatible with L-Max® in
that it can replace the initial direct leach process step.
RESEARCH AND
DEVELOPMENT ARE CORE
TENANTS OF LEPIDICO’S
STRATEGY THAT WILL
ENABLE IT TO MAINTAIN
A COMPETITIVE EDGE.
2019 LEPIDICO ANNUAL REPORT
9
102019 LEPIDICO ANNUAL REPORTL-Max® Pilot PlantMajor advances in the L-Max® process were achieved in fiscal 2019 with the development and operation of a pilot plant capable of processing 15 kilograms per hour of lepidolite concentrate feed, a ten-fold increase from the mini-plant trial undertaken in 2016. Importantly the pilot plant employs small scale industrial equipment versus the mini-plant, which relied on predominantly laboratory equipment. Scale-up from the pilot plant to the planned Phase 1 Plant, that is designed to process 6.9 tonnes per hour of lepidolite concentrate is a manageable 460 times. The pilot plant design and construct phase was delivered on schedule and within the budget of $2.6 million before contingency. Importantly, the Project was completed lost time incident free. After a seven week commissioning, Campaign 1 commenced on lepidolite concentrate feed sourced from the Alvarrões mine in Portugal. This Campaign lasted for 10-days of continuous operation and was modified to allow stockpiling of lithium sulphate, to accommodate a subsequent trial of a planned retrofitted LOH-MaxTM circuit. Campaign 1 produced excellent results based on assay received. These data confirmed the chemistry underlying the L-Max® process and support the Phase 1 Plant design parameters, including an average lithium recovery of more than 90% to the intermediate product liquor. Process optimisation, including improved process control capabilities are expected to lead to higher future recoveries. A proportion of the stockpiled lithium sulphate liquor was successfully processed to a high purity lithium carbonate of 99.9%. SOP fertiliser of more than 96% purity was produced from Campaign 1, equivalent to 52.2% K2O, a high purity product. The results also confirm the design parameters for the SOP recovery circuit in the Phase 1 Plant. The rubidium and caesium rich sulphate by-product from the potassium sulphate crystalliser was stockpiled for research and development work during fiscal 2020. Development work is also planned on the amorphous silica rich leach residue from Campaign 1, along with the aggregated impurity removal residue streams which will be assessed as a potential landfill remediation product (see Sustainable Development).BUSINESS DEVELOPMENTPILOT PLANT PRODUCED HIGH PURITY LITHIUM CARBONATE GRADING 99.9%MINEFELDSPAR CONCENTRATELOCALMARKETORECONCENTRATORLEPIDOLITECONCENTRATE› 112019 LEPIDICO ANNUAL REPORTLOH-MaxTM capability and Campaign 2Design of a LOH-Max™ pilot plant circuit was completed in late fiscal 2019. It is planned that LOH-MaxTM capability will be retro-fitted in early fiscal 2020 for larger batch lithium hydroxide trials using stockpiled lithium sulphate feed from Campaign 1. Data generated from Campaign 1 and the LOH-MaxTM batch test will be used to optimise the pilot plant, including the S-MaxTM leach and L-Max® impurity removal circuits, ahead of the next campaign.Drilling at Karibib is planned to generate improved understanding of the Rubicon and Helikon 1 deposits, allowing representative mineralisation samples to be taken mid-fiscal 2020 for concentration to generate lepidolite feed for a planned pilot plant Campaign 2. Campaign 2 will generate lithium hydroxide and certain by-product samples, which are planned to be used for the first stages of product qualification.TRANSPORT TO CHEMICAL PLANTL-MAX®& LOH-Max™PROCESSINGSULPHURIC ACIDLIMESTEAMLITHIUM HYDROXIDE &/OR LITHIUM CARBONATEAMORPHOUSSILICASOP(FERTILIZER)OTHERBY-PRODUCTSRESIDUEPRODUCT Other Research & Development
Caesium and rubidium were selectively concentrated into two separate product streams, including
a caesium rich brine, which has potential application in the oil and gas industry. This work led to a
provisional patent application being lodged for the associated hydro-metallurgical process. Further
development activities are planned in early fiscal 2020 as larger caesium-rubidium samples became
available from the first pilot plant campaign. The objective is to develop another by-product stream
from the processing of lepidolite concentrates.
Work was completed in January 2019 by the Department of Earth and Environmental Sciences
at the University of Waterloo in Ontario to characterise the blended residue streams from the
L-Max® process and assess this material as a potential product for the environmental reclamation
of industrial and/or city landfill sites. Encouraging results were received that indicate the material
should be viable for industrial applications. Growth trials were performed using the residue blended
with various proportions of nutrients including soil and peat, providing further promising results.
Follow up work programmes are planned on samples generated from the pilot plant for application
in Abu Dhabi. Assuming the land reclamation residue project is successful, the need to have a
dedicated residue storage on site may be eliminated, thereby making the Phase 1 Plant a “zero
waste” facility, and result in additional capital and operating cost savings.
Phase 2 Plant Scoping Study
To become a globally significant producer, a larger lithium chemical conversion facility will be
required to that envisaged in the Phase 1 Plant design. To this end, Lepidico continued scoping
study activities during fiscal 2019 for a Phase 2 Plant. This work included continued optimal location
studies, which identified Abu Dhabi as a favourable setting for a plant. Work in fiscal 2020 will
capture valuable data from the Phase 1 Plant Feasibility Study, which is expected to allow Phase 2
scale alternatives to be assessed. The scoping study remains a longer term initiative to ultimately
provide Lepidico with a project pipeline.
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2019 LEPIDICO ANNUAL REPORT
PROJECTS
Phase 1 Feasibility Study
The flowsheet for a Phase 1 chemical plant in L-Max® configuration was finalised in August 2018,
incorporating the findings from a major equipment vendor testwork programme. This allowed
Lycopodium Minerals Pty Ltd (“Lycopodium”) to undertake the engineering for the Phase 1 L-Max®
chemical conversion plant, based on a nominal concentrate throughput rate of approximately 6.9
tonnes per hour (tph), which it completed on schedule in December 2018.
Two opportunities were subsequently identified during the review of the engineered design that
could materially enhance the economics of the Project: 1) production of lithium hydroxide using
LOH-MaxTM (see Technology Section of this report); and 2) locating the plant in Abu Dhabi as
an alternative to Sudbury, Canada. Lycopodium started work on the additional engineering to
accommodate these scope changes in July 2019.
In May 2019 Lepidico entered into a non-binding Memorandum of Understanding with Gulf Fluor
LLC (“Gulf Fluor”) – an established Abu Dhabi based industrial chemicals company – for: 1) the
supply of sulphuric acid; 2) provision of land to construct the Phase 1 Plant Project; and 3) the
marketing of Phase 1 Plant by-products for sale in the region.
Gulf Fluor has sulphuric acid production capacity of 140,000 tonnes per annum (tpa), along
with hydrogen fluoride and aluminium fluoride plants. Gulf Fluor’s facilities are located within the
Industrial City of Abu Dhabi (ICAD), just 30km from the heart of Abu Dhabi and in close proximity to
some of the world’s largest aluminium producers.
2019 LEPIDICO ANNUAL REPORT
13
Material capital and operating cost benefits have been identified associated
with developing the Phase 1 conversion plant at ICAD and a separate study
has revealed that local markets exist for L-Max® and S-Max® by-products.
Logistics costs for shipping concentrate from both Namibia and Portugal to
ICAD are estimated to be lower than to Sudbury. Gas, labour and the cost of
certain consumables have also been identified as being lower at ICAD. Finally,
ICAD promotes a “plug and play” philosophy for new developments, allowing
for rapid permitting and approvals. This is, in part afforded by having world
class established infrastructure, including power, gas, water and developed
roads, storage and logistic hubs that have quick and easy access to multiple
ports and airports.
Environmental consultant GHD Global Pty Ltd (“GHD”) was appointed in July
2019 to manage the environmental approval process in Abu Dhabi for the
development of the Phase 1 conversion plant and secure all relevant permits
to construct. This process is expected to complete in 4 to 6 months. Following
on from the work undertaken by the University of Waterloo in Ontario on
evaluating the L-Max® residues as a potential product for landfill reclamation,
GHD is also tasked with identifying technically sound solutions for the
processing and use of the residue-products within the UAE, along with fall
back solutions for disposal. Ultimately, the objective of this work continues to
be for the Phase 1 Plant to become a zero-waste facility.
Key results for the integrated Phase 1 Project Feasibility Study are scheduled
to become available late in the March 2020 quarter. This will incorporate
mine and concentrator designs for the Karibib Lithium Project, following a
planned intensive drill programme intended to upgrade the Mineral Resource;
a new mine plan for Alvarrões based on the significant April 2019 Mineral
Resource upgrade; and the re-engineered Phase 1 lithium hydroxide chemical
plant designs for ICAD. This strategy will provide optionality for the selection
of a low permitting risk development scenario, coupled with considerable
expansion potential.
14
2019 LEPIDICO ANNUAL REPORT
Karibib Lithium Project (80% Lepidico)
Lepidico acquired the Karibib Lithium Project in July 2019 on closing of the plan of arrangement for
the takeover of former TSX-V listed Desert Lion Energy Inc. Within the large exploration package
is a 68km2 Mining Licence (ML) area, awarded for 10 years in 2018 for the re-development of mines
at Rubicon and Helikon and the development of a flotation plant to produce lepidolite concentrate.
Accordingly, permitting for this upstream component of the Phase 1 Project is largely resolved,
providing an opportunity to rapidly transition the project to implementation.
The Rubicon and Helikon deposits, located approximately 17km outside of the town of Karbib and
within the ML, were mined at various times during the twentieth century, primarily for petalite with
some tantalite, quartz and minor lepidolite. More than 8.0 million tonnes of Mineral Resources have
been estimated at three deposits, Rubicon, Helikon 1 and Helikon 4. An intensive drill programme
started in July 2019 at Rubicon and Helikon 1 with the objective of upgrading the Mineral Resources
at these deposits to Measured and Indicated categories and allow a maiden Ore Reserve to be
estimated to support a Phase 1 Project.
Mineralisation at Rubicon and Helikon outcrops at surface and previous mining for petalite has
partially stripped the high-grade lepidolite zones at both deposits. As such, preliminary mining
studies indicate that the strip ratio should be less than 1 to 1 in the early years of production. Due
diligence also indicated the Karibib Lithium Project could provide feed to Lepidico’s planned Phase
1 Plant for approximately 14 years, based on the current Mineral Resources base. L-Max® amenability
testwork, undertaken on a sample of Karibib lepidolite mineralisation returned excellent results, with
a lithium extraction of 94% from concentrate and production of lithium carbonate with 99.8% purity.
Design of a 300,000 tonne per year concentrator capable of producing 60,000 tonnes of lepidolite
concentrate grading approximately 4.0% Li2O is scheduled for completion in the March quarter
2020. It is envisaged that concentrate from Karibib will be exported to the Phase 1 chemical
conversion plant in Abu Dhabi.
2019 LEPIDICO ANNUAL REPORT
15
Alvarrões Lepidolite Mine
Lepidico entered into an ore offtake agreement with Mota Ceramic Solutions (“MCS”), operator of
the Alvarrões lepidolite mine, in fiscal 2017 with a three year exclusivity period. A more definitive
arrangement for expanding Alvarrões to produce a lepidolite concentrate is being developed
between MCS and Lepidico, with the intention of providing a sustainable framework for operations.
Alvarrões, located in Gonçalo, Portugal has been in operation since 1992, producing a lepidolite-
feldspar material for use in the ceramics industry. Significant increases in the Mineral Resource
tonnes, in large part due to the identification of a new pegmatite at depth, Sill P, necessitated a
reassessment of the mine development plan for Alvarrões in late fiscal 2019 (see Mineral Resource
and Exploration Section).
Studies for a small open pit mine to extract the near surface mineralised sills along with an
underground mine for Sill P are ongoing. An annual ore mining rate of up to 200,000 tonnes
per year is now contemplated. It is planned that the mined ore will be processed on site by a
new flotation plant with nominal annual output of 60,000 tonnes of lepidolite concentrate. The
concentrate is to be containerised and transported to port for shipping to Abu Dhabi. An inaugural
Alvarrões Ore Reserve estimate is now scheduled for completion in the December 2019 quarter.
Permits and approvals represent the critical path for the further development of Alvarrões.
16
2019 LEPIDICO ANNUAL REPORT
MINERAL RESOURCES &
EXPLORATION OVERVIEW
Karibib Lithium Project
The Karibib Lithium Project comprises four granted tenements encompassing 1,054km2 of the
Karibib Pegmatite Belt in central Namibia, a major regional intrusive zone of LCT-type (lithium
caesium tantalum) pegmatites.
The project itself contains numerous highly fractionated LCT-type pegmatites in which the dominant
lithium minerals are lepidolite, lithium-mica and petalite, with minor cookeite, and trace amblygonite
and spodumene. A number of the pegmatites have been mined since the 1930’s for beryl, tantalite
and petalite for use in the ceramics industry. The largest of the known lepidolite-rich deposits occur
at Rubicon and Helikon.
Mineral Resources include the Rubicon pegmatite and five pegmatites in the Helikon field (Helikon
1 – 5) located 7km to the north. All these Resources are located within the granted Mining Licence
(ML 204).
The Mineral Resource estimate is based on an extensive programme of work completed between
2016 and 2018 that includes data from 264 diamond core and RC drill holes, totalling 20,400 metres.
The estimate is derived from modelling of lepidolite-dominant mineralised zones (1m to 24m thick)
within much larger quartz-feldspar pegmatites ranging up to approximately 70m in thickness.
The largest deposit, Rubicon Main, is modelled to 400m down dip and 600m along strike. The
pegmatite dips to the northeast at 45˚ near surface, flattening to between 18˚ and 25˚ at depth.
A 4,700m diamond core drill programme commenced at Rubicon and Helikon 1 in July 2019, aimed
at upgrading portions of the current Mineral Resource to Measured and Indicated categories, along
with extending the mineralisation envelope in selected areas at both deposits.
Rubicon and Helikon Mineral Resource estimate (0.2% Li2(cid:15)(cid:3)(cid:31)(cid:49)(cid:48)(cid:289)(cid:43)(cid:251)(cid:297)
Deposit
Rubicon
Rubicon
Rubicon
Resource
Category
Indicated
Inferred
Helikon
Helikon 1
Inferred
Helikon 2
Helikon 3
Helikon 4
Helikon 5
Inferred
Inferred
Inferred
Inferred
Rubicon + Helikon
Indicated
Rubicon + Helikon
Inferred
Total
Total
Total
Tonnes
(cid:296)(cid:48)(cid:36)(cid:43)(cid:49)(cid:47)(cid:28)(cid:42)(cid:32)(cid:47)(cid:297)(cid:3)
3,006.9
1,600.9
2,030.0
215.6
294.7
1,510.1
179.2
3,006.9
5,830.4
8,837.3
Li2O
(cid:296)(cid:332)(cid:297)(cid:3)
0.63
0.58
0.62
0.56
0.48
0.38
0.31
0.63
0.53
0.56
Ta(cid:457)O(cid:460)
(cid:296)(cid:44)(cid:44)(cid:41)(cid:297)(cid:3)
70
67
105
180
75
47
44
70
53
59
1. The Mineral Resource is stated as at 1 October 2018.
2. The Mineral Resource is depleted by surface and underground excavations where data is available.
3. All tabulated data have been rounded and as a result minor computational differences may occur.
5. The gross Mineral Resource for the project is reported.
6. Preliminary mineralogical work has demonstrated that the lithium mineralogy is dominantly lepidolite,
which increases in proportion to other lithium bearing minerals with increasing Li2O grade.
2019 LEPIDICO ANNUAL REPORT
17
Alvarrões Lepidolite Project
The Alvarrões property comprises an extensive system of flat-lying lepidolite-bearing pegmatite sills
intruded into a granite host over an 8km by 2km corridor.
In December 2018, the Company completed a diamond drilling programme to infill and extend the
existing Inferred Mineral Resource, with 25 holes for 1,677m of core. Subsequently, an updated Mineral
Resource estimate was completed by Snowden Mining Industry Consultants Pty Ltd (“Snowden”).
Global Mineral Resource tonnes increased by 290% and contained lithium within the estimate rose
by approximately 210%, versus the previous estimate. While the global grade reduced as a result
of the inclusion of mineralised halo material, the average grade of the pegmatite mineralised units
rose modestly.
Snowden estimates a total JORC (2012) Code-compliant Indicated and Inferred Resource at
Alvarrões of 5.87Mt @ 0.87% Li2O comprising lithium mineralisation within the thicker pegmatite
sills and a 0.5m mineralised halo within the granite host rock. The pegmatites themselves represent
an Indicated and Inferred Resource of 3.9Mt @ 1.16% Li2O, with the sub-horizontal pegmatite system
remaining open in all directions.
The Mineral Resource estimate is based on the geological interpretation by Lepidico of just four
of the thicker pegmatite sills, where continuity across the deposit was established by drilling,
designated Sill M, Sill N, Sill O and Sill P, the last of which was delineated in fiscal 2019.
Alvarroes Mineral Resource estimate (0.20% Li(cid:457)(cid:15)(cid:3)(cid:31)(cid:49)(cid:48)(cid:289)(cid:43)(cid:251)(cid:297)
Pegmatite
Li2O%
0.5 m Halo
Li2O%
Total
Indicated
Inferred
Total
1.84Mt
2.06Mt
3.90Mt
1.12
1.20
1.16
0.76Mt
1.21Mt
1.97Mt
0.26
0.31
2.60 Mt @ 0.87% Li2O
3.27 Mt @ 0.87% Li2O
0.30
5.87 Mt @ 0.87% Li(cid:457)O
18
2019 LEPIDICO ANNUAL REPORT
Other exploration
The work at Karibib and Alvarrões is part of Lepidico’s Mineral Resource definition programme
to establish a multi-deposit inventory of high-quality lithium mica and lithium phosphate Mineral
Resources to provide feedstock for not just the proposed Phase 1 L-Max® Plant but also conceptual
larger-scale L-Max® plants.
Lepidico is committed to building a portfolio of quality lithium mica Mineral Resources. The Company
will continue to critically assess promising assets to support its longer term growth objectives.
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 the Karibib Lithium Project Mineral Resource estimate in Namibia is based on
information compiled by Mr Jeremy Witley, who is a fellow of The Geological Society of South Africa (GSSA) and is registered
professional with the South African Council for Natural Scientific Professions (SACNSAP). Mr Witley is the Head of Mineral
Resources at The MSA Group (Pty) Ltd (an independent consulting company). Mt Witley has sufficient experience relevant
to the style of mineralisation and the types of deposit under consideration, and to the activity he is undertaking, to qualify as
a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves.” Mr Witley 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 the Alvarrões Mineral Resource estimate is based on information compiled by John
Graindorge who is a Chartered Professional (Geology) and a Member of the Australasian Institute of Mining and Metallurgy
(MAusIMM) and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity to which he is undertaking 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”. John Graindorge is a full-time employee of
Snowden Mining Industry Consultants Pty Ltd and consents to the inclusion in the report of the matters based on this information
in the form and context in which it appears.
2019 LEPIDICO ANNUAL REPORT
19
SUSTAINABLE
DEVELOPMENT
The aim of this second sustainability report is to discuss management’s
approach to social responsibility initiatives and how these are being integrated
into a sustainable business strategy. This report is not a full sustainability report,
but rather an insight into the sustainability initiatives Lepidico is undertaking as
it transitions, from a pre-development company, into a future lithium chemical
producer.
Lepidico is committed to developing a sustainable lithium business providing high
quality products whilst minimising environmental, and social impacts. Operating
in a corporately responsible manner within a rapidly changing and challenging
global environment is embedded within our approach to strategic planning.
As a modern company that is quickly moving forward to complete the feasibility
study on the Phase 1 Lithium Project, we have embraced the opportunity to
integrate social, economic, environmental and health and safety best practices
into project design criteria while also minimising business risks.
Once the business transitions to a production footing detailed sustainability
performance data metrics will be captured from our operations and contractors.
Accordingly, we believe the appropriate timing for full sustainability disclosure
will be the year following the commissioning of the Phase 1 Project, currently
scheduled for 2021. We expect that our understanding of the material issues
will become clearer for each business unit as we progress regulatory approval
processes and gain 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 expanding 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 here our experiences to date, 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 continues to implement improvements to our Corporate Governance
system as the company grows in complexity to meet our development needs.
In fiscal 2019, we developed measurable objectives in accordance with
our Diversity Policy which is available under Corporate Governance on
the Company’s website. We also started to benchmark and track gender
diversity against our peers and we are committed to provide flexible work
and salary arrangements to accommodate family commitments, study and
self-improvement goals, cultural traditions and other personal choices of our
employees. In addition, all job descriptions and job titles were reviewed to be
more gender neutral and inclusive.
The proportion of women employed by Lepidico as at 30 June 2019 is outlined
below. These data do not include new Namibian based employees that joined the
Company effective 12 July 2019.
Non-Executive Directors
Senior Executive Positions (including Executive Directors)
Non-Management
All Employees
25%
33%
66%
40%
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2019 LEPIDICO ANNUAL REPORT
Sustainability Policy and Risk
The corporate risk register was extended in fiscal 2019 to include a residual
risk rating for all risks following the implementation of all planned actions and
controls. The risk register covers corporate, exploration, technical evaluation
and project implementation activities. Risks are based on the critical tasks
identified in the Company’s Strategic Plan with risks ranked based on their
residual risk rating. 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,
securing offtake contracts for products and project implementation risks.
A risk assessment in fiscal 2019 for Lepidico’s Phase 1 Plant identified by-
product sodium sulphate as a material exposure should demand growth
remain stagnant and global production materially increase, thereby
necessitating a contingency disposal method be found. This led Lepidico
to seek alternative process routes for making lithium chemicals from the
L-Max® intermediate, lithium sulphate and resulted in the development of the
LOH-Max™ process (see Technology Section). LOH-Max™ produces lithium
hydroxide without by-product sodium sulphate, thereby eliminating the
associated risk.
Environmental Initiatives
Partnership to Investigate Waste Re-use Opportunities: in fiscal 2019
Lepidico commissioned 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 combined residues can be used, when blended with
a nutrient such as soil or peat, as a contaminated land encapsulation and
remediation material.
Work was completed in early January 2019 by the University of Waterloo
which identified that when mixed with certain nutrients at a one to one ratio
the blended L-Max® residue has the potential to be used for the environmental
remediation of industrial and/or city landfill sites in the Sudbury region,
including mine waste and tailings facilities.
Chemical analysis, to USEPA land fill testing standards determined that the
gypsum rich (60% of solids) residue is benign and alkaline; containing 74%
moisture and having a pH of 8.5, thereby providing an acid neutralising capacity.
Furthermore, laboratory leach testwork indicated that the blended soil or clay
residue meets Ontario standards for industrial (non-potable) ground water.
Follow up work programmes are being undertaken by consultant GHD for the
Phase 1 Plant feasibility Study based on the residue being deployed in the Abu
Dhabi region. The objective of this work is for the Phase 1 Plant to become a
zero-waste facility. This may then lead to significant community environmental
benefits including, vegetation of landfill sites, a reduced Phase 1 Plant footprint,
as well as lower capital and operating costs.
Ore Concentrator Waste Minimisation: feasibility studies for both Karibib and
Alvarrões contemplate that 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). However, testwork indicates that thickened
concentrator tailings will be a benign mix of predominantly feldspar and
quartz with some residual mica, which may be co-disposed with mine waste
rock and thereby negate the requirement for a TSF. This work will continue in
fiscal 2020.
2019 LEPIDICO ANNUAL REPORT
21
Environmental Baseline Studies for the Phase 1 L-Max® Proposed Plant site: Lepidico completed
logistics trade-off studies which identified that Sudbury, Ontario and Abu Dhabi in the UAE represent
strategic locations to construct an L-Max® chemical plant. Established industrial parks in both locations
have been identified as suitable for the development. These sites are well serviced with road access
and utilities, thereby minimising the development footprint and restricting the development to land
that is already designated for industrial use.
Lepidico has commenced environmental approval processes and baseline monitoring for one site
in each location. This work is planned to be finalised in fiscal 2020 for the Abu Dhabi site, coinciding
with completion of the engineering definitive plant design studies. It is anticipated that the necessary
environmental documents supporting a development application will be able to be lodged to allow the
required permits and approvals to be granted by mid-fiscal 2020.
Carbon emissions: at the pre-development stage of its evolution Lepidico’s carbon emissions are
largely associated with air travel. The international business footprints necessitates air travel, however,
efforts are made to minimise this by employing audio-visual conferencing favouring public transport
and aggregation of business initiatives into single travel itineraries. In fiscal 2019 Lepidico generated
an estimated 285 tonnes of CO2 compared with 234 tonnes the previous year. In Toronto, Lepidico
employees exclusively use public transport for local business needs.
Stakeholder Consultation
Comprehensive consultation with Ontario and particularly Sudbury stakeholders continued during
fiscal 2019. Consultation is imperative across a wide community cross section in order that Lepidico
development and operational plans are understood, including associated risks and opportunities. A
consultation processes has also commenced in Abu Dhabi for the development of a Phase 1 lithium
chemical plant.
22
2019 LEPIDICO ANNUAL REPORT
Lithium processing is a new industry for both Sudbury and Abu Dhabi. Both cities are 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. The Company will need to select a location for the development of the Phase 1
Project but also sees opportunity to develop a possible Phase 2 Project at either location in the fullness
of time. Lepidico will continue to keep stakeholders informed as to its plans in a timely manner in all
jurisdictions in which it evaluates for possible future operations.
Stakeholder engagement in Namibia commenced following the end of fiscal 2019 and will be reported
upon in 2020.
In 2019, Lepidico further developed its operating management systems. Internal goals focus on
governance, occupational health and safety, the environment and meeting project milestones. Both
the exploration and project development groups report 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 Australian Securities Exchange (ASX). Lepidico
has established a suite of Corporate Governance documents and Charters to meet ASX standard
disclosure requirements, which are available at the Company’s website.
2019 LEPIDICO ANNUAL REPORT
23
Summary of 2019 Sustainability Outcomes
Goal
Outcome
Comments
Governance
Compliance
In compliance with all exploration licence
conditions in Portugal and Western Australia.
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
No Fatalities.
No LTI.
No MAI.
OHS Policy and OHS Management Plan.
No recordable spills at managed sites.
Sustainable Development Policy.
Environmental Baseline
Studies
Ongoing
Metallurgical Studies
Metallurgical Studies
(waste minimisation)
Ongoing
Phase 1 Plant studies continued in Sudbury and
consultant appointed in Abu Dhabi.
Preliminary review of environmental requirements
for Karibib and Alvarrões mines and
concentrators. Engagement of Knight Piesold to
commence works to meet study timelines.
Remediation of disturbed land at exploration sites
in Western Australia completed.
Initial development work completed for LOH-
MaxTM to produce lithium hydroxide without by-
product sodium sulphate.
Studies completed by University of Waterloo on
using process waste residues as a potential soil
ameliorant, which could significantly reduce or
eliminate the mass reporting to waste.
Investigation of ore concentrator waste
characteristics to identify opportunities to
co-dispose with mine waste and eliminate the
requirement for a dedicated tailings storage.
Investigation of opportunities to produce saleable
feldspar and quartz products from lepidolite ore.
Consultation with Sudbury region First Nations
representatives regarding the P1P project.
Communities
Ongoing
Consultation with Ontario and Sudbury
Government officials.
Consultation with ICAD officials in Abu Dhabi.
24
2019 LEPIDICO ANNUAL REPORT
252019 LEPIDICO ANNUAL REPORTMr Gary Johnson(cid:427)(cid:36)(cid:28)(cid:37)(cid:46)(cid:41)(cid:28)(cid:42)(cid:3)(cid:296)(cid:14)(cid:43)(cid:42)(cid:289)(cid:33)(cid:52)(cid:33)(cid:31)(cid:49)(cid:48)(cid:37)(cid:50)(cid:33)(cid:297) Qualifications - MAusIMM, MTMS, MAICDMr Johnson has over 40 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 is a principal and part owner of Strategic Metallurgy Pty Ltd, which specialises 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: NoneMr Julian “Joe” Walsh (cid:13)(cid:28)(cid:42)(cid:28)(cid:35)(cid:37)(cid:42)(cid:35)(cid:3)(cid:4)(cid:37)(cid:46)(cid:33)(cid:31)(cid:48)(cid:43)(cid:46)(cid:3)(cid:296)(cid:5)(cid:52)(cid:33)(cid:31)(cid:49)(cid:48)(cid:37)(cid:50)(cid:33)(cid:297)Qualifications - BEng, MScMr Walsh is a resources industry executive, mining engineer and geophysicist with over 30 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.Special responsibilities: Member of the Diversity CommitteeOther Current Directorships of listed public companies: NoneFormer Directorships of listed public companies in the last 3 years: NoneMr Mark Rodda Non-Executive DirectorQualifications - BA, LLBMr 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: Chair of the Remuneration and Nomination Committee Member of Audit and Risk Committee Member of the Diversity Committee Other Current Directorships of listed public companies: NoneFormer Directorships of listed public companies in the last 3 years: NoneMR GARY JOHNSONMR JOE WALSHMR MARK RODDABOARD OF DIRECTORS 262019 LEPIDICO ANNUAL REPORTMr Tom Dukovcic (cid:7)(cid:33)(cid:43)(cid:40)(cid:43)(cid:35)(cid:53)(cid:3)(cid:4)(cid:37)(cid:46)(cid:33)(cid:31)(cid:48)(cid:43)(cid:46)(cid:3)(cid:296)(cid:5)(cid:52)(cid:33)(cid:31)(cid:49)(cid:48)(cid:37)(cid:50)(cid:33)(cid:297)Qualifications - BSc(Hons), MAIG, MAICDMr 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: NoneFormer Directorships of listed public companies in the last 3 years: NoneMs Cynthia Thomas Non-Executive DirectorQualifications – B.Com, MBAMs 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 Chair of the Diversity Committee Member of the Remuneration and Nomination CommitteeOther Current Directorships of listed public companies: Executive 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 Qualifications – B.Sc Eng. (Hons)Mr Talbot is the Acting Chief Operating Officer of Galaxy Resources Ltd, which holds a 9.35% interest in the Company. He has over 25 years’ experience in mining and minerals processing operations. Prior to joining Galaxy Brian was Operations Manager 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: NoneOther Current Directorships of listed public companies: NoneFormer Directorships of listed public companies in the last 3 years: NoneMR TOM DUKOVCICMS CYNTHIA THOMASMR BRIAN TALBOT 272019 LEPIDICO ANNUAL REPORTCHIEF FINANCIAL OFFICER AND JOINT COMPANY SECRETARYMs 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 SECRETARYMr Alex Neuling Qualifications: BSc, FCA (ICAEW), FCISMr 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 Peter WalkerGeneral Manager – Business DevelopmentQualifications: BScENG, CENG, ARSMPeter Walker is a metallurgist with more than 30 yearsí 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.MANAGEMENTTEAMMS SHONTEL NORGATEMR ALEX NEULINGMR PETER WALKER CORPORATE
GOVERNANCE
STATEMENT
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(cid:33)(cid:40)(cid:33)(cid:31)(cid:48)(cid:33)(cid:32)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:48)(cid:43)(cid:3)(cid:51)(cid:36)(cid:43)(cid:41)(cid:3)(cid:48)(cid:36)(cid:33)(cid:53)(cid:3)(cid:28)(cid:46)(cid:33)(cid:3)(cid:28)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:28)(cid:30)(cid:40)(cid:33)(cid:267)
(cid:21)(cid:36)(cid:37)(cid:47)(cid:3)(cid:47)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:47)(cid:33)(cid:48)(cid:47)(cid:3)(cid:43)(cid:49)(cid:48)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:41)(cid:28)(cid:37)(cid:42)(cid:3)(cid:31)(cid:43)(cid:46)(cid:44)(cid:43)(cid:46)(cid:28)(cid:48)(cid:33)(cid:3)(cid:35)(cid:43)(cid:50)(cid:33)(cid:46)(cid:42)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)(cid:44)(cid:46)(cid:28)(cid:31)(cid:48)(cid:37)(cid:31)(cid:33)(cid:47)(cid:3)(cid:37)(cid:42)(cid:3)(cid:44)(cid:40)(cid:28)(cid:31)(cid:33)(cid:3)(cid:48)(cid:36)(cid:46)(cid:43)(cid:49)(cid:35)(cid:36)(cid:43)(cid:49)(cid:48)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:53)(cid:33)(cid:28)(cid:46)(cid:3)(cid:37)(cid:42)(cid:3)(cid:28)(cid:31)(cid:31)(cid:43)(cid:46)(cid:32)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)
(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:259)(cid:46)(cid:32)(cid:3)(cid:33)(cid:32)(cid:37)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:43)(cid:34)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:437)(cid:20)(cid:25)(cid:3)(cid:16)(cid:46)(cid:37)(cid:42)(cid:31)(cid:37)(cid:44)(cid:40)(cid:33)(cid:47)(cid:3)(cid:43)(cid:34)(cid:3)(cid:7)(cid:43)(cid:43)(cid:32)(cid:3)(cid:427)(cid:43)(cid:46)(cid:44)(cid:43)(cid:46)(cid:28)(cid:48)(cid:33)(cid:3)(cid:7)(cid:43)(cid:50)(cid:33)(cid:46)(cid:42)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:491)(cid:33)(cid:47)(cid:48)(cid:3)(cid:16)(cid:46)(cid:28)(cid:31)(cid:48)(cid:37)(cid:31)(cid:33)(cid:3)(cid:19)(cid:33)(cid:31)(cid:43)(cid:41)(cid:41)(cid:33)(cid:42)(cid:32)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:267)
(cid:21)(cid:36)(cid:37)(cid:47)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:51)(cid:28)(cid:47)(cid:3)(cid:28)(cid:44)(cid:44)(cid:46)(cid:43)(cid:50)(cid:33)(cid:32)(cid:3)(cid:30)(cid:53)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:491)(cid:43)(cid:28)(cid:46)(cid:32)(cid:3)(cid:43)(cid:34)(cid:3)(cid:4)(cid:37)(cid:46)(cid:33)(cid:31)(cid:48)(cid:43)(cid:46)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:37)(cid:47)(cid:3)(cid:31)(cid:49)(cid:46)(cid:46)(cid:33)(cid:42)(cid:48)(cid:3)(cid:28)(cid:47)(cid:3)(cid:28)(cid:48)(cid:3)(cid:25)(cid:3)(cid:15)(cid:31)(cid:48)(cid:43)(cid:30)(cid:33)(cid:46)(cid:3)(cid:258)(cid:256)(cid:257)(cid:266)(cid:267)(cid:3)
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
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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
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security holders a candidate
for election as a Director
and provide security holders
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relevant to a decision on
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re-elect a Director
1.3: A listed entity should
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(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:33)(cid:28)(cid:31)(cid:36)(cid:3)(cid:32)(cid:37)(cid:46)(cid:33)(cid:31)(cid:48)(cid:43)(cid:46)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:47)(cid:33)(cid:42)(cid:37)(cid:43)(cid:46)(cid:3)
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,
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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.
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.
28
2019 LEPIDICO ANNUAL REPORT
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LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
1.5: A listed entity should:
The Company has complied with this recommendation.
• Have a diversity policy
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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
(cid:48)(cid:43)(cid:51)(cid:28)(cid:46)(cid:32)(cid:47)(cid:3)(cid:28)(cid:31)(cid:36)(cid:37)(cid:33)(cid:50)(cid:37)(cid:42)(cid:35)(cid:3)(cid:48)(cid:36)(cid:33)(cid:41)(cid:270)(cid:3)
and
• disclose the respective
proportions of men and
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and at each level of
management and the
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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
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(cid:33)(cid:50)(cid:28)(cid:40)(cid:49)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:51)(cid:28)(cid:47)(cid:3)(cid:49)(cid:42)(cid:32)(cid:33)(cid:46)(cid:48)(cid:28)(cid:39)(cid:33)(cid:42)(cid:3)(cid:37)(cid:42)(cid:3)
(cid:28)(cid:31)(cid:31)(cid:43)(cid:46)(cid:32)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:28)(cid:3)(cid:44)(cid:46)(cid:43)(cid:31)(cid:33)(cid:47)(cid:47)(cid:267)(cid:3)
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 table below sets out the measurable objectives for the 2019 financial year and
provides details on the progress of the Company toward achieving them:
Objective
Implement a Diversity Committee
Benchmark and track gender diversity against peers
Provide flexible work and salary arrangements to accommodate family
commitments, study and self-improvement goals, cultural traditions
and other personal choices of current and potential employees.
Results
Achieved
Achieved
Achieved
Review job descriptions and job titles to be more gender neutral and
inclusive
Achieved
Gender representation
The proportion of women employed by the Company as at 30 June 2019 is listed below:
Level
Non-Executive Directors
Senior Executive Positions (including Executive Directors)
Non-Management
All Employees 1
2019
25%
33%
66%
40%
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.
1 Includes full-time, part-time and regular casual employees
2019 LEPIDICO ANNUAL REPORT
29
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
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LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
2.1: The Board of a listed
entity should establish a
Nomination Committee:
• With at least three
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:
members the majority of
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Directors;
• Mr Mark Rodda (Chair) - Independent
• Ms Cynthia Thomas - Independent
• Mr Gary Johnson
• 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 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, geophysical, mining 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 capital markets and financiers: Experience in working in or raising
funds from the equity or other capital markets, and debt financiers.
Investor relations: Experience in identifying and establishing relationships with
Shareholders, potential investors, institutions and equity analysts.
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2019 LEPIDICO ANNUAL REPORT
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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 365,413,438 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 and is the acting 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 Chair, 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.
Mr Joe Walsh is Managing Director of the Company.
2.6: A listed entity should
have a program for inducting
(cid:42)(cid:33)(cid:51)(cid:3)(cid:4)(cid:37)(cid:46)(cid:33)(cid:31)(cid:48)(cid:43)(cid:46)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:44)(cid:46)(cid:43)(cid:50)(cid:37)(cid:32)(cid:33)(cid:3)
appropriate professional
development opportunities.
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.
2019 LEPIDICO ANNUAL REPORT
31
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
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
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
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 complied with this recommendation.
4.1: The Board of a listed
entity should establish an
audit committee:
•
•
•
With at least three
(cid:41)(cid:33)(cid:41)(cid:30)(cid:33)(cid:46)(cid:47)(cid:268)(cid:3)(cid:28)(cid:40)(cid:40)(cid:3)(cid:43)(cid:34)(cid:3)(cid:51)(cid:36)(cid:43)(cid:41)(cid:3)
are non-executive
Directors and a majority
(cid:43)(cid:34)(cid:3)(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)(cid:28)(cid:46)(cid:33)(cid:3)(cid:37)(cid:42)(cid:32)(cid:33)(cid:44)(cid:33)(cid:42)(cid:32)(cid:33)(cid:42)(cid:48)(cid:3)
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
(cid:28)(cid:44)(cid:44)(cid:46)(cid:43)(cid:50)(cid:33)(cid:47)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:33)(cid:42)(cid:48)(cid:37)(cid:48)(cid:53)(cid:282)(cid:47)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)
(cid:47)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)(cid:34)(cid:43)(cid:46)(cid:3)(cid:28)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)
period, receive from its CEO
and CFO a declaration that,
(cid:37)(cid:42)(cid:3)(cid:48)(cid:36)(cid:33)(cid:37)(cid:46)(cid:3)(cid:43)(cid:44)(cid:37)(cid:42)(cid:37)(cid:43)(cid:42)(cid:268)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)
records of the entity have
been properly maintained
(cid:28)(cid:42)(cid:32)(cid:3)(cid:48)(cid:36)(cid:28)(cid:48)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)
(cid:47)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)(cid:31)(cid:43)(cid:41)(cid:44)(cid:40)(cid:53)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)
the appropriate accounting
standards and give a true
(cid:28)(cid:42)(cid:32)(cid:3)(cid:34)(cid:28)(cid:37)(cid:46)(cid:3)(cid:50)(cid:37)(cid:33)(cid:51)(cid:3)(cid:43)(cid:34)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)
position and performance
of the entity and that the
opinion has been formed on
the basis of a sound system
of risk management and
(cid:37)(cid:42)(cid:48)(cid:33)(cid:46)(cid:42)(cid:28)(cid:40)(cid:3)(cid:31)(cid:43)(cid:42)(cid:48)(cid:46)(cid:43)(cid:40)(cid:3)(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)(cid:37)(cid:47)(cid:3)
(cid:43)(cid:44)(cid:33)(cid:46)(cid:28)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:33)(cid:251)(cid:33)(cid:31)(cid:48)(cid:37)(cid:50)(cid:33)(cid:40)(cid:53)(cid:267)
32
2019 LEPIDICO ANNUAL REPORT
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
4.3: A listed entity should
ensure that the external
auditor attends its Annual
General Meeting and is
(cid:28)(cid:50)(cid:28)(cid:37)(cid:40)(cid:28)(cid:30)(cid:40)(cid:33)(cid:3)(cid:48)(cid:43)(cid:3)(cid:28)(cid:42)(cid:47)(cid:51)(cid:33)(cid:46)(cid:3)(cid:45)(cid:49)(cid:33)(cid:47)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:3)
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
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
5.1: A listed entity should
(cid:33)(cid:47)(cid:48)(cid:28)(cid:30)(cid:40)(cid:37)(cid:47)(cid:36)(cid:3)(cid:51)(cid:46)(cid:37)(cid:48)(cid:48)(cid:33)(cid:42)(cid:3)(cid:44)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)(cid:3)
designed to ensure
(cid:31)(cid:43)(cid:41)(cid:44)(cid:40)(cid:37)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:437)(cid:20)(cid:25)(cid:3)
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 Chair, 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
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
6.1: A listed entity should
provide information about
itself and its governance to
(cid:37)(cid:42)(cid:50)(cid:33)(cid:47)(cid:48)(cid:43)(cid:46)(cid:47)(cid:3)(cid:50)(cid:37)(cid:28)(cid:3)(cid:37)(cid:48)(cid:47)(cid:3)(cid:51)(cid:33)(cid:30)(cid:47)(cid:37)(cid:48)(cid:33)(cid:267)
6.2: A listed entity should
design and implement an
investor relations program
(cid:48)(cid:43)(cid:3)(cid:34)(cid:28)(cid:31)(cid:37)(cid:40)(cid:37)(cid:48)(cid:28)(cid:48)(cid:33)(cid:3)(cid:33)(cid:251)(cid:33)(cid:31)(cid:48)(cid:37)(cid:50)(cid:33)(cid:3)(cid:48)(cid:51)(cid:43)(cid:289)
(cid:51)(cid:28)(cid:53)(cid:3)(cid:31)(cid:43)(cid:41)(cid:41)(cid:49)(cid:42)(cid:37)(cid:31)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)
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 Geology are the Company’s main
contacts for 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.
2019 LEPIDICO ANNUAL REPORT
33
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
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
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
7.1: The Board of a listed
entity should have a
committee to oversee risk:
•
•
•
With at least three
(cid:41)(cid:33)(cid:41)(cid:30)(cid:33)(cid:46)(cid:47)(cid:268)(cid:3)(cid:28)(cid:40)(cid:40)(cid:3)(cid:43)(cid:34)(cid:3)(cid:51)(cid:36)(cid:43)(cid:41)(cid:3)
are non-executive
Directors and a majority
(cid:43)(cid:34)(cid:3)(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)(cid:28)(cid:46)(cid:33)(cid:3)(cid:37)(cid:42)(cid:32)(cid:33)(cid:44)(cid:33)(cid:42)(cid:32)(cid:33)(cid:42)(cid:48)(cid:3)
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
(cid:46)(cid:33)(cid:50)(cid:37)(cid:33)(cid:51)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:33)(cid:42)(cid:48)(cid:37)(cid:48)(cid:53)(cid:282)(cid:47)(cid:3)(cid:46)(cid:37)(cid:47)(cid:39)(cid:3)
(cid:41)(cid:28)(cid:42)(cid:28)(cid:35)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:34)(cid:46)(cid:28)(cid:41)(cid:33)(cid:51)(cid:43)(cid:46)(cid:39)(cid:3)
at least annually to satisfy
itself that it continues to be
sound and disclose in relation
to each reporting period
(cid:51)(cid:36)(cid:33)(cid:48)(cid:36)(cid:33)(cid:46)(cid:3)(cid:47)(cid:49)(cid:31)(cid:36)(cid:3)(cid:28)(cid:3)(cid:46)(cid:33)(cid:50)(cid:37)(cid:33)(cid:51)(cid:3)(cid:51)(cid:28)(cid:47)(cid:3)
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
(cid:37)(cid:41)(cid:44)(cid:46)(cid:43)(cid:50)(cid:37)(cid:42)(cid:35)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:33)(cid:251)(cid:33)(cid:31)(cid:48)(cid:37)(cid:50)(cid:33)(cid:42)(cid:33)(cid:47)(cid:47)(cid:3)
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.
34
2019 LEPIDICO ANNUAL REPORT
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
LEPIDICO’S COMPLIANCE WITH RECOMMENDATIONS
7.4: A listed entity should
(cid:32)(cid:37)(cid:47)(cid:31)(cid:40)(cid:43)(cid:47)(cid:33)(cid:3)(cid:51)(cid:36)(cid:33)(cid:48)(cid:36)(cid:33)(cid:46)(cid:3)(cid:37)(cid:48)(cid:3)(cid:36)(cid:28)(cid:47)(cid:3)
any material exposure to
economic, environmental
and social sustainability risks
(cid:28)(cid:42)(cid:32)(cid:3)(cid:37)(cid:34)(cid:3)(cid:37)(cid:48)(cid:3)(cid:32)(cid:43)(cid:33)(cid:47)(cid:3)(cid:36)(cid:43)(cid:51)(cid:3)(cid:37)(cid:48)(cid:3)(cid:41)(cid:28)(cid:42)(cid:28)(cid:35)(cid:33)(cid:47)(cid:3)
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.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
(cid:437)(cid:20)(cid:25)(cid:3)(cid:19)(cid:5)(cid:427)(cid:15)(cid:13)(cid:13)(cid:5)(cid:14)(cid:4)(cid:437)(cid:21)(cid:9)(cid:15)(cid:14)
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 and additional fixed fees for Board Committee
participation. 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
(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)(cid:28)(cid:46)(cid:33)(cid:3)(cid:37)(cid:42)(cid:32)(cid:33)(cid:44)(cid:33)(cid:42)(cid:32)(cid:33)(cid:42)(cid:48)(cid:3)
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.
(cid:265)(cid:267)(cid:259)(cid:269)(cid:3)(cid:437)(cid:3)(cid:40)(cid:37)(cid:47)(cid:48)(cid:33)(cid:32)(cid:3)(cid:33)(cid:42)(cid:48)(cid:37)(cid:48)(cid:53)(cid:3)(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)
has an equity based
remuneration scheme should
(cid:36)(cid:28)(cid:50)(cid:33)(cid:3)(cid:28)(cid:3)(cid:44)(cid:43)(cid:40)(cid:37)(cid:31)(cid:53)(cid:3)(cid:43)(cid:42)(cid:3)(cid:51)(cid:36)(cid:33)(cid:48)(cid:36)(cid:33)(cid:46)(cid:3)
participants are permitted to
(cid:33)(cid:42)(cid:48)(cid:33)(cid:46)(cid:3)(cid:37)(cid:42)(cid:48)(cid:43)(cid:3)(cid:48)(cid:46)(cid:28)(cid:42)(cid:47)(cid:28)(cid:31)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:3)(cid:51)(cid:36)(cid:37)(cid:31)(cid:36)(cid:3)
limit the economic risk of
participating in the scheme
and disclose the policy or a
summary of that policy.
2019 LEPIDICO ANNUAL REPORT
35
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
37
51
53
54
55
56
57
85
86
36
2019 LEPIDICO ANNUAL REPORT
DIRECTORS’
REPORT
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 2019 (“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
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 development, and development of proprietry technologies:
L-Max®, S-Max® and LOH-Max™.
DIVIDENDS PAID OR RECOMMENDED
The Directors recommend that no dividend be paid for the year ended 30 June
2019, 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 2019 the Group recorded a net loss of
$5,105,014 (2018: $7,219,713) and a net cash outflow from operations of $3,503,582
(2018: $3,038,346).
The net assets of the Group increased to $38,589,652 at 30 June 2019
(2018: $24,499,573).
DEVELOPMENT
(cid:11)(cid:28)(cid:46)(cid:37)(cid:30)(cid:37)(cid:30)(cid:3)(cid:12)(cid:37)(cid:48)(cid:36)(cid:37)(cid:49)(cid:41)(cid:3)(cid:16)(cid:46)(cid:43)(cid:38)(cid:33)(cid:31)(cid:48)(cid:3)(cid:296)(cid:265)(cid:256)(cid:332)(cid:297)
A summary of the terms of the business combination with Desert Lion Energy is
provided in the Corporate section of this Report. This transaction provides Lepidico
with direct ownership of its first lepidolite Mineral Resources (JORC-2012) and
a large prospective exploration package in Namibia. The Rubicon and Helikon
deposits, located approximately 17km outside of the town of Karbib, were mined at
various times during the twentieth century primarily for petalite with some tantalite,
quartz and minor lepidolite production.
The first lepidolite Mineral Resource was estimated in 2018 under NI43-101 and was
subsequently confirmed with a JORC Code (2012) compliant Mineral Resource
estimate in June 2019 of 8.8Mt grading 0.56% Li2O, comprising Indicated Resources
of 3.0Mt grading 0.63% Li2O and Inferred Resources of 5.8Mt grading 0.53% Li2O at
a 0.20% Li2O cut-off (Table 1). Due diligence indicated the Karibib Lithium Project
could provide feed to Lepidico’s planned Phase 1 Plant for approximately 14 years,
based on the current Mineral Resources base.
Importantly, a ten year Mining Licence was issued in 2018 for the re-development of
mines at Rubicon and Helikon and the development of a flotation plant to produce
a lepidolite concentrate, thereby substantially reducing permitting risk and providing
an opportunity to rapidly transition to development. Furthermore, an evaluation is
being undertaken of the used processing equipment purchased by Desert Lion to
determine its suitability for use in a new concentrator, including the refurbishment of
two mills and two banks of flotation cells.
2019 LEPIDICO ANNUAL REPORT
37
(cid:21)(cid:28)(cid:30)(cid:40)(cid:33)(cid:3)(cid:257)(cid:267)(cid:3)(cid:10)(cid:15)(cid:19)(cid:427)(cid:3)(cid:427)(cid:43)(cid:32)(cid:33)(cid:3)(cid:296)(cid:258)(cid:256)(cid:257)(cid:258)(cid:297)(cid:3)(cid:13)(cid:19)(cid:5)(cid:3)(cid:34)(cid:43)(cid:46)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:19)(cid:49)(cid:30)(cid:37)(cid:31)(cid:43)(cid:42)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:8)(cid:33)(cid:40)(cid:37)(cid:39)(cid:43)(cid:42)(cid:3)(cid:32)(cid:33)(cid:44)(cid:43)(cid:47)(cid:37)(cid:48)(cid:47)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:37)(cid:42)(cid:3)(cid:13)(cid:12)(cid:258)(cid:256)(cid:261)
Deposit
Rubicon
Rubicon Main
Rubicon Main
Resource
Category
Indicated
Inferred
Helikon
Helikon 1
Inferred
Helikon 2
Helikon 3
Helikon 4
Helikon 5
Total
Total
Rubicon + Helikon
Rubicon + Helikon
Inferred
Inferred
Inferred
Inferred
Indicated
Inferred
Tonnes
(cid:296)(cid:48)(cid:36)(cid:43)(cid:49)(cid:47)(cid:28)(cid:42)(cid:32)(cid:47)(cid:297)(cid:3)
3,006.9
1,600.9
2,030.0
215.6
294.7
1,510.1
179.2
3,006.9
5,830.4
Li2O
(cid:296)(cid:332)(cid:297)(cid:3)
0.63
0.58
0.62
0.56
0.48
0.38
0.31
0.63
0.53
Ta(cid:457)O(cid:460)
(cid:296)(cid:44)(cid:44)(cid:41)(cid:297)(cid:3)
70
67
105
180
75
47
44
70
53
1. The Mineral Resource is stated as at 1 October 2018.
2. The Mineral Resource is depleted by surface and underground excavations where available.
3. All tabulated data have been rounded and as a result minor computational errors may occur.
4. Mineral Resources which are not Mineral Reserves have no demonstrated economic viability.
5. The gross Mineral Resource for the project is reported.
6. Preliminary mineralogical work has demonstrated that the lithium mineralogy is dominantly lepidolite,
which increases in proportion to other lithium bearing minerals with increasing Li2O grade.
L-Max® amenability testwork undertaken on a sample of Karibib lepidolite mineralisation returned excellent results, with a
lithium extraction of 94% from concentrate and production of lithium carbonate with 99.8% purity.
(cid:20)(cid:49)(cid:44)(cid:44)(cid:40)(cid:53)(cid:3)(cid:274)(cid:3)(cid:13)(cid:28)(cid:46)(cid:39)(cid:33)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:28)(cid:40)(cid:40)(cid:37)(cid:28)(cid:42)(cid:31)(cid:33)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:7)(cid:49)(cid:40)(cid:34)(cid:3)(cid:6)(cid:40)(cid:49)(cid:43)(cid:46)
In May 2019 the Company entered into a non-binding Memorandum of Understanding (MoU) with Gulf Fluor LLC (“Gulf
Fluor”), an established Abu Dhabi based industrial chemicals company, for: 1) the supply of sulphuric acid; 2) provision of land
to construct the Phase 1 Plant Project; and 3) the marketing of Phase 1 Plant by-products to be sold within the region.
Gulf Fluor is an Abu Dhabi based industrial chemical manufacturing company, established in 2008. The Gulf Fluor Industrial
complex consists of a sulphuric acid plant with a production capacity of 140,000 tonnes per annum (tpa), hydrogen fluoride
plant with a capacity of 54,000tpa, and aluminium fluoride plant with an annual capacity of 60,000tpa, in addition to a waste
water treatment plant. The state of the art aluminium fluoride plant is the only plant of its kind in the region and is considered
the largest single unit facility in the world. With its proximity to some of the world’s largest aluminium producers, Gulf Fluor is
located in the Industrial City of Abu Dhabi (ICAD), just 30km from the heart of Abu Dhabi. ICAD homes many light to medium
manufacturing, engineering, and processing industries, including lime cement and concrete manufacture, and covers 11km²
with marine access and provides Gulf Fluor with a variety of convenient local services.
Phase 1 L-Max® Plant Feasibility Study
During the year Lepidico extended the scope of the Phase 1 Plant Feasibility Study to include a LOH-Max™ circuit for the
production of lithium hydroxide, as well as the evaluation of a plant development in ICAD. The Study will, however, continue
to contemplate the base case scenario of Sudbury, Canada for a Phase 1 Plant until the ICAD study is complete, scheduled
for late 2019. Material capital and operating cost benefits have been identified associated with developing the Phase 1 Plant
at ICAD and a separate study has revealed that local markets exist for L-Max® and S-Max® by-products. Logistics costs for
shipping concentrate from both Namibia and Portugal to ICAD are estimated to be lower than to Sudbury. Gas, labour and
the cost of certain consumables have also been identified as being lower at ICAD. Engineering for the LOH-Max™ circuit is
expected to be completed by Lycopodium in December 2019, which will also take into account the change in location. Finally,
ICAD promotes a “plug and play” philosophy for new developments, allowing for rapid permitting and approvals. This is in
part afforded by having world class established infrastructure, including power, gas, water and developed roads, storage and
logistic hubs that have quick and easy access to multiple ports and airports.
Results for the integrated Phase 1 Plant Feasibility Study are now scheduled for completion in the March 2020 quarter. This
will incorporate a new mine plan for Alvarrões based on the recent Mineral Resource upgrade, a mine design for the Karibib
Lithium Project following a planned intensive drill programme intended to upgrade the Mineral Resource, and a re-engineered
Phase 1 lithium hydroxide chemical plant designs for ICAD. This strategy will provide optionality for the selection of a low
permitting risk development scenario, coupled with considerable expansion potential. Commercial production of lithium
hydroxide is envisaged in 2021.
38
2019 LEPIDICO ANNUAL REPORT
Lycopodium has commenced work to complete the further engineering required for the Phase 1 Plant, rated at a nominal
concentrate throughput of 6.9tph to produce approximately 5,500tpa of lithium hydroxide, plus by-products of SOP fertiliser
and amorphous silica. Importantly the plant design will not contemplate production of sodium sulphate. This engineering
will also take into account the alternative location of Abu Dhabi. This work is scheduled to be completed by the end of
December 2019.
Environmental consultant GHD Global Pty Ltd (“GHD”) has been appointed to manage the environmental approval process
in Abu Dhabi for the development of the Phase 1 Plant and secure all relevant permits to construct. This process is expected
to complete in 4 to 6 months. GHD will also advance the work undertaken by the University of Waterloo in Ontario on
evaluating the L-Max® residues as a potential product for landfill reclamation. GHD is tasked with identifying technically sound
solutions for the processing and use of the residue-products within UAE, as well as fall back solutions for disposal. Ultimately,
the objective of this work is for the Phase 1 Plant to become a zero-waste facility.
(cid:437)(cid:40)(cid:50)(cid:28)(cid:46)(cid:46)(cid:188)(cid:33)(cid:47)(cid:3)(cid:12)(cid:33)(cid:44)(cid:37)(cid:32)(cid:43)(cid:40)(cid:37)(cid:48)(cid:33)(cid:3)(cid:13)(cid:37)(cid:42)(cid:33)(cid:3)(cid:296)(cid:7)(cid:43)(cid:42)(cid:96)(cid:28)(cid:40)(cid:43)(cid:297)(cid:268)(cid:3)(cid:16)(cid:43)(cid:46)(cid:48)(cid:49)(cid:35)(cid:28)(cid:40)(cid:3)(cid:366)
Feasibility Study
Preliminary engineering for a modular and semi-transportable concentrator for Alvarrões started in June, with results due in
September 2019. The scope for the concentrator design includes an ore feed rate of 200,000tpa to produce approximately
60,000tpa of lepidolite-amblygonite concentrates.
A mine benchmarking assessment has indicated that the newly identified Sill P could be amenable to underground room and
pillar mining. A trade-off study is being undertaken to determine the optimal mining methods for the lepidolite mineralised
sills at Alvarrões, which is planned to be completed in September. A four hole geotechnical drill programme is scheduled for
August to inform this work. Ore Reserve input assumptions, including unit operating costs, recoveries, production rates and
other physical data will be updated on completion of the trade-off study. An inaugural Alvarrões Ore Reserve estimate is now
scheduled for completion by the end of December 2019.
The terms of reference for the Environmental Impact Study (EIS) for the Alvarrões mine expansion and concentrator
development were reviewed by the regulator and comments received allowing EIS to continue.
Alvarrões Mineral Resource
In December 2018, the Company completed a diamond drilling program to infill and extend the existing lepidolite-bearing
pegmatite Inferred Mineral Resource. 25 holes were drilled for 1,677m of core (351m PQ and 1,326m HQ). Subsequently an
updated Mineral Resource estimate (“MRE”) was completed by Snowden Mining Industry Consultants Pty Ltd (“Snowden”) as
announced on 11 April 2019.
Global Mineral Resource tonnes increased by 290% and contained lithium within the estimate rose by approximately 210%,
versus the December 2017 estimate. While the global grade has reduced as a result of the inclusion of mineralised halo
material, the average grade of the pegmatite mineralised units has risen modestly.
Snowden estimates a total JORC Code-compliant Indicated and Inferred Resource at Alvarrões of 5.87Mt @ 0.87% Li2O
comprising lithium mineralisation within five pegmatites and a 0.5m mineralised halo within the granite host rock (Table 2).
The pegmatites themselves represent an Indicated and Inferred Resource of 3.9Mt @ 1.16% Li2O, with the flat-lying Alvarrões
pegmatite system remaining open in all directions.
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 Plant but also conceptual
full-scale plants using Lepidico’s proprietary technologies.
Table 2. Alvarroes Mineral Resource estimate by category (0.20% Li(cid:457)(cid:15)(cid:3)(cid:31)(cid:49)(cid:48)(cid:289)(cid:43)(cid:251)(cid:297)
Pegmatite
Li2O%
0.5 m Halo
Li2O%
Total
Indicated
Inferred
Total
1.84Mt
2.06Mt
3.90Mt
1.12
1.20
1.16
0.76Mt
1.21Mt
1.97Mt
0.26
0.31
0.30
2.60Mt @ 0.87% Li2O
3.27Mt @ 0.87% Li2O
5.87Mt @ 0.87% Li(cid:457)O
1 Lepidico announced on 9 March 2017 that it had signed a term sheet for ore off-take from the Alvarrões Lepidolite Mine
with Grupo Mota, the 66% owner and operator of Alvarrões.
2019 LEPIDICO ANNUAL REPORT
39
Phase 2 L-Max® Plant Scoping Study
In parallel with the engineering work for the Phase 1 Plant Feasibility Study, budget prices are being sought for larger
scale major equipment items with the objective of developing scoping study level capital and operating cost figures for a
hybrid LOH-MaxTM-L-Max® plant with configurations ranging from 10,000tpa to 20,000tpa LCE. Initial indications are that
significant economies of scale will apply at higher throughput rates, in particular for the L-Max® chemical plant but also for
ore concentration.
RESEARCH & DEVELOPMENT
Pilot Plant Development, Perth, Western Australia
During the period the Company commissioned the construction of an L-Max® Pilot Plant. The 15 kilogram per hour (kgph)
facility was completed on time and on budget in Perth, Australia and employs similar equipment to that proposed in the
Phase 1 L-Max® plant design, albeit of smaller scale. The scale-up ratio from the pilot plant to the Phase 1 Plant will be around
480 times (15kgph to 6.9tph).
Wet commissioning, which involved programming and calibration of all drives, pumps and instruments was completed on 25
June 2019, when the first concentrate reported to the leach circuit. On 27 June operations were temporarily suspended due
to degradation of the leach filter cloths. Subsequent engagement with the filter Original Equipment Manufacturer (OEM)
revealed that nylon rather than the specified polypropylene filter cloth had been supplied. Replacement filter cloths were
sourced resulting in approximately one week of down time.
The L-Max® impurity removal circuit was successfully commissioned on leach liquor, allowing continuous plant operations to
commence on 9 July, marking the commencement of Pilot Plant Campaign 1. The leach circuit operated continuously for
approximately 200 hours, outperforming filtration rate design criteria in this application by approximately 20%. During this
period leach slurry was processed through a pressure filter to produce lithium containing leach liquor and approximately
2.2 tonnes of high silica residue. The polypropylene filter cloths performed well, with the filtration of the leach slurry
also successful in producing lower moisture levels in the residue than in batch test work. These outcomes have positive
implications for capital cost savings in the final Phase 1 Plant design. Furthermore, opportunities for plant optimisation have
already been identified, including where various materials of construction were assessed during the trial, and in the areas of
operability, process control and maintainability where improved performance can be achieved.
The leach liquor was continuously processed through the L-Max® impurity removal circuit from 8 July to 18 July, for
approximately 250 hours of continuous operation. This process produced over 5,000L of lithium sulphate containing
intermediate liquor and more than 2.5 tonnes of residue. The filtration of the residue was consistent with batch test work and
confirms the Phase 1 design for this process stream. More than 200 samples were collected during the operation to assess
lithium losses to the residues and a further 300 samples from other process streams.
The bulk of the lithium sulphate liquor was stockpiled as feed for the planned LOH-MaxTM lithium hydroxide circuit, which is
expected to be retro-fitted to the Pilot Plant later in the year. The remaining lithium sulphate was treated to produce lithium
carbonate via the conventional circuit currently installed at the Pilot Plant, during week beginning 29 July. This process step
was deferred to ensure that no sodium sulphate recirculates into lithium sulphate intermediate, which could contaminate
subsequent lithium hydroxide product.
The potassium sulphate (SOP fertiliser) recovery circuit operated continuously from 12 July for more than 100 hours. Filtration
of this residue stream also outperformed design (based on batch test work) with significantly lower moisture contents in
residue, with positive implications for capital cost savings in this area of the Phase 1 Plant. Over 2,000 litres of brine containing
potassium, rubidium and caesium sulphates were produced. This solution was concentrated in the Pilot Plant crystalliser to
produce by-product SOP, along with a rubidium and caesium brine.
Work has commenced to adapt the final process stages of the Pilot Plant to include a LOH-Max™ circuit, initially at mini-
plant scale using laboratory equipment. Strategic Metallurgy has developed the process design criteria for this circuit which
is being used by Lycopodium to finalise the design for the Phase 1 Plant, and a smaller scale circuit appropriate for the Pilot
Plant, providing lithium hydroxide capability.
40
2019 LEPIDICO ANNUAL REPORT
L-Max® Product Development
Another benefit of the pilot plant is that it will provide material for further product development work, in particular for:
amorphous silica, SOP fertiliser, caesium brine and the use of the L-Max® residue as a land reclamation product. The
considerable quantities of materials generated will enable further work to enhance the quality and value of each product, and
potentially allow new products to be evaluated. The lithium carbonate produced from the pilot plant is planned to be used to
provide samples for testing by prospective customers. The pilot plant also generated data for optimisation of Phase 1 Plant
operating parameters.
Caesium brine
A caesium brine grading 32% caesium, 8% rubidium and less than 1% potassium has been produced in the laboratory from
a lepidolite concentrate generated from the Alvarrões mine in Portugal. Further testwork is planned with the objective of
producing a marketable quality caesium brine, while also refining the associated process circuit. No value was considered for
caesium products in the Phase 1 L-Max® Plant Pre-Feasibility Study (“PFS”).
Amorphous silica
Since lodging the provisional patent application for S-Max™ in May 2018, Lepidico, in collaboration with Strategic Metallurgy,
has been evaluating alternative uses for amorphous silica generated from the L-Max® leach residue. Testwork has indicated
that this silica residue is suitable for use in concrete as a Supplementary Cementitious Material (SCM).
When added to Ordinary Portland Cement (OPC) and water the SCM reacts (with the excess calcium hydroxide generated
by the OPC reaction with water) to yield additional cementitious material. This is a valuable attribute of the residue, as
substitution of OPC with L-Max® silica residue could reduce both concrete production costs and the embodied CO2 content
within the concrete, while increasing its strength for equivalent OPC additions.
Tests conducted by Strategic Metallurgy resulted in a significant increase in concrete compressive strength of up to 30%
when the L-Max® residue replaced 10% of the OPC and after curing for approximately 20 days. Subsequent tests by Boral,
conducted according to ASTM C1240 standard specification for silica fume used in cementitious mixtures, resulted in strength
increases ranging from 4 to 11% versus the baseline 100% OPC sample after curing for just 7 days. Compressive strength
increases with curing time and further testwork is planned.
Production of amorphous silica from the planned Phase 1 L-Max® Plant will simplify the process flowsheet versus the PFS,
which assumed the production of sodium silicate. The associated operating cost and capital cost savings are expected to be
offset by lower revenue and are planned to be incorporated into the current feasibility study. A market study has commenced
for the sale of amorphous silica from the Phase 1 Plant and the Company is pursuing commercial alternatives in this regard.
Once in operation the research and development of alternative higher value silica products may be considered.
LOH-Max™ - Lithium Hydroxide Process
On 18 February 2019, the Company announced that high purity lithium hydroxide had been produced using a new process,
LOH-MaxTM, developed by the principals of Strategic Metallurgy Pty Ltd (“Strategic Metallurgy”). A binding exclusivity
arrangement has been entered into with the developers of the process technology, whereby Lepidico has the right to use the
process and sole rights for marketing the technology to third parties worldwide.
Patents
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 through much of 2019.
On 10 April 2019, the Company filed International Patent Applications, PCT/AU2019/050317 and PCT/AU2019/050318 in
relation to the S-Max® Process.
In addition, the Provisional Patent Application (2019900356) has been filed in relation to the LOH-Max™ Process.
2019 LEPIDICO ANNUAL REPORT
41
EXPLORATION
Lepidico’s exploration strategy is to identify and secure lithium mica deposits that are capable of providing material quantities
of quality L-Max® concentrate feed.
Youanmi Lepidolite Project, Youanmi, Western Australia ²
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 20km southwest of the historical Youanmi gold mine.
Following the completion of an initial drilling program in August 2018 and a follow-up RC drilling program the Company
elected not to exercise its option to proceed with the farm-in over the Youanmi tenement.
(cid:11)(cid:28)(cid:46)(cid:37)(cid:30)(cid:37)(cid:30)(cid:3)(cid:12)(cid:37)(cid:48)(cid:36)(cid:37)(cid:49)(cid:41)(cid:3)(cid:16)(cid:46)(cid:43)(cid:38)(cid:33)(cid:31)(cid:48)(cid:3)(cid:296)(cid:265)(cid:256)(cid:332)(cid:297)
The Company has commenced a program of drilling at the Karibib Lithium Project to further increase data density and
confidence to a level to enable classification of JORC Code 2012 compliant Resources in the Measured and/or Indicated
categories to facilitate a subsequent Ore Reserve Estimate. A total of 4,700m of diamond core drilling at a cost of
approximately A$1 million is planned. Work will include:
• Rubicon – 2,650m of infill and extensional drilling to a nominal 50m x 25m spacing, including the infill of critical gaps in the
drill database; and
• Helikon 1 – 2,050m of infill and extensional drilling on a nominal 25m x 25m spacing.
By late-July 2019 four rigs were on site, three operating at Rubicon and one at Helikon 1. Assay are scheduled to be received
from late August. The programme is scheduled to complete in September to allow an updated Mineral Resource estimate
during the December 2019 quarter.
CORPORATE
As at 30 June 2019, Lepidico had cash and cash equivalents of $13.7 million.
Desert Lion Energy Business Combination
On 7 May 2019 the Company and Desert Lion Energy Inc. (“Desert Lion”) announced they had entered into a definitive
arrangement agreement whereby Lepidico would acquire all of the outstanding common shares of Desert Lion for 5.4
Lepidico ordinary shares for every 1 Desert Lion share (The “Transaction”). The Transaction successfully closed on 11 July
2019. Lepidico has maintained its primary listing on the ASX under the code “LPD”, and the Desert Lion common shares have
delisted from the TSX-V. Lepidico continues to be headquartered in Perth, Australia and there were no changes to Lepidico’s
Board of Directors.
In addition, each Desert Lion option was exchanged for a replacement Lepidico option reflecting the exchange ratio and
any outstanding warrants of Desert Lion will be adjusted to allow for the acquisition of Lepidico ordinary shares upon their
exercise (also reflecting the exchange ratio). Desert Lion securityholders held approximately 14.8% of the shares in the
combined company and 17.8% on a fully diluted basis on closing.
The outstanding convertible notes of Desert Lion have also been adjusted to allow for the acquisition of LPD Shares upon
their exercise (reflecting the Exchange Ratio). The Company may therefore issue up to 108,000,000 new LPD Shares upon
conversion of the outstanding convertible notes at the election of the holder, on or before 7 December 2020 with a balance of
C$1,000,000 to be repaid in cash on maturity.
2 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.
42
2019 LEPIDICO ANNUAL REPORT
Capital Raising
In September 2018 the Company completed a pro-rata Renounceable Entitlement Offer (Entitlement 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) at $0.019 per New Share. New Options have an exercise price of 4.5 cents, a
term of two years and are listed under the ASX code LPDOA.
The Company raised $7.9 million (before costs) under the Entitlements Offer and issued 417,877,158 New Shares and
208,938,579 New Options. The Company 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”).
Following the announcement of the business combination with Desert Lion in May 2019 the Company successfully completed
a Renounceable Entitlements Offer (the “Offer”) which was well supported by the Company’s shareholders and new investors
and closed oversubscribed.
The Company raised $10.8 million (before costs) and issued 372,908,354 new shares and 186,454,177 new options. The new
options are listed under the ASX code LPDOB. The Company placed a further 8,620,690 fully paid ordinary shares at $0.029
with 4,310,345 attaching LPDOB options to raise an additional $250,000 (“Placement”).
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 11 July 2019 the Company closed of the previously announced plan of arrangement (the “Arrangement”), with Desert Lion
Energy Inc. (“Desert Lion”) whereby Lepidico acquired all of the outstanding common shares of Desert Lion for consideration
of 5.4 Lepidico ordinary shares for every 1 Desert Lion common share (the “Exchange Ratio”). The Arrangement, which was
announced on May 7, 2019, was approved by the Desert Lion’s shareholders at an annual general and special meeting held on
June 27, 2019.
On 31 July 2019 the Company issued 13,786,605 new fully paid ordinary shares to Bacchus Capital Advisors in accordance
with the terms of its engagement as Corporate Advisor in relation to the Desert Lion Energy Inc business combination at an
issue price of $0.026 per share (Lepidico’s closing share price on 11 July 2019, the day the transaction closed).
Other than the matters discussed above there are no other matters or circumstances which have arisen since 30 June 2019
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 to become a vertically integrated lithium chemical company
through the commercialisation of its proprietary L-Max®, S-Max® and LOH-Max™ technologies 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:
Number of fully paid ordinary shares
Number of options
Mr Gary Johnson
Mr Joe Walsh
Mr Tom Dukovcic
Mr Mark Rodda
Ms Cynthia Thomas
Mr Brian Talbot
365,413,438
30,500,000
10,146,269
-
-
-
406,059,707
35,177,810
42,875,000
32,710,495
20,000,000
7,500,000
7,500,000
145,763,305
2019 LEPIDICO ANNUAL REPORT
43
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, the Remuneration Committee reviewed the elements of KMP remuneration for the year
commencing 1 July 2018 including comparative information relating to the KMP remuneration for the Company’s peers.
The recommendations from the Remuneration Committee were approved by the Board.
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
Non-executive Director
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 $55,356 (2018: $33,621)
In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration
is separate and distinct.
44
2019 LEPIDICO ANNUAL REPORT
Non-Executive Director Remuneration
Fees and payments to the Non-Executive Directors reflect the demands made, and the responsibilities placed on the Non-
Executive Directors. The maximum annual aggregate directors’ fee pool limit is $600,000 and was approved by shareholders
at the annual general meeting on 22 November 2018.
The Board reviewed the Non-Executive Director fees and payments with effect from 1 December 2018.
Base fees (annual) Non-Executive Chairman
Other Non-Executive Directors
Chair of Committee
Member of Committee
1 December 2018
1July 2018
87,600
54,750
10,950
10,950
87,600
65,700
-
-
The Company’s policy is to remunerate Non-Executive Directors at market rates (for comparable companies) and 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).
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.
2019 LEPIDICO ANNUAL REPORT
45
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 Managing Director 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 construction of the L-Max® Pilot Plant
and commencement of commissioning. The Company increased the size of the resource at Alvarroes by over 290% and
secured further resources via a business combination with Desert Lion Energy Inc. The Company entered into an MOU with
Gulf Fluor for the provision of land and supply of sulphuric acid in Abu Dhabi. The Company successfully raised over $19.0
million in two Entitlement Offers ensuring the Company was fully funded to complete the Feasiblity Study integrating the
new business opportunities identified. The Company implemented further corporate governance initiatives including the
establishment of a Diversity Committee.
For the year ended 30 June 2019, STIs of $322,373 (inclusive of superannuation) were payable to KMP of the Company or
Group (2018: $222,347)
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.
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.
2015
$
2016
$
2017
$
2018
$
2019
$
Net Profit/(Loss)
(1,044,346)
(2,263,225)
(5,357,243)
(7,219,713)
(5,105,014)
EPS
Share price at 30 June
(0.006)
0.010
(0.005)
0.017
(0.003)
0.013
(0.003)
0.037
(0.002)
0.026
46
2019 LEPIDICO ANNUAL REPORT
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:
Short-term Benefits
Cash Salary
and Fees
$
Other
$
Post-
employment
benefits
Superannuation
Benefits
$
91,667
80,000
71,667
60,000
60,965
21,462
85,901
23,519
369,648
243,985
227,397
183,267
258,754
207,545
1,165,999
819,778
-
-
-
-
-
-
-
182,520
110,390
60,000
44,749
79,853
62,957
322,373
218,096
8,708
7,600
6,808
5,700
5,792
2,039
-
-
-
-
21,603
21,661
-
12,667
42,911
49,667
Share-based
payments
Equity Options
Total
Vested
$
60,000
315,000
60,000
315,000
60,000
-
60,000
-
120,000
630,000
80,000
420,000
$
160,375
402,600
138,475
380,700
126,757
23,501
145,901
23,519
672,168
984,375
389,000
669,677
80,000
457,500
418,607
740,669
520,000
2,051,283
2,137,500
3,225,041
Non-Executive Directors
Mr Gary Johnson
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
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(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
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.
(cid:15)(cid:48)(cid:36)(cid:33)(cid:46)(cid:3)(cid:21)(cid:46)(cid:28)(cid:42)(cid:47)(cid:28)(cid:31)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:3)(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:11)(cid:33)(cid:53)(cid:3)(cid:13)(cid:28)(cid:42)(cid:28)(cid:35)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:16)(cid:33)(cid:46)(cid:47)(cid:43)(cid:42)(cid:42)(cid:33)(cid:40)
Payments to director-related entities(1)
2019
$
2018
$
4,003,387
857,219
(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 and included
approximately $2.1 million in equipment purchases relating to the Pilot Plant which were on-charged by Strategic
Metallurgy Pty Ltd at cost. As at 30 June 2019 invoices totalling $15,730 (2018: $89,617) are payable.
2019 LEPIDICO ANNUAL REPORT
47
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.
As previously disclosed, Mr Walsh’s remuneration effective from 1 July 2018 includes a salary of C$350,000 per annum. Mr
Walsh did not receive any further increase to base salary during the reporting period; however, an increase in base salary
to C$360,500 was awarded effective 1 July 2019. A monetary bonus of C$168,000 has been awarded for the financial year
ended 30 June 2019.
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, Geology Director (“GD”) has an employment agreement with the Group. The agreement specifies duties
and obligations to be fulfilled as GD and provides for an annual review of base remuneration taking into account performance.
As previously disclosed, Mr Dukovcic’s remuneration effective from 1 July 2018 includes a salary of $200,000 per annum
inclusive of superannuation. Mr Dukovcic did not receive any further increase to base salary during the reporting period;
however, an increase in base salary to $206,000 was awarded effective 1 July 2019. A monetary bonus of $60,000 (inclusive
of superannuation) has been awarded for the financial year ended 30 June 2019.
Termination of the employment agreement requires 6 months written notice. Upon termination, the GD 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 GD 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. As previously disclosed, Ms Norgate’s remuneration effective from 1 July 2018 includes a salary of C$245,000
per annum. Ms Norgate did not receive any further increase to base salary during the reporting period; however an increase
in base salary to C$252,350 was awarded effective 1 July 2019. A monetary bonus of C$73,500 has been awarded for the
financial year 30 June 2019.
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).
48
2019 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:
2019
Non-Executive Directors
Balance at
start of year
Purchased/
Exercised
Options
Exercised
Options
Sold
Other Net
Change
Balance at
end of year
Mr Gary Johnson
363,257,820
15,355,618
Mr Mark Rodda
Mr Brian Talbot
Ms Cynthia Thomas
Executive Directors
-
-
-
-
-
-
-
-
-
-
(3,200,000)
(10,000,000)1
365,413,438
-
-
-
-
-
-
Mr Joe Walsh
19,750,000
750,000
20,000,000
(10,000,000)
Mr Tom Dukovcic
9,725,280
420,989
Executives
Ms Shontel Norgate
5,007,619
556,403
-
-
-
-
-
-
-
30,500,000
10,146,269
5,564,022
Total
397,740,719
17,083,010
20,000,000
(13,200,000)
(10,000,000)
411,623,729
1. Mr Johnson’s notifiable interest in securities decreased by 10,000,000 ordinary shares by virtue of the termination of a voting agreement
by mutual consent.
Option Holdings
2019
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
Purchased
during
the year
Exercised/
Expired
during year
Balance at
end of year
Vested and
exercisable at
end of year
20,000,000
12,500,000
-
-
7,500,000
7,500,000
7,500,000
7,500,000
7,677,810
-
-
-
-
-
-
-
35,177,810
35,177,810
20,000,000
20,000,000
7,500,000
7,500,000
7,500,000
7,500,000
Mr Joe Walsh
47,500,000
15,000,000
375,000 (20,000,000)
42,875,000
42,875,000
Mr Tom Dukovcic
22,500,000
10,000,000
210,495
Executives
Ms Shontel Norgate
22,500,000
10,000,000
278,202
-
-
32,710,495
32,710,495
32,778,202
32,778,202
Total
125,000,000
65,000,000
8,541,507
(20,000,000)
178,541,507
178,541,507
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 2018.
2019 LEPIDICO ANNUAL REPORT
49
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2019,
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
8
8
8
8
8
8
8
8
8
8
7
8
2
0
0
2
0
2
2
0
0
2
0
2
2
0
0
2
0
2
2
0
0
2
0
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
65,000,000
220,518,031
190,746,921
9,450,000
945,000
3,921,982
5,967,000
18,900,000
625,448,934
Exercise Price
Grant
Expiry
$0.015
$0.025
$0.025
$0.091
$0.026
$0.045
$0.050
$0.040
$0.100
$0.100
$0.350
$0.020
9 November 2017
8 November 2019
25 November 2016
31 December 2019
30 November 2016
31 December 2019
24 November 2017
23 November 2020
23 November 2018
22 November 2021
30 September 2018
30 September 2020
5 June 2019
11 July 2019
11 July 2019
11 July 2019
11 July 2019
11 July 2019
5 June 2022
25 October 2021
31 March 2022
21 June 2022
26 February 2023
14 January 2024
50
2019 LEPIDICO ANNUAL REPORT
512019 LEPIDICO ANNUAL REPORTWARRANTSAt the date of this report, the Company has a contractual obligation to issue Lepidico shares on the exercise of the following warrants in accordance with the Desert Lion Energy Inc business combination:NumberExercise PriceExpiry14,210,780$0.4422 September 2019700,115$0.3522 September 20194,140,941$0.4410 October 2019312,476$0.3510 October 20192,880,085$0.4429 November 2019181,165$0.3529 November 20192,832,991$0.4429 November 2019121,063$0.3529 November 20191,179,387$0.446 December 201989,008$0.356 Decmeber 20197,706,421$0.4413 December 20191,659,388$0.3513 December 2019103,783,680$0.047 December 2020139,797,500AUDITOR’S INDEPENDENCE DECLARATIONThe Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001(Cth) for the year ended 30 June 2019 is included on page 52 of the Directors’ Report.The Auditor did not provide any non-audit services for the year ended 30 June 2019 (2018: $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 WalshManaging DirectorDated this 20th day of September 2019 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 2019 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.
Neil Pace
Partner
Moore Stephens
chartered accountants
Signed at Perth this 20th day of September 2019
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.
52
2019 LEPIDICO ANNUAL REPORT
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
AND OTHER COMPREHENSIVE INCOME
as at 30 June 2019
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
Note
3
3
4
5
2019
$
-
59,110
2018
$
61,170
179,952
59,110
241,122
(589,148)
(492,003)
(1,827,998)
(1,550,458)
(1,472,185)
(1,103,365)
(8,287)
(6,230)
(520,000)
(2,137,500)
(630,241)
(2,170,815)
(116,265)
(464)
(5,105,014)
(7,219,713)
-
-
Loss from continuing operations
(5,105,014)
(7,219,713)
Other comprehensive income
-
-
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
93,059
(17,141)
Total comprehensive loss for the year attributable to owners of the Group
(cid:296)(cid:262)(cid:268)(cid:256)(cid:257)(cid:257)(cid:268)(cid:266)(cid:262)(cid:262)(cid:297)
(cid:296)(cid:264)(cid:268)(cid:258)(cid:259)(cid:263)(cid:268)(cid:265)(cid:262)(cid:261)(cid:297)
Loss per share for the year attributable to the members of Lepidico Ltd
Basic and diluted loss per share
7
(0.002)
(0.003)
The accompanying notes form part of these financial statements.
2019 LEPIDICO ANNUAL REPORT
53
Note
2019
$
2018
$
8
9
9
10
11
12
13
14
15
16
13,660,308
1,148,086
4,859,962
624,556
14,808,394
5,484,518
71,729
19,685
1,928,203
87,114
27,049
729,697
22,925,130
19,026,700
24,944,747
19,870,560
39,753,141
25,355,078
1,077,812
85,677
804,475
51,030
1,163,489
855,505
1,163,489
855,505
38,589,652
24,499,573
59,430,846
3,858,668
40,733,812
3,360,609
(24,699,862)
(19,594,848)
38,589,652
24,499,573
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2019
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.
54
2019 LEPIDICO ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the Year ended 30 June 2019
Issued Capital
Reserves
Number of
shares
Amount
Options
Foreign
Currency
Translation
Accumulated
Losses
$
$
$
$
Total
$
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
-
-
-
-
-
-
-
-
565,000
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)
-
-
-
(12,375,135)
20,629,913
(7,219,713)
(cid:296)(cid:264)(cid:268)(cid:258)(cid:257)(cid:266)(cid:268)(cid:264)(cid:257)(cid:259)(cid:297)
-
-
-
-
(17,141)
565,000
-
8,799,014
Balance at 30 June 2018
2,901,520,897
40,733,812
3,377,750
(cid:296)(cid:257)(cid:264)(cid:268)(cid:257)(cid:261)(cid:257)(cid:297)
(cid:296)(cid:257)(cid:266)(cid:268)(cid:262)(cid:266)(cid:261)(cid:268)(cid:265)(cid:261)(cid:265)(cid:297)
24,499,573
Loss for the year
Other comprehensive loss
Options issued during the year
-
-
-
-
-
-
-
-
565,000
Options exercised during the year
20,000,000
160,000 (160,000)
Shares issued during the year
816,183,076
18,537,034
-
-
(5,105,014)
(cid:296)(cid:262)(cid:268)(cid:257)(cid:256)(cid:262)(cid:268)(cid:256)(cid:257)(cid:261)(cid:297)
93,059
-
-
-
-
-
-
-
93,059
565,000
-
18,537,034
Balance at 30 June 2019
3,737,703,973 59,430,846 3,782,750
75,918 (cid:296)(cid:258)(cid:261)(cid:268)(cid:263)(cid:266)(cid:266)(cid:268)(cid:265)(cid:263)(cid:258)(cid:297)
38,589,652
The accompanying notes form part of these financial statements.
2019 LEPIDICO ANNUAL REPORT
55
CONSOLIDATED STATEMENT OF CASH FLOW
For the Year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from external parties
Payments to suppliers and employees
Interest received
Note
2019
$
2018
$
-
89,483
(3,560,720)
(3,196,592)
57,138
68,763
Net cash used in operating activities
20
(3,503,582)
(3,038,346)
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
(1,568,920)
(1,565,714)
-
110,000
(5,167,505)
(1,933,633)
484,796
(1,586)
2,050
467,718
(25,547)
-
(6,251,165)
(2,947,176)
18,099,034
6,517,288
363,000
1,038,000
18,462,034
7,555,288
8,707,287
1,569,766
Cash at beginning of financial year
4,859,962
3,307,337
Effect of foreign exchange rate changes
93,059
(17,141)
(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:28)(cid:48)(cid:3)(cid:33)(cid:42)(cid:32)(cid:3)(cid:43)(cid:34)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:53)(cid:33)(cid:28)(cid:46)
8
13,660,308
4,859,962
The accompanying notes form part of these financial statements.
56
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
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 20 September 2019 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
(cid:296)(cid:28)(cid:297)(cid:3)(cid:7)(cid:43)(cid:37)(cid:42)(cid:35)(cid:3)(cid:427)(cid:43)(cid:42)(cid:31)(cid:33)(cid:46)(cid:42)
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 $5,105,014 for the year to 30 June 2019 and had a net cash outflow from operations of
$3,503,582 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 $13,644,905 as at 30 June 2019 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 research, development and exploration programs and for working capital.
The Company raised $19.2 million (before costs) during the financial year from two Entitlement Offers. The Directors
believe that the Group will be able to raise additional capital as required based on the successful outcome of the
Entitlement Offers and ongoing interest in the Company and the lithium industry generally.
(cid:296)(cid:30)(cid:297)(cid:3)(cid:16)(cid:46)(cid:37)(cid:42)(cid:31)(cid:37)(cid:44)(cid:40)(cid:33)(cid:47)(cid:3)(cid:43)(cid:34)(cid:3)(cid:427)(cid:43)(cid:42)(cid:47)(cid:43)(cid:40)(cid:37)(cid:32)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)
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.
.
2019 LEPIDICO ANNUAL REPORT
57
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:31)(cid:297)(cid:3)(cid:491)(cid:49)(cid:47)(cid:37)(cid:42)(cid:33)(cid:47)(cid:47)(cid:3)(cid:427)(cid:43)(cid:41)(cid:30)(cid:37)(cid:42)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)
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.
.
(cid:296)(cid:32)(cid:297)(cid:3)(cid:7)(cid:43)(cid:43)(cid:32)(cid:51)(cid:37)(cid:40)(cid:40)
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.
58
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:33)(cid:297)(cid:3)(cid:9)(cid:42)(cid:31)(cid:43)(cid:41)(cid:33)(cid:3)(cid:21)(cid:28)(cid:52)
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.
.
(cid:296)(cid:34)(cid:297)(cid:3) (cid:16)(cid:46)(cid:43)(cid:44)(cid:33)(cid:46)(cid:48)(cid:53)(cid:268)(cid:3)(cid:16)(cid:40)(cid:28)(cid:42)(cid:48)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:5)(cid:45)(cid:49)(cid:37)(cid:44)(cid:41)(cid:33)(cid:42)(cid:48)
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
.
2019 LEPIDICO ANNUAL REPORT
59
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:35)(cid:297)(cid:3)(cid:5)(cid:52)(cid:44)(cid:40)(cid:43)(cid:46)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:4)(cid:33)(cid:50)(cid:33)(cid:40)(cid:43)(cid:44)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:5)(cid:52)(cid:44)(cid:33)(cid:42)(cid:32)(cid:37)(cid:48)(cid:49)(cid:46)(cid:33)
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.
.
(cid:296)(cid:36)(cid:297)(cid:3)(cid:6)(cid:28)(cid:37)(cid:46)(cid:3)(cid:23)(cid:28)(cid:40)(cid:49)(cid:33)(cid:3)(cid:43)(cid:34)(cid:3)(cid:437)(cid:47)(cid:47)(cid:33)(cid:48)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:12)(cid:37)(cid:28)(cid:30)(cid:37)(cid:40)(cid:37)(cid:48)(cid:37)(cid:33)(cid:47)
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.
.
60
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:37)(cid:297)(cid:3) (cid:6)(cid:37)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:9)(cid:42)(cid:47)(cid:48)(cid:46)(cid:49)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to
the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset
(ie trade date accounting is adopted).
Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except
where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to
profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other
circumstances, valuation techniques are adopted.
Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant
financing component or if the practical expedient was applied as specified in AASB 15.63.
Classification and subsequent measurement
Financial liabilities
Financial instruments are subsequently measured at:
• amortised cost; or
• fair value through profit or loss.
A financial liability is measured at fair value through profit and loss if the financial liability is:
a contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies;
•
• held for trading; or
•
initially designated as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial
asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the
instrument to the net carrying amount at initial recognition.
A financial liability is held for trading if:
it is incurred for the purpose of repurchasing or repaying in the near term;
•
• part of a portfolio where there is an actual pattern of short-term profit taking; or
•
a derivative financial instrument (except for a derivative that is in a financial guarantee contract or a derivative that is in
a effective hedging relationships).
Any gains or losses arising on changes in fair value are recognised in profit or loss to the extent that they are not part of a
designated hedging relationship are recognised in profit or loss.
The change in fair value of the financial liability attributable to changes in the issuer's credit risk is taken to other
comprehensive income and are not subsequently reclassified to profit or loss. Instead, they are transferred to retained
earnings upon derecognition of the financial liability. If taking the change in credit risk in other comprehensive income
enlarges or creates an accounting mismatch, then these gains or losses should be taken to profit or loss rather than other
comprehensive income.
A financial liability cannot be reclassified.
2019 LEPIDICO ANNUAL REPORT
61
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:37)(cid:297)(cid:3) (cid:6)(cid:37)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:9)(cid:42)(cid:47)(cid:48)(cid:46)(cid:49)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)continued
Financial assets
Financial assets are subsequently measured at:
• amortised cost;
• fair value through other comprehensive income; or
• fair value through profit or loss.
Measurement is on the basis of two primary criteria:
• the contractual cash flow characteristics of the financial asset; and
• the business model for managing the financial assets.
A financial asset that meets the following conditions is subsequently measured at amortised cost:
• the financial asset is managed solely to collect contractual cash flows; and
•
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding on specified dates.
A financial asset that meets the following conditions is subsequently measured at fair value through other
comprehensive income:
• the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding on specified dates;
• the business model for managing the financial assets comprises both contractual cash flows collection and the selling
of the financial asset.
By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value
through other comprehensive income are subsequently measured at fair value through profit or loss.
The Group initially designates a financial instrument as measured at fair value through profit or loss if:
•
it eliminates or significantly reduces a measurement or recognition inconsistency (often referred to as “accounting
mismatch”) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them
on different bases;
it is in accordance with the documented risk management or investment strategy, and information about the groupings
was documented appropriately, so that the performance of the financial liability that was part of a group of financial
liabilities or financial assets can be managed and evaluated consistently on a fair value basis;
it is a hybrid contract that contains an embedded derivative that significantly modifies the cash flows otherwise
required by the contract.
•
•
The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on
initial classification and is irrevocable until the financial asset is derecognised.
Equity instruments
At initial recognition, as long as the equity instrument is not held for trading and not a contingent consideration
recognised by an acquirer in a business combination to which AASB 3:Business Combinations applies, the Group made
an irrevocable election to measure any subsequent changes in fair value of the equity instruments in other comprehensive
income, while the dividend revenue received on underlying equity instruments investment will still be recognised in profit
or loss.
Regular way purchases and sales of financial assets are recognised and derecognised at settlement date in accordance
with the Group's accounting policy.
Derecognition
Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of
financial position.
62
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:37)(cid:297)(cid:3) (cid:6)(cid:37)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:9)(cid:42)(cid:47)(cid:48)(cid:46)(cid:49)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)continued
Derecognition of financial liabilities
A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or
expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial
modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of a
new financial liability.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Derecognition of financial assets
A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in
such a way that all the risks and rewards of ownership are substantially transferred.
All of the following criteria need to be satisfied for derecognition of financial asset:
• the right to receive cash flows from the asset has expired or been transferred;
• all risk and rewards of ownership of the asset have been substantially transferred; and
•
the Group no longer controls the asset (ie the Group has no practical ability to make a unilateral decision to sell the
asset to a third party).
On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and
the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of a debt instrument classified as at fair value through other comprehensive income, the cumulative gain
or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss.
On derecognition of an investment in equity which was elected to be classified under fair value through other
comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is not
reclassified to profit or loss, but is transferred to retained earnings.
Impairment
The Group recognises a loss allowance for expected credit losses on:
• financial assets that are measured at amortised cost or fair value through other comprehensive income;
•
• contract assets (eg amounts due from customers under construction contracts);
•
loan commitments that are not measured at fair value through profit or loss; and
• financial guarantee contracts that are not measured at fair value through profit or loss.
lease receivables;
Loss allowance is not recognised for:
• financial assets measured at fair value through profit or loss; or
• equity instruments measured at fair value through other comprehensive income.
Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial
instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to
be received, all discounted at the original effective interest rate of the financial instrument.
The Group uses the general approach to impairment, as applicable under AASB 9: Financial Instruments.
Under the general approach, at each reporting period, the Group assesses whether the financial instruments are credit-
impaired, and if:
•
the credit risk of the financial instrument has increased significantly since initial recognition, the Group measures the
loss allowance of the financial instruments at an amount equal to the lifetime expected credit losses; or
there is no significant increase in credit risk since initial recognition, the Group measures the loss allowance for that
financial instrument at an amount equal to 12-month expected credit losses.
•
2019 LEPIDICO ANNUAL REPORT
63
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:37)(cid:297)(cid:3) (cid:6)(cid:37)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:9)(cid:42)(cid:47)(cid:48)(cid:46)(cid:49)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)continued
Recognition of expected credit losses in financial statements
At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the
statement of profit or loss and other comprehensive income.
The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset.
Assets measured at fair value through other comprehensive income are recognised at fair value, with changes in fair
value recognised in other comprehensive income. Amounts in relation to change in credit risk are transferred from other
comprehensive income to profit or loss at every reporting period.
For financial assets that are unrecognised (eg loan commitments yet to be drawn, financial guarantees), a provision for
loss allowance is created in the statement of financial position to recognise the loss allowance.
(cid:296)(cid:38)(cid:297)(cid:3) (cid:9)(cid:41)(cid:44)(cid:28)(cid:37)(cid:46)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:437)(cid:47)(cid:47)(cid:33)(cid:48)(cid:47)
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.
(cid:296)(cid:39)(cid:297)(cid:3)(cid:6)(cid:43)(cid:46)(cid:33)(cid:37)(cid:35)(cid:42)(cid:3)(cid:427)(cid:49)(cid:46)(cid:46)(cid:33)(cid:42)(cid:31)(cid:53)(cid:3)(cid:21)(cid:46)(cid:28)(cid:42)(cid:47)(cid:28)(cid:31)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:491)(cid:28)(cid:40)(cid:28)(cid:42)(cid:31)(cid:33)(cid:47)
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.
64
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:40)(cid:297)(cid:3) (cid:3)(cid:5)(cid:41)(cid:44)(cid:40)(cid:43)(cid:53)(cid:33)(cid:33)(cid:3)(cid:491)(cid:33)(cid:42)(cid:33)(cid:252)(cid:48)(cid:47)
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.
(cid:296)(cid:41)(cid:297)(cid:3)(cid:3)(cid:16)(cid:46)(cid:43)(cid:50)(cid:37)(cid:47)(cid:37)(cid:43)(cid:42)(cid:47)
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.
(cid:296)(cid:42)(cid:297)(cid:3)(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:5)(cid:45)(cid:49)(cid:37)(cid:50)(cid:28)(cid:40)(cid:33)(cid:42)(cid:48)(cid:47)
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.
(cid:296)(cid:43)(cid:297)(cid:3)(cid:19)(cid:33)(cid:50)(cid:33)(cid:42)(cid:49)(cid:33)
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).
(cid:296)(cid:44)(cid:297)(cid:3)(cid:7)(cid:43)(cid:43)(cid:32)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:20)(cid:33)(cid:46)(cid:50)(cid:37)(cid:31)(cid:33)(cid:47)(cid:3)(cid:21)(cid:28)(cid:52)(cid:3)(cid:296)(cid:7)(cid:20)(cid:21)(cid:297)
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.
(cid:296)(cid:45)(cid:297)(cid:3)(cid:427)(cid:46)(cid:37)(cid:48)(cid:37)(cid:31)(cid:28)(cid:40)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:5)(cid:47)(cid:48)(cid:37)(cid:41)(cid:28)(cid:48)(cid:33)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:10)(cid:49)(cid:32)(cid:35)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)
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.
2019 LEPIDICO ANNUAL REPORT
65
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
(cid:296)(cid:45)(cid:297)(cid:3)(cid:427)(cid:46)(cid:37)(cid:48)(cid:37)(cid:31)(cid:28)(cid:40)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:5)(cid:47)(cid:48)(cid:37)(cid:41)(cid:28)(cid:48)(cid:33)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:10)(cid:49)(cid:32)(cid:35)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)continued
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).
(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.
(cid:296)(cid:47)(cid:297)(cid:3)(cid:14)(cid:33)(cid:51)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:437)(cid:41)(cid:33)(cid:42)(cid:32)(cid:33)(cid:32)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)(cid:3)(cid:437)(cid:32)(cid:43)(cid:44)(cid:48)(cid:33)(cid:32)(cid:3)(cid:30)(cid:53)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:7)(cid:46)(cid:43)(cid:49)(cid:44)
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on or
after 1 January 2018.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to
the Group include:
• AASB 9 Financial Instruments and related amending Standards
• AASB 15 Revenue from Contracts with Customers and related amending Standards
66
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
AASB 9 Financial Instruments and related amending Standards
In the current year, the Group has applied AASB 9 Financial Instruments (as amended) and the related consequential
amendments to other Accounting Standards that are effective for an annual period that begins on or after 1 January 2018.
The transition provisions of AASB 9 allow an entity not to restate comparatives, which the Group has adopted.
AASB 9 requires an expected credit loss (ECL) model for trade receivables and loans as opposed to an incurred
credit loss model under AASB 139. The ECL model requires the Group to account for expected credit losses in trade
receivables and financial instruments at an amount equal to the lifetime expected credit losses (ECL) if the credit risk on
that receivable or financial instrument has increased significantly since initial recognition, or if the receivable or financial
instrument is a purchased or originated credit impaired financial asset. However, if the credit risk has not increased
significantly since initial recognition (except for a purchased or originated credit impaired financial asset), the Group is
required to measure the loss allowance at an amount equal to 12 months ECL. AASB 9 also allows a simplified approach
for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease
receivables in certain circumstances.
The directors of the Company reviewed and assessed the Group’s existing financial assets as at 1 July 2018 based on
the facts and circumstances that existed at that date and concluded that the application of AASB 9 has had no material
impact on the Group's financial performance or position.
In summary AASB 9 introduced new requirements for:
• The classification and measurement of financial assets and financial liabilities;
•
• General hedge accounting.
Impairment of financial assets, and
AASB 15 Revenue from Contracts with Customers and related amending Standards
In the current year, the Group has applied AASB 15 Revenue from Contracts with Customers (as amended) which is
effective for an annual period that begins on or after 1 January 2018. AASB 15 introduced a 5-step approach to revenue
recognition. Far more prescriptive guidance has been added in AASB 15 to deal with specific scenarios.
The Group has applied AASB 15 in accordance with the fully retrospective transitional approach. The Group’s accounting
policies for its revenue streams are disclosed in more detail in note 1(o)
The directors of the Company have reviewed and assessed the Group’s contracts with customers and determined that the
application of AASB 15 has not had a material impact on the financial position and/or financial performance of the Group.
There was no material impact on adoption of the standard and no adjustment made to current or prior period amounts.
The adoption of AASB15 Revenue from contracts with customers has not resulted in any significant changes to
accounting policies nor has it materially impacted on amounts recognised in the financial statements.
(cid:296)(cid:48)(cid:297)(cid:3) (cid:14)(cid:33)(cid:51)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:20)(cid:48)(cid:28)(cid:42)(cid:32)(cid:28)(cid:46)(cid:32)(cid:47)(cid:3)(cid:34)(cid:43)(cid:46)(cid:3)(cid:437)(cid:44)(cid:44)(cid:40)(cid:37)(cid:31)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:37)(cid:42)(cid:3)(cid:6)(cid:49)(cid:48)(cid:49)(cid:46)(cid:33)(cid:3)(cid:16)(cid:33)(cid:46)(cid:37)(cid:43)(cid:32)(cid:47)
The AASB has issued a number of new and amended Accounting Standards that have mandatory application dates for
future reporting periods, some of which are relevant to the Group. The directors have decided not to early-adopt any
of the new and amended pronouncements. The following sets out their assessment of the pronouncements that are
relevant to the Group but applicable in future reporting periods.
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
The Group has chosen not to early-adopt AASB 16. However, the Group has conducted a preliminary assessment of the
impact of this new Standard, as follows.
A core change resulting from applying AASB 16 is that most leases will be recognised on the balance sheet by lessees
as the standard no longer differentiates between operating and finance leases. An asset and a financial liability are
recognised in accordance to this new Standard. There are, however, two exceptions allowed: short-term and low-value
leases. The accounting for the Group's operating leases will be primarily affected by this new Standard.
AASB 16 will be applied by the Group from its mandatory adoption date of 1 July 2019. The comparative amounts for
the year prior to first adoption will not be restated, as the Group has chosen to apply AASB 16 retrospectively with
cumulative effect. While the right-of-use assets for property leases will be measured on transition as if the new rules
had always been applied, all other right-of-use assets will be measured at the amount of the lease liability on adoption.
2019 LEPIDICO ANNUAL REPORT
67
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:257)(cid:269)(cid:3)(cid:20)(cid:48)(cid:28)(cid:48)(cid:33)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:31)(cid:31)(cid:43)(cid:49)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:3)(cid:16)(cid:43)(cid:40)(cid:37)(cid:31)(cid:37)(cid:33)(cid:47)
The Group's non-cancellable operating lease commitments amount to $45,630 as at the reporting date, see note 19.
The Group intends to adopt the short term lease exception for leases with terms of less than 12 months, which would
equate to rental expense of approximately $45,630. All impacts are based on current estimates which are subject to
finalisation prior to final implementation.
Based on a preliminary assessment, the Group has estimated that on 1 July 2019, no right-of-use assets and lease
liabilities will be required to be recognised.
The Group does not expect a material impact to net profit after tax for 2019 as a result of adopting the new standard.
The directors anticipate that the adoption of AASB 16 should not have a material impact on the Group’s financial
statements.
(cid:296)(cid:49)(cid:297)(cid:3)(cid:427)(cid:43)(cid:41)(cid:44)(cid:28)(cid:46)(cid:28)(cid:48)(cid:37)(cid:50)(cid:33)(cid:3)(cid:6)(cid:37)(cid:35)(cid:49)(cid:46)(cid:33)(cid:47)
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
(%)
2019
2018
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) Ltd
Canada
68
2019 LEPIDICO ANNUAL REPORT
100
100
100
100
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
Management Company
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 3: Revenue
Operating activities
Operating Income
Other activities
Interest
Profit on sale of available for sale financial assets
Sale of interest in exploration tenement
Other Income
Total Revenue
Note 4: Administrative Expenses
Office & general
Professional services
Compliance related
Travel
2019
$
-
-
57,060
2,050
-
59,110
59,110
2019
$
339,690
250,100
369,636
460,550
1,419,976
2018
$
61,170
61,710
69,952
-
110,000
179,952
241,122
2018
$
299,890
515,601
312,190
404,436
1,532,117
(cid:15)(cid:48)(cid:36)(cid:33)(cid:46)(cid:3)(cid:20)(cid:37)(cid:35)(cid:42)(cid:37)(cid:252)(cid:31)(cid:28)(cid:42)(cid:48)(cid:3)(cid:437)(cid:32)(cid:41)(cid:37)(cid:42)(cid:37)(cid:47)(cid:48)(cid:46)(cid:28)(cid:48)(cid:37)(cid:50)(cid:33)(cid:3)(cid:5)(cid:52)(cid:44)(cid:33)(cid:42)(cid:47)(cid:33)(cid:47)
The following significant expenses were incurred during the period
and impacted the financial performance:
Legal Costs associated with settled dispute
Takeover Response
408,022
-
-
18,341
Total Administrative Expenses
1,827,998
1,550,458
2019 LEPIDICO ANNUAL REPORT
69
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 5: Income Tax Expense
(cid:296)(cid:28)(cid:297)
The components of tax expense comprise:
Current tax
Deferred tax
Losses recouped not previously recognised
Income tax expense reported in statement of comprehensive income
2019
$
2018
$
-
-
-
-
-
-
-
-
(cid:296)(cid:30)(cid:297)
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%)
(1,403,879)
(1,985,421)
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
(cid:296)(cid:31)(cid:297)
Deferred tax recognised:
Deferred Tax Liabilities:
Exploration expenditure
L-Max® Technology
L-Max® Pilot Plant
Other
Deferred Tax Assets:
Carry forward revenue losses
Net deferred tax
(cid:296)(cid:32)(cid:297)
Unrecognised deferred tax assets:
Carry forward revenue losses
Carry forward capital losses
Capital raising and other costs
L-Max Licence
Provision and accruals
70
2019 LEPIDICO ANNUAL REPORT
-
1,032,902
143,000
178,867
49,731
(621)
-
-
-
-
-
630,101
587,813
38,128
421,078
308,301
-
-
-
-
(1,141)
(227,973)
(272,694)
-
(1,141)
(362,873)
-
(24)
501,808
364,038
-
-
6,190,047
268,663
506,301
20,007
8,686
5,137,306
268,663
334,345
-
14,132
6,993,703
5,754,446
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 5: Income Tax Expense continued
(cid:296)(cid:33)(cid:297)(cid:3)(cid:3)(cid:21)(cid:28)(cid:52)(cid:3)(cid:31)(cid:43)(cid:42)(cid:47)(cid:43)(cid:40)(cid:37)(cid:32)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:269)
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;
b) the Company continues to comply with the conditions for deductibility imposed by law; and
c) no changes in income tax legislation adversely affect the company in utilising the benefits.
Note 6: Auditor’s Remuneration
Audit services
2019
$
39,116
39,116
2018
$
34,789
34,789
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.
2019
$
2018
$
Loss attributable to the ordinary equity holders of the Company
0.002
0.003
Loss from continuing operations
5,105,014
7,219,713
Weighted average number of ordinary shares
3,272,423,591
2,624,394,631
No.
No.
$
$
Note 8: Cash and Cash Equivalents
Cash at bank and in hand
2019
$
2018
$
13,660,308
4,859,962
13,660,308
4,859,962
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 22.
2019 LEPIDICO ANNUAL REPORT
71
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 9: Trade and Other Receivables
Current
Prepaid expenses
R&D tax rebate receivable
Goods and services tax receivable
Other receivables
2019
$
35,397
950,000
162,689
-
2018
$
63,680
484,795
76,002
79
Total Current Trade and Other Receivables
1,148,086
624,556
Non-Current
Cash backed guarantees
Total Non-Current Trade and Other Receivables
71,729
71,729
87,114
87,114
Total Trade and Other Receivables
1,219,815
711,670
2019
$
2018
$
105,601
1,587
(37,173)
80,054
25,547
-
70,015
105,601
78,552
8,287
(36,509)
50,330
72,322
6,230
-
78,552
19,685
27,049
Note 10: Property, Plant and Equipment
Furniture, Fittings and Equipment
At cost
Opening Balance
Additions
Disposals
Closing Balance
Accumulated depreciation
Opening Balance
Depreciation
Disposals
Closing Balance
Net Book Value
72
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 11: Exploration and Evaluation Expenditure
2019
$
2018
$
Exploration expenditure
1,928,203
729,697
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
2019
$
2018
$
729,697
1,838,747
(640,241)
1,619,842
1,280,670
(2,170,815)
Balance at the end of the year
1,928,203
729,697
Note 12: Intangible asset
L-Max® Technology
S-Max® Technology
LOH-Max™ Technology
Intangible assets
2019
$
2018
$
22,692,203
19,010,660
136,543
96,384
16,040
-
22,925,130
19,026,700
The recoverability of the carrying amount of the L-Max®, S-Max® and LOH-Max™ Technologies 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
2019
$
19,026,700
4,848,430
(950,000)
2018
$
16,698,154
2,813,341
(484,795)
Research and Development Tax Credit received/receivable
22,925,130
19,026,700
2019 LEPIDICO ANNUAL REPORT
73
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 13: Trade and Other Payables
Current
Trade payables
Sundry payables and accrued expenses
2019
$
648,449
429,363
2018
$
406,527
397,948
Total Current Trade and Other Payables
1,077,812
804,475
Note 14: Provisions
Current
Employee Provisions
Reconciliation of movements during the year:
Balance at the beginning of year
Additional provisions
Provisions used
2019
$
2018
$
85,677
51,030
2019
$
51,030
89,184
(54,537)
2018
$
45,797
58,169
(52,936)
Balance at the end of the year
85,677
51,030
Note 15: Contributed Equity
(cid:28)(cid:297)(cid:3) (cid:20)(cid:36)(cid:28)(cid:46)(cid:33)(cid:3)(cid:31)(cid:28)(cid:44)(cid:37)(cid:48)(cid:28)(cid:40)
Fully paid ordinary shares
Share Issue Costs
2019
2018
Number
$
Number
$
3,737,703,973
63,858,677
2,901,520,897
43,961,658
(4,427,831)
59,430,846
(3,227,846)
40,733,812
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.
74
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 15: Contributed Equity continued
(cid:28)(cid:297)(cid:3) (cid:20)(cid:36)(cid:28)(cid:46)(cid:33)(cid:3)(cid:31)(cid:28)(cid:44)(cid:37)(cid:48)(cid:28)(cid:40)(cid:3)continued
Movements in ordinary share capital
Description
Opening Balance
Exercise of options
Date
Number of
shares
Issue Price
$
1 July 2018
2,901,520,897
40,733,812
11 July 2018
10,000,000
$0.01815
Fair value of options exercised
11 July 2018
-
-
Exercise of options
Fair value of options exercised
Issue of shares to Venus Metals Ltd
Entitlement Offer
Entitlement Offer
Less: Share issue costs
17 July 2018
10,000,000
$0.01815
17 July 2018
31 July 2018
-
-
3,619,254
$0.03316
1 October 2018
431,035,037
5 June 2019
381,528,785
-
-
$0.019
$0.029
-
-
181,500
80,000
181,500
80,000
120,000
8,189,666
11,064,335
(1,199,967)
(1,199,967)
Closing Balance
30 June 2019
3,737,703,973
59,430,846
(cid:30)(cid:297)(cid:3) (cid:20)(cid:36)(cid:28)(cid:46)(cid:33)(cid:3)(cid:43)(cid:44)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)
As at reporting date, Lepidico has the following options on issue:
Number
5,000,000
42,500,000
12,500,000
220,518,031
50,000,000
65,000,000
190,746,921
586,264,952
Exercise Price
Grant
Expiry
$0.015
$0.025
$0.025
$0.045
$0.091
$0.026
$0.050
9 November 2017
8 November 2019
25 November 2016
31 December 2019
30 November 2016
31 December 2019
30 September 2018
30 September 2020
24 November 2017
23 November 2020
23 November 2018
22 November 2021
5 June 2019
5 June 2022
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.
Movements in Options
Balance at 1 July 2017
Granted
Exercised
Expired
Balance at 30 June 2018
Granted
Exercised
Expired
Balance at 30 June 2019
Weighted
Average Exercise
Price
$
0.023
0.078
0.019
0.030
0.049
0.044
0.019
-
0.046
Number
151,750,000
60,000,000
(54,000,000)
(27,750,000)
130,000,000
476,264,952
(20,000,000)
-
586,264,952
2019 LEPIDICO ANNUAL REPORT
75
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 15: Contributed Equity continued
(cid:31)(cid:297)(cid:3) (cid:20)(cid:36)(cid:28)(cid:46)(cid:33)(cid:3)(cid:491)(cid:28)(cid:47)(cid:33)(cid:32)(cid:3)(cid:16)(cid:28)(cid:53)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)
On 31 July 2018, the Company issued 3,619,254 shares to Venus Metals Ltd as the intial payment for farm-in on Moriarty
Lithium Rights. Under the terms of the farm-in, Venus Metals Ltd was issued with $120,000 in shares.
On 1 October, the Company issued 5,000,000 listed options (valued at $0.009) to CPS Capital as part of the the
Underwriiting Agreement for the Entitlement Offer which closed on 1 October. The option terms were the same as the
terms of the options included in the Entitlement Offer. 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
5,000,000
$0.022
$0.045
111%
2 years
0.00%
1.98%
On 22 November 2018, the Company issued a total of 65,000,000 options (valued at $0.008) 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
65,000,000
Unlisted Options
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Interest Rate
$0.017
$0.026
86%
3 years
0.00%
1.97%
76
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 16: Reserves
Option Reserve
Foreign Currency Translation Reserve
Total Reserves
2019
$
3,782,750
75,918
2018
$
3,377,750
(17,141)
3,858,668
3,360,609
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
2019
$
3,377,750
565,000
(160,000)
2018
$
1,513,250
2,307,500
(443,000)
Closing Balance
3,782,750
3,377,750
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 2019.
2019
$
(17,141)
93,059
2018
$
-
(17,141)
75,918
(cid:296)(cid:257)(cid:264)(cid:268)(cid:257)(cid:261)(cid:257)(cid:297)
2019 LEPIDICO ANNUAL REPORT
77
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 18: Segment reporting
Reportable Segments
The Group has two reportable segments, being mineral exploration and development of its technologies, which reflects the
structure used by the Group’s management to assess the performance of the Group.
Mineral
Exploration
Technology
Corporate &
Unallocated items
$
Total
$
$
-
(630,241)
$
-
-
59,110
59,110
(4,474,773)
(5,105,014)
110,000
(2,060,815)
61,170
51,211
69,952
241,122
(5,210,109)
(7,219,713)
1,928,203
22,925,130
14,899,807
39,753,140
729,697
19,026,700
5,598,681
25,355,078
2019
$
2018
$
59,110
241,122
59,110
241,122
(3,989,287)
(5,067,612)
(984,790)
(130,927)
(2,152,101)
-
(cid:296)(cid:262)(cid:268)(cid:257)(cid:256)(cid:262)(cid:268)(cid:256)(cid:257)(cid:261)(cid:297)
(cid:296)(cid:264)(cid:268)(cid:258)(cid:257)(cid:266)(cid:268)(cid:264)(cid:257)(cid:259)(cid:297)
37,625,789
24,629,530
208,110
1,899,761
19,480
21,682
703,866
-
39,753,140
25,355,078
(cid:296)(cid:37)(cid:297)(cid:3)(cid:20)(cid:33)(cid:35)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:44)(cid:33)(cid:46)(cid:34)(cid:43)(cid:46)(cid:41)(cid:28)(cid:42)(cid:31)(cid:33)
Year ended 30 June 2019
Revenue
Total Profit/(Loss)
Year ended 30 June 2018
Revenue
Total Profit/(Loss)
(cid:296)(cid:37)(cid:37)(cid:297)(cid:3)(cid:20)(cid:33)(cid:35)(cid:41)(cid:33)(cid:42)(cid:48)(cid:3)(cid:28)(cid:47)(cid:47)(cid:33)(cid:48)(cid:47)
As at 30 June 2019
As at 30 June 2018
Geographical Information
Australia
Total Revenue
Australia
Canada
Europe
Total Loss
Australia
Canada
Europe
Africa
Total Assets
78
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 19: Commitments
Operating lease commitments
Not later than one year
After one year but less than two years
Exploration lease commitments
There are no exploration lease commitments at at 30th June 2019.
(cid:14)(cid:43)(cid:48)(cid:33)(cid:3)(cid:258)(cid:256)(cid:269)(cid:3)(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:6)(cid:40)(cid:43)(cid:51)(cid:3)(cid:9)(cid:42)(cid:34)(cid:43)(cid:46)(cid:41)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)
(cid:19)(cid:33)(cid:31)(cid:43)(cid:42)(cid:31)(cid:37)(cid:40)(cid:37)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:43)(cid:34)(cid:3)(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:6)(cid:40)(cid:43)(cid:51)(cid:3)(cid:34)(cid:46)(cid:43)(cid:41)(cid:3)(cid:15)(cid:44)(cid:33)(cid:46)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)(cid:3)
(cid:51)(cid:37)(cid:48)(cid:36)(cid:3)(cid:12)(cid:43)(cid:47)(cid:47)(cid:3)(cid:28)(cid:34)(cid:48)(cid:33)(cid:46)(cid:3)(cid:9)(cid:42)(cid:31)(cid:43)(cid:41)(cid:33)(cid:3)(cid:21)(cid:28)(cid:52)
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 property, plant & equipment
(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
2019
$
45,630
-
45,630
2018
$
100,746
50,251
150,997
2019
$
2018
$
(5,105,014)
(7,219,713)
8,287
630,241
520,000
(1,387)
6,230
2,170,815
2,137,500
-
-
(110,000)
(90,362)
500,006
34,647
10,907
(39,318)
5,233
(cid:427)(cid:28)(cid:47)(cid:36)(cid:3)(cid:253)(cid:43)(cid:51)(cid:3)(cid:49)(cid:47)(cid:33)(cid:32)(cid:3)(cid:37)(cid:42)(cid:3)(cid:43)(cid:44)(cid:33)(cid:46)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)(cid:47)
(cid:296)(cid:259)(cid:268)(cid:262)(cid:256)(cid:259)(cid:268)(cid:262)(cid:265)(cid:258)(cid:297)
(cid:296)(cid:259)(cid:268)(cid:256)(cid:259)(cid:265)(cid:268)(cid:259)(cid:261)(cid:263)(cid:297)
2019 LEPIDICO ANNUAL REPORT
79
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
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 44 to 49.
Payments to director-related parties
2019
$
1,488,372
42,911
520,000
2018
$
1,037,874
49,667
2,137,500
2,051,283
3,225,041
2019
$
2018
$
Payments to director-related entities(1)
4,003,387
857,219
(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 and included
approximately $2.1 million in equipment purchases relating to the Pilot Plant which were on-charged by Strategic Metallurgy
Pty Ltd at cost. As at 30 June 2019 invoices totalling $15,730 are payable (2018: $89,617).
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.
80
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 22: Financial Risk Management continued
(cid:296)(cid:28)(cid:297)(cid:3)(cid:427)(cid:46)(cid:33)(cid:32)(cid:37)(cid:48)(cid:3)(cid:19)(cid:37)(cid:47)(cid:39)
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 HSBC Bank, and management consider the Group’s exposure to
credit risk is low.
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
(cid:21)(cid:43)(cid:48)(cid:28)(cid:40)(cid:3)(cid:252)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:28)(cid:47)(cid:47)(cid:33)(cid:48)(cid:47)
(cid:296)(cid:30)(cid:297)(cid:3)(cid:12)(cid:37)(cid:45)(cid:49)(cid:37)(cid:32)(cid:37)(cid:48)(cid:53)(cid:3)(cid:19)(cid:37)(cid:47)(cid:39)
Note
8
9
2019
$
2018
$
13,660,308
1,148,086
4,859,962
624,556
14,808,394
5,484,518
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
Note
2019
$
2018
$
13
1,077,812
804,475
2019 LEPIDICO ANNUAL REPORT
81
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 22: Financial Risk Management continued
(cid:296)(cid:31)(cid:297)(cid:3)(cid:13)(cid:28)(cid:46)(cid:39)(cid:33)(cid:48)(cid:3)(cid:19)(cid:37)(cid:47)(cid:39)
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.
Interest Rate Risk
(i)
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
0.70%
13,858,394
1.41%
4,859,962
%
2019
$
%
2018
$
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.
Change in Loss
Increase by 1%
Decrease by 1%
Change in Equity
Increase by 1%
Decrease by 1%
2019
$
82,313
(57,060)
2018
$
50,697
(50,697)
82,313
(57,060)
50,697
(50,697)
Currency Risk
(ii)
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.
82
2019 LEPIDICO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 23: Parent Entity Financial Information
The following information relates to the legal parent only.
(cid:296)(cid:28)(cid:297)(cid:3)(cid:20)(cid:49)(cid:41)(cid:41)(cid:28)(cid:46)(cid:53)(cid:3)(cid:43)(cid:34)(cid:3)(cid:6)(cid:37)(cid:42)(cid:28)(cid:42)(cid:31)(cid:37)(cid:28)(cid:40)(cid:3)(cid:9)(cid:42)(cid:34)(cid:43)(cid:46)(cid:41)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)
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
2019
$
2018
$
14,618,365
5,397,312
50,364,845
34,157,254
507,622
507,622
619,478
619,478
94,964,846
4,171,241
76,257,812
3,997,433
(49,278,865)
(46,717,469)
49,857,223
33,537,776
(3,030,828)
(5,510,579)
178,808
(17,141)
Total comprehensive loss for the year
(cid:296)(cid:258)(cid:268)(cid:265)(cid:262)(cid:258)(cid:268)(cid:256)(cid:258)(cid:256)(cid:297)
(cid:296)(cid:262)(cid:268)(cid:262)(cid:258)(cid:264)(cid:268)(cid:264)(cid:258)(cid:256)(cid:297)
(cid:296)(cid:30)(cid:297)(cid:3)(cid:427)(cid:43)(cid:42)(cid:48)(cid:46)(cid:28)(cid:31)(cid:48)(cid:49)(cid:28)(cid:40)(cid:3)(cid:31)(cid:43)(cid:41)(cid:41)(cid:37)(cid:48)(cid:41)(cid:33)(cid:42)(cid:48)(cid:47)(cid:3)(cid:34)(cid:43)(cid:46)(cid:3)(cid:48)(cid:36)(cid:33)(cid:3)(cid:28)(cid:31)(cid:45)(cid:49)(cid:37)(cid:47)(cid:37)(cid:48)(cid:37)(cid:43)(cid:42)(cid:3)(cid:43)(cid:34)(cid:3)(cid:44)(cid:46)(cid:43)(cid:44)(cid:33)(cid:46)(cid:48)(cid:53)(cid:268)(cid:3)(cid:44)(cid:40)(cid:28)(cid:42)(cid:48)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:33)(cid:45)(cid:49)(cid:37)(cid:44)(cid:41)(cid:33)(cid:42)(cid:48)
As at 30 June 2019 the parent entity has no contractual commitments for the acquisition of property, plant or equipment.
(cid:296)(cid:31)(cid:297)(cid:3)(cid:7)(cid:49)(cid:28)(cid:46)(cid:28)(cid:42)(cid:48)(cid:33)(cid:33)(cid:47)(cid:3)(cid:28)(cid:42)(cid:32)(cid:3)(cid:31)(cid:43)(cid:42)(cid:48)(cid:37)(cid:42)(cid:35)(cid:33)(cid:42)(cid:48)(cid:3)(cid:40)(cid:37)(cid:28)(cid:30)(cid:37)(cid:40)(cid:37)(cid:48)(cid:37)(cid:33)(cid:47)(cid:3)
As at 30 June 2019 the parent entity has no guarantees or contingent liabilities other than as disclosed in Note 17.
2019 LEPIDICO ANNUAL REPORT
83
NOTES TO THE FINANCIAL STATEMENTS
for the Year ended 30 June 2019
Note 24: Events Subsequent to Reporting Date
(cid:296)(cid:28)(cid:297)(cid:3)(cid:4)(cid:33)(cid:47)(cid:33)(cid:46)(cid:48)(cid:3)(cid:12)(cid:37)(cid:43)(cid:42)(cid:3)(cid:491)(cid:49)(cid:47)(cid:37)(cid:42)(cid:33)(cid:47)(cid:47)(cid:3)(cid:427)(cid:43)(cid:41)(cid:30)(cid:37)(cid:42)(cid:28)(cid:48)(cid:37)(cid:43)(cid:42)
On 11 July 2019 the Company closed of the previously announced plan of arrangement (the “Arrangement”), with
Desert Lion Energy Inc. (“Desert Lion”) whereby Lepidico acquired all of the outstanding common shares of Desert Lion
for consideration of 5.4 Lepidico ordinary shares for every 1 Desert Lion common share (the “Exchange Ratio”). The
Arrangement, which was announced on May 7, 2019, was approved by the Desert Lion’s shareholders at an annual general
and special meeting held on June 27, 2019.
Under the terms of the Arrangement, the Company issued:
(i) 571,157,062 new fully paid ordinary shares (“LPD Shares”) to existing Desert Lion shareholders;
(ii) 39,183,982 new options at exercise prices ranging from $0.02 - $0.35; and
(iii) 139,797,500 warrants at exercise prices ranging from $0.04 to $0.044.
The outstanding convertible notes of Desert Lion were adjusted to allow for the acquisition of LPD Shares upon their
exercise (reflecting the Exchange Ratio). The Company will therefore either issue up to 108,000,000 new LPD Shares
upon conversion of the outstanding convertible notes or repay the principal amount of C$4,000,000 at the election of the
holder on or before 7 December 2020 with a balance of C$1,000,000 to be repaid in cash on maturity.
The Company has also issued 76,020,767 new fully paid ordinary shares to certain creditors of Desert Lion in settlement of
debt arrangements, which Desert Lion had intended to settle in common shares at the time of the announcement of the
Arrangement but which had not been allotted at transaction close.
(cid:296)(cid:30)(cid:297)(cid:3)(cid:9)(cid:47)(cid:47)(cid:49)(cid:33)(cid:3)(cid:43)(cid:34)(cid:3)(cid:20)(cid:36)(cid:28)(cid:46)(cid:33)(cid:47)(cid:3)(cid:48)(cid:43)(cid:3)(cid:491)(cid:28)(cid:31)(cid:31)(cid:36)(cid:49)(cid:47)(cid:3)(cid:427)(cid:28)(cid:44)(cid:37)(cid:48)(cid:28)(cid:40)(cid:3)(cid:437)(cid:32)(cid:50)(cid:37)(cid:47)(cid:43)(cid:46)(cid:47)
On 31 July 2019 the Company issued 13,786,605 new fully paid ordinary shares to Bacchus Capital Advisors in accordance
with the terms of its engagement as Corporate Advisor in relation to the Desert Lion Energy Inc business combination at
an issue price of $0.026 per share (Lepidico’s closing share price on 11 July 2019, the day the transaction closed).
84
2019 LEPIDICO ANNUAL REPORT
852019 LEPIDICO ANNUAL REPORTIn 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 2019 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 2019.4. 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 WalshManaging DirectorDated this 20th day of September 2019DIRECTORS’ DECLARATION 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 2019, 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
.
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.
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.
86
2019 LEPIDICO ANNUAL REPORT
(cid:11)(cid:33)(cid:53)(cid:3)(cid:437)(cid:49)(cid:32)(cid:37)(cid:48)(cid:3)(cid:13)(cid:28)(cid:48)(cid:48)(cid:33)(cid:46)(cid:47)(cid:3)(cid:296)(cid:31)(cid:43)(cid:42)(cid:48)(cid:37)(cid:42)(cid:49)(cid:33)(cid:32)(cid:297)
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 2019 the Group had $1,928,203 in capitalised
exploration and evaluation expenditure and intangible
assets with a carrying value of $22,925,130.
The intangible asset includes the Group’s investment in
the L-Max® Technology, S-Max® Technology and LOH-
Max® 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.
.
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
2019 ($97.2 million) to its net asset position ($38.6 million)
and noted that the market capitalisation at balance date
was significantly higher.
Assessing the appropriateness of the relevant disclosures in
the financial statements.
2019 LEPIDICO ANNUAL REPORT
87
(cid:11)(cid:33)(cid:53)(cid:3)(cid:437)(cid:49)(cid:32)(cid:37)(cid:48)(cid:3)(cid:13)(cid:28)(cid:48)(cid:48)(cid:33)(cid:46)(cid:47)(cid:3)(cid:296)(cid:31)(cid:43)(cid:42)(cid:48)(cid:37)(cid:42)(cid:49)(cid:33)(cid:32)(cid:297)
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 2019, the Group transacted
with Key Management Personnel and their related entities
including:
•
•
Awarded share-based payments amounting to
$520,000 in the form of share options, to Key
Management Personnel
Paid $4,003,387 in development and consulting costs
related to the L-Max Technology
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.
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.
Reviewing payments, receipts and general journals
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.
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.
88
2019 LEPIDICO ANNUAL REPORT
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.
• 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.
.
2019 LEPIDICO ANNUAL REPORT
89
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 2019.
In our opinion, the Remuneration Report of Lepidico Limited, for the year ended 30 June 2019 complies with section 300A
of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian Auditing Standards.
Neil Pace
Partner
Moore Stephens
Chartered Accountants
Signed at Perth on the 20th day of September 2019
90
2019 LEPIDICO ANNUAL REPORT
SUPPLEMENTARY (ASX) INFORMATION
The Shareholder information set out below was applicable as at 10 September 2019.
(cid:6)(cid:22)(cid:12)(cid:12)(cid:26)(cid:3)(cid:16)(cid:437)(cid:9)(cid:4)(cid:3)(cid:15)(cid:19)(cid:4)(cid:9)(cid:14)(cid:437)(cid:19)(cid:26)(cid:3)(cid:20)(cid:8)(cid:437)(cid:19)(cid:5)(cid:20)(cid:3)(cid:296)(cid:437)(cid:20)(cid:25)(cid:3)(cid:269)(cid:3)(cid:12)(cid:16)(cid:4)(cid:297)
Top 20 Holders of Fully Paid Ordinary Shares
Shareholder
Galaxy Resources Ltd
Strategic Metallurgy PL
J P Morgan Nom Aust PL
Computershare Investor Services
Citicorp Nom PL
HSBC Custody Nom Aust Ltd
Roytor & Co
Pella Ventures Ltd
Bacchus Cap Advisers Ltd
AIP Global Macro Fund
Strategic Metallurgy PL
Perth Cap Pl
Georgaklis Bill + G
Becker Gavin S B & W M
Netwealth Inv Ltd
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16 Walsh Julian Pearce
17
18
19
Avalon Retmnt Inv PL
BNP Paribas Nom PL
NBF Inc
20
Vadzis Ivars
Total Top 20
Number
411,111,112
294,271,201
158,744,687
157,236,204
96,905,448
77,506,419
70,075,071
56,786,377
56,181,883
54,066,954
50,000,134
48,000,000
40,468,389
38,000,000
33,273,010
30,500,000
30,107,472
29,894,140
29,481,521
26,057,412
%
9.35%
6.69%
3.61%
3.57%
2.20%
1.76%
1.59%
1.29%
1.28%
1.23%
1.14%
1.09%
0.92%
0.86%
0.76%
0.69%
0.68%
0.68%
0.67%
0.59%
1,788,667,434
40.65%
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 Holding Pty Ltd and Gary Donald Johnson
365,413,438
Distribution of Shares
The distribution of members and their shareholding was as follows:
Number of Shares
%
411,111,112
9.35%
8.30%
Number Held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Total number of shareholders
Number of Shareholders
912
291
439
3,392
2,956
7,990
2019 LEPIDICO ANNUAL REPORT
91
(cid:12)(cid:9)(cid:20)(cid:21)(cid:5)(cid:4)(cid:3)(cid:15)(cid:16)(cid:21)(cid:9)(cid:15)(cid:14)(cid:20)(cid:3)(cid:5)(cid:25)(cid:16)(cid:9)(cid:19)(cid:9)(cid:14)(cid:7)(cid:3)(cid:259)(cid:256)(cid:3)(cid:20)(cid:5)(cid:16)(cid:21)(cid:5)(cid:13)(cid:491)(cid:5)(cid:19)(cid:3)(cid:258)(cid:256)(cid:258)(cid:256)(cid:3)(cid:437)(cid:21)(cid:3)(cid:312)(cid:256)(cid:267)(cid:256)(cid:261)(cid:262)(cid:3)(cid:296)(cid:437)(cid:20)(cid:25)(cid:3)(cid:269)(cid:3)(cid:12)(cid:16)(cid:4)(cid:15)(cid:437)(cid:297)
Top 20 Holders of Listed Options
Shareholder
Galaxy Resources Ltd
Ruan Xiaoling
J P Morgan Nom Aust PL
Carson Darryl R + L A
Spreadborough Ryan
Perth Cap PL
Strategic Metallurgy PL
Kenworthy Anthony C
Rae Michael John
1
2
3
4
5
6
7
8
9
10 Wang Dan
11
12
13
14
15
16
17
18
19
Patel Dhaval J
Becker Gavin S B & W M
Yin Xin
Boss John Robert + L M
Zhang Luyu
Isaiah Sixty PL
Howitt Rhys Edward
BNP Paribas Noms PL
Rookharp Inv Pl
20
Tuckett Daniel Aaron H
Number
24,312,576
5,000,000
4,661,144
4,035,000
3,500,000
3,214,286
3,157,895
3,000,000
2,974,999
2,836,244
2,596,501
2,571,429
2,500,000
2,494,132
2,324,898
2,241,228
2,187,563
2,175,961
2,131,579
2,093,069
%
11.03%
2.27%
2.11%
1.83%
1.59%
1.46%
1.43%
1.36%
1.35%
1.29%
1.18%
1.17%
1.13%
1.13%
1.05%
1.02%
0.99%
0.99%
0.97%
0.95%
Total Top 20
80,008,504
36.30%
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
Over 100,000
Total Number of Option Holders
Number of Shareholders
120
399
228
589
281
1,617
92
2019 LEPIDICO ANNUAL REPORT
(cid:12)(cid:9)(cid:20)(cid:21)(cid:5)(cid:4)(cid:3)(cid:15)(cid:16)(cid:21)(cid:9)(cid:15)(cid:14)(cid:20)(cid:3)(cid:5)(cid:25)(cid:16)(cid:9)(cid:19)(cid:9)(cid:14)(cid:7)(cid:3)(cid:262)(cid:3)(cid:10)(cid:22)(cid:14)(cid:5)(cid:3)(cid:258)(cid:256)(cid:258)(cid:258)(cid:3)(cid:437)(cid:21)(cid:3)(cid:312)(cid:256)(cid:267)(cid:256)(cid:262)(cid:3)(cid:296)(cid:437)(cid:20)(cid:25)(cid:3)(cid:269)(cid:3)(cid:12)(cid:16)(cid:4)(cid:15)(cid:491)(cid:297)(cid:3)
Top 20 Holders of Listed Options
Shareholder
Galaxy Resources Ltd
McInnes Morgan J
Isaiah Sixty PL
Anderson Antony Edward
J P Morgan Nom Aust PL
Wythenshawe PL
Joyce Roger Eric
Terrill James
Cocks Thomas Michael
Brennan Leanne Maree
Strategic Metallurgy Pl
Bacchus Cap Advisers Ltd
Kenworthy Anthony C
BNP Paribas Noms PL
Forwood Danny
Netwealth Inv Ltd
Rookharp Inv Pl
Rae Michael John
Kostadinovic Veselinka
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Carson Darryl R + L A
Number
20,555,556
11,165,220
6,505,000
3,517,242
3,051,242
2,801,588
2,770,690
2,445,359
2,342,173
2,318,000
2,273,552
2,271,910
2,000,000
1,902,255
1,845,000
1,832,128
1,724,138
1,600,000
1,508,621
1,277,778
%
10.78%
5.85%
3.41%
1.84%
1.60%
1.47%
1.45%
1.28%
1.23%
1.22%
1.19%
1.19%
1.05%
1.00%
0.97%
0.96%
0.90%
0.84%
0.79%
0.67%
Total Top 20
75,707,452
39.69%
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
Over 100,000
Total Number of Option Holders
Number of Shareholders
140
454
281
708
278
1,861
2019 LEPIDICO ANNUAL REPORT
93
UNLISTED OPTIONS
Unlisted Option holdings as at 10 September 2019
The company has 214,183,982 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.
9,450,000 options expiring 25 October 2021 with an exercise price of 4.0c (“F”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
55,000,000 options expiring 22 November 2021 with an exercise price of 2.6c (“G’), which were issued to the Company’s
Directors.
10,000,000 options expiring 22 November 2021 with an exercise price of 2.6c (“H”), which were issued under the Company
Employee Share Plan.
945,000 options expiring 31 March 2022 with an exercise price of 10.0c (“I”), which were issued in accordance with the Plan of
Arrangement for the acquisition of Desert Lion Energy Inc.
3,921,982 options expiring 20 June 2022 with an exercise price of 10.0c (“J”), which were issued in accordance with the Plan of
Arrangement for the acquisition of Desert Lion Energy Inc.
5,967,000 options expiring 26 February 2023 with an exercise price of 35.0c (“K”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
18,900,000 options expiring 14 January 2024 with an exercise price of 2.0c (“L”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
A
B
C
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Total number of holders
-
-
-
-
1
1
-
-
-
-
4
4
-
-
-
-
1
1
D
-
-
-
-
4
4
E
-
-
-
-
1
1
F
-
-
-
-
3
3
G
-
-
-
-
6
6
H
-
-
-
-
1
1
I
-
-
-
-
2
2
J
-
-
-
-
5
5
K
-
-
-
2
6
8
L
-
-
-
-
10
10
94
2019 LEPIDICO ANNUAL REPORT
UNLISTED WARRANTS
Unlisted Warrant holdings as at 10 September 2019
4,140,941 warrants expiring on 10 October 2019 with an exercise price of 44c (“A”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
312,476 warrants expiring on 10 October 2019 with an exercise price of 35c (“B”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
2,880,085 warrants expiring on 29 November 2019 with an exercise price of 44c (“C”), which were issued in accordance with
the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
181,165 warrants expiring on 29 November 2019 with an exercise price of 35c (“D”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
1,179,387 warrants expiring on 6 December 2019 with an exercise price of 44c (“E”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
89,008 warrants expiring on 6 December 2019 with an exercise price of 35c (“F”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
7,706,421 warrants expiring on 13 December 2019 with an exercise price of 44c (“G”), which were issued in accordance with
the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
1,659,388 warrants expiring on 13 December 2019 with an exercise price of 35c (“H”), which were issued in accordance with
the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
2,832,991 warrants expiring on 29 December 2019 with an exercise price of 44c (“I”), which were issued in accordance with
the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
121,063 warrants expiring on 29 December 2019 with an exercise price of 35c (“J”), which were issued in accordance with the
Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
103,783,680 warrants expiring on 7 December 2020 with an exercise price of 4c (“K”), which were issued in accordance with
the Plan of Arrangement for the acquisition of Desert Lion Energy Inc.
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
101,000 and above
Total number of holders
A
-
-
-
-
2
2
B
-
-
-
-
2
2
C
-
-
-
-
2
2
D
-
-
-
-
2
2
E
-
-
-
7
3
10
F
-
-
-
7
3
10
G
-
10
9
10
2
31
H
-
10
9
10
2
31
I
-
-
-
-
7
7
J
-
-
-
-
7
7
K
-
-
-
1
29
30
2019 LEPIDICO ANNUAL REPORT
95
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
3855
Shares
26,082,049
RESTRICTED AND ESCROWED SECURITIES
There are currently no restricted or escrowed securities.
ON-MARKET BUY-BACK
There is no current on-market buy-back.
TENEMENT INFORMATION
The Company currently holds interests in tenements as set out below.
Karibib Lithium Project Tenement Schedule
Farm-in Agreements
Project/
Tenement ID
ML 204
EPL 5439
EPL 5555
EPL 5718
Notes:
Registered Holder
Desert Lion Energy (Pty) Ltd
Desert Lion Energy (Pty) Ltd
Desert Lion Energy (Pty) Ltd
Desert Lion Energy (Pty) Ltd
Lepidico Interest in
tenement
80%
80%
80%
80%
Expiry Date
18/06/2028
Area
69km²
10/02/20191
301km²
03/04/2021
553km²
26/10/20192
200km²
1. Renewal application submitted; final grant pending partial relinquishment.
2. Renewal application submitted.
96
2019 LEPIDICO ANNUAL REPORT
www.lepidico.com